United States District Court, N.D. Illinois, Eastern Division
GREGORY GREENE, JOSEPH LACK, and ANTHONY MOTTO, individually and on behalf of all others similarly situated, Plaintiffs,
MIZUHO BANK, LTD. and MARK KARPELES, Defendants.
MEMORANDUM OPINION AND ORDER
putative class action, Plaintiffs Gregory Greene, Joseph
Lack, and Anthony Motto allege that Mizuho Bank, Ltd. and
Mark Karpeles are liable for financial losses arising from
the demise of the Mt. Gox Bitcoin exchange. Doc. 205.
Plaintiffs bring only state law claims, and subject matter
jurisdiction lies under the Class Action Fairness Act, 28
U.S.C. § 1332(d). Earlier in the litigation, Mizuho
moved to dismiss under Federal Rule of Civil Procedure
12(b)(2) for lack of personal jurisdiction, and the court
denied the motion. Docs. 199-200 (reported at ___ F.Supp.3d
___, 2016 WL 946921 (N.D. Ill. Mar. 14, 2016)). Mizuho now
moves to dismiss for failure to state a claim under Rule
12(b)(6) or, alternatively, for forum non
conveniens. Doc. 172. The motion is granted as to
Greene's tortious interference claim and Plaintiffs'
accounting claim, and otherwise is denied.
resolving a Rule 12(b)(6) motion, the court assumes the truth
of the operative complaint's well-pleaded factual
allegations, though not its legal conclusions. See Zahn
v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th
Cir. 2016). The court must also consider “documents
attached to the complaint, documents that are critical to the
complaint and referred to in it, and information that is
subject to proper judicial notice, ” along with
additional facts set forth in Plaintiffs' brief opposing
dismissal, so long as those facts “are consistent with
the pleadings.” Phillips v. Prudential Ins. Co. of
Am., 714 F.3d 1017, 1020 (7th Cir. 2013) (internal
quotation marks omitted); see also Defender Sec. Co. v.
First Mercury Ins. Co., 803 F.3d 327, 335 (7th Cir.
2015). The facts are set forth as favorably to Plaintiffs as
those materials allow. See Pierce v. Zoetis, 818
F.3d 274, 277 (7th Cir. 2016). In setting forth those facts
at the pleading stage, the court does not vouch for their
accuracy. See Jay E. Hayden Found. v. First Neighbor
Bank, N.A., 610 F.3d 382, 384 (7th Cir. 2010).
is a digital payment system, and bitcoins are the
system's unit of account. See Beyond Silk Road:
Potential Risks, Threats and Promises of Virtual Currencies:
Hearing Before the S. Comm. on Homeland Sec. &
Governmental Affairs, 113th Cong. 3-4 (2013) (statement of
Jennifer Shasky Calvery), https://perma.cc/2TFX-6BCQ
(noting that the Treasury Department classifies Bitcoin as a
“decentralized virtual currency”). Bitcoins can
be bought and sold on exchanges.
to its collapse and bankruptcy, Mt. Gox was a Bitcoin
exchange based in Tokyo, Japan. Doc. 205 at ¶ 12.
Karpeles was Mt. Gox's President, CEO, and majority
shareholder. Id. at ¶¶ 7, 18. To fund
their activities on the exchange, Mt. Gox users could either
(1) transfer bitcoins directly into their accounts at Mt. Gox
or (2) wire fiat currency (government-issued money, such as
dollars and euros) to Mizuho, which would deposit the money
into a bank account it held on behalf of Mt. Gox.
Id. at ¶¶ 15, 24. Mizuho is headquartered
in Tokyo and earned service fees from processing those wire
deposits. Id. at ¶¶ 8, 17. To withdraw
fiat currency, a Mt. Gox user would make a request through
her account at Mt. Gox, which would send the request, along
with the user's banking details, to Mizuho, which in turn
would transfer the requested amount to the user's bank.
Id. at ¶ 25.
an Illinois resident, opened a Mt. Gox account in 2012 and
began trading and selling bitcoins. Id. at
¶¶ 4, 49. For over a year, Greene traded bitcoins
without incident. Id. at ¶¶ 49-51. In
November 2013, Greene contacted Mt. Gox customer service
after experiencing delays with his transactions. Id.
at ¶ 51.
to Greene, Mt. Gox had for several months been under pressure
on two fronts. First, exploiting security vulnerabilities
that dated from as early as 2011, Karpeles was stealing
bitcoins that belonged to Mt. Gox users. Id. at
¶¶ 20-22. Second, and of particular relevance here,
Mizuho was attempting to end its relationship with Mt. Gox.
