International Fruit Genetics LLC v. P.E.R. Asset Management Trust, No. 2:2014cv05273 - Document 36 (C.D. Cal. 2014)
Court Description: ORDER DENYING DEFENDANTS MOTION TO DISMISS 26 AND PLAINTIFFS REQUEST FOR ATTORNEYS FEES 28 . The Court ORDERS that Plaintiff shall file a Voluntary Notice of Dismissal as to Defendant P.E.R. Asset Management Trust within seven days by Judge Otis D. Wright, II. (lc). Modified on 11/25/2014 .(lc).
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International Fruit Genetics LLC v. P.E.R. Asset Management Trust Doc. 36 O 1 2 3 4 5 United States District Court Central District of California 6 7 8 9 10 INTERNATIONAL FRUIT GENETICS, LLC, Plaintiff, 11 12 Case 2:14-cv-05273-ODW(MRWx) ORDER DENYING DEFENDANTS’ v. MOTION TO DISMISS [26] 13 P.E.R. ASSET MANAGEMENT TRUST; AND PLAINTIFF’S REQUEST FOR 14 PIETER EDUARD RETIEF 15 REDELINGHUYS N.O., IN HIS 16 CAPACITY AS TRUSTEE; DEBORAH 17 MARY REDELINGHUYS N.O., IN HER 18 CAPACITY AS TRUSTEE 19 20 ATTORNEY’S FEES Defendants. I. INTRODUCTION 21 Until recently, Defendants were an approved licensee of Plaintiff for certain 22 table grape varieties in South Africa. This case arises from Defendants’ alleged theft, 23 illegal importation into South Africa, and propagation of Plaintiff’s proprietary plant 24 materials in violation of the parties’ license agreement. Defendants filed two Motions 25 to Dismiss, the first on behalf of P.E.R. Asset Management Trust and the second on 26 behalf of the two trustees. (ECF Nos. 18, 26.) Plaintiff opposed both Motions. (ECF 27 Nos. 20, 28.) However, at the November 24, 2014 hearing, Plaintiff stipulated to 28 dismiss Defendant P.E.R. Asset Management Trust. Therefore, the Court need not Dockets.Justia.com 1 decide the Motion. For the reasons discussed below, the Court ORDERS that 2 Plaintiff shall file a Voluntary Notice of Dismissal as to Defendant P.E.R. Asset 3 Management Trust within seven days, and DENIES Defendants’ Motion to Dismiss 4 as to the trustees. (ECF No. 26.) The Court also DENIES Plaintiff’s request for 5 attorney’s fees. (ECF Nos. 28.) II. 6 1. 7 FACTUAL BACKGROUND Plaintiff’s Business Model 8 Plaintiff International Fruit Genetics, LLC (“IFG”) is a California-based 9 company that invents, develops, and licenses proprietary hybrid table grape varieties 10 in the United States and other countries. (FAC ¶ 9.) IFG operates a grape-breeding 11 program that invents and develops new table grape varieties, which are of particular 12 interest to commercial grape growers. (Id. ¶ 10.) In the last thirteen years, IFG has 13 spent millions of dollars on its breeding program. (Id.) IFG’s income is derived 14 principally from the intellectual property rights held in the proprietary plant varieties 15 that it develops. (Id. ¶ 11.) Consequently, it is critical that these rights are closely 16 monitored and controlled. (Id.) 17 After IFG develops a table grape variety, the company applies for “plant variety 18 rights” in foreign countries. (Id.) IFG then enters license agreements with parties in 19 those countries that allow them to grow, evaluate, market, farm, and/or sell table 20 grapes from IFG’s proprietary table grape varieties, subject to the terms and 21 conditions of the license agreements. (Id. ¶ 12.) 22 IFG does not provide its plant materials directly to licensees in foreign countries. 23 (Id. ¶ 13.) Rather, IFG enters license agreements with one or more table grape 24 nurseries in foreign countries and grants the nurseries the exclusive right to propagate 25 and distribute proprietary plants to IFG-approved licensees in those countries. (Id.) 26 This provides IFG with an effective method to monitor and control the distribution of 27 proprietary plant material to growers around the world. (Id.) 28 /// 2 1 Once license agreements are in place, IFG places its proprietary plant varieties 2 into the plant quarantine system of foreign countries. (Id. ¶ 14.) Most countries with 3 large agricultural sectors require that new plant materials undergo a quarantine 4 process where plants are tested for diseases and pests. (Id.) When plants pass the 5 quarantine process, they are delivered to IFG-licensed nurseries, which then propagate 6 the plants for distribution to other licensees. (Id.) 2. 