Court Opinion

ID: 9897982
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:27:34.260202+00
Date Added: 2024-06-11T09:14:50.323160
License: Public Domain

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                                                                      FILED
                                                                    MAY 25, 2023
                                                           In the Office of the Clerk of Court
                                                          WA State Court of Appeals, Division III

                IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
                                   DIVISION THREE

       BIOCHRON, INC., a Washington                 )         No. 38834-4-III
       corporation, KEVIN RUDEEN, an                )
       individual, BART BENNETT, an                 )
       individual, JOHN GILLINGHAM, an              )
       individual,                                  )
                                                    )
                           Respondents,             )         PUBLISHED OPINION
                                                    )
                    v.                              )
                                                    )
       BLUE ROOTS, LLC, a Washington                )
       limited liability company,                   )
                                                    )
                           Appellant.               )

             LAWRENCE-BERREY, J. — Blue Roots initially filed a demand for arbitration, but

       Biochron filed this action to enjoin that arbitration from proceeding. Blue Roots

       promptly moved the trial court to compel arbitration, but the court denied the motion on

       the basis that the agreement containing the arbitration clause was unenforceable. The

       parties participated in litigation for over one year. Biochron moved for partial summary

       judgment, and Blue Roots renewed its motion to compel arbitration. The trial court

       granted Biochron’s motion, denied Blue Roots’s renewed motion to compel, and entered

       a CR 54(b) order certifying finality. Blue Roots appealed.
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              We conclude that the trial court erred in denying Blue Roots’s renewed motion to

       compel arbitration because the enforceability of a contract containing an agreement to

       arbitrate is a question for the arbitrator, not the court. In general, a court may only decide

       whether the agreement to arbitrate exists in a record and whether the arbitration clause

       can be fairly read to encompass the scope of the dispute. Here, we decide both questions

       in favor of arbitration.

              We further conclude that Biochron is unable to meet its heavy burden of showing

       that Blue Roots waived its right to arbitrate. Blue Roots filed a demand for arbitration

       and twice moved the trial court to compel arbitration. These actions are consistent with a

       desire to arbitrate.

              Also, ordering arbitration will not prejudice Biochron. The trial court entered two

       partial summary judgment orders during the course of litigation. Blue Roots has waived

       any challenge to the first ruling, and the second ruling was erroneous—the grant of partial

       summary judgment dismissing Blue Roots’s misappropriation of trade secrets claim.

       Because we would have reversed the trial court’s second ruling, Biochron is not

       prejudiced by Blue Roots’s delay in renewing its motion to compel arbitration. That is,

       it would have had to litigate the trade secrets claim in one forum or the other.

                                                     2
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              We reverse the trial court’s order denying Blue Roots’s renewed motion to compel

       arbitration.

                                                 FACTS

              This appeal stems from a failed effort by Blue Roots LLC to purchase the assets of

       Biochron, Inc. Blue Roots and Biochron are both licensed commercial cannabis

       producers located in Spokane County. We set forth the facts in the light most favorable

       to Blue Roots to the extent they relate to its misappropriation of trade secrets claim,

       which the trial court dismissed by partial summary judgment.

              Memorandum of understanding

              On May 21, 2019, the parties executed a memorandum of understanding (MOU),

       which we attach as an appendix to this opinion. The MOU outlined the terms of the sale

       of all of Biochron’s assets, including its license with the Washington State Liquor and

       Cannabis Board,1 to Blue Roots. The MOU stated it was “a commitment by the Parties to

       complete a transaction as defined in this Agreement and memorialize the terms and

       conditions in a definitive asset purchase agreement (the “APA”) and any related

              1
                 Biochron states that the MOU did not agree to transfer Biochron’s license. To
       the contrary, while the MOU states the purchased assets will not include an interest in the
       business entity that holds Biochron’s license—i.e., Biochron itself—it expressly provides
       for the transfer of the license after 10 years of payments.

                                                     3
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       transactions necessary to execute the APA and achieve the Parties’ objectives.” Clerk’s

       Papers (CP) at 49. Biochron, Inc., and its individual principals, Bart Bennett, Kevin

       Rudeen, and John Gillingham, collectively acted as the sellers. The MOU anticipated that

       the transaction would close on June 1, 2019. It listed a condition precedent: that the

       parties would obtain legal analysis of the transaction to ensure it would comply with

       Liquor and Cannabis Board regulations.

              The MOU provided that Blue Roots would purchase 100 percent of Biochron’s

       assets except any interest in the Biochron business entity itself. The assets were to “be

       carefully defined in the APA,” but included Biochron’s real property, business assets,

       intellectual property, and “grow” plant material in any form. CP at 49, 52. In exchange,

       Blue Roots would pay Biochron 10 percent of its monthly net profits for 10 years,

       beginning six months after the execution of the asset purchase agreement and would

       employ Biochron’s president, Mr. Bennett, as a manager in Blue Roots for a salary of

       $5,000 per month.

              The MOU included a section entitled “Dispute Resolution.” CP at 51 (some

       capitalization omitted). The section provided:

                                                    4
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              The Parties will resolve any discrepancy of interpretation on an amicable
              basis and with the utmost good will and cooperation. In the event of any
              irresolvable disagreement between the parties, the parties agree to submit to
              arbitration via the AMERICAN ARBITRATION ASSOCIATION, to be
              conducted in the City of Spokane, Washington.

       CP at 51.

              Allan Holms, managing member of Blue Roots, signed on behalf of the company.

       Mr. Bennett signed on behalf of Biochron. By signing, each represented they had

       “sufficient authority to enter into this MOU on behalf of the identified party and bind

       such party to the terms herein.” CP at 51.

