throbber
Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 1 of 26
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`ERIK CROWL, KEITH WADE, ERIC
`O’REILLY, ALTON PARKER, STEVEN
`HEY, NATHAN COHEN, SAMUEL
`GLICK, FARSHID SEPASSI, ROBERT
`NEELY, ANTHONY WATSON, TYLER
`HANDLEY, QWNTM CAPITAL
`
`LIMITED LIABILITY LIMITED
`
`PARTNERSHIP, DAVID WARD, ANDRE
`PAEZ, and SALEM ALOBAID
`
`
`
`
`Plaintiffs,
`
`vs.
`
`STRONGBLOCK, et al.,
`
`Defendants.
`____________________________________
`
`Dated: October 14, 2022
`
`Case No. 1:22-cv-7313-VSB
`
`MEMORANDUM OF LAW IN
`SUPPORT OF DEFENDANTS’
`MOTION TO DISMISS
`AND COMPEL ARBITRATION
`
`Respectfully submitted,
`
`LATHROP GPM LLP
`
`/s/ Nancy Sher Cohen
`Nancy Sher Cohen (NY Bar No. 4160479)
`2049 Century Park East, Suite 3500S
`Los Angeles, California 90067
`(310) 789-4600 / (310) 789-4601 FAX
`Nancy.Cohen@LathropGPM.com
`
`and
`
`Michael J. Abrams (pro hac vice forthcoming)
`Kate O’Hara Gasper (pro hac vice forthcoming)
`2345 Grand Boulevard, Suite 2200
`Kansas City, Missouri 64108-2618
`(816) 292-2000 / (816) 292-2001 FAX
`Michael.Abrams@LathropGPM.com
`Kate.Gasper@LathropGPM.com
`
`ATTORNEYS FOR DEFENDANTS
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 2 of 26
`
`TABLE OF CONTENTS
`
`PRELIMINARY STATEMENT .................................................................................................... 1
`FACTUAL BACKGROUND ......................................................................................................... 2
`I. StrongBlock and the Sign-Up for Nodes-as-a-Service ............................................................. 2
`II. StrongBlock’s Terms of Service and the Arbitration Agreements ........................................... 5
`LEGAL ARGUMENT .................................................................................................................. 10
`A.
`Legal Standards to Dismiss and Compel Arbitration ..................................................... 10
`1. StrongBlock and Plaintiffs Entered into a Valid and Enforceable Arbitration
`Agreement. ..................................................................................................................... 12
`2. Plaintiffs’ Claims Against StrongBlock are Within the Scope of the Arbitration
`Agreement ...................................................................................................................... 17
`3. Plaintiffs’ Claims Against the Individual Defendants are Within the Scope of the
`Arbitration Agreement ................................................................................................... 19
`4. Defendants Seek a Dismissal of Plaintiffs’ Action and, in the Alternative,
`Request a Stay Pending Arbitration. .............................................................................. 21
`CONCLUSION ............................................................................................................................. 21
`
`i
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 3 of 26
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`Applebaum v. Lyft, Inc.,
`263 F. Supp. 3d 454 (S.D.N.Y. 2017)................................................................................12, 17
`
`Begonja v. Vornado Realty Trust,
`159 F. Supp.3d 402 (S.D.N.Y. 2016).......................................................................................11
`
`In re Bibox Grp. Holdings Ltd. Sec. Litig.,
`534 F. Supp. 3d 326 (S.D.N.Y. 2021)........................................................................................2
`
`Citigroup, Inc. v. Abu Dhabi Investment Authority,
`776 F.3d 126 (2d Cir. 2015).....................................................................................................11
`
`Cornelius v. Wells Fargo Bank, N.A.,
`No. 19-CV-11043 (LJL), 2020 WL 1809324 (S.D.N.Y. Apr. 8, 2020) ..................................10
`
`Crawford v. Beachbody, LLC,
`No. 14CV1583-GPC(KSC), 2014 WL 6606563 (S.D. Cal. Nov. 5, 2014) .............................17
`
`Daly v. Citigroup Inc.,
`No. 16-cv-9183 (RJS), 2018 WL 741414 (S.D.N.Y. Feb. 6, 2018) ........................................11
`
`Epic Sys. Corp. v. Lewis,
`138 S.Ct. 1612 (2018) ..............................................................................................................11
`
`Feld v. Postmates, Inc.,
`442 F. Supp. 3d 825 (S.D.N.Y. 2020)......................................................................................16
`
`Flores v. Chime Fin., Inc.,
`No. 21-CV-4735 (RA), 2022 WL 873252 (S.D.N.Y. Mar. 23, 2022) .....................................16