7 Plaintiff and Defendants Enter Testing Agreement, Marketing Agreement, and Planting Agreement 8 9 In July 2004, IFG entered an International Fruit Genetics Proprietary Variety 10 Testing and Marketing Rights Option Agreement (the “Testing Agreement”) with 11 Defendants, P.E.R Asset Management Trust (the “Trust”) and two trustees, Pieter 12 Eduard 13 (“Deborah”).1 (Id. ¶ 20.) Pieter is a grape grower and marketer based in South Africa. 14 (Id. ¶ 19.) The Testing Agreement allowed Defendants to evaluate IFG’s proprietary 15 table grape varieties and gave Defendants an option to enter a marketing rights 16 17 agreement. (Id. ¶ 20.) In April 2010, IFG entered an International Fruit Genetics Proprietary Variety 18 Marketing Rights and Trademark License Agreement (the “Marketing Agreement”). 19 (Id. ¶ 32.) The Marketing Agreement allowed Defendants to market IFG’s proprietary 20 plant varieties to plant growers, market and sell fruit from licensees entitled to grow 21 IFG’s proprietary plant varieties, and request that Defendants and IFG or IFG and 22 other plant growers enter planting rights agreements. (Id.) Retief Redelinghuys (“Pieter”) and Deborah Mary Redelinghuys 23 In April 2010, IFG also entered an International Fruit Genetics Proprietary 24 Variety Planting Rights and Trademark License Agreement (the “Planting 25 Agreement”). (Id. ¶ 36.) The Planting Agreement allowed Defendants to grow plants 26 of certain varieties, in certain quantities, and in certain locations with IFG’s written 27 28 consent. (Id.) 1 For convenience, the Court references the trustee Defendants by their first names. 3 1 3. Jurisdiction and Venue Listed in Agreements 2 The Testing Agreement contained a “Jurisdiction and Venue” section, which 3 provided that the exclusive forums in which the parties could adjudicate any case or 4 controversy would be the “United States District Court, Central District of California 5 or a court of similar standing in the Territory.” (Id. Ex. F “General Terms and 6 Conditions.”) The “Territory” was defined as the Republic of South Africa and the 7 Republic of Namibia. (Id. ¶ 30.) The Marketing Agreement and Planting Agreement 8 provided that the exclusive forum in which the parties could adjudicate any case or 9 controversy would be the United States District Court, Central District of California. 10 11 12 13 14 15 16 17 (Id. Ex. F “General Terms and Conditions.”) The Marketing Agreement and Planting Agreement each contained a provision that in the event of litigation arising out of or in connection with either agreement in the United States District Court, Central District of California, the parties would not contest or challenge the Court’s jurisdiction or venue. (Id.) 4. Defendants’ Propagation of Plaintiff Plant Material In May 2013, 1,680 plants of IFG’s proprietary IFG Ten table grape variety 18 were discovered on Defendants’ property. (Id. ¶ 40.) Other IFG proprietary table 19 grape varieties were found growing on Defendants’ property: 540 plants of IFG 20 Nineteen, 1,960 plants of IFG Seventeen, 1,840 plants of IFG Sixteen, 864 plants of 21 IFG Six, and 277 vines of IFG Eleven. (Id. ¶¶ 41-45.) None of these plants or vines 22 had been supplied to Defendants nor were Defendants authorized to propagate these 23 IFG varieties. (Id.) 24 On April 4, 2014, IFG alleges, Pieter admitted to IFG’s Business Manager that 25 in July 2013 he took a cutting of an IFG Eleven grapevine from the Director of IFG’s 26 ranch in California, smuggled it into South Africa, and propagated the cutting to 27 produce four vines on Defendants’ property in South Africa. (Id. ¶ 46.) Pieter 28 4 1 explained, allegedly, it was from these four vines that he propagated the additional 2 IFG Eleven plants that were found on Defendants’ property. (Id.) 3 IFG obtained a DNA test of the IFG Eleven plants found on Defendants’ 4 property and those held in quarantine at the nursery. (Id. ¶ 47.) The test showed that 5 the IFG Eleven plants on Defendants’ property were genetically identical to those held 6 at the nursery. (Id.) