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Arvegenix, LLC v. Seth

United States District Court, C.D. Illinois, Peoria Division

March 13, 2014

ARVEGENIX, LLC, Plaintiff/Counter-Defendant,
v.
SUDHIR SETH, individually and as agent of Pennycress Energy Company, LLC, and Arvens Technology, Inc., PENNYCRESS ENERGY COMPANY, and ARVENS TECHNOLOGY, INC., Defendants/Counter-Claimants, and SUDHIR SETH, individually and as agent of Pennycress Energy Company, LLC, and Arvens Technology, Inc., PENNYCRESS ENERGY COMPANY, and ARVENS TECHNOLOGY, INC., Third-Party Plaintiffs,
v.
VIJAY CHAUHAN, DENNIS PLUMMER, MICHAEL ROTH, BIOGENERATOR, a Missouri not-for-profit corporation, and BIOSTL, a Missouri not-for-profit corporation, Third-Party Defendants,

ORDER & OPINION

JOE BILLY McDADE, Senior District Judge.

This matter is before the Court on Plaintiff/Counter-Defendant Arvegenix, LLC's Motion to Dismiss Counterclaim X (Doc. 64). For the reasons explained below, this Motion is granted, and Counterclaim X, seeking a declaratory judgment, is dismissed.

PROCEDURAL HISTORY

Plaintiff/Counter-Defendant Arvegenix, LLC ("Plaintiff") filed the present action on June 4, 2013, alleging ten counts against Defendants Sudhir Seth ("Seth"), Pennycress Energy Company, LLC ("PEC"), and Arvens Technology, Inc. ("ATI") (collectively, "Defendants"). (Doc. 1). Plaintiff's claims include defamation, unfair competition, and a declaratory judgment claim, and are based primarily on conduct by Defendants after a business arrangement between Defendants and Plaintiff's members broke down. On November 26, 2013, Defendants filed ten counterclaims against Plaintiff and against three individuals and two not-for-profit corporations (collectively, "Third-Party Defendants"), related to the consequences of the same breakdown in business relations. (Doc. 40). In particular, Counterclaim X is a claim for a declaratory judgment that would declare the rights and relationships of the parties resulting from a non-disclosure agreement. (Doc. 40 at 18-20). Plaintiff filed the instant Motion to Dismiss, arguing Counterclaim X must be dismissed.

LEGAL STANDARD

In ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), "the court must treat all well-pleaded allegations as true and draw all inferences in favor of the non-moving party." In re marchFIRST Inc., 589 F.3d 901, 904 (7th Cir. 2009). The pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). To survive a motion to dismiss, the challenged pleading must contain sufficient detail to give notice of the claim, and the allegations must "plausibly suggest that the [non-movant] has a right to relief, raising that possibility above a speculative level.'" EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The plausibility standard requires enough facts "to present a story that holds together, " but does not require a determination of probability. Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010). Though detailed factual allegations are not needed, a "formulaic recitation of a cause of action's elements will not do." Twombly, 550 U.S. at 545.

FACTUAL BACKGROUND[1]

Defendants are in the business of developing technology to make biofuel out of a plant called pennycress. In fall 2012, Defendant Seth, as an agent for Defendants ATI and PEC, approached Third-Party Defendant BioGenerator in search of investment assistance to begin commercial production of pennycress for biofuel. BioGenerator is a company that "place[s] inventors and entrepreneurs with investors and technological experts in order to develop their business ideas." (Doc. 40 at 4). Defendants and BioGenerator entered into a non-disclosure agreement to facilitate their arrangement and provide protection for any confidential information shared by Defendants. The agreement provided that confidential information would not be disclosed, and would be returned or destroyed at the conclusion of the business arrangement.

In fall 2012 and spring 2013, Seth was introduced to some individuals BioGenerator represented as having knowledge and experience in start-up agribusiness. These individuals included Third-Party Defendants Vijay Chauhan, Dennis Plummer, and Michael Roth, as well as non-party Arnold Rosielle. BioGenerator represented to Seth that these individuals were pursuing due diligence to determine whether Defendants had a viable business idea. Defendants provided access to information about the production of pennycress as well as business information and present and potential partners. During this time, Chauhan, Plummer, Roth, and Rosielle represented to Seth that they were meeting with potential investors. They also altered Seth's proposed business plans by reducing Seth's role in the proposed new business and his compensation.

BioGenerator, Defendants, Chauhan, Plummer, and Roth set a May 1, 2013, deadline for reaching agreement on the new business; none was reached. BioGenerator did not require its consultants to destroy or return confidential information pursuant to the non-disclosure agreement. Chauhan, Plummer, and Roth, in collaboration with BioGenerator, then formed a new company, Arvegenix, LLC, Plaintiff in this case, which would compete with PEC and ATI. Plaintiff, as well as Chauhan, Plummer, and Roth, used information and data provided by Defendants to seek researchers and partners to work with, and attempted to persuade them to cancel agreements with Defendants to instead work with them. On May 22, 2013, Seth demanded the return or destruction of all information provided to BioGenerator and Chauhan, Plummer, and Roth, as BioGenerator consultants. BioGenerator advised they had received no confidential information.

ANALYSIS

Plaintiff essentially makes two arguments against Defendants' Counterclaim X. First, it argues Plaintiff should not be subject to the claim because, as is made clear from the allegations throughout the Counterclaim, it was not a party to the non-disclosure agreement and thus cannot be in breach of it. Second, Plaintiff argues the claim is improper because it seeks affirmative relief, not a declaratory injunction. Because the Court finds Plaintiff's second argument dispositive of the matter, it does not address Plaintiff's first argument herein.

I. Preliminary Matters

There are some minor issues that can be cleared up before addressing Plaintiff's arguments. First, the Court does not consider the exhibits attached to Plaintiff's Motion to Dismiss and Defendants' Response. (Docs. 65-1, 65-2, 65-3, 68-1). If matters outside the pleadings are considered by a court in ruling on a motion to dismiss, the motion must be treated as a motion for summary judgment, and the parties are to be given sufficient time to present all pertinent material. Fed.R.Civ.P. 12(d). The exhibits presented by the parties are largely irrelevant to the issues to be decided, and add nothing to the determination of whether or not Defendants have stated a claim in Counterclaim X. Accordingly, ...


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