Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-4_08-cv-03581/USCOURTS-ared-4_08-cv-03581-0/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 17:101 Copyright Infringement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

GREENLINE INDUSTRIES, INC.,

Plaintiff,

v.

AGRI-PROCESS INNOVATIONS, INC.; and

AP FABRICATIONS, LLC, f/k/a/

GREENLINE FABRICATIONS, LLC,

Defendants.

 /

No. C 08-2438 CW

ORDER DENYING

WITHOUT PREJUDICE

DEFENDANTS’

MOTION TO STAY OR

TO TRANSFER AND

THEIR MOTION TO

DISMISS FOR LACK

OF STANDING AND

DENYING

PLAINTIFF’S

MOTION FOR

PRELIMINARY

INJUNCTION

Defendants Agri-Process Innovations, Inc. and AP Fabrications,

LLC (collectively API/APF) move to dismiss or stay this action or,

in the alternative, to transfer it to the Eastern District of

Arkansas. Plaintiff Greenline Industries, Inc. (GII) opposes the

motion. The motion is decided on the papers; the July 24 hearing

Case 4:08-cv-03581-BSM Document 30 Filed 07/28/08 Page 1 of 12
United States District Court

For the Northern District of California

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1As discussed below, the complaint erroneously states that

Plaintiff GII took various actions as early as 2005. However, GII

was not incorporated until March 5, 2008. It appears that, prior

to incorporation, GII may have conducted business as Greenline

Industries, LLC (GIL). Because it is not clear what entity took

the actions alleged in the complaint, all actions that occurred

prior to the date of incorporation are attributed to “Greenline.” 

2

is vacated. Having considered all of the papers filed by the

parties, the Court denies without prejudice API/APF’s motion to

stay or to transfer as well as their motion to dismiss for lack of

standing. 

BACKGROUND

Except where noted, the following facts are taken from the

complaint and assumed true for purposes of this order. 

In 2003, Jacques Sinoncelli and Michael Brown founded BioEnergy Systems, LLC, to develop and build a biodiesel plant in

Vallejo, California based on biodiesel processing technology

developed by Sinoncelli. Sinoncelli’s technology is unique because

it does not require water in the purification process. After

completion of the plant, Bio-Energy Systems turned to improving and

automating its biodiesel processing technology. By 2005, BioEnergy had increased the capacity of its Vallejo plant from just

over 200,000 gallons per year to over two million gallons per year. 

Bio-Energy also developed a continuous flow, computerized process

previously unavailable for small- and medium-scale biodiesel

processors. At an unspecified later date, Sinoncelli and Brown

founded Greenline Industries.1

In 2005, Greenline began marketing the bio-diesel processing

units designed by Bio-Energy. In July, 2006 Greenline obtained an

Case 4:08-cv-03581-BSM Document 30 Filed 07/28/08 Page 2 of 12
United States District Court

For the Northern District of California

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exclusive, world-wide license to tecnhnology enabling it to

increase the capacity of its systems to sixty million gallons per

year.

In 2005, a company called Patriot BioFuels contacted Greenline

regarding the purchase of a biodiesel processing unit. In

September, 2005, Greenline and Patriot entered into a contract for

the manufacture and installation of a processing plant on Patriot’s

property in Arkansas. Although Greenline designed such plants, it

contracted with others for the actual manufacture and installation. 

Patriot proposed Defendant API, an Arkansas engineering firm. 

Patriot’s Chief Operating Officer Michael Shook was, at the time,

one of the two principles of API. API had no prior experience in

biodiesel processing.

In December, 2005, Greenline entered into a contract with API

for the installation of the processing units for Patriot. Shook

signed the contract on behalf of API. The contract included a

confidentiality and non-disclosure provision to protect Greenline’s

proprietary designs and technology. 

In March, 2006, after completion of the Patriot facility,

Greenline and API together founded Greenline Fabrications, LLC, for

the purpose of installing Greenline’s biodiesel plants. Under the

terms of the agreement creating Greenline Fabrications, Greenline

was solely and exclusively responsible for the design and

development of the biodiesel processing units and API was

responsible for managing the manufacture and installation of those

units. Greenline Fabrication has installed approximately twentytwo processing facilities. 

