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GenoSource, LLC v. Inguran, LLC

United States District Court, N.D. Iowa, Cedar Rapids Division

March 14, 2019

GENOSOURCE, LLC, Plaintiff/Counter-Defendant,
v.
INGURAN, LLC, d/b/a SEXING TECHNOLOGIES, Defendant/Counter-Plaintiff. INGURAN, LLC, d/b/a SEXING TECHNOLOGIES, Third-Party Plaintiff,
v.
HAWKEYE BREEDER SERVICES, INC., Third-Party Defendant.

          OPINION

          C.J. Williams, United States District Judge

         TABLE OF CONTENTS

         I. THE PARTIES .............................................................................. 2

         II. THE IOWA ACTION ..................................................................... 4

         III. THE TEXAS ACTION .................................................................... 10

         IV. APPLICABLE LAW ...................................................................... 13

         V. DISCUSSION ............................................................................... 15

         A. Parallel Proceedings ............................................................... 16

         1. Same Parties ................................................................ 16

         2. Same Issues ................................................................. 17

         B. Exceptions to the First-Filed Rule ............................................... 23

         VI. CONCLUSION ............................................................................. 28

         This matter is before the Court on GenoSource, LLC's (“GenoSource”) Motion for Temporary Restraining Order and Preliminary Injunction. (GenoSource v. Inguran, 18-cv-113-CJW-KEM, Doc. 114 (N.D. Iowa) (hereinafter “GenoSource”)). Inguran, LLC, d/b/a Sexing Technologies (“Sexing Technologies”) timely resisted the motion. (Doc. 120). For the following reasons, the Court finds injunctive relief appropriate.

         GenoSource seeks “a temporary restraining order and subsequent preliminary injunction barring [Sexing Technologies] from taking any further action to prosecute a duplicative and overlapping lawsuit” that Sexing Technologies filed in the Southern District of Texas (“Texas Action”) against two of GenoSource's members. (Doc. 114, at 1). In support, GenoSource asserts that because the issues and claims in the Texas Action allegedly “overlap with and duplicate issues asserted in [the instant case] against GenoSource based on the same conduct of [the same individuals], the first-filed rule and general preference to avoid duplicative federal actions justifies an order enjoining Sexing Technologies from taking any further action to prosecute the Texas federal action.” (Id.).

         On February 26, 2019, the Court entered an Order providing as follows:

For reasons that will be enumerated in a separate Opinion, Inguran, LLC, doing business as Sexing Technologies, is enjoined from taking any further action in, and from taking any action to prosecute, the action filed in the Southern District of Texas, bearing case No. 4:19-cv-00574, and which is styled Inguran, LLC dba Sexing Technologies v. Mark Butz, Tim Rauen, pending further order of this Court.
GenoSource, LLC is directed to transmit this Order to the Southern District of Texas and to ensure that the presiding judge receives actual notice of this Order.

(Doc. 122 (emphasis in original)). This Opinion is the “separate Opinion” to which the Court's February 26, 2019 Order referred, and this Opinion provides the basis for the Court's prior ruling.[1]

         I. THE PARTIES[2]

         Plaintiff in the instant action (“the Iowa Action”), GenoSource, asserts that it “owns a large herd of Holstein dairy cattle, and it generates its revenue primarily from selling milk from its dairy cows, with additional revenue coming from . . . the sale of genetic materials and/or genetically superior dairy cattle.” (Doc. 1, at 1-2).[3] Defendant in the instant action, Sexing Technologies, describes itself as follows:

[Sexing Technologies] is a worldwide leader in sexed semen and embryo production for cattle. [Sexing Technologies] owns technology (and the intellectual property rights associated with that technology) that permits the separation of X (female) and Y (male) chromosomes from bovine spermatozoa.[4] [Sexing Technologies'] technology enables the sorting of semen and embryo production for enhanced cattle breeding. [Sexing Technologies] has developed proprietary technology enabling the sorting of sperm that helps develop better herds-cows that are healthier and produce more milk. [Sexing Technologies] also uses artificial insemination . . . or natural process to fertilize embryos in “donor” cattle, flush the embryos from the donors, and transfer the embryos to “recipients” that act as surrogates to carry the pregnancy. [Sexing Technologies] also markets and sells certain types of bull semen obtained from its own herd or from the bulls of other parties.[5]

(Doc. 113, at 2-3 (footnotes added)).