              Joint operations

              The asset purchase agreement was not completed by June 1, 2019. However, in

       June, Biochron turned over its assets and keys to its facility, and Blue Roots began

       overhauling Biochron’s facility to meet its standards for growing cannabis. Also in June,

       Blue Roots opened a new bank account for joint operating expenses. In July, Blue Roots

       began paying Mr. Bennett a salary as agreed in the MOU. Blue Roots also paid for the

       expansion of Biochron’s facility and required that Biochron’s remaining operations be

       modified to meet Blue Roots’s standards. When the expansion was complete, Blue Roots

       delivered its mother plants to be propagated at Biochron’s facility.

                                                    5
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

             An attorney and an accountant experienced in the cannabis industry reviewed the

       MOU and determined it should be modified to stay within the guidelines of the Liquor

       and Cannabis Board. They recommended the parties adopt a product purchase and option

       agreement. Thereafter, Blue Roots and Biochron began negotiations for a product

       purchase and option agreement.

             In late September or early October 2019, the parties agreed to the terms of a joint

       venture, although they did not sign any document memorializing the agreement. The

       terms of the joint venture agreement “would mirror the original MOU” with three

       changes. CP at 633. The changes were: (1) the agreement would be a product purchase

       agreement (rather than a purchase of all of Biochron’s assets), and Blue Roots would

       purchase all of Biochron’s product; (2) Blue Roots would pay Biochron its monthly

       operating expenses and, beginning December 1, 2019, Blue Roots would additionally pay

       Biochron 10 percent of Blue Roots’s net profit from the previous month’s sale of

       Biochron’s product; and (3) Blue Roots would assume the responsibility of managing the

       grow operations and the costs of production. In January 2020, Blue Roots began making

       the payments as outlined in the proposed joint venture agreement and those payments

       continued through April 2020.

                                                   6
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              In February, Blue Roots e-mailed Biochron an “Intellectual Property Policy And

       Non-Disclosure Agreement” and directed Biochron to have each employee sign it.

       CP at 656 (some capitalization omitted). The agreement required Biochron employees

       not to disclose the “innovative processes and products, including unique strains of

       cannabis plants” used by Biochron. CP at 656 (boldface omitted). It further stated that

       the products and strains were the property of the “Company,” which the agreement

       defined as Biochron. CP at 656-57.2 One week later, Biochron confirmed that all of its

       employees signed the agreement and that a signed agreement was in each employee’s file.

              In April, the parties’ business relationship began to sour. Biochron, which had

       previously been negotiating on its own behalf, retained counsel to continue the

       negotiations of the product purchase agreement. By May, that agreement had been

       divided into two separate documents: a product purchase agreement and an asset purchase

       and sale agreement. The parties ultimately could not agree on the pricing for Blue

       Roots’s purchase of Biochron’s cannabis harvest, and Biochron began selling its cannabis

              2
               At the time, Biochron was growing Blue Roots’s strains according to Blue
       Roots’s processes. Viewing the evidence and all reasonable inferences in favor of Blue
       Roots, because it was Blue Roots who required Biochron’s employees to sign the
       agreement, a reasonable trier of fact could find that both Blue Roots and Biochron
       understood and intended for the agreement to protect Blue Roots’s strains and processes,
       not Biochron’s.

                                                    7
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       harvest to third parties. Thereafter, the parties’ relationship completely broke down and

       the acquisition fell through. On June 16, Blue Roots declared an impasse.

              Because Blue Roots anticipated it would soon own Biochron’s entire business, it

       had disclosed proprietary information to Biochron, including its mother plants and grow

       processes. After negotiations ceased, Blue Roots demanded that Biochron return Blue

       Roots’s cannabis plants and cease using Blue Roots’s grow processes. Biochron refused

       to do so.

              Trial court enjoins Blue Roots’s arbitration demand

              Blue Roots filed an arbitration demand in August against Biochron and its

       individual owners, Bart Bennett, Kevin Rudeen, and John Gillingham. On September 18,

       Biochron filed this case in Spokane County Superior Court, requesting injunctive relief

       from Blue Roots’s arbitration demand and damages. It also moved for a temporary

       restraining order and preliminarily injunction preventing Blue Roots from pursuing

       arbitration.

              On October 9, Blue Roots moved to compel arbitration. It later opposed

       Biochron’s motion for a preliminary injunction. Blue Roots argued that under

       Washington law, a challenge to the MOU as a whole, rather than the arbitration clause

                                                    8
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       itself, was a question for the arbitrator to decide, and the arbitration clause itself covered

       any irresolvable disagreement.

              At oral argument on the motions, Biochron argued the MOU was an unenforceable

       agreement to agree. The court questioned whether the arbitration clause would be

       enforceable even if the MOU was not. Blue Roots noted that termination or failure of a

       contract typically does not terminate an arbitration agreement contained therein. The

       court disagreed.

              On October 27, the court entered a written order granting Biochron’s motion for a

       preliminary injunction in which it concluded in part:

                     1.      Challenges to the very existence of a contract, as opposed to
                             its validity, must be decided by the court.
                     2.      The MOU is not a contract.
                     3.      The MOU is an unenforceable agreement to agree.

       CP at 467. The court denied Blue Roots’s motion to compel arbitration.

              Continued litigation

              Blue Roots did not seek appellate review of the orders. It instead filed an answer

       to Biochron’s complaint and asserted counterclaims against it, including claims for trade

       secret misappropriation. On December 31, Blue Roots moved for a preliminary

       injunction to protect its purported trade secrets and order return of certain cannabis plants.

       On January 8, 2021, Biochron moved for partial summary judgment to dismiss

                                                      9
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       Biochron’s owners in their individual capacities. For reasons that are not apparent in our

       record, the court did not rule on either motion for more than one year. During the interim,

       a trial date was set for April 25, 2022.