`
`Fteja v. Facebook,
`841 F. Supp. 2d 829 (S.D.N.Y. 2012)......................................................................................16
`
`Katz v. Cellco P’ship,
`794 F.3d 341 (2d Cir. 2015).....................................................................................................21
`
`KPMG LLP v. Cocchi,
`565 U.S. 18 (2011) ...................................................................................................................11
`
`Latif v. Morgan Stanley & Co. LLC,
`No. 18CV11528 (DLC), 2019 WL 2610985 (S.D.N.Y. June 26, 2019) .................................12
`
`ii
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 4 of 26
`
`McDonnell Douglas Fin. Corp. v. Pennsylvania Power & Light Co.,
`858 F.2d 825 (2d Cir. 1988).....................................................................................................18
`
`Meridian Autonomous Inc. v. Coast Autonomous LLC,
`No. 17-CV-5846 (VSB), 2020 WL 496078 (S.D.N.Y. Jan. 30, 2020) ....................................20
`
`Meyer v. Uber Techs., Inc.,
`868 F.3d 66 (2d Cir. 2017)............................................................................................... passim
`
`Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
`473 U.S. 614 (1985) .................................................................................................................11
`
`Morrison v. Nat’l Australia Bank Ltd.,
`561 U.S. 247, 130 S. Ct. 2869, 177 L. Ed. 2d 535 (2010) .........................................................3
`
`Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs., Inc.,
`369 F.3d 645 (2d Cir. 2004) ..............................................................................................18, 19
`
`Rost v. Liberty Coca-Cola Beverages, LLC,
`No. 20 CV 10559 (VB), 2021 WL 3723092 (S.D.N.Y. Aug. 23, 2021 ..................................21
`
`Schnabel v. Trilegiant Corp.,
`697 F.3d 110 (2d Cir. 2012).....................................................................................................14
`
`Starke v. Gilt Groupe, Inc.,
`No. 13-CV-5497, 2014 WL 1652225 (S.D.N.Y. Apr. 24, 2014) ............................................16
`
`Swift v. Zynga Game Network, Inc.,
`805 F. Supp. 2d 904 (N.D. Cal. 2011) .....................................................................................17
`
`Thorne v. Square, Inc.,
`No. 20CV5119NGGTAM, 2022 WL 542383 (E.D.N.Y. Feb. 23, 2022),
`appeal withdrawn, No. 22-542, 2022 WL 2068771 (2d Cir. Apr. 14, 2022)...........................16
`
`Vera v. Saks & Co,
`335 F.3d 109 (2d Cir. 2003).....................................................................................................18
`
`WorldCrisa Corp. v. Armstrong,
`129 F.3d 71 (2d Cir. 1997).......................................................................................................17
`
`Statutes
`
`9 U.S.C. § 2 ....................................................................................................................................10
`
`Federal Arbitration Act ..................................................................................................2, 10, 11, 21
`
`iii
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 5 of 26
`
`PRELIMINARY STATEMENT
`
`Defendant Jenison Holdings SEZC, improperly named in this action by its registered
`
`tradename “Strongblock,”1 and individual Defendants David Moss, Brian Abramson, Corey
`
`Lederer, and Konstantin Shkut (collectively “Defendants”) respectfully ask the Court to dismiss
`
`this action, in its entirety, and compel arbitration. This Court does not have jurisdiction over this
`
`dispute because Plaintiffs’ claims are covered by a valid and binding arbitration agreement that
`
`they assented to when they signed up for StrongBlock’s services. Plaintiffs filed this action against
`
`Defendants on August 26, 2022, alleging violations of the Securities Act, and common law claims
`
`for breach of contract, conversion, misrepresentation, fraudulent inducement, negligence and
`
`unjust enrichment. The crux of Plaintiffs’ Complaint is that StrongBlock’s tokens and nodes are
`
`purportedly unregistered securities, and that Defendants improperly capped the rewards issued for
`
`StrongBlock’s nodes. For a variety of reasons, Plaintiffs’ claims lack any merit. But as an initial
`
`matter, Plaintiffs’ attempt to bring these claims before this Court directly violates the arbitration
`
`agreement they entered into when Plaintiffs accepted the StrongBlock Terms of Service.