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5. Plaintiff Terminates All Agreements with Defendants In a letter dated May 9, 2014, IFG counsel informed Defendants that their possession and propagation of IFG’s plants without authorization violated, among other things, the Testing Agreement and IFG’s plant breeder’s rights under South African law and demanded Defendants’ cooperation in resolving the issues between the parties. (Id. ¶ 48.) On May 19, 2014, Pieter attended a meeting with IFG executives in California. (Id. ¶ 49.) During this meeting, Pieter allegedly stated that he took the IFG Eleven grapevine from the IFG General Manager’s vineyard in California, smuggled it into South Africa, and propagated it at the Defendants’ property. (Id.) IFG argues that this was but one of many contradictions in Pieter’s explanations for how IFG plant materials ended up in large quantities on Defendants’ property. (Id.) IFG alleges that during the same meeting Pieter admitted that he propagated IFG Ten, IFG Nineteen, and IFG Six. (Id.) In a letter dated June 11, 2014, IFG counsel informed Defendants that their unauthorized propagation of IFG’s proprietary plant materials constituted an “Event of Default” and an infringement of IFG’s plant variety rights under the Testing Agreement. (Id. ¶ 54.) The letter stated that IFG was immediately terminating the 26 Testing Agreement. (Id.) In a letter dated June 26, 2014, IFG counsel informed Defendants that their 27 unauthorized propagations constituted an “Event of Default” under the Marketing 28 Agreement, and an “Event of Default” and infringement of IFG’s plant variety rights 5 1 under the Planting Agreement. (Id. ¶ 55.) The letter stated that IFG was terminating 2 the Marketing Agreement and the Planting Agreement. (Id.) 6. 3 Defendants File for Emergency Relief in South Africa, Plaintiff Files Suit in the United States, and Defendants File Suit in South Africa 4 5 On June 24, 2014, Defendants sought a preliminary injunction from the High 6 Court of South Africa, Western Cape Division, Cape Town, Case No. 10899/2014. 7 (Id. ¶ 56.) 8 delivering its plant materials covered under the Testing Agreement, Marketing 9 Agreement, and Planting Agreement. (Id. ¶ 60.) On July 8, 2014, IFG filed the 10 instant action in the United States. (ECF No. 1) On July 9, 2014, IFG and Defendants 11 12 13 14 15 16 The preliminary injunction was intended to force IFG to continue agreed that the injunction sought in South Africa would be submitted to binding arbitration. (Id. ¶ 61.) On July 23, 2014, the arbitrator found that IFG was not obligated to continue delivering its plant materials to Defendants. (Id. ¶ 62.) On August 1, 2014, Defendants filed suit in South Africa. (Dawson Decl. ¶ 3, Ex. A.) That suit is still pending. (Id. ¶ 12.) 7. 17 The Instant Motions to Dismiss 18 Defendants filed two Motions to Dismiss. (ECF Nos. 18, 26.) IFG opposed 19 both Motions. (ECF Nos. 20, 28.) IFG has requested an award of attorney’s fees on 20 the grounds that Defendants’ Motions constitute an independent breach of contract 21 because the parties’ agreements state that neither side will contest the jurisdiction or 22 venue of the forum(s) listed. (Id.) 23 24 III. A. LEGAL STANDARD 12(b)(1) 25 Federal Rule of Civil Procedure 12(b)(1) provides for dismissal of a complaint 26 for lack of subject-matter jurisdiction. The Article III case or controversy requirement 27 limits a federal court’s subject-matter jurisdiction. Chandler v. State Farm Mut. Auto. 28 Ins. Co., 598 F.3d 1115, 1121–22 (9th Cir. 2010). When a motion to dismiss attacks 6 1 subject-matter jurisdiction on the face of the complaint, the court assumes that the 2 factual allegations in the complaint are true and draws all reasonable inferences in the 3 plaintiff’s favor. Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009). 4 B. 12(b)(2) 5 Federal Rule of Civil Procedure 12(b)(2) provides for dismissal of a complaint 6 for lack of personal jurisdiction. The plaintiff bears the burden of demonstrating that 7 there is jurisdiction. Love v. Assoc. Newspapers Ltd., 611 F.3d 601, 608 (9th Cir. 8 2010). 9 A district court has the power to exercise personal jurisdiction to the extent of 10 the law of the state in it sits. Fed. R. Civ. P. 4(k)(1)(A); Panavision Int’l, L.P. v. 11 Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1988). California’s long-arm jurisdictional 12 statute is coextensive with federal due process requirements. Cal. Civ. Proc. Code § 13 410.10; Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). 14 For a court to exercise personal jurisdiction over a nonresident defendant 15 consistent with due process, the defendant must have sufficient “minimum contacts” 16 with the forum state so that the exercise of jurisdiction “does not offend traditional 17 notions of fair play and substantial justice.” 