              On January 26, 2022, the trial court denied Blue Roots’s motion for a preliminary

       injunction. It granted in part Biochron’s motion for partial summary judgment,

       dismissing Blue Roots’s counterclaims against John Gillingham in their entirety, and its

       counterclaims against Bart Bennett and Kevin Rudeen, except for the claims of

       misappropriation of trade secrets, unfair competition, and conversion.

              On January 28, Blue Roots filed a motion to continue the trial date and associated

       deadlines. Biochron opposed the continuance. On February 11, Biochron filed a second

       motion for partial summary judgment, seeking to dismiss Blue Roots’s misappropriation

       of trade secrets counterclaim.

              Three days later, Blue Roots filed a renewed motion to compel arbitration.

       It argued the MOU was an enforceable contract with open terms and was further

       enforceable based on the parties’ course of conduct. Alternatively, it argued the

       arbitration agreement was severable, and it had not waived its right to arbitrate by

       participating in litigation.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              In response to Biochron’s motion for partial summary judgment, Blue Roots

       argued that the parties’ course of conduct created a partnership and associated fiduciary

       duties, including the duty of confidentiality. Supported by expert declarations, it argued

       that its cannabis cultivars and grow processes were proprietary information. It further

       argued that because of the existence of fiduciary duties between the parties, its disclosures

       to Biochron were made with reasonable efforts to maintain its secrecy.

              The trial court considered Biochron’s partial summary judgment motion and Blue

       Roots’s renewed motion to compel arbitration at the same hearing. The court granted

       Biochron’s motion on the sole basis that Blue Roots had failed to take reasonable efforts

       to protect the confidentiality of its purported trade secrets. It denied Blue Roots’s

       renewed motion to compel arbitration because it believed Blue Roots had not provided a

       sufficient reason for the court to overturn the first judge’s ruling.

              The trial court later granted CR 54(b) certification of the second partial summary

       judgment order and stayed litigation of Blue Roots’s remaining claims. Blue Roots then

       appealed the partial summary judgment order and the order denying its renewed motion to

       compel arbitration.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

                                              ANALYSIS

             A.      MOTION TO COMPEL ARBITRATION

             Blue Roots argues the trial court erred in denying its renewed motion to compel

       arbitration. We agree.

             We review a trial court’s determination of the arbitrability of a dispute de novo.

       Satomi Owners Ass’n v. Satomi, LLC, 167 Wn.2d 781, 797, 225 P.3d 213 (2009). “‘The

       party opposing arbitration bears the burden of showing that the agreement is not

       enforceable.’” Id. (quoting Zuver v. Airtouch Commc’ns, Inc., 153 Wn.2d 293, 302, 103

       P.3d 753 (2004).

             Biochron advances three arguments why this matter should not be submitted to

       arbitration: (1) there was no enforceable agreement to arbitrate because the MOU is

       unenforceable, (2) the claims made by Blue Roots are outside the scope of the arbitration

       provision, and (3) Blue Roots waived arbitration by participating in litigation. We discuss

       each argument in turn.

             1.      The trial court erred when it inquired about the enforceability of the MOU

             The trial court concluded that to reach the arbitration clause, it first needed to

       determine if the MOU was enforceable. This was error.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              Where the party opposing arbitration does not bring a discrete challenge to the

       arbitration provision, but instead challenges the agreement as a whole, that challenge is

       for the arbitrator to decide. Townsend v. Quadrant Corp., 173 Wn.2d 451, 459-60, 268

       P.3d 917 (2012) (lead opinion of Alexander, J.) (citing McKee v. AT&T Corp., 164 Wn.2d

       372, 191 P.3d 845 (2008); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126

       S. Ct. 1204, 163 L. Ed. 2d 1038 (2006); Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

       388 U.S. 395, 87 S. Ct. 1801, 18 L. Ed. 2d 1270 (1967)), 464 n.4 (concurring/

       dissenting, Stephens, J.).

              Here, Biochron argued to the trial court that the agreement was an unenforceable

       agreement to agree. Thus, its challenge was to the MOU itself, it was not a discrete

       challenge to the arbitration provision. The trial court erred by overstepping its limited

       authority when it inquired into the enforceability of the MOU.3

              3
                We note that in its demand for arbitration, Blue Roots requested specific
       performance of the MOU. However, Blue Roots also sought additional relief on other
       theories, including breach of oral agreement/course of conduct, misappropriation of trade
       secrets, unjust enrichment, civil conspiracy, promissory estoppel, and an injunction.
       These additional theories are not dependent on an enforceable written contract. Nor, as
       explained later, is the arbitration provision limited to resolving a claimed breach of the
       MOU’s written terms.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              2.     The scope of the arbitration provision covers this dispute

              The court, not the arbitrator, decides if a claim or controversy is subject to an

       agreement to arbitrate. RCW 7.04A.060(4). Biochron suggests that the arbitration clause

       covers only disagreements about a “discrepancy of interpretation” of the MOU. CP at 33.

       While that is a plausible interpretation, Washington’s public policy favoring arbitration

       requires that we order arbitration “[i]f we can fairly say that the parties’ arbitration

       agreement covers the dispute.” Davis v. Gen. Dynamics Land Sys., 152 Wn. App. 715,

       718, 217 P.3d 1191 (2009); cf. Townsend v. Quadrant Corp., 153 Wn. App. 870, 887, 224

       P.3d 818 (2009), aff’d, 173 Wn.2d 451 (requiring arbitration unless the agreement to

       arbitrate “cannot be interpreted to cover a particular dispute”).

