intellectual-property property civil-legal-system civil-judgment
Can possession of an asset be assumed in US civil court?
<p>I'm wondering about what facts can be assumed in a civil court, or in different terms, is civil court more concerned about the exact argument between parties, rather than actual facts?</p>
<p>In Bitcoin news, <a href="https://www.bbc.com/news/business-59571277" rel="noreferrer">a man named Craig Wright won a civil case</a> allowing him to keep 1.1 million Bitcoin, but must payout $100M for intellectual theft of Bitcoin related software (I'm actually unclear what exactly was stolen/misused, though I'm well-versed about how bitcoin works).</p>
<p>Here's the problem: There's no proof Craig Wright owns the Bitcoin in question, and there's quite a few skeptics regarding his claims about it. Further, it would be negligibly easy for Wright to prove it, either publically or privately to the court.</p>
<p>However, in this case, both parties agree on the &quot;fact&quot;.  Is that all that's required for a fact of such gravity? What if he was ordered to give up some of the Bitcoin (not its value, the bitcoin itself), but turned out he's not actually in possession of it? Is it different in criminal court?</p>

<h2>If the parties agree the sky is green then that is taken as fact by the court</h2>
<p><a href="/questions/tagged/common-law" class="post-tag" title="show questions tagged &#39;common-law&#39;" rel="tag">common-law</a></p>
<p>Common law courts are adversarial and exist to resolve the dispute between the parties. That may involve them making a decision on what the facts are on the evidence <em>if</em> those facts are in dispute. If the parties agree on the facts then the court will not enquire into whether those facts are objectively correct.</p>
<p>This is so fundamental that virtually the first thing that happens in a case is the parties submit an agreed statement of facts which tells the court “nothing to see here, move along.”</p>

<blockquote>
<p>in this case, both parties agree on the &quot;fact&quot;. Is that all that's
required for a fact of such gravity? What if he was ordered to give up
some of the Bitcoin (not its value, the bitcoin itself), but turned
out he's not actually in possession of it? Is it different in criminal
court?</p>
</blockquote>
<p>It is not the same standard as a criminal court. Also, some of the questions related to ownership were resolved as a discovery sanction in 2019, rather than by mutual agreement or through actual direct proof.</p>
<p>The answers by @DaleM and @gnasher729 are both correct as far as they go. But I'll just follow up on a point in the question that neither answer addresses and some related matters, together with some of the larger context.</p>
<blockquote>
<p>it would be negligibly easy for Wright to prove it, either publically
or privately to the court.</p>
<p>However, in this case, both parties agree on the &quot;fact&quot;. Is that all
that's required for a fact of such gravity?</p>
</blockquote>
<p><strong>The Civil Procedure Rules Related To Admissions In The Pleadings</strong></p>
<p>If the facts are admitted at the outside in the Answer to the Complaint in the scenario that @gnasher729 imagines (and @gnasher729 may know the facts of this particular case better than I do), then as explained in that answer and the answer by @DaleM, this is just taken as a given by the court and the parties and there is no disclosure or discovery prior to trial on that point.</p>
<p>Incidentally, the case was <a href="https://www.washingtonpost.com/business/bitcoin-trial-defendant-wins-keeps-bitcoins-worth-50b/2021/12/06/3d4d43c8-56bb-11ec-8396-5552bef55c3c_story.html" rel="noreferrer">the tried in the U.S. District Court for the Southern District of Florida</a> (i.e. a federal court in which the federal rules of civil procedure would have applied) and the nominal plaintiff was an intellectual property holding company owned by the probate estate of someone whose ideas were found to have been used in connection with the development of Bitcoin.</p>
<p>Typically, a party to a civil case will not admit to a fact that this party knows to be false if this could prove to be a disadvantage to that party later in the case, and a judicial admission that you have 1.1 million Bitcoin would often be a disadvantage under the circumstances suggested in the question or in follow up collection action to secure payment of the $100M judgment entered against him.</p>
