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Farmedhere, LLC v. Just Greens, LLC

United States District Court, N.D. Illinois, Eastern Division

June 16, 2014

FARMEDHERE, LLC, an Illinois Limited Liability Company, Plaintiff,
v.
JUST GREENS, LLC, d/b/a AERO FARM SYSTEMS, LLC, a Delaware Limited Liability Company, Defendant.

MEMORANDUM OPINION AND ORDER

JAMES F. HOLDERMAN, District Judge.

On January 17, 2014, Plaintiff FarmedHere, LLC ("FarmedHere") filed a three-count complaint (Dkt. No. 1, "Compl." or "Complaint") against Defendant Just Greens, LLC, d/b/a Aero Farm Systems, LLC ("AeroFarms"). In the Complaint, FarmedHere purports to allege violations of the Lanham Act (Count I) and the Illinois Uniform Deceptive Trade Practices Act (Count II) against AeroFarms. ( Id. ¶¶ 36-60.) Additionally, FarmedHere requests a declaratory judgment that AeroFarm's U.S. Patent No. 8, 533, 992 (the "992 Patent") is invalid or that FarmedHere did not infringe on the 992 Patent (Count III). ( Id. ¶¶ 61-67.)

FarmedHere's first two claims are based on allegations that AeroFarms (1) claimed as its own various FarmedHere achievements and (2) lied about its affiliation with FarmedHere. ( Id. ¶¶ 36-60.) FarmedHere seeks a declaratory judgment on the 992 Patent due to AeroFarms filing a notice of arbitration with the Judicial Arbitration, Mediation, and ADR Services ("JAMS"). ( Id. ¶¶ 61-67.) In the JAMS proceeding, filed in New York, New York, AeroFarms alleges FarmedHere infringed on the 992 Patent among other claims. ( Id. )

Before the court is AeroFarms' "Motion to Dismiss Plaintiff's Complaint or, Alternatively, to Stay this Action pursuant to Fed. R. Civ. Proc. 12(b)(3)" (Dkt. No. 12, the "Motion to Dismiss"), accompanied by a supporting memorandum (Dkt. No. 13, "Def's Mem."). In both filings, AeroFarms states the Complaint must be dismissed because this court lacks jurisdiction to determine whether FarmedHere's claims are arbitrable. ( Id. at 6-9.) For the reasons set forth below, this court grants AeroFarms' Motion to Dismiss without prejudice.

BACKGROUND

AeroFarms' Factual Assertions

AeroFarms developed a method of aeroponic farming to locally grow produce in urban environments. (Def's Mem. at 1.) On February 1, 2011, AeroFarms entered into a distribution agreement with CityPonic, LLC (Cross-Petition, Ex. B., the "Distribution Agreement" or "Distrib. Agrmt.")[1] Under the Distribution Agreement, AeroFarms agreed to provide CityPonic with equipment, technology, trade secrets and training, for AeroFarm's aeroponic system. ( Id. ) Paul Hardej ("Mr. Hardej") signed the Distribution Agreement on behalf of CityPonic, LLC ("CityPonic"). ( Id. )

Under the Distribution Agreement, CityPonic pledged to use its "best efforts" to develop, market, and promote the sales of AeroFarms aeroponic system in a defined territory. ( Id. § 5.) CityPonic represented it would not "directly or indirectly, design, license, manufacture or sell any products that are similar or competitive with" AeroFarm's system. ( Id. § 2(c).) CityPonic also represented that the information AeroFarms provided would be kept confidential, and CityPonic would not attempt to "copy, replicate, imitate or reverse-engineer" any of AeroFarm's products. ( Id. § 10.)

Mr. Hardej, as Managing Partner of CityPonic, described the company as "a corporation organized and existing under the laws of the State of Illinois with its head office located at: 329 W. 18th St., Suite 501, Box 7, Chicago Illinois, 60616." ( Id. at pg. 1.) Moreover, the Distribution Agreement also contained a representation and warranty that CityPonic "is a company duly organized and validly existing under the laws of Illinois and is duly qualified to conduct its business as presently conducted". ( Id. § 21.)

In spite of these representations, Mr. Hardej had yet to form CityPonic. (Cross-Petition, Ex. C.) Instead, Mr. Hardej emailed Edward Harwood of AeroFarms, on the same day the Distribution Agreement was entered into, to inform him that Mr. Hardej would "organize the company this weekend and forward Sec. of State confirmation to you." ( Id. )

Rather than formally incorporate CityPonic, Mr. Hardej formed FarmedHere on August 6, 2011. (Cross-Petition, Ex. D.) Mr. Hardej stated "[w]e started a new entity, which is the farm development/operating company called FarmedHere". ( Id. ) Mr. Hardej later requested that AeroFarms substitute FarmedHere for CityPonic in invoices, which AeroFarms had sent to Mr. Hardej. ( Id. )

Documents AeroFarms has provided the court indicate that Mr. Hardej played a key role in FarmedHere's corporate management and relationship with AeroFarms. For example, Mr. Hardej drafted a letter of intent dated September 9, 2011 to "utilize AeroFarms equipment component technology to build a vertical farm in the Chicago metro area." ( Id., Ex. F.) There, Mr. Hardej expressed FarmedHere's intent (1) "to build either a larger single use system or a dual-system (aero-aquaponics) unit using the AeroFarms technology and/or own aquaponic technology" and (2) to use AeroFarm's technology "in the form of either the cloth growing surface spray system and/or specialized LED lighting." ( Id. ) Significantly, Mr. Hardej signed this letter of intent as FarmedHere's "Chief Executive Officer". ( Id. )

AeroFarms argues, based on the above documents, that Mr. Hardej created FarmedHere to reap the benefits AeroFarms provided him under the Distribution Agreement. (Def's Mot. at 4-5.) According to AeroFarms, FarmedHere stepped into CityPonic's shoes, at Mr. Hardej's direction, to exploit AeroFarms' aeroponics system. ( Id. ) AeroFarms, consequently, believes FarmedHere is bound to and assumed the obligations of the Distribution Agreement. ( Id. )

The Distribution Agreement contains a section entitled "ARBITRATION", which states "[a]ny controversy or claim arising out of or relating to this contract or the breach hereof shall be settled by arbitration to be held in the State of New York in accordance with the law in this jurisdiction, and judgment upon the award rendered by the ...


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