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IBC Advanced Technologies, Inc. v. Ucore Rare Metals, Inc.

United States District Court, D. Utah

December 23, 2019

UCORE RARE METALS, INC., JIM MCKENZIE, and PETER MANUEL, Defendants. Dismissed Utah State Court Complaint Proposed Amended Complaint

          Howard C. Nielson, Jr. District Judge


          Dustin B. Pead United States Magistrate Judge

         This case is referred to the undersigned pursuant to 28 U.S.C. § 636(b)(1)(A) from District Judge Howard C. Nielson. (ECF No. 26.) This matter is before the court on Plaintiffs' Motion for Leave to File Amended Complaint. (ECF No. 43.) Plaintiffs have added a party to its Amended Complaint as well as several additional causes of action. The motion is fully briefed and the court has carefully reviewed the moving papers submitted by the parties. Pursuant to DUCivR 7-1(f), oral argument is unnecessary and the court will determine the motions on the basis of the written papers.


         Plaintiff IBC Advanced Technologies, Inc., a privately held corporation incorporated under the laws of Utah, and Defendant Ucore Rare Metals, Inc., a company incorporated under the laws of Alberta, Canada, entered into a series of contracts to explore business interests.[1]Among these agreements were a confidentiality agreement, a research agreement, a cooperating agreement and an option agreement. See Complaint pp. 8-26. As is sometimes the case, things did not go as planned between the parties and they ended up in court in Nova Scotia, Canada. Plaintiffs challenged jurisdiction in the Canadian court and after losing that challenge, Plaintiffs filed two suits in the Utah state courts against Defendants. One complaint is based in tort and the other based in contract. On April 3, 2019, Ucore removed the contract action to federal court. The other suit remains in state court (Utah state court case). In the federal action here, Plaintiff brings multiple causes of action including, breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, multiple fraud claims, unjust enrichment and breach of fiduciary duties. Ucore allegedly breached the parties' contracts by among other things, disclosing confidential information and using trademarks without authorization.

         On February 27, 2019, Defendants sought to dismiss the Utah state court case for lack of personal jurisdiction. Defendants argued the claims were based on non-Utah conduct and therefore, Utah lacked jurisdiction over the claims. Utah state court judge Laura Scott agreed with Defendants and found the Utah state court lacked general and specific jurisdiction over the individual defendants. The Utah court also found it lacked general jurisdiction and specific jurisdiction over Ucore. Following Judge Scott's oral ruling that the Utah courts lacked jurisdiction, Plaintiffs requested leave to file an amended complaint. Judge Scott denied this motion. In rejecting the state court motion to amend, Judge Scott found it was untimely, that Plaintiffs failed to offer any justification for not including the proposed claims in the original Complaint, and that Defendants would be prejudiced by allowing the amended complaint. Judge Scott also cited to this case as reasoning for denying the Motion to Amend. The “proposed claims - or similar versions of these claims - were already being asserted in the Federal Action.” Utah State Court decision p. 13, attached as Ex. C to Def.s' Op, ECF No. 58-3. Additionally, Judge Scott found Defendants were prejudiced because they were already “defending the Federal Action, where Plaintiffs have asserted similar claims against the same parties based on the same alleged wrongdoing.” Id. p. 13-14. Judge Scott determined that justice is not served by forcing Defendants to “defend the same claims at the same time in two different forums.” Id. p. 14. And finally, the proposed Amended Complaint would still be futile because the Utah state court lacked jurisdiction over any of the Defendants. Plaintiff's state case was accordingly dismissed without prejudice and on October 18, 2019, Plaintiffs appealed Judge Scott's decision to the Utah Court of Appeals. That appeal is still pending.

         Further relevant to this case is Plaintiffs representation. Plaintiffs state that if they “are permitted to amend their claims in this Court, … Plaintiffs plan to withdraw their appeal and fully litigate all claims in one court before one judge, just as Plaintiffs had planned before Ucore decided to litigate the first case in state court and remove this case to federal court.” Reply pp. 6-7, ECF No. 61.


