Vuori v. Grasshopper Capital LLC

NIKO VUORI, Plaintiff, v. GRASSHOPPER CAPITAL LLC, et al., Defendants.

Case No. 17-cv-06362-JCS

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

February 22, 2018

ORDER DENYING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AND IMPROPER VENUE AND DENYING MOTION TO TRANSFER VENUE

Re: Dkt. No. 16

I. INTRODUCTION

Plaintiff Niko Vuori brings this action alleging breach of contract and misappropriation of likeness claims against Defendants Grasshopper Capital LLC ("Grasshopper"), Ari Lewis, and Sagar Rambhia. Defendants move to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), asserting that they do not have sufficient minimum contacts with California. Defendants also move for dismissal in accordance with Federal Rule of Civil Procedure 12(b)(3), contending that venue is improper in this District. In the alternative, Defendants move to transfer venue to the United States District Court for the Eastern District of New York pursuant to 28 U.S.C. § 1406(a). The Court held a hearing on February 16, 2018. For the reasons stated below, Defendants' Motion is DENIED.¹

II. BACKGROUND

A. Vuori's Complaint

Vuori alleges that he is a "successful entrepreneur and investor" who has garnered a "strong reputation in Silicon Valley and beyond for identifying and developing cutting-edge technologies." Complaint (dkt. 1) ¶¶ 6, 18. He has launched startup companies, worked as seniorexecutive at Zynga, Inc., and currently serves as an advisor to startup companies in the Bay Area. Id. ¶¶ 15-17, 19. He resides in Piedmont, California. Id. ¶ 6. Vuori alleges that Lewis and Rambhia are cryptocurrency investors from Jericho, New York, and that they created Grasshopper to operate a cryptocurrency fund, namely Grasshopper Capital Fund I LP (the "Fund"), which was "seeded primarily with the profits from their own previous investments." Id. ¶¶ 25-26, 30-31. Adam Collins, Lewis's classmate at Case Western Reserve University, has also assisted with Grasshopper. Id. ¶ 30. Vuori alleges that Grasshopper is a limited liability company organized under the laws of Delaware with its principal place of business in Jericho, New York, and that Lewis and Rambhia are the company's "sole and controlling members." Id. ¶ 7. Vuori alleges that Lewis lives in Jericho, New York, and serves as Managing Member of Grasshopper. Id. ¶ 8. He further alleges that "[i]n the course of his work for Grasshopper, Lewis traveled to San Francisco to seek advice from Vuori and solicit investments from persons residing in the district, trading on Vuori's name and reputation." Id. Rambhia lives in Cleveland, Ohio, where he is currently enrolled at Case Western Reserve University School of Medicine and also serves as a Managing Member of Grasshopper. Id. ¶ 9, 29.

Vuori alleges that he met Lewis in April 2015 and that Lewis later wrote to Vuori on May 2, 2017, "with Rambhia copied, to reintroduce himself and explain that he and Rambhia had 'decided to go full-time and raise a digital currency fund.'" Id. ¶ 34 (quoting an email sent by Lewis to Vuori). Vuori alleges that Lewis indicated that he and Rambhia were interested in setting up an advisory group. Id. ¶ 38. According to Vuori, Lewis and Rambhia sought an advisor who is "'down to earth'" and trustworthy, and who could facilitate introductions to individual and institutional investors. Id. ¶¶ 39-40 (quoting correspondence). Vuori alleges that he and Lewis agreed during a May 15, 2017 phone call "on the previously discussed scope of work, including Defendants' ability to advertise Vuori as an advisor in order to boost Defendants' credibility, access to Vuori's fundraising network, and Vuori's general advice on Fund operation and investments." Id. ¶ 42. With respect to compensation, Vuori alleges that: (1) Lewis "suggested that Vuori receive 5% of Grasshopper's carry"; (2) "Vuori countered by requesting 10% of the carry to serve as an advisor"; and (3) Lewis accepted Vuori's counterproposal of 10% of the carryin exchange for serving as an advisor. Id. ¶ 42 (quoting a conversation by phone).

Vuori alleges that he asked Lewis to "memorialize their agreement in an e-mail" because Lewis had previously informed Vuori that it would take "a number of weeks or months" to draw up formal paper work. Id. ¶ 42. According to Vuori, Lewis sent Grasshopper's transactional attorney, Bart Mallon, an email on May 16, 2017 to inform him that Vuori would be serving as an advisor for Grasshopper in exchange for 10% of the fund's carry. Id. ¶ 45. Lewis elaborated on the nature of Vuori's role as an advisor, indicating that Vuori "'is going to help [the Fund]' by 'evaluating macroeconomic trends in the cryptocurrency market'; '[h]elping us make buy and sell decisions on tokens'; '[h]elping portfolio companies when we engage management teams'; '[w]hen we begin to expand, help[ing] us identify hiring needs'"; and by providing "'[e]motional support for the ups and downs of running a fund.'" Id. (quoting correspondence) (alterations in original). Earlier that same day, Lewis also replied to Vuori, stating that he had spoken with his attorney and that they were "good to go on the advisory deal." Id. ¶ 44 (quoting correspondence). Vuori also alleges that Rambhia sent an email on May 18, 2017 in which Rambhia confirmed the agreement discussed above. Id. ¶ 46.

