Gevorkyan v. Bitmain Inc.

• Court: District Court, N.D. California
• Decided: August 26, 2022
• Docket: 3:18-cv-07004
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 9 GOR GEVORKYAN, Case No. 18-cv-07004-JD

10 Plaintiff, ORDER RE PERSONAL 11 v. JURISDICTION

12 BITMAIN TECHNOLOGIES LTD., Defendant. 13

14 This is a consumer action brought by plaintiff Gor Gevorkyan, a California citizen, against 15 defendant Bitmain Technologies, Ltd. (Bitmain), a Chinese company. Bitmain sells 16 cryptocurrency mining devices known as Application Specific Integrated Circuit (ASIC) devices. 17 Gevorkyan alleges that the ASIC devices he bought from Bitmain were first used by Bitmain to 18 “mine[] cryptocurrency for itself” prior to delivery, and when they were eventually delivered to 19 him, the devices were preconfigured to continue to “deliver Bitcoin to Bitmain rather than the 20 customers who purchase” the ASIC devices. Dkt. No. 32 (Compl.) ¶¶ 1, 62-72. Gevorkyan filed 21 this putative class action for claims under the California Unfair Competition Law, and for unjust 22 enrichment, conversion, and trespass to chattel. Id. ¶¶ 81-116. 23 Bitmain asked to dismiss the complaint for lack of personal jurisdiction. Dkt. No. 33. 24 After a hearing on the motion, the Court granted Gevorkyan a period of limited jurisdictional 25 discovery. Dkt. No. 44. The discovery period was extended a number of times due to the parties’ 26 many disputes and pandemic-related delays. Dkt. Nos. 47-78. Discovery has closed, and the 27 parties have filed two rounds of supplemental briefs on the jurisdictional issue. Dkt. Nos. 63, 66, 1 Before getting to the jurisdictional question, an observation about Bitmain’s briefs is 2 required. Overall, the briefs filed by Bitmain’s counsel, O’Melveny & Myers LLP, fell below the 3 standards of professionalism and quality expected of every litigant and counsel in this District. 4 The many instances of this will be called out in the ensuing discussion, but the Court notes at the 5 start that it has serious concerns about O’Melveny & Myers’ repeated citations to overruled cases, 6 and legal tests that were expressly disapproved well before it filed its brief. These practices are 7 not consonant with O’Melveny & Myers’ duty of candor, and they unduly burdened the Court and 8 opposing counsel with frivolous arguments. Bitmain and its attorneys are advised that future 9 conduct along these lines will be sanctioned, including but not limited to monetary sanctions, 10 defense or evidence preclusion, and professional conduct sanctions. There is no room in our busy 11 and resource-constrained federal courts for parties and lawyers who do not play by the rules and 12 fight fairly on the merits. 13 DISCUSSION 14 I. LEGAL STANDARDS 15 “In opposition to a defendant’s motion to dismiss for lack of personal jurisdiction, the 16 plaintiff bears the burden of establishing that jurisdiction is proper.” Boschetto v. Hansing, 539 17 F.3d 1011, 1015 (9th Cir. 2008). A district court has discretion to decide the mode of resolving 18 the jurisdictional motion, and when the Court determines that it will receive only written 19 materials, “these very limitations dictate that a plaintiff must make only a prima facie showing of 20 jurisdictional facts through the submitted materials in order to avoid a defendant’s motion to 21 dismiss.” Data Disc, Inc. v. Systems Technology Assocs., Inc., 557 F.2d 1280, 1285 (9th Cir. 22 1977); see also Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). All 23 factual conflicts in the parties’ affidavits are to be resolved in favor of the party asserting 24 jurisdiction, namely the plaintiff. Action Embroidery Corp. v. Atlantic Embroidery, Inc., 368 F.3d 25 1174, 1177 (9th Cir. 2004). 26 When as here, no federal statute authorizes personal jurisdiction, the Court applies the law 27 of the state in which the Court sits. Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th 1 limits of the Constitution’s Due Process Clause, so the Court need only ensure that that clause 2 permits the exercise of jurisdiction over defendant. Schwarzenegger, 374 F.3d at 800-01. The 3 Fourteenth Amendment’s Due Process Clause requires that “a State’s assertion of personal 4 jurisdiction over a nonresident defendant be predicated on ‘minimum contacts’ between the 5 defendant and the State.” Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984) (citing 6 World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98 (1980); International Shoe 7 Corp. v. Washington, 326 U.S. 310, 317 (1945)); see also Ford Motor Co. v. Montana Eighth 8 Judicial District Court, 141 S. Ct. 1017, 1024 (2021). 9 Personal jurisdiction may be general or specific. Ford Motor, 141 S. Ct. at 1024. 10 Gevorkyan’s supplemental briefs urge only that the Court has specific personal jurisdiction over 11 Bitmain. See Dkt. No. 63 at 1. To be subject to specific personal jurisdiction, the defendant must 12 have had contacts with the forum state that “often go by the name ‘purposeful availment,’” i.e., the 13 defendant “must take ‘some act by which [it] purposefully avails itself of the privilege of 14 conducting activities within the forum State.’” Ford Motor, 141 S. Ct. at 1024-25 (citations 15 omitted). In addition, the plaintiff’s claims “‘must arise out of or relate to the defendant’s 16 contacts’ with the forum.” Id. at 1025. As always, “the exercise of jurisdiction must comport with 17 fair play and substantial justice, i.e. it must be reasonable.” Schwarzenegger, 374 F.3d at 802. 18 II. PURPOSEFUL AVAILMENT 19 Bitmain’s sales of ASIC devices in California go a long way toward establishing 20 purposeful availment. Gevorkyan has proffered evidence that “Bitmain HK generated more than 21 $50,000,000 in revenue from its sale of ASIC devices to customers in California, including 22 Plaintiff, during the relevant time period.” Dkt. No. 62-4 at 3; Dkt. No. 62-9 (Karapetyan Decl., 23 Ex. 2, Bitmain Technologies, Ltd.’s Sales Figures). Bitmain does not dispute this evidence, and 24 acknowledges that “[t]he evidence shows annual California sales of Bitmain ASIC devices (which 25 can cost thousands of dollars each) ranging from $486,481 in 2016 to $32,657,754 in 2018.” Dkt. 26 No. 84 at 6. These are substantial sums, and even if considered by number of units rather than by 27 revenue totals, it appears Bitmain cumulatively sold well over 66,000 units in the relevant time 1 This evidence establishes purposeful availment. In Keeton v. Hustler Magazine, Inc., 465 2 U.S. 770 (1984), defendant Hustler Magazine, Inc.’s contacts with the forum state of New 3 Hampshire “consist[ed] of the sale of some 10 to 15,000 copies of Hustler magazine in that State 4 each month.” Id. at 772. The United States Supreme Court held that “[s]uch regular monthly 5 sales of thousands of magazines cannot by any stretch of the imagination be characterized as 6 random, isolated, or fortuitous,” and that where Hustler Magazine has “continuously and 7 deliberately exploited the New Hampshire market, it must reasonably anticipate being haled into 8 court there in a libel action based on the contents of its magazine.” Id. at 774, 781. So too, here. 9 Bitmain’s suggestions otherwise are wholly unpersuasive. It says that its California sales 10 should not count for an “express aiming” finding because they were a “small proportion . . . 11 relative to overall global sales.” Dkt. No. 84 at 5-6 (noting annual California sales “accounted for 12 a fraction of Bitmain’s overall global sales,” ranging between “a mere 0.08% in 2019” to “1.09% 13 in 2018”). That may be, but it is entirely irrelevant to the jurisdiction question. Our circuit has 14 expressly rejected that ostensible objection. “As Keeton demonstrates, there is no ‘small 15 percentage of sales’ exception to the purposeful direction principles,” and a defendant’s “sales to 16 the forum are no less substantial simply because the company sold more products elsewhere.” 17 Ayla, LLC v. Alya Skin Pty. Ltd., 11 F.4th 972, 981 (9th Cir. 2021). 