US Law Firm Airdrops Court Order: NFTs Could Revolutionize The Legal Industry

AUTHORED BY

INITIATING A LAWSUIT

As our reliance on the internet grows, so do online scams. As a result, causes of action arising out of online activities are booming. People perpetuating online attacks frequently utilize pseudonyms, email addresses, cryptocurrency wallets, or blockchain addresses in lieu of legal names. Often, parties injured by online activities like thefts, defamation, harassment, etc., do not know the identity of the person responsible, but only know their IP address, email address, blockchain address, or hacker “handle”. Even anonymous online actors must be “served”, but how do you serve an unknown person?

Historically, when initiating a lawsuit, you must serve the opposing party with a copy of the Complaint and Summons detailing the nature of the lawsuit and commanding them to appear in court to address the issues. For hundreds of years, “service” was primarily effectuated by having a person – a private process server or a sheriff – hand the documents to the other side. Today, Ohio R. Civ. P. 4 sets out the various ways that process may be served to both in-state residents (Rule 4.2) out of state or international residents (Rule 4.3) or by publication in a newspaper (Rule 4.4). As a general rule, service (at least of the papers necessary to initiate a lawsuit) must be made either in person, by certified mail, by repeated publication in a local newspaper of general circulation or – for international service of process – as provided in the Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Service Convention), the Additional Protocol to the Inter-American Convention on Letters Rogatory (Inter-American Convention), and letters rogatory service requests received through diplomatic channels.

LAW FIRM ORDERED TO AIRDROP LEGAL DOCUMENTS

So, what is to be done when you don’t know the identity of the party who violated the law? Various laws require that anonymous online actors be provided with notice throughout the litigation process. This includes, but is not limited to, pre-suit demands for retraction in defamation lawsuits, notice of the initiation of an action, and notice that a party is attempting to unmask an anonymous online actor’s identity through the discovery process. Internet attorneys must often be creative in meeting these requirements. Some courts allow attorneys to provide notice by posting a public comment responding to the anonymous online actor on an online message board. This requirement can also be met by a non-party being subpoenaed for information related to the true legal identity of the anonymous online actor. For example, when subpoenaing Facebook for the identity of a user, Facebook will notify that person that his or her identifying information is being subpoenaed. The Facebook user will then have the opportunity to prevent the disclosure of his or her identity by filing a motion to quash.

One mechanism to “serve” an anonymous online actor is to file a “John Doe” lawsuit in local court, suing the unknown person and using the rules of discovery to attempt to unmask the perpetrator’s identity. This typically involves sending discovery requests to the holders of relevant data points, including internet service providers, social media platforms, website administrators, and even blockchain accounts. Internet attorneys will then follow these trails until they identify the person acting pseudonymously.

Additionally, in some jurisdictions a party seeking to initiate a lawsuit can simply attempt to contact the other party and request that they “waive” their right to be served. For example, Ohio Civ. R. 4.7 allows a party to request that the other side waive formal service, and if they do waive this right the responding party is granted more time to respond to the allegations. In requesting a waiver of service, the request must only be served either by first class mail or “other reliable means.” It is possible that “reasonable means” includes email, text message, or even posting to social media. If the party does not agree to the waiver, they may (if the Court has jurisdiction over them) be forced to pay the costs of later service of process. Of course, if that request is ignored, as it most likely will be in cases of alleged theft or anonymous activity, then the proposed Plaintiff is back to square one: having to provide evidence of actual service of process.

NAVIGATING NOTICE REQUIREMENTS AS TECHNOLOGY ADVANCES

While navigating notice requirements in cases involving anonymous online actors is not new for internet lawyers, it is new in the context of blockchain and the metaverse. Certain parties have attempted to get creative in their attempt to effectuate service. Recently, in LCX AG v. John Doe Nos. 1-25 (Dkt.No.,154644/2022) (N.Y. Supreme, Ct., NY County) a European cryptocurrency exchange, LCX had about $8 Million USD in cryptocurrency stolen from one of its crypto wallets and transferred into another wallet. LCX wanted to “freeze” the wallet into which the transfer had been made but had no information about the owner of the wallet. Indeed, the only data point was the wallet’s unique blockchain address. The problem for LCX’s lawyers in New York was that they could not effectuate a lawsuit without some form of service of process. The lawyers sought and obtained permission from the New York State Supreme Court (New York’s lowest court of general trial jurisdiction) to “serve” the crypto wallet via its blockchain address, and to notify Centre Consortium, the controller of the cryptocurrency not to permit transfers of funds from the wallet unless and until the Defendant either responded the Court’s order to show cause or responded to the lawsuit itself.

The Court specifically ordered LCX’s lawyers to serve a copy of the Court’s Order to Show Cause and the other legal documents:

“Upon the person or persons controlling the [blockchain] Address via a special-purpose Ethereum-based token (the Service Token) delivered – airdropped – into the Address. The Service Token will contain a hyperlink (the Service Hyperlink) to a website created by [plaintiff’s lawyers] wherein Plaintiff’s attorneys shall publish this Order to show Cause and all papers upon which it is based. The Service Hyperlink will include a mechanism to track when a person clicks on the Service Hyperlink. Such service shall constitute good and sufficient service for the purposes of jurisdiction under NY law on the person or persons controlling the Address…”

Note that, unlike Ohio, the New York law for service of process provides for service in person, by mail, to a registered agent, by publication and , as relied upon by the Court here (without reference), “in such manner as the court, upon motion without notice, directs, if service is impracticable…”.

Effectively, the New York Court authorized the lawyers to execute a “grappling hook.” They were permitted to send notice via a hyperlink to the blockchain address. When someone associated with that blockchain address clicked on the link, it would take them to a website which contained the necessary documents (summons, complaint, etc.) and recorded the fact that the site had been visited. Effectively, clicking on the link would be deemed by the Court to be accepting service of process. While the approach is novel, the overall idea is to provide the Court with reasonable assurance that the party against whom you are seeking a remedy has actual and effective notice of the fact that they are being sued or enjoined. As technology changes, courts need to remain flexible, and civil procedure rules need to be amended, on how to apply service rules to our new virtual environment.

Source: https://www.jdsupra.com/legalnews/us-law-firm-airdrops-court-order-nfts-9522277/