Case 4:08-cv-03581-BSM Document 30 Filed 07/28/08 Page 3 of 12
United States District Court

For the Northern District of California

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Effective January 1, 2007, Greenline transferred all of its

ownership rights in Greenline Fabrication to API, making API the

sole owner. API changed the name from Greenline Fabrications to

APF. At the time of the transfer, Greenline also entered into a

vendor agreement with APF that provided terms for the completion of

the biodiesel plant projects that were already in progress and on

which APF was acting as project manager. In addition, the vendor

agreement provided terms for any future projects in which Greenline

selected APF as the vendor to oversee the manufacture and assembly

of biodiesel plants. The vendor agreement provided that Greenline

was solely and exclusively responsible for the design of the

biodiesel processing units and APF’s only responsibility was for

the installation of the units designed by Greenline. Under the

vendor agreement, API was permitted to sell Greenline’s biodiesel

processing systems on a commission basis on the condition that it

market the product as a “Greenline Industries” plant and include

such an acknowledgment in the sales contract.

In a letter dated May 5, 2008, API/APF informed Greenline that

they intended to terminate the vendor agreement and demanded over

$20 million in exchange for undefined intellectual property created

by API and utilized by Greenline. 

On May 12, 2008, GII filed the complaint in this case,

asserting claims for: (1) anticipatory breach of contract; 

(2) misappropriation of trade secrets; (3) false advertising

pursuant to the Lanham Act; and (4) a declaration of its rights

with respect to copyrights in the drawings and specifications for

the biodiesel plants designed by Greenline and installed by

Case 4:08-cv-03581-BSM Document 30 Filed 07/28/08 Page 4 of 12
United States District Court

For the Northern District of California

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API/APF.

On February 27, 2008, API/APF had filed, in Arkansas state

court, a complaint against GIL for breach of contract. The

Arkansas complaint alleged that GIL solicited and hired other firms

to build biodiesel plants and failed to pay API/APF $698,654.38 due

under the vendor agreement. At the time it filed its complaint in

this Court, GII was not aware of the Arkansas case because API/APF

had not yet served it on GIL. On May 15, 2008, after the complaint

in this case had been filed, but before API/APF were served,

API/APF filed an “amended and substituted complaint” in the

Arkansas state court alleging five claims for: (1) a declaration of

the termination of the vendor agreement; (2) a declaration

regarding the existence and ownership of intellectual property

rights; (3) an accounting of the sums owed by GIL to API/APF; 

(4) breach of contract; and (5) breach of the duty of good faith

and fair dealing.

On June 10, 2008, API/APF filed the present motion to dismiss

GII’s complaint for lack of standing or failure to state a claim. 

In the alternative, API/APF argue that GII’s complaint should be

dismissed, stayed or transferred based on the earlier filing of the

Arkansas state court complaint. 

 On June 18, 2008, after being served in the Arkansas state

court case, GIL removed that case to the Eastern District of

Arkansas and, on July 1, 2008, it filed a motion to dismiss, stay

or transfer the Arkansas suit, arguing that GII’s case in this

Court was the first to be filed.

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United States District Court

For the Northern District of California

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DISCUSSION

I. Standing

Because it appears that GII has standing to pursue the

intellectual property claims and could amend the complaint to

include allegations to establish standing to pursue the breach of

contract claim, the Court denies without prejudice API/APF’s motion

to dismiss for lack of standing. The motion may be renewed as

discussed below.

II. First to File

"There is a generally recognized doctrine of federal comity

which permits a district court to decline jurisdiction over an

action when a complaint involving the same parties and issues has

already been filed in another district." Pacesetter Systems, Inc.

v. Medtronic, Inc., 678 F.2d 93, 94-5 (9th Cir. 1982). This

doctrine, known as the first-to-file rule, "gives priority, for

purposes of choosing among possible venues when parallel litigation

has been instituted in separate courts, to the party who first

establishes jurisdiction." Northwest Airlines, Inc. v. American

Airlines, Inc., 989 F.2d 1002, 1006 (8th Cir. 1993). The rule

“serves the purpose of promoting efficiency well and should not be

disregarded lightly.” Church of Scientology of California v.

United States Dep’t of Army, 611 F.2d 738, 750 (9th Cir. 1979). 

In applying the first-to-file rule, a court looks to three

threshold factors: "(1) the chronology of the two actions; (2) the

similarity of the parties, and (3) the similarity of the issues." 

Z-Line Designs, Inc. v. Bell'O Int'l LLC, 218 F.R.D. 663, 665 (N.D.

