Primo Broodstock, Inc. v. Am. Mariculture, Inc., Case No: 2:17-cv-9-FtM-29CM

Decision Date27 April 2017
Docket NumberCase No: 2:17-cv-9-FtM-29CM
PartiesPRIMO BROODSTOCK, INC., a Texas corporation, Plaintiff, v. AMERICAN MARICULTURE, INC., a Florida corporation, AMERICAN PENAEID, INC., a Florida corporation, and ROBIN PEARL. Defendants.
CourtUnited States District Courts. 11th Circuit. United States District Court of Middle District of Florida

PRIMO BROODSTOCK, INC., a Texas corporation, Plaintiff,
v.
AMERICAN MARICULTURE, INC., a Florida corporation,
AMERICAN PENAEID, INC., a Florida corporation, and ROBIN PEARL.
Defendants.

Case No: 2:17-cv-9-FtM-29CM

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA FORT MYERS DIVISION

April 27, 2017


OPINION AND ORDER

This matter comes before the Court on Plaintiff's Alternative Motion for Preliminary Injunction (Doc. #21) filed on January 26, 2017 and Supplement to the Motion for Preliminary Injunction (Doc. #68) filed on February 28, 2017. Defendants filed a Response in Opposition (Doc. #39) on February 7, 2017 and a Supplement to the Response (Doc. #64) on February 21, 2017. The Court conducted a hearing on the Motion on February 10, 2017. For the reasons set forth below, the Court grants in part and denies in part Plaintiff's request for injunctive relief.

I.

Former United States Supreme Court Justice Byron White - quoting a "piscatorially favored" Louisiana district court - once described shrimp as "a gustatory delight." Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 518 (1972) (quoting Laitram Corp. v. Deepsouth Packing Co., 301 F. Supp. 1037, 1040 (E.D. La. 1969)).

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Benjamin Buford Blue ("Bubba"), of "Forrest Gump" fame, memorably called shrimp "the fruit of the sea."1 To assist Mother Nature's efforts and produce enough of this "fruit" to satisfy society's cravings for the "gustatory delight," people around the world have turned to shrimp farming.2 This case involves a dispute between American business partners-turned-competitors in that industry.

Primo Broodstock, Inc. (Plaintiff or Primo) is a Texas corporation engaged in the business of studying shrimp genetics and breeding and selling "highly disease-resistant" shrimp from the Ecuadorian litopenaeus vannamei strain. (Doc. #20, ¶¶ 10-11.) Defendant Robin Pearl (Mr. Pearl) has an extensive background in shrimp farming and is the co-founder of defendants American Mariculture, Inc. (AMI) and American Penaeid, Inc. (API). (Doc. #41, ¶¶ 2, 4.) AMI is a supplier of fresh and frozen shrimp, which is produced at AMI's large shrimp farming facility (the AMI Facility) located in St. James City, Florida. (Id. ¶ 5.) API is AMI's wholly-owned subsidiary, formed in 2016. (Doc. #40, ¶ 40.)

A. The Mutual Nondisclosure Agreement

The parties' relationship began in December 2014, when AMI hired Neil Gervais (N. Gervais) - at the time, Primo's lead scientist - to serve as a paid consultant to help API improve the viability of its shrimp farming operations. (Doc. #41, ¶ 18, 31.)

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On December 11, 2014, Plaintiff and AMI entered into a Mutual Nondisclosure Agreement (the NDA) (Doc. #20-1) for the purpose of "explor[ing] a business possibility in connection with which each may disclose its Confidential Information to the other," and under which each party agreed not to "use" or "disclose" the other's "Confidential Information." It did not take long for this business possibility to become a reality.

B. The Grow-Out Agreement

On January 1, 2015, Plaintiff and AMI formalized a new written agreement (the Grow-Out Agreement),3 the "primary goal" of which was "to use a defined portion of AMI grow-out capacity to produce broodstock for Primo for sale to third parties." (Doc. #20-2.) Specifically, AMI agreed to grow young, post-larval shrimp - supplied by Primo - to large adult size at the AMI Facility in Florida.4 AMI would then either sell the live adult shrimp back to Primo at fixed prices based on the animal's weight, or "harvest" (kill) the animals to sell as fresh or frozen dead shrimp, with the proceeds belonging exclusively to AMI. (Id. ¶¶ 1, 3, 4, 9.) The Grow-Out Agreement states that Primo shrimp are considered Plaintiff's intellectual property and prohibits AMI from selling or transferring any live Primo Shrimp to others without Plaintiff's permission. (Id. ¶¶ 7, 8.)

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C. The State Court Lawsuit and Resultant "Term Sheet"

The business relationship quickly began to deteriorate. Among other perceived breaches, Defendants claimed Plaintiff was not repurchasing the live adult shrimp, as required by the Grow-Out Agreement. This, in turn, was causing Defendants to incur significant costs to maintain the large animals, which already exceeded the size at which Plaintiff was supposed to buy them back. In January 2016, Defendants threatened to harvest all live Primo shrimp of a certain size that Plaintiff did not buy back within ten days. Plaintiff filed suit in state court seeking a temporary restraining order to prevent this shrimp-ocide. (Doc. #20, ¶ 44.)

