Blockchain Mining Supply and Services Ltd. v. SUPER CRYPTO MINING
Blockchain Mining Supply and Services Ltd. v. SUPER CRYPTO MINING, INC. n/k/a DIGITAL FARMS, INC. and DPW HOLDINGS, INC. n/k/a AULT ALLIANCE, INC.
- Andrew Carter
- 1:18-cv-11099
- U.S. District Court · Southern District of New York
- 4
In Blockchain Mining Supply v. Super Crypto, Judge Carter allowed limited jurisdictional discovery, granted it in part and denied it in part, and denied dismissal without prejudice.
Blockchain Mining Supply and Services Ltd. received limited discovery concerning personal jurisdiction and its alter-ego theory. Super Crypto Mining, Inc. and DPW Holdings Inc. faced limited discovery, and their motion to dismiss was denied without prejudice.
What happened
Blockchain Mining Supply and Services Ltd. sued Super Crypto Mining, Inc. and DPW Holdings Inc. over an alleged contract to sell cryptocurrency-mining machines, asserting breach of contract and promissory estoppel. The defendants asked the court to dismiss the amended complaint, and the plaintiff requested discovery to respond to issues involving personal jurisdiction and whether DPW was Super Crypto’s alter ego.
The court found that the plaintiff made a sufficient initial showing for limited discovery about personal jurisdiction and alter-ego status. It authorized certain interrogatories and document requests, limited the discovery to specified subjects and to 2018, and declined to authorize other requests as overly broad. The request for jurisdictional discovery was granted in part and denied in part.
Judge Andrew L. Carter, Jr. denied the defendants’ motion to dismiss without prejudice. The plaintiff was required to complete the limited discovery by March 4, 2021, after which the parties had to propose a schedule for further briefing.
The detailed version
- Blockchain Mining Supply and Services Ltd. v. SUPER CRYPTO MINING · No. 1:18-cv-11099
- Andrew Carter
- Dec. 4, 2020
Background
Blockchain Mining Supply and Services Ltd. brought the action against Super Crypto Mining, Inc. and DPW Holdings Inc. The amended complaint alleged that Blockchain and Super Crypto entered into an agreement under which Blockchain would sell cryptocurrency-mining machines to Super Crypto. Blockchain asserted claims for breach of contract and promissory estoppel.
The complaint also alleged that DPW dominated Super Crypto’s affairs in connection with the agreement and acted as Super Crypto’s alter ego. The allegations included that DPW was Super Crypto’s sole shareholder; that the two companies shared an address, office space, and attorneys; that they made no distinction between themselves concerning obligations to Blockchain; and that DPW completely dominated Super Crypto regarding the agreement.
The defendants moved to dismiss the amended complaint under Federal Rules of Civil Procedure 12(b)(2), concerning personal jurisdiction, and 12(b)(6), concerning whether the complaint adequately stated a claim. Blockchain said it could not adequately respond to the motion and sought formal discovery about personal jurisdiction and alter-ego status.
Court’s analysis
The court explained that district courts have broad authority to determine the scope of discovery and may allow discovery concerning personal jurisdiction. Such discovery may be appropriate when a plaintiff makes an initial showing that there may be a basis for jurisdiction. The court also noted that this discovery may sometimes be allowed even without a full initial showing of jurisdiction.
The court found that Blockchain had made a sufficient initial showing for limited discovery. As to personal jurisdiction, the court relied on allegations concerning Milton “Todd” Ault III’s activities in New York. As to the alter-ego theory, the court considered the allegations about DPW’s ownership, shared operations, lack of distinction, and control over Super Crypto.
The court limited discovery to verifying specific facts important to the jurisdiction and alter-ego theories. It authorized formal service of Interrogatory No. 1, limited to Ault’s activities, and Interrogatory Nos. 2 and 5. It also authorized Requests for Production Nos. 1, 3, 8, 9, and 10. The defendants were directed to use the search terms proposed in their October 16, 2020 letter to the court. All authorized limited discovery was restricted to the period from January 1, 2018, through December 31, 2018.
The court declined to authorize Interrogatory Nos. 3, 4, 6, and 8 and Requests for Production Nos. 2, 4, 5, 6, and 7. It characterized the rejected requests as an overbroad search for jurisdictional facts rather than focused discovery.
Disposition
The court granted in part and denied in part Blockchain’s request for jurisdictional discovery. It denied the defendants’ motion to dismiss without prejudice. Blockchain was ordered to complete the limited discovery by March 4, 2021, and the parties were ordered to file a joint status letter by March 8, 2021 proposing a briefing schedule for the motion to dismiss the amended complaint.
The order addressed discovery and the timing of the dismissal motion; it did not decide the underlying contract or promissory-estoppel claims.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.