United States District Court, D. Arizona
Murray Snow Chief United States District Judge
before the Court is a motion by Counterclaim Defendants
Arizona Plant Breeders, Inc. and Arizona Grain, Inc. (jointly
“APB”) to dismiss Counts One, Three, Four, Five,
Six, and Seven of the Counterclaims filed by Northern Agri
Brands, LLC (“NAB”) against APB for failure to
state claims upon which relief may be granted. (Doc. 33.)
APB's officers and directors, Eric Wilkey, K. Andrew
Kroese, William Ken Dickey, Russell S. Dickey, and Tod V.
Dickey (collectively “APB officers”), have, on
behalf of themselves and their unnamed wives (“Jane Doe
Defendants”), moved to dismiss all Counterclaims for
failure to state claims upon which relief may be granted and
insufficient process. Lockwood Seed and Grain
(“Lockwood”), a distributor for APB, has moved to
dismiss all Counterclaims for improper venue and lack of
personal jurisdiction, and has also joined in APB's
motion to dismiss for failure to state claims. (Doc.
For the following reasons, the motions are granted in part
and denied in part.
facts as alleged in NAB's Counterclaims (Doc. 25) are as
follows. NAB is a seed company with an internal research and
development division that sells seed products to farms.
Several of NAB's seed products are varieties of
triticale, a hybrid of wheat and rye. NAB's
predecessor-in-interest Resource Seeds, Inc. owned an
extensive triticale library of breeding materials from which
to select to cross lines to achieve preferred genetic traits.
Resource Seeds plant breeder Dr. Bob Matchett and field
technician Oly Cantu developed many triticale varieties,
including the one at issue in this case, SY 158T. SY 158T is
an “awned” triticale variety, meaning it has
2014, Plant Variety Protection (PVP) Certificate No.
201200083 was issued to Syngenta (NAB's
predecessor-in-interest and Resource Seeds'
successor-in-interest) pursuant to 28 U.S.C. § 2482 for
SY 158T. The PVP Certificate was subsequently assigned to
NAB. At all times relevant herein, the PVP Certificate for SY
158T was and remains in full force and effect. NAB and its
predecessors only authorized sales of PVP protected triticale
seed varieties with written notice containing statutorily
designated language signifying that: (1) the seed was
protected under the Plant Variety Protection Act (PVPA); (2)
unauthorized propagation or multiplication of the seed was
prohibited; and (3) use of the seed by the purchaser was
authorized only for purposes of growing a commercial crop of
grain. NAB required such notice on all bags of triticale seed
sold and on notices accompanying all bulk sales of such
triticale seed. In addition, NAB consistently and prominently
marked the varieties with statutory PVPA notices on its
marketing and promotional materials for such varieties.
Seeds also developed awnless triticale varieties, which do
not have the bristle-like appendages of SY 158T. On October
19, 1999, the United States Patent and Trademark Office
issued United States Patent No. 5, 969, 219 (the “219
Patent” or the “Patent”), entitled
“Awn-inhibitor genes for triticale and their
use.” The 219 Patent is directed towards awn-inhibitor
triticale genes. The Patent includes 36 claims, including
independent claims 1, 18, and 36 at issue in this case.
Resource Seeds assigned the Patent to Syngenta, and
thereafter, Syngenta assigned the Patent to NAB. NAB and its
predecessors sold its seed in bags together with a limited
label license prohibiting use of the seed for any commercial
purposes, including breeding or multiplication.
his employment with Resource Seeds and Syngenta, technician
Cantu had access to all breeding materials and germplasm,
including direct access to both awnless and awned breeding
materials of triticale and the crossing and progeny of
triticale undergoing various stages of generational breeding
and selection. In 2010, Cantu announced he was leaving
Syngenta. Prior to leaving Syngenta, Cantu communicated with
Albert Carleton, the former owner and president of APB, to
arrange a replacement job. Cantu then secretly and without
authority accessed, secured, and removed a portion of
triticale breeding materials and related information
contained within confidential breeding records, including
records covering SY 158T, and took these materials to APB. At
APB, Cantu and Carleton used the materials to establish a
directly competitive triticale breeding program founded upon
Syngenta's triticale breeding materials.
