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Walkwell International, Inc. v. DJO Global, Inc.

United States District Court, D. Idaho

November 15, 2017

WALKWELL INTERNATIONAL, INC., an Idaho corporation Plaintiff,
v.
DJO GLOBAL, INC., a Delaware corporation, and DOES 1-10, Defendants.

          MEMORANDUM DECISION AND ORDER

          Edward J. Lodge United States District Judge

         INTRODUCTION

         Pending before the Court is Defendants' Motion to Dismiss Idaho State Law Claims and to Compel Arbitration. (Dkt. 9.) The parties filed responsive briefing and the motion is now ripe. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, the Motion shall be decided on the record before the Court without oral argument.

         FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiff Walkwell International, Inc. (“Walkwell”) is an Idaho corporation that designs medical support devices. (Dkt. 1-4, Ex. D, Complaint, ¶ 1.) Defendant DJO Global, Inc. (“DJO”) is a Delaware corporation with its principal place of business in Vista, California. Id. at ¶ 2. DJO is the largest nonsurgical orthopedic rehabilitation device company in the United States. Id. at ¶ 12.

         On February 14, 1997, Walkwell and Johnson & Johnson Professional, Inc. (“J&J”) entered into a License Agreement. Id. at ¶ 4. Walkwell owned patents and a trademark relating to the “Dorsiwedge Night Splint” (the “splint”). Id. at ¶ 4-10. Pursuant to the Licensing Agreement, Walkwell licensed the splint patents and trademark for use by J&J. Id. at ¶ 4-10. In exchange for the exclusive license to produce and sell the splint, J&J agreed to pay certain royalties to Walkwell. J&J later transferred its interests, rights, and responsibilities under the License Agreement to DJO, who is the contractual successor to J&J with respect to the License Agreement. Id. at ¶ 11.

         Pursuant to the License Agreement, J&J and then DJO manufactured and sold the splint, paying Walkwell royalties. Id. at ¶ 11-14. However, in 2015, Walkwell alleges that DJO violated the License Agreement when it stopped making royalty payments, but continued to manufacture and sell the split. Id. at ¶ 15.

         On May 11, 2017, as a result of these alleged violations, Walkwell filed suit against DJO in the Fourth Judicial District of Idaho. (Dkt. 1-4, Ex. D, Complaint.) In its Complaint, Walkwell alleges trademark infringement under the Lanham Act and common law, patent infringement, and violations of the Idaho Consumer Protection Act (ICPA). (Dkt. 1-4, Ex. D, Complaint.) On June 27, 2017, DJO filed a Notice of Removal to this Court pursuant to 28 U.S.C. §§ 1441 and 1446. (Dkt. 1.) DJO removed the case based on this Court having federal question over the Lanham Act and patent claims and supplemental jurisdiction over the remaining claims. (Dkt. 1.)

         On July 28, 2017, DJO filed its Motion to Dismiss Idaho State Law Claims and to Compel Arbitration. (Dkt. 9.) On August 16, 2017, Walkwell filed an Objection and Cross-Motion to Remand. (Dkt. 12.) The Motion is ripe for the Court's consideration and the Court finds as follows.

         STANDARD OF LAW

         A motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a party's claim for relief. When considering such a motion, the Court's inquiry is whether the allegations in a pleading are sufficient under applicable pleading standards. Federal Rule of Civil Procedure 8(a) sets forth minimum pleading rules, requiring only a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2).

         In general, a motion to dismiss will only be granted if the complaint fails to allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a ‘probability requirement, ' but asks for more than a sheer possibility that a defendant has acted lawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(citations omitted).

         Apart from factual insufficiency, a complaint is also subject to dismissal under Rule 12(b)(6) where it lacks a cognizable legal theory, Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990), or where the allegations on their face “show that relief is barred for some legal reason.” Jones v. Bock, 549 U.S. 199, 215 (2007).

         Although the Court “must take all of the factual allegations in the complaint as true, ” it is “not bound to accept as true a legal conclusion couched as a factual allegations.” Twombly, 550 U.S. at 555. Therefore, “conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim.” Caviness v. Horizon Comm. Learning Cent., Inc., 590 F.3d 806, 811-12 (9th Cir. 2010)(citation omitted).

         When ruling on a motion to dismiss, the court must normally convert a Rule 12(b)(6) motion into one for summary judgment under Rule 56 if the court considers evidence outside of the pleadings. United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). However, a court may consider attachments to the complaint and documents referred to in the complaint, where the authenticity of such documents are not in question. Cooper v. Pickett, 137 F.3d 616, 622-23 (9th Cir. 1997) (citing Branch v. Tunnel, 14 F.3d 449, 453-54 (9th Cir. 1994)).

         DISCUSSION

         Walkwell alleges DJO violated the Lanham Act and common law by infringing on its trademark, committed patent infringement, and violated the Idaho Consumer Protection Act (ICPA). (Dkt. 1.) DJO contends that Walkwell should be compelled to arbitrate these claims as the parties agreed in the Licensing Agreement. (Dkt. 9, 14.) DJO further contends that Walkwell's state law claims, brought under Idaho law, must be dismissed because the Licensing Agreement contains a choice of law provision in which the parties agreed that their relationship would be controlled by the law of New Jersey. (Dkt. 9, 14.)

         In response to DJO's Motion, Walkwell argues that the Licensing Agreement's arbitration and choice of law provisions are unconscionable. Walkwell further ...


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