Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 1 of 17
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`
`Case No. 1:22-cv-7313-VSB
`
`
`JURY TRIAL DEMANDED
`
`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,
`
`v.
`
`STRONGBLOCK, DAVID MOSS, BRIAN
`ABRAMSON, COREY LEDERER,
`KONSTANTIN SHKUT, AND JOHN DOE
`DEFENDANTS 1-5,
`
`Defendants.
`
`PLAINTIFFS’ OPPOSITION TO DEFENDANTS’
`MOTION TO DISMISS AND COMPEL ARBITRATION
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Payton H. Poliakoff
`GOVERNMENT LAW GROUP, PLLC
`Museum Plaza Building
`200 S Andrews Avenue, Suite 601
`Fort Lauderdale, Florida 33301
`Tel.: (954) 909-0580
`ppoliakoff@govlawgroup.com
`
`
`
`
`Daniel B. Ravicher
`ZEISLER PLLC
`45 Rockefeller Plaza, 20th Floor
`New York, NY 10111
`Tel.: (212) 671-1921
`Fax: (888) 229-1921
`dan@zeisler-law.com
`
`Counsel for Plaintiffs
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 2 of 17
`
`TABLE OF CONTENTS
`
`TABLE OF CONTENTS ................................................................................................................. i
`
`TABLE OF AUTHORITIES .......................................................................................................... ii
`
`INTRODUCTION ...........................................................................................................................1
`
`BACKGROUND .............................................................................................................................1
`
`A. The Strongblock Node Purchase Page ...........................................................................1
`
`B. Strongblock, Inc. ............................................................................................................4
`
`ARGUMENT ...................................................................................................................................5
`
`I.
`
`Plaintiffs Did Not Have Notice of or Assent to Any Agreement to Arbitrate .........5
`
`A. Plaintiffs Did Not Have Notice of the Terms of Service ...................................5
`
`B. Defendants Have Failed to Show Plaintiffs Assented to the Terms of Service .8
`
`II.
`
`The Agreement to Arbitrate Is Unenforceable Because It Prevents Effective
`Vindication of Plaintiffs’ U.S. Securities Act Claims ...........................................10
`
`CONCLUSION ..............................................................................................................................12
`
`
`
`
`
`i
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 3 of 17
`
`TABLE OF AUTHORITIES
`
`Am. Exp. Co. v Italian Colors Restaurant
`570 U.S. 228 (2013) ...........................................................................................................10
`
`Berkson v. Gogo, LLC
`97 F. Supp. 3d 359 (E.D.N.Y 2015) ................................................................................6, 9
`
`Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel
`346 F.3d. 360 (2d Cir. 2003)................................................................................................5
`
`Celltrace Commc’ns Ltd. v. Acacia Research Corp.
`15-CV-4746 (AJN), 2016 WL 3407848 (S.D.N.Y. June 16, 2016) ....................................5
`
`Celltrace Commc’ns Ltd v. Acacia Research Corp.
`689 F. App’x 6 (2d Cir. 2017) .............................................................................................5
`
`Duran v. J. Hass Group, L.L.C.
`531 F. App’x. 146 (2d. Cir. 2013) .......................................................................................5
`
`Eisen v. Venulum Ltd.
`244 F. Supp. 3d 324 (W.D.N.Y. 2017) ........................................................................11, 12
`
`Hines v. Overstock.com, Inc.
`380 F. App’x. 22 (2d Cir. 2010) ..........................................................................................6
`
`Meyer v. Uber Techs., Inc.
`868 F.3d 66 (2d Cir. 2017).............................................................................................7, 10
`
`Nguyen v. Barnes & Noble, Inc.
`763 F.3d 1171 (9th Cir. 2014) .............................................................................................6
`
`Nicosia v. Amazon.com, Inc.
`834 F.3d 220 (2d Cir. 2016).................................................................................................5
`
`Plazza v. AIRBNB, INC.
`289 F. Supp. 3d 537 (S.D.N.Y. 2018)..............................................................................7, 8
`
`Ragone v. Atl. Video at Manhattan Ctr.
`595 F.3d 115 (2d Cir. 2010).................................................................................................5
`
`Rent-A-Center, West, Inc., v. Jackson
`561 U.S. 63 (2010) ...............................................................................................................5
`
`Schnabel v. Trilegiant Corp.
