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Agjunction LLC v. Agrian Inc.

United States District Court, D. Kansas

June 6, 2014

AGRIAN INC., ET AL. Defendant.


DANIEL D. CRABTREE, District Judge.

This matter comes before the Court on the Motion to Dismiss for Failure to State a Claim (Doc. 33) filed by Defendants Agrian Inc., Jeffrey A. Dearborn, Aaron D. Hunt, Matthew C. Dedmon, David J. Nerpel, and Derrick B. Anderson. Pursuant to Fed.R.Civ.P. 12(b)(6), Defendants have moved to dismiss all ten counts asserted by Plaintiff AgJunction LLC in its Complaint. For the reasons set forth below, the Court grants Defendants' Motion to Dismiss in part and denies it in part.

I. Background Facts

The following facts are taken from the Complaint. For purposes of a Rule 12(b)(6) motion to dismiss, the Court accepts the factual allegations in the Complaint as true and draws reasonable inferences in favor of the plaintiff. Gann v. Cline, 519 F.3d 1090, 1092 (10th Cir. 2008).

Plaintiff AgJunction LLC and Defendant Agrian, Inc. are makers and sellers of agrono-my-related software. In addition to selling its own products, Agrian sometimes acts as a software reseller. In December 2012, AgJunction and Agrian entered into the "Master Services and Licensing Agreement" (the "Agreement"), under which AgJunction granted Agrian a license to access and use AgJunction's software for the purpose of reselling or sublicensing the software to other companies.

The Agreement placed limits on Agrian's use of AgJunction's proprietary software. Section 2.1 of the Agreement provides that: "Reseller [Agrian's] access and use of the [software] shall only be for its internal use and for purposes of supporting" specified clients and customers. Section 9.1 states, "[Agrian] shall use Confidential Information only in performing under this Agreement and shall retain the Confidential Information in confidence and not disclose to any third party."

AgJunction filed this lawsuit on February 16, 2014, alleging that Agrian unlawfully copied AgJunction's proprietary software to create and begin selling a nearly identical competing product. The lawsuit also brings claims against five former AgJunction employees who now work for Agrian (the "Employee Defendants"). Each Employee Defendant entered into a "Confidentiality and Intellectual Property Agreement" with AgJunction (the "Employee Agreements"), under which they agreed not to disclose confidential information about AgJunction's software to third parties. The Employee Defendants had access to such information in their job duties at AgJunction.

One by one, from April 2013 through December 2013, the Employee Defendants resigned from AgJunction and began working for Agrian. AgJunction alleges that the Employee Defendants took confidential information about AgJunction's proprietary software with them when they departed AgJunction and provided it to Agrian in order to create competing software.

AgJunction's Complaint asserts various contract and tort theories against Defendants. Defendants have responded by filing this motion to dismiss all of AgJunction's claims.

II. Legal Standards

Under Rule 12(b)(6), a defendant may move to dismiss any claim which fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering such a motion, the court must decide "whether the complaint contains enough facts to state a claim to relief that is plausible on its face.'" Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible if the plaintiff pleads facts sufficient for the court reasonably to infer that the defendant is liable for the alleged misconduct. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). This plausibility standard reflects the requirement in Fed.R.Civ.P. 8 that pleadings must provide defendants with fair notice of the nature of the claims as well as the grounds upon which each claim rests. See Khalik v. United Air Lines, 671 F.3d 1188, 1191-92 (10th Cir. 2012); see also Fed R. Civ. P. 8(a)(2) ("A pleading that states a claim for relief must contain [a] short and plain statement of the claim showing that the pleader is entitled to relief....").

Under Rule 12(b)(6), a district court must accept as true all factual allegations in the complaint, but need not afford such a presumption to any legal conclusions it may assert. Iqbal, 556 U.S. at 678. Viewing the complaint in this manner, a court must decide whether the plaintiff's allegations give rise to more than speculative possibilities. See id. ("The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully."). If the allegations in the complaint at issue are "so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs have not nudged their claims across the line from conceivable to plausible.'" Robbins v. Oklahoma, 519 F.3d 1242, 1247 (quoting Twombly, 550 U.S. at 570).

III. Discussion and Analysis

A. Breach of Contract Claims

In Counts I and II of its Complaint, AgJunction claims that Defendant Agrian (1) breached the Agreement it executed with AgJunction and (2) breached the covenant of good faith and fair dealing implied in the Agreement. In Count III, AgJunction claims that the Employee Defendants breached their Employee Agreements.

The parties agree that the Agreement's choice of law provision provides that the Agreement is to be construed under the laws of the state of Delaware. In addition, the parties agree that the Employee Agreements' choice of law provisions provide that the Employee Agreements are to be construed under the laws of the Canadian province of Alberta.

"Under Kansas law, [1] the enforceability of a contractual choice-of-law provision turns on whether the forum selected bears a reasonable relation to the contract at issue." Griffin v. Bank of America, 971 F.Supp. 492, 496 (D. Kan. 1997). The Court determines that the forum selected by the respective choice of law provisions bears a reasonable relation to the Agreement and Employee Agreements. The Court therefore will apply Delaware law to Counts I and II and Alberta's law to Count III.

Count I - Breach of Contract

A claim for breach-of-contract under Delaware law requires a plaintiff to show (1) the existence of a contract, (2) the breach of an obligation imposed by the contract, and (3) damages the plaintiff suffered as a result of the breach. Osram Sylvania Inc. v. Townsend Ventures, LLC, No. 8123, 2013 WL 6199554, at *6 (Del. Ch. Nov. 19, 2013).

Defendants take issue with Paragraph 56 of the Complaint, which alleges that: "Defendant Agrian has breached the terms of the Agreement by failing, among other things, to honor the obligations set forth in the Agreement to access and use AgJunction's confidential and protected information solely for the purpose of administering its reseller agreements...." Defendants argue that Paragraph 56 is the lone allegation of breach in the Complaint and that it "does not allege facts in sufficient detail so as to put Agrian on notice of the specific conduct [AgJunction] claims constitutes the breach."[2]

This argument misapprehends the pleading requirements of Twombly. Under Rule 8, the pleading need only give the defendant fair notice of what the claim is and the grounds upon which it rests. Khalik v. United Air Lines, 671 F.3d 1188, 1192 (10th Cir. 2012). The Complaint alleges that AgJunction and Agrian entered the Agreement, the Agreement restricted the use of confidential and proprietary information, and that Agrian violated the terms of the Agreement by using the confidential and proprietary information to create its own competing software. Furthermore, Count I incorporates the preceding allegations in the Complaint, which describe the nature of the software and assert that Agrian misappropriated it to craft a competing product. Taken together, AgJunction has ...

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