Opinion
CASE NO. 4:19-cv-00054-YGR
06-19-2020
JAMES FABIAN, Plaintiff, v. COLIN LEMAHIEU, ET. AL., Defendants.
ORDER: (1) GRANTING MOTION FOR LEAVE TO EFFECT ALTERNATIVE SERVICE; (2) GRANTING IN PART AND DENYING IN PART MOTION TO STRIKE AFFIRMATIVE DEFENSES RAISED IN THE ANSWER; (3) DENYING MOTION TO DISMISS FOR FORUM NON CONVENIENS Re: Dkt. Nos. 81, 84, 85
Plaintiff James Fabian brings this putative class action against defendants Nano f/k/a/ RaiBlocks f/k/a Hieusys, LLC ("Nano"), Colin LeMahieu, Mica Busch, Zack Shapiro, and Troy Retzer (collectively, "Nano Defendants") as well as B.G. Services SRL f/k/a BitGrail SRL f/k/a Webcoin Solutions ("BitGrail") and Francesco "The Bomber" Firano (collectively "BitGrail Defendants")1 for securities fraud and related claims in connection with defendants' promotion of and statements regarding a cryptocurrency or digital asset referred to as NANO f/k/a RaiBlocks ("XRB" or "Nano Tokens"). (Dkt. No. 58 ("FAC") at 1.)
Now before the Court are the following motions: (1) Fabian's motion for leave to effect alternative service (Dkt. No. 81); (2) Fabian's motion to strike affirmative defenses raised in the Nano Defendants' answer (Dkt. No. 84); and (3) the Nano Defendants' motion to dismiss for forum non conveniens. (Dkt. No. 85)
Having carefully reviewed the record, the papers submitted on each motion, and for the reasons set forth more fully below, the Court HEREBY ORDERS as follows: (1) motion for leave to effect alternative service is GRANTED; (2) the motion to strike affirmative defenses raised in Nano Defendants' answer is GRANTED IN PART and DENIED IN PART; and (3) the motion to dismiss for forum non conveniens is DENIED.
I. RELEVANT BACKGROUND
In order to expedite the issuance of this Order, the Court incorporates the factual and procedural background from the prior order granting in part and denying in part the motion to dismiss. (Dkt. No. 66 at 2-11.) The Court only summarizes the relevant background since the issuance of the prior order. Thus:
See also Fabian v. LeMahieu, 4:19-cv-00054-YGR, 2019 WL 4918431, at *2-7 (N.D. Cal. Oct. 4, 2019).
In response to the Court's prior orders, the Nano Defendants filed their answer on October 25, 2019. (Dkt. No. 70.) In the answer, the Nano Defendants raise ten affirmative defenses. (Id.)
The Court and the parties conferred for a case management conference on November 18, 2019, where the parties indicated their intention to bring the now pending motions. (Dkt. No. 80.) Upon the completion of the parties' briefing, the Court vacated the motion hearings, (Dkt. Nos. 89, 99) deciding that the motions were appropriate for resolution without oral argument. See Lake at Las Vegas Investors Group, Inc. v. Pacific Malibu Dev. Corp., 933 F.2d 724, 729 (9th Cir. 1991).
II. MOTION FOR LEAVE TO EFFECT ALTERNATIVE SERVICE
A. Legal Standard
Rule 4(f)(3) of the Federal Rules of Civil Procedure provides that "an individual . . . may be served at a place not within any judicial district of the United States . . . by other means not prohibited by international agreement, as the court orders." Fed. R. Civ. P. 4(f)(3). Similarly, Rule 4(h)(2) permits service of a corporation "at a place not within any judicial district of the United States, in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery under (f)(2)(C)(i)." Fed. R. Civ. P. 4(h)(2).
It is left "to the sound discretion of the district court the task of determining when the particularities and necessities of a given case require alternate service of process under Rule 4(f)(3)." Rio Properties, Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1016 (9th Cir.2002). Service under Rule 4(f)(3) is "neither a last resort nor extraordinary relief." Id. at 1015. To the contrary, "court-directed service under Rule 4(f)(3) is as favored as service available under Rule 4(f)(1) or Rule 4(f)(2)" and "the advisory notes indicate the availability of alternate service of process under Rule 4(f)(3) without first attempting service by other means." Id. To satisfy constitutional norms of due process, the alternative method of service must be "reasonably calculated, under all the circumstances, to apprise the interested parties of the action and afford them an opportunity to present their objections." Id. at 1016. In other words, "'service under Rule 4(f)(3) must be (1) directed by the court; and (2) not prohibited by international agreement. No other limitations are evident from the text.'" Id. at 1014. In applying Rule 4(f)(3), "trial courts have authorized a wide variety of alternative methods of service including publication, ordinary mail, mail to the defendant's last known address, delivery to the defendant's attorney, telex, and most recently, email." Id. at 1016 (collecting cases).
B. Analysis
Fabian requests service on the BitGrail Defendants, Firano's counsel, and the BitGrail Defendants' bankruptcy trustee via mail, email, and social media. The Court addresses the three issues raised by Fabian, namely that: (1) service on the BitGrail Defendants' bankruptcy trustee and Firano's counsel in Italy - in addition to service on the BitGrail Defendants themselves - is appropriate; (2) the proposed methods of service - by mail, by electronic mail, and social media - are not prohibited by international agreement; and (3) the proposed methods of alternative service are reasonably calculated to provide the BitGrail Defendants with notice of this action and afford them the opportunity to present their objections to the charges against them. The Nano Defendants filed no response to this motion. The Court addresses each of these three arguments in turn below.
