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Applied Hydrogel Technology, Inc. v. Raymedica

March 2, 2007

APPLIED HYDROGEL TECHNOLOGY, INC., PLAINTIFF,
v.
RAYMEDICA, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Rudi M. Brewster United States Senior District Court Judge

ORDER DENYING IN PART AND GRANTING IN PART DEFENDANTS' MOTION TO DISMISS THE FIRST AMENDED COMPLAINT UNDER FRCP 12(b)(6)

I. INTRODUCTION

On February 26, 2007, the Court held hearing for Defendants Raymedica, Inc., Raymedica LLC (together "Raymedica"), and Kornahrens' Motion to Dismiss the First Amended Complaint Under Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 12.) For the reasons set forth below, the Court hereby DENIES Defendants' Motion with respect to (1) the Second Cause of Action, Fraudulent Inducement to enter Consulting Agreement and Amendment Against Raymedica and Kornahrens; (2) the Third Cause of Action, Intentional Misrepresentation Against Raymedica and Kornahrens; and (3) the Fourth Cause of Action, Negligent Misrepresentation Against Raymedica and Kornahrens. The Court GRANTS Defendants' Motion with respect to the Sixth Cause of Action, Conversion Against Raymedica and Kornahrens. The Court also GRANTS Plaintiff Applied Hydrogel Technology, Inc. ("AHT") leave to amend its Complaint to adequately plead the Sixth Cause of Action of Conversion. AHT shall have twenty (20) days from the date of the hearing on February 26, 2007, to file this amended Complaint.

II. BACKGROUND

On August 29, 2005, Raymedica and AHT entered a Mutual Confidentiality Agreement ("MCA"), under which the parties stated that they (1) were "exploring a possible relationship," (2) would "be exposed to Confidential Information*fn1 ," and (3) "agree[d] to execute this Agreement as a condition to entering into any relationship." (Doc. No. 9, Ex. A at 1.) On August 31, 2005, Raymedica and AHT entered a Consulting Agreement ("CA"), under which AHT as the "Consultant" agreed to provide Raymedica with the benefit of its "substantial expertise in the field of Hydrogel Materials specific to medical devices" pursuant to the MCA. (Doc. No. 2, Ex. A at 1.)

On November 13, 2006, AHT filed its First Amended Complaint, alleging against Raymedica and/or Kornahrens: breach of Mutual Confidentiality Agreement, fraudulent inducement to enter Consulting Agreement and Amendment, intentional misrepresentation, negligent misrepresentation, misappropriation of trade secrets, and conversion. (Doc. No. 9.) Defendants then filed the present Motion to Dismiss on December 6, 2006. (Doc. No. 12.)

III. DISCUSSION

A. STANDARD OF LAW

A motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of the claims in the complaint. A claim should not be dismissed under Rule 12(b)(6) "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief." Hydrick v. Hunter, 466 F.3d 676, 686 (9th Cir. 2006); see Conley v. Gibson, 355 U.S. 41, 45 - 46 (1957). The court must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them, and must construe the complaint in the light most favorable to plaintiff. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995).

"Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios v. Richard Feiner and Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). "However, material which is properly submitted as part of the complaint may be considered." Id..

A court may, on a Rule 12(b)(6) motion to dismiss, take judicial notice of "facts outside the pleadings" and "matters of public record." Mack v. S. Bay Beer Distrib., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986) (abrogated on other grounds by Astoria Fed. Sav. and Loan Ass'n v. Solimino, 501 U.S. 104 (1991)).

B. ANALYSIS

1. Minnesota Law Governs

If federal subject-matter jurisdiction is based on the parties' diversity of citizenship, as it is here, the Ninth Circuit "appl[ies] the choice-of-law principles of the forum state." Bassidji v. Goe, 413 F.3d 928, 933 (9th Cir. 2005). The forum state here is ...


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