              Here, the arbitration provision expressly covers “any irresolvable disagreement

       between the parties.” CP at 51 (emphasis added). Given the context of the provision

       within the MOU (and the parties’ later performance of the purported joint venture

       agreement that would incorporate the nonconflicting terms of the MOU), we conclude

       that the scope of the arbitration provision fairly includes any disagreement between the

       parties as they worked toward consummating a final business agreement. This certainly

       includes the causes of action asserted in Blue Roots’s demand for arbitration.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              3.      Whether Blue Roots waived its right to arbitrate depends on whether
                      Biochron is prejudiced by Blue Roots’s delay in renewing its motion to
                      compel arbitration

              Biochron argues that even if the arbitration clause is enforceable, Blue Roots has

       waived its right to arbitrate.

              “We review de novo whether a party has waived the right to arbitration.”

       Jeoung Lee v. Evergreen Hosp. Med. Ctr., 195 Wn.2d 699, 705, 464 P.3d 209 (2020).

       To determine if a party has waived its right to arbitration, we consider three factors:

       “‘(1) knowledge of an existing right to compel arbitration, (2) acts inconsistent with that

       right, and (3) prejudice.’” Id. (internal quotation marks omitted) (quoting Adler v. Fred

       Lind Manor, 153 Wn.2d 331, 362, 103 P.3d 773 (2004)). The parties do not dispute that

       Blue Roots knew of its right to compel arbitration; we thus confine our discussion to the

       second and third factors.

                      1.     Acts inconsistent with right to arbitrate

              “Whether a party has waived its right [to arbitration] by its conduct depends on the

       particular facts of the case and is not susceptible to bright line rules.” Berman v. Tierra

       Real Est. Grp., LLC, 23 Wn. App. 2d 387, 400, 515 P.3d 1004 (2022). To show a party

       has acted inconsistent with its right to arbitrate, the opposing party must show “that as

       events unfolded, the party’s conduct reached a point where it was inconsistent with any

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       other intention but to forgo the right to arbitrate.” River House Dev., Inc. v. Integrus

       Architecture, PS, 167 Wn. App. 221, 238, 272 P.3d 289 (2012). The party asserting

       waiver “has a ‘heavy burden of proof.’” Id. at 237 (quoting Steele v. Lundgren, 85 Wn.

       App. 845, 852, 935 P.2d 671 (1997)).

              The trial court originally denied Blue Roots’s motion to compel arbitration because

       it concluded the MOU was an unenforceable contract and therefore there was no valid

       agreement to arbitrate. Blue Roots then, together with Biochron, engaged in discovery.

       But we have previously held that engaging in discovery is not inconsistent with

       arbitration, in which discovery is also available. See Lake Wash. Sch. Dist. No. 414 v.

       Mobile Modules Nw., Inc., 28 Wn. App. 59, 64, 621 P.2d 791 (1980); RCW 7.04A.170.

              We turn now to discuss cases that analyze whether a party seeking arbitration has

       acted inconsistent with an intent to arbitrate.

              In Lee, an employee filed a putative class action lawsuit against her former

       employer, alleging it failed to provide rest and meal breaks in accordance with

       Washington law. 195 Wn.2d at 700-01. As an affirmative defense, the employer asserted

       that the employee had failed to exhaust the grievance and arbitration process under her

       collective bargaining agreement, but it did not move to compel arbitration until the

       employee filed her second amended complaint, nearly one year after she filed her initial

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       complaint. Id. at 703-04. In the meantime, the employer had unsuccessfully opposed

       class certification, sought dismissal of the case, engaged in discovery, and opposed the

       employee’s motion to continue trial on the basis it was prepared for trial, all without

       moving to compel arbitration. Id. at 703. The trial court denied the motion to compel

       arbitration in part because the parties had been litigating the same issues for months, and

       the employer had not previously sought to enforce its right to arbitration. Id. at 704.

              Our Supreme Court affirmed, noting that while the employer listed arbitration in

       its answer, it participated in discovery and litigation and did not move to compel

       arbitration “until the third iteration of the complaint even though the complaint had

       almost identical claims throughout.” Id. at 708. The court also pointed to the fact that

       when the employee moved to continue trial, the employer opposed the continuance

       because it was ready to go to trial. Id. In addition to the employer acting inconsistently

       with its right to arbitrate, arbitration would severely prejudice the employee because she

       had spent a large amount of money on the litigation and it would give the employer the

       opportunity to relitigate class certification, an issue on which it had lost. Id.

              In River House, a developer sent a demand letter to an architect stating its intent to

       pursue arbitration regarding a contract dispute, but subsequently filed a complaint in

       superior court due to concerns about the statute of limitations. 167 Wn. App. at 225-26.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       In a joint case status report, the developer agreed to eliminate language that arbitration

       would be pursued, although it retained language about mediation. Id. at 227. During

       discovery, the developer failed to mention arbitration but extensively discussed its trial

       strategy. Id. at 228. Approximately nine months after it filed its complaint, the developer

       moved to stay the lawsuit and compel arbitration. Id. at 228-29. The trial court denied

       the motions, concluding the developer had waived its right to arbitrate. Id. at 229.

              We affirmed, noting that despite the developer’s “equivocation early in the

       process,” it chose to file a lawsuit instead of a demand for arbitration. Id. at 238. When it

       moved to compel arbitration, it had been participating in the lawsuit for months without

       making mention of arbitration. Id. at 238-39. We concluded that the developer’s conduct

       was inconsistent with any other intention but to forgo arbitration such that it had waived

       its contractual right. Id. at 239.

              By contrast, in Townsend, two families sued their home builder and its parent

       companies. 173 Wn.2d at 454. The builder moved to stay the proceedings and compel

       arbitration per its contracts with the families, while the parent companies moved for

       summary judgment on the basis they had no connection to the plaintiffs or their houses.

       Id. After the superior court denied the motions and consolidated the suit with those of

       two more families, the builder and its parent companies again moved to compel

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       arbitration. Id. at 454-55. The superior court again denied the motion, concluding there

       were issues of fact as to whether the families’ contracts with the builder were enforceable.

       Id.

