TrustLabs, Inc. v. Daniel Jaiyong An

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TRUSTLABS, INC., Plaintiff, v. DANIEL JAIYONG AN, Defendant.

No. 21-cv-02606-CRB

United States District Court, N.D. California

March 30, 2024

ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE COUNTERCLAIMS

CHARLES R. BREYER, United States District Judge

In 2021, Plaintiff TrustLabs, Inc. (“TrustLabs”) sued Defendant Daniel Jaiyong An (“Jaiyong”), its former CEO/President, for violating the Federal Computer Fraud and Abuse Act, Stored Communications Act, and California Comprehensive Computer Data Access and Fraud Act. See Compl. ¶¶ 26-40 (dkt. 1). TrustLabs alleges that, after TrustLabs executives asked for Jaiyong's resignation as CEO/President, Jaiyong retaliated by “intentionally and maliciously” deleting TrustLabs' Slack messaging system.^[1] Id. ¶ 19. TrustLabs also alleges that Jaiyong attempted to access other company systems after his termination. Id. ¶ 23-24.

The deadline to amend his pleadings as a matter of course has passed, so Jaiyong moves for leave to file counterclaims (“Mot. for Leave”) (dkt. 92). Jaiyong seeks leave to add nine counterclaims against TrustLabs and three Counter-Defendants.^[2] See Counterclaims (“CC”) (dkt. 92-1). As discussed below, the Court DENIES Jaiyong's Motion for Leave.

I.FACTUAL BACKGROUND

TrustLabs is a cryptocurrency company co-founded by Jaiyong in 2015.^[3] Compl. ¶ 1. From 2015 to 2020 Jaiyong was an employee of TrustLabs, served as its CEO/President, and served on its Board of Directors. Id. ¶ 5. Jaiyong remains a current stockholder of the Company. CC ¶¶ 162, 235.

A. TrustLabs' Allegations

TrustLabs alleges the following:

In early 2020, Jaiyong began “making major company decisions unilaterally” and acting against TrustLabs' best interests. Compl. ¶ 14. For example, Jaiyong “refused to name project managers to or develop project plans for major company initiatives in Q1 2020, against the advice of the management team,” “unilaterally declared a policy of video recording all Company meetings, resulting in additional post facto work” to address GDPR privacy concerns, “launched a message board application” to communicate with purchasers “without prior discussion with the management team and legal counsel,” and other alleged wrongful conduct. Id. Multiple employees and stockholders expressed to TrustLabs' executives that Jaiyong should be removed as CEO. Id. ¶ 15.

During the week of June 29, 2020, Rafael Cosman (“Cosman”), CTO and co-founder of TrustLabs, and Alex de Lorraine (“de Lorraine”), COO and Head of Finance, spoke with Jaiyong and asked him to voluntarily step aside as CEO and president. Id. ¶ 1, 15-16. They expected to receive Jaiyong's resignation letter by July 3, 2020. Id. Jaiyong never provided his resignation letter. Id.

Instead, on July 6, 2020, Jaiyong deleted the company's Slack messaging system. Id. ¶ 16-17. TrustLabs' Slack services were registered under Jaiyong's company email, Jaiyong was the sole administrator of the company's Slack services account, and he was the only person who had access to delete the Slack platform.^[4] Id. Slack was “critical to the operations of TrustLabs” because TrustLabs used the Slack platform as its primary means of internal communication. Id. ¶ 18.

After Jaiyong deleted the platform, “TrustLabs immediately began extraordinary efforts to protect its other Company assets, including by securing [its] computer systems, changing login information, confirming that digital assets required sign-off of multiple individuals to be moved, and removing Jaiyong's access to social media accounts. TrustLabs incurred significant costs to protect its assets from Jaiyong, including the value of time spent by the Company's IT Security Department.” Id. ¶ 20.

Once TrustLabs' executives discovered that Jaiyong had deleted the company's Slack system, the Board of Directors held an emergency meeting to remove Jaiyong from the Board and terminate his employment, effective on July 7, 2020. Id. ¶ 22.

On July 8, 2020, TrustLabs sent Jaiyong a notice of termination and demanded that he return his TrustLabs laptop, tablet, and iPhone. Id. Jaiyong then attempted to tamper with various other company systems and platforms. Id. ¶ 23.

In April 2021, TrustLabs sued Jaiyong, asserting claims under the Computer Fraud and Abuse Act and the Stored Communications Act. See id. ¶ 6.

B. Jaiyong's Proposed Counterclaims

On July 17, 2023, Jaiyong filed this Motion for Leave alleging the following in connection with his proposed counterclaims:

In 2015, Jaiyong co-founded TrustLabs with Cosman. CC ¶ 4. From 2017 to 2018, Jaiyong and Cosman offered Simple Agreements for Future Tokens (SAFTs) to investors, which were intended to fund a “TrustToken platform” where clients could interact using Trust tokens. Id. ¶¶ 4, 40. The SAFTS gave investors the right to receive “TRU tokens” (a cryptocurrency) upon the launch of the TrustLabs (then known as TrustToken) platform. Id. ¶ 4.