1. Additional Service on the Bankruptcy Trustee and Counsel.
Based on a review of the record, the Court concludes that additional service on the BitGrail's bankruptcy trustee and Firano's counsel in Italy is appropriate in this matter. As the record demonstrates, Firano's counsel in Italy, Francesco Ballati, remains in contact with Firano. (See generally Dkt. No. 81-5.) Moreover, Ballati's response - that communications about this action should be sent to the bankruptcy trustee - indicates that service upon the bankruptcy trustee is appropriate. (Id.) "[T]rial courts have authorized a wide variety of alternative methods of service including . . . delivery to the defendant's attorney." Rio Props., 284 F.3d at 1016. Indeed, "courts around the country have found that service upon a foreign defendant through counsel is appropriate to prevent further delays in litigation." Knit With v. Knitting Fever, Inc., No. 08-cv-4221 (RLB), 2010 WL 4977944, at *4 (E.D. Pa. Dec. 7, 2010) (collecting cases).
Thus, service on the BitGrail Defendants by providing the service documents to Ballati and the Bankruptcy Trustees and requesting that the documents be forwarded to Firano is appropriate.
2. Proposed Methods of Service Are Not Prohibited by International Agreement
Here, the Court concludes that service via mail, electronic mail, and social media are appropriate. First, it is well established that service by mail to Italian based parties is appropriate. "Both the Ninth Circuit and California courts have held that Article 10(a) of the Hague Convention allows service of process by mail, so long as the country in which service is being effected does not object." Bondanelli v. Ocean Park SRL, No. CV 12-07724 GAF (SSx), 2013 WL 12139129, at *1 (C.D. Cal. Oct. 7, 2013) (citing Brockmeyer v. May, 383 F.3d 798, 801-02 (9th Cir. 2004)). "Italy has not objected" to Article 10(a). Bondanelli, 2013 WL 12139129, at *1. Moreover, Italy explicitly permits service of process by mail. See United States Department of State, Judicial Assistance Country Information: Italy (last updated Nov. 15, 2013). In light of the foregoing, numerous other courts have found service of process by mail to be accepted in Italy. See Bondanelli, 2013 WL 12139129, at *1 (collecting cases).
As to authorization of service in this jurisdiction, "the determination of whether Plaintiff properly served the Summons and Complaint will be made applying the California Code of Civil Procedure." Id. at *2. These requirements include mailing via first-class mail or airmail, postage prepaid, requiring or requesting a return receipt. See Cal. Code Civ. Proc. § 415.40. Thus, with regard to service by mail, the Court finds that service is not prohibited by international agreement.
Second, with regards to service via electronic mail and social media, courts have found such service not prohibited by international agreement and have approved of such service in the court's discretion. "[T]rial courts have authorized a wide variety of alternative methods of service including . . . email." Rio Properties, Inc., 284 F.3d at 1018 (citations omitted). And courts in this district have authorized service of process by social media. See, e.g., St. Francis Assisi v. Kuwait Fin. House, No. 3:16-cv-3240 (LB), 2016 WL 5725002, at *2 (N.D. Cal. Sep. 30, 2016) (discussing decision to grant "service by email, Facebook, and LinkedIn because notice through these accounts was reasonably calculated to notify the defendant of the pendency of the action and was not prohibited by international agreement"); UBS Fin. Servs. v. Berger, No. 13-cv-03770 (LB), 2014 WL 12643321, at *2 (N.D. Cal. Apr. 24, 2014) (recounting court's decision to authorize service via defendant's "gmail address and through LinkedIn's 'InMail' feature"); Tatung Co. v. Shu Tze Hsu, SA CV 13-1743-DOC (ANx), 2015 WL 11089492, at *2 (C.D. Cal. May 18, 2015) ("Courts routinely authorize email service under Rule 4(f)(3)") (citing cases). Here, the Court concludes that neither service method is prohibited by international agreement. Moreover, the Court exercises its discretion to permit such methods of service in this matter. Thus, the court finds that service by email and social media - coupled with service by mail - are appropriate here and are not prohibited by international agreement.
3. Proposed Methods of Service Are Reasonably Calculated to Provide the BitGrail Defendants with Notice of this Action
Finally, the Court concludes that the proposed methods of service are reasonably calculated to provide the BitGrail defendants with notice of this action. Rule 4 is "flexible rule that should be liberally construed so long as a party receives sufficient notice of the complaint." United Food & Commercial WorkersUnion v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984)). Here, in light of the facts that: service is being made personally on Firano, that Ballati confirmed in October 2019 that he continues to represent Firano, that Ballati indicated that documents regarding this action should be forwarded to the bankruptcy trustee, and that service is being made on the BitGrail Defendants via several methods, the Court concludes that, under the circumstances, the methods are reasonably calculated to provide notice to the BitGrail defendants and afford them an opportunity to present their objections.
Accordingly, in light of the foregoing analysis, the Court Grants the motion for leave to effect alternative service as requested in the motion.
III. MOTION TO STRIKE AFFIRMATIVE DEFENSES RAISED IN THE ANSWER
A. Legal Standards
Rule 12(f) allows a court to strike "redundant, immaterial, impertinent, or scandalous matter" from a pleading. A court may grant a motion to strike where "the matter to be stricken clearly could have no possible bearing on the subject of the litigation." In re Arris Cable Modem Consumer Litig., No. 17-CV-01834-LHK, 2018 WL 288085, at *5 (N.D. Cal. Jan. 4, 2018). The purpose of a Rule 12(f) motion is to "avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial." Sydney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983).
Further, because Rule 12(f) motions are disfavored, "courts often require a showing of prejudice by the moving party before granting the requested relief." Sanchez v. City of Fresno, 914 F. Supp. 2d 1079, 1122 (E.D. Cal. 2012) (quoting Cal. Dep't of Toxic Substances Control v. Alco Pac., Inc., 217 F. Supp. 2d 1028, 1033 (C.D. Cal. 2002)). "If there is any doubt whether the portion to be stricken might bear on an issue in the litigation, the court should deny the motion." Holmes v. Elec. Document Processing, Inc., 966 F. Supp. 2d 925, 930 (N.D. Cal. 2013) (quoting Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004)). It is within the sound discretion of the district court whether to grant a motion to strike. See Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (citing Nurse v. United States, 226 F.3d 996, 1000 (9th Cir. 2000)).