Id. at ¶¶ 27-28 & n.8. Concerned about
a reported U.S. investigation into money laundering on Mt.
Gox and wary of potential legal liability or reputational
harm, Mizuho pressed Karpeles to close the Mt. Gox bank
account at Mizuho. Id. at ¶¶ 28-29. When
Karpeles refused, Mizuho unilaterally took several measures
designed to make the banking relationship untenable for Mt.
Gox. Id. at ¶¶ 29-30, 32. Those measures
included limiting the number and amount of Mt. Gox customer
withdrawals and refusing to process some wire transfers.
mid-2013, Mizuho was no longer processing any international
wire withdrawals for Mt. Gox, meaning that Mt. Gox users who
had wired fiat currency to Mizuho for deposit in Mt.
Gox's account could not withdraw their money.
Id. at ¶¶ 30, 32. Mizuho's qualms
about handling Mt. Gox's business did not extend,
however, to receiving fiat currency from Mt. Gox
users for deposit into Mt. Gox's account. Even as it
limited and then barred withdrawals, Mizuho continued to
accept deposits from Mt. Gox users, earning revenue from the
associated service fees. Id. at ¶¶ 17,
32-33. Plaintiffs allege that Mizuho prohibited Mt. Gox from
disclosing that the withdrawal difficulties were attributable
to Mizuho or that Mizuho wanted to terminate its relationship
with Mt. Gox. Id. at ¶¶ 37, 136. Mizuho
knew that if Mt. Gox's members learned of its prohibition
on withdrawals of fiat currency from Mt. Gox's Mizuho
account, members would stop making deposits and Mizuho would
stop collecting the associated fees. Id. at ¶
133. By August 2013, press reports indicated that Mt. Gox
users were suffering significant delays in withdrawing fiat
currency, but those reports indicated only that withdrawals
were slow, not that they were barred. Id. at
¶¶ 27 n.8 (citing Romain Dillet, “Feds Seize
Another $2.1 Million from Mt. Gox, Adding Up to $5 Million,
” TechCrunch (Aug. 23, 2013),
https://perma.cc/4NUG-XPDC), 31 & n.11 (citing
Daniel Cawrey, “Withdrawals from Mt. Gox: Growing Pains
or Banking Bottleneck?, ” CoinDesk (Aug. 12,
2013), https://perma.cc/ERP8-GB8F; Peter N.
Steinmetz, “Mt. Gox USD Withdrawals to Take Up to 22
Months, ” Bitcoin Mag. (Sept. 21, 2013),
California resident, did not join Mt. Gox until January 22,
2014, about six months after Mizuho had barred all
withdrawals from its Mt. Gox account. Id. at
¶¶ 5, 58. At the time, Mizuho had not publicly
disclosed that it had halted all international wire transfers
out of the Mt. Gox account. Id. at ¶¶
65-66. On February 3, 2014, Lack wired $40, 000 in fiat
currency from his local Wells Fargo branch to Mizuho, and
Mizuho accepted the transfer. Id. at ¶¶
59, 67. On February 7, 2014, Karpeles halted all Mt. Gox
users' ability to withdraw bitcoins from the Mt. Gox
Bitcoin exchange. Id. at ¶ 38. On February 20,
2014, after Mt. Gox indicated that it had not yet received
his deposit, Lack went to his local bank branch to attempt to
trace the wire transfer and recall his deposit. Id.
at ¶ 64.
an Illinois resident, joined Mt. Gox in early 2014.
Id. at ¶¶ 6, 69. On February 15, 2014,
eight days after Karpeles halted bitcoin withdrawals, Motto
wired $1, 000 in fiat currency from his local Chase bank
account to Mizuho, and Mizuho accepted the deposit.
Id. at ¶¶ 70, 72. When the money did not
appear in Motto's Mt. Gox account, Mt. Gox asked Motto to
confirm that wire transfer listed the correct bank name
(“Mizuho”), which Motto confirmed. Id.
at ¶ 73. Mt. Gox indicated that it had not yet received
Motto's deposit. Ibid.