`697 F.3d 110 (2d Cir. 2012).................................................................................................8
`
`ii
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 4 of 17
`
`Sgouros v. TransUnion Corp.,
`No. 14-CV-1850, 2015 WL 507584 (N.D. Ill. Feb. 5, 2015) ..............................................6
`
`Specht v. Netscape Commc’ns Corp.
`150 F. Supp. 2d 585 (S.D.N.Y. 2001)................................................................................10
`
`Starke v. SquareTrade, Inc.
`913 F.3d 279 (2d Cir. 2019).................................................................................................6
`
`Other Authorities
`
` 9
`
` U.S.C. §4 (2022) ...........................................................................................................................5
`
`
`
`iii
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 5 of 17
`
`INTRODUCTION
`
`Defendants’ Motion to Dismiss and Compel Arbitration should be denied because
`
`Plaintiffs neither had notice of nor assented to any agreement to arbitrate. Regarding notice, the
`
`purported agreement to arbitrate is buried in the middle of a Terms of Service that was never
`
`presented to Plaintiffs but was instead merely linked to via a dark blue link at the very bottom of
`
`a long list of other unrelated details on a black background on a node purchase page. Regarding
`
`assent, contrary to Defendant Moss’ declaration, the node purchase page changed over time and
`
`for a relevant period did not require node purchasers to agree to the Terms of Service, but rather
`
`merely read them. Defendants admit they do not collect any personal information from purchasers
`
`of nodes and, as a result, they cannot directly show that any Plaintiff agreed to arbitrate disputes.
`
`Regardless, the January 16, 2021, Terms of Service agreement to arbitrate, which applies
`
`to Plaintiffs given they all purchased nodes after that date, is unenforceable because the choice of
`
`law clause in the Terms of Service states “the internal laws of the Cayman Islands without regard
`
`to choice-of-law rules” apply and application of that law would prevent effective vindication of
`
`Plaintiffs’ U.S. Securities Act claims given they are not recognized by Cayman Islands law.
`
`A.
`
`The Strongblock Node Purchase Page
`
`BACKGROUND
`
`Plaintiffs purchased Strongblock nodes from Defendants by visiting the Strongblock
`
`website App located at https://app.strongblock.com/, connecting their electronic cryptocurrency
`
`wallet, and clicking on the “Create Node” button. Doing this displayed to Plaintiffs a “Create Your
`
`Node” page, which Plaintiffs will refer to as the “Node Purchase” page, as it is the page from
`
`which the purchase of nodes is completed.
`
`In his declaration supporting Defendants’ motion, Mr. Moss provided a January 1, 2021,
`
`screenshot of the Node Purchase page. Doc. 24-1, p. 4. Relevant here are the facts that the page
`
`1
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 6 of 17
`
`has a white background with black text, that there is only one paragraph to which a purchaser was
`
`required to check a box next to in order to complete a node purchase, and that the Terms of Service
`
`were linked to at the end of the paragraph with a bright blue hyperlink.
`
`However, the Node Purchase page has changed substantially from January 1, 2021, to
`
`today. Most notably, Defendant Moss’ declaration that “from December 2020 through present, the
`
`phrase ‘I also agree to the ... Terms of Service’ has always appeared,” is false. A screenshot of the
`
`Node Purchase page taken May 20, 2022, is shown below and does not say “I also agree to the …
`
`Terms of Service.” It merely says, “I have read … the Terms of Service.” Decl. Poliakoff, Ex. A.
`
`A zoomed in portion of the above screenshot is provided below focusing on this language.
`
`
`
`2
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 7 of 17
`
`
`
`Id.
`
`There are other relevant differences between the January 1, 2021, Node Purchase page
`
`provided by Defendants with Mr. Moss’ declaration and the May 20, 2022, screenshot of the Node
`
`Purchase page provided by Plaintiffs herewith.
`
`First, at some point between July 26, 2021, and September 21, 2021, Strongblock changed
`
`the background color on its website from white to black.1 Decl. Poliakoff, Ex. B (Internet Archive
`
`Wayback Machine
`
`captures
`
`of
`
`the
`
`Strongblock website App
`
`located
`
`at
`
`https://app.strongblock.com/ dated July 26, 2021, and September 21, 2021). All Plaintiffs’
`
`purchased nodes after September 21, 2021. Decl. Poliakoff, Ex. C. Thus, those purchases occurred
`
`when the Node Purchase page background was black, not white.2
`
`
`
` 1
`
` In the upper right-hand corner of Strongblock’s website with a black background is a button that
`looks like the sun that users can click to change the black background to white.
