Martin v. Binance Holdings Ltd

• Court: District Court, S.D. Florida
• Decided: April 21, 2025
• Docket: 1:25-cv-22100
• Status: Unknown

Opinion

1 The Honorable Barbara J. Rothstein

5 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 6 AT SEATTLE

7 Case No. 2:24-cv-1264-BJR PHILIP MARTIN, T.F. (NATALIE) TANG, 8 and YATIN KHANNA, Individually and on ORDER GRANTING DEFENDANTS’ Behalf of All Others Similarly Situated, MOTION TO TRANSFER OR 9 COMPEL ARBITRATION Plaintiffs, 10 v. 11 BINANCE HOLDINGS, LTD. d/b/a 12 BINANCE, BAM TRADING SERVICES INC. d/b/a BINANCE.US, a Delaware corporation, 13 and CHANGPENG ZHAO,

14 Defendants.

15 I. INTRODUCTION 16 This matter is before the Court on a Motion to Transfer Pursuant to the First-to-File Rule or 17 Compel Arbitration, Dkt. No. 67, by Binance Holdings, LTD (“BHL”), BAM Trading Services, 18 Inc. (“BAM”), and Changpeng Zhao (collectively, “Defendants”). Having fully considered the 19 materials and the relevant legal authorities, the Court grants Defendants’ motion. The reasoning for 20 the Court’s decision follows. 21 22 23

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION 1 II. BACKGROUND 2 This case (the “Martin action”) is the third in a set of three related putative class actions. 3 See Martin Compl., Dkt. No. 1.; Osterer v. BAM Trading Servs. Inc., et al., No. 23-cv-22083 (S.D. 4 Fla. 2023) [hereinafter Osterer]; Kattula v. Coinbase Glob., Inc., et al., No. 22-cv-03250 (N.D. Ga. 5 2022). Plaintiffs in each of the actions allege claims arising from third-party hackers’ theft of 6 cryptocurrency from Coinbase, a cryptocurrency exchange and storage platform, and subsequent 7 use of Binance.com, another cryptocurrency exchange and storage platform, to untraceably 8 exchange the stolen assets. By this Motion, Defendants seek to transfer this action to the Southern 9 District of Florida under the first-to-file rule, or in the alternative, to compel arbitration. 10 Defendants’ first-to-file argument is premised on similarities between this action and the 11 earlier-filed Osterer action. The procedural histories of the relevant actions are discussed below.

12 A. The Osterer Action 13 In 2023, Michael Osterer initiated a putative class action against BHL and BAM, alleging 14 claims for (1) conversion, (2) aiding and abetting conversion, and (3) unjust enrichment. Osterer 15 Compl., Dkt. No. 1. BHL and BAM moved to compel arbitration, or in the alternative, dismiss the 16 complaint for failure to state a claim and lack of personal jurisdiction. Osterer Mot. to Compel Arb., 17 Dkt. No. 49. Osterer moved for leave to amend the complaint to add Zhao as a defendant and Philip 18 Martin, T.F. Tang, and Yatin Khanna as named plaintiffs. Osterer Mot. for Leave to Amend at 1, 19 Dkt. No. 62. Osterer also sought to add a single claim for violations of the Racketeer Influenced 20 and Corrupt Organizations Act. (“RICO”).1 Id. In July 2024, the district court granted BHL and 21

23 1 18 U.S.C. § 1962(c)-(d).

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION 1 BAM’s motion to compel arbitration, stayed the district court proceedings, and denied as moot 2 Osterer’s motion for leave to amend the complaint. Osterer Arb. Or. at 11, Dkt. No. 71. 3 B. The Martin Action 4 The month after the Osterer court granted BHL and BAM’s motion to compel arbitration, 5 the three proposed plaintiffs that Osterer sought to add by amendment—Martin, Tang, and Khanna 6 (collectively, “Plaintiffs”)—filed the instant action in this Court. Martin Compl. Defendants in this 7 action include BHL and BAM, the same defendants from the Osterer action, and Zhao, the proposed 8 defendant that Osterer sought to add to the Osterer action by amendment. Id. Plaintiffs allege claims 9 for (1) RICO violations, (2) conversion, and (3) aiding and abetting conversion. Id. 10 III. LEGAL STANDARD 11 The first-to-file rule is a “generally recognized doctrine of federal comity which permits a

