Zakinov v. Ripple Labs, Inc.

• Citation: 369 F.Supp.3d 950
• Decision Date: 28 February 2019
• Docket Number: Case No. 18-cv-06753-PJH
• Parties: Vladi ZAKINOV, et al., Plaintiffs, v. RIPPLE LABS, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of California

369 F.Supp.3d 950

Vladi ZAKINOV, et al., Plaintiffs,

v.RIPPLE LABS, INC., et al., Defendants.

Case No. 18-cv-06753-PJH

United States District Court, N.D. California.

Signed February 28, 2019

Brian J. Robbins, Eric M. Carrino, Stephen J. Oddo, Robbins Arroyo LLP, Brian Edward Cochran, Brian O. O'Mara, David Conrad Walton, Robbins Geller Rudman & Dowd LLP, John T. Jasnoch, Scott+Scott Attorneys at Law LLP, San Diego, CA, Shawn A. Williams, Robbins Geller Rudman & Dowd LLP, San Francisco, CA, Lauren Sager McCabe, Pro Hac Vice, Rhiana Swartz, Thomas L. Laughlin, IV, Scott and Scott Attorneys at Law LLP, New York, NY, for Plaintiffs.

Peter Bradley Morrison, Virginia Faye Milstead, Skadden Arps Slate Meagher and Flom LLP, Los Angeles, CA, John M. Neukom, Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto, CA, for Defendants.

ORDER DENYING MOTIONS TO REMAND

Re: Dkt. No. 17, 18

PHYLLIS J. HAMILTON, United States District JudgeOn December 7, 2018, plaintiffs Vladi Zakinov and David Oconer moved to remand this action to the San Mateo County Superior Court. On the same day, in a separately filed motion, plaintiff Avner Greenwald also moved to remand this action to the San Mateo County Superior Court. Those motions came on for hearing before this court on February 13, 2019. Plaintiffs Zakinov and Oconer appeared through their counsel, Stephen Oddo and Brian O'Mara. Plaintiff Greenwald appeared through his counsel, Tom Laughlin. Defendants Ripple Labs, Inc. ("Ripple"), XRP II, LLC, a subsidiary of Ripple, and various individual defendants¹ appeared through their counsel, Peter Morrison. Having read the papers filed by the parties and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby DENIES plaintiffs' motions, for the following reasons.

BACKGROUND

This is the third action premised on the same theory of liability that this court has considered. On two prior occasions, this court has detailed plaintiffs' theory of liability at length. See Coffey v. Ripple Labs Inc., 333 F. Supp. 3d 952, 954 (N.D. Cal. 2018) ; Greenwald v. Ripple Labs, Inc., No. 18-CV-04790-PJH, 2018 WL 4961767, at *1 (N.D. Cal. Oct. 15, 2018). As was the case with those orders, which also addressed motions to remand, this order does not turn on the substance of plaintiffs' allegations. Accordingly, the court only briefly recites plaintiffs' theory of liability:

Plaintiffs allege that Ripple created a digital currency called XRP and that defendants and their affiliates have been engaged in an ongoing scheme to sell XRP to the general public. Plaintiffs further allege that because XRP qualifies as a "security" under either the California or federal securities laws, Ripple's past and ongoing sales of XRP constitute the selling of unregistered securities in violation of federal or state law.

Like Coffey and Greenwald, defendants removed the present action under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1453, and plaintiffs now move to remand.

DISCUSSION

A. Legal Standard

This court has previously explained

The right to remove a case to federal court is entirely a creature of statute. See Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979). In general, the Ninth Circuit "strictly construe[s] the removal statute against removal jurisdiction," and "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (discussing 28 U.S.C. § 1441 ). "The ‘strong presumption’ against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Id. If a defendant fails to meet this burden, the action must be remanded.

* * *

CAFA "relaxed" the diversity requirements for putative class actions. See Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 135 S.Ct. 547, 551, 190 L.Ed.2d 495 (2014). [And,] [c]ontrary to the Ninth Circuit's general rule for removal, "[n]o antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court." Id. at 554. Pursuant to CAFA, a defendant may remove an action under § 1453 if the amount in controversy exceeds $ 5 million, the putative class has more than 100 members, and the parties are minimally diverse. Id. at 552 ; 28 U.S.C. §§ 1332(d), 1453.

Coffey, 333 F.Supp.3d at 955-56 ; 28 U.S.C. § 1453.