18 This obvious flaw in Bitmain’s argument illustrates why the Court has serious concerns 19 about its litigation conduct. Bitmain inexplicably cited to the district court opinion in the Ayla 20 case, which was reversed by the circuit well over a month before Bitmain filed its brief. See Dkt. 21 No. 84 at 6 (citing Ayla, LLC v. Alya Skin Pty. Ltd., 2019 WL 5963149, at *4 (N.D. Cal. Nov. 13, 22 2019), for proposition that “[c]ompared to total sales, the ‘de minimis amount’ of California sales 23 does not establish jurisdiction”); compare to Ayla, LLC, 11 F.4th at 981 (“Alya Skin’s argument 24 that its United States sales are ‘de minimis’ and preclude the exercise of jurisdiction therefore 25 fails.”). 26 Bitmain made matters worse by saying that the California sales should not count because 27 Gevorkyan’s claims “would be unchanged even if Bitmain HK had not made any other sales [to 1 customers other than Gevorkyan] in California.” Dkt. No. 84 at 5. This is another instance of 2 Bitmain failing to follow current case law, see Ford Motor, 141 S. Ct. at 1029, and it is rejected. 3 Gevorkyan’s prima facie evidence bolsters the demonstration of purposeful availment. 4 Among other facts, Bitmain hosted a YouTube channel with the description, “Beijing-based 5 Bitmain Technologies Ltd.’s official YouTube channel,” and the channel included a video which 6 offered a “sneak peek into . . . our office in San Jose, California.” Dkt. No. 37-2 (Marlborough 7 Decl.) ¶ 7 & Ex. 6. This is consistent with Gevorkyan’s statement that Bitmain maintained a sales 8 office in San Jose, California. See Dkt. No. 63 at 5. Bitmain filed a declaration saying that 9 “Bitmain Technologies, Ltd. does not operate the . . . YouTube page” referenced by Gevorkyan, 10 and the YouTube page is instead “operated by Beijing Bitmain Technology Co., Ltd.” Dkt. 11 No. 38-1 (Liu Declaration) ¶ 12. But as the Court has previously noted, “[w]hen the Court 12 resolves a Rule 12(b)(2) motion on the papers, as it has the discretion to do, it is not in a position 13 to ‘“weigh” the affidavits in order to resolve disputed issues,’ and without further evidence, there 14 is ‘no way to select one set of facts as more credible than the other.’” In re Capacitors Antitrust 15 Litigation, No. 14-cv-03264-JD, 2017 WL 897340, at *3 (N.D. Cal. Mar. 7, 2017) (quoting Data 16 Disc, 557 F.2d at 1284-85). Our circuit has expressly disapproved any framework under which a 17 defendant could “obtain a dismissal simply by controverting the facts established by a plaintiff 18 through his own affidavits and supporting materials.” Data Disc, 557 F.2d at 1285. For the 19 YouTube page, plaintiff’s submitted evidence on its face indicates that the page is hosted by 20 Bitmain Technologies Ltd., the entity at issue here, and it shows a San Jose office for that entity. 21 Dkt. No. 37-2, Ex. 6. 22 Bitmain’s sales in this District establish personal jurisdiction, which plaintiff’s additional 23 evidence underscores. The Court need not consider the other evidence offered by Gevorkyan, 24 which is subject to some factual disputes that are beyond the scope of the present proceeding. 25 III. CLAIMS AND DEFENDANT’S CONTACTS WITH FORUM 26 The next question is whether Gevorkyan’s claims “arise out of relate to” Bitmain’s 27 “contacts with the forum.” Ford Motor, 141 S. Ct. at 1026 (emphasis omitted). Once again, 1 Bitmain got the law wrong on the applicable standard, which makes its comment that Gevorkyan 2 “relies on bad law,” Dkt. No. 84 at 9, all the more unbecoming. 3 Bitmain repeatedly says that there is a “‘but-for’ test that requires a ‘direct nexus’ between 4 the defendant’s forum contacts and the plaintiff’s cause of action.” Dkt. No. 84 at 2. Not so. Our 5 circuit definitively concluded, well over a month before Bitmain filed its brief, that “our 6 precedents permit but do not require a showing of but-for causation to satisfy the nexus 7 requirement. A narrower test is foreclosed by the Supreme Court’s recent decision in Ford Motor, 8 141 S. Ct. at 1026. In that case, the Supreme Court emphasized that a strict causal relationship is 9 not required.” Ayla, LLC, 11 F.4th at 983 n.5 (internal citations omitted). Bitmain inexplicably 10 did not mention or discuss theses controlling cases -- Ayla, LLC, 11 F.4th at 972, and Ford Motor, 11 141 S. Ct. 1017 -- which were decided well before Bitmain filed its last brief here. This omission 12 gives the Court considerable pause about the candor and professionalism of Bitmain’s counsel at 13 O’Melveny & Myers. 