`
`2 While one Plaintiff, Tyler Handley, purchased his first node in June 2021, when the Node
`Purchase page background was white, he continued to make node purchases between
`September 21, 2021 and April 29, 2022, when the background was black. Another Plaintiff,
`Farshid Sepassi, made his first node purchase on August 31, 2021, when it is uncertain whether
`the Node Purchase page background was white or black. Mr. Sepassi continued to make purchases
`
`3
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 8 of 17
`
`Second, the color of the link to the Terms of Service was also changed by Strongblock,
`
`from bright blue on the white background in the January 2021 screenshot of the page provided by
`
`Mr. Moss, to dark blue on the black background in the May 2022 screenshot provided by Plaintiffs
`
`herewith. This dark blue link on black background obfuscates the legibility of the link to the Terms
`
`of Service by blending it into the background of the page itself.
`
`Third, another significant difference is that instead of having a single paragraph next to a
`
`single check box as shown in the January 1, 2021, version the Node Purchase page, Strongblock
`
`changed the page to instead have a bulleted list of nine separate sentences placed next to the single
`
`check box. Notably, the checkbox is not placed next to the ninth bullet point containing the
`
`language that the user has “read” the Terms of Service. Rather, it is placed next to the middle of
`
`the bulleted list between the fourth and fifth bullets.
`
`B.
`
`Strongblock, Inc.
`
`Defendants claim in their opening sentence that the defendant named herein as
`
`Strongblock, and alleged by Plaintiffs to be a general partnership, is instead a Cayman Islands
`
`company called Jenison Holdings SEZC. However, both versions of the Terms of Service provided
`
`by Defendants with their motion state, “https://strongblock.com, a website-hosted user interface
`
`(the ‘Interface or ‘App’) provided by StrongBlock, Inc. (‘we’, ‘our’, or ‘us’).” See Doc. 24-2
`
`(December 3, 2020, Terms of Service) and Doc. 24-3 (January 16, 2021, Terms of Service). Thus,
`
`in their own Terms of Service Defendants represent that they are a corporation named
`
`StrongBlock, Inc. However, no such corporation has ever existed.
`
`While Jenison Holdings is the registrant of a Strongblock trademark, that does not prove it
`
`
`from September 21, 2021, to January 6, 2022, when the background was black.
`
`
`
`4
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 9 of 17
`
`is the operator of the Strongblock website, app, and nodes at issue here. Indeed, in his declaration,
`
`Mr. Moss concedes that neither he nor any of the other individual defendants are employed by
`
`Jenison Holdings SEZC. Rather, they are “employed by a limited liability company that contracts
`
`with Jenison Holdings SEZC.” Doc. 24-1. Defendants conveniently fail to identify the LLC that
`
`employs them and operates the Strongblock website, app, and nodes. Defendants also fail to
`
`provide any details regarding the contract between the unnamed LLC and Jenison Holdings.
`
`Further, the Directors of Jenison Holdings SEZC according to the Cayman Islands General
`
`Registry are individuals named Christopher John Bowring and Sean John Inggs. Decl. Poliakoff,
`
`Ex. D. Neither of these individuals are named defendants here or alleged by Plaintiffs to be
`
`involved in any way with the acts involved herein. Further, the Cayman Islands General Registry
`
`also identifies the “Nature of Business” of Jenison Holdings SEZC as “Holding company”, not as
`
`any type of operating company. Id.
`
`Regarding Jenison Holding SEZC’s Strongblock trademark, it is not registered for use with
`
`the sale of nodes as is relevant here. Decl. Poliakoff, Ex. E. Rather, it is registered for goods and
`
`services including “computer software,” “an online marketplace for selling and trading virtual
`
`goods with other users,” and “providing temporary use of on-line non-downloadable software for
`
`use in the exchange of virtual items.” Plaintiffs here did not purchase any such goods or services.
`
`Rather, Plaintiffs here purchased nodes. Thus, the trademark is a red herring and does not support
`
`Defendants’ argument that the Strongblock general partnership is actually Jenison Holdings.