<p>On the other hand, if a fact alleged in the pleadings is known by the party admitting it to be true, there is a legal obligation on the part of that party to admit it (unlike a criminal case where a defendant has an absolute right to make the prosecution prove up everything alleged with actual evidence).</p>
<p>If it is not admitted when it is know to be true, the party failing to admit that fact could receive a sanction up to the other side's attorney fees incurred proving the fact that was improperly denied by the party improperly denying that fact.</p>
<p>In practice, the consequences of denying that a fact is true in the pleadings and then being proven wrong later in the case only rarely has significant downsides for the party not admitting the fact known to be true, because it is hard to prove what a party knew at the outset of the case, it is hard to parse out the small portion of the total legal fees spend on that issue, and it is futile to do so if there is contractual or statutory fee shifting in the case anyway.</p>
<p><strong>Suppose It Was Not Admitted In The Pleadings</strong></p>
<p><em>Pretrial Disclosures</em></p>
<p>In a civil case in the United States, prior to trial, the parties have extensive ability to obtain mandatory disclosure of facts from the other side, in writing, in the form of documents in the possession, custody and control of the other side, and in the form of pre-trial deposition testimony. They also have the obligation to disclose all documents relevant to disputed facts that are relevant to the case before the other side even asks for them, and to disclose all potential witnesses who are likely to have actual knowledge of the material facts that are disputed in the case.</p>
<p>If it would be trivially easy for Wright to prove this fact, and this fact wasn't admitted in the Answer, then Wright almost surely had to disclose documentary evidence of this fact within two or three months after the case was filed. And, if such a document was disclosed, in the face of an unequivocal business record, both parties would frequently stipulate to that relevant fact in order to avoid taking up scarce time from the judge or jury as the case might be to hear evidence about that point.</p>
<p>If one party wasn't willing to stipulate, it is also likely that the other party would seek a partial summary judgment on the issue prior to trial based upon the documents disclosed in the litigation in such a high stakes case.</p>
<p><em>Extrajudicial Investigation</em></p>
<p>It is also quite plausible that the parties suing Wright already had the relevant information about Wright's Bitcoin holdings, true, false or otherwise, from sources outside the court process and knowing the truth, were willing to agree to the claim of 1.1 million Bitcoin shares owned.</p>
<p>Given their intimate involvement with the Bitcoin system, maybe they had access to records that could tell them what Wright owned that wouldn't be available to the general public, for example.</p>
<p>Even if they didn't have direct access through the Bitcoin system of that fact, in a $100M lawsuit, they would also have had an essentially unlimited budget to investigate the matter through the methods of a private investigator, that might have left them comfortable with the non-proof of this fact on the merits.</p>
<p>For example, maybe someone slipped them a loan agreement in which Wright pledges 1.1 million Bitcoin as collateral without legal authorization to do so that a private investigator managed to get ahold of somehow, and the lenders was someone known to always verify the existence of loan collateral, or maybe they got a copy of a filing in a divorce or palimony lawsuit or in pretrial negotiations over a divorce that was called off, in which this was disclosed. As long as the parties suing Wright learned the actual facts and were comfortable with whatever the actual facts were, they don't need to prove or disprove Wright's allegations on that point.</p>
<p>So, the fact that this wasn't proven at trial doesn't necessarily mean that parties to the case didn't know the actual facts.</p>
<p><strong>Did anyone admit to anything?</strong></p>
<p>According to the news account linked in the question:</p>
<blockquote>
<p>A jury rejected claims that Craig Wright's former business partner was
due half of the assets.</p>
