Alec Otto v. Nano f/k/a Raiblocks f/k/a Hieusys LLC et al

Filing 197

ORDER GRANTING MOTION TO WITHDRAW MOTION FOR CLASS CERTIFICATION AND MOTION FOR VOLUNTARY DISMISSAL by Judge Yvonne Gonzalez Rogers granting 194 Motion to Withdraw.The Court VACATES the motion hearing set for July 20, 2021. Nano Defendants opening brief due by 7/27/2021. Plaintiff Responses due by 8/10/2021. Replies due by 8/17/2021.Court tentatively grants motion for voluntary dismissal with prejudice pending resolution of the Section 27(c) issue.(fs, COURT STAFF) (Filed on 7/15/2021)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ALEC OTTO,
Plaintiff,

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United States District Court
Northern District of California

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Case No. 4:19-cv-00054-YGR

v.

ORDER GRANTING MOTION TO
WITHDRAW MOTION FOR CLASS
CERTIFICATION AND MOTION FOR
VOLUNTARY DISMISSAL

COLIN LEMAHIEU, ET AL.,
Defendants.

Re: Dkt. No. 194

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Plaintiff Alec Otto brings this putative class action against defendants Nano f/k/a/

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RaiBlocks f/k/a Hieusys, LLC (“Nano”), Colin LeMahieu, Mica Busch, Zack Shapiro, and Troy

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Retzer (collectively, “Nano Defendants”) as well as B.G. Services SRL f/k/a BitGrail SRL f/k/a

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Webcoin Solutions (“BitGrail”) and Francesco “The Bomber” Firano (collectively “BitGrail

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Defendants”) for securities fraud and related claims in connection with defendants’ promotion of

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and statements regarding a cryptocurrency or digital asset referred to as NANO f/k/a RaiBlocks

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(“XRB” or “Nano Tokens”).

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Now before the Court is plaintiff’s notice of withdrawal of plaintiff’s motion for class

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certification and motion for voluntary dismissal. (Dkt. No. 194 (“Mot.”)) The Nano Defendants

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agree that plaintiff’s motion for class certification should be withdrawn, as do they agree that this

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matter should be dismissed with prejudice. (Dkt. No. 195 (“Resp.”))

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Having carefully reviewed the record, the papers submitted on each motion, and for the

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reasons set forth more fully below, the Court accepts plaintiff’s withdrawal of his motion for class

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certification and tentatively GRANTS the motion for voluntary dismissal, pending the Court’s

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evaluation of the parties’ performance under Section 27(c) of the Securities Act of 1933 (“Section

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27(c)”).1

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I.

BACKGROUND

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The Court assumes familiarity with the factual and procedural background of this case.

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The Court only summarizes the case background that is relevant for the issuance of this order.

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Thus: On August 4, 2020, plaintiff filed his first motion to certify the class. (Dkt. No. 144.) On

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December 8, 2020, plaintiff filed a second motion to certify the class. (Dkt. No. 168.) The Nano

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Defendants opposed plaintiff’s second class certification motion and moved to strike the report of

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David Weisberger on February 26, 2021. (Dkt. Nos. 179 and 180.) The Court granted the Nano

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Defendant’s motion to strike on April 26. (Dkt. No. 191.) In that order, the Court directed
plaintiff to advise as to whether he intended to proceed on the motion for class certification or

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United States District Court
Northern District of California

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withdraw it. (Id.) Plaintiff initially responded that he intended to proceed with the motion. (Dkt.

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No. 192.) On June 13, however, plaintiff filed this current motion, seeking withdrawal of the

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motion and dismissal of the action.

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II.

LEGAL FRAMEWORK

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A.

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Under Rule 7-7(e) of the Civil Local Rules, a motion may only be withdrawn as of right

Withdrawal of the Motion for Class Certification

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“within the time for filing and serving a reply.” If a motion is not withdrawn within this

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timeframe, the Court may proceed to decide the motion. Civil Local Rule 7-7(e).

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B.

