DarkPulse, Inc. v. FirstFire Global Opportunities Fund, LLC

Background

DarkPulse, Inc. sued FirstFire Global Opportunities Fund, LLC and its managing member, Eli Fireman. The dispute involved two convertible promissory notes. Under the 2018 note, FirstFire loaned DarkPulse $225,000 in exchange for a note with a $247,500 principal amount and later converted the debt into DarkPulse stock. Under the 2021 note, FirstFire loaned DarkPulse $750,000 in exchange for a note with an $825,000 principal amount. The 2021 transaction also required DarkPulse to issue 60,000,000 commitment shares and allowed FirstFire to convert the debt into stock.

DarkPulse alleged that FirstFire acted as an unregistered securities dealer in violation of Section 15(a) of the Securities Exchange Act of 1934. It asserted related claims against Fireman as a controlling person, brought a claim under the Racketeer Influenced and Corrupt Organizations Act based on alleged collection of unlawful debt, and asserted unjust-enrichment and constructive-trust claims. DarkPulse sought to declare the transactions void, rescind them, and require FirstFire to return stock.

Rulings on the federal claims

The court granted Defendants’ motion to dismiss under Federal Rule of Civil Procedure 12. Rule 12(b)(6) tests whether a complaint plausibly states a legal claim, while Rule 12(b)(3) concerns improper venue and Rule 12(b)(1) concerns subject-matter jurisdiction.

For the claims involving the 2021 transaction, the court held that an amendment to the 2021 note contained a mandatory forum-selection clause requiring covered actions to be brought in Delaware. The court found that the provision was reasonably communicated to DarkPulse because it appeared in a one-page amendment under a bold and underlined “Governing Law; Venue” heading. The court also found that the provision was mandatory and covered the parties and claims involving the 2021 transaction. The court therefore dismissed Counts I and II as they related to that transaction.

The court rejected DarkPulse’s argument that New York criminal-usury law allowed it to invalidate the 2021 transaction affirmatively. The court explained that, under the authorities it considered, criminal usury generally operates as a defense to an action seeking repayment, rather than as an affirmative claim by a corporation seeking to void an agreement and obtain relief.

As to the 2018 transaction, the court held that Counts I through III were barred by the three-year limitations period it applied to these claims. DarkPulse entered into the 2018 agreement on September 20, 2018, but filed the action on December 31, 2021. The court rejected DarkPulse’s argument that later stock conversions restarted the limitations period because the conversions were authorized by the original agreement and were foreseeable when it was made.

The court also held that Counts I through III failed to state a claim as to both transactions. A contract may be rescinded under the relevant Exchange Act provision only if it involves a prohibited transaction. The court concluded that neither note required FirstFire to act as a broker or dealer. FirstFire’s obligation to purchase the notes did not itself explicitly require it to perform broker-dealer services. The court therefore did not decide whether FirstFire was actually a dealer under the Exchange Act.

The court dismissed Count IV, the RICO claim, as to both transactions. DarkPulse’s unlawful-debt theory depended on the notes violating usury law. The court enforced the 2018 note’s Nevada choice-of-law provision because Nevada had a reasonable connection to the parties and transaction, and DarkPulse did not show that applying Nevada law would violate a fundamental New York public policy. The court likewise enforced the Delaware choice-of-law provision in the 2021 amendment because both parties were incorporated under Delaware law and DarkPulse had not shown that applying Delaware law would violate New York public policy. The court noted that neither Nevada nor Delaware had adopted a usury statute relevant to DarkPulse’s theory.

State-law claims and disposition

After dismissing the federal claims, the court declined to exercise supplemental jurisdiction over the remaining unjust-enrichment and constructive-trust claims. Those state-law claims were dismissed without prejudice to repleading in state court.

The court’s conclusion states that Defendants’ motion to dismiss was granted in its entirety. The Clerk was directed to terminate the motions and close the case. Judge Edgardo Ramos signed the opinion and order.