`
`Plaintiffs allege that they “purchas[ed] Strongblock . . . nodes from Defendants.”
`
`Complaint, ¶¶ 15-29. This allegation renders their claims improperly before this Court because at
`
`all relevant times the StrongBlock Terms of Service (“TOS”) included a broad arbitration
`
`1 Plaintiffs, without any factual support, make the conclusory statement that “Strongblock
`is an unincorporated general partnership operating within the United States of which the individual
`Defendants are partners.” Complaint, at ¶ 1. However, as disclosed on StrongBlock’s website and
`Terms of Service, StrongBlock is an official tradename, registered with the United States Patent
`and Trademark Office, of Jenison Holdings SEZC, a Special Economic Zone Company located in
`the Cayman Islands. See Declaration of David Moss, Exhibit A, at ¶ 4; see also Exhibit A-2
`(Terms of Service).
`
`1
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 6 of 26
`
`agreement. During the StrongBlock sign-up process, Plaintiffs were presented with a sign-up flow
`
`that clearly notified them of the contractual nature of the Terms of Service and allowed them the
`
`opportunity to review the terms before manifesting their consent. See Moss Declaration, at ¶ 21.
`
`The Second Circuit has found similar sign-up flows binding and enforceable, and the Supreme
`
`Court has long recognized the liberal policy in favor of enforcing arbitration agreements, as
`
`evidenced by the Federal Arbitration Act (“FAA”). Plaintiffs should be compelled to submit their
`
`claims to individual arbitration and this action should be dismissed.
`
`FACTUAL BACKGROUND
`
`I.
`
`StrongBlock and the Sign-Up for Nodes-as-a-Service
`
`StrongBlock’s business model is to provide Nodes-as-a-Service (NaaS). Moss
`
`Declaration, at ¶ 6. In general, a blockchain node participates in a blockchain network. Id. at ¶ 7.
`
`A node runs the blockchain protocol’s software, which allows the node to submit transactions on
`
`the blockchain and keep the network secure. Id. Nodes historically did not receive any financial
`
`incentive for performing the node’s function. Id. StrongBlock sought to change this drawback by
`
`incentivizing individuals to support nodes, which StrongBlock would provision, operate and
`
`maintain. Id. at ¶ 8.
`
`StrongBlock started offering NaaS on December 3, 2020. Id. at ¶ 9. All StrongBlock
`
`nodes, infrastructure and applications are provisioned and exist on servers in Singapore; the nodes
`
`are owned, operated and maintained by StrongBlock. Id. at ¶ 10. NaaS works similarly to a typical
`
`subscription service; meaning, users pay fees in exchange for certain benefits. Id. at ¶ 11.
`
`Specifically, StrongBlock users contribute 10 non-refundable STRONG (now STRNGR) tokens2
`
`2STRONG and STRNGR are utility tokens, which “allow the holder to use or access a
`certain product or service,” namely, sign up for StrongBlock’s NaaS. See In re Bibox Grp.
`
`2
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 7 of 26
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`and an initial maintenance fee to sign up for StrongBlock’s NaaS, and are then eligible to receive
`
`tokens as a reward. Id. at ¶ 12. Node rewards were initially paid in STRONG tokens. Id. at ¶ 13.
`
`In April 2022, StrongBlock began paying rewards in STRNGR tokens. Id. at ¶ 14.