<p>As a result Mr Wright will retain 1.1m Bitcoin, worth $54bn (£40bn).</p>
<p>However he will pay $100m to the family of Dave Kleiman for
intellectual property infringement.</p>
<p>The family of Mr Kleiman, a computer security expert who died in 2013,
said that the two men had worked together to create and mine the first
Bitcoin in existence, and that Mr Wright had stolen it.</p>
</blockquote>
<p>It isn't obvious from the news account that the amount of Bitcoin owned by Mr. Wright was ever even disclosed to the jury or that it became a relevant fact in the case at all.</p>
<p>The claim was for a 50% ownership stake in whatever Bitcoin that Mr. Wright owned at the time of the trial, not for a particular sum certain number of Bitcoin (probably in the form of a general partnership or tenancy-in-common joint ownership or a constructive trust to be adjudicated post-trial if necessary in an enforcement action of some kind such as placing Mr. Wright's Bitcoin under the control of a receiver).</p>
<p>The jury may have faced a yes or no question on the verdict form -- was the Plaintiff's estate entitled to 50% of Mr. Wright's Bitcoin -- without ever having been told what it was worth or having a specific number specified since that specific number wasn't legally relevant.</p>
<p><strong>UPDATE</strong></p>
<p>The <a href="https://www.washingtonpost.com/business/bitcoin-trial-defendant-wins-keeps-bitcoins-worth-50b/2021/12/06/3d4d43c8-56bb-11ec-8396-5552bef55c3c_story.html" rel="noreferrer">Washington Post related some key facts</a> in the case that moot some of the analysis above, such as the assertion that there was no affirmative evidence presented at trial that Wright owned the Bitcoin that he was claimed to own, and supporting the idea that public information would have revealed a lot of the key information (but not all of it, since there was never direct proof that Wright had control of the private key to the 1.1. million Bitcoin that he claims to own):</p>
<blockquote>
<p>Wright’s claim that he is Nakamoto has been met with skepticism from a
sizeable portion of the cryptocurrency community. <strong>Due to its
structure, all transactions of Bitcoin are public and the 1.1 million
Bitcoin in question have remained untouched since their creation.</strong>
Members of the Bitcoin community have regularly called for Wright to
move just a fraction of the coins into a separate account to prove
ownership and show that he truly is as wealthy as he claims.</p>
<p><strong>During the trial, both Wright and other cryptocurrency experts testified under oath that Wright owns the Bitcoin in question. Wright
said he would prove his ownership if he were to win at trial.</strong></p>
<p>The lawyers for W&amp;K Information Defense Research LLC, the joint
venture between the two men, said they were “gratified” that the jury
awarded the $100 million in intellectual property rights to the
company, which developed software that set the groundwork for early
blockchain and cryptocurrency technologies.</p>
<p>“Wright refused to give the Kleimans their fair share of what (David
Kleinman) helped create and instead took those assets for himself,”
said Vel Freedman and Kyle Roche of Roche Freedman LLP and Andrew
Brenner, a partner at Boies Schiller Flexner, in a joint statement.</p>
<p>Wright’s lawyers have said repeatedly that David Kleiman and Wright
were friends and collaborated on work together, but their partnership
had nothing to do with Bitcoin’s creation or early operation.</p>
<p>Wright has said he plans to donate much of the Bitcoin fortune to
charity if he were to win at trial. In an interview, Wright’s lawyer
Rivero reconfirmed Wright’s plans to donate much of his Bitcoin
fortune.</p>
</blockquote>
<p>More details about the case are found <a href="https://en.wikipedia.org/wiki/Craig_Steven_Wright#Bitcoin" rel="noreferrer">at Wikipedia</a> (citing sources):</p>
<blockquote>
<p>In February 2018 the estate of Dave Kleiman initiated a lawsuit at the
U.S. District Court for the Southern District of Florida against
Wright over the rights to US$5,118,266,427.50 worth of bitcoin
claiming that Wright defrauded Kleiman of bitcoins and intellectual
property rights.</p>
<p><strong>In August 2019, Magistrate Judge Bruce Reinhart, ruling on a motion to
force Wright to list his early bitcoin holdings, ordered that, for the
purposes of this case, the Kleiman estate owned half the bitcoin