18 Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). Int’l Shoe Co. v. Wash., Office of 19 When there is a forum-selection clause and strong evidence that it is a vital part 20 of an agreement, “it would unrealistic to think that the parties did not conduct their 21 negotiations, including fixing the monetary terms, with the consequences of the forum 22 clause figuring prominently in their calculations.” M/S Bremen v. Zapata Off–Shore 23 Co., 407 U.S. 1, 14 (1972). 24 C. 12(b)(3) 25 Federal Rule of Civil Procedure 12(b)(3) provides for dismissal of a complaint 26 for improper venue. In cases where there is a forum-selection clause, whether the 27 clause is mandatory or permissive is a matter of contract interpretation. N. California 28 Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1036 (9th 7 1 Cir. 1995). For a forum-selection clause to be mandatory, it must clearly designate a 2 3 forum as the exclusive one. Id. at 1037. A court should enforce a mandatory forum-selection clause unless the opposing 4 party demonstrates that (1) formation of the clause was tainted by fraud or 5 overreaching; (2) enforcement would effectively deprive the complaining party of his 6 day in court or deprive him of any remedy; or (3) enforcement would contravene a 7 strong public policy of the forum state. M/S Bremen, 407 U.S. at 12-13 (1972). 8 If the contractually designated forum is a foreign country, a motion to dismiss 9 under the doctrine of forum non conveniens is the appropriate procedural mechanism. 10 Id. at 580. The forum non conveniens analysis entails the same balancing-of-interests 11 that courts typically conduct in considering motions to transfer venue, wherein they 12 “must evaluate both the convenience of the parties and various public-interest 13 14 15 considerations.” Id. at 581. However, if there is a valid mandatory forum-selection clause, courts should not consider the parties’ private interests because by agreeing to the forum-selection clause, the parties “waive the right to challenge the preselected 16 17 18 forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation.” Id. at 581-82. IV. 19 DISCUSSION 20 The first Motion to Dismiss was filed on behalf of the Trust, and the second 21 was filed on behalf of the trustees, Pieter and Deborah. The Court will address each 22 Motion separately. 23 1. Motion to Dismiss #1: The Trust 24 Defendant moved to dismiss Plaintiff’s suit against P.E.R. Asset Management 25 Trust. Plaintiff opposed the Motion. However, at the November 24, 2014 hearing, 26 Plaintiff stipulated to voluntarily dismiss the Trust. Therefore, Defendant’s Motion is 27 moot. The Court ORDERS that Plaintiff shall file a Voluntary Notice of Dismissal 28 as to Defendant P.E.R. Asset Management Trust within seven days. 8 1 2. 2 Defendants argue that Plaintiff’s suit against Pieter and Deborah must be 3 dismissed pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 4 12(b)(3). (Mot. 1.) a. 12(b)(1) 5 Motion to Dismiss #2: The Trustees 6 Defendants argue that the Court lacks subject-matter jurisdiction because IFG is 7 a limited liability company and the First Amended Complaint does not allege the 8 citizenship of IFG’s members. 9 Plaintiff has the burden of establishing that the Court has subject-matter 10 jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 376- 11 378 (1994). For purposes of diversity jurisdiction, the citizenship of a limited liability 12 company depends on the citizenship of its members. Johnson v. Columbia Properties 13 Anchorage, LP, 437 F3d 894, 899 (9th Cir. 2006). 14 15 16 17 With its Opposition to Defendants’ Motion, IFG established that IFG and all its members are citizens of and domiciled in California. (Decl. Pandol ¶¶ 2-4.) Defendants are citizens of and domiciled in South Africa. Contrary to Defendants’ assertion, Plaintiff’s Opposition and supporting documents were filed on time by 18 19 20 21 November 3, 2014. There is no need for Plaintiff to incur the cost of filing a Second Amended Complaint. The Court finds that the Court has subject-matter jurisdiction. b. 12(b)(2) 22 Defendants argue that the Court lacks personal jurisdiction because Defendants 23 are residents of South Africa and do not have the requisite “minimum contacts” with 24 California for the Court to exercise jurisdiction. (Mot. 4.) 25 Personal jurisdiction hinges on whether the maintenance of an action against a 26 foreign defendant offends “traditional notions of fair play and substantial justice” in 27 light of defendant’s minimum contacts with the forum state. Int’l Shoe Co. v. 28 Int’l Shoe Co., 326 U.S. at 316. 