         Rule 15(a)(2) provides that “[t]he court should freely give leave [to amend] when justice so requires.” Fed.R.Civ.P. 15(a)(2). “The district court has ‘wide discretion to recognize a motion for leave to amend in the interest of a just, fair or early resolution of litigation.'” Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009) (quotingCalderon v. Kan. Dep't of Soc. & Rehab. Servs., 181 F.3d 1180, 1187 (10th Cir. 1999)). “Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.” Id.(quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993)).

         The procedural posture of this case creates a fairly unique situation. Seemingly at odds here are legal doctrines that seek to aid the integrity of the legal process: jurisdiction, res judicata, collateral estoppel and judicial estoppel. Defendants argue leave to amend is futile here because of Judge Scott's decision in the state case regarding personal jurisdiction. “Judge Scott's ruling that Utah lacks jurisdiction over IBC's claims is res judicata on the issue of personal jurisdiction over these claims in Utah.” (ECF No. 60 p. 5.) Defendants argue the factors for res judicata are satisfied here.[2] Defendants further take issue with the timeliness of Plaintiffs motion, argue it evidences bad faith, is prejudicial and poses a risk of duplicative litigation because Plaintiff “appealed Judge Scott's Order” (ECF No. 60 p. 11.) and that appeal is still pending.

         In stark contrast to Defendants reliance on res judicata, Plaintiffs rely on the doctrine of judicial estoppel, arguing Defendants should be estopped from taking contrary positions. In the state court proceedings Defendants argued the state court “should defer to the federal district court where the newly alleged facts have been pending for nearly six months” and “plaintiffs can walk across the street and ask for leave in the already pending case to amend their complaint to account for any non-duplicative claims.” Def.s' Op p. 8 filed in the state case, attached as exhibit 1 to Plaintiffs' reply, ECF No. 61-1. Now, presumably according to Plaintiffs, this is exactly what they have done-walked across the street and sought to amend their complaint. Thus, the court should reject Defendants contrary arguments. The court now turns to the parties' arguments.

         I. Judicial Estoppel is not appropriate in this case

         Judicial estoppel “is an equitable doctrine invoked by a court at its discretion.” Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990). “'[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.'” New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (quoting Davis v. Wakelee, 156 U.S. 680, 689, 15 S.Ct. 555, 39 L.Ed. 578 (1895)). Judicial estoppel, “generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.” Pegram v. Herdrich, 530 U.S. 211, 227, n. 8 (2000); see 18 Moore's Federal Practice § 134.30, p. 134-62 (3d ed. 2000) (“The doctrine of judicial estoppel prevents a party from asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding”); 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4477, p. 782 (1981) (hereinafter Wright) (“absent any good explanation, a party should not be allowed to gain an advantage by litigation on one theory, and then seek an inconsistent advantage by pursuing an incompatible theory”). Judicial estoppel “is most commonly applied to bar a party from making a factual assertion in a legal proceeding which directly contradicts an earlier assertion made in the same proceeding or a prior one.” Russell, 893 F.2d at 1037.

         Although the circumstances under which judicial estoppel is invoked are unlikely to be reducible to a general formulation or principle, seeAllen v. Zurich Ins. Co., 667 F.2d 1162, 1166 (4th Cir. 1982), several factors provide guidance. First, a party's later position must be “clearly inconsistent” with its earlier position. SeeNew Hampshire, 532 U.S. at 750; United States v. Hook, 195 F.3d 299, 306 (7th Cir. 1999). Second, “courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create 'the perception that either the first or the second court was misled.'” New Hampshire, 532 U.S. at 750 (quoting Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir. 1982)). In essence, the second factor is concerned with the threat to judicial integrity. Third, courts look to “whether the party seeking to assert an inconsistent position would ...

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