"The key to determining the sufficiency of pleading an affirmative defense is whether it gives plaintiff fair notice of the defense." G & G Closed Circuit Events, LLC v. Nguyen, No. 10-CV-00168-LHK, 2010 WL 3749284, at *1 (N.D. Cal. Sept. 23, 2010) (quoting Wyshak v. City Nat. Bank, 607 F.2d 824, 827 (9th Cir.1979)). "What constitutes fair notice depends on the particular defense in question." G &G, 2010 WL 3749284, at *1 (quoting 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1381, at 410 (3d ed.2004)). "While a defense need not include extensive factual allegations in order to give fair notice . . . bare statements reciting mere legal conclusions may not be sufficient." G &G, 2010 WL 3749284, at *1 (internal citations omitted). "Because motions to strike a defense as insufficient are disfavored, they 'will not be granted if the insufficiency of the defense is not clearly apparent.'" Id. (quoting 5C Wright & Miller § 1381, at 428).
B. Analysis
Fabian moves to strike all of the affirmative defenses raised in the Nano Defendants' answer, including the reservation to add further affirmative defenses. Given the breadth of the motion, the Court considered sanctioning Fabian for the filing of a frivolous motion which did not meet the basic standards of such a disfavored motion. Not surprisingly, the Nano Defendants oppose the request to strike the defenses. Fabian is hereby warned that the Court will deal with any such similar filings in the future summarily and may sua sponte inquire on the appropriateness of sanctions. Counsel should know better than to overburden courts without cause. All of this could have been easily accomplished through written discovery. Similarly, the Nano Defendants should not haphazardly include affirmative defenses without a legitimate legal basis.
The Court addresses each ground in turn below. Thus:
First Affirmative Defense: Failure to State a Claim. GRANTED. "Failure to state a claim is not a proper affirmative defense but, rather, asserts a defect in [plaintiff's] prima facie case." Barnes v. AT&T Pension Ben. Plan-Nonbargained Program, 718 F. Supp. 2d 1167, 1174 (N.D. Cal. 2010). See also id. ("[D]espite its inclusion in Civil Form 30, failure to state a claim under Rule 12(b)(6) is more properly brought as a motion and not an affirmative defense."); G &G, 2010 WL 3749284, at *1 ("The following affirmative defenses are merely denials of the allegations and claims set forth in the Complaint: . . . failure to state a claim[.]"). Moreover, the Court notes that it has now dealt with two prior motions to dismiss from the Nano Defendants and have addressed similar arguments regarding Fabian's failure to state a claim. (See Dkt. Nos. 56, 66.) Thus, this affirmative defense is appropriately stricken but was quite unnecessary for purposes of a motion.
Second Affirmative Defense: Contributory Negligence/Comparative Fault. DENIED. At this stage, prior to discovery, such a defense is appropriately maintained. This is so where the Court has made no formal holding as the choice of law in this class action. Moreover, the Court concludes that while the factual details in the answer are scant, such details are sufficient where the lack of greater detail can be remedied through the formal discovery process. See Figueroa v. Baja Fresh Westlake Vill., Inc., No. 12-cv-769-GHK-SPX, 2012 WL 2373254, at *2 (C.D. Cal. May 24, 2012) ("[P]laintiff's Motion is DENIED inasmuch as it relies on the factual insufficiency of the defenses asserted."); see also Diaz v. Alternative Recovery Mgmt., No. 12-cv- 1742-MMA-BGS, 2013 WL 1942198, at *2 (S.D. Cal. May 8, 2013) ("Any lack of factual detail in these defenses may be remedied through the formal discovery process, as is done in the vast majority of cases."). Thus, the Court declines to strike this affirmative defense.
The Court highlights that the Nano Defendants concede that, should California law apply to this class action, such a defense is not recognized under California law.
Third Affirmative Defense: Failure to Mitigate. DENIED. Courts routinely permit parties to plead a failure to mitigate defense without specific factual allegations prior to the conclusion of discovery. See Bd. Of Trs. Of San Diego Elec. Pension Trust v. Bigley, Elec., Inc., No. 07-cv-634-IEG (LSP), 2007 WL 2070355, at *3 (S.D. Cal. July 12, 2007) (collecting cases) ("A handful of courts have been confronted with the issue of whether a defendant's mere allegation that 'plaintiff failed to mitigate damages' is sufficient under the pleading requirements of Rule 8. These courts have typically held that a generalized statement, such as the one used in the instant case, meets defendant's pleading burden with respect to the affirmative defense of damage mitigation."); accord Nomadix, Inc. v. Guest-Tek Interactive Entm't LTD., No. 2:16-CV-08033, 2017 WL 7275391, at *7 (C.D. Cal. Nov. 30, 2017); Horton v. NeoStrata Co. Inc., No. 3:16-cv-02189-AJB-JLB, 2017 WL 2721977, at *12 (S.D. Cal. June 22, 2017) ("The Court finds that this same analysis applies . . . . Thus, as the discovery cut-off date is set for February 6, 2018, the Court cannot say at this juncture that other facts may not come to light later down the road. Thus, Plaintiffs' motion to strike 24 Seven Defendants' sixth [unclean hands], eighteenth [failure to mitigate], nineteenth [contribution by Plaintiffs' own acts], and twenty-first [willfulness] affirmative defenses is DENIED."); Lexington Ins. Co. v. Energetic Lath & Plaster, Inc., No. 2:15-cv-00861-KJM, 2015 WL 5436784, at *13 (E.D. Cal. Sept. 15, 2015); Ganley v. Cty. of San Mateo, No. 3:06-CV-03923, 2007 WL 902551, at *6 (N.D. Cal. Mar. 22, 2007) ("Although no case law from this district or circuit is available, several courts have held that 'where discovery has barely begun, the failure to mitigate defense is sufficiently pled without additional facts.' . . . . This reasoning is persuasive here because discovery has just begun, Plaintiff has been put on notice of the defense, and the possibility remains that additional facts may be alleged that would support the affirmative defense of mitigation. Therefore, the defense may be supported by additional, as of yet undiscovered facts, and will not be stricken."). Thus, the Court declines to strike this affirmative defense.