`
`ARGUMENT
`
`There are two issues presented before the Court: (1) whether there is an agreement to
`
`arbitrate between the parties, Cap Gemini Ernst & Young, U.S. L.L.C., v. Nackel, 346 F. 3d. 360,
`
`365 (2d Cir. 2003), and, if there is, whether that agreement is enforceable. Ragone v. Atl. Video at
`
`5
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 10 of 17
`
`Manhattan Ctr., 595 F. 3d 115, 121, (2d. Cir. 2010) (emphatic application of arbitration
`
`agreements does not amount to automatic application).
`
`
`
`Where one party argues that there is no valid arbitration agreement, courts have decided
`
`the questions of arbitrability. Celltrace Commc’ns Ltd. v. Acacia Research Corp., 15-CV-4746
`
`(AJN), 2016 WL 3407848 (S.D.N.Y. June 16, 2016). “If there is an issue of fact as to the making
`
`of the agreement for arbitration, then a trial is necessary.” Nicosia v. Amazon.com, Inc., 834 F.3d
`
`220, 229 (2d Cir. 2016); see also 9 U.S.C. §4. When the movant asserts an intent to arbitrate and
`
`there is a dispute as to the relevance, authenticity, or accuracy of the asserted agreement to arbitrate
`
`then the district court may not dismiss the complaint with the same material(s) in mind but instead
`
`should hear the request to compel arbitration in a summary judgment fashion and stay the
`
`underlying matter in the event arbitration is compelled. Id. at 230-31; see also Celltrace
`
`Communications Limited v. Acacia Research Corporation, 689 F. App’x. 6 (2d Cir. 2017).
`
`Arbitration clauses are matters of contract law and as such “may be invalidated by generally
`
`applicable contract defenses.” Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010). “If a
`
`party challenges the validity . . . of the precise agreement to arbitrate at issue, the federal court
`
`must consider the challenge before ordering compliance with that agreement . . .” Id. at 71; see
`
`e.g., Duran v. J. Hass Group, L.L.C., 531 F. App’x. 146, 147 (2d Cir. 2013).
`
`I.
`
`Plaintiffs Did Not Have Notice of or Assent to Any Agreement to Arbitrate
`
`A.
`
`Plaintiffs Did Not Have Notice of the Terms of Service
`
`Defendants argue the Node Purchase page provided Plaintiffs with notice of the Terms of
`
`Service that contain an agreement to arbitrate.
`
`While it is true that a party cannot avoid the terms of a contract on the ground that
`he or she failed to read it before signing, an exception to this general rule exists
`when the writing does not appear to be a contract and the terms are not called to the
`attention of the recipient. In such a case no contract is formed with respect to the
`undisclosed terms.
`
`6
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 11 of 17
`
`
`Berkson v. Gogo, LLC, 97 F. Supp. 3d. 359, 394 (E.D.N.Y 2015) (citing Sgouros v. TransUnion
`
`Corp., No. 14-CV-1850, 2015 WL 507584, at *5-7 (N.D. Ill. Feb. 5, 2015) (finding an internet
`
`agreement invalid because users were not provided with sufficient notice that they were being
`
`bound by the terms due to such notice being “amply far” from the text requiring authorization));
`
`see also Hines v. Overstock.com, Inc., 380 F. App’x. 22, 25 (2d Cir. 2010) (asserting use of a
`
`website constitutes acceptance of terms and conditions is insufficient in the absence of allegations
`
`to establish knowledge of the terms and conditions themselves).
`
`“In the context of web-based contracts, we look to the design and content of the relevant
`
`interface to determine if the contract terms were presented to the offeree in way that would put her
`
`on inquiry notice of such terms.” Starke v. SquareTrade, Inc., 913 F.3d 279, 289 (2d Cir. 2019)
`
`(citing Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1177 (9th Cir. 2014)). See also Berkson,
`
`97 F. Supp. 3d. at 396. The design and content of the Strongblock App webpage fails to provide
`
`constructive notice of the Terms of Service for several reasons.
`
`It is undisputed that the Terms of Service containing the agreement to arbitrate were never
`
`presented directly to any node purchaser, including Plaintiffs. No purchaser of Strongblock nodes
`
`was ever required to scroll down through the Terms of Service in order to ensure they were directly
`
`presented on the user’s screen. And no purchaser of a Strongblock node was ever required to click
`
`a box stating “I agree” to the Terms of Service in and by itself.