In 2018, TrustLabs launched its first product: “TrueUSD.”^[5] Id. ¶ 45. TrueUSD is a cryptocurrency whose value is linked to the U.S. dollar.^[6] Id. ¶¶ 6, 29. Around November 21, 2020, TrustLabs issued “TRU tokens” under the SAFTs to accredited investors.^[7] Id. ¶ 48. However, according to Jaiyong, the “TRU tokens,” as issued, differed substantially from the TrustToken platform that investors had been promised. Id. ¶¶ 38-49. Jaiyong alleges that “the TRU Tokens as issued did not match the TrustToken platform as originally contemplated by [Jaiyong] and communicated to investors at the time of their investments.” Id. ¶ 49. Jaiyong became concerned that the SAFT investors would be “materially disadvantaged.” Id. ¶ 69.

Jaiyong believed that TrustLabs was violating securities laws. Id. ¶ 72. Jaiyong wanted to offer investors updated disclosures and the option of a refund. Id. Despite Cosman and de Lorraine rejecting this proposal, id. ¶ 170, Jaiyong alleges that he “began taking steps toward sharing updated risk disclosures and a refund offer.” Id. ¶ 92. He also alleges that, in an effort to “increase[e] transparency to SAFT investors,” he switched TrustLabs' primary communication system from Slack to Discord and Discourse.^[8] Id. ¶¶ 93, 190-91.

Additionally, Jaiyong believed that switching from Slack-a paid subscription service-to Discord and Discourse-no-cost options-would reduce unnecessary costs. Id. ¶ 189.

Jaiyong alleges that Cosman voted him out as CEO in July 2020 so that TrustLabs could “proceed in breaking securities law.” Id. ¶¶ 9, 124, 132, 135. Jaiyong alleges that Cosman offered de Lorraine and Tom Shields (“Shields”) promotions in exchange for voting to remove Jaiyong as CEO. Id. ¶ 171-75. He further alleges he was “removed so [Rafael Cosman, Alex de Lorraine, Tom Shields] could avoid their disclosure obligations under securities laws and self-enrich, at the expense of the original SAFT investors.” Id. ¶ 10. Jaiyong further alleges that “[Cosman] and others . . . enriched themselves by granting themselves TRU tokens. . . [and] transferr[ing] assets to a Cayman Islands entity they control.” Id. ¶ 11.^[9]

Additionally, Jaiyong alleges that “post ousting,” TrustLabs and/or Counter-Defendants made “legal threats” against him for discussing the alleged securities law violations with SAFT investors.^[10] Id. ¶ 166. He alleges that TrustLabs and/or Counter-Defendants “initiate[d] a call” from the Frisco Police Department to Jaiyong's “mother, father, and brother . . . to initiate threats to his family.” Id. ¶ 178. The Frisco Police Department purportedly called Jaiyong's mother the week of July 20, 2020, and said “to do what [TrustLabs] wants[,] or [TrustLabs] will press criminal charges.” CC ¶ 178. Days after that call, Jaiyong emailed TrustLabs executives to notify them that he was “in the midst of filing” a TCR report with the SEC Whistleblower Program. Id. ¶ 169. Cosman allegedly then called Jaiyong's brother threatening “legal action would be taken upon [Jaiyong] unless [he] does what [TrustLabs] wants.” Id.

Thereafter, Jaiyong received a Notice of Legal Claims (“Notice”) from TrustLabs' attorney. Id. ¶ 186. The Notice informed Jaiyong of the claims that TrustLabs would file against him. Id. The Notice also proposed a settlement offer. Id. Jaiyong refused the offer because he believed the offer undervalued his TrustLabs shares. Id. In April of 2021, TrustLabs filed this lawsuit against Jaiyong. See Compl.

On June 14, 2023, TrustLabs sent Jaiyong a DocuSign regarding a proposed merger which would redomicile TrustLabs and all its assets to Switzerland. CC ¶ 161. Jaiyong alleges that this merger prompted him to file a complaint with the Court of Chancery of Delaware on July 13, 2023.^[11] Id. ¶ 163; see also Pl. Opp., Ex. 1 (dkt. 94-1). Thereafter, Jaiyong filed this Motion for Leave. Id.

II. PROCEDURAL BACKGROUND

TrustLabs initiated this lawsuit on April 9, 2021, alleging that Jaiyong violated the Computer Fraud and Abuse Act (“CFAA”), Stored Communications Act (“SCA”), and California's Comprehensive Computer Data Access and Fraud Act (“CCDAFA”), when he intentionally and maliciously deleted TrustLabs' Slack messaging system. See generally Compl.

A. Prior Motions

On May 17, 2021, Jaiyong moved to dismiss or quash TrustLabs' complaint for invalid service of summons. Dkt. 13. The Court denied Jaiyong's motion because TrustLabs properly served Jaiyong at his Texas address. Dkt. 21. Jaiyong then filed his Answer to the Complaint. Dkt. 24.

In October of 2022, Jaiyong's most recent counsel filed a Motion to Withdraw as Counsel for Defendant. Dkt. 50. The Court granted the motion. Dkt. 53. Jaiyong has been proceeding pro se ever since.

B. Case Management

The Court entered an initial scheduling order on March 14, 2022 setting various deadlines for...