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Primo Broodstock, Inc. v. American Mariculture, Inc.

United States District Court, M.D. Florida, Fort Myers Division

April 27, 2017

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

          OPINION AND ORDER

          JOHN E. STEELE, Judge

         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)).

         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.)

         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.)

         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 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 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, crossbreeding, 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 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, 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 hearing on, Plaintiff's pending Alternative Motion for Preliminary Injunction. (Id. pp. 5, 7.)

         3) Request For Preliminary Injunction

         Primo now seeks an order enjoining Defendants, and those acting in concert, from:

1. manufacturing, marketing, distributing, shipping, offering for sale, or conducting of research, testing, or analysis of the viability[, ] of Primo Shrimp;
2. soliciting (or assisting others in such solicitation) of shrimp breeders, shrimp distributors, shrimp farmers, or consultants in the shrimp industry that in any way, directly or indirectly, relates to the manufacturing, marketing, distributing, shipping, offering for sale, selling, or conducting of research, testing, or analysis of the viability[, ] of Primo Shrimp;
3. disclosing Plaintiff's confidential, proprietary or trade secret information to others, including but not limited to any shrimp breeders, shrimp distributors, shrimp farmers, or consultants in the shrimp industry;
4. advertising or otherwise marketing or making any reference to any products or services that in any way, directly or indirectly, relates to the manufacturing, marketing, distributing, shipping, offering for sale, selling, or conducting of research, testing, or analysis of the viability[, ] of Primo Shrimp, including, inter alia, on Defendants' websites.

(Doc. #68-3.)

         Plaintiff argues that it is entitled to a preliminary injunction because Defendants continue to: (i) breach the restrictive covenants contained in the NDA and in the Grow-Out Agreement; (ii) convert Primo's property; (iii) misappropriate the “trade secrets” embodied in the superior genetics of Primo's twenty-four “unique” families of shrimp; and (iv) and engage in unfair competition and violate the Lanham Act and the Florida Unfair and Deceptive Trade Practices Act by continuing to “mislead the world markets into believing that [Defendants], and they alone, have the ‘real Primo'” - all of which will cause Plaintiff to suffer continued, irreparable harm.

         Defendants oppose a preliminary injunction, except as to the use of the “Primo” name. Regarding Plaintiff's claim of irreparable harm absent an injunction, Defendants note that any Primo shrimp left at the AMI Facility have since died, and point out that Primo has remained in business in the year since Defendants began breeding and selling the shrimp Primo did not repurchase by April 30, 2016. (Doc. #64, p. 16.) Defendants assert that, in contrast, issuance of the broad injunction Plaintiff seeks - namely, an order enjoining Defendants from breeding and selling its animals - will result in “a loss of employment for [Defendants'] 25 current employees [and] a complete loss of investment for AMI's investors.”[9] (Doc. #39, p. 24.) Defendants contend further that “the American public will lose the largest current supplier of U.S.-grown, all natural, fresh shrimp, which will reduce the ability of the United States to become self-sufficient in its domestic seafood supply.”[10] (Id.) To the extent the Court does grant the injunction Plaintiff seeks, Defendants request a bond of at least $10 million to cover the damages they expect to incur through the end of trial.

         II.

         “[A] preliminary injunction in advance of trial is an extraordinary remedy” whose purpose “is to preserve the positions of the parties as best [the court can] until a trial on the merits may be held.” Bloedorn v. Grube, 631 F.3d 1218, 1229 (11th Cir. 2011) (citations omitted). Primo seeks “a ‘traditional' injunction, which may be issued as either an interim or permanent remedy for certain breaches of common law, statutory, or constitutional rights.” Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1097 (11th Cir. 2004) (footnote omitted). A traditional injunction is warranted where the movant succeeds in establishing four things: (1) that it has a substantial likelihood of success on the merits of one or more of its claims; (2) that it will suffer irreparable injury, absent an injunction; (3) that the harm posed to the party opposing the injunction does not outweigh the movant's threatened injury; and (4) that the injunctive relief sought is not adverse to the public interest. Id.; Siegel v. Lepore, 234 F.3d 1163, 1176 (11th Cir. 2000) (en banc) (per curiam). The “failure to meet even one [of these four prerequisites] dooms” a request for injunctive relief. Wreal, LLC v. Amazon.com, Inc., 840 F.3d 1244, 1248 (11th Cir. 2016). Where an injunction is deemed warranted, the court has considerable discretion in shaping the particular relief afforded. Pac. & S. Co. v. Duncan, 792 F.2d 1013, 1014-15 (11th Cir. 1986) (“Framing an injunction appropriate to the facts of a particular case is a matter peculiarly within the discretion of the district judge.” (quoting Gore v. Turner, 563 F.2d 159, 165 (5th Cir. 1977))).

