Quan v. BAM Trading Services, Inc.

Background

Long Quan sued BAM Trading Services, Inc., doing business as Binance.US, in state court. He alleged that his cryptocurrency-exchange account was frozen because of a Los Angeles Sheriff’s investigation and asserted three California-law claims: conversion, breach of the implied covenant of good faith and fair dealing, and violation of California’s Unfair Competition Law. BAM removed the case to federal court and moved to dismiss for lack of personal jurisdiction and failure to state a claim.

Quan did not timely oppose the motion. After the court ordered him to explain the omission, he filed a response, and BAM replied.

Personal Jurisdiction

The court held that Quan had not shown either general or specific personal jurisdiction over BAM. For general jurisdiction, Quan had not shown that BAM was incorporated in California or had its principal place of business there when he filed the complaint. The complaint referred to an office in San Francisco no later than February 2, 2023, while the complaint was filed on September 14, 2023; BAM submitted evidence that it had a principal place of business in Florida as of March 16, 2023.

For specific jurisdiction, Quan did not address the required questions of whether BAM purposefully conducted relevant activities in California and whether his claims arose from those activities. BAM also argued that Quan may have opened an account with Binance.com, a separate entity from BAM, and the court found that Quan appeared to agree that BAM was probably the wrong defendant. The court therefore concluded that exercising jurisdiction over BAM would not be reasonable.

Failure to State a Claim

The court also granted BAM’s motion under Rule 12(b)(6), which allows dismissal when a complaint does not allege enough facts to support a legally plausible claim.

For conversion, the court held that Quan had not alleged that he owned or had the right to possess the account funds when the alleged conversion occurred. He also provided no contract or other facts supporting an immediate right to the funds. The court additionally noted that Quan did not dispute BAM’s argument that the economic-loss rule required him to pursue the dispute as a contract claim rather than a tort claim. The motion was granted as to conversion.

For breach of the implied covenant of good faith and fair dealing, the court held that Quan had not provided a contract or identified its terms. The court therefore granted the motion as to that claim.

For the Unfair Competition Law claim, the court noted that Quan lives in China and had not alleged misconduct occurring in California. The court also found that the claim appeared to rely on the same unsupported contractual allegations. It granted BAM’s motion as to the Unfair Competition Law claim.

Disposition

The court granted BAM’s motion to dismiss, with leave to amend. Quan was permitted to file an amended complaint by May 27, 2024. The court stated that failure to file a timely amended complaint may result in dismissal.