February 24, 2014, the Mt. Gox website became inaccessible,
and on February 28, Mt. Gox filed for bankruptcy protection
in Japan. Id. at ¶¶ 40-41. Greene was
unable to access approximately $25, 000 in bitcoins from his
Mt. Gox account. Id. at ¶ 56. Lack was unable
to recover his $40, 000 in fiat currency from Mizuho, and
that sum was not reflected in his Mt. Gox account.
Id. at ¶¶ 67-68. Motto was unable to
recover his $1, 000 in fiat currency from Mizuho, and his Mt.
Gox account continued to reflect a balance of $0.00.
Id. at ¶ 77. All three Plaintiffs allege that
had they known that Mizuho had barred all outgoing wire
transfers for Mt. Gox users, they would not have made their
deposits. Id. at ¶¶ 57, 66, 76, 137.
filed this suit against various Mt. Gox entities and Karpeles
on February 27, 2014, Doc. 1, and in an amended complaint he
added Lack as a plaintiff and Mizuho (among others) as a
defendant, Doc. 37. The case was stayed by agreement for some
time, Docs. 95, 129, and after a settlement attempt failed,
Plaintiffs voluntarily dismissed all defendants other than
Mizuho and Karpeles. Doc. 147. A new amended complaint,
adding Motto, was filed on April 4, 2016. Doc. 205.
operative complaint has seven counts. Counts I-III name only
Karpeles and need not be discussed. Doc. 205 at ¶¶
84-110. Count IV is brought by Plaintiffs on behalf of the
entire putative class; it alleges that Mizuho, in limiting
withdrawals from Mt. Gox's bank account, tortiously
interfered with Plaintiffs' contracts with Mt. Gox.
Id. at ¶¶ 111-119. Counts V-VII are
brought on behalf only of Lack, Motto, and the putative
“Deposit Subclass, ” defined as those class
members who deposited fiat currency into their Mt. Gox
accounts through Mizuho after Mizuho had stopped processing
withdrawals. Id. at ¶ 78. The Deposit Subclass
does not include those individuals, like Greene, whose Mt.
Gox assets consisted solely of bitcoins and who therefore did
not deposit fiat currency at Mizuho. Ibid. Count V
alleges that Mizuho unjustly enriched itself by accepting
transaction fees in connection with incoming wire transfers
from Deposit Subclass members after it had halted Mt. Gox
withdrawals without disclosing that it had done so.
Id. at ¶¶ 120-127. Count VI alleges that
Mizuho fraudulently concealed from the Deposit Subclass that
it had halted such withdrawals. Id. at ¶¶
128-139. Count VII seeks an order “requiring Mizuho to
provide a full and complete accounting of all transactions or
records relating to the deposit, transfer, and processing
of” the Deposit Subclass's assets. Id. at
moves to dismiss Counts IV-VII. Doc. 172. Although, as
discussed below, Mizuho has raised a choice-of-law issue with
regard to forum non conveniens, Doc. 183 at 36-38;
Doc. 207 at 23, and has given notice pursuant to Rule 44.1
that it intends to raise foreign law at a later stage in the
litigation, Doc. 183 at 36 n.18; Doc. 207 at 8, it has not
raised the issue as to its Rule 12(b)(6) motion and seeks
dismissal of Counts IV-VII under Illinois law. Id.
at 9 (“Mizuho applies Illinois … law solely for
the convenience of effectively resolving its motion to
dismiss.”). Because Plaintiffs also do not raise a
conflict-of-law issue, Illinois law governs the Rule 12(b)(6)
motion. See Fednav Int'l v. Cont'l Ins. Co.,
624 F.3d 834, 838 (7th Cir. 2010) (“When neither party
raises a conflict of law issue in a diversity case, the
applicable law is that of the state in which the federal
court sits.”) (internal quotation marks omitted).
Tortious Interference with Contract (Count IV)
state a claim under Illinois law for tortious interference
with contracts, a plaintiff must demonstrate: (1) the
existence of a valid and enforceable contract between the
plaintiff and another; (2) the defendant's awareness of
this contractual relation; (3) the defendant's
intentional and unjustified inducement of a breach of the
contract; (4) a subsequent breach by the other, caused by the
defendant's wrongful conduct; and (5) damages.”
Healy v. Met. Pier & Exposition Auth., 804 F.3d
836, 842 (7th Cir. 2015). Mizuho challenges the third and
fourth elements. Doc. 183 at 18-26; Doc. 207 at 9-15.
the third element, intentional and unjustified inducement of
a breach, Mizuho makes two arguments, which largely fail at
the pleading stage. First, Mizuho contends that the
complaint's allegations reveal that Mizuho did not induce
Mt. Gox to breach its contracts with Plaintiffs, since Mt.