`
`Defendants’ only argument is that a link to the Terms of Service, though buried at the
`
`bottom of the Node Purchase page and comingled with many other details relating to the node
`
`purchase, was nonetheless sufficient notice of the arbitration agreement contained within the
`
`Terms of Service. This argument fails for several reasons.
`
`First, the placement of the link to the Terms of Service at the very bottom of the Node
`
`7
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 12 of 17
`
`Purchase page in an undistinguished font size and colored dark blue on a black background renders
`
`it inconspicuous to a user.
`
`Second, the link to the Terms of Service is placed directly after another link (to a Node
`
`Applications Policy) with identical styling. When terms are not displayed on the page, as is the
`
`case here, courts look for “a clear prompt directing users to read [the terms].” Meyer v. Uber
`
`Techs., Inc., 868 F.3d 66, 79 (2d Cir. 2017). Here the Node Applications Policy and Terms of
`
`Service are both hyperlinked in such as a way as to not clearly prompt any user to read the Terms
`
`of Service. The similar coloring and style of the links (dark blue on black background) also makes
`
`them appear virtually redacted from the web page itself.
`
`When evaluating the design and content of the webpage assessed in Plazza, this court
`
`recognized that insufficient notice may be found in circumstances where the hyperlinks are located
`
`at the bottom of the page with typeface bearing colors similar to that of the page background and
`
`placed next to other hyperlinks. Plazza v. Airbnb, Inc., 289 F. Supp. 3d. 537, 553 (S.D.N.Y 2018).
`
`Here, the link to the Terms of Service was not in large font, all caps, or in bold. Further, the
`
`hyperlink itself was obscured by the coloring of the text as construed against the background of
`
`the webpage itself and placed directly behind a separate hyperlink to the Node Applications Policy.
`
`Defendants asserted similarities with the circumstances in Meyer relies on the “bright white
`
`background and contrasting hyperlinks” with the hyperlinks being located “directly adjacent to the
`
`button to manifest assent as shown in the screenshot provided by Mr. Moss from January 2021.
`
`Def’s Mot. at 15; see also Meyer, Inc., 868 F.3d at 78 (2d Cir. 2017). However, the screenshot of
`
`the Node Purchase page provided by Plaintiffs herewith is diametrically opposite to the
`
`circumstances of Meyer in that it utilizes a black background with dark blue links. Moreover, the
`
`Node Purchase page is cluttered with large quantities of white text, all of which stands out against
`
`8
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 13 of 17
`
`the webpage which further serves to obscure its hyperlinks.
`
`The one-line bullet point that provides the hyperlink to the terms of service is not “spatially
`
`coupled” in an organized manner and “placed directly below the node name and description fields”
`
`but instead is at the very bottom of a list of nine bullet points3 listed in small uncapitalized font in
`
`a single-spaced style and is absent any indicia of assent to the Terms of Service.
`
`Defendants rely upon a myriad of case law claiming factual similarities that hinge upon the
`
`assertion that the Node Purchase page offered in support of Defendants’ Motion is the same Node
`
`Purchase page that has been used since January 16, 2021. However, as Plaintiffs have shown with
`
`their May 2022 screenshot of the Node Purchase page, Defendants have substantively changed the
`
`Node Purchase page over time, that the Node Purchase page utilized by Defendants does not
`
`require unambiguous assent to the Terms of Service in order to purchase nodes, and that the design
`
`and content of the Node Purchase page does not provide conspicuous notice of the terms.
`
`B.
`
`Defendants Have Failed to Show Plaintiffs Assented to the Terms of Service
`
`Manifestation of assent can only be found through one’s actions when the user “knows or
`
`has reason to know that the other party may infer from his conduct that he assents.” Schnabel v.
`
`Trilegiant Corp., 697 F.3d 110, 120 (2d Cir. 2012). When determining whether the parties have
`
`entered into a valid agreement to arbitrate, courts should apply ordinary state-law principles that
`
`govern the formation of contracts and evaluate the allegations to determine whether they raise a
`
`genuine issue of material fact. Plazza, F. Supp. 3d at 547. Relying on a contractual provision before
`
`a contract has been found to have been accepted by the parties as binding is unacceptable, as mutual
`
`manifestation of assent is the “touchstone” of a binding contract. Berkson 97 F.Supp. 3d at 387-
`
`
`
` 3
`
` Plaintiffs Complaint asserts that two additional bullet points were added to the Node Purchase
`page on May 19, 2022.
