Bielski v. Coinbase Global, Inc.

Background

Abraham Bielski, Dzhura Binyaminov, and Auryan Sajjadi sought to represent proposed classes of people with claims against Coinbase, Inc. They alleged that unauthorized electronic transfers depleted their cryptocurrency-exchange account balances, that they promptly notified Coinbase, and that Coinbase failed to investigate and remedy the alleged thefts. They also alleged that Coinbase did not provide required initial disclosures before electronic transfers were made.

The proposed claims included violations of the Electronic Funds Transfer Act and Regulation E, along with related state statutes and common-law duties. The plaintiffs sought damages, statutory and treble damages, restitution, disgorgement, punitive damages, and litigation fees and costs. This order did not decide those underlying claims. It addressed only whether interim class counsel should be appointed before the court decided whether to certify a class.

Legal standard

Rule 23(g)(3) permits a court to appoint interim class counsel before class certification when necessary to protect the interests of a proposed class. The court explained that this procedure is commonly used when overlapping, duplicative, or competing proposed class actions are pending and counsel’s responsibilities need to be clarified.

The court also considered the factors listed in Rule 23(g)(1), including the lawyers’ investigation of potential claims, experience with class actions and similar complex litigation, knowledge of the relevant law, and available resources. Other relevant matters may include efficiency and economy. Appointment of interim class counsel is discretionary.

Parties’ positions

The plaintiffs argued that their lawyers from Tycko & Zavareei LLP had effectively investigated the claims, represented Bielski on appeal, had relevant class-action experience and legal knowledge, and were prepared to commit the necessary resources. They also argued that appointing them would promote efficiency in light of related and potentially competing cases and that the “first to file” principle supported appointment.

Coinbase did not take a position at that time on whether the lawyers satisfied the Rule 23(g)(1) factors. Instead, Coinbase argued that appointment was premature because the usual circumstances—many proposed class actions pending in or consolidated before one court—were not present. Coinbase also argued that any efficiency benefits would be limited while an appeal concerning the court’s denial of a motion to compel arbitration for Bielski was pending.

Court’s reasoning

The court found that the situation was not the typical one requiring interim class counsel. There was one related action, several similar but unrelated actions in federal and state courts, and a likelihood that more actions would be filed. The court concluded that the possibility of future cases did not make appointment necessary at that time.

The court also noted that class discovery had been stayed by agreement while the arbitration appeal was pending. Appointing interim counsel before the timing and outcome of that appeal were known could produce negative consequences for the proposed classes. The court reasoned that taking that risk was not necessary to protect their interests at that point.

The plaintiffs’ lawyers also raised concern that Coinbase might enter into an inadequate settlement elsewhere that could harm the proposed classes. In response, Coinbase agreed to give the plaintiffs’ lawyers and the court immediate notice if it began negotiating such a settlement. The court said that an interim-counsel appointment might become appropriate if that situation arose.

Disposition

The court exercised its discretion not to appoint interim class counsel at that time. Plaintiffs’ motion to appoint interim class counsel was DENIED. The order did not resolve the plaintiffs’ underlying statutory, state-law, or common-law claims.