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Old Dominion Univ. Research Found v. Aqua Terra Int'l, LLC

United States District Court, E.D. Virginia, Norfolk Division

November 5, 2014

OLD DOMINION UNIV. RESEARCH FOUND., Plaintiff-Counterclaim Defendant,
v.
AQUA TERRA INT'L, LLC, Defendant-Counterclaim Plaintiff.

OPINION AND ORDER

HENRY COKE MORGAN, Jr., District Judge.

This matter came before the Court on Plaintiff-Counterclaim Defendant Old Dominion University Research Foundation's ("ODURF") Motion to Strike Defendant-Counterclaim Plaintiff Aqua Terra International LLC's ("Aqua Terra") Answer, Doc. 8, and Motion to Dismiss the Counterclaim, or in the alternative, Motion for a More Definite Statement, Doc. 10. A hearing was held on October 27, 2014. Ruling from the bench, the Court DENIED the Motion to Dismiss, GRANTED the Motion for a More Definite Statement, and GRANTED the Motion to Strike in Part. The Court now issues this Opinion and Order explaining its reasoning.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

a. Factual Background[1]

This dispute arises out of a soured contractual relationship. Aqua Terra alleges that ODURF made fraudulent statements to induce Aqua Terra to enter into an Exclusive License Agreement and Services Agreement ("the Agreements"). Aqua Terra alleges that ODURF made false representations concerning its ability to produce valuable "Specialty Chemicals." Countercl. ¶ 7. ODURF's representations included, inter alia, that:

(a) it had "establish[ed] beyond reasonable doubt that [its production facility] is an effective system to convert vegetable oils... to biodiesel and high-value chemicals";
(b) it could produce in excess of 3, 000 gallons of the Specialty Chemicals during an 18-month period;
(c) these Specialty Chemicals were worth "$1, 000 per gallon or more"; and
(d) the "process is what generates $8 million dollars annually. We can scale that up by 100X by building a much larger [plant]..."

Id. ¶ 8. Aqua Terra alleges that these fraudulent misrepresentations and omission of critical facts induced it to enter into the Agreements. Id . ¶ 12. Aqua Terra alleges that ODURF knew that it had not developed the necessary technology to perform its obligations under the Agreements. Id . ¶ 13.

Aqua Terra alleges that ODURF held out Dr. Patrick Hatcher, an Old Dominion University ("ODU") professor as its agent with actual and/or apparent authority to discuss the disputed technology and negotiate the Agreements. Id . ¶ 20. Aqua Terra alleges that ODURF was seeking capital to fund Dr. Hatcher's research and continued experimentation, but was holding the technology out as ready for commercialization when it was not. Id . ¶ 27.

ShellTek International ("ShellTek"), a corporation which would later become a member of Aqua Terra, began meeting with Dr. Hatcher and ODURF in June 2012. Id . ¶ 32. ODURF made representations concerning the status of the technology, and the readiness of the technology to be used to prepare a commercialized product; however, the Counterclaim does not contain when and who specifically made these statements. Id . ¶¶ 33-41. However, the Counterclaim does contain allegations that Dr. Hatcher made numerous statements concerning the status of the technology, and included copies of these e-mails with the Counterclaim. Id . ¶ 42, Exs. 1-11. Additionally, Aqua Terra alