Troell v. Binance Holdings Limited

Background

Plaintiffs Jocelyn Troell, individually and for the estate of Stephen Troell, and other plaintiffs brought claims under the Anti-Terrorism Act, as amended by the Justice Against Sponsors of Terrorism Act, against Changpeng Zhao, BAM Trading Services Inc. (identified in the opinion as Binance US), and Binance Holdings Limited (identified in the opinion as Binance). The complaint alleges that the defendants knowingly helped entities designated by the United States as foreign terrorist organizations transfer millions of dollars in cryptocurrency.

The plaintiffs served Binance on October 15, 2024, but made multiple unsuccessful attempts to serve Zhao. They attempted to serve him while he was expected to be released from federal custody in California, sought assistance from the U.S. Marshals Service, hired investigators, and tried to locate his address in the United Arab Emirates. The investigators could not confirm his address. Plaintiffs also asked lawyers at Cahill Gordon to accept service, but the firm stated that it was not authorized to do so and later indicated that it did not represent Zhao in this lawsuit.

Zhao later retained BakerHostetler, which confirmed that he was residing in the United Arab Emirates. The plaintiffs then asked to serve Zhao through a law firm currently representing him. Zhao opposed the request, arguing principally that the plaintiffs had not first made sufficiently reasonable efforts under the other provisions of Rule 4(f) and that service through United States-based counsel was not permitted.

Legal standard

Federal Rule of Civil Procedure 4(f) governs service on an individual in a foreign country. Rule 4(f)(3) permits a court to order another method of service if the method is not prohibited by an international agreement and satisfies constitutional due process. Due process requires a method reasonably calculated to give the defendant actual notice of the case and a fair opportunity to be heard.

Court’s analysis

The court found that the United Arab Emirates is not a signatory to the Hague Convention on service abroad or another international service treaty. Therefore, no international agreement governed service on Zhao there.

The court also found that service through BakerHostetler would satisfy due process. Communications attached to Zhao’s opposition showed that Zhao and his lawyers had discussed the alternative-service motion and that Zhao had authorized his lawyers to accept a seven-day extension in exchange for confirming his residence in the United Arab Emirates. The court concluded that these communications showed Zhao was apparently aware of the lawsuit and that service on his counsel would provide adequate notice.

The court rejected Zhao’s argument that plaintiffs had to exhaust service methods under Rule 4(f)(1) or Rule 4(f)(2) before seeking an order under Rule 4(f)(3). Although courts may consider whether plaintiffs made reasonable attempts and whether court intervention is necessary, the court held that exhaustion is not a prerequisite. The court found that plaintiffs had made sufficient efforts, including attempts to serve Zhao in the United States, efforts to locate him in the United Arab Emirates, and requests that counsel accept service.

The court also held that service on United States-based counsel can be a permissible method under Rule 4(f)(3), because the relevant location is where the defendant is located, not where the intermediary receiving the papers is located.

Disposition

The court granted plaintiffs’ motion for alternative service on Zhao pursuant to Rule 4(f)(3). It ordered plaintiffs to serve Zhao’s domestic counsel at BakerHostetler with the summons and complaint within 30 days of the order. The court did not address the merits of plaintiffs’ alternative request under Rule 4(e). The Clerk of Court was directed to terminate the motion at ECF No. 45.