holdings that Wright mined in partnership with Kleiman from 2009 to
2013, as Wright's &quot;non-compliance with the court's orders is willful
and in bad faith.&quot; Wright was also ordered to transfer half of the
partnership's intellectual property, and pay Kleiman's reasonable
attorney fees in bringing the motion. Reinhart said that the court was
not required to decide, and would not decide, whether Wright was
Satoshi Nakamoto, and was not required to decide and did not decide
how much bitcoin Wright controlled.</strong></p>
<p>Reinhart said that &quot;Dr. Wright's demeanor did not impress me as
someone who was telling the truth&quot; and that he rejected Wright's
testimony in the motion: &quot;Dr. Wright’s story not only was not
supported by other evidence in the record, it defies common sense and
real-life experience.&quot;</p>
<p>Following a three-week trial in late 2021, a jury found Wright liable
for conversion but awarded Kleiman's estate only $100 million in
damages. Given that Kleiman's estate had sought upwards of $25 billion
at trial, <strong>Wright took the position that verdict served as a
vindication of his role in inventing bitcoin and stated that he would
not appeal the jury's findings.</strong></p>
</blockquote>
<p><strong>Bitcoin Is Not As Secure As Its Advocates Would Suggest</strong></p>
<p>As an aside, the fact that you can claim to own $54 billion in Bitcoin, a system with a public disclosure of Bitcoin holdings system, and that ownership claim can be subject to reasonable dispute anyway, <a href="https://en.wikipedia.org/wiki/Bitcoin" rel="noreferrer">belies the supposed advantages of a Bitcoin's blockchain system</a> as applied in real life.</p>
<p>No title company in its right mind, for example, would willingly sign off on a transaction with that much insecurity of proof of ownership in the sale of a small suburban tract home, let alone property worth $54 billion U.S. dollars.</p>
<p><strong>It Was Not The World's Greatest Win</strong></p>
<p>FWIW, I'm also not clear exactly why this outcome would be considered a &quot;win&quot; for Wright.</p>
<p>Keeping property worth $54 billion USD that everyone believed you owned pre-litigation and having to pay $100 million (that is roughly 1852 Bitcoin) that you didn't have to pay pre-litigation sure sounds like a pretty horrible loss to me, even if it isn't the absolutely worst case scenario, and was only about 0.17% of his total claimed Bitcoin holdings.</p>
<p>Certainly, there was a large margin of error for the estate suing him in terms of collectibility.</p>
<p>I suspect, but do not know, that the $100 million size of the award may have been a function of statute of limitations issues. The statute of limitations for copyright infringement is <a href="https://smallbusiness.chron.com/federal-statute-limitations-copyright-infringement-64917.html" rel="noreferrer">three years</a> (discovery of the violation was probably not an issue in this case). So, any damages from the invention of Bitcoin's underlying document on October 31, 2008, until three years before the lawsuit was filed, in February of 2015, would not be recoverable in a copyright infringement theory (this statute of limitations would not apply to a claim on a co-ownership theory).</p>
<p><em>A $100 million jury verdict is huge</em></p>
<p>A $100M verdict is still be one of the biggest jury verdicts in the United States in any given year. In 2019, a $100 million jury verdict would be in the top 30 in the entire U.S., including seven individual defendants. It would have ranked #12 in the year 2020 and there was only one verdict in 2020 against an individual natural person defendant in the top 25 jury verdicts in the U.S. It is will probably still in the top twenty-five jury verdicts for 2021 and in the top one or two jury verdicts against individual defendants. None of <a href="https://verdictsearch.com/state/all/" rel="noreferrer">the top ten so far in 2021</a> are against individual defendants, and the tenth largest jury verdict in the year 2021 so far was for $152 million.</p>
<p><em>A collectible $26 billion jury verdict for a single individual/probate estate plaintiff would have been unprecedented, if it had been won</em></p>