         III.

         The Court now turns to whether Plaintiff has shown entitlement to injunctive relief for each of the claims for which such relief has been requested, [11] and if so, the scope of relief that is appropriate under the facts of the case.

         A. The Breach of Contract Claim (Count I)

         Count I of the Amended Complaint asserts a breach of contract claim against AMI, for which Plaintiff requests an award of money damages, including punitive damages. Count I also seeks an order (1) enjoining AMI “from further breaches of the NDA . . . [and] the Grow-Out Agreement, ” and (2) requiring AMI “to kill all Primo shrimp in its possession for sale as dead fresh or frozen shrimp product into the market.” (Doc. #20, ¶¶ 93-97.) According to Plaintiff, under Florida law, where an enforceable restrictive covenant is breached, irreparable harm is presumed, and an award of injunctive relief is typically warranted. (Docs. ## 21, ¶ 17; 53, pp. 9, 136.) Plaintiff also invokes a provision in the NDA stating that “each party agrees and acknowledges that any . . . violation [of the obligations imposed] will cause irreparable injury to [Plaintiff], ” entitling Plaintiff “to obtain injunctive relief against . . . the continuation of any such breach.” (Id. p. 9 (quoting Doc. #20-1, ¶ 10).)

         Defendants admittedly sold at least 2, 330 live shrimp that Primo left at the AMI Facility (Doc. #64-1, ¶ 10), and they also admittedly bred Primo shrimp with shrimp from other sources to create the new “High Vigor” hybrid line that API now sells. (Doc. #41, ¶ 101.) Defendants argue that no injunction is warranted, however, since Plaintiff is unlikely to succeed on the merits of the breach of contract claim, and since Plaintiff cannot show irreparable harm absent an injunction. Specifically, Defendants contend that: (1) shrimp do not fall within the NDA's definition of “Confidential Information”; (2) the Term Sheet terminated the Grow-Out Agreement and transferred title in the remaining Primo animals at the AMI Facility to Defendants; and (3) due to their short lifespan, any live shrimp left at the AMI Facility on April 30, 2016 have since died. (Doc. #39, pp. 9-13.)

         Normally, a breach of contract claim will not support issuance of a preliminary injunction because breaches can typically be remedied through an award of money damages. See United Steelworkers of Am., AFL-CIO-CLC v. USX Corp., 966 F.2d 1394, 1405 (11th Cir. 1992) (injunctive relief on the plaintiff's breach of contract claim deemed inappropriate where an “adequate remedy at law in the form of money damages” existed); Stand Up for Animals, Inc. v. Monroe Cty., 69 So.3d 1011, 1013 (Fla. 3d DCA 2011) (“Because the allegations assert no more than a breach of contract compensable by a damage award, no irreparable harm essential to secure injunctive relief . . . could be demonstrated.”). While the Court will assume without deciding that Primo is, in fact, eligible for injunctive relief for its breach claim based on the above-mentioned language in the NDA and/or Fla. Stat. § 542.335(1)(j), this assumption does not obviate Primo's obligation to “show a sufficient likelihood that [it] will be affected by the allegedly unlawful conduct in the future” in order “to obtain [the] forward-looking [injunctive] relief” that it seeks. Wooden v. Bd. of Regents of Univ. Sys. of Ga., 247 F.3d 1262, 1283 (11th Cir. 2001); see also Hoop Culture, Inc. v. GAP Inc., 648 F.App'x 981, 986 (11th Cir. 2016) (“[P]ast harm is not a basis for preliminary injunctive relief, which requires a showing of likely future injury if an injunction does not issue.”). Indeed, the Eleventh Circuit has stressed that the presumption of irreparable injury created under Florida law by the breach of a restrictive covenant is “rebuttable, ”[12] Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223, 1231 (11th Cir. 2009) (citing JonJuan Salon, Inc. v. Acosta, 922 So.2d 1081, 1084 (Fla. 4th DCA 2006)), and a remote (or nonexistent) possibility of future irreparable harm is sufficient to rebut that presumption. TransUnion Risk & Alternative Data Sols., Inc. v. Challa, No. 16-11878, __ Fed.App'x __, 2017 WL 117128, at *3 (11th Cir. Jan. 12, 2017).

