United States District Court, D. Idaho
R. POWER BIOFUELS LLC, a Delaware limited liability company, on its own behalf, and derivatively for NORTH STAR BIOFUELS LLC, a Delaware limited liability company, Plaintiff,
AGRI BEEF CO., an Idaho corporation; ROBERT REBHOLTZ, an individual and Member Representative of NSB; TODD LINDSEY, an individual and Member Representative of NSB; and KIM STUART, an individual and Member Representative of NSB, Defendants.
MEMORANDUM DECISION AND ORDER
B. LYNN WINMILL, District Judge.
Plaintiff R.Power Biofuels LLC brings this action individually and derivatively as a member of North Star Biofuels, LLC, a limited liability company. North Star's members include RPower and AB Bioenergy, LLC. The defendants are Agri Beef Co., an Idaho corporation, and three of North Star's Member Representatives - Robert Rebholtz, Todd Lindsey, and Kim Stuart (collectively, "Member Representatives") - all of whom are Idaho citizens. RPower alleges derivative claims on behalf of North Star for the breach of the duty of good faith and fair dealing (Count One), breach of the duty of care and loyalty (Count Two), duress and economic coercion (Count Four), unjust enrichment (Count Five), constructive trust (Count Six), unconscionability (Count Seven), and injunctive relief (Count Eight), as well as a direct claim against the Member Representatives for breach of the duty of good faith and fair dealing and duty of care (Count Three). Subject-matter jurisdiction is based on diversity.
The Member Representatives argue that complete diversity does not exist. They have therefore moved to dismiss the Complaint. Defendant Agri Beef joined in the motion to dismiss. For the reasons set forth below the Court will dismiss RPower's derivative claims, but will allow RPower's direct claim against the Member Representatives to survive.
RPower is the creation of Michael Doyle, a petroleum engineer and the "creative genius" behind the technology, and James Levine, a professional engineer and self-proclaimed innovator. Levine Decl. ¶ 2, Dkt. 8. In 2006, Doyle approached Levine with the idea for this new technology. Id. Doyle and Levine then formed Sauber Technologies LLC, a California limited liability company, to develop, test, and prove the efficacy of the technology. Id. ¶ 3. Doyle submitted a patent application for the technology, identifying Sauber as the owner. Id. ¶ 5. The application remains pending. Id.
In 2009, after spending three years testing the technology and submitting a patent application, Doyle and Levine formed RPower as a Delaware limited liability company. Id. ¶ 6. Sauber gave RPower an exclusive license to the technology and together they continued to develop it for the next two years. Id. ¶ 8. In July 2011, seeking to capitalize on their "know how" and the emerging demand for biodiesel fuel, RPower successfully started a 2, 000 gallon-per-day commercial production facility in Redwood City, California. The apparent success of this facility led RPower to begin soliciting and accepting angel investor funding with the goal of developing the business for a broader, ideally worldwide, platform. Id. ¶ 10.
At this point, RPower and Defendant Agri Beef's paths converge. Id. ¶ 11. Agri Beef's goal of finding "environmentally positive profit activities" for its affiliate, AB Bioenergy, LLC, to pursue coincided with RPower's goal of finding investors to develop a global biodiesel business using the technology it had developed.
Agri Beef's affiliate, AB Bio, and RPower formed North Star to pursue this business opportunity. Id. ¶ 12/ At the outset, RPower and AB Bio were the sole members of North Star. As the sole members, each held a 50 percent membership and management interest in the company. Operating Agreement, §§ 16, 17. The Operating Agreement further provided that both RPower and AB Bio were to appoint three Members' Representatives to "do all things necessary or convenient to carry out the business of North Star." Id. § 18.b. RPower and Sauber also agreed to license to North Star their "Existing Technology, " which consisted of the patent application submitted by Sauber, and trade secrets relating to the use of that technology. Id., § 2.8.1.
As part of deal, Agri Beef agreed to loan to North Star the $8 million estimated cost for construction and startup of the plant. Levine ¶ 12; Loan Agreement. The loan collateral included, among other things, the Existing Technology and RPower's ownership interest in North Star. Loan Agreement, pp. 8-9. RPower and Sauber guaranteed the loan. Id., p. 16.
So far the project has not gone quite as planned. During the first year and a half of the project, North Star drew down the entire $8 million under the Loan Agreement, had the Loan Agreement maturity extended twice, and issued over $4 million in capital calls. Rebholtz Decl. ¶¶ 22-30. In July 2013, according to Agri Beef, North Star defaulted under the Loan Agreement.
Alleging that North Star had defaulted on the loan, Agri Beef sued RPower and Sauber as the guarantors of the loan. AgriBeef Co. v. R. Power Biofuels, LLC, et al, Case No. 1:14-cv-00298-BLW (" Agri Beef action"). On August 29, 2014, Agri Beef notified North Star that it intended to auction collateral on October 7, 2014. RPower responded by filing a counterclaim in the Agri Beef action, id. at Dkt. 11, and filing a motion for a temporary restraining order, id. at Dkt. 17. RPower also filed this action against Agri Beef and the Member Representatives. It filed a separate motion for a TRO in this action as well.
The Member Representatives now move to dismiss RPower's claims in this action. AgriBeef has joined this motion. Defendants argue that complete diversity does not exist because RPower is a necessary party, and its joinder would destroy ...