`
`9
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 14 of 17
`
`88. Where the terms of the contract are offered by one party to another, unequivocal acceptance of
`
`the terms by the receiving party is required. Id.
`
`Defendants’ assertion that this case is similar to the circumstances presented before the
`
`Meyer court is misplaced because Defendants’ Node Purchase page did not require that an
`
`individual agree to the Terms of Service prior to creating a node. The “registration flow” in Meyer
`
`provided users with notice that creating an Uber account necessitated agreement to the terms of
`
`service and privacy policy. Meyer, 868 F.3d at 80. Here, the Node Purchase page neither provides
`
`nor asserts any meaningful assent to the Terms of Service.
`
`While Defendants, and Moss specifically, assert that “from December 2020 through
`
`present, the phrase ‘I also agree to the . . . Terms of Service” has always appeared” on the Node
`
`Purchase page, this assertion is false as shown by the Node Purchase page provided by Plaintiffs.
`
`Most importantly, the version of the Node Purchase page provided by Plaintiffs is wholly absent
`
`of any meaningful expression of Plaintiffs Agreement to the Terms of Service. All it requires is
`
`that a node purchaser agree that they have “read” the Terms of Service. Reading a Terms of Service
`
`is not the same as agreeing to it. At minimum there exists a clear and bona fide dispute as to
`
`whether Plaintiffs ever meaningfully assented to the Strongblock Arbitration Agreement as
`
`contained within the Terms of Service.
`
`Defendants assert Plaintiffs’ manifested their assent to the Strongblock Arbitration
`
`Agreement by utilizing the Strongblock Platform to name nodes, describe nodes, and “most
`
`importantly, click[ed] the digital box expressly agreeing to the Terms of Service.” Notwithstanding
`
`the clear dispute as to whether Plaintiffs were ever required to expressly agree to the Terms of
`
`Service, unambiguous assent to the terms of an arbitration agreement is necessary in order for this
`
`Court to compel arbitration. Meyer v. Uber Techs., Inc., 868 F.3d 66, 76 (2d Cir. 2017). See also
`
`10
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 15 of 17
`
`Specht v. Netscape Commc’ns Corp., 150 F. Supp. 2d. 585, 594 (S.D.N.Y 2001) (finding the
`
`contractual nature of writing as “not obvious” because the offer did not carry an immediately
`
`visible notice of existence of license terms or require unambiguous manifestation of assent to those
`
`terms). Here, there was no notice of the agreement to arbitrate provided to Plaintiffs.
`
`II.
`
`The Agreement to Arbitrate Is Unenforceable Because It Prevents Effective
`Vindication of Plaintiffs’ U.S. Securities Act Claims
`
`In American Express Co. v Italian Colors Restaurant, the Supreme Court confirmed the
`
`existence of an “effective vindication” exception to the rule that courts must “rigorously enforce”
`
`arbitration agreements. 570 U.S. 228, 235, 133 S. Ct. 2304, 2310, 186 L. Ed. 2d 417 (2013). In
`
`doing so, the Court explained:
`
`The “effective vindication” exception to which respondents allude originated as
`dictum in Mitsubishi Motors, where we expressed a willingness to invalidate, on
`“public policy” grounds, arbitration agreements that “operat [e] ... as a prospective
`waiver of a party's right to pursue statutory remedies.” 473 U.S., at 637, n. 19, 105
`S.Ct. 3346 (emphasis added). ... [W]e said that “so long as the prospective litigant
`effectively may vindicate its statutory cause of action in the arbitral forum, the
`statute will continue to serve both its remedial and deterrent function.” ... As we
`have described, the exception finds its origin in the desire to prevent “prospective
`waiver of a party's right to pursue statutory remedies,” Mitsubishi Motors, supra,
`at 637, n. 19, 105 S.Ct. 3346 (emphasis added). That would certainly cover a
`provision in an arbitration agreement forbidding the assertion of certain statutory
`rights.
