Tarverdiyeva v. Coinbase

Background

Rahila Tarverdiyeva alleged that Coinbase took cash and cryptocurrency from her. Coinbase maintained that the claims had to be arbitrated. Tarverdiyeva originally sued in the Middle District of Florida in July 2021. That court ordered arbitration and stayed the federal case. Tarverdiyeva later voluntarily dismissed that case without prejudice in October 2022.

While the Florida case was pending, Tarverdiyeva filed this action in September 2022. The factual basis was the same, but Vijay Tandon was added as a plaintiff, and Phillip Martin and Matthew Muller were added as defendants. Coinbase argued that the action was barred by res judicata, a rule that prevents parties from relitigating claims or issues that were already decided. The court dismissed the claims and entered final judgment in December 2022, concluding that the parties were the same or in a legally sufficient relationship with the earlier parties, the factual basis was the same, and the prior decision requiring arbitration prevented the claims from being decided in this action.

The plaintiffs later filed a first motion to vacate the judgment under Federal Rule of Civil Procedure 60(b)(3), arguing that Coinbase had obtained the judgment through fraud and that they had not received a meaningful opportunity for a merits decision. The court denied that motion, and the Court of Appeals affirmed. The appellate court also concluded that it could not review the underlying res judicata ruling because the plaintiffs had not timely appealed it.

Second Motion to Vacate

The plaintiffs then filed this second motion under Rule 60(b)(4), which allows relief when a judgment is void. The court explained that a judgment is not void merely because it may be wrong. Relief under this rule is limited to situations such as a lack of subject-matter jurisdiction, a lack of authority over the parties, or action inconsistent with due process of law.

The court declined to reconsider the factual and legal basis of the earlier res judicata ruling because alleged legal error was not enough under Rule 60(b)(4). The plaintiffs did not identify a jurisdictional defect, so the court addressed their due-process arguments.

Due-Process Arguments

The plaintiffs argued that their rights were violated because the court dismissed the action without holding an oral hearing. The court rejected that argument, explaining that motions may be decided on written submissions without oral argument.

The plaintiffs also challenged the court’s consideration of proceedings in the Middle District of Florida. The court found that they had notice of the request for judicial notice and an opportunity to object. The court further noted that the plaintiffs themselves had asked it to consider additional material from the Florida proceedings.

The court characterized the plaintiffs’ other unclear arguments as disagreements with the earlier arbitration and res judicata decisions, rather than evidence of a due-process violation. The court stated that those issues could not be revisited through this motion.

Supplemental Briefing About Arbitration

The court asked the parties to address whether the case could proceed in federal court if the defendants refused to arbitrate the fraud and conversion claims. The defendants rejected that premise and stated that they considered the claims subject to arbitration. They said that any limitations-period issues should also be decided in arbitration and agreed to treat the relevant periods as paused while the litigation was pending in the Florida and California courts and the Court of Appeals for the Ninth Circuit.

The plaintiffs argued that they alleged criminal violations and that they would be left without a forum. The court responded that civil litigants could not litigate criminal violations in federal court and that the plaintiffs’ arguments still amounted to disagreement with the earlier arbitration and res judicata decisions. The court also noted that the plaintiffs said they had no intention of initiating arbitration.

Disposition

The court concluded that the plaintiffs had not identified any plausible basis for finding the judgment void. Judge William Alsup denied the plaintiffs’ second motion to vacate the judgment. He warned that repeating the same arguments in the district court would be frivolous and could result in sanctions, including an order requiring payment of the other side’s defense costs.