<p>The verdict sought by the estate for half Mr. Wright's Bitcoin worth a claimed $26 billion USD would have been the biggest collectible jury verdict brought by a single natural person or probate estate plaintiff of all time in the U.S., if the estate had won that portion of the case, and would have been the third largest collectable jury verdict or settlement of a lawsuit that could have been resolved by a jury if it went to trial in U.S. history. It would have been larger than all but one class action lawsuit settlement of all time in the U.S., and would have been larger all but one class action jury verdict in the history of the U.S.</p>
<p>There were no jury verdicts in the U.S. that large for example, in 2021 (so far), in 2020, or in 2019, which are the only years I searched in a quick review.</p>
<p>The <a href="https://www.bmelaw.com/record-wins.html" rel="noreferrer">largest jury verdict of all time in Georgia</a>, for example, was for $454 million. Only <a href="https://www.dhdlaw.com/historically-large-catastrophic-injury-verdicts/" rel="noreferrer">a handful of jury verdicts that large have been awarded in the history of the United States</a>, some of the very big awards were to a whole class of plaintiffs or a business, and not to a single individual or probate estate as this case was, at least one of them biggest (<a href="https://www.nbcnews.com/id/wbna45761980" rel="noreferrer">$150 billion</a>) was just symbolic because there was no ability to pay (unlike this case), and another for $<a href="https://legal.thomsonreuters.com/blog/2002-phillip-morris/" rel="noreferrer">28 billion</a> was reduced substantially on appeal, which would have been unlikely in this case. There has also been only <a href="https://topclassactions.com/in-depth/10-largest-class-action-settlements-in-american-history/" rel="noreferrer">one class action lawsuit settlement</a> that large in U.S. history.</p>
<p>So, preventing a plaintiff from hitting the biggest home run of all time in a comparable case, isn't exactly all that impressive of a &quot;win.&quot;</p>

<p>The court can assume that anything the plaintiff claims and the defendant admits is true. In this strange case, the defendant has for a long time claimed that he is the inventor of Bitcoin. There are huge doubts that this is true. But the plaintiff claims it is true (without any evidence), the defendant not only admits but claims it is true, therefore as far as the court is concerned, it will make its judgement as if it was true.</p>
<p>In a criminal court, the jury would have some responsibility to check that a confession is true and the defendant hasn’t made a confession to protect someone else, or because of mental illness, or because they are actually wrong. Usually if there is evidence that the confession was wrong.</p>

<h2>Doesn't matter. The judgment is denominated in <em>dollars</em> not Bitcoin.</h2>
<p>So even if Bitcoin crash-dived to $30/coin, making the hoard worth only $33M, the defendant owes the plaintiff $100 million.</p>
<p>If defendant claims <em>now</em> not to have the Bitcoin, they're too late.  <em>They would have had to make that claim during the legal process leading up to the trial</em>, and then, the evidence of their claim could then be examined and cross-examined.</p>
<p><em>Since they refused to make that claim at trial, we presume they had a reason: that the claim would not stand up to cross-examination.  They had their opportunity</em>.</p>
<p>The only way they could claim that <em>now</em> is if they could also show <em>how on earth</em> it would be possible that they failed to mention this at trial.  For instance a valid reason would be &quot;all the Bitcoin keys are sitting on a hard drive.  Post-trial, we attempted to read the hard drive and it came up with bad sectors.  We sent it out for forensic recovery and the data was unrecoverable.  The bitcoins are <em>simply gone</em>.&quot;  But that wouldn't take them anywhere useful legally, it would be little more than negotiating material.</p>
<p>Of course, those Bitcoins would be watched, and if it was found that they moved later, the claimant would really be up the creek.  (Unless the forensic hard drive recoverer suddenly bought a mega-yacht! LOL!)</p>
<h2>But the judgment is <em>still</em> $100M.  Dollars.</h2>
<p>Even if they could show total loss of the Bitcoins, they still owe $100 million <em>dollars</em>.</p>
<p>The best they could hope for try to negotiate <strong>a downward adjustment of the judgment amount</strong>, owing to genuine inability to <em>ever</em> pay it, now or in the future. And even that is not a legal right.</p>