Fourth Affirmative Defense: Assumption of Risks. DENIED. While the Court concluded that Fabian alleged sufficient facts to state a claim, including that the Nano Defendants owed a duty to Fabian, there has been no merits determination on this issue. Fabian otherwise provides no basis for the striking of this affirmative defense. Thus, the Court declines to strike this affirmative defense.
Fifth Affirmative Defense: Set-Off. DENIED. Although the allegations in the answer are bare, the Court finds that they sufficiently plead sufficient facts as to any "set-off affirmative defense. Thus, the Court declines to strike this affirmative defense.
Sixth Affirmative Defense: Apportionment. DENIED. As the Nano Defendants point out, courts in this district note that apportionment is applicable in negligence and intentional tort actions. See Izett v. Crown Asset Mgmt., LLC, No. 18-cv-05224-EMC, 2018 WL 6592442, at *3 (N.D. Cal. Dec. 14, 2018) ("Courts have held that affirmative defenses like apportionment and equitable indemnity 'while applicable in negligence and intentional tort actions, have no relation to . . . FDCPA or RFDCPA claims' like those asserted in Plaintiff's complaint."); Perez v. Gordon & Wong Law Grp., P.C., No. 11-cv-03323-LHK, 2012 WL 1029425, at *11 (N.D. Cal. Mar. 26, 2012) ("Finally, the Court concludes that Defendants' ninth (apportionment) and eleventh (equitable indemnity) affirmative defenses, while applicable in negligence and intentional tort actions, have no relation to the FDCPA or RFDCPA claims asserted in Plaintiff's Complaint."). Thus, the Court declines to strike this affirmative defense.
Seventh Affirmative Defense: Current Law Prohibits Plaintiff's Claims. GRANTED. This affirmative defense appears to be another way of stating that Fabian has failed to state a claim. See, e.g., Minns v. Advanced Clinical Emp't Staffing, LLC., No. 13-cv-03249-SI, 2014 WL 5826984, at *3 (N.D. Cal. Nov. 10, 2014) (striking multiple affirmative defenses as "not proper affirmative defense" after concluding that each were "just different ways of saying that plaintiffs have failed to state a claim for relief"). The Court has already concluded that such a defense is not technically an affirmative defense. Moreover, while the Nano Defendants aver that the Italian bankruptcy proceedings may prohibit Fabian's claims, they fail to elaborate on how such proceedings would impact the claims here. Thus, this affirmative defense is appropriately stricken.
Eighth Affirmative Defense: Laches. DENIED. Although the allegations in the answer are bare, the Court finds that they sufficiently put Fabian on notice of the "laches" affirmative defense. Thus, the Court declines to strike this affirmative defense.
Ninth Affirmative Defense: Supervening Cause. GRANTED. The Court concludes that the "supervening cause" affirmative defense lacks sufficient allegations to place Fabian on notice. See, e.g., J & J Sports Prods. v. Mendoza-Govan, No. C 10-05123 WHA, 2011 WL 1544886, at *4 (N.D. Cal. Apr. 25, 2011) ("Defendant does not indicate who, besides defendant, may have caused plaintiff's damages. In addition, she does not indicate what conduct by plaintiff or third parties allegedly caused the damages.") (citing G &G, 2010 WL 3749284, at *2 (finding the defense of "superseding acts of third persons" to be insufficiently pled because the defendants did not identify any superseding acts of third persons)). Thus, this affirmative defense is appropriately stricken.
Tenth Affirmative Defense: Indemnification / Innocence. GRANTED. First, as Fabian highlights, "Indemnification is not an affirmative defense, 'but rather a claim that must be pleaded and proved.'" G & G Closed Circuit Events, LLC v. Nguyen, No. 10-CV-05718, 2011 WL 6293922, at *3 (N.D. Cal. Dec. 15, 2011) (quoting J & J Sports Prods. v. Vizcarra, No. 11-1151 SC, 2011 WL 4501318, at *3 (N.D. Cal, Sep. 27, 2011) ("If Defendants believe they are entitled to indemnification by Direct TV, then they must bring an action against Direct TV. Accordingly, the Court strikes Defendants' second and fifth affirmative defenses with prejudice.")). Second, the Court cannot otherwise determine how an "innocence" affirmative defense is anything other than a general denial defense. The Nano Defendants fail to provide any authority demonstrating the appropriateness of this affirmative defense. Thus, this affirmative defense is appropriately stricken.
Additional Affirmative Defense: Reservation to Add Affirmative Defenses. DENIED. Fabian seeks to strike a reservation to add affirmative defenses. Thus, the Court declines to strike this reservation, which is not, by definition, an affirmative defense.
Accordingly, the motion to strike affirmative defenses raised in the Nano Defendants' answer is GRANTED IN PART and DENIED IN PART. IV. MOTION TO DISMISS FOR FORUM NON CONVENIENS
The parties have filed several ancillary requests and objections with regards to evidence in support of the motion to dismiss for forum non conveniens. First, Fabian's request for judicial notice of the deposition transcript of LeMahieu. (Dkt. No. 101.) That request is DENIED, as deposition transcripts are not properly subject to judicial notice by Courts. See Warwick v. Bank of New York Mellon, No. CV 15-3343, 2016 WL 2997166, at *11 (C.D. Cal. May 23, 2016); Hernandez v. Santa Clara Cty. Sheriff's Dep't, No. 06-CV-6977, 2009 WL 1537877, at *1 n.1 (N.D. Cal. June 2, 2009). The Court does consider the evidence in so far as it constitutes admissions by LeMahieu under Federal Rule of Evidence 801. Second, Fabian objects to the evidence submitted by the Nano Defendants in connection with the reply. (Dkt. Nos. 95 (objections), 98 (opposition).) Having reviewed the briefing and the arguments therein, these objections are OVERRULED.
