33 F. Supp. 3d 1224
D. Colo.2014Background
- Greenway Nutrients, a Colorado corporation, sued multiple defendants alleging theft of trade secrets, breach of nondisclosure and fulfillment contracts, trademark infringement, RICO, fraud, unjust enrichment, and related Colorado consumer/unfair practices claims arising from distribution of two products marketed as “No Powdery Mildew” and “No Spider Mites.”
- Greenway previously contracted with Ecowin (Korea) to distribute product and with Fulfillment Solutions (and related entities) for bottling/shipping; Greenway alleges Defendants used confidential information to cut Greenway off from Ecowin and to sell the products themselves (often via other entities).
- Several defendants moved to dismiss for shotgun pleading, lack of personal jurisdiction, and failure to state claims; the Magistrate recommended dismissal of most claims and many defendants, leaving only an unjust enrichment claim as plausibly pled but suggesting the court decline supplemental jurisdiction.
- Greenway objected only to seek leave to amend; it filed a proposed First Amended Complaint narrowing defendants and asserting breach of contract, unjust enrichment, and Lanham Act claims against a subset of defendants.
- The District Court adopted the Magistrate Judge’s Recommendation, granted the motions to dismiss, but granted Greenway leave to amend in part: the proposed amended pleading was not accepted and Greenway was ordered to refile a clarified Amended Complaint within 14 days or face dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of RICO (mail/wire fraud predicates) | Greenway alleges a scheme to obtain trade secrets and used mails/wires to further it. | Defendants say no predicate mail or wire fraud acts are adequately alleged; no pattern. | RICO dismissed: complaint fails to plead mail or wire fraud with required particularity or a pattern. |
| Personal jurisdiction over out-of-state defendants (e.g., Selakovic, Vegalab, Grower Trust, Hoops) | Greenway relied on RICO (nationwide reach) and, as to Selakovic, attached an NDA and alleged purchases directed to Colorado. | Defendants contend insufficient minimum contacts; web activity and remote sales do not establish purposeful direction to Colorado. | Jurisdiction found only over Steve Blackburn, Fulfillment, and Supreme Growers; Selakovic shown to have sufficient contacts in amended allegations to proceed; other out-of-state defendants dismissed for lack of jurisdiction. |
| Pleading standards / Shotgun pleading for Lanham Act, state unfair competition, and consumer protection claims | Greenway contends facts suffice and amendment will cure defects; claims are supportable. | Defendants assert the complaint is a shotgun pleading that hides which facts support which claims, violating Rules 8/10/9. | Court agrees many counts are shotgun-pled and dismissed; but the proposed amended claims for trademark and false designation were deemed salvageable (allowed to be repled more clearly). |
| Leave to amend after scheduling deadline | Greenway: delay excused by pending motions to dismiss and plaintiff acted promptly after the Recommendation; amendment will not prejudice defendants. | Defendants: plaintiff had notice and failed to amend by deadline; amendment prejudicial and futile; alleges forged contract. | Court finds plaintiff’s delay weak but no undue prejudice shown; grants leave to amend in part but rejects the offered amended complaint and directs re-filing with clarified contract exhibits and pleading. |
Key Cases Cited
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (explains purposeful availment and contract-related minimum contacts)
- World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (minimum contacts and foreseeability test for jurisdiction)
- H.J., Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (definition of a RICO "pattern" requires relationship and continuity)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility standard for pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (Twombly plausibility standard for complaints)
- Minter v. Prime Equip. Co., 451 F.3d 1196 (good cause under Rule 16(b) for late amendment)
- Frank v. U.S. West, Inc., 3 F.3d 1357 (standards for denial of leave to amend)
- Cory v. Aztec Steel Bldg., Inc., 468 F.3d 1226 (RICO nationwide service analysis)
- Shrader v. Biddinger, 633 F.3d 1235 (internet contacts and purposeful direction for jurisdiction)
- TH Agric. & Nutrition, LLC v. Ace Eur. Group Ltd., 488 F.3d 1282 (substantial connection test for contract-based jurisdiction)