14 In Ford Motor, the Supreme Court rejected Ford’s argument that personal jurisdiction 15 exists “only if the company’s conduct in the State had given rise to the plaintiff’s claims,” and the 16 link between the company’s in-state conduct and plaintiff’s claims is “causal in nature.” 141 S. 17 Ct. at 1023, 1026. The Court concluded that “[n]one of our precedents has suggested that only a 18 strict causal relationship between the defendant’s in-state activity and the litigation will do.” Id. at 19 1026. The Court determined that specific personal jurisdiction could properly be exercised over 20 Ford where “resident-plaintiffs allege[d] that they suffered in-state injury because of defective 21 products that Ford extensively promoted, sold, and serviced” in their home states. Id. at 1032. In 22 Keeton, too, which our circuit cited favorably in Ayla, LLC, 11 F.4th at 981, after the Ford Motor 23 decision, the Supreme Court held that Hustler Magazine’s “regular circulation of magazines in the 24 forum State is sufficient to support an assertion of jurisdiction in a libel action based on the 25 contents of the magazine.” Keeton, 465 U.S. at 773-74. 26 The same conclusion fully applies here. Bitmain’s ASIC sales in California are sufficient 27 to support an assertion of jurisdiction in a consumer action based on those sales activities. 1 here, Bitmain sold to Gevorkyan 20 ASIC devices through its website. Compl. ¶ 62. Bitmain 2 accepted payment, and delivered the products to Gevorkyan, shipping the devices to California. 3 Id. ¶¶ 64-65. Gevorkyan alleges that the products were “preconfigured to deliver virtual currency 4 to Bitmain’s virtual currency account during the setup procedures as soon as the Products were 5 connected to the power supply and the internet.” Id. ¶ 68. This means that, as soon as they were 6 plugged in, the devices started using Gevorkyan’s electricity that he purchased from California 7 energy companies, and his internet service, provided by his California internet provider. Dkt. 8 No. 37-1 (Gevorkyan Decl.) ¶¶ 8-9; Dkt. No. 63 at 3-4. These are parts of his claims under the 9 Unfair Competition Law, and for unjust enrichment, conversion, and trespass to chattel. 10 Gevorkyan’s claims “relate to” Bitmain’s contacts with the forum, and there is a sufficient 11 “affiliation between the forum and the underlying controversy, principally, an activity or an 12 occurrence that takes place in the forum State and is therefore subject to the State’s regulation.” 13 Ford Motor, 141 S. Ct. at 1025 (cleaned up). Bitmain “chose to enter the [California] market” and 14 to make regular and significant sales of its ASIC devices here, and it consequently should have 15 reasonably anticipated being haled into a court in this forum to account for its in-state sales 16 activities under California’s consumer protection laws. Keeton, 465 U.S. at 779-81. 17 IV. REASONABLNESS OF EXERCISING JURISDICTION 18 For the final factor, the burden is on the defendant “to ‘present a compelling case’ that the 19 exercise of jurisdiction would not be reasonable.” Schwarzenegger, 374 F.3d at 802. 20 Bitmain made almost no effort to meet this standard, making only a passing reference to an 21 alleged arbitration agreement with Gevorkyan that is said to require arbitration in Hong Kong. 22 Dkt. No. 84 at 10. But this is of no moment. Whether the Court has personal jurisdiction over 23 Bitmain, and whether this case should be arbitrated instead of litigated, are entirely different 24 questions. 25 CONCLUSION 26 Bitmain’s motion to dismiss, Dkt. No. 33, is denied. Bitmain’s request under Rule 12(f) to 27 strike Gevorkyan’s nationwide class allegations on personal jurisdiction grounds, Dkt. No. 33 at 1 14-15, is denied. The determination of the proper scope of any class is appropriately considered 2 under Rule 23, not Rule 12(f). The case is re-opened, and the Court will issue a scheduling order. 3 IT IS SO ORDERED. 4 || Dated: August 26, 2022 5 6 JAMES/#PONATO 7 United fftates District Judge 8 9 10 11 12

© 15 16

= 17

Z 18 19 20 21 22 23 24 25 26 27 28