Vuori alleges that he dedicated approximately twenty percent of his time following the agreement on May 15, 2017 through September 2017 on matters pertaining to Grasshopper. Id. ¶¶ 48-49. According to Vuori, had he not been devoting his time to Grasshopper as an advisor, he would have "dedicated his time and resources to new investments and ventures" in addition to his other commitments to serve as an advisor. Id. ¶ 49.

Vuori alleges that Defendants began using Vuori's name, likeness, and reputation to "bolster the credibility and prominence of the Fund." Id. ¶ 50. According to Vuori, Lewis listed Vuori as an advisor to Grasshopper on AngelList, which is "the industry's leading startup funding website." Id. ¶ 51. Additionally, Defendants named Vuori as an advisor in their pitch deck and provided information about his prior work experience, including: (1) Vuori's work as a senior executive at Zynga; (2) Vuori's role as a founder of Rocket Games; and (3) the fact that Rocket Games was acquired for up to $170 million. Id. ¶ 52. Vuori further alleges that Lewis wrote to Vuori in an email that Vuori's work as an advisor was one of the "3 key stats that we think are keyto the initial email pitch." Id. ¶ 53 (quoting correspondence). According to Vuori, Defendants "often made reference in their solicitation e-mails to Vuori's ongoing work as an advisor and Vuori's previous successes as an entrepreneur." Id. ¶ 54. To illustrate how this practice was "immediately effective," Vuori alleges that, after a "prominent CEO" declined to answer an initial e-mail from Lewis, the CEO "promptly replied" after a second email from Lewis noted that Vuori was serving as an advisor to Grasshopper. Id. ¶ 57.

Vuori also alleges that Vuori introduced Defendants to his network of potential investors between May and September of 2017 and that at least one of those investors pledged to invest in the Fund. Id. ¶¶ 58-59. According to Vuori, Lewis sent Vuori an email, with Rambhia copied, in which Lewis sought to discuss matters pertaining to Grasshopper. Id. ¶ 60. One such topic was fundraising, as Lewis wrote that he "would like to discuss [Rambhia's] and my progress on raising money" as well as how to "plan to target [Vuori's] contacts." Id.

Vuori alleges that Defendants sought advice from Vuori concerning various operational aspects of Grasshopper and that Grasshopper thrived during the time period in which Vuori served as an advisor. Id. ¶¶ 65-74. According to Vuori, Defendants repeatedly sought his input and feedback, and Vuori "continued to fulfill his role as advisor" by "exchanging e-mails, making himself available for calls, helping to make available his network of potential investors" and by providing "input on Grasshopper's operation processes, such as bookkeeping, IT, and trading." Id. ¶ 70. During his time as an advisor, Vuori alleges that Grasshopper grew and "began to garner headlines." Id. ¶ 73. In terms of growth, Vuori alleges that "Defendants have raised several million dollars in investments since May 15, 2017, when Vuori agreed to serve as an advisor to Defendants." Id. ¶ 77.

Vuori alleges that Defendants refused to reduce their May 15, 2017 agreement with Vuori to a formal written contract and that Defendants repudiated the terms of the agreement on October 13, 2017. Id. ¶ 84. Vuori alleges that Lewis initially told him on May 22, 2017 that he would get an estimate as to how long it would take for Defendants' transactional attorneys to finish drafting formal papers for their agreement. Id. ¶ 78. According to Vuori, Lewis copied Rambhia when he provided Vuori numerous documents for his signature on August 9, 2017. Id. ¶ 80. Thesedocuments included: (1) "a Side Letter indicating that Vuori would not be charged a management fee"; (2) "a Subscription Agreement"; (3) "a PPM/LPA"; and (4) "an Operating Agreement, which Lewis said 'indicates [Vuori has] a 10% economic right in the fund." Id. ¶ 80. Vuori further alleges that "the drafts supplied by Lewis and Rambhia contained additional provisions that previously had not been discussed." Id.

Vuori alleges that he retained independent legal counsel to review the documents that Lewis had provided and that he worked with his independent legal counsel "consistently from August 21 through September 26 in an effort to formally document the May 15 agreement he had reached with Grasshopper." Id. ¶ 81. During this time, Vuori alleges that he "made sure to keep Lewis updated" and that "Lewis indicated that Vuori's review of the documents did not pose a problem." Id. ¶ 82. Vuori further alleges that he "sent Lewis a few...