New Oriental Enterprise, PTE, Ltd. v. Mission Critical Solutions LLC

Background

New Oriental alleged that it agreed to buy Bitcoin from a cryptocurrency broker in Costa Rica. It alleged that, at the broker’s direction, it wired $800,000 to a bank account belonging to Mission Critical Solutions LLC, but no Bitcoin was purchased.

New Oriental’s complaint asserted claims for fraud, rescission, money had and received, conversion, and unjust enrichment against Mission Critical Solutions LLC and three John Doe defendants. Mission Critical Solutions LLC moved to dismiss under Federal Rules of Civil Procedure 9(b) and 12(b)(6). It also sought damages, attorney’s fees, and costs under New York Civil Practice Law and Rules § 6212(e).

New Oriental opposed the dismissal motion and sought permission to file an amended complaint adding Mark-Anthony Phillips, who had originally been identified as a John Doe defendant, and Transac-Trade LLC. The proposed amended complaint alleged that the Costa Rican broker acted for Mission Critical Solutions LLC, Phillips, and Transac-Trade LLC. It also alleged that Mission Critical Solutions LLC was a shell company used by Phillips as a front to commit fraud. The opinion states that Phillips was the sole member of Mission Critical Solutions LLC and the co-founder and chief executive officer of Transac-Trade LLC.

Reason for Allowing Amendment

The court explained that amendments to pleadings are generally allowed when justice requires, and that adding parties under Rule 21 is governed by the same liberal standard generally applied to amendments under Rule 15. The court found no undue delay or bad faith by New Oriental and no undue prejudice to Mission Critical Solutions LLC. The case was at an early stage: no defendant had answered, no conference under Rule 16 had been held, and no discovery deadlines had been set.

The court also stated that, when a plaintiff seeks to amend while a motion to dismiss is pending, the court may either evaluate the dismissal motion using the proposed amended pleading or deny the pending motion as moot. The court chose the latter approach because the amendment required court permission, added two defendants who had not yet had an opportunity to respond, and promoted judicial economy.

The court allowed New Oriental to add the new defendants and to include allegations needed to correct any pleading deficiencies identified by the dismissal motion. It warned that it would be reluctant to allow another amendment if a later motion to dismiss the amended complaint succeeded.

Ruling

Judge Mary Kay Vyskocil granted New Oriental’s motion for leave to amend. New Oriental was granted permission to add the two defendants and any further allegations necessary to cure pleading deficiencies, and it was ordered to file the amended complaint by March 26, 2021.

The court denied Mission Critical Solutions LLC’s motion to dismiss as moot and without prejudice to refiling after service of the amended complaint. The court did not decide whether the original claims satisfied Rules 9(b) or 12(b)(6), and the opinion does not resolve the underlying fraud or other claims.