Cal. 2003). If the first-to-file rule does apply to a suit, the

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United States District Court

For the Northern District of California

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court in which the second suit was filed may transfer, stay or

dismiss the proceeding in order to allow the court in which the

first suit was filed to decide whether to try the case. Alltrade,

Inc. v. Uniweld Products, Inc., 946 F.2d 622, 622 (9th Cir. 1991). 

"Circumstances under which an exception to the first-to-file

rule typically will be made include bad faith, anticipatory suit

and forum shopping." Id. at 628 (internal citations omitted).

Another exception to the first-to-file rule applies if "the balance

of convenience weighs in favor of the later-filed action." Ward v.

Follett Corp., 158 F.R.D. 645, 648 (N.D. Cal. 1994). This is

analogous to the "convenience of parties and witnesses" on a

transfer of venue motion pursuant to 28 U.S.C. § 1404(a). Med-Tec

Iowa, Inc. v. Nomos Corp., 76 F. Supp. 2d 962, 970 (N.D. Iowa

1999); 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F.

Supp. 128, 133 (S.D.N.Y. 1994). The court with the first-filed

action should normally weigh the balance of convenience and decide

whether an exception to the first-to-file rule applies. 

Pacesetter, 678 F.2d at 96 (citing Kerotest Mfg. Co. v. C-O-Two

Fire Equipment Co., 342 U.S. 180, 185 (1952)); see also Alltrade

Inc., 946 F.2d at 628.

API/APF argue that the first-to-file rule warrants a

dismissal, stay or transfer of this action because they filed the

original complaint in the Arkansas suit before GII filed this

action, and the parties and issues in both cases are substantially

the same. GII agrees that the first-to-file rule applies to this

case, but argues its complaint in this case, rather than API/APF’s

Arkansas complaint, was the first-filed complaint. 

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United States District Court

For the Northern District of California

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While API/APF’s Arkansas state court complaint was filed

before GII’s complaint in this Court, API/APF’s case was not

removed to federal court until after the instant action was filed

and after API/APF filed their amended complaint in the Arkansas

state court. Although neither party directly addresses whether the

application of the first-to-file rule is affected by the fact that

API/APF originally filed the Arkansas suit in state court and the

Court is not aware of any Ninth Circuit case addressing the issue,

it appears that the courts that have addressed this issue have

found that the date of filing in the state court, not the date of

removal, is considered for purposes of deciding which action was

filed first. See, e.g., Manufacturers Hanover Trust Co. v. Palmer

Corp., 798 F. Supp. 161, 166 (S.D.N.Y. 1992) (finding “ample

authority for the proposition that the state court filing date is

the relevant benchmark”); see also Wright, Miller and Cooper, 

§ 3738 (1998) (“After the removal of an action from state court,

the federal district court acquires full and exclusive subject

matter jurisdiction over the litigation. The case will proceed as

if it had been brought in the federal court originally.”). 

Applying this standard, API/APF’s original complaint filed in the

Arkansas state court was the first-filed case. 

GII next argues that API/APF’s original complaint “is

irrelevant to the first filed analysis because . . . the complaint

was never served and thus is null, void and immaterial.” 

Opposition at 10. GII bases this argument on API/APF’s failure to

serve the complaint within 120 days from filing as required by

Arkansas Rule of Civil Procedure 4(i). However, API/APF filed an

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amended complaint, as they were entitled to do under Arkansas Rule

of Civil Procedure 15, and served it on GIL before the 120-day time

limit had elapsed. Moreover, the Ninth Circuit has held that it is

“the filing of actions in coordinate jurisdictions that invokes

considerations of comity.” Pacesetter, 678 F.2d at 96 n.3

(emphasis added); see also Ward v. Follett, 1994 U.S. Dist. LEXIS

19751, *5 (N.D. Cal.) (“In determining when a party filed an action

for purposes of the first to file rule, courts focus on the date

upon which the party filed its original, rather than its amended

complaint.”). 

GII further contends that the Court should not consider

API/APF’s original Arkansas state court complaint because it is not

related to the claims in the amended complaint. GII contends that

“the amended complaint supersedes and replaces the previously filed

complaint.” Opposition at 11. While it is true that an amended

complaint becomes the operative complaint once it is filed, this

does not override the Ninth Circuit’s holding that the date of the

filing of an action, rather than the filing of an amended

complaint, is used for purposes of the first-to-file rule. GII

also argues that the single breach of contract claim in API/APF’s

original complaint does not appear in the amended complaint. 