              After concluding that the enforceability of the contract was an issue for the

       arbitrator because the families challenged the contracts as a whole rather than the

       arbitration clause, as discussed above, our Supreme Court found that the parent

       companies had not waived their right to arbitrate by first moving for summary judgment.

       Id. at 462. They had promptly moved to compel arbitration after their motion for

       summary judgment, which did not evince an intent to waive arbitration. Id. at 463.

              Here, unlike in Lee and River House, Blue Roots did not equivocate or delay in

       asserting its right to arbitrate. It filed a demand for arbitration before any litigation

       commenced. When Biochron filed this suit to enjoin arbitration, Blue Roots promptly

       asserted its right to arbitrate. When that was unsuccessful, Blue Roots mostly played

       defense to Biochron’s two partial summary judgment motions and its motion to compel

       discovery. The only affirmative motions Blue Roots filed were an unsuccessful motion to

       return its property and purported trade secrets, and a later motion to continue the trial date

       and associated deadlines. As in Townsend, this mostly defensive posture is not

       inconsistent with an intent to arbitrate the dispute.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              Biochron complains that Blue Roots did not appeal the initial denial of its motion

       to compel arbitration and extensively participated in discovery. We agree that the order

       was immediately appealable under RAP 2.2(a)(3), see Verbeek Props., LLC v. GreenCo

       Env’t, Inc., 159 Wn. App. 82, 86, 246 P.3d 205 (2010), and acknowledge that early

       appellate intervention would have curtailed the litigation below. But it is not enough that

       Blue Roots failed to exhaust a potential remedy, Biochron must show that Blue Roots’s

       actions were inconsistent with any other intention but to forgo the right to arbitrate. River

       House, 167 Wn. App. at 238. We conclude that Biochron does not show that Blue

       Roots’s actions evince that intention.

                     2.      Prejudice

              Biochron argues it will be prejudiced if the matter is sent to arbitration because,

       like the plaintiff in Lee, it has incurred substantial attorney fees and costs during

       litigation. We are not convinced. “‘Incurring legal expenses inherent in litigation,

       without more, is insufficient evidence of prejudice to justify a finding of waiver.’” Wiese

       v. CACH, LLC, 189 Wn. App. 466, 481, 358 P.3d 1213 (2015) (quoting PPG Indus., Inc.

       v. Webster Auto Parts Inc., 128 F.3d 103, 107 (2d Cir. 1997)). Further, unlike the

       plaintiff in Lee, Biochron was on notice that Blue Roots sought to arbitrate their dispute

       before Biochron incurred these expenses; indeed, Biochron filed this suit to enjoin Blue

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       Roots from proceeding with its arbitration demand. To the extent Biochron incurred

       additional expenses due to Blue Roots’s delay in reasserting its right to arbitration,

       Biochron fails to show that expense was due to Blue Roots’s conduct instead of its own

       offensive litigation, including two motions for partial summary judgment.

              Biochron’s strongest argument for waiver is that Blue Roots failed to renew its

       motion to compel arbitration until after Biochron filed its second partial summary

       judgment motion, which sought to have Blue Roots’s misappropriation of trade secrets

       claim dismissed. Indeed, Biochron succeeded in this motion. And if we reverse the trial

       court and send this dispute to arbitration, all of the trial court’s previous rulings are

       arguably void for lack of authority. See Lee, 195 Wn.2d at 708 (“[A]n effective attempt

       to use arbitration to relitigate a motion that was lost on the merits can support a finding of

       substantive prejudice.”).

              In this case, the trial court made two significant rulings. The first dismissed all of

       Blue Roots’s counterclaims against Mr. Gillingham and some of its counterclaims against

       Mr. Bennett and Mr. Rudeen. But during oral argument before this panel, Blue Roots

       said it was not seeking to overturn that ruling. Wash. Court of Appeals oral argument,

       Biochron, Inc. v. Blue Roots, LLC, No. 38834-4-III (Apr. 26, 2023), at 3 min., 2 sec.

       through 3 min., 41 sec. (on file with court).

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              The second ruling dismissed Blue Roots’s misappropriation of trade secrets claim.

       Blue Roots challenges this ruling in this appeal. If Blue Roots prevails in this challenge,

       Biochron will not have suffered prejudice because of Blue Roots’s delay. In other words,

       Biochron will have to litigate the misappropriation of trade secrets claim either in court or

       in arbitration. To determine whether Biochron was prejudiced by Blue Roots’s delay, it

       therefore is necessary for us to decide if the trial court erred in summarily dismissing Blue

       Roots’s misappropriation of trade secrets claim.

              B.     TRADE SECRETS

              Blue Roots contends the trial court erred in dismissing its misappropriation of

       trade secrets claim. We agree.

              We review a summary judgment de novo, “engag[ing] in the same inquiry as the

       trial court.” Clements v. Travelers Indem. Co., 121 Wn.2d 243, 249, 850 P.2d 1298

       (1993). A party moving for summary judgment must show there is no genuine issue of

       material fact and that they are entitled to judgment as a matter of law. CR 56(c). A

       material fact is one on which the outcome of the litigation depends. Clements, 121 Wn.2d

       at 249. In deciding a motion for summary judgment, the court views all facts and

       reasonable inferences therefrom in the light most favorable to the nonmoving party. Id.

                                                    22
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              1.     Trial court’s failure to consider evidence

              As a preliminary matter, Blue Roots contends the trial court erred by not

       considering earlier-filed declarations it cited and referenced in its response to Biochron’s

       second partial summary judgment. We first provide some context for this issue.

              In its memorandum response to Biochron’s motion, Blue Roots cited declarations

       it filed early in the litigation. But it did not provide a bench copy of those declarations.

