Gadasalli v. Bulasa
| Decision Date | 22 May 2023 |
| Docket Number | Civil Action 4:22-CV-249 |
| Parties | DIVYA GADASALLI, Plaintiff, v. JERRY BULASA, DONG LIAN, DANYUN LIN, BINANCE HOLDINGS, LTD., POLONIEX, LLC, and POLO DIGITAL ASSETS, LTD. Defendants. |
| Court | U.S. District Court — Eastern District of Texas |
Pending before the Court is Defendant Binance Holdings Ltd.'s Motion to Dismiss the Amended Complaint for Lack of Personal Jurisdiction and Failure to State a Claim (Dkt. #32). Having considered the motion, the pleadings, and the relevant law the Court finds that the motion should be GRANTED.
This case arises out of an alleged scam involving cryptocurrency where Plaintiff Divya Gadasalli (“Gadasalli”) was promised romance and financial prosperity but ultimately ended up losing over eight million dollars. The specifics of the alleged fraudulent scheme devised by the Defendants Jerry Bulasa (“Bulasa”), Dong Lian, and Danyun Lin have been more fully set forth in the Court's Memorandum Opinion and Order on Gadasalli's emergency motion for a temporary restraining order (Dkt. #13).
Briefly Gadasalli met Bulasa online through a dating service, and Gadasalli believed that they had a romantic connection. Eventually, Gadasalli began investing at the direction of Bulasa who she believed was a successful cryptocurrency investor. Although she was informed that her investments had grown to approximately ten million dollars by Bulasa, Gadasalli was unable to withdraw any of the actual funds from her account. After multiple excuses from Bulasa and being down over eight million dollars in the span of a year, Gadasalli filed the pending lawsuit.
In addition to suing Bulasa and his alleged accomplices, Gadasalli also sued a number of entities, one of those being Defendant Binance Holdings, Ltd. (“Binance”) (Dkt. #24). Binance is a foreign digital currency wallet platform and is currently one of the largest cryptocurrency exchanges in the world (Dkt. #24 ¶ 17). Binance refers to itself as an “ecosystem” comprising of several interrelated components (Dkt. #24 ¶ 18).
On June 20, 2022, Binance filed the pending motion, asking the Court to dismiss any and all claims against it for a lack of personal jurisdiction and for failure to state a claim (Dkt. #32). On July 13, 2022, Gadasalli filed her response, opposing Binance's motion on both grounds (Dkt. #37). On July 27, 2022, Binance filed a reply (Dkt. #39).[1]
Federal Rule of Civil Procedure 12(b)(2) requires a court to dismiss a claim if the court does not have personal jurisdiction over the defendant. FED. R. CIV. P. 12(b)(2). After a non-resident defendant files a motion to dismiss for lack of personal jurisdiction, it is the plaintiff's burden to establish that in personam jurisdiction exists. See, e.g., Luv N' care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006).
To satisfy that burden, the party seeking to invoke the court's jurisdiction must “present sufficient facts as to make out only a prima facie case supporting jurisdiction,” if a court rules on a motion without an evidentiary hearing. Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir. 2000). When considering the motion to dismiss, “[a]llegations in [a] plaintiff's complaint are taken as true except to the extent that they are contradicted by defendant's affidavits.” Int'l Truck & Engine Corp. v. Quintana, 259 F.Supp.2d 553, 557 (N.D. Tex. 2003) (citing Wyatt v. Kaplan, 686 F.2d 276, 282-83 n.13 (5th Cir. 1982)); Black v. Acme Mkts., Inc., 564 F.2d 681, 683 n.3 (5th Cir. 1977). Thus, courts accept a plaintiff's non-conclusory, uncontroverted allegations as true, and resolve conflicts between the facts contained in the parties' affidavits in the plaintiff's favor. See, e.g., Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 868 (5th Cir. 2001).
Binance requests that the Court dismiss Gadasalli's claims against it for a lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) and alternatively, for a failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) (Dkt. #32 at p. 7). The Court will begin with its analysis on personal jurisdiction.
Gadasalli presents two theories regarding how the Court has personal jurisdiction over Binance. First, Gadasalli contends that Binance itself has purposefully placed itself in the United States, and in turn, Texas, based on the activity that it has conducted in the United States. Gadasalli asserts that this activity is valid to show both general and specific jurisdiction. Second, Gadasalli argues that through the doctrine of alter ego, Binance should take on the contacts of its American affiliate, Binance.US. Gadasalli requests that the Court disregard the separate corporate forms and the imputed contacts should be sufficient for the Court to exercise personal jurisdiction over Binance (Dkt. #37 at pp 11-13).
