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Arvegenix, LLC v. Seth

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

April 29, 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 two Motions to Dismiss (Docs. 77, 80), filed by the Third-Party Defendants in this action, seeking to dismiss the claims brought against them by Third-Party Plaintiffs for failure to state a claim upon which relief can be granted. Third-Party Plaintiffs failed to respond to either Motion by the response deadlines. As a result, under Local Rule 7.1, the Court presumes there is no opposition to the Motions. The Court has also independently assured that Third-Party Defendants' grounds have merit. As explained below, both Motions are granted in part and denied in part.

PROCEDURAL HISTORY

Plaintiff/Counter-Defendant Arvegenix, LLC ("Arvegenix") filed the present action on June 4, 2013, bringing multiple claims against Sudhir Seth ("Seth"), Pennycress Energy Company, LLC ("PEC"), and Arvens Technology, Inc. ("ATI"). (Doc. 1). On November 26, 2013, Seth, PEC, and ATI filed a pleading entitled "Counterclaim, " which lists ten counts against Arvegenix and also names five Third-Party Defendants[1] in some or all of these claims: BioGenerator, BioSTL, Vijay Chauhan, Dennis Plummer, and Michael Roth. (Doc. 40). The present Motions concern only this latter pleading, and relate only to the third-party claims by Seth, PEC, and ATI, against BioGenerator, BioSTL, Chauhan, Plummer, and Roth. Accordingly, for purposes of this Order only, the Court will hereafter refer to Seth, PEC, and ATI collectively as Plaintiffs, and to BioGenerator, BioSTL, Chauhan, Plummer, and Roth collectively as Defendants, despite the third-party nature of the claims at issue.

On March 13, 2014, the Court dismissed Counterclaim X, exercising its discretion to decline to entertain the request for a declaratory judgment, because it was redundant of the other causes of action before the Court and did not serve the purposes of the Declaratory Judgment Act. (Doc. 76 at 9).[2] Accordingly, only nine claims in Plaintiffs' Counterclaim remain.

On March 18, 2014, BioGenerator and BioSTL (collectively, "Nonprofit Defendants") filed a Motion to Dismiss, seeking dismissal of all claims in the Counterclaim for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), or alternatively, for a more definite statement pursuant to Rule 12(e). Defendants Chauhan, Plummer, and Roth (collectively, "Individual Defendants") filed their Motion to Dismiss a few days later, joining the arguments of the Nonprofit Defendants and presenting some additional arguments for dismissal. These Motions are presently before the Court.

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.

Under Federal Rule of Civil Procedure 12(e), a party may move for a more definite statement if the pleading is "so vague or ambiguous that the party cannot reasonably prepare a response, " and the party must "point out the defects complained of and the details desired." Fed.R.Civ.P. 12(e). Whether to grant such a motion is generally left to the discretion of the trial court. Hummel v. Wells Petroleum Co., 111 F.2d 883, 886 (7th Cir. 1940).

FACTUAL BACKGROUND[3]

Plaintiff Seth, as President and CEO of Plaintiffs ATI and PEC, is in the business of developing technology to make biofuel out of a plant called pennycress. He formed ATI and PEC to further that business. Since 2008, ATI and its predecessor entity had a series of research agreements with other organizations, including the United States Department of Agriculture and Western Illinois University, for various pennycress research undertakings, including possible commercial production.

In fall 2012, Seth, as an agent for ATI and PEC, approached Defendant BioGenerator in search of investment assistance to begin commercial production of pennycress for biofuel. BioGenerator, a subsidiary of BioSTL, 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). ATI and BioGenerator entered into a non-disclosure agreement ("NDA") on October 9, 2012, to facilitate their potential relationship and provide protection for any confidential information shared by Plaintiffs. The NDA provided that confidential information would not be disclosed to unapproved third parties or used for competitive purposes, and would be returned or destroyed at the conclusion of the business arrangement. This agreement is attached as an exhibit to the Counterclaim. (Doc. 40-6).