Ultimately, the parties resolved the dispute out of court. On January 28, 2016, Mr. Pearl and Randall Aungst (Mr. Aungst), Primo's Vice President, signed a one-page handwritten "Term Sheet" (Doc. #20-3), giving Primo until April 30, 2016 to remove all of its live shrimp from the AMI Facility.5 Ultimately, Plaintiff left about 46,000 live adult shrimp at the Facility, which it could not afford to repurchase, as well as 650,000 shrimp that were too young to buy back. (Doc. 20, ¶¶ 51, 52.) The Term Sheet does not state what would happen to any live animals not removed from the Facility by April 30, 2016. The Amended Complaint avers, however, that Mr. Aungst "obtained unqualified verbal assurances from [Mr.] Pearl prior to executing the Term Sheet that, consistent with

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Sections 3 and 7 of the Grow-Out Agreement, AMI would harvest (i.e., kill) all live shrimp left behind on April 30, 2016." (Id. ¶ 50.) Mr. Pearl denies he ever made any such statement.

D. Defendants' Disposition of Primo's Animals

In late July 2016, Plaintiff learned that Mr. Pearl and the newly-formed API were seemingly attempting to attract buyer interest, particularly in China, for the shrimp Primo had left at the AMI Facility. (Id. ¶ 59.) At the time, Primo animals were available for purchase in China only through Primo's exclusive distributor, Haimao Group. (Id. ¶ 37.)

Plaintiff's attorney sent AMI a cease and desist letter (Doc. #20-5) on August 30, 2016, which stated that any sale of Primo's shrimp would constitute a breach of the NDA and the Grow-Out Agreement. The September 16, 2016 response of AMI's attorney (Doc. #20-6) disputed this contention and asserted that Plaintiff possessed no continued rights in the live shrimp left at the AMI Facility past April 30, 2016. The letter asserted further that AMI was entitled to sell or otherwise dispose of the animals as it pleased.

E. This Federal Lawsuit

1) The First Motion for TRO

Plaintiff filed suit in federal court on January 9, 2017 (Doc. #1) and immediately moved for an ex parte temporary restraining

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order (Motion for TRO) (Doc. #2).6 The Motion for TRO sought to enjoin Defendants for fourteen days "from shipping, selling or otherwise removing or relocating any shrimp broodstock in their possession or under their control, whether directly or indirectly, pending determination of whether such broodstock [were] descended or derived from Primo's broodstock." (Id. p. 36.) Plaintiff contended that distribution of live Primo Shrimp outside of Plaintiff's control would permit others to study and then replicate, through breeding, the animals' genetic superiority, destroying the "decades of painstaking selection, testing, cross-breeding, and trial and error [that was needed for Plaintiff] to finally achieve what is recognized as the heartiest and most disease-resistant shrimp ever created." (Id. pp. 2-3.)

The Court denied the Motion for TRO (Doc. #9) primarily on the ground that there was no "true emergency" justifying a grant of ex parte relief. To the contrary, the evidentiary materials showed that the shrimp whose distribution Plaintiff sought to enjoin "ha[d] been available for distribution since at least as early as July 2016" and had seemingly already been sent to China - the geographic location of primary concern to Plaintiff - the previous month. (Id. p. 5.) In other words, "the genie [was] likely already out of the bottle." (Id.) Moreover, there was

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nothing indicating that future shipments had been scheduled, let alone were imminent. (Id.)

2) The Amended Complaint and Renewed Motion for TRO

On January 26, 2017, Plaintiff filed a nine-count Amended Complaint (Doc. #20), as well as a Renewed Motion seeking a temporary restraining order (Renewed Motion for TRO) or, alternatively, a preliminary injunction (Alternative Motion for Preliminary Injunction) (both Doc. #21).7 The Renewed Motion for TRO alleged that, absent an injunction, Defendants would be able to "effectively eliminate Primo from the Chinese market." (Id. at 52.) This claim was based on allegations regarding Defendants' wide-scale breeding operations in China, as well as Defendants' use of the "Primo" trade name in connection with the animals they send to China for further breeding and for sale to farmers.8 (Id. ¶¶ 50-59.) The Renewed Motion for TRO requested an ex parte order enjoining Defendants from shipping any shrimp and from "advertising or otherwise marketing or making any reference to any products or services that in any way, directly or indirectly,

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relate[d] to the manufacturing, marketing, distributing, shipping, offering for sale, selling, or conducting of research, testing, or analysis of the viability of Primo shrimp." (Doc. #21-7, p. 4.)

The Court again found insufficient evidentiary grounds to grant the ex parte relief sought. Specifically, there was "no plausible indication that additional shipments [of any shrimp would] occur before Defendants ha[d] the opportunity to be heard on th[e] matter." (Doc. #25, pp. 5-6.) The fact that, after receiving Defendants' attorney's response to the cease and desist letter, Primo delayed taking legal action for months also mitigated against an award of emergency ex parte relief. (Id. p. 6.) Nonetheless, appreciating the "significant legal rights, and perhaps billions of dollars, at stake," the Court expedited Defendants' response to, and a...

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