12 district court to decline jurisdiction over an action when a complaint involving the same parties and 13 issues has already been filed in another district.” Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 14 93, 94-95 (9th Cir. 1982). The purpose of the first-to-file rule is to promote efficiency and to avoid 15 duplicative litigation, and thus, the doctrine “should not be disregarded lightly.” Church of 16 Scientology of California v. U.S. Dep’t of Army, 611 F.2d 738, 750 (9th Cir. 1979), overruled in 17 part on other grounds by Animal Leg. Def. Fund v. U.S. Food & Drug Admin., 836 F.3d 987 (9th 18 Cir. 2016). Under the first-to-file rule, a district court may transfer, stay, or dismiss the second 19 action if it determines that it would be in the interest of judicial economy and convenience of the 20 parties. Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 623 (9th Cir. 1991); Pacesetter, 678 21 F.2d at 95.

22 23

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION 1 IV. DISCUSSION 2 There are two issues before this Court: (1) the applicability of the first-to-file rule and 3 (2) whether transferring this matter to the Southern District of Florida is appropriate. The Court 4 addresses each argument in turn. 5 A. The Threshold Factors of The First-to-File Rule Weigh in Favor of Application 6 Courts analyze three factors in determining whether to apply the first-to-file rule: 7 (1) chronology of the actions; (2) similarity of the parties; and (3) similarity of the issues. Alltrade, 8 946 F.2d at 625. In this case, all three factors weigh in favor of applying the first-to-file rule. 9 1. The Osterer Action Was Filed Before this Action 10 First, it is undisputed that Osterer was filed in the Southern District of Florida in June 2023, 11 more than a year before the instant action. Compare Osterer Compl., with Martin Compl.

12 Accordingly, the chronology of the actions weighs in favor of applying the first-to-file rule. See 13 Wallerstein v. Dole Fresh Vegetables, Inc., 967 F. Supp. 2d 1289, 1294 (N.D. Cal. 2013) (finding 14 the chronology factor satisfied where the second action was filed more than three weeks after the 15 first action). 16 2. The Parties Are “Substantially Similar” 17 Regarding the second factor, “the first-to-file rule requires only substantial similarity of 18 parties.” Kohn L. Group, Inc. v. Auto Parts Mfg. Mississippi, Inc., 787 F.3d 1237, 1240 (9th Cir. 19 2015). When assessing the similarity of plaintiffs in the class action context, “a court should 20 compare the putative classes, rather than the named plaintiffs, to determine whether the classes 21 encompass at least some of the same individuals.” Edmonds v. Amazon.com, Inc., No. C19-1613,

22 2020 WL 5815745, at *4 (W.D. Wash. Sept. 30, 2020); see also Bewley v. CVS Health Corp., No. 23 C17-802, 2017 WL 5158443, at *2 (W.D. Wash. Nov. 7, 2017).

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION 1 Here, the putative classes in Osterer and this action are effectively identical. The putative 2 class in Osterer includes “[a]ll persons or entities in the United States within the applicable statute 3 of limitations period through class certification who had their stolen cryptocurrency deposited in a 4 Binance account.” Osterer Compl. ¶ 85. The putative class in this action includes: 5 [a]ll persons or entities in the United States whose cryptocurrency was removed from a non-Binance/BAM digital wallet, account, or protocol as a result of a hack, 6 ransomware, or theft and, between August 16, 2020 and the date of Judgment (the “Class Period”), transferred to a Binance.com account, and who have not recovered 7 all of their cryptocurrency that was transferred to Binance.com (the “Class”).