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Federal Rule of Civil Procedure 41(a)(2) provides in pertinent part:

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Voluntary Dismissal under Federal Rule of Civil Procedure 41(a)(2)

[A]n action may be dismissed at the plaintiff's request only by court
order, on terms that the court considers proper. If a defendant has
pleaded a counterclaim before being served with the plaintiff's motion
to dismiss, the action may be dismissed over the defendant's objection
only if the counterclaim can remain pending for independent
adjudication. Unless the order states otherwise, a dismissal under this
paragraph . . . is without prejudice.

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Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court
finds this motion appropriate for decision without oral argument. Accordingly, the Court
VACATES the motion hearing set for July 20, 2021.
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Thus, the rule “vests the district court with discretion to dismiss an action at the plaintiff’s instance

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‘upon such terms and conditions as the court deems proper.’ That broad grant of discretion does

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not contain a preference for one kind of dismissal or another.”) Hargis v. Foster, 312 F.3d 404,

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407 (9th Cir. 2002).

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III.

DISCUSSION

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A.

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Plaintiff filed this motion to withdraw the motion for class certification over two months

Withdrawal of Class Certification Motion

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after filing the reply. (See Dkt. Nos. 188 and 194.) Under Local Rule 7-7(e), the motion is

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untimely. The Court, however, will excuse the late withdrawal given that the Nano Defendants do

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United States District Court
Northern District of California

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not oppose the withdrawal.
B.

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Motion for Voluntary Dismissal
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Whether to Allow Dismissal of Action

A motion for voluntary dismissal should be granted absent a showing by the defendant that

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it will suffer resulting “legal prejudice,” which is “prejudice to some legal interest, some legal

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claim, [or] some legal argument.” See Westlands Water Dist.v. U.S., 100 F.3d 94, 97 (9th Cir.

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1996). Here, both parties agree that plaintiff’s claims should be dismissed with prejudice. (See

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Dkt. No. 196 at 1; Resp. at 4.) The parties dispute, however, whether the Nano Defendants

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should be awarded attorneys’ fees and costs. As a threshold matter, the Court finds that dismissal

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with prejudice is warranted.2

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2.

Terms of Dismissal

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The Nano Defendants request attorneys’ fees as sanctions under Section 27(c) of the

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Securities Act of 1933 (“Section 27(c)”). Under Section 27(c), upon final adjudication of a private

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action arising under federal securities law, a court must assess the parties’ Rule 11 compliance

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Plaintiff avers that dismissal is required because the Court no longer has jurisdiction in
light of the withdrawal of the motion for class certification. (Mot. at 1.) The Court is not
persuaded. See United Steel v. Shell Oil Co., 602 F.3d 1087, 1089 (9th Cir. 2010) (“We accepted
defendants’ appeal to consider whether the denial of class certification divests federal courts of
jurisdiction over cases removed under § 1332(d). Today we join the Seventh and Eleventh
Circuits in holding that it does not. If the putative class action was properly removed to begin
with, the subsequent denial of Rule 23 class certification does not divest the district court of
jurisdiction.”) The Court maintains jurisdiction.
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with regards to “any complaint, responsive pleading, or dispositive motion.” 15 U.S.C. § 77z-

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1(c). If the Court finds that any party did not comply with its Rule 11 requirements, the Court

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should award appropriate sanctions. Id.
Given the Court’s obligation, the Court orders briefing on the issue. Nano Defendants shall

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file its opening brief detailing its position on whether sanctions are appropriate by JULY 27, 2021.

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Plaintiff shall respond by AUGUST 10, 2021. The Nano Defendants shall file a reply by AUGUST

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17, 2021. The opening brief and response shall be limited to 15 pages, and the reply to 10 pages.

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The Court anticipates resolving the issue on the papers.

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IV.

CONCLUSION
Accordingly, for the foregoing reasons, the Court accepts plaintiff’s withdrawal of his

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United States District Court
Northern District of California

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motion for class certification and tentatively GRANTS the motion for voluntary dismissal with

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prejudice pending resolution of the Section 27(c) issue.

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IT IS SO ORDERED.
Dated: July 15, 2021

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YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT JUDGE

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