A. Legal Standard
"Dismissal pursuant to the doctrine of forum non conveniens is a 'drastic exercise of the court's inherent power' and one that is 'an exceptional tool to be employed sparingly . . . 'The mere fact that a case involves conduct or plaintiffs from overseas is not enough for dismissal . . . A defendant must show that the chosen forum results in 'oppressiveness and vexation . . . out of proportion to the Plaintiff's convenience.'" Kedkad v. Microsoft Corp., Inc., No. C13-0141-THE, 2013 WL 5945807, at *2 (N.D. Cal. Nov 4, 2013); see also Ridgway v. Phillips, 383 F. Supp. 3d 938, 948-49 (N.D. Cal. 2019) (defendants must make a clear showing of facts establishing that litigating in this forum is so "oppressive and vexatious" as to be "out of proportion to plaintiff's convenience.").
"To prevail on a motion to dismiss based on forum non conveniens, a defendant bears the burden of demonstrating: (1) the adequacy of the alternative forum and (2) that the balance of private and public interest factors favors dismissal . . . . A forum non conveniens determination is committed to the sound discretion of the district court." Kedkad, 2013 WL 5945807, at *2 (internal citations and quotation marks omitted). See also Piper Aircraft Co. v. Reyno, 454 U.S. 235, 247-52 (1981). "In a motion to dismiss on the ground of forum non conveniens, the burden of proving an alternative forum is the defendant's and . . . the remedy must be clear before the case will be dismissed." Cheng v. Boeing Co., 708 F.2d 1406, 1411 (9th Cir. 1983), cert. denied, 464 U.S. 101 (1983). "In carrying this burden, [a defendant] must provide sufficient information to enable the district court to balance the parties' interests." Contact Lumber Co. v. P.T. Moges Shipping Co., 918 F.2d 1446, 1449 (9th Cir. 1990). This standard requires a "clear showing of facts." Carijano v. Occidental Petroleum Corp., 643 F.3d 1216, 1236 (9th Cir. 2011).
"[U]nless the balance [of conveniences] is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947). "When the home forum has been chosen, it is reasonable to assume that this choice is convenient. When the plaintiff is foreign, however, this assumption is much less reasonable." Piper Aircraft Co., 454 U.S. at 255-56. Further, "the greater the degree of deference to which the plaintiff's choice of forum is entitled, the stronger a showing of inconvenience the defendant must make to prevail in securing forum non conveniens dismissal." Iragorri v. United Technologies Corp., 274 F.3d 65, 74 (2d Cir. 2001). "Although great weigh is generally accorded plaintiff's choice of forum, when an individual . . . represents a class, the named plaintiff's choice of forum is given less weight." Hendricks v. StarKist, Case No. 13-cv-729-YGR, 2014 WL 1245880, at *2 (N.D. Cal. Mar. 25, 2014) (citing Lou v. Belzberg,834 F.2d 730, 739 (9th Cir.1987)). However, in class actions, courts have still given some deference to the named plaintiff's choice of forum where the plaintiff lived in the transferor district and the events at issue occurred in the transferor district. Id. at *2-3.
Here, Fabian chose his home forum where some of the events at issue occurred - a presumptively convenient choice which should ordinarily not be disturbed. See Carijano, 643 F.3d at 1227 ("When a domestic plaintiff initiates litigation in its home forum, it is presumptively convenient."). Thus, the Court gives some deference to Fabian's choice of forum.
B. Analysis
Here, the Nano Defendants aver that the complaint should be dismissed on the ground of forum non conveniens. Specifically, the Nano Defendants contend that the appropriate forum is Italy, and not the Northern District of California. Based on the foregoing authority, the Court first determines the the adequacy of the alternative forum, Italy, before reviewing the private and public interest factors, and, finally, balancing these factors to determine whether the complaint should be dismissed. As discussed below, the Court concludes that, on balance, a dismissal on the doctrine of forum non conveniens is not warranted here.
1. Whether Italy is An Adequate Alternative Forum
"An alternative forum is deemed adequate if: (1) the defendant is amenable to process there; and (2) the other jurisdiction offers a satisfactory remedy." Carijano, 643 F.3d at 1225. Furthermore, "[t]he foreign court's jurisdiction over the case and competency to decide the legal questions involved will also be considered." Id. (citing Leetsch v. Freedman, 260 F.3d 1100, 1103 (9th Cir. 2001)).
Fabian does not contest the first factor - that the defendants are amenable to process in Italy. Nor can he contest this factor, where the Nano Defendants have uniformly indicated that they would be amenable to process in Italy. Along with the BitGrail Defendants, who are based in Italy, the first factor is clearly satisfied.
With regards to the second factor, Fabian avers that Italy does not offer a satisfactory remedy such that it is an adequate alternative forum. Specifically, Fabian asserts that the Nano Defendants do not demonstrate that Fabian can achieve similar relief on behalf of a nationwide class in the Italian courts. Moreover, Fabian contends that the bankruptcy proceedings in Italy would likely stay any relief Fabian could obtain, that class actions are not as successful in Italian courts as they are in United States federal actions, and that the discovery process is more cumbersome and limited in Italian courts.
