Birmingham v. RoFx.net

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Ryan Birmingham and others, Plaintiffs, v. ROFX.net and others, Defendants.

Civil Action No. 21-23472-Civ-Scola

United States District Court, S.D. Florida

May 11, 2023

ORDER ON THE PLAINTIFFS' MOTION FOR CLASS CERTIFICATION

Robert N. Scola, Jr. United States District Judge

This cause is before the Court upon the Plaintiffs Ryan Birmingham, Roman Leonov, Steven Hansen, Mitchell Parent, and Jonathan Zarley's (collectively, the “Plaintiffs”) motion for class certification pursuant to Federal Rule of Civil Procedure 23. (Mot., ECF No. 241.) None of the Defendants has responded to the Plaintiffs' motion. The Court has carefully reviewed the motion, the record, the applicable law, and is otherwise fully advised in the premises. For the reasons set forth below, the Court denies, without prejudice the Plaintiffs' motion for class certification. (Mot., ECF No. 241.)

1. Background^[1]

The Plaintiffs filed the instant action on September 29, 2021 and amended their complaint on February 14, 2022. The case arises from the Defendants' purported scheme to defraud the Plaintiffs and similarly situated customers who invested in RoFx.net, a phony trading website.

Per the Plaintiffs, between 2018 and 2021, an informal association of Ukrainians (the “RoFx Operators”) operated a phony foreign exchange trading service via RoFx.net-a website hosted in Jacksonville, Florida. (Am. Compl. ¶¶ 1, 3-4, 17-18, 121, ECF No. 64.) The RoFx Operators claimed to have artificially intelligent software that could conduct foreign exchange trading on behalf of customers; the customers needed only to send funds to the RoFx Operators and, in return, the customers were promised passive income. (Id. at ¶ 2.) The RoFx Operators perpetrated this years-long fraud (the “RoFx Scheme”) using a sophisticated website, an active customer service team, invoices, account statements, foreign exchange activity reported on third-party websites, and promotions via advertisements and sponsored articles and even allowed some customers to withdraw limited funds. (Id. at ¶¶ 2, 61-125.)

However, according to the Plaintiffs, the entire RoFx platform was a fabrication. (Id. at ¶ 102.) There was no trading algorithm, there was never a registered company, customers' funds were not being invested on their behalf, the online advertising was fictitious, there was never going to be an IPO or a legitimate ICO, and customers were never free to withdraw their funds. (Id. at ¶¶ 102-27.) Instead, the Plaintiffs claim, the Defendants engaged in an illegitimate enterprise meant to steal the funds of RoFx customers for their own benefit. RoFx.net was shut down on or about September 17, 2021, and the RoFx Operators stopped responding to customers. (Id. at ¶ 127.)

Based on the foregoing, the Plaintiffs' amended complaint brings nine counts against the various Defendants. (See generally id.) Twenty-six (26) of the Defendants that were served failed to appear, answer, or otherwise plead to the Amended Complaint, and the Clerk of Court entered defaults against them. The Plaintiffs moved for default judgment as to those Defendants, and on December 6, 2022, Magistrate Judge Goodman issued a report and recommendations on the Plaintiffs' default judgment motions. (See R. & R., ECF No. 233.) Judge Goodman recommended that the Plaintiffs' motions be granted only on the issue of liability with respect to fifteen (15) of the Defendants, as follows:

• Count Three for fraud against Defendants Peter Mohylny and The Investing Online;

• Count Three for fraud against Ester Holdings, Inc. but only with respect to Plaintiffs Leonov, Parent, and Zarley;

• Count Nine for unjust enrichment against Wealthy Developments LP, Notus, LLC, Global E-Advantages, LLC, Easy Com, LLC, ShopoStar, LLC, Grovee, LLC, Trans-Konsalt MR Ltd., Art Sea Group Ltd., VDD-Trading, Ltd., Brass Marker s.r.o., Profit Media Group LP, and Auro Advantages, LLC.

(Id. at 3-4.) On January 5, 2023, the Court adopted Judge Goodman's report and recommendations in full. (ECF No. 236.)

Now, prior to moving for default judgment as to damages, the Plaintiffs seek certification of the following proposed class of victims of the RoFx Scheme:

All persons who contributed funds to the RoFx foreign exchange trading scheme. Excluded from the Class are 1) Defendants, any entity or division in which Defendants have a controlling interest, and their legal representatives, officers, directors, agents, assigns, and successors; 2) anyone employed by counsel for Plaintiffs in this action; and 3) the judge to whom this case is assigned and the judge's staff.