`
`Id. Even the dissent agreed there is an “effective vindication” exception to enforcing arbitration
`
`agreements. 570 U.S. 228 at 242, 133 S. Ct. at 2314 (Kagan, J., with Ginsberg, J. and Breyer, J.,
`
`dissenting) (“our cases establish this proposition: An arbitration clause will not be enforced if it
`
`prevents the effective vindication of federal statutory rights, however it achieves that result”).
`
`Here, the January 16, 2021, Terms of Service that applies to all Plaintiffs not only requires
`
`disputes be arbitrated by ICC arbitration in the Cayman Islands, it also requires that, “all Disputes
`
`are governed by ... the internal laws of the Cayman Islands without regard to choice-of-law rules.”
`
`Filed herewith is a declaration of Andrew Johnstone, a Partner in the Cayman Islands office
`
`11
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 16 of 17
`
`of Harney Westwood & Riegels (“Harneys”). Mr. Johnstone is the head of Harneys’ Litigation,
`
`Insolvency and Restructuring group in the Cayman Islands and has significant arbitration
`
`experience, including acting as advocate and counsel in arbitrations conducted under the rules of
`
`most leading arbitral bodies, including the ICC. As set forth in Mr. Johnstone’s declaration,
`
`“Plaintiffs’ claims for violations of the U.S. Securities Act could not be vindicated in an ICC
`
`arbitration, or any other proceeding, brought in the Cayman Islands applying the internal laws of
`
`the Cayman Islands without regard to choice-of-law rules.” Decl. Johnstone, p. 2 (¶ 11). Thus, the
`
`“effective vindication” exception to enforcement of arbitration agreements applies in this case.
`
`The same result was reached in a 2017 decision from the Western District of New York
`
`with facts virtually identical to this case. Eisen v. Venulum Ltd., 244 F. Supp. 3d 324 (W.D.N.Y.
`
`2017). The court in Eisen refused to enforce an arbitration agreement that required ICC arbitration
`
`in the British Virgin Islands applying BVI law because doing so would result in the plaintiffs
`
`losing the ability to bring U.S. Securities Act claims. The Court explained:
`
`A court can invalidate an agreement to arbitrate which acts as a “prospective waiver
`of a party's right to pursue statutory remedies.” Am. Express Co. v. Italian Colors
`Rest., ––– U.S. ––––, 133 S.Ct. 2304, 2310, 186 L.Ed.2d 417 (2013) (original
`emphasis omitted). “[A] federal court will compel arbitration of a statutory claim
`only if it is clear that the prospective litigant effectively may vindicate its statutory
`cause of action in the arbitral forum, such that the statute under which its claims are
`brought will continue to serve both its remedial and deterrent function.” Ragone,
`595 F.3d at 125 (internal citations omitted); see, e.g., Am. Express, 133 S.Ct. at
`2310; Hayes, 811 F.3d at 674 (“[W]hile the Court has affirmed that the FAA gives
`parties the freedom to structure arbitration in the way they choose, it has repeatedly
`cautioned that this freedom does not extend to a substantive waiver of federally
`protected civil rights in an arbitration agreement.”) (internal citation omitted).
`
`Id. at 344.
`
`The effective vindication exception invalidates the entire arbitration agreement. Id. It does
`
`not lead to a segregating of the claims that can not be vindicated from any other claims that might
`
`be vindicated through the arbitration. Id. Thus, here, the entire agreement to arbitrate is invalid.
`
`12
`
`

`

`Case 1:22-cv-07313-VSB Document 30 Filed 11/14/22 Page 17 of 17
`
`
`
`For the reasons set forth above, Defendants’ Motion to Dismiss and Compel Arbitration
`
`CONCLUSION
`
`should be denied.
`
`
`
`November 14, 2022
`
`
`
`Respectfully submitted,
`
`/s/ Payton H. Poliakoff
`Payton H. Poliakoff (admitted pro hac vice)
`GOVERNMENT LAW GROUP, PLLC
`Museum Plaza Building
`200 S Andrews Avenue, Suite 601
`Fort Lauderdale, Florida 33301
`Tel.: (954) 909-0580
`ppoliakoff@govlawgroup.com
`
`Daniel B. Ravicher
`ZEISLER PLLC
`45 Rockefeller Plaza, 20th Floor
`New York, NY 10111
`Tel.: (212) 671-1921
`Fax: (888) 229-1921
`dan@zeisler-law.com
`
`Counsel for Plaintiffs
`
`13
`
`