Gox ultimately went dark as a result of
Karpeles's actions and alleged theft, not
Mizuho's barring of outbound transfers. Doc. 183
at 18-20; Doc. 205 at ¶¶ 20-21, 38, 40; Doc. 207 at
9-10. The court agrees that Plaintiffs have not pleaded
“sufficient factual matter” to claim, as the
complaint does, id. at ¶ 117, that Mizuho's
barring of outbound wire transfers forced Karpeles to steal
bitcoins, caused Mt. Gox to suffer security vulnerabilities,
and led Karpeles to close Mt. Gox. See Stapleton v.
Advocate Health Care Network, 817 F.3d 517, 521 (7th
Cir. 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009)). That particular charge does not comport with
“common sense, ” which must be applied when
determining whether a complaint states a claim. Thulin v.
Shopko Stores Operating Co., LLC, 771 F.3d 994, 997 (7th
Cir. 2014) (quoting Iqbal, 556 U.S. at 679).
that particular charge is not necessary for Plaintiffs'
tortious interference claim. “Under Illinois law,
liability for tortious interference may … be premised
on acts immediately directed at a third party which cause
that party to breach its contract with the plaintiff.”
George A. Fuller Co. v. Chi. Coll. of Osteopathic
Med., 719 F.2d 1326, 1331 (7th Cir. 1983); see also
Havoco of Am., Ltd. v. Sumitomo Corp. of Am., 971 F.2d
1332, 1344-45 (7th Cir. 1992) (noting that tortious
interference “encompasses the situation in which the
defendant prevents the plaintiff from performing the
contract”) (internal quotation marks omitted). Here,
for several months between its mid-2013 decision to bar
outgoing withdrawals from its Mt. Gox bank account and Mt.
Gox's February 2014 collapse, Mizuho made it impossible
for Mt. Gox to perform on its contracts with its U.S.-based
users because, with Mizuho refusing to process outbound wire
transfers, U.S. users could not withdraw fiat currency from
Mt. Gox. Mizuho retorts that Mt. Gox's performance was
not impossible because Mt. Gox maintained upwards of forty
accounts at different banks and payment processors, and also
because Mt. Gox could have closed its account with Mizuho,
withdrawn the money, and then used the funds to pay U.S.
depositors either via check or through one of its other bank
accounts. Doc. 183 at 21; Doc. 207 at 11-12. That argument
fails; accepting at the pleading stage that Mt. Gox could
have serviced Lack and Motto through those other accounts,
even though nothing in the complaint suggests that it could
have, would require drawing factual inferences against
Plaintiffs, which on a Rule 12(b)(6) motion the court cannot
do. See Zahn, 815 F.3d at 1087.
next argues that even if it did induce Mt. Gox to breach its
contracts with Plaintiffs, Mizuho's conduct was neither
intentional nor unjustified. “In our legal system,
every person is presumed to intend the natural consequences
of his acts.” In re Sentinel Mgmt. Grp., Inc.,
728 F.3d 660, 667 (7th Cir. 2013) (internal quotation marks
omitted); see also Trzcinski v. Am. Cas. Co., 953
F.2d 307, 313 (7th Cir. 1992) (“[T]he law presumes
every man to intend the natural consequences of his
acts.”) (internal quotation marks omitted); Miller
v. Washington, 2013 WL 1340590, at *6 (N.D. Ill. Mar.
30, 2013) (“It is a basic principle of Illinois tort
law that a person is considered to intend the natural and
probable consequences of his actions.”). Plaintiffs
allege that Mizuho knew that barring outbound wire transfers
“would render Mt. Gox incapable of fulfilling its
contractual obligations to its American users, ” Doc.
197 at 17-18, and that is sufficient to plead intent.
protests that this is a conclusory assertion, and it
enumerates several possibly relevant facts that are absent
from the complaint. Doc. 207 at 13 & n.6. But to survive
a Rule 12(b)(6) motion, Plaintiffs need not plead every
conceivable fact to support a claim; the complaint need only
“contain sufficient factual matter, accepted as true,
‘to state a claim to relief that is plausible on its
face.'” Stapleton, 817 F.3d at 521
(quoting Iqbal, 556 U.S. at 678). “A claim has
facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Roberts v. City of Chicago, 817 F.3d 561, 564-65
(7th Cir. 2016) (quoting Iqbal, 556 U.S. at 678).