`
`StrongBlock users can sign up for NaaS only if the user affirmatively checks the digital
`
`sign-up flow agreeing to StrongBlock’s Terms of Service. Id. at ¶ 22. An example of the NaaS
`
`sign-up flow, from January 1, 2021, is shown below:
`
`Holdings Ltd. Sec. Litig., 534 F. Supp. 3d 326, 330 (S.D.N.Y. 2021) (comparing utility tokens to
`security tokens). Moreover, these utility tokens are neither sold on a United States-based
`exchange, nor are they exchanged as part of a “domestic transaction,” as required for application
`of Securities Act. See Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247, 130 S. Ct. 2869, 177
`L. Ed. 2d 535 (2010) (§ 10(b) of the Securities Exchange Act applies only to transactions in
`securities listed on domestic exchanges and domestic transactions in other securities).
`All STRONG and STRNGR tokens were created on servers located in Singapore by
`individuals located in Germany and the Cayman Islands, and issued by an entity related to
`StrongBlock. See Moss Declaration, at ¶ 15. There was no Initial Coin Offering of the STRONG
`or STRNGR tokens. Id. at ¶ 16. As a part of the NaaS offering, StrongBlock has never sold tokens
`on its website or sold them to StrongBlock users. Id. at ¶ 17. Crypto wallet holders may buy and
`sell the tokens from other token holders on crypto exchanges, but none of the revenue from these
`token trades has been passed along to StrongBlock or any of its associated entities. Id. at ¶ 18.
`The StrongBlock nodes, as opposed to the STRONG and STRNGR tokens, are not bought or sold
`on any type of exchange; StrongBlock maintains control and possession of the nodes, and the
`nodes physically remain in Singapore. StrongBlock users—including Plaintiffs—have no control
`or possession of the nodes at any time. Id. at ¶ 20.
`Counts I and II of Plaintiffs’ Complaint, the two claims alleging violations of the Securities
`Act, are subject to dismissal for failure to state a claim upon which relief can be granted.
`Defendants will seek such dismissal if Plaintiffs individually continue to pursue their Securities
`Act claims in arbitration.
`
`3
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 8 of 26
`
`Id. at ¶ 23. The above graphic is a screenshot of the StrongBlock user experience on or
`
`around January 1, 2021.3 Id. at ¶ 24. However, from December 2020 through present, the phrase
`
`“I also agree to the . . . Terms of Service” has always appeared, along with a hyperlink to the
`
`referenced Terms of Service. Id. at ¶ 25. Without checking the box, a StrongBlock user cannot
`
`sign up for NaaS. Id. at ¶ 26.
`
`3 Notably, even from the beginning of the StrongBlock NaaS rollout, StrongBlock advised
`its users that “Rewards calculations are based on many factors, including the number of nodes,
`node health, node revenue, token price, and NFT ownership.” See Moss Declaration, at ¶ 29.
`Users were advised that rewards “are variable,” and are “not guaranteed.” Id. at ¶ 30. The plain
`text of this sign-up flow belies the very essence of Plaintiffs’ claims that StrongBlock supposedly
`promised them infinite rewards. StrongBlock will raise this issue, among many others, to the
`arbitrator should Plaintiffs individually pursue their claims in the correct forum.
`
`4
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 9 of 26
`
`The current StrongBlock Terms of Service pertaining to dispute resolution have been
`
`published on the StrongBlock website continuously since January 16, 2021 with no changes. Id.
`
`at ¶ 33. A previous version of the Terms of Service, which included a similarly broad arbitration
`
`provision, was in place before December 3, 2020, when StrongBlock launched the NaaS platform.
`
`Id. at ¶ 34. All individuals or entities who claim to have “purchased”4 StrongBlock nodes have
`
`agreed to accept StrongBlock’s Terms of Service, which have always included a broad provision
`
`for individual binding arbitration. Id. at ¶ 35.