8 Martin Compl. ¶ 202. Although the two Complaints describe the proposed classes in slightly 9 different terms, both encompass the same proposed class of individuals whose cryptocurrency was 10 stolen and transferred to a Binance.com account during the relevant period. Therefore, this Court 11 concludes that the classes of plaintiffs are sufficiently similar to warrant application of the 12 first-to-file rule. See Edmonds, 2020 WL 5815745, at *4. 13 As to the similarity of the defendants, the instant action includes the same two defendants 14 as in Osterer —BHL and BAM—but adds Zhao. Compare Osterer Compl., with Martin Compl. 15 However, even with Zhao added as a defendant, the parties in the two actions are substantially 16 similar.2 See Kohn, 787 F.3d at 1240 (“We conclude that the omission of [a defendant] from the 17 present action does not defeat application of the first-to-file rule.”); Bewley, 2017 WL 5158443, at 18 *2 (“The presence of one additional defendant . . . does not change the fact that the parties on the 19 whole are substantially similar.”). 20 3. The Issues Are “Substantially Similar”

21 22 2 The Court notes that Zhao was the defendant that would have added in the Osterer action 23 if the motion for leave to amend were granted. Osterer Mot. for Leave to Amend at 1.

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION 1 As with the “similarity of the parties” factor, the third factor requires only that the issues 2 presented in the relevant actions are “substantially similar.” Kohn, 787 F.3d at 1240-41. When 3 analyzing whether issues are substantially similar for purposes of the first-to-file rule, district courts 4 in the Ninth Circuit consider if the common facts, taken together, would lead to the same central 5 question between the cases. See, e.g., Booker v. Am. Honda Motor Co., No. 2:20-CV-5166, 2020 6 WL 7263538, at *3 (C.D. Cal. Oct. 20, 2020); Adoma v. Univ. of Phoenix, Inc., 711 F. Supp. 2d 7 1142, 1149 (E.D. Cal. 2010). 8 Plaintiffs argue that the issues in this action are dissimilar from those in Osterer, because 9 unlike in Osterer, the Complaint here (1) does not allege unjust enrichment, and (2) adds a RICO 10 claim. Pls.’ Resp. at 5, Dkt. No. 70. The Court is unpersuaded. Plaintiffs’ attempts to distinguish 11 this case from Osterer do not change the fact that the two cases arise from the same factual predicate

12 and concern the same central issue. See Bates-Ferreira v. Swedish Match N.A., LLC, No. 13 2:24-CV-987, 2025 WL 950506, at *4 (E.D. Cal. Mar. 28, 2025) (“Even if a plaintiff presents 14 alternative theories compared to another pending action, it does not necessarily prevent the 15 application of the first-to-file rule because common facts may give rise to a central issue between 16 the cases.”). Indeed, the Osterer Complaint and Martin Complaint contain numerous identical or 17 nearly identical allegations. Compare, e.g., Osterer Compl. ¶ 99 (“Defendants ignored their own 18 internal policies and procedures and knowingly maintained inadequate KYC and AML policies 19 which enabled cryptocurrency hackers and thieves to launder cryptocurrency through the Binance 20 ecosystem without providing valid or sufficient personal identification and proof of lawful 21 possession of the cryptocurrency.”), with Martin Compl. ¶ 254 (“Defendants ignored the law and

22 knowingly maintained inadequate KYC and AML policies which enable cryptocurrency hackers 23 and thieves to launder cryptocurrency through the Binance.com ecosystem without providing valid

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION 1 or sufficient personal identification and proof of lawful possession of the cryptocurrency.”). It is 2 apparent from comparing the factual allegations in the two Complaints that the central issue in both 3 cases is whether the relevant defendants may be held responsible for acting in a manner that enabled 4 hackers to launder cryptocurrency through Binance.com. Compare Osterer Compl., with Martin 5 Compl. Accordingly, the third and final factor weighs in favor of applying the first-to-file rule. 6 B. Transfer to the Southern District of Florida is Appropriate 7 Because the threshold requirements of the first-to-file rule are satisfied, this Court next 8 considers whether transfer of this action to the Southern District of Florida is appropriate given 9 relevant statutory requirements and considerations of fairness and convenience. 10 1. This Action “Might Have Been Brought” in the Southern District of Florida 11 Under the first-to-file rule an action may be transferred to a district “where it might have

