Celtig, LLC v. Patey

• Decision Date: 26 September 2018
• Docket Number: Case No. 2:17-cv-01086-JNP
• Parties: CELTIG, LLC, Plaintiff, v. Aaron A. PATEY, et al., Defendants.
• Court: U.S. District Court — District of Utah

347 F.Supp.3d 976

CELTIG, LLC, Plaintiff,

v.Aaron A. PATEY, et al., Defendants.

Case No. 2:17-cv-01086-JNP

United States District Court, D. Utah.

Signed September 26, 2018

Richard D. Burbidge, Abigail M. Dizon-Maughan, Burbidge | Mitchell, Salt Lake City, UT, for Plaintiff.

Michael J. Davidson, Lindon, UT, for Defendants.

MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS THIRD-PARTY DEFENDANT EDWARDS

Jill N. Parrish, United States District Court Judge

Before the court is Third-Party Defendant Brain Edwards's Motion to Dismiss with Prejudice Third-Party Complaint Against Third-Party Defendant Edwards for Lack of Personal Jurisdiction. For the reasons set forth below, the court GRANTS IN PART and DENIES IN PART Edwards's motion. The Third-Party Complaint filed by Third-Party Plaintiffs Evergreen Strategies, LLC and Relay Advanced Materials, Inc. is dismissed without prejudice as to Edwards.

I. INTRODUCTION

Third-Party Plaintiffs Evergreen and Relay Advanced Materials (RAM) bring suit against Third-Party Defendant Brian Edwards, CEO of Celtig, LLC, on two counts: tortious interference with economic relations and civil conspiracy. Third-Party Complaint ¶¶ 121-26; 153-58. Edwards moves to dismiss the claims against him for lack of personal jurisdiction. Motion to Dismiss ("Motion").

Evergreen and RAM allege personal jurisdiction over Edwards arising from his actions "in furtherance of the common scheme to commit tortious and contractual breaches" that caused "tortious injury" to Third-Party Plaintiffs in the state of Utah, "pursuant to Utah Code § 78B-3-205(3)." Third-Party Compl. ¶ 13, 22. Evergreen and RAM have not alleged that Edwards is domiciled in the state of Utah, which would subject Edwards to the court's general jurisdiction. Therefore, to establish personal jurisdiction over Edwards individually, Evergreen and RAM must meet their burden of showing that Edwards intentionally caused Third-Party Plaintiffs harm within the state of Utah. As Evergreen and RAM have failed to allege a prima facie case of conspiracy involving Edwards, the court must dismiss, without prejudice, the claims against Edwards for lack of personal jurisdiction.

II. FACTUAL ALLEGATIONS

A. BACKGROUND

This case involves a business dispute between the parties regarding the substance graphene, a "unique substance that has not been easily or economically produced." Third-Party Compl. ¶ 1. Plaintiff and Third-Party Defendant Celtig L.L.C. is a Tennessee limited liability company that created a process allowing for the mass production of graphene at low cost. Third-Party Compl. ¶ 1, 8. On or about March 28, 2017, Evergreen, a Nevada limited liability company with offices in Utah County, Utah, signed two business agreements with Celtig: the Definitive Agreement and the Exclusive License and Distribution Agreement ("Licensing Agreement"). Third-Party Compl. ¶¶ 6, 25. On or about the same day, Evergreen and Impel Sales LLC, a Utah limited liability company (Third-Party Compl. ¶ 16), entered into the "Impel Agreement." Third-Party Compl. ¶ 65. Finally, as part of the negotiations, Third-Party Plaintiff Relay Advanced Materials, Inc. ("RAM"), a Delaware corporation whose principal place of business is Lindon, Utah, was formed "for the purpose of purchasing product from Celtig." Third-Party Compl. ¶ 7.

Conflict between the parties concerning the Definitive Agreement arose almost immediately after the signing. Section 1 of the Definitive Agreement calls for Evergreen to pre-pay $750,015 for the purchase of 833,350 grams of graphene from Celtig within three business days following execution of the agreement. Third-Party Compl. ¶ 27. Evergreen and RAM allege that Evergreen pre-paid the $750,015, but Celtig failed to deliver the 833,350 grams of graphene. Third-Party Compl. 29. Evergreen alleges that Celtig refused to deliver the graphene because it was unable to produce graphene that met the quality and purity standards to which the parties agreed. Third-Party Compl. ¶ 30. Evergreen and RAM also allege that Celtig refused to deliver the graphene because of concerted actions taken by the "Conspirators." The Conspirators allegedly mischaracterized the requirements of the Definitive Agreement to make it appear that the $750,015 payment was for graphene that Celtig would produce at a later date and that the graphene would need to be paid for again before delivery. Third-Party Compl. ¶ 32. These mischaracterizations made it appear to Celtig that Evergreen breached the Definitive Agreement. Third-Party Compl. ¶ 32.