`
`II. StrongBlock’s Terms of Service and the Arbitration Agreements
`
`Those who signed up for StrongBlock’s NaaS during the first six weeks of the rollout,
`
`between December 3, 2020 and January 16, 2021, agreed to the following terms for dispute
`
`resolution:
`
`15. Dispute Resolution
`
`We will use our best efforts to resolve any potential disputes through informal, good
`faith negotiations. If a potential dispute arises, you must contact us by sending an
`email … so that we can attempt to resolve it without resorting to formal dispute
`resolution. If we aren’t able to reach an informal resolution within sixty days of
`your email, then you and we both agree to resolve the potential dispute according
`to the process set forth below. Any claim or controversy arising out of or relating
`to the App, this Agreement, or any other acts or omissions for which you may
`contend that we are liable, including (but not limited to) any claim or controversy
`as to arbitrability (“Dispute”), shall be finally and exclusively settled by arbitration
`under the JAMS Optional Expedited Arbitration Procedures. You understand that
`you are required to resolve all Disputes by binding arbitration. The arbitration shall
`be held on a confidential basis before a single arbitrator, who shall be selected
`pursuant to JAMS rules. The arbitration will be held in San Francisco, California,
`
`4 The Complaint alleges that Plaintiffs “purchased” StrongBlock nodes. See Doc. 1, at
`¶¶ 15-29. However, as previously explained, the NaaS business model operates similarly to a
`subscription service. See Moss Declaration, at ¶ 11. By signing up for NaaS, or “creating” a
`StrongBlock node, a StrongBlock user pays a fee for StrongBlock’s node service in exchange for
`receiving rewards. Id. at ¶ 31. The StrongBlock user does not purchase, own, control or take
`possession of a node. Id. at ¶ 32.
`
`5
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 10 of 26
`
`unless you and we both agree to hold it elsewhere. Unless we agree otherwise, the
`arbitrator may not consolidate your claims with those of any other party. Any
`judgment on the award rendered by the arbitrator may be entered in any court of
`competent jurisdiction.
`
`(hereafter referred to as the “December 3, 2020 Arbitration Agreement”). See Moss
`
`Declaration, at ¶ 36; also Exhibit A-1 (complete copy of the December 3, 2020 StrongBlock Terms
`
`of Service). The December 3, 2020 Arbitration Agreement contains a choice of law provision for
`
`California law. Id. at ¶ 38.
`
`Those who signed up for StrongBlock’s NaaS from January 16, 2021, through the present,
`
`agreed to the following terms for dispute resolution:
`
`PLEASE READ THESE TERMS CAREFULLY, AS THEY CONTAIN AN
`AGREEMENT TO ARBITRATE AND OTHER IMPORTANT INFORMATION
`REGARDING YOUR LEGAL RIGHTS, REMEDIES, AND OBLIGATIONS.
`
`*
`
`*
`
`*
`
`DISPUTE RESOLUTION - AGREEMENT TO ARBITRATE
`
`Dispute Resolution by Binding Arbitration; Jury Trial Waiver; Class Action
`Waiver.
`
`PLEASE READ THIS SECTION CAREFULLY AS IT AFFECTS YOUR
`RIGHTS.
`
`INFORMAL DISPUTE RESOLUTION: Most user concerns can be resolved by
`use of our “Support” feature available on all applications pages. If StrongBlock is
`unable to resolve your concerns and a dispute remains between you and
`StrongBlock, this Section explains how the parties have agreed to, and shall, resolve
`it.
`
`You and StrongBlock agree to make reasonable, good faith efforts to informally
`resolve any dispute before you initiate formal dispute resolution. You agree to send
`StrongBlock a written notice that describes the nature and basis of the claim or
`dispute and sets forth the relief sought. Written notice to StrongBlock must be sent
`via postal mail to Strathvale House, 90 North Church Street, George Town, Grand
`Cayman, KY1-1106, Cayman Islands (“Notice Address”).
`
`FORMAL DISPUTE RESOLUTION: If StrongBlock and you do not resolve the
`claim within sixty (60) calendar days after the Notice is received, then your options
`for formal dispute resolution depend upon your country of residence. This Section
`does not prevent you from bringing your dispute to the attention of any federal,
`6
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 11 of 26
`
`state, or local government agencies that can, if the law allows, seek relief from us
`for you.
