Gevorkyan v. Bitmain Inc.

Background

Gor Gevorkyan brought a putative class action against Bitmain Technologies Ltd., identified in the opinion as a Chinese company that sells cryptocurrency-mining devices known as application-specific integrated circuit devices. Gevorkyan alleges that Bitmain used the devices to mine cryptocurrency for itself before delivering them and configured them to continue sending Bitcoin to Bitmain rather than to the customers who purchased them.

The complaint asserts claims under California’s Unfair Competition Law, along with claims for unjust enrichment, conversion, and trespass to chattel. Bitmain moved to dismiss under Federal Rule of Civil Procedure 12(b)(2), arguing that the court lacked personal jurisdiction—meaning the court lacked power over Bitmain in this case. The court allowed limited discovery on that issue, and the parties submitted supplemental briefs after discovery closed.

Personal Jurisdiction

The court considered whether it had specific personal jurisdiction, which applies when a defendant deliberately conducts activities in the forum state and the plaintiff’s claims arise out of or relate to those activities. The court found that Bitmain purposefully availed itself of California by making substantial sales there. The evidence showed more than $50 million in revenue from sales of its devices to California customers, including Gevorkyan, during the relevant period. Bitmain did not dispute the evidence and acknowledged annual California sales ranging from $486,481 in 2016 to $32,657,754 in 2018, with more than 66,000 units apparently sold during the relevant period.

The court rejected Bitmain’s argument that California sales should not count because they represented only a small percentage of its global sales. It also rejected Bitmain’s argument that jurisdiction required a strict cause-and-effect connection between its California contacts and Gevorkyan’s claims. The court explained that the claims sufficiently related to Bitmain’s California activities because Bitmain sold Gevorkyan 20 devices through its website, accepted payment, shipped the devices to California, and allegedly configured them to send virtual currency to Bitmain when connected to electricity and the internet there.

The court also considered evidence concerning a Bitmain YouTube page and a San Jose office. Because the motion was decided on written materials, the court was required to resolve factual conflicts in Gevorkyan’s favor at this stage and could not choose between competing declarations. The court stated that Bitmain’s California sales alone established personal jurisdiction and that the additional evidence supported that conclusion.

Reasonableness and Other Request

The court said Bitmain had the burden to show that exercising jurisdiction would be unreasonable and found that Bitmain made almost no effort to meet that burden. Bitmain briefly referred to an alleged arbitration agreement requiring arbitration in Hong Kong, but the court explained that whether it had personal jurisdiction and whether the case should be arbitrated were separate questions.

Bitmain also asked under Rule 12(f) to strike Gevorkyan’s nationwide class allegations based on personal jurisdiction. The court denied that request, explaining that the proper scope of any class should be considered under Rule 23 rather than Rule 12(f).

Disposition

The court denied Bitmain’s motion to dismiss and denied Bitmain’s request to strike the nationwide class allegations on personal jurisdiction grounds. The case was reopened, and the court stated that it would issue a scheduling order. Judge James Donato separately criticized the quality and professionalism of Bitmain’s legal briefing, including citations to overruled cases and rejected legal tests, and warned that future conduct of that kind could result in monetary, evidentiary, or professional-conduct sanctions.