The Court conducts a two-step inquiry when a defendant challenges personal jurisdiction. Frank v. P N K (Lake Charles) L.L.C., 947 F.3d 331, 336 (5th Cir. 2020). First, the Court must determine whether the forum state's long-arm statute confers personal jurisdiction over the defendant. Id. Second, the Court must determine whether the exercise of jurisdiction is consistent with due process under the United States Constitution. Id.
In Texas, the long-arm statute's broad doing business language authorizes personal jurisdiction over a nonresident defendant as far as the federal constitutional requirements of due process will allow. Id. (citing Zinc Nacional, S.A. v. Bouche Trucking, Inc., 308 S.W.3d 395, 397 (Tex. 2010)). Accordingly, the Court may exercise personal jurisdiction over Binance only to the extent authorized by the Due Process Clause. The sole inquiry that remains then is whether personal jurisdiction offends or comports with federal constitutional guarantees. Bullion, 895 F.2d at 216. The Due Process Clause permits the exercise of personal jurisdiction over a non-resident defendant when the defendant has established minimum contacts with the forum state “such that maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'lShoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Those “minimum contacts” can give rise to two types of personal jurisdiction: general or specific. See, e.g., Frank, 947 F.3d at 336. General jurisdiction exists only when the defendant's contacts with the forum are so “‘continuous and systematic' as to render them essentially at home in the forum State.” Daimler AG v. Bauman, 571 U.S. 117, 127 (2014) (quoting Goodyear Dunlop Tires Operations., S.A. v. Brown, 564 U.S. 915, 919 (2011)). Likewise, specific jurisdiction exists if the asserted claims arise out of or relate to the defendant's contacts with the forum. See, e.g., Carmona v. Leo Ship Mgmt., Inc., 924 F.3d 190, 197 (5th Cir. 2019). The Court will start its analysis on personal jurisdiction with Gadasalli's theory of alter ego.
Gadasalli argues that the Court should look at the relationship between Binance and Binance.US, and in doing so, “fuse the two together for jurisdictional purposes,” meaning that the contacts of one would be imputed to the other.[2] Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 346 (5th Cir. 2004) (citing Hargrave v. Firebrand Corp., 710 F.2d 1154, 1159 (5th Cir. 1983)). It is not a contested fact that these are two separate companies, rather, the parties dispute how the two are interrelated and if the relationship constitutes the certain relationship that this doctrine requires (Dkt. #32 at pp. 18-22; Dkt. #37 at pp. 11-13).
Under the doctrine of alter ego, when two corporations are essentially the “same entity, the jurisdictional contacts of one are the jurisdictional contacts of the other” for the purposes of a personal jurisdiction analysis. See Jackson v. Tanfoglio Giuseppe, S.R.L., 615 F.3d 579, 586 (5th Cir. 2010) (citing Patin v. Thoroughbred Power Boats, Inc., 294 F.3d 640 653 (5th Cir. 2002)). However, this analysis is not a simple one. Federal courts have found that the proper exercise of personal jurisdiction over a nonresident corporation may not be based solely upon another corporate entity's contacts with the forum state when the two corporations are merely affiliates. See Frudensprung, 379 F.3d at 346. Rather, there must be “something beyond” that affiliation. Dickson Marine, Inc. v. Panalpina, Inc., 179 F.3d 331, 338 (5th Cir. 1999). For this analysis, because separate corporate forms “should not be lightly disregarded,” courts should begin with a presumption that the two entities are independent for jurisdictional purposes. Fellowship Filtering Techs., LLC v. Alibaba.com, Inc., No. 2:15-CV-2049, 2016 WL 6917272, at *2 (E.D. Tex. Sept. 1, 2016); Dickson Marine, 179 F.3d at 338. However, this “presumption of institutional independence” for related corporate entities may be rebutted by “clear and convincing evidence” that one entity controls the internal business operations and affairs of the other entity. Licea, 952 F.3d at 213.
At least two other federal courts have heard a similar argument regarding this alter ego theory and declined to impute the contacts from Binance.US to Binance. See Reynolds v Binance Holdings Ltd., 481 F.Supp.3d 997, 1009 (N.D. Cal. Aug. 26, 2020) (); Order Granting Motion to Dismiss at 6, 8, Guarini v. Doe, No. 21-CV-81890 (S.D. Fl. Apr. 5, 2022), ECF No. 25 (...
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