`
`FOR RESIDENTS OF THE UNITED STATES & OTHER JURISDICTIONS
`THAT ENFORCE BINDING ARBITRATION: YOU AND StrongBlock AGREE
`THAT ANY DISPUTE, CLAIM, OR CONTROVERSY BETWEEN YOU AND
`StrongBlock ARISING IN CONNECTION WITH OR RELATING IN ANY WAY
`TO THESE TERMS OR TO YOUR RELATIONSHIP WITH StrongBlock AS A
`USER OF THE SERVICE (WHETHER BASED IN CONTRACT, TORT,
`STATUTE, FRAUD, MISREPRESENTATION, OR ANY OTHER LEGAL
`THEORY, AND WHETHER THE CLAIMS ARISE DURING OR AFTER THE
`TERMINATION OF THE SERVICE) WILL BE DETERMINED BY
`MANDATORY BINDING INDIVIDUAL (NOT CLASS, REPRESENTATIVE,
`OR ACTION) ARBITRATION. YOU AND StrongBlock FURTHER AGREE
`THAT THE ARBITRATOR SHALL HAVE THE EXCLUSIVE POWER TO
`RULE ON HIS OR HER OWN JURISDICTION, INCLUDING ANY
`OBJECTIONS WITH RESPECT TO THE EXISTENCE, SCOPE OR VALIDITY
`OF THE ARBITRATION AGREEMENT OR TO THE ARBITRABILITY OF
`ANY CLAIM OR COUNTERCLAIM.
`
`Arbitration is a proceeding before a neutral arbitrator, instead of before a judge or
`jury. Arbitration is less formal than a lawsuit in court, and provides more limited
`discovery. It follows different rules than court proceedings, and is subject to very
`limited review by courts. The arbitrator will issue a written decision and provide a
`statement of reasons if requested by either party. YOU UNDERSTAND THAT
`YOU ARE GIVING UP THE RIGHT TO SUE IN COURT AND TO HAVE A
`TRIAL BEFORE A JUDGE OR JURY.
`
`YOU AND StrongBlock AGREE THAT EACH MAY BRING CLAIMS
`AGAINST THE OTHER ONLY IN YOUR OR ITS INDIVIDUAL CAPACITY
`AND NOT AS A PLAINTIFF OR CLASS MEMBER
`(OR
`IN A
`REPRESENTATIVE OR ACTION) IN ANY PURPORTED CLASS OR,
`REPRESENTATIVE, OR ACTION. Unless both you and StrongBlock agree, no
`arbitrator or judge may allow more than one person’s claims or otherwise preside
`over any form of a representative or class proceeding, and the arbitrator specifically
`does not have the power to alter this. The arbitrator may award injunctive relief
`only in favor of the individual party seeking relief and only to the extent necessary
`to provide relief warranted by that party’s individual claim. If a court decides that
`applicable law precludes enforcement of any of this Section’s limitations as to a
`particular claim for relief, then that claim (and only that claim) must be severed
`from the arbitration and may be brought in court.
`
`Either you or we may start arbitration proceedings. Any arbitration between you
`and StrongBlock will be administered at the International Chamber of Commerce
`(“ICC”) International Court of Arbitration under the Rules of Arbitration of the ICC
`then in force (the “ICC Rules”), as modified by this Arbitration Agreement, or, if
`ICC no longer exists or is unable to participate, such other arbitration forum
`
`7
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 12 of 26
`
`selected by StrongBlock. The language to be used in the arbitral proceeding shall
`be English. For more information on the ICC, the Rules and Procedures, or the
`process for filing an arbitration claim, you may call the ICC in Paris, France at +33
`(0) 1 49 53 28 28 or visit the ICC website at https://iccwbo.org.
`
`Unless StrongBlock expressly agrees in writing to the contrary, the parties shall
`keep confidential all awards and orders in any arbitration pursuant to this section,
`as well as all materials in the arbitral proceedings created for the purpose of the
`arbitration and all other documents produced by another party in the arbitral
`proceedings not otherwise in the public domain; provided that the foregoing shall
`not prevent either party from making any disclosure of such to the extent that
`disclosure is required of a Party by a legal duty, to protect or to pursue a legal right,
`or to enforce or challenge an award in legal proceedings before the appropriate
`court or other judicial authority. You and StrongBlock agree that the US Federal
`Arbitration Act applies and governs the interpretation and enforcement of this
`provision, to the extent applicable.