From fall 2012 to early 2013, Seth was introduced to Individual Defendants Vijay Chauhan, Dennis Plummer, and Michael Roth, as well as non-party Arnold Rosielle. BioGenerator represented that these individuals had knowledge and experience in start-up agribusiness, and that they were pursuing due diligence to determine whether Plaintiffs had a viable business idea. Plaintiffs 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 expected compensation.

By May 1, 2013, no agreement on the new business had yet been reached among the involved parties. Shortly thereafter, Individual Defendants, in collaboration with BioGenerator, formed a new company, Arvegenix, which was intended to compete with PEC and ATI. BioGenerator allegedly did not require its consultants to destroy or return Plaintiffs' confidential information that was disclosed pursuant to the NDA. In response to Plaintiffs' request for the return or destruction of all information provided to BioGenerator and the Individual Defendants, as BioGenerator consultants, BioGenerator advised they had received no confidential information. Arvegenix, as well as the Individual Defendants as Arvegenix's members, used the information and data provided by Plaintiffs to seek researchers and partners for their new company. They contacted Plaintiffs' collaborators in the pennycress industry in an attempt to persuade them to cancel agreements with Plaintiffs and to instead work with Arvegenix.

DISCUSSION

Defendants seek dismissal of each of the nine remaining counts in Plaintiff's Counterclaim. Each count is addressed in turn, below, after a few preliminary matters are addressed.

Preliminary Matters

First, throughout the Counterclaim, Plaintiffs make ample use of vague, conclusory statements, devoid of factual detail. For example, Plaintiffs repeatedly use the phrase "Counter/Defendants" in nearly every count, which applies collectively to the three Individual Defendants, the two Nonprofit Defendants, and Arvegenix. This does not afford adequate notice to each of the Defendants of the claims against them or allow them to respond appropriately, and it detracts from the plausibility of Plaintiffs' claims.

Perhaps the most egregious example is the inclusion of BioSTL as a Defendant in every one of Plaintiffs' claims, despite the fact that the only two factual allegations specifically related to BioSTL in the entire pleading are (1) that BioGenerator is a subsidiary of BioSTL (Doc. 40 at 4), and (2) in the already-dismissed Count X, that BioSTL was required to prevent collaborators from using confidential information obtained pursuant to the NDA (Doc. 40 at 19). BioSTL was even named in several claims in which BioGenerator was not named as a Defendant, even though many of Plaintiffs' general factual allegations are targeted at BioGenerator. If BioSTL's status as a parent company to BioGenerator is the sole basis for BioSTL's liability, Plaintiffs should indicate as much, and BioSTL can then assess the legal soundness of such liability. Alternatively, if BioSTL is directly liable for its own actions, Plaintiffs must state what these actions were.

Defendants request, in the alternative to dismissal, a more definite statement under Rule 12(e). The primary defect and missing detail they point out is the failure to specify which Defendants are alleged to have been involved in which conduct. (Doc. 78 at 22). For the claims that are not dismissed, this alternative request for a more definite statement is granted. Plaintiffs must be more specific in repleading any of their dismissed third-party claims. The occasional grouping of multiple or all Defendants may be fine in some contexts, but the allegations must adequately indicate which Defendants are responsible for or liable for which conduct. Plaintiffs' amended pleading should provide sufficient detail as to the conduct of specific parties and make more specific allegations that will allow Defendants to prepare a response.

Second, Defendants argue that several of Plaintiffs' claims, at least in part, are based on alleged theft of trade secrets, and that the claims are thus precluded by the Illinois Trade Secrets Act ("ITSA"), 765 Ill. Comp. Stat. 1065/1 to 1065/9. The ITSA provides that:

(a) Except as provided in subsection (b), this Act is intended to displace conflicting tort, restitutionary, unfair competition, and other laws of this State providing civil ...

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