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12-3

12-3

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Published by Ars Technica

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Published by: Ars Technica on Feb 05, 2014
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03/20/2014

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IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF KANSASMARTIN MEISSNER, ))Plaintiff, ))v. ) Case No. 13-2617-RDR-KGS)BF LABS INC., ))Defendant. )BF LABS INC.’S MEMORANDUM OF LAWIN SUPPORT OF ITS MOTION TO DISMISS
Defendant BF Labs Inc. (“BF Labs”), pursuant to Fed. R. Civ. P. 12(b)(6) and LocalRules 7.1(a) and 7.6, respectfully submits this memorandum of law in support of itscontemporaneously filed motion to dismiss:
I. NATURE OFTHE CASE
Plaintiff Martin Meissner, through his company TradeMost Enterprises Ltd.(“Trademost”), wire-transferred $62,598 to BF Labs for two 1,500 GH/s Bitcoin Miners(“Bitcoin Miners”) in late Spring 2013. Complaint, ¶ 24, 27. When Plaintiff placed his pre- production order and secured his place in the delivery queue for these Bitcoin Miners, heunderstood and agreed that “[p]roducts are shipped according to placement in the order queue,and delivery may take 2 months or more after order . . . .” Compl. ¶ 32. Because Plaintiff hadnot received his Bitcoin Miners from BF Labs by October, he advised BF Labs that he wouldrefuse any shipment. Compl. ¶ 44. Based on this delay, Plaintiff filed his Complaint against BFLabs on December 2, 2013, despite the fact he understood that it took time to build these BitcoinMiners, seeking consequential damages in excess of $5,000,000 on his purchase for $62,598.
See
 WHEREFORE clauses to each Count of the Complaint. Plaintiff brought five causes of action: (1) breach of contract; (2) fraud; (3) negligent misrepresentation; (4) Kansas consumer 
Case 2:13-cv-02617-RDR-KGS Document 12-3 Filed 02/04/14 Page 1 of 15
 
2 protection act (deceptive acts); and (5) Kansas consumer protection act (unconscionable acts).
See
 Compl. ¶¶ 63-97.BF Labs manufactures a line of high speed encryption processors for use in Bitcoinmining, research, telecommunication, and security applications.
 See
 Compl. ¶ 7. Once full production of this line of Devices begas, notice was sent to customers like Plaintiff advising thatorders would be shipped as produced according to the order queue and that if anyone wasunwilling to endure the wait, they had a final opportunity to cancel their order.
 See
 Compl. ¶¶ 39,57. In this case, Plaintiff decided to wait on the production of his pre-order knowing that amulti-month wait was expected for the production and delivery of his order and that in Spring2013, BF Labs had current back orders from June 2012 that would be shipped first.
 See
Complaint ¶ 39.
II. BACKGROUNDALLEGATIONS
1. Plaintiff, through TradeMost, wire-transferred $62,598 to BF Labs for two 1,500GH/s Bitcoin Miners in late Spring 2013. Complaint, ¶ 24, 27.2. When Plaintiff purchased these Bitcoin Miners, he understood and agreed that“[p]roducts are shipped according to placement in the order queue, and deliverymay take 2 months or more after order . . . .” Compl. ¶ 32.3. Because Plaintiff had not received his Bitcoin Miners from BF Labs by October,he advised BF Labs that he would refuse any shipment. Compl. ¶ 44.4. BF Labs manufactures specialized technology equipment for Bitcoin mining. SeeCompl. ¶ 7.
5.
 Orders are shipped as produced according to the order queue and that if anyonewas unwilling to endure the wait, they had a final opportunity to cancel their order. See Compl. ¶¶ 39, 57.6. Plaintiff knew that a multi-month wait was expected for the production anddelivery of his order and that in Spring 2013, BF Labs had current back ordersfrom June 2012 that would be shipped first. See Complaint ¶¶ 32, 39.
7.
 TradeMost wire-transferred the payment for the pre-order to BF Labs. Compl. ¶27.
Case 2:13-cv-02617-RDR-KGS Document 12-3 Filed 02/04/14 Page 2 of 15
 
38. BF Labs had no idea that Plaintiff wire-transferred funds to it and understood thatthe funds received from TradeMost were for a separate order for Bitcoin Miners.Compl. ¶ 34.
9.
 Plaintiff claims that if he had received the Bitcoin Miners earlier, he would have“mined” approximately 5,000 to 7,500 Bitcoins. Compl. ¶ 59.
III. QUESTIONS PRESENTED
The sole issues before this Court are: (1) whether Plaintiff can recover speculative,unproven consequential damages of over $5,000,000 dollars based on a $62,598 pre-order of twoDevices, based on the fact he believed that this technology (which changes rapidly) and whichwas on backorder at the time he ordered it, was not shipped to him fast enough even though heacknowledged shipment would take multiple months; (2) whether the economic-loss doctrine bars Plaintiff’s fraud claims; (3) whether Plaintiff’s negligent misrepresentation claims are also barred by the economic loss doctrine or at least barred by the fact that under Kansas law, a partycannot negligently misrepresent a present intent to perform in the future; and (4) whether Plaintiff’s Kansas Consumer Protection Act claims are barred by the fact Plaintiff’s company pre-ordered the Bitcoin Miners.
IV. STANDARD OFREVIEW
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaintand is designed to dispose of cases where the material facts are not in dispute and a judgment onthe merits can be rendered by looking to the substance of the pleadings and any judicially noticedfacts. Fed. R. Civ. Proc. 12(b)(6);
 Sunrise Valley, LLC v. Kempthorne
, 528 F.3d 1251, 1254(10th Cir. 2008). To survive a motion to dismiss, a pleading must contain sufficient factualmatter to “state a claim to relief that is plausible on its face.”
 Ashcroft v. Iqbal 
, 129 S. Ct. 1937,1949 (2009) (quoting
 Bell Atlantic Corp. v. Twombly
, 550 U.S. 544 (2007)). “Threadbare recitals
Case 2:13-cv-02617-RDR-KGS Document 12-3 Filed 02/04/14 Page 3 of 15

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