`
`Absent a contrary decision of the arbitrator or otherwise required by applicable law,
`the parties agree that the seat and venue of the arbitration is the Cayman Islands.
`The language of the arbitration will be English. The arbitration will be conducted
`before one commercial arbitrator from the International Chamber of Commerce
`(“ICC”) with substantial experience in resolving commercial contract disputes. As
`modified by these Terms, and unless otherwise agreed upon by the parties in
`writing, the arbitration will be governed by the ICC’s Arbitration Rules including
`its Expedited Procedure Provisions (collectively, the “Rules and Procedures”). The
`ICC Emergency Arbitrator Provisions shall not apply.
`
`The dispute will be resolved by the submission of documents without a hearing,
`unless a hearing is requested by a party or deemed to be necessary by the arbitrator,
`in which case, a party may elect to participate telephonically. The arbitrator shall
`make a decision in writing, and shall provide a statement of reasons if requested by
`either party. The arbitrator must follow applicable law, and any award may be
`challenged if the arbitrator fails to do so. You and StrongBlock may litigate in court
`to compel arbitration, to stay proceeding pending arbitration, or to confirm, modify,
`vacate or enter judgment on the award entered by the arbitrator.
`
`Nothing in this Section removes or limits StrongBlock's liability for fraud,
`fraudulent misrepresentation, death or personal injury caused by its negligence,
`and, if required by applicable law, gross negligence. Additionally, notwithstanding
`this agreement to arbitrate, claims for infringement or misappropriation of the other
`party’s patent, copyright, trademark, trade secret or other intellectual property
`rights shall not be subject to arbitration under this Section.
`
`You or StrongBlock may seek emergency equitable relief before a court located in
`the Cayman Islands in order to maintain the status quo pending arbitration and you
`agree to submit to the exclusive personal jurisdiction of the courts located within
`
`8
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 13 of 26
`
`the Cayman Islands for such purpose. A request for interim measures shall not be
`deemed to be a waiver of the right to arbitrate.
`
`FOR RESIDENTS OF THE EUROPEAN UNION & OTHER JURISDICTIONS
`THAT DO NOT ENFORCE THE BINDING ARBITRATION ABOVE: Any non-
`arbitrable disputes arising under or in connection with these Terms shall be subject
`to the exclusive jurisdiction of the courts of the Cayman Islands.
`
`This Section will survive termination of your account and these Terms as well as
`any voluntary payment of any debt in full by you or any bankruptcy by you or
`StrongBlock. With the exception of any provision of this Section prohibiting
`arbitration on a class or collective basis, if any part of this arbitration provision is
`deemed to be invalid, unenforceable, or illegal, or otherwise conflicts with the
`Rules and Procedures, then the balance of this arbitration provision will remain in
`effect and will be construed in accordance with its terms as if the invalid,
`unenforceable, illegal or conflicting part was not contained herein. If, however, any
`provision of this Section prohibiting arbitration on a class or collective basis is
`found to be invalid, unenforceable, or illegal, then the entirety of this arbitration
`provision will be null and void, and neither you nor StrongBlock will be entitled to
`arbitration.
`
`YOU AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY
`APPLICABLE LAW, ANY CLAIM OR CAUSE OF ACTION ARISING OUT
`OF OR RELATING TO THE SERVICE OR THESE TERMS MUST BE FILED
`WITHIN ONE (1) YEAR AFTER SUCH CLAIM OR CAUSE OF ACTION
`AROSE OR IT WILL BE FOREVER BARRED.