2015, NAB observed awnless triticale varieties in various
stages of growth and development in APB test plots. NAB
became concerned that the awnless triticale varieties
observed in APB plots were either (1) the product of
unauthorized use of NAB's breeding materials and other
patented awnless triticale varieties that were
misappropriated by Cantu prior to his departure from
Syngenta, or (2) the product of APB's unauthorized and
illegal efforts to breed against NAB's patented awnless
triticale varieties, or (3) both.
the summer of 2017, APB president Eric Wilkey proposed a
license for awnless triticale payable to NAB for the use of
awnless varieties APB claimed to possess. Wilkey confirmed
APB was actively licensing a triticale variety to Lockwood
for distribution to the public. Wilkey further acknowledged
that SY 158T, NAB's awned triticale, was “one of
the parents” of APB's “RAPTOR”
September 2017, NAB obtained samples of APB's RAPTOR
triticale from Lockwood. According to the seed bag label, the
seed had been tested in September 2017 for germination and
purity and claimed a lot number of “RAPTOR 17-1.”
NAB planted the RAPTOR triticale in areas immediately
adjacent to SY 158T to perform agronomic study. NAB then
observed the growth of the two triticale varieties and
compared the information, concluding that RAPTOR was the same
variety as SY 158T. According to NAB, the plants in each test
plot had identical characteristics. NAB then submitted
samples for scientific testing and obtained test results
concluding RAPTOR branded triticale genetically matched SY
October 19, 2018, APB filed suit against NAB. (Doc. 1.) The
amended complaint, filed March 14, 2019, requested
declaratory judgments that APB had not infringed the PVPA or
misappropriated trade secrets and alleged tortious
interference with prospective business relations, unfair
competition, aiding and abetting tortious conduct, and civil
conspiracy. (Doc. 16.) On April 16, 2019, NAB filed its
answer and affirmative defenses and alleged seven
counterclaims against Defendants: (1) infringement under the
PVPA; (2) infringement of the 219 patent; (3) trade secret
misappropriation pursuant to Arizona law, (4) California law,
and (5) federal law; (6) conversion; and (7) unjust
enrichment. (Doc. 25.) On May 31, 2019, APB filed this motion
to dismiss Counts One and Three through Seven on behalf of
APB and all Counts on behalf of Third-party Defendants. (Doc.
survive dismissal for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6), a complaint must
contain more than a “formulaic recitation of the
elements of a cause of action”; it must contain factual
allegations sufficient to “raise the right of relief
above the speculative level.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)). While “a
complaint need not contain detailed factual allegations . . .
it must plead ‘enough facts to state a claim to relief
that is plausible on its face.'” Clemens v.
DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir.
2008) (quoting Twombly, 550 U.S. at 570). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Twombly, 550 U.S. at 556). The
plausibility standard “asks for more than a sheer
possibility that a defendant has acted unlawfully. Where a
complaint pleads facts that are ‘merely consistent
with' a defendant's liability, it ‘stops short
of the line between possibility and plausibility of
entitlement to relief.'” Id. (quoting
Twombly, 550 U.S. at 555) (internal citations
analyzing a complaint for failure to state a claim,
“allegations of material fact are taken as true and
construed in the light most favorable to the non-moving
party.” Smith v. Jackson, 84 F.3d 1213, 1217
(9th Cir. 1996). In addition, the Court must assume that all
general allegations “embrace whatever specific facts
might be necessary to support them.” Peloza v.
Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th
Cir. 1994). However, legal conclusions couched as factual
allegations are not given a presumption of truthfulness, and
“conclusory allegations of law and unwarranted
inferences are not sufficient to defeat a motion to
dismiss.” Pareto v. F.D.I.C., 139 F.3d 696,
699 (9th Cir. 1998).