B. THE CONSPIRACY

The "Conspirators" allegedly include Brent Benjamin Woodson, Phillip Cox, Michael Gunderson, Tibor Kalnoki-kes, David Nielson, David Waite, Brian Edwards, ULLC, Impel Sales, and "other Doe Defendants." Third-Party Compl. ¶ 85. According to Evergreen, the Conspirators "precipitated the instant dispute between Evergreen and Celtig," and are "liable for any damages Celtig may prove against Evergreen." Third-Party Compl. ¶ 124. The Conspirators allegedly made it appear that Evergreen breached the Definitive Agreement, but in actuality, it was Celtig that breached the Definitive Agreement on multiple occasions. Third-Party Compl. ¶ 34-45. Celtig also allegedly breached the requirements of the Licensing Agreement. Third-Party Compl. ¶ 58. According to Evergreen and RAM, "some or all of these breaches by Celtig are the result of the concerted action of some or all of the Conspirators." Third-Party Compl. ¶ 46.

The Conspirators allegedly also attempted to directly interfere with the business agreements between Celtig, Evergreen, and RAM by establishing competing businesses. In April 2017, Cox allegedly formed "a series of companies" to "supplant Evergreen and RAM." Third-Party Compl. ¶ 87. On or about August 18, 2017, Woodson and Kalnoki-kes allegedly formed ULLC for the purpose of competing with RAM, in violation of their employment agreements. Third-Party Compl. ¶ 70. Nielson and Waite allegedly worked in concert with Woodson and Kalnoki-kes to establish ULLC. Third-Party Compl. ¶ 80, 82. It is not alleged that Edwards had any involvement with this part of the scheme.

After six months of failed business negotiations, on or about September 11, 2017, Edwards, acting on behalf of Celtig, attempted to terminate the Definitive Agreement and the Licensing Agreement by sending an email to the President of RAM and Evergreen. Third-Party Compl. ¶ 91.

According to Evergreen, Celtig's attempts to terminate the Definitive Agreement and Licensing Agreement were without cause. Third-Party Compl. ¶¶ 53, 62. Evergreen and RAM allege that "[b]ut for the tortious activities of the Conspirators, no attempt would have been made by Celtig to terminate the Definitive Agreement" or the "Licensing Agreement," two actions which "furthered the aims of the Conspirators." Third-Party Compl. ¶¶ 54, 62, 63.

RAM and Evergreen did not receive the email terminating the agreements until three days later, on September 14, 2017, allegedly because Edwards did not address the email to the correct email address per the notice provisions of the agreements. Instead, Edwards sent the email to the President's "relaycorp.com" email, which allegedly had been tampered with by Woodson. Third-Party Compl. ¶ 92. It is alleged that Woodson, one of the Conspirators, on or about September 7, 2017, used his control of RAM's email server, "relaycorp.com" to prevent the President of RAM and Evergreen from accessing his email address. Third-Party Compl. ¶ 90. The correct email address could not have been tampered with by Woodson. Third-Party Compl. ¶ 91.

During the same time period, on or about September 12, 2017, someone at RAM informed Celtig that Woodson was going to be fired in a communication marked "CONFIDENTIAL INFORMATION." Third-Party Compl. ¶ 93. Edwards was allegedly bound, as CEO of Celtig, by the Definitive Agreement and the Licensing Agreement, which contained confidentiality provisions prohibiting "disclosing confidential information to third parties without the consent of Evergreen." Third-Party Compl. ¶ 47. Edwards had been informed the communicated information was confidential per the terms of the agreements between Celtig and Evergreen. Third-Party Compl. ¶ 94. Despite this, Edwards told Woodson that he was going to be fired. Woodson quit the next day, on or about September 13, 2017. Third-Party Compl. ¶ 94.

C. THE LAWSUIT

On September 14, 2017, Evergreen learned that Edwards, Cox, and Celtig had jointly retained an attorney in Salt Lake City, Utah. Third-Party Compl. ¶ 96. On September 26, 2017, Celtig filed suit against RAM and Evergreen, alleging, among other things, breach of contract and fraud. Motion 3. Evergreen and RAM filed their Third-Party Complaint on November 1, 2017. Evergreen and RAM allege that the Conspirators tortiously and intentionally interfered with Evergreen's contractual relationship with Celtig in order to appropriate the benefits of the contracts for themselves, as well as conspiring to damage Evergreen and RAM's "relationships with potential partners." Third-Party Compl. ¶ 86; 4. As a result of their actions, and the breaches by Celtig, Evergreen and RAM allege they have been harmed in an amount "which conservatively exceeds $5 billion dollars [sic]." Third-Party Compl. ¶ 5.

III. ANALYSIS

A. PERSONAL JURISDICTION GENERALLY

Edwards moves to dismiss with prejudice Evergreen and RAM's Third-Party Complaint against Edwards for lack of personal jurisdiction. A court may dismiss a party for lack of personal jurisdiction under Rule 12(b)(2) of the Federal Rules of Civil Procedure. Such a dismissal is without prejudice.

Hollander v. Sandoz Pharm. Corp. , 289 F.3d 1193, 1216 (10th Cir. 2002).¹

When personal jurisdiction is contested at the pleading stage, courts may determine whether it exists based on the pleadings and affidavits. Shrader v. Biddinger , 633 F.3d 1235, 1239 (10th Cir. 2011). The plaintiff bears the burden of...