These arguments do not persuade. Courts routinely reject arguments that limited discovery and the difficulties of certifying a class, as compared to federal courts in the United States, are relevant to a determination of whether an alternative forum is adequate. See, e.g., Carijano v. Occidental Petroleum Corp., 548 F. Supp. 2d 823, 830 (C.D. Cal. 2008) ("The fact that Peru lacks a class action mechanism does not make it inadequate for forum non conveniens purposes."), rev'd on other grounds, 643 F.3d 1216 (9th Cir. 2011); Deirmenjian v. Deutsche Bank, A.G., No. 06-CV 06-774, 2006 WL 4749756, at *8 (C.D. Cal. Sept. 25, 2006) ("The mere fact that Germany lacks a class action mechanism does not make it inadequate for forum non conveniens purposes, however."); Sarei v. Rio Tinto PLC, 221 F. Supp. 2d 1116, 1170 (C.D. Cal. 2002) ("Nonetheless, the court finds that the unavailability of class actions . . . do not render Papua New Guinea an inadequate forum for forum non conveniens purposes."); Harp v. Airblue Ltd, 879 F. Supp. 2d 1069, 1074 (C.D. Cal. 2012) ("Differences in discovery procedures do not provide a sufficient basis for finding an alternative forum to be inadequate."); In re Air Crash Over the Taiwan Straits on May 25, 2002, 331 F. Supp. 2d 1176, 1187 (C.D. Cal. 2004) ("Plaintiffs' arguments regarding the availability of . . . pretrial discovery . . . do not warrant a finding that Taiwan's procedural safeguards are inadequate for forum non conveniens purposes."); Pavlov v. Bank of NY Inc., 135 F. Supp. 2d 426, 434-35 (S.D.N.Y. 2001) ("[T]he unavailability of pretrial discovery . . . does not render the forum inadequate.").
Instead, it is only "where the remedy offered by the other forum is clearly unsatisfactory" will an alternative forum be inadequate. Piper, 454 U.S. at 245 n.22. "A foreign forum must merely provide some remedy." Ranza v. Nike, Inc., 793 F.3d 1059, 1077 (9th Cir. 2015) (emphasis supplied). In other words, for an alternative forum to fail to be adequate, the remedy provided there must be "so clearly inadequate or unsatisfactory, that it is no remedy at all." Lueck v. Sundstrang Corp., 236 F.3d 1137, 1143 (9th Cir. 2001) (internal quotation marks omitted).
Here, based on the record including the declarations submitted by the Nano Defendants, the Court concludes that Italy is an adequate alternative forum to hear the claims at issue. The courts are open, impartial, and authorized to provide full compensatory damages for the wrongs alleged in the amended complaint. While any Italian based proceedings would be stayed pending the ongoing BitGrail bankruptcy proceedings in Italy, such a stay does not ultimately preclude the relief sought in Italy. Indeed, courts that have specifically considered the adequacy of Italian courts have generally found Italian courts as an adequate alternative forum. See Costa Sandoval v. Carnival Corp., No. 12-CV-5517, 2014 WL 12585803, at *4 (C.D. Cal. Sept. 15, 2014) (holding Italy adequate to hear negligence claims related to shipwreck); Giglio Sub S.N.C. v. Carnival Corp., No. 12-CV-21680, 2012 WL 4477504, at *13 (S.D. Fla. Sept. 26, 2012) (same). Thus, the Court here similarly concludes that Italy is an adequate alternative forum.
2. Private Interest Factors
The private interest factors to consider when determining whether to grant a motion to dismiss for forum non conveniens, as enumerated by the Ninth Circuit in Carijano, are as follows: (1) the residence of the parties and the witnesses; (2) the forum's convenience to the litigants; (3) access to physical evidence and other sources of proof; (4) whether unwilling witnesses can be compelled to testify; (5) the cost of bringing witnesses to trial; (6) the enforceability of the judgment; and (7) all other practical problems that make trial of a case easy, expeditious and inexpensive. See Carijano, 643 F.3d at 1229 (citing Boston Telecomms. Grp. v. Wood, 588 F.3d 1201, 1206-07 (9th Cir. 2009)). The Court considers each of these factors in turn below. Thus:
1. Residence of the Parties and the Witnesses. When reviewing this factor, courts look to "the materiality and importance of the anticipated witnesses' testimony." Kleiner v. Spinal Kinetics, Inc., No. 5:15-cv-02179-EJD, 2016 WL 1565544, at *4 (N.D. Cal. Apr. 19, 2016) (quoting Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1335-36 (9th Cir. 1984)). "The key inquiry . . . requires assessing the materiality and importance of these witnesses' testimony and determining whether some of these witnesses are 'critical' and beyond the jurisdiction of domestic courts." Kleiner, 2016 WL 1565544, at *4; see also Lueck, 236 F.3d at 1146 ("We have said previously that a court's focus should not rest on the number of witnesses or quantity of evidence in each locale. Rather, a court should evaluate 'the materiality and importance of the anticipated [evidence and] witnesses' testimony and then determine . . . their accessibility and convenience to the forum.'") (quoting Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1335-36 (9th Cir. 1984)).
Here, Fabian is a resident of Discovery Bay, California, which is within the boundaries of the United States District Court of the Northern District of California. Based on the amended complaint, some of the actions occurred within the district. Moreover, to the extent that California law applies, California itself has an interest in preventing fraud within its borders. See Boston Telecomms. Grp. v. Wood, 588 F.3d 1201, 1212 (9th Cir. 2009) (California has an "interest in preventing fraud from taking place within its borders.").
Of the Nano Defendants: Nano is a Texas corporation with its principle place of business in Austin, Texas; LeMahieu is a resident of Texas, but has spent significant time in Europe; Shapiro lives in New York; Retzer lives in Massachusetts; and Busch lives in Illinois. Thus, some material information is likely in the hands of the Nano Defendants who are located primarily throughout the United States.
