Nev. Select Royalty, Inc. v. Jerritt Canyon Gold LLC

• Docket Number: 3:22-cv-00415-LRH-CSD
• Decision Date: 07 July 2023
• Parties: NEVADA SELECT ROYALTY, INC., Plaintiff, v. JERRITT CANYON GOLD LLC, Defendant. JERRITT CANYON GOLD LLC, Counter-Claimant, v. NEVADA SELECT ROYALTY, INC., and NOUGHT TECHNOLOGIES, LLC, Counter-Defendants. NOUGHT TECHNOLOGIES, LLC, Counter-Claimant, v. JERRITT CANYON GOLD LLC; DOE I through X, inclusive; ROE ENTITIES I through X, inclusive, Counter-Defendants. FIRST MAJESTIC SILVER CORP., Counter-Claimant, v. NOUGHT TECHNOLOGIES, LLC, Counter-Defendant.
• Court: U.S. District Court — District of Nevada

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NEVADA SELECT ROYALTY, INC., Plaintiff, v. JERRITT CANYON GOLD LLC, Defendant.

JERRITT CANYON GOLD LLC, Counter-Claimant, v. NEVADA SELECT ROYALTY, INC., and NOUGHT TECHNOLOGIES, LLC, Counter-Defendants.

NOUGHT TECHNOLOGIES, LLC, Counter-Claimant, v. JERRITT CANYON GOLD LLC; DOE I through X, inclusive; ROE ENTITIES I through X, inclusive, Counter-Defendants.

FIRST MAJESTIC SILVER CORP., Counter-Claimant, v. NOUGHT TECHNOLOGIES, LLC, Counter-Defendant.

No. 3:22-cv-00415-LRH-CSD

United States District Court, D. Nevada

July 7, 2023

ORDER

LARRY R. HICKS UNITED STATES DISTRICT JUDGE

Before the Court is Plaintiff/Counter-Defendant Nevada Select Royalty, Inc.'s (“Nevada Select”) motion to dismiss Defendant/Counter-Claimant/Counter-Defendant Jerritt Canyon Gold LLC's (“Jerritt”) second, third and fourth counterclaims. ECF No. 24. Jerritt opposed the motion (ECF No. 34) and Nevada Select replied to the opposition (ECF No. 36). Counter-Defendant/Counter-Claimant NouHgt Technologies, LLC (“NouHgt”) joined Nevada Select's motion to dismiss. ECF No. 28. The Court denies Jerritt's request for oral argument. For the reasons articulated below, the Court grants Nevada Select's motion in accordance with this Order.

I. BACKGROUND

This matter involves a contractual dispute between Nevada Select and Jerritt over royalty payments owed to Nevada Select for Jerritt's alleged use of specific licensed patents (the “Patents”). The Patents, amongst other things include a process by which mercury is removed from gas at a specific pH level. ECF No. 21 at 11, 12. The Patents were created by a party not named in this Action and, eventually, they were assigned to NouHgt on May 5, 2015. Id. On May 19, 2015, NouHgt granted a perpetual license of the Patents to Veris Gold Corp. (“Veris”) for use at the Jerritt Canyon Mine (the “Amended License Agreement”). ECF No. 24-1 at 11, 12. As part of the Amended License Agreement, Jerritt agreed to make per ton royalty payments to NouHgt for its use of the patented mercury removal process. Id. The Amended License Agreement states that any improvement to the Patents made by, for, or on behalf of Veris is the property of NouHgt. Id. at 14. The Amended License Agreement also contains a “Termination” provision which states the agreement may be terminated only by (1) a mutual agreement in writing from the parties, or (2) after a material default, if the non-defaulting party sends a written demand for cure and the defaulting party fails to cure within 30-days of that written demand. Id.

On August 16, 2019, NouHgt assigned the receipt of its royalty payments under the Amended License Agreement to Nevada Select as the royalty purchaser (the “Assignment”). Id. at 2, 3. Also on August 16, 2019, Jerritt signed an Acknowledgement & Consent of Assignment of Royalty Payments Agreement (the “Acknowledgement”), acknowledging and consenting to the Assignment and agreeing to pay subsequent royalties to Nevada Select for its use of the Patents. Id. at 17-21. In the Acknowledgement, Jerritt acknowledged that the Amended License Agreement, which includes the Patents, was “current and in full force and effect.” Id. at 18.

On January 7, 2022, Nevada Select received a letter on behalf of Jerritt in which Jerritt explained that it believed it no longer used the patented mercury removal process. ECF No. 1-1 at 7. Jerritt further informed Nevada Select that it was terminating the Amended License Agreement, the Assignment, and the Acknowledgment and that it was no longer required to make royalty payments to Nevada Select. Id. According to Jerritt, a hired consultant studied the patented mercury removal process and found that it inefficiently operated at the patented pH level. ECF No. 34 at 3. The consultant recommended that Jerritt adjust the system's pH parameters to a level outside the patented parameters to improve the process. Id. Jerritt followed the consultant's recommendation and adjusted the pH level. Id. After it adjusted the pH level, Jerritt claimed that it was no longer using the patented mercury removal process nor obligated to make royalty payments to Nevada Select. ECF No. 1-2 at 3-6.

On January 18, 2022, Nevada Select sent Jerritt a letter explaining that the Amended License Agreement did not provide a provision for termination unless the other party has materially defaulted. ECF No. 1-1 at 7. On August 21, 2022, Nevada Select filed a complaint against Jerritt for breach of contract and breach of the covenant of good faith and fair dealing in the Fourth Judicial District Court of the State of Nevada in and for the County of Elko. ECF No. 1- 1. On September 14, 2022, Jerritt answered the complaint, and denied that it owes or failed to pay royalties to Nevada Select. See generally, ECF No. 1-2. In its answer, Jerritt also asserted counterclaims for declaratory relief against Nevada Select and NouHgt in which it seeks: (1) a declaration of patent non-infringement, (2) a declaration that the Patents are invalid and unenforceable, (3) a declaration that the Patents are invalid for patent misuse, and (4) a declaration that no royalties are owed pursuant to the Amended License Agreement. Id. at 12-15.

On September 15, 2022, Jerritt removed the matter based on the asserted patent-counterclaims pursuant to 28 U.S.C. §§ 1295(a), 1331, 1338(a), 1367, 1441(a), 1446 and 1454. See generally, ECF No. 1. On November 7, 2022, Nevada Select and NouHgt answered Jerritt's counterclaims. ECF Nos. 21, 23. In its answer, NouHgt also asserted counterclaims against Jerritt.

ECF No. 21 at 17-20. On November 7, 2022, Nevada Select filed a motion to dismiss Jerritt's second, third, and fourth counterclaims based on Federal Rule of Civil Procedure 12(b)(6). ECF No. 24 at 2. On November 10, 2022, NouHgt joined in Nevada Select's motion. ECF No. 28 at 2. The motion is addressed below.

II. LEGAL STANDARD

A party may seek the dismissal of a complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a legally cognizable cause of action. See Fed.R.Civ.P. 12(b)(6) (stating that a party may file a motion to dismiss for “failure to state a claim upon which relief can be granted[.]”). To survive a motion to dismiss for failure to state a claim, a complaint must satisfy the notice pleading standard of Federal Rule 8(a)(2). See Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008). Under Rule 8(a)(2), a complaint 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). Rule 8(a)(2) does not require detailed factual allegations; however, a pleading that offers only “‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action'” is insufficient and fails to meet this broad pleading standard. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

To sufficiently allege a claim under Rule 8(a)(2), viewed within the context of a Rule 12(b)(6) motion to dismiss, a complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference, based on the court's judicial experience and common sense, that the defendant is liable for the alleged misconduct. See id. at 678-679 (stating that “[t]he plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.”) (quotations and citations omitted). Further, in reviewing a motion to dismiss, the court accepts the factual allegations in the complaint as true. Id. However, bare assertions in a complaint amounting “to nothing more than a formulaic recitation of the elements of a . . . claim . . . are not entitled to an assumption of truth.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quoting Iqbal, 556 U.S. at 698) (quotations omitted). The court discounts these allegations because “they do nothing more than state a legal conclusion-even if that conclusion is cast in the form of a factual allegation.” Id. “In sum, for a complaint to survive a motion to dismiss, the non-conclusory ‘factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Id.

III. DISCUSSION

“A motion to dismiss a counterclaim brought pursuant to Federal Rule of Civil Procedure 12(b)(6) is evaluated under the same standard as a motion to dismiss a plaintiff's complaint.” AirWair Int'l Ltd. v. Schultz, 84 F.Supp.3d 943, 949 (N.D. Cal. Mar. 23, 2015); see also Boon Rawd Trading Inter'l v. Paleewong Trading Co., 688 F.Supp.2d 940, 947 (N.D. Cal. Feb. 19, 2010). In terms of a motion to dismiss counterclaims, the counterclaims become the “operative complaint” and the court must “accept all factual allegations in the [counterclaims] as true” but not afford the same presumption of truth to those allegations in the actual complaint. Finato v. Keith Fink & Assocs., Case No. 2-16-CV-06713-RGK-AJW, 2017 WL 3075510, at *2 (C.D. Cal. May 17, 2017) (quotations and citations omitted). The Court evaluates Nevada Select's motion to dismiss counterclaims accordingly.

Jerritt alleges four counterclaims against Nevada Select and NouHgt all of which are grounded in the general allegation that Jerritt ceased using the patented mercury removal process after it adjusted the pH parameters of the system. ECF No....