       The court stated it did not review those documents because it believed they were not

       appropriately provided as required by local rule. The local rule is Spokane County Local

       Civil Rule (LCR) 40(b)(12)(D): “Any documents previously filed and cited for review by

       the court, shall be provided as bench copies.” LCR 56(c)(2)(G), relating specifically to

       dispositive motions, instructs that practitioners should comply with LCR 40(b)(12)

       regarding bench copies. LCR 56(c)(3) instructs that a failure to comply with the rule is

       governed by LCR 40(b)(6). LCR 40(b)(6) in turn provides that “[i]n the event a party

       fails to comply with LCR 40 or LCR 56, including . . . providing bench copies, . . . the

       court shall have the discretion to not consider the document or citation, strike the

       document, strike the hearing, continue the hearing, and/or impose terms or sanctions.”

       Thus, under the local rules, the trial court had the authority not to consider Blue Roots’s

       improperly presented evidence.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              Although the court had the authority not to consider the evidence, on summary

       judgment,

              the decision to exclude evidence that would affect a party’s ability to
              present its case amounts to a severe sanction. And before imposing a severe
              sanction, the court must consider the three Burnet[4] factors on the record:
              whether a lesser sanction would probably suffice, whether the violation was
              willful or deliberate, and whether the violation substantially prejudiced the
              opposing party.

       Keck v. Collins, 184 Wn.2d 358, 368-69, 357 P.3d 1080 (2015) (citation omitted).

              The trial court did not consider any of the Burnet factors on the record before

       deciding to disregard Blue Roots’s evidence. It therefore erred in refusing to consider

       Blue Roots’s previously filed evidence that was not provided as bench copies. In our de

       novo review of Biochron’s motion for partial summary judgment, we will consider all

       evidence incorporated by reference by Blue Roots in its response.

              2.       Summary judgment dismissing misappropriation of trade secrets claim

              Blue Roots claims Biochron misappropriated its trade secrets, namely, its cannabis

       cultivars and grow processes, and argues there are genuine issues of material fact

       precluding summary judgment on its claims. We agree.

              4
                  Burnet v. Spokane Ambulance, 131 Wn.2d 484, 933 P.2d 1036 (1997).

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              Under the Uniform Trade Secrets Act (UTSA), chapter 19.108 RCW, a “trade

       secret” is information that:

                     (a) Derives independent economic value, actual or potential, from
              not being generally known to, and not being readily ascertainable by proper
              means by, other persons who can obtain economic value from its disclosure
              or use; and
                     (b) Is the subject of efforts that are reasonable under the
              circumstances to maintain its secrecy.

       RCW 19.108.010(4). “We review interpretation of the UTSA de novo as a question of

       law, while we review whether specific information satisfies the statute’s definition of a

       ‘trade secret’ in any given case as a question of fact.” Lyft, Inc. v. City of Seattle, 190

       Wn.2d 769, 781, 418 P.3d 102 (2018). “‘[W]hen reasonable minds could reach but one

       conclusion, questions of fact may be determined as a matter of law.’” Money Mailer, LLC

       v. Brewer, 194 Wn.2d 111, 130, 449 P.3d 258 (2019) (internal quotation marks omitted)

       (alteration in original) (quoting Harvey v. County of Snohomish, 157 Wn.2d 33, 43, 134

       P.3d 216 (2006)).

                     a.      Independent economic value

              The trial court acknowledged there were genuine issues of material fact as to

       whether Blue Roots’s claimed trade secrets derived independent economic value from not

       being known to or readily ascertainable by others. We agree.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              Blue Roots introduced evidence that it engages in phenohunting, where it takes

       commonly available seeds, all with different genetic makeup, grows them into genetically

       unique plants, and then selects and propagates those plants with the most desirable

       phenotypical traits, a time- and resource-intensive process. It also introduced evidence

       that its grow processes use publicly available procedures and materials in novel and

       unique ways to maximize production.

              Biochron advances several unconvincing arguments for why Blue Roots’s cultivars

       do not constitute trade secrets. First, it argues that Blue Roots’s cultivars are not

       protectible because Blue Roots does not breed plants. But Blue Roots’s experts explain

       that each seed has a unique genetic makeup; thus, no other grower has seeds—and

       eventually plants—with exactly the same genotype as those grown by Blue Roots.

              Biochron next argues that phenohunting is not a proprietary process. But Blue

       Roots does not argue the process is a trade secret; it argues the cultivars are a trade secret.

       Finally, Biochron argues that the plants cannot be trade secrets because marijuana

       reproduces sexually. That may be relevant were Blue Roots claiming a trade secret in

       marijuana seeds, but it is not. It claims that its mother plants, grown from seed, selected

       through phenohunting, and used to asexually propagate genetically identical clones, are

       trade secrets. Such information is protectible as a trade secret. See 35 U.S.C. § 161

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       (“Whoever invents or discovers and asexually reproduces any distinct and new variety of

       plant . . . may obtain a patent therefor.”).

              Biochron also argues that Blue Roots’s growing procedures are not proprietary

       because they are publicly available. However, publicly available information can still

       constitute a trade secret when it is not readily ascertainable.5 See Boeing Co. v. Sierracin

       Corp., 108 Wn.2d 38, 50, 738 P.2d 665 (1987) (“[T]rade secrets frequently contain

       elements that by themselves may be in the public domain but together qualify as trade

       secrets.”). Biochron’s expert states that Blue Roots uses off-the-shelf nutrients and soil,

       but Blue Roots’s expert states that the specific combination of nutrients, timing of

       application, and application rates are different than those recommend by the manufacturer

       or used by other commercial cannabis operations with which he is familiar. Similarly,

       Biochron’s expert points to the fact that trellising plants is common, while Blue Roots’s

       expert describes Blue Roots’s trellising technique as novel and unique to Blue Roots. We

       agree with the trial court, the parties’ competing expert reports present genuine issues of

       material fact as to whether Blue Roots’s purported trade secrets derived independent

              5
                Indeed, Biochron’s own briefing suggests that Blue Roots’s grow process is not
       readily ascertainable. Biochron assembles various Internet sources to illustrate that the
       information is publicly available, but in doing so, picks and chooses discrete processes
       from four unrelated sources, one of which is about bed bugs rather than cannabis.