9 1 All the agreements that Defendants signed provided that the United States 2 District Court, Central District of California would be a forum in which the parties 3 could adjudicate any case or controversy. In fact, Defendants signed two agreements 4 that provided the Central District of California would be the exclusive forum. These 5 two agreements also each contained a provision that in the event of litigation arising 6 out of or in connection with either agreement in the Central District of California, the 7 parties would not contest or challenge the Court’s jurisdiction. 8 As residents of South Africa, Defendants likely considered the forum-selection 9 clauses a vital part of their agreements. Defendants have provided no convincing 10 argument that it would offend “traditional notions of fair play and substantial justice” 11 12 13 14 15 16 17 to permit Plaintiff to maintain an action against Defendants in the forum state in which they agreed that they could be sued. c. 12(b)(3) Defendants argue that the Court should dismiss the Complaint because Los Angeles, CA is not the proper venue for litigation of the instant action since an action relating to the same nucleus of facts is already pending in the High Court of South 18 Africa. In the alternative, Defendants argue that the Court should stay the action 19 pending resolution of the concurrently pending litigation in South Africa. 20 The Ninth Circuit has “reject[ed] the notion that a federal court owes greater 21 deference to foreign courts than to our own state courts.” Neuchatel Swiss Gen. Ins. 22 Co. v. Lufthansa Airlines, 925 F.2d 1193, 1195 (9th Cir. 1991). As a result, the 23 existence of a parallel foreign proceeding is afforded little deference. The limited 24 instance in which federal courts should contemplate deference to a foreign court is 25 when the foreign court has reached a judgment on the merits. Turner Entm’t Co. v. 26 Degeto Film GMBH, 25 F.3d 1512, 1521 (11th Cir. 1994). Failure to defer to a 27 judgment on the merits “would have serious implications for the concerns of 28 international comity.” Id. 10 The South Africa action is still pending. 1 2 Therefore, there is no foreign judgment on the merits to which the Court should defer. 3 The forum-selection clause provided in two of the parties’ three agreements 4 clearly designates the Central District of California as the exclusive forum. There has 5 been no suggestion from Defendants that the formation of the clause was tainted by 6 fraud, that enforcement would preclude any remedy, or that enforcement would 7 contravene a strong public policy of the forum state. 8 Because there is a valid mandatory forum-selection clause, the Court will not 9 consider the Defendants’ argument that litigating the instant action will be less 10 convenient than South Africa. By signing the agreements, Defendants waived the 11 right to challenge the Central District of California as less convenient for themselves, 12 their witnesses, or for their pursuit of the litigation. Therefore, the Court will not 13 dismiss the instant action because this venue is less convenient than South Africa. 14 3. Attorney’s Fees 15 Plaintiff argues that the Court should award attorney’s fees because 16 Defendants’ Motion constitutes an independent breach of contract because the parties’ 17 agreements state that neither side will contest the jurisdiction or venue of the forum(s) 18 listed. (ECF No. 28.) 19 The first agreement provided that the exclusive forums in which the parties 20 could adjudicate any case or controversy would be the Central District of California or 21 a court of similar standing in South Africa or Namibia. Defendants were within their 22 right to argue that South Africa would be more convenient. Therefore, the Court will 23 not award attorney’s fees. 24 /// 25 /// 26 /// 27 /// 28 /// 11 V. 1 CONCLUSION 2 For the reasons discussed above, the Court ORDERS that Plaintiff shall file a 3 Voluntary Notice of Dismissal as to Defendant P.E.R. Asset Management Trust 4 within seven days, and DENIES Defendants’ Motion to Dismiss. (ECF No. 26.) 5 The Court also DENIES Plaintiff’s request for attorney’s fees. (ECF No. 28.) 6 IT IS SO ORDERED. 7 8 November 24, 2014 9 10 11 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12
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