Kleiman v. Wright

• Decision Date: 18 September 2020
• Docket Number: Case No. 18-cv-80176-BLOOM/Reinhart
• Court: U.S. District Court — Southern District of Florida
• Parties: IRA KLEIMAN, as the personal representative of the Estate of David Kleiman, and W&K INFO DEFENSE RESEARCH, LLC, Plaintiffs, v. CRAIG WRIGHT, Defendant.

IRA KLEIMAN, as the personal representative of the Estate of David Kleiman,and W&K INFO DEFENSE RESEARCH, LLC, Plaintiffs, v. CRAIG WRIGHT, Defendant.

Case No. 18-cv-80176-BLOOM/Reinhart

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

September 18, 2020

OMNIBUS ORDER

THIS CAUSE is before the Court upon Defendant's Motion for Summary Judgment, ECF No. [487] ("Defendant's Motion"), and Plaintiffs' Motion for Partial Summary Judgment on Defendant's Affirmative Defenses, ECF No. [498] ("Plaintiffs' Motion")¹ (collectively, the "Motions"). The Court has considered the Motions, all supporting and opposing submissions (ECF Nos. [526], [533], [560], and [561]),² the record in this case, the applicable law, and is otherwise fully advised. For the reasons set forth below, Defendant's Motion is denied, and Plaintiffs' Motion is granted in part and denied in part.

TABLE OF CONTENTS

I. BACKGROUND AND MATERIAL FACTS.................................................3

II. LEGAL STANDARD...................................................................................25

III. DISCUSSION..........................................................................................28

A. Defendant's Motion...............................................................................28

1. Subject matter jurisdiction and Ira Kleiman's authority to file the action on behalf of W&K.................................................................32

2. Statute of limitations...........................................................................36

a. A genuine dispute of material fact exists whether the alleged partnership ended in 2011.........................................................40

b. The Australian judgments did not trigger a statute of limitations commencing on November 6, 2013.............................................41

3. Oral partnership and statute of frauds......................................................52

a. A genuine dispute of material fact exists whether Defendant and Mr. Kleiman entered into an oral partnership.................................54

i. Plaintiffs' approach......................................................54

ii. Defendant's approach....................................................57

b. The statute of frauds does not bar claims based on the oral partnership..........................................................................62

4. Preemption.................................................................................64

5. Fraud claim.................................................................................68

a. Fraud................................................................................69

b. Constructive fraud................................................................74

B. Plaintiffs' Motion..................................................................................77

1. Accord and satisfaction, release, waiver, payment, set-off, and failure to mitigate damages.......................................................................77

2. Estoppel.....................................................................................79

3. Res judicata and collateral estoppel....................................................83

4. Statute of limitations and laches........................................................85

5. Good faith...................................................................................86

6. Unclean hands..............................................................................87

7. Statute of frauds...........................................................................90

8. Personal jurisdiction......................................................................92

CONCLUSION.............................................................................................93

*******************************

I. BACKGROUND AND MATERIAL FACTS

The Court assumes the parties' familiarity with the general factual allegations and nature of this case. See, e.g., ECF Nos. [68],[83], [87], [265], and [373]. The initial complaint was filed on February 14, 2018. ECF No. [1]. On January 14, 2019, Plaintiffs filed the operative Second Amended Complaint ("Complaint"), ECF No. [83]. The Complaint alleges that Defendant and David Kleiman ("David Kleiman" or "Mr. Kleiman") were former business partners that created Bitcoin³ under the pseudonym Satoshi Nakamoto. Between 2008 and before David Kleiman's death in April 2013, the two allegedly worked together on Bitcoin, mining bitcoins and developing blockchain related intellectual property. Starting in 2008 through February 2011, they allegedly worked together as a partnership, and from February 2011 until Mr. Kleiman's death in 2013, they conducted their work through Plaintiff W&K Info Defense Research LLC ("W&K"). During this period, significant amounts of bitcoins allegedly were mined and acquired by Defendant and Mr. Kleiman and valuable intellectual property was developed. This lawsuit concerns a dispute over the ownership of bitcoins and Bitcoin-related intellectual property.

