Court Stays BerkShares Crypto Partnership Case Pending Arbitrator’s Decision

On Tuesday, March 19, 2024, the United States District Court for the District of Massachusetts denied a motion to dismiss a case regarding a dispute over a digital currency project.

The case was brought by Neighborly Capital Company (doing business as Humanity Cash) and Ning-Feng Wang against the Schumacher Center for a New Economics, Susan Witt and BerkShares Inc. Humanity Cash had partnered with the Schumacher Center and BerkShares to develop a digital version of the BerkShares currency, which had been used since 2006 in Berkshire County, Massachusetts to support the local economy. BerkShares functioned like legal tender but could only be spent at participating local businesses.

As part of the collaboration agreement signed in June 2021, Humanity Cash took on responsibilities like developing the software and mobile application for digital BerkShares. This would have allowed BerkShares to utilize blockchain technology on a public ledger instead of just existing as paper notes. The project launched in March 2022 but soon ran into issues. Humanity Cash claimed it fulfilled its obligations under the contract, but that the Schumacher Center failed to adequately support marketing as planned. Disputes also arose regarding regulatory issues and money transmission rules. While Humanity Cash did consulting work, the parties did not finalize an agreement for compensation. By October 2022, tensions had grown due to issues like a shortfall in donor funds reportedly set aside for a token giveaway program.

The relationship broke down, leading to terminated agreements and the mobile app being shut down by Schumacher Center in November despite objections. Plaintiffs brought various claims including unfair practices, breach of contract, unjust enrichment, and more. However, the defendants argued the case should be dismissed due to a mandatory arbitration clause.

While the court agreed claims between the agreement signatories must be arbitrated, it found the arbitrator must first decide issues of arbitrating claims involving Wang and Witt as non-signatories. Thus, it denied the motion to dismiss and instead stayed the case pending the arbitrator’s decision on arbitrability. How the dispute progresses from here will depend on the outcome of arbitration proceedings.

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