                                                      27
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       economic value from not being known to or readily ascertainable by others.

                     b.     Reasonable efforts to protect confidentiality

              The trial court found that the dispositive question on summary judgment was

       whether Blue Roots had made reasonable efforts to protect the confidentiality of its trade

       secrets. It resolved this question by noting that even if there was a partnership, there was

       no fiduciary requirement to protect the alleged trade secrets because “if something is

       disclosed, it’s not a trade secret.” Rep. of Proc. (Mar. 11, 2022) at 42. This

       oversimplified statement does not accurately reflect Washington law.

              There is no requirement for absolute secrecy under the UTSA. Precision

       Moulding & Frame, Inc. v. Simpson Door Co., 77 Wn. App. 20, 28, 888 P.2d 1239

       (1995); see also Machen, Inc. v. Aircraft Design, Inc., 65 Wn. App. 319, 329, 828 P.2d 73

       (1992), overruled on other grounds by Waterjet Tech., Inc. v. Flow Int’l Corp., 140

       Wn.2d 313, 996 P.2d 598 (2000). “‘[R]easonable use of a trade secret including

       controlled disclosure to employees and licensees is consistent with the requirement of

       relative secrecy.’” Machen, 65 Wn. App. at 327 (quoting UTSA § 1, cmt., 14 U.L.A.

       438, 439 (1990)). The trial court erred by concluding that because Blue Roots had

       disclosed its alleged trade secrets to Biochron, it could not claim them as trade secrets.

                                                    28
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              Blue Roots argues that the parties’ joint operations formed a partnership; thus, by

       virtue of Biochron’s fiduciary duties, Blue Roots made reasonable efforts to maintain the

       confidentiality of its trade secrets when it disclosed them in the context of their business

       arrangement. We agree that, viewing the facts in the light most favorable to Blue Roots,

       a reasonable mind could conclude that their disclosure of trade secrets was made with

       efforts that were reasonable under the circumstances to maintain its secrecy. Importantly,

       a trier of fact could find that Blue Roots’s (albeit late) requirement for Biochron’s

       employees to sign an intellectual property and nondisclosure agreement combined with

       Biochron’s willingness, evinced a mutual understanding that Blue Roots’s processes and

       marijuana strains were proprietary and protected.

              In addition, Biochron may have had a fiduciary duty not to disclose Blue Roots’s

       trade secrets. Under the “Revised Uniform Partnership Act” (RUPA), chapter 25.05

       RCW, “the association of two or more persons to carry on as co-owners a business for

       profit forms a partnership, whether or not the persons intend to form a partnership.”

       RCW 25.05.055(1). RUPA also modifies the common law duties partners owe each other

       and the partnership, limiting them to the duty of loyalty and the duty of care, as defined

       by the statute. RCW 25.05.165(1). The duty of loyalty includes the duty “[t]o account to

       the partnership and hold as trustee for it any property, profit, or benefit derived by the

                                                     29
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       partner in the conduct . . . of the partnership business or derived from a use by the partner

       of partnership property.” RCW 25.05.165(2)(a).

              Even if no partnership was formed, the record suggests that Biochron was acting

       as Blue Roots’s agent during their business relationship. “An agency relationship arises

       when one party acts at the instance of, and under the direction and control of, another.”

       Cascade Auto Glass, Inc. v. Progressive Cas. Ins. Co., 135 Wn. App. 760, 765, 145 P.3d

       1253 (2006). Blue Roots provided evidence that Biochron began using Blue Roots’s

       grow processes and marijuana strains at Blue Roots’s instance and under Blue Roots’s

       direction and control, which Biochron does not dispute. An agent has a duty not to use or

       disclose its principal’s trade secrets even after the termination of the agency relationship.

       Ed Nowogroski Ins., Inc. v. Rucker, 137 Wn.2d 427, 437, 971 P.2d 936 (1999); see also

       RESTATEMENT (THIRD) OF AGENCY § 8.05 (“An agent has a duty . . . not to use property

       of the principal [and] not to use or communicate confidential information of the principal

       for the agent’s own purposes . . . .”).

              Blue Roots introduced evidence that it relied on its business relationship with

       Biochron to maintain the secrecy of its alleged trade secrets. Blue Roots’s lead grower

       stated in a declaration: “When we thought we had acquired Biochron, we shared the Blue

       Roots Standard Operating Procedures with certain Biochron representatives via a

                                                    30
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       password-protected Google drive.” CP at 609. One of Blue Roots’s owners similarly

       declared that Blue Roots’s delivery of its mother plants to Biochron

              were not one-off purchases by Biochron. They were entirely dependent on
              the overall deal that the companies reached with one another and had been
              operating under for several months. Access and use of the mother plants
              was entirely dependent on the parties’ overall deal, which included
              Biochron’s obligation to use Blue Roots[’s] proprietary grow methods and
              then sell the harvested products exclusively to Blue Roots.

       CP at 642. This is the sort of controlled disclosure that can constitute reasonable efforts

       to maintain the secrecy of trade secrets. See Machen, 65 Wn. App. at 327. Whether it did

       under these circumstances is a question of fact that cannot be resolved on summary

       judgment.

              Biochron relies on Pacific Title, Inc. v. Pioneer National Title Insurance Co.,

       33 Wn. App. 874, 658 P.2d 684 (1983), to argue that Blue Roots cannot claim a trade

       secret in information it disclosed to Biochron without telling Biochron the information

       was confidential. Pacific Title is not helpful to Biochron.