         Thus, a threshold question underlying Plaintiff's entitlement to injunctive relief as to its claim for breach of contract is whether Defendants are capable of breaching the NDA or the Grow-Out Agreement in the future, thereby exposing Plaintiff to additional harm. The answer is no.

         1) The Non-Disclosure Agreement

         Paragraph 3 of the NDA imposes on Defendant AMI the obligation “(i) to hold in trust and confidence and not disclose to any third parties . . . any Confidential Information and (ii) not to use any Confidential Information for any purpose other than to carry out discussions concerning, and the undertaking of, the Relationship.” (Doc. #20-1, ¶ 3.) Plaintiff alleges that “AMI breached and continues to breach the NDA by failing to preserve the ‘Confidential Information' (as defined in the NDA) that had been imparted to it by Primo, including by transferring both males and females of several highly desirable, disease-resistant lines to the AMI's [sic] agents and instrumentalities.” (Doc. #20, ¶ 84.) Defendants dispute that they have used or disclosed anything that constitutes “Confidential Information” under the NDA.

         “[P]arties to a contract have the right to define the terms of that contract.” Buce v. Allianz Life Ins. Co., 247 F.3d 1133, 1150 (11th Cir. 2001) (Barkett, J., concurring); see also Okeechobee Resorts, L.L.C. v. E Z Cash Pawn, Inc., 145 So.3d 989, 993 (Fla. 4th DCA 2014) (“Contracts are voluntary undertakings, and contracting parties are free to bargain for - and specify - the terms and conditions of their agreement.”). As relevant here, the NDA defines “Confidential Information” as “any information, technical data, or know-how, including, but not limited to, that which relates to . . . research, product plans, [and] products.” (Doc. #20-1, ¶ 2.) Defendants argue that Plaintiff is not likely to succeed with the merits of this claim because “there has been no showing by Primo that the subject shrimp constitute information, technical data, or know-how, ” as is necessary to bring Defendants' activities within the scope of Paragraph 3's prohibitions. (Doc. #64, p. 12.)

         But Plaintiff's argument is not that a Primo shrimp itself constitutes “information, technical data, or know-how”; rather, it is that “genetic material traceable to Primo Shrimp” constitutes “Confidential Information.” (Doc. #68, p. 22.) It is this “information relating to a product” that was “used” when Defendants created new hybrids using Primo shrimp and “disclosed” when Defendants sold Primo shrimp to others. The Court sees no reason why shrimp genetics would not fall within the NDA's broad “information relating to a product” definition to which the parties agreed.[13] See United States v. Kriesel, 720 F.3d 1137, 1145 (9th Cir. 2013) (“The district court also properly concluded that the blood sample itself is a tangible object, and the genetic code contained within the blood sample is information.”).

         But - and ultimately dispositive on Plaintiff's request for injunctive relief - Plaintiff's assertion that all genetic material traceable to Primo shrimp is Confidential Information is not supported by the record. The evidentiary materials instead show that Plaintiff has never deemed “confidential” the genetic material contained in one pure shrimp or in a hybrid (or “locked”[14]) pair. Rather, the information Primo considers “confidential” is the genetic material contained in Primo's “crown jewels”: a “pure breeder pair, ” i.e., a male and a female from the same family line.

         Indeed, this is the information Plaintiff has scrupulously sought to protect by never providing pure breeder pairs to anyone other than AMI. (See Doc. #20, ¶¶ 132-33 (“The breeder pairs of a single genetic family of shrimp constitute trade secrets of Primo.

         Primo's maintained the secrecy of its trade secrets by not making its breeder pairs available for sale but only a male or female of a particular family line.”).) As Plaintiff's counsel explained in further detail at the preliminary injunction hearing:

[Primo doesn't] sell the breeders, males and females, to [its] clients. And even Haimao, [Primo's] exclusive distributor, does not get a male and a female [from the same family]. What they get is an A and a B. And that AB combination, through [Primo's] testing and through all the[] work ...

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