12 been brought.” In re Bozic, 888 F.3d 1048, 1053 (9th Cir. 2018) (quoting 28 U.S.C. § 1404(a)). 13 Here, Plaintiffs allege a federal RICO claim. Martin Compl. ¶¶ 211-32. Therefore, the Southern 14 District of Florida can exercise subject matter jurisdiction. 28 U.S.C. § 1331. Additionally, venue 15 is proper in the Southern District of Florida because BAM resides there while BHL and Zhao are 16 foreign defendants. Id. § 1391(b)-(c); Martin Compl. ¶¶ 23-24. 17 Regarding personal jurisdiction, Plaintiffs argue that this action cannot be transferred to the 18 Southern District of Florida because that court lacks personal jurisdiction over Plaintiffs. Pls.’ Resp. 19 at 5-6. Plaintiffs assert that they are not citizens of Florida and have not purposefully availed 20 themselves of any privileges in Florida by contracting there. Id. at 6. This argument is without 21 merit. In transferring a case, “there is no due-process concern, at least to the level of requiring

22 minimum contacts with the new forum, for plaintiff[s].” Murray v. Scott, 176 F. Supp. 2d 1249, 23

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION 1 1255 (M.D. Ala. 2001); see also F.T.C. v. Watson Pharm., Inc., 611 F. Supp. 2d 1081, 1090 (C.D. 2 Cal. 2009).3 Accordingly, this action “might have been brought” in the Southern District of Florida. 3 2. Additional Considerations Weigh in Favor of Transfer 4 Even if the threshold factors of the first-to-file rule are met, a court may refuse to apply the 5 rule based on considerations of fairness and convenience. Inherent.com v. Martindale-Hubbell, 420 6 F. Supp. 2d 1093, 1097-98 (N.D. Cal. 2006). Plaintiffs argue that the fact that the Osterer 7 proceedings are stayed pending arbitration is a “significant consideration” weighing against 8 transfer. Pls.’ Resp. at 8. Plaintiffs contend that, if this case is transferred, “the resolution of both 9 matters would likely be further postponed to the detriment of all plaintiffs.” Id. However, the fact 10 that the first-filed action has been stayed does not preclude transfer under the first-to-file rule. See 11 Alltrade, 946 F.2d at 628 (“The most basic aspect of the first-to-file rule is that it is discretionary .

12 . . .”). And this Court is not persuaded that the stay in the Osterer proceedings is a significant 13 consideration weighing against transfer here. 14 Notably, it is not apparent that transferring this action would delay its resolution or 15 resolution of Osterer. If anything, that the Osterer court has compelled arbitration and stayed those 16 proceedings makes it unlikely that transferring this case will delay Osterer. Moreover, transferring 17 this action to the Southern District of Florida would further the first-to-file rule’s purpose of 18 promoting efficiency and avoiding duplicative litigation because the Southern District of Florida 19 has already addressed the merits of the arbitrability issue. See Church of Scientology, 611 F.2d at 20 750; Pars Equality Ctr. v. Pompeo, No. C18-1122, 2018 WL 6523135, at *7 (W.D. Wash. Dec. 12, 21

22 3 This Court recognizes that the Osterer court has not addressed whether it has personal jurisdiction over the defendants in that action. See Osterer Or. Granting Stip. at 3, Dkt. No. 39; 23 Osterer Arb. Or.

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION 1 2018) (“To allow two parallel class actions to proceed in separate districts would be duplicative 2 and inefficient.”). Thus, transfer of this action to the Southern District of Florida is warranted under 3 the first-to-file rule. 4 V. CONCLUSION 5 For the foregoing reasons: 6 1. Defendants’ Motion to Transfer Pursuant to the First-to-File Rule or Compel Arbitration (Dkt. No. 67) is GRANTED. 7 2. This case is hereby TRANSFERRED to the United States District Court for the 8 Southern District of Florida. 9 DATED this 21st Day of April 2025. A 10 11 B arbara Jacobs Rothstein U .S. District Court Judge 12 13 14 15 16 17 18 19 20 21 22 23

24 ORDER GRANTING DEFENDANTS’ MOTION TO TRANSFER OR COMPEL ARBITRATION