         Mark Butz, of Butz-Hill Holsteins, and Tim Rauen, of TJR Genetics, are cattle breeders. (Inguran v. Butz, No. 19-cv-574, Doc. 1, at 3 (S.D. Tex.) (hereinafter “Inguran”); see also GenoSource, Doc. 113, at 25, 27). At some point before September 2014, Mr. Butz and Mr. Rauen, in their capacities as principals of Butz-Hill Holsteins and TJR Genetics, respectively, along with other cattle breeders, entered into contractual agreements with Sexing Technologies to “join forces to combine their higher genetic cattle lineage to produce a higher level lineage of cattle through a joint venture [p]rogram.” (GenoSource, Doc. 83, at 26 (internal quotation marks omitted); see also Doc. 61-2, at 63-76 (contract signed by Mark Butz, as agent of Butz-Hill Holsteins, and ST)). This joint venture became known as the Nature's Finest Joint Venture (“Joint Venture”), and the series of contracts that the various cattle breeders signed became known as the “JV Agreement.” (Doc. 113, at 26). Through the arrangement, certain cattle belonging to GenoSource, Mr. Butz, and/or Mr. Rauen came into Sexing Technologies' possession for purposes of, inter alia, extracting genetic material and breeding those animals.

         Mr. Butz and Mr. Rauen were intimately involved with Sexing Technologies' operations, both as corporate signatories to the Joint Venture, and by virtue of having been hired as consultants “with Natures Finest Breeders and [Sexing Technologies].” (Id., at 29). Sexing Technologies asserts that Mr. Butz and Mr. Rauen “were hired for the primary purpose of establishing the [Joint Venture], managing the breeding protocols with the [Joint Venture], and marketing the high end genetic animals, cell lines, sperm and embryo[ ] products in accordance with the terms of the Joint Venture Agreements.” (Id.). Sexing Technologies further asserts that each of the written consultant agreements contained a two-year non-competition provision that prohibited Mr. Butz and Mr. Rauen “from engaging directly or indirectly in activities or business transaction[s] which compete with the operations of the [Joint Venture], the Breeders or [Sexing Technologies], or results in a conflict of interest . . ..” (Id., at 29-30).

         All of those involved seem to agree that confidentiality is of paramount importance for the success of the Joint Venture and to Sexing Technologies' business. Through their involvement with Sexing Technologies and the Joint Venture, Mr. Butz and Mr. Rauen became privy to a great deal of allegedly confidential information and directly participated in making various decisions, such as deciding which bulls' semen should be sold to the public instead of maintained for use only by members of the Joint Venture. (See, e.g., Doc. 113, at 46). These decisions, the parties have informed the Court, are integral to the success of Sexing Technologies and the Joint Venture.

         II. THE IOWA ACTION

         GenoSource filed its single-count complaint against Sexing Technologies in the Northern District of Iowa on October 25, 2018. (Doc. 1). On November 5, 2018, GenoSource filed a motion for temporary restraining order and preliminary injunction, in which GenoSource sought injunctive relief barring ST

from taking any further action to market or sell Holstein cattle owned by GenoSource and/or genetic material from those cattle and from taking any actions that could lead to injury or risk to the health of GenoSource's animals, and to enter a preliminary mandatory injunction requiring [Sexing Technologies] to quarantine GenoSource's animals, release them to GenoSource, and provide any paperwork necessary to permit the transport of those animals from ST's facilities to GenoSource's facility in Iowa.

(Doc. 11, at 1). On November 8, 2018, Sexing Technologies filed its resistance to GenoSource's motion for injunctive relief. (Doc. 23). That same day, Sexing Technologies filed a Motion to Dismiss or Stay Litigation and Compel Arbitration, arguing that GenoSource was a party to the Joint Venture Agreement, which contained an arbitration clause that Sexing Technologies sought to enforce. (See Docs. 24, 27). Sexing Technologies urged the Court to decide the motion to compel arbitration before considering GenoSource's motion for injunctive relief, but the Court declined to do so. In sum, the issues presented in the motion for injunctive relief and in the motion to dismiss were complex, both legally and factually.

         On November 9, 2018, the Court held a hearing lasting approximately two hours on the two pending motions. (Doc. 29). Also on November 9, 2018, the Court granted GenoSource's motion for a temporary restraining order and imposed a $50, 000.00 bond requirement in a summary Order. (Doc. 28). The bond was posted several hours later, at which point the Temporary Restraining Order went into effect. (See Doc. 28; unnumbered docket annotation dated November 9, 2018, reading “CASH BOND in the amount of $50, 000 posted by TJR Genetics pursuant to [Temporary Restraining Order].”). On November 15, 2018, the Court held a hearing on GenoSource's motion for expedited discovery to permit GenoSource to better support its application for injunctive relief. (See Doc. 40). On November 16, 2018, the Court issued its Opinion regarding the Temporary Restraining Order, and the Court issued an Order permitting GenoSource to engage in limited expedited discovery. (Docs. 39, 41).

         The Court permitted the parties to file supplemental briefs on plaintiff's motion for a preliminary injunction (Docs. 47, 48, 64), and on November 30, 2018, the Court held a full day hearing on the motion for preliminary injunctive relief, the motion to compel arbitration, and a pending motion for discovery for alleged violations of the Temporary Restraining Order. During the hearing, the parties introduced a great deal of evidence and offered oral argument. (See Doc. 68). Before the November 30, 2018 ...


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