Lockwood's Motion to Dismiss for Lack of Jurisdiction and
initial matter, in its Opposition to Lockwood's motion to
dismiss, NAB states that “it is not asserting patent
infringement, trade secret misappropriation, or conversion
claims against Lockwood.” (Doc. 53 at 2 n.2.)
Accordingly, these claims are dismissed as to Lockwood.
the remaining claims for infringement under the PVPA and
unjust enrichment, NAB must demonstrate that personal
jurisdiction exists over Lockwood. “Where, as here,
there is no applicable federal statute governing personal
jurisdiction, the law of the state in which the district
court sits applies.” Harris Rutsky & Co. v.
Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir.
2003). Arizona Rule of Civil Procedure 4.2(a) allows state
courts to exercise personal jurisdiction to the extent
permitted by the state and federal constitutions. The Court
must therefore examine whether exercising jurisdiction over
Lockwood comports with due process. Cybersell v.
Cybersell, 130 F.3d 414, 416 (9th Cir. 1997).
personal jurisdiction is appropriate when: (1) the defendant
purposefully directed its activities or consummated some
transaction with the forum or a resident of the forum, or
performed some act by which it purposefully availed itself of
the privileges of conducting activities in the forum; (2) the
claim arises out of or relates to the defendant's
forum-related activities; and (3) the exercise of
jurisdiction is reasonable. Harris, 328 F.3d at
1129. NAB argues that exercise of specific personal
jurisdiction over Lockwood is appropriate because the
unsigned licensing agreement between Lockwood and APB
provided by Lockwood in discovery, (Doc. 55-1), includes an
Arizona choice of law/jurisdiction clause and “raises
the reasonable inference . . . that the agreement was
negotiated in Arizona, that royalties were paid to APB . . .
and that Lockwood employees . . . travelled to Arizona in
connection with this Agreement, ” (Doc. 53 at 6).
Moreover, NAB asserts that Lockwood “sold seed
protected by NAB's PVPA certificate to an Arizona
cites Bristol-Myers Squibb Co. v. Superior Court of
California, San Francisco County, 137 S.Ct. 1773 (2017),
for the proposition that a “defendant's negotiation
and entry into a contract with a forum resident, standing
alone, is not enough to confer personal jurisdiction over the
defendant in that forum for torts allegedly committed outside
the forum.” (Doc. 59 at 5.) Unlike NAB, however, the
plaintiffs in Bristol-Myers were not domiciled in
the state where the action was brought-the court even
distinguished its case from a case where specific personal
jurisdiction existed by stating, in part, “here the
nonresidents' claims involve . . . no harm to California
residents.” Id. at 1782. And unlike Lockwood,
the Bristol-Myers defendant was not alleged to have
engaged in “relevant acts” with its contract
partner in the forum; nor was it alleged that that the harm
caused by the Bristol-Myers defendant originated
with its contract partner, as NAB alleges here. Id.
at 1783. Finally, Bristol-Myers is particularly
inapposite here, where NAB has brought suit in its home
state, because the court concluded in dicta that the
nonresident plaintiffs “could probably sue together in
their home States” (though it did not explain whether
that was because the plaintiffs' home states were the
location of their harm or the location of their residence (or
a “contract with an out-of-state party alone can[not] .
. . establish sufficient minimum contacts in the other
party's home forum, ” if the contract demonstrates
that the defendant contemplated a long-term interdependent
relationship in the forum state, the defendant cannot argue
that its relationship to that state is “random, ”
“fortuitous, ” or “attenuated.”
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 482
(1985). In Burger King, Burger King, a Florida
corporation, brought an action in Florida federal district
court when Rudzewicz, a Burger King franchise owner, refused
a termination order and continued to operate a Burger King
restaurant in Michigan. Id. The court found that
although Rudzewicz did not maintain offices in or ever visit
Florida, the franchise dispute grew directly out of “a
contract which had a substantial connection with
[Florida]” because Rudzewicz deliberately
“reach[ed] out beyond” Michigan and
“entered into a ...