Reynolds v. Binance Holdings Ltd.

481 F.Supp.3d 997

Steven Cody REYNOLDS, Plaintiff,

v.BINANCE HOLDINGS LTD., Defendant.

Case No. 20-cv-02117-JSC

United States District Court, N.D. California.

Signed August 26, 2020

Anne K. Edwards, Smith Gambrell & Russell, LLP, Los Angeles, CA, Daniel Steven Goldstein, Pro Hac Vice, Smith, Gambrell and Russell, LLP, New York, NY, for Plaintiff.

Peter R. Boutin, Christopher A. Stecher, Keesal Young & Logan A Professional Corporation, San Francisco, CA, Karen R. King, Pro Hac Vice, Theodore V. Wells, Jr., Pro Hac Vice, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, Roberto J. Gonzalez, Pro Hac Vice, Paul Weiss LLP, Washington, DC, for Defendant.

ORDER RE MOTION TO DISMISS AND MOTION TO STAY

Re: Dkt. Nos. 20 & 21

JACQUELINE SCOTT CORLEY, United States Magistrate Judge

Steven Cody Reynolds brings claims of conversion, unjust enrichment, and negligence against Binance Holdings Limited alleging Binance unlawfully seized and confiscated his property in the form of cryptocurrency.¹ Binance moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. After consideration of the parties’ briefing and having had the benefit of oral argument on August 13, 2020, for the reasons set out below the Court GRANTS Binance's motion to dismiss for lack of personal jurisdiction, and DENIES Mr. Reynold's request to conduct jurisdictional discovery.

BACKGROUND

A. Complaint Allegations

Mr. Reynolds is a cryptocurrency investor who provides consulting services to companies in the digital currency industry. (Dkt. No. 1 ("Complaint") ¶ 1.)² He maintained a digital currency account with Binance, a global cryptocurrency exchange that provides a platform for buying, selling, and storing digital currencies. (Id. ¶¶ 2-3.) From July 2017 to December 2017, Binance retained Mr. Reynolds to support Binance's online communications with English-speaking customers; Mr. Reynolds was compensated with "BNB tokens", or Binance coin, which he stored in his Binance account along with other cryptocurrencies. (Id. ¶¶ 3-6.) In December 2017, Mr. Reynolds stopped providing services to Binance. (Id. ¶ 7.) In January 2018, Binance contacted Mr. Reynolds, requesting he delete a group chat Mr. Reynolds maintained on a platform called Telegram Messenger; after deleting any reference to Binance from the chat, Mr. Reynolds was contacted by Binance's CEO, Changpeng Zhao, who insisted Mr. Reynolds delete the entire chat under threat of financial damages. (Id. ¶¶ 9-10). Minutes after the phone call, "Binance unilaterally lowered Reynolds’ withdrawal limit in his account to zero." (Id. ¶ 10.) Mr. Reynolds was prohibited from withdrawing any assets from his Binance account, even after attempting to restore his account through Binance's customer service program. (Id. ¶ 12.) At the time, Mr. Reynolds had approximately $285,000 of digital currencies in the account. (Id. ¶ 13.) When Mr. Reynolds regained access to his account on or about March 31, 2018, he discovered his account balance was $0. (Id. ¶ 14.) Mr. Reynolds alleges that his account's digital currencies "could have sold ... in an amount up to $337,500" over the subsequent months. (Id. ¶ 16.)

B. Procedural Background

Plaintiff filed the complaint on March 27, 2020. (See Dkt. No. 1.) On June 18, 2020, after the parties stipulated to an extension of time for Binance to respond to Plaintiff's complaint, Binance moved to dismiss the complaint and stay discovery. (Dkt. Nos. 20 and 21.) The motions are fully briefed, and came before this Court for hearing on August 13, 2020. (See Dkt. Nos. 29, 30, 35, 36.)

DISCUSSION

Binance moves to dismiss on the grounds that the Court does not have personal jurisdiction over Binance, nor is Binance U.S. ("BAM") an alter ego whose conduct or presence in California provides sufficient bases for subjecting Binance to the Court's personal jurisdiction.