`
`(hereafter referred to as the “January 16, 2021 Arbitration Agreement”). Id. at ¶ 39; see also
`
`Exhibit A-2 (complete copy of the January 16, 2021 StrongBlock Terms of Service). The January
`
`16, 2021 Arbitration Agreement contains a choice of law provision for the Cayman Islands. Id. at
`
`¶ 42. The December 3, 2020 Arbitration Agreement and January 16, 2021 Arbitration Agreement
`
`may be referred to separately, or collectively as the “StrongBlock Arbitration Agreement.”
`
`The Complaint does not identify when Plaintiffs allegedly signed up for NaaS, such that it
`
`is currently unclear which Dispute Resolution terms apply to which Plaintiff.5 However, only
`
`about 0.5% of all NaaS subscriptions were created by StrongBlock users prior to January 16, 2021.
`
`5 StrongBlock does not collect any Personal Identifying Information that would allow
`StrongBlock to identify Plaintiffs at this time. See Moss Declaration, at ¶ 43.
`
`9
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 14 of 26
`
`See Moss Declaration, at ¶ 44. It is most likely that all Plaintiffs assented to the updated TOS on
`
`StrongBlock’s website after January 16, 2021 and bound themselves to the January 16, 2021
`
`Arbitration Agreement, which expressly “supersedes and replaces any prior agreements or
`
`understandings between StrongBlock and you regarding the Site and Service.” Id. at ¶ 41.
`
`Nevertheless, the slight differences in the Arbitration Agreements do not prevent the Court
`
`from compelling arbitration at this juncture. Plaintiffs’ claims are covered by either the December
`
`3, 2020 Arbitration Agreement or the January 16, 2021 Arbitration Agreement—and both
`
`Arbitration Agreements require the Court to compel arbitration.
`
`LEGAL ARGUMENT
`
`The StrongBlock Terms of Service contain a valid binding arbitration provision and must
`
`be enforced pursuant to the FAA and relevant case law. This Court should therefore enter an order
`
`compelling individual arbitration and dismissing this action, or, in the alternative, staying the case
`
`pending resolution of the parties’ individual arbitration proceedings.
`
`A.
`
`Legal Standards to Dismiss and Compel Arbitration
`
`Section 4 of the FAA provides that “[a] party aggrieved by the alleged failure, neglect, or
`
`refusal of another to arbitrate under a written agreement for arbitration may petition [the] . . .
`
`district court . . . for an order directing that such arbitration proceed in the manner provided for in
`
`such agreement.” 9 U.S.C. § 4. It is well settled that “[a] court ruling on a petition to compel
`
`arbitration generally must decide two issues: (1) whether the parties agreed to arbitrate, and (2) if
`
`so, whether the scope of the agreement encompasses the claims at issue.” Cornelius v. Wells Fargo
`
`Bank, N.A., No. 19-CV-11043 (LJL), 2020 WL 1809324, at *3 (S.D.N.Y. Apr. 8, 2020) (citing
`
`Holick v. Cellular Sales of N.Y., LLC, 802 F.3d 391, 394 (2d Cir. 2015)).
`
`The FAA provides that a written agreement to arbitrate “shall be valid, irrevocable, and
`
`enforceable, save upon grounds as exist at law or in equity for the revocation of any contract,” 9
`
`10
`
`

`

`Case 1:22-cv-07313-VSB Document 24 Filed 10/14/22 Page 15 of 26
`
`U.S.C. § 2. “The [FAA] reflects an ‘emphatic federal policy in favor of arbitral dispute
`
`resolution.’” KPMG LLP v. Cocchi, 565 U.S. 18, 21 (2011) (quoting Mitsubishi Motors Corp. v.
`
`Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985)). The FAA and the strong federal policy
`
`favoring arbitration require courts to “rigorously enforce agreements to arbitrate.” Mitsubishi
`
`Motors Corp., 473 U.S. at 625–26 (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221
`
`(1985)). The United States Supreme Court reinforced that principle stating: “Congress has
`
`instructed that arbitration agreements . . . must be enforced as written.” Epic Sys. Corp. v. Lewis,
`
`138 S.Ct. 1612, 1632 (2018). Both the Second Circuit and this District observed that “it is difficult
`
`to overstate the strong federal policy in favor of arbitration, and it is a policy we have often and
`
`emphatically appl

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