In addition to the Italy-based BitGrail Defendants, the Nano Defendants also identify several witnesses in Italy that, they assert, are crucial to the matter here. These witnesses include: (1) the bankruptcy court-appointed expert, the Consulete Tecnico d'Ufficio, Dal Checco; (2) the experts retained by Firano, the public prosecutor's office, and the principal creditor, Eirik Ulvers0y, in the same proceedings; (3) Firano's partner, Andrea Davoli; (4) assistants who helped Firano and Davoli operate BitGrail; and (5) the prosecutors investigating Firano's criminal liability in the matter.
These individuals identified above present a close question: some of these individuals appear to have material and important information related to this litigation, and others do not. Indeed, the Court cannot determine how expert witnesses appointed by the Italian bankruptcy court, the expert witnesses retained by the parties in the Italian proceedings, and the public prosecutors themselves could be material witnesses in this matter. But the Court recognizes that BitGrail, Firano, Davoli, and the assistants who helped run BitGrail may indeed be material and important witnesses in this matter. As a whole, the Court notes that some material and important witnesses are located throughout the United States - relating to the Nano Defendants - and Italy - relating to the BitGrail Defendants. Thus, on balance, this factor weighs neutrally between the two forums.
Moreover, the Nano Defendants provide no authority that such individuals are even appropriately called as witnesses in the Italian courts. While the Court is unfamiliar with the nuances of Italian law, the Court expresses skepticism at the notion that public prosecutors in parallel criminal proceedings can be called as fact or expert witnesses in related civil proceedings.
2. Forum's Convenience to the Litigants. The Nano Defendants only identify LeMahieu's inconvenience in traveling to this district in support of Italy as an alternate forum. Specifically, at the time of the briefing of this motion, Le Mahieu was residing in Madrid, Spain. However, where the remainder of the parties in this action, aside from the BitGrail defendants and LeMahieu, reside in the United States, the Court is not persuaded that this factor weighs in favor of Italy over California. Indeed, the undisputable facts - that Fabian and lead counsel are located here in this district and that most of the defendants reside in the United States - show that this district is highly convenient to the parties. See In re Volkswagen "Clean Diesel" Mktg., Sales Practices, & Prods. Liab. Litig., No. 2672 CRB (JSC), 2017 WL 66281, at *9 (N.D. Cal. Jan. 4, 2017) ("The forum is clearly convenient for Plaintiffs as they brought suit here."); Carijano, 643 F.3d at 1227 ("When a domestic plaintiff initiates litigation in its home forum, it is presumptively convenient.").
The Court recognizes that - in light of the ongoing coronavirus pandemic (COVID-19), LeMahieu may no longer reside in Madrid.
Thus, this factor weighs in favor of the United States and California over Italy.
3. Access to Physical Evidence and Other Sources of Proof. When evidence is available under the Hague Convention, this factor tends to weigh in favor of the potential transferor jurisdiction. See Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1181 (9th Cir. 2006) ("Any court . . . will necessarily face some difficulty in securing evidence from abroad," but that does not justify dismissal when the administrative costs are not particularly great); Boston Telecom, 588 F.3d at 1210 (determining that this factor is neutral when seeking evidence from a foreign jurisdiction under the Hague Convention, and "do[es] not necessarily justify dismissal.").
Here, the parties point to evidence in both locations - in Italy and the United States. Fabian highlights that some evidence is likely in the hands of the Nano Defendants themselves. On the other hand, the Nano Defendants identify that relevant and significant evidence exists in Italy. Moreover, the Nano Defendants' expert witness notes that obtaining documents through the Hague Convention would be "time consuming, expensive, and complicated."
These arguments do not persuade. Expensiveness and complexity aside, the Nano Defendants concede that the Hague Convention would permit the parties to obtain the evidence in Italy. The Court recognizes that a significant portion of evidence - evidence that would likely be relevant to the Nano Defendants' affirmative defenses - is within Italy. However, where the Hague Convention would permit both parties access to the evidence, the Court cannot conclude that this factor weighs in favor of Italy. Thus, this factor is neutral as to the two forums.
4. Whether Unwilling Witnesses Can Be Compelled to Testify. Where no unwillingness of witnesses to appear has been shown, this factor does not tend to weigh in favor dismissal. See Carijano, 643 F.3d at 1231 (citing Duha v. Agrium, Inc., 448 F.3d 867, 877 (6th Cir. 2006)).
Here, the Nano Defendants aver that the BitGrail Defendants, and witnesses associated with the BitGrail Defendants are unlikely to appear in this action. The Nano Defendants further highlight that the Nano Defendants are willing to submit themselves to the jurisdiction of Italy, and that this factor therefore weighs in favor of Italy. Fabian responds that this determination is premature where the Court, at the time of the briefing the motion to dismiss, had not yet ruled on the motion for alternate service on the BitGrail defendants.
Fabian's arguments do not persuade. While the Court cannot make a final determination as to whether the BitGrail Defendants will appear as this Order only just effectuated service on the BitGrail Defendants, the Court notes that, in light of the Nano Defendants' statement of their submission to the Italian Courts, Italy appears to be the only forum where all witnesses would willingly appear. Thus, at this time, this factor weighs slightly in favor of Italy.
5. Cost of Bringing Witnesses to Trial. "The factor relating to the cost of bringing witnesses to trial is largely tied to the location of witnesses with material information regarding the Plaintiff's claims." See Kleiner, 2016 WL 1565544, at *4.
Here, as discussed, the parties and material witnesses are located throughout the United States and Europe. Neither travel to California nor Italy is particularly cheap for the entirety of the parties and witnesses in this matter. Thus, this factor is neutral as to the two forums.
6. Enforceability of the Judgment. The Nano Defendants aver that proceedings in Italy would be automatically enforceable globally in light of their waivers to accept judgment from the Italian courts. The Nano Defendants highlight that there may be some issues for Fabian and the class in obtaining a judgment against the BitGrail defendants, in light of the ongoing bankruptcy proceedings, and that enforcing a judgment from a United States district court is not automatically enforceable in Italy. Thus, this factor weighs slightly in favor of Italy.