“[A]ll this means is that the plaintiff must include
enough details about the subject-matter of the case to
present a story that holds together.” Runnion ex
rel. Runnion v. Girl Scouts of Greater Chi. & Nw.
Ind., 786 F.3d 510, 526 (7th Cir. 2015) (internal
quotation marks omitted).
Plaintiffs have done. The complaint alleges that
“Mizuho facilitated all international cash wire
transfers into the [Mt. Gox] Exchange and processed user
requests to withdraw cash from the Exchange”; that it
“exclusively processed all bank deposits and
withdrawals made by Mt. Gox users located in the United
States”; and that it “knew that if U.S. customers
found about … the fact that withdrawals were no longer
allowed … they would no longer continue making
deposits into the Exchange.” Doc. 205 at ¶¶
23, 26, 32. This factual predicate supports the reasonable
inference that Mizuho at the very least knew or expected that
its barring of outgoing wire transfers would severely disrupt
Mt. Gox's contractual relationships with its American
users, including Lack and Motto. See Hudson Ins. Co. v.
City of Chicago Heights, 48 F.3d 234, 238 (7th Cir.
1995) (“[E]ven if Chicago Heights did not intend the
destruction of the buildings through vandalism by third
parties, it should have expected the destruction of the
buildings and the ultimate damages suffered by the …
plaintiffs as the likely consequence of that action.”).
Indeed, disrupting those relationships was the point of
Mizuho's conduct; otherwise, Mizuho's policy of
barring withdrawals would not have served its conceded
purpose of inducing Mt. Gox to terminate its banking
relationship with Mizuho, for, as Mizuho notes, on a strictly
financial basis Mizuho's actions arguably enriched Mt.
Gox by preventing users from withdrawing their money. Doc.
207 at 9. For these reasons, Plaintiffs have adequately
pleaded that Mizuho's conduct was intentional.
justification, “Illinois recognizes a conditional
privilege to interfere with contracts where the defendant was
acting to protect an interest which the law deems to be of
equal or greater value than the plaintiff's contractual
rights.” Nation v. Am. Capital, Ltd., 682 F.3d
648, 651 (7th Cir. 2012) (internal quotation marks omitted);
see also TABFG, LLC v. Pfeil, 746 F.3d 820, 825 (7th
Cir. 2014) (“The Illinois Supreme Court has recognized
a privilege in tortious interference cases where the interest
which the defendant was acting to protect is one which the
law deems to be of equal or greater value than the
plaintiff's contractual rights.”). The privilege
can include situations in which “a party acts to
enhance its own business interests, ” Fidelity
Nat'l Title Ins. Co. of N.Y. v. Westhaven Props.
P'ship, 898 N.E.2d 1051, 1067-68 (Ill.App. 2007)
(internal quotation marks omitted), a category into which
Mizuho contends that its efforts to inoculate itself from
legal liability and reputational harm from its association
with Mt. Gox fall. Doc. 183 at 22-23; Doc. 207 at 14-15.
“Illinois courts have been unclear about whether the
issue of conditional privilege is part of the plaintiff's
claim-that is, an aspect of the plaintiff's burden to
prove that the defendant's interference with his contract
was unjustified-or an affirmative defense to be proved by the
defendant, ” Nation, 682 F.3d at 651 n.2, and
the parties here dispute the issue, Doc. 197 at 22-23; Doc.
207 at 14. But the burden issue is irrelevant on this motion,
because the privilege is contingent on the interference being
incidental, not intentional. See Curt Bullock Builders,
Inc. v. H.S.S. Dev., Inc., 586 N.E.2d 1284, 1290
(Ill.App. 1992) (“If the interference which results is
of an incidental nature rather than an intentional
nature, no tort occurs.”) (emphasis added).
Mizuho's interference was not incidental; to the
contrary, and as noted, Mizuho intended to disrupt Mt.
Gox's relationships with its U.S. users, including
Plaintiffs. Further, as discussed below, Mizuho's alleged
conduct was inherently wrongful, as it was founded on a tort:
fraudulently concealing the fact that Plaintiffs' money,
once deposited, could not be recovered. That is more than
sufficient to show that Mizuho “committed some
impropriety” in interfering with Plaintiffs'
contracts with Mt. Gox, which is all that Plaintiffs must
plead to allege unjustified conduct. See Dowd & Dowd,
Ltd. v. Gleason, 639 ...