Further,

[t]he Supreme Court has explained that CAFA's " ‘provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.’ " Dart Cherokee, 135 S.Ct. at 554 (discussing legislative history and quoting S. Rep. No. 109–14 at 43 (2005) ); Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 595, 133 S.Ct. 1345, 185 L.Ed.2d 439 (2013) ("CAFA's primary objective" is to "ensur[e] Federal court consideration of interstate cases of national importance." (internal quotation marks omitted) ). "The Senate Report on CAFA explains that ‘[b]ecause interstate class actions typically involve more people, more money, and more interstate commerce ramifications than any other type of lawsuit, the Committee firmly believes that such cases properly belong in federal court.’ " Jordan [v. Nationstar Mortg. LLC, 781 F.3d 1178, 1182 (9th Cir. 2015) ] (quoting S. Rep. No. 109-14 at 5 ). There can be little doubt that the present action—involving a proposed international class and issues of first impression regarding the federal securities laws['] applicability to a nascent technology—falls into that category of class actions.

Coffey, 333 F.Supp.3d at 962 (discussing similar XRP-related allegations).

B. Analysis

1. Coffey, Greenwald, and In re Ripple

As noted, the above-captioned action is the third Ripple-related action assigned to this court. Along with Coffey and Greenwald, both of which this court previously addressed on motions to remand, plaintiffs Zakinov and Oconer filed separate state court actions on June 5, 2018, and June 27, 2018, respectively. The Zakinov and Oconer actions were subsequently consolidated, pursuant to stipulation, into "In re Ripple" by Judge Richard DuBois of the San Mateo County Superior Court. While all three actions share the same legal theory of liability, they are dissimilar in ways that affect the propriety of removal under CAFA—defendants' sole basis for removal in each of the three actions.

a. Coffey

In Coffey, plaintiff was a California resident who asserted four causes of action for violations of §§ 5 & 12(a)(1) of the federal Securities Act and §§ 25110 & 25503 of the California Corporation Code for the unregistered offer and sale of securities, and for control person liability under the Securities Act and the California Corporation Code. Coffey, 333 F.Supp.3d at 955. The Coffey plaintiff brought the action on behalf of all persons or entities that purchased XRP. Id. The Coffey defendants removed the action on June 1, 2018, contending that plaintiff's state law claims independently satisfied CAFA's jurisdictional requirements. This court agreed and denied the Coffey plaintiff's motion to remand. Id. at 965-966. In doing so, the court found the Ninth Circuit's decision in Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031 (9th Cir. 2008), inapplicable because Luther only "considered whether an action that solely alleged Securities Act claims could be removed under CAFA[,]" whereas the Coffey defendants "removed th[e] action based on plaintiff's California claims." Id. at 957-58.² The Coffey plaintiff voluntarily dismissed the action on August 22, 2018.

b. Greenwald

Greenwald was initially removed on August 8, 2018, from the San Mateo County Superior Court. Greenwald, a resident of Israel, asserts only Securities Act claims for the unregistered offer and sale of securities and for control person liability. Greenwald, 2018 WL 4961767, at *1. As was the case in Coffey, Greenwald brings his action on behalf of all persons or entities who purchased XRP. Id. On October 15, 2018, the court remanded the action to the San Mateo County Superior Court because Luther directly applied to Greenwald 's complaint alleging only Securities Act claims. Id. at *3.

c. In re Ripple

As noted, the In re Ripple action is the result of Judge DuBois consolidating two actions: Oconer v. Ripple Labs Inc. et al., 18-CIV-3332 (Cal. Super. Ct. San Mateo Cty.), and Zakinov v. Ripple, 18-CIV-2845 (Cal. Super. Ct. San Mateo Cty.). In those actions, Oconer and Zakinov, both California residents, sought to represent all citizens of California who purchased XRP, and asserted claims under only the California Corporation Code. In addition, those actions named as defendants only Garlinghouse (Ripple's CEO), Ripple, and XRP II; all of whom are also citizens of California. The Oconer and Zakinov defendants did not remove either Zakinov or Oconer because (presumably) those actions did not satisfy CAFA's minimal diversity requirement and/or were exempt under CAFA's local controversy exception.³

On August 30, 2018, pursuant to stipulation, Judge DuBois consolidated Zakinov and Oconer for all purposes as In re Ripple Labs Inc. Litig, 18-CIV-2845 ("In re Ripple"). Dkt. 2-1, Ex. E (the "First Consolidation Order" or "First Consol. Order"). As relevant here, that order, entitled "Stipulation and [ ] Order Consolidating Related Actions and Related Matters," states:

6. The following Related Actions are hereby consolidated for all purposes, including pre-trial proceedings and trial (the "Consolidated Action"):

 Abbreviated Case Name Case Number Date Filed
                Zakinov v. Ripple Labs Inc.   18-CIV-02845    6/5/2018
                  Oconer v. Ripple Labs Inc.    18-CIV-03332    6/27/2018
                

Every pleading filed in the Consolidated Action, or in any separate action included herein, shall bear the following caption:

                                     SUPERIOR COURT OF THE STATE OF CALIFORNIA

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