7. All Other Practical Problems. The Court concludes that neither party provides persuasive arguments on this factor, nor identifies any further practical problems that are relevant to the determination here. Thus, this factor is neutral as to the two forums.
3. Public Interest Factors
The public interest factors, as enumerated by the Ninth Circuit in Carijano, are as follows: (1) the local interest in the lawsuit, (2) the court's familiarity with the governing law, (3) the burden on local courts and juries, (4) congestion in the court, and (5) the costs of resolving a dispute unrelated to a particular forum. See Carijano, 643 F.3d at 1232 (citing Boston Telecomms., at 1211). The Court considers each of these factors in turn below. Thus:
1. Local Interest in the Lawsuit. In deciding this factor, the Court "need not hold, California is the principal locus of the case or that California has more of an interest than any other jurisdiction to conclude that California has a meaningful interest in this litigation. [W]ith this [public] interest factor, we ask only if there is an identifiable local interest in the controversy, not whether another forum also has an interest . . . California has an interest in preventing fraud from taking place within its borders." Boston Telecom, 588 F.3d at 1212; see also Kleiner, 2016 WL 1565544, at *6 ("Here, the court finds that Germany has a significant local interest in this lawsuit. Plaintiffs are residents of Germany, underwent their respective implantation operations in Germany, and suffered similar injuries there.").
The Nano Defendants' arguments to the contrary notwithstanding, California has a meaningful interest in the controversy as "California has an interest in preventing fraud from taking place within its borders." Although the Nano Defendants characterize Fabian's actions in this state as constituting of a "few mouse clicks," such actions are still significant enough that Fabian is now seeking to recover damages that he and the similarly situated proposed class sustained that resulted from those clicks.
Thus, the Court concludes that this factor weighs against dismissal and in favor of California.
2. Court's Familiarity with the Governing Law. Unless certain federal statutes are implicated, district courts do not need to make a definitive choice of law determination for the purposes of deciding a forum non conveniens motion. See Lueck, 236 F.3d at 1148. Here, based on the parties' briefing, the Court expressly declines to make a definitive choice of law determination. However, the Court is not persuaded that Italian law conclusively governs the claims against the defendants or that Italy has a significant interest in seeing its laws applied that is greater than California's (or another United States jurisdiction's) interest. This is especially so where the class to be certified is a United States national class led by a California based lead plaintiff. Moreover, the defendants in this lawsuit include several United States citizens as well as a company organized within the United States. Thus, the Court concludes that this factor weighs in favor of California.
3. Burden on Local Courts and Juries. The Nano Defendants aver that this Court would require numerous exhibits and pieces of evidence translated from Italian into English. The Nano Defendants' arguments do not persuade. The inverse is also true: there are several pieces of evidence in English in the possession of the Nano Defendants and there are claims that would likely require the application of California law to reach resolution. The Italian courts would therefore be left in a similar situation of requiring translations of material evidence. This is unsurprising given the global nature of the commerce in this action. The Court is otherwise unpersuaded by the parties' remaining arguments. Thus, the Court concludes that this factor weighs neutrally.
4. Congestion in the Court. "The determinative inquiry regarding th[is] factor[] is whether a trial would be speedier in another court due to a less crowded docket." Kleiner, 2016 WL 1565544, at *7. As the Nano Defendants highlight and the Court acknowledges, the Northern District of California has a significant number of civil filings and pending motions per judge. The Nano Defendants also submit evidence that Italian proceedings have "tight timelines" for pleadings and briefings. However, in light of the bankruptcy stay in Italy, it is unclear whether proceedings in Italy would be faster than proceedings in this district. Thus, the Court concludes that this factor weighs neutrally.
5. Costs of Resolving a Dispute Unrelated to a Particular Forum. The Nano Defendants aver that California has minimal interest in this dispute. On the other hand, Fabian asserts that California has a significant interest in this litigation. In light of the Court's prior findings - that California has an interest in this litigation, and that the costs weigh evenly between the forums - the Court finds that this factor weighs slightly in favor of California.
4. The Weighing of the Private and Public Factors
In light of the foregoing analysis, the Court concludes that the balance of factors is close, but that the balance does not warrant a dismissal of this case on the grounds of forum non conveniens. Indeed, the Court remarks that this case only demonstrates the global interconnectedness of the cryptocurrency market: where cryptocurrency programmers, operators, and consumers on both sides of the transactions can be from numerous and different countries. Despite this close balancing, the Court notes that even if some factors were shifted in favor of Italy, it would not be enough to disturb Fabian's choice of forum in his home forum, which here is entitled to some deference. In other words, the Nano Defendants have failed to demonstrate the continued litigation in this district results in "oppressiveness and vexation" that is "out of proportion" to the Fabian's convenience to his choice of forum.
Accordingly, in light of the above, the Court DENIES the motion to dismiss for forum non conveniens.
V. CONCLUSION
For the foregoing reasons, the Court HEREBY ORDERS as follows:
(1) the motion for leave to effect alternative service is GRANTED;
(2) the motion to strike affirmative defenses raised in the Nano Defendants' answer is GRANTED IN PART and DENIED IN PART; and
(3) the motion to dismiss for forum non conveniens is DENIED.
Further, the Nano Defendants request leave to amend to remedy any dismissed affirmative defense. In light of the foregoing, the Court GRANTS the request for leave to amend the answer solely to the ninth affirmative defense. Such an amended answer shall be due within fourteen (14) days of the date of this Order. Fabian is prohibited from filing a motion with respect to that affirmative defense without permission from the Court.
This Order terminates Docket Numbers 81, 84, and 85.
IT IS SO ORDERED. Dated: June 19, 2020
/s/ _________
YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT JUDGE