(See Mot. 2, ECF No. 241.) The Plaintiffs' motion for certification specifies that it is being made pursuant to Fed. R. Civ. Proc. 23(b)(3) and that it is limited to the claims on which the Court granted default judgment for liability, namely fraud (Count Three) and unjust enrichment (Count Nine). (Id.) In addition, the Plaintiffs move to be appointed representatives of the class, and for the appointment of Holland & Knight LLP to serve as class counsel pursuant to Fed.R.Civ.P. 23(g). (Id.)

2. Legal Standard

Federal Rule of Civil Procedure 23 “establishes the legal roadmap courts must follow when determining whether class certification is appropriate.” Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181, 1187 (11th Cir. 2003). In view of the “awesome power of a district court” in controlling the class action mechanism, any decision to certify a class must rest on a “rigorous analysis” of the requirements of Rule 23. See Sacred Heart Health Sys., Inc. v. Humana Military Healthcare Servs., Inc., 601 F.3d 1159, 1169 (11th Cir. 2010) (citation omitted); see also Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). While the district court's class certification analysis “may entail some overlap with the merits of the plaintiff's underlying claim, Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage.” See Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S.Ct. 1184, 185 L.Ed.2d 308, 2013 WL 691001, at *7 (U.S. 2013) (cleaned up). Rather, “[m]erits questions may be considered to the extent - but only to the extent - that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.” See id. “The burden of proof to establish the propriety of class certification rests with the advocate of the class.” Valley Drug Co., 350 F.3d at 1187.

“Under Rule 23, certification is proper where the proposed classes satisfy an implicit ascertainability requirement, the four requirements listed in Rule 23(a), and the requirements listed in any of Rule 23(b)(1), (2), or (3).” Karhu v. Vital Pharms., Inc., 621 Fed.Appx. 945, 946 (11th Cir. 2015). Per “Rule 23(a), every putative class first must satisfy the prerequisites of numerosity, commonality, typicality, and adequacy of representation.” Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1265 (11th Cir. 2009) (cleaned up). Thus, Rule 23(a) is satisfied only where:

(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class

Fed. R. Civ. P. 23(a). Moreover, where certification is sought under Rule 23(b)(3), as it is here, the plaintiff must show, in addition to the four requirements of Rule 23(a), that “the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” See Fed.R.Civ.P. 23(b)(3); Vega, 564 F.3d at 1265.

The defaulted status of a defendant will not preclude plaintiffs from receiving class certification so long as the requirements of Rule 23 are satisfied. See, e.g., Kron v. Grand Bahama Cruise Line, LLC, 328 F.R.D. 694, 698-703 (S.D. Fla. 2018) (certifying class against a defaulted defendant in a TCPA case) (Martinez, J.); Leo v. Classmoney.net, No. 18-CV-80813, 2019 U.S. Dist. LEXIS 230923, 2019 WL 238548, at *2 (S.D. Fla. Jan. 10, 2019) (Matthewman, Mag. J.) (recognizing that the prerequisites for class certification must be satisfied notwithstanding a defendant's failure to appear and defend an action).

3. Analysis

Because the Court finds Rule 23(b)(3)'s predominance requirement to be dispositive here, it limits its discussion to that aspect of the certification inquiry. “[P]redominance . . is perhaps the central and overriding prerequisite for a Rule 23(b)(3) class.” Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1278 (11th Cir. 2009). To satisfy the predominance requirement of Rule 23(b)(3), a movant must show that the issues subject to generalized proof, which are applicable to the putative class members generally, predominate over issues requiring individualized evidence. Jackson v. Motel 6 Multipurpose, Inc., 130 F.3d 999, 1005 (11th Cir.1997). “Common issues of fact and law predominate if they ‘ha[ve] a direct impact on every class member's effort to establish liability' that is more substantial than the impact of individualized issues in resolving the claim or claims of each class member.” Sacred Heart Health Sys. v. Humana Military Healthcare Servs., 601 F.3d 1159, 1170 (11th Cir. 2010) (quoting Vega, 564 F.3d at 1270) (emphasis in original). “The predominance inquiry focuses on ‘the legal or factual questions that qualify each class member's case as a genuine controversy,' and is ‘far more demanding' than Rule 23(a)'s commonality requirement.” Jackson, 130 F.3d at...