I. Request for Judicial Notice

Pursuant to the Federal Rules of Evidence, courts may judicially notice an adjudicative fact if it is not subject to reasonable dispute because it: "(1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). Plaintiff requests judicial notice of thirty documents, twenty-eight of which are online news articles or excerpts from various websites. Regarding these news articles and websites, "a court may take judicial notice of publicly available newspaper and magazine articles and web pages that indicate what was in the public realm at the time, not whether the contents of those articles were in fact true." Tarantino v. Gawker Media , LLC, No. CV 14-603-JFW FFMX, 2014 WL 2434647, at *1 (C.D. Cal. Apr. 22, 2014) (citing Von Saher v. Norton Simon Museum of Art at Pasadena , 592 F.3d 954, 960 (9th Cir. 2010) ) (internal quotations omitted); see also Bruce v. Chaiken , No. 215CV00960TLNKJN, 2019 WL 645044, at *1 (E.D. Cal. Feb. 15, 2019) ("While [a court] may take judicial notice of the fact that the internet, Wikipedia, and journal articles are available to the public, it may not take judicial notice of the truth of the matters asserted therein."). Therefore, the Court may not take judicial notice of the facts contained in the articles. See Bruce , 2019 WL 645044, at *1. Regarding the remaining two documents that are filed with the California Secretary of State and Department of Treasury, these documents are appropriate subjects of judicial notice. See, e.g., Harris v. Cty. of Orange , 682 F.3d 1126, 1132 (9th Cir. 2012) (noting that judicial notice is appropriate for "undisputed matters of public record, including documents on file in federal or state courts.") (internal citation omitted).

II. Rule 12(b)(2) Motion

On a defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of demonstrating that the exercise of personal jurisdiction over the defendant is proper. See Pebble Beach Co. v. Caddy , 453 F.3d 1151, 1154 (9th Cir. 2006). "Where, as here, the motion is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdiction to withstand the motion to dismiss." Mavrix Photo, Inc. v. Brand Techs., Inc. , 647 F.3d 1218, 1223 (9th Cir. 2011). California's long-arm statute allows the exercise of personal jurisdiction to the full extent permissible under the U.S. Constitution. See Daimler AG v. Bauman , 571 U.S. 117, 125, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014) ; see also Cal. Code Civ. Proc. § 410.10 ("[A] court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States."). California's jurisdictional statute is coextensive with federal due process requirements, and thus the jurisdictional analysis is the same. Schwarzenegger v. Fred Martin Motor Co. , 374 F.3d 797, 800-801 (9th Cir. 2004).

There are two categories of personal jurisdiction: general and specific. Bristol-Myers Squibb Co. v. Superior Court , ––– U.S. ––––, 137 S. Ct. 1773, 1780, 198 L.Ed.2d 395 (2017). Because Mr. Reynolds does not argue that Binance is subject to specific personal jurisdiction, the Court considers Mr. Reynold's arguments in turn regarding Binance's exposure to general personal jurisdiction and its status as BAM's alter ego.

A. General Personal Jurisdiction

A court has general personal jurisdiction over a corporate defendant in a forum where "the corporation is fairly regarded as at home." Daimler , 571 U.S. at 137, 134 S.Ct. 746 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 U.S. 915, 924, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011) ). General jurisdiction over a corporation is appropriate only in the forum where the corporation is incorporated or has its principal place of business, or in exceptional cases where the corporation's contacts with the forum state are "so constant and pervasive as to render [it] essentially at home in the forum State." Id. at 122, 134 S.Ct. 746 (quoting Goodyear , 564 U.S. at 919, 131 S.Ct. 2846 ). Merely engaging "in a substantial, continuous, and systematic course of business" in a forum is insufficient for a court to exercise general personal jurisdiction over the defendant in that forum. Id. at 138-139, 134 S.Ct. 746.

Mr. Reynolds has not met his burden of showing that the exercise of general personal jurisdiction over Binance is proper. He argues that California is Binance's principal place of business because "there is no other more suitable place," and that this makes Binance's decentralized organization the "exceptional case" Daimler contemplated. (Dkt. No. 29 at 17.) However, taking the substance of a defendant's operations in a forum as the basis for determining its suitability as the defendant's principal place of business misstates the inquiry; the Supreme Court has rejected similar calls for standards beyond those laid out in Goodyear when setting the boundaries of courts’ jurisdictional reach. See Daimler , 571 U.S. at 137-38, 134 S.Ct. 746 (rejecting the exercise of general jurisdiction over corporations in states where they "engage[ ] in a substantial, continuous, and systematic course of business" as an "unacceptably grasping" formulation) (internal quotations and citations omitted). Simply put, Mr. Reynolds fails to demonstrate that Binance is incorporated or has its principal place of business in California, and an argument that the substance of its operations or business within the state constitutes an "exceptional case" cannot serve as a basis for circumventing Daimler ’s bedrock principle: that the inquiry is not whether a foreign corporation's in-forum contacts can be said in some sense to be "continuous and systematic," but rather if the "corporation's affiliations with the State are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State." Id. at...