However, as API/APF respond, both the original complaint and the

amended complaint assert a breach of contract claim arising out of

the vendor agreement. 

In the alternative, GII argues that, if the Court considers

API/APF’s Arkansas state court case to be the first-filed, the

Court should not apply the first-to-file rule because the breach of

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contract claim in the original, unserved complaint is not

sufficiently similar to GII’s claims in this case. However, this

case, too, arises out of a claim of breach of the vendor agreement. 

Citing Northwest Airlines Inc. v. Filipas, 2008 U.S. Dist.

LEXIS 31084 (D. Minn.), GII also argues that its complaint is the

first filed with respect to the claims now at issue. In Northwest,

the airline filed an action seeking a declaration that its revised

pension plan complied with the Employment Retirement Income

Security Act (ERISA). Id. at *1. The defendant pilots had earlier

filed an ERISA breach of fiduciary duty action in the Western

District of Washington seeking production of documents and

information regarding the revisions the airline was then

considering. Id. at *2. The Washington court denied the pilots’

motion for a preliminary injunction and the pilots moved to stay

the action pending an appeal of the denial. Id. While the motion

to stay was pending, the revised pension plan went into effect and

the airline filed the declaratory judgment action in the District

of Minnesota. Id. The pilots withdrew their motion to stay in the

Washington case and filed an amended complaint including

affirmative claims against the airline regarding the legality of

the revised pension plan. Id. 

Even though the Washington action for production of documents

had been filed first, both the Washington and Minnesota courts

found that the Washington case “was not the first-filed action

regarding the legality of the [revised pension plan].” Id. at 6. 

The Washington court noted that “resolution of the original Seattle

action would not adjudge or impact the claims raised in Minnesota.” 

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United States District Court

For the Northern District of California

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Id. And, as the Minnesota court pointed out, “Allegations

concerning the legality of the Target Plan were not raised by the

pilots in the Seattle Litigation until January 10, 2008.” Id. 

The Northwest court’s decision is not binding on this Court

and is distinguishable from this case. Although the claims

regarding intellectual property were first raised in GII’s claims

in this Court, resolution of the breach of contract claim in

API/APF’s original complaint in the Arkansas court would certainly

impact the GII’s contract claims in this Court. 

The Court finds that API/APF’s Arkansas suit has priority for

purposes of the first-to-file rule. Therefore, the Court defers to

the Eastern District of Arkansas to decide the appropriate forum

and whether an exception to the first-to-file rule is applicable. 

See Pacesetter, 678 F.2d at 96 (noting that normally the respective

convenience of the two courts should be addressed to the court in

the first-filed action). 

CONCLUSION

For the foregoing reasons, the Court DENIES without prejudice

API/APF’s motion to stay or to transfer this action and their

motion to dismiss for lack of standing (Docket No. 7). If the

Arkansas court grants GIL’s pending motion to transfer, the parties

shall file a notice of related cases and the Court will relate the

cases, GII may file an amended complaint establishing standing to

pursue the breach of contract claim and API/APF may, if necessary,

file a motion to dismiss the amended complaint. If the Arkansas

court denies GIL’s motion to transfer, the parties shall notify the

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United States District Court

For the Northern District of California

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Court. This case will be transferred to the Eastern District of

Arkansas and API/APF may raise their standing arguments in that

court. 

On July 10, 2008, GII filed a motion for preliminary

injunction, seeking to enjoin API/APF from pursuing the Arkansas

litigation. That motion is based on GII’s position that this case

is first for purposes of the first-to-file rule. As discussed

above, the Court finds that argument unavailing. Therefore, the

Court DENIES GII’s motion for preliminary injunction (Docket No.

16). The hearing previously scheduled for August 14, 2008 is

hereby VACATED. 

A case management conference will be held in this case as

previously scheduled on August 21, 2008 at 2:00 PM, unless by that

date the case has been transferred to Arkansas. If the Arkansas

court has not ruled on the motion to transfer by August 11, 2008,

the Court will continue the case management conference and all

related obligations. 

IT IS SO ORDERED.

Dated: 7/28/08 

CLAUDIA WILKEN

United States District Judge

Case 4:08-cv-03581-BSM Document 30 Filed 07/28/08 Page 12 of 12