The Complaint alleges that following David Kleiman's death, Defendant perpetrated a fraudulent scheme to seize Plaintiffs' bitcoins and their rights to certain blockchain related intellectual property. This scheme included, among other things, producing fraudulent documentsand forging David Kleiman's signatures on documents to purportedly show that David Kleiman transferred to Defendant bitcoins and intellectual property rights belonging to David Kleiman and W&K before David Kleiman's death. Since then, Defendant has taken sole ownership and control over the bitcoins and related intellectual property and refuses to return any bitcoins or intellectual property to either the estate or W&K. Plaintiffs seek relief against Defendant through various causes of action:⁴ conversion (Count I); unjust enrichment (Count II); misappropriation (Count III); violation of the Defend Trade Secrets Act (Count IV); breach of fiduciary duty (Count V); breach of partnership duties of loyalty and care (Count VI); fraud (Count VII); constructive fraud (Count VIII); permanent injunction (Count IX); and civil theft (Count X).

On May 8, 2020, the parties filed the instant Motions and accompanying statements of material fact. See ECF Nos. [488] ("Def.'s SOMF") and [495] ("Pls.' SOMF").⁵ The parties then filed responses to the Motions on May 22, 2020, see ECF Nos. [526] ("Defendant's Response") and [533] ("Plaintiffs' Response"),⁶ and counterstatements of material facts. See ECF Nos. [531] ("Def.'s CSOMF") and [534] ("Pls.' CSOMF").⁷ On June 2, 2020, the parties filed replies insupport of the Motions. See ECF No. [560] ("Plaintiffs' Reply")⁸ and ECF No. [561] ("Defendant's Reply").

Defendant makes six primary arguments: (1) Plaintiffs' claims are time-barred, and the statute of limitations accrued no later than November 6, 2013; (2) Plaintiffs cannot establish that an oral partnership existed between Defendant and Mr. Kleiman, but even if there was such a partnership, it would be void for vagueness and claims based on it would be barred by the statute of frauds; (3) Plaintiffs' common law claims are preempted and displaced by Fla. Stat. § 688.008; (4) the Court lacks subject matter jurisdiction based on evidence of W&K's membership; (5) Ira Kleiman, Mr. Kleiman's brother and the estate's personal representative, lacked authority to file this action on behalf of W&K and (6) Plaintiffs' fraud and constructive fraud claims cannot be established based on the record. See generally ECF No. [487].

Plaintiffs respond as follows: (1) their claims are not barred by the statute of limitations, and regardless their claims would be tolled by the doctrines of fraudulent concealment and equitable estoppel; (2) the record contains sufficient evidence to support the existence of a partnership under Florida law; (3) claims based on the alleged partnership are not barred by the statute of frauds; (4) Defendant fails to present any credible evidence that diversity jurisdiction is lacking, and supplemental jurisdiction should be exercised alternatively; (5) Ira Kleiman had authority to file this action on behalf of W&K (6) Plaintiffs' fraud and constructive fraud claims are well supported by record evidence; and (7) Plaintiffs' claims are not preempted. See generally ECF No. [533]. Defendant replies that Plaintiffs' claims are time-barred, neither fraudulentconcealment nor equitable estoppel apply to toll the limitations period, there is no evidence of an oral partnership, and the statute of frauds applies. See generally ECF No. [561].

Plaintiffs seek summary judgment on each of Defendant's fourteen affirmative defenses: accord and satisfaction; release; waiver; payment; set-off; failure to mitigate damages; estoppel; res judicata and collateral estoppel; statute of limitations; laches; good faith; unclean hands; statute of frauds; and lack of personal jurisdiction. See generally ECF No. [498]. Defendant responds that Plaintiffs' claims are time-barred; laches and unclean hands bar Plaintiffs' claims for equitable relief; the statute of frauds applies; W&K's claims are barred by res judicata; Plaintiffs are judicially estopped and equitably estopped from asserting their claims; Defendant did not abandon his "Coin-Exch" defenses; and he is entitled to preserve his defense of lack of personal jurisdiction. See generally ECF No. [526]. Plaintiffs reply as follows: (1) the Court should deem admitted facts in their statement of material facts; (2) they are entitled to summary judgment on the Coin-Exch defenses; (3) Defendant's statute of limitations and laches defenses fail because of lack of evidentiary support, the doctrines of equitable estoppel and fraudulent concealment, Plaintiffs' claims are timely and, in any event, Defendant was not prejudiced by any delayed filing; (4) the statute of frauds defense fails; (5) Defendant's estoppel defense is legally unavailing; (6) D...