              In Pacific Title, both parties were title insurance companies. Id. at 875. They

       entered into a 10-year contract in which Pacific acted as the agent of Pioneer, issuing title

       insurance policies in Pioneer’s name and retaining 87.5 percent of the premiums

       collected. Id. at 875-76. Pacific sent Pioneer copies of each policy it issued in Pioneer’s

       name, which Pioneer later provided to a subsequent agent after its contract with Pacific

                                                    31
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

       ended. Id. at 876. Pacific sued for conversion and misappropriation of the title

       information it produced, and the trial court dismissed the complaint. Id. at 875.

              We affirmed, noting that

              [a]lthough an agent may not use or disclose confidential information
              obtained during the course of his employment for the principal, a principal
              may use information developed by the agent during the agency in the scope
              of work to which the agency relates and for which the principal has paid the
              agent.

       Id. at 879 (citations omitted). Because the title information had been “transmitted

       pursuant to contract in circumstances where the originator knows or should know that the

       recipient has a legitimate business use for the information,” we required Pacific to show it

       had “secure[d] confidentiality by express or implied provision of the contract.” Id. We

       reasoned that in such a situation, an “originator of information cannot claim a property

       right in it as against one to whom he has disclosed it without bringing to the latter’s

       attention his expectation that the information will be held in confidence and not used in

       competition.” Id. Because the parties did not address their rights to the information

       under the contract, Pacific did not have an exclusive right to it. Id. at 880.

              Pacific Title is not analogous to these facts. Biochron was not the principal of

       Blue Roots and thus did not have the right to use information developed by Blue Roots, as

       Pioneer did for Pacific.

                                                     32
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

                      c.     Misappropriation

                Biochron asserts that Blue Roots has no evidence that Blue Roots is currently

       using its grow processes. But Blue Roots did present evidence that Biochron continued

       using Blue Roots’s grow processes after ending their business relationship. Biochron

       further argues that it legitimately purchased Blue Roots’s mother plants. But Blue Roots

       presented evidence that the purchase was made in the context of the parties’ business

       relationship, evidenced by their sale at significantly below market value in order to

       comply with Washington regulations that transferred cannabis plants must have a

       recorded sale price. Again, this competing evidence creates a genuine issue of fact

       precluding summary judgment.

                Because we conclude that the trial court erred in dismissing Blue Roots’s

       misappropriation of trade secrets claim, Biochron is not prejudiced by arbitrating the

       claims that survived the first partial summary judgment order in arbitration rather than

       court.

                                              CONCLUSION

                The trial court erred in denying Blue Roots’s renewed motion to compel

       arbitration. Blue Roots did not waive its right to arbitrate because its conduct was not

       inconsistent with an intent to arbitrate its claims.

                                                     33
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

              Biochron is not prejudiced by arbitration being ordered. Biochron would have had

       to litigate the same claims in trial court as it now must litigate in arbitration.

              We remand with directions for the trial court to compel arbitration. The order to

       compel should state that Blue Roots may not assert claims that were dismissed by the trial

       court’s first order granting partial summary judgment.

                                                           ________________________________
                                                           Lawrence-Berrey, J.

       I CONCUR:

       __________________________________
       Pennell, J.

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

                                           APPENDIX

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

                                           36
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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

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       No. 38834-4-III
       Biochron, Inc. v. Blue Roots, LLC

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                                             No. 38834-4-III

              FEARING, C.J. (concurring) — I write separately because the majority opinion

       conflates the concepts of waiver and estoppel rather than analyzing each separately.

       Waiver is the intentional and voluntary relinquishment of a known right. In re of Estate

       of Petelle, 23 Wn. App. 2d 203, 212, 515 P.3d 548 (2022). Estoppel entails justifiable

       reliance on an adversary’s conduct in such a manner as to change one’s position for the

       worse. Saunders v. Lloyd’s of London, 113 Wn.2d 330, 340, 779 P.2d 249 (1989);

       Buchanan v. Switzerland General Insurance Co., 76 Wn.2d 100, 108, 455 P.2d 344

       (1969). Waiver and estoppel are distinct concepts with differing elements. Schuster v.

       Prestige Senior Management, LLC, 193 Wn. App. 616, 631, 376 P.3d 412 (2016).

       Strictly defined, waiver describes the act, or the consequences of the act, of one party

       only, while estoppel exists when the conduct of one party has induced the other party to

       take a position that would result in harm if the first party’s act were repudiated. Pitts v.

       American Security Life Insurance Co., 931 F.2d 351, 357 (5th Cir. 1991). Estoppel

       involves some element of reliance or prejudice on the part of the party asserting estoppel.

       Pitts v. American Security Life Insurance Co., 931 F.2d 351, 357 (5th Cir. 1991). Waiver
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        No. 38834-4-III (concurrence)
        Bichron, Inc. v. Blue Roots, LLC

       requires no reliance. Schuster v. Prestige Senior Management, LLC, 193 Wn. App. 616,

       632 (2016).

              Biochron, Inc. only contends that Blue Roots, LLC waived the right to arbitration.

       Therefore, I would not examine whether Biochron relied on conduct or statements of

       Blue Roots or whether Biochron suffered any prejudice. I agree with the majority’s

       astute analysis and implied ruling that Blue Roots never intentionally relinquished the

       right to arbitration.

              I do not blame the majority author for conflating the concepts of waiver and

       estoppel. For some unknown and odd reason, all Washington decisions, if not also all

       foreign decisions, meld the two concepts in the context of arbitration. Schuster v.

       Prestige Senior Management, LLC, 193 Wn. App. 616, 632-34 (2016).

              I concur:

                                                 ______________________________
                                                 Fearing, C.J.

                                                    2