Saidnia v. Nimbus Mining LLC

Background

Tiffany Saidnia alleged that she entered into a July 2014 contract with Nimbus Mining LLC for cloud Bitcoin-mining services. She paid $50,000 and received mining services for about six months, during which she mined nearly 40 bitcoins. She alleged that Nimbus later stopped providing the services, promised compensation for the interruption, and never delivered the bitcoins it said she was owed. She further alleged that, after direct communications with the individual defendants, she still had not received the promised bitcoins as of October 2021.

Saidnia sued Nimbus and its three cofounders: Jean-Marc Jacobson, Remy Jacobson, and Greg Bachrach. She asserted breach of contract, fraud, and unjust enrichment, and sought to pierce the corporate veil—that is, to hold the individual defendants responsible for Nimbus’s obligations by showing that the company was dominated and used to cause her harm.

Jurisdiction

The court addressed subject-matter jurisdiction because the case was brought under diversity jurisdiction, which generally requires more than $75,000 in dispute and complete citizenship diversity between the opposing sides. An LLC’s citizenship depends on the citizenship of each member, not simply the state where the LLC was formed or operated.

Saidnia alleged that she was a California citizen and that Nimbus was most likely a citizen of Delaware and/or Florida, but she could not determine Nimbus’s members and their citizenship. The court found that her substantial investigation and undisputed jurisdictional allegations established diversity at that stage, but it ordered limited jurisdictional discovery to remove any remaining doubt about Nimbus’s citizenship before broader discovery began.

The court also rejected Bachrach’s challenge to personal jurisdiction. It found that the contract’s provision requiring disputes to be heard in New York courts could apply to the individual defendants because they were alleged to be Nimbus’s cofounders and CEO, were involved in its operations, were closely connected to the contract dispute, and allegedly participated in conduct related to Saidnia’s claims.

Claims Against the Individual Defendants

The Jacobsons moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint contains enough factual allegations to state a legally plausible claim. Bachrach moved under Rule 12(b)(2) for lack of personal jurisdiction and under Rule 12(b)(6) for failure to state a claim.

The court concluded that Saidnia plausibly alleged an alter-ego theory. She alleged that the individual defendants were Nimbus’s sole cofounders, that the Jacobsons handled daily operations, and that Bachrach was CEO. She also alleged that Nimbus was undercapitalized, failed to follow corporate formalities, did not maintain records, could not pay its debts, served as a façade for the individual defendants, and was used to siphon funds and bitcoins. The court held that these allegations were sufficient at the pleading stage to allow Saidnia to pursue claims against the individual defendants under a veil-piercing theory.

For breach of contract, the court rejected Bachrach’s argument that a corporate officer cannot be personally liable for the company’s breach. The court stated that personal liability could be possible if veil piercing was necessary to prevent unfairness, and that an officer who participates in a tort may also be personally liable regardless of veil piercing. The court found Saidnia’s allegations about Bachrach’s promises concerning payment and his alleged role in siphoning Nimbus’s funds sufficient to allow the contract claim against him to proceed.

The court also allowed the fraud claim to proceed. Saidnia identified alleged false statements about a mining outage in customer-support emails, quoted the statements, identified the source as Nimbus’s customer-support team, and supplied the dates on which she received the messages. She alleged that the outage was invented so the defendants could use her purchased computing power and retain the bitcoins. The court found that these allegations were sufficiently detailed under the heightened pleading standard for fraud and provided a factual basis for alleging that the individual defendants knew the statements were false or acted recklessly.

The court likewise found the unjust-enrichment claim adequately pleaded. Saidnia alleged that the defendants retained bitcoins that belonged to her and that the individual defendants were enriched through their management roles and direct conduct. The court explained that, although she could not ultimately recover twice under both contract and unjust-enrichment theories for the same loss, she could plead those theories alternatively at this stage.

Disposition

Defendants’ motions to dismiss were DENIED. The individual defendants were ordered to file answers to the amended complaint within fourteen days after entry of the order. The parties were directed to conduct discovery concerning Nimbus’s citizenship before other discovery. The opinion did not decide the truth of Saidnia’s allegations or finally determine liability or damages. Judge Vernon S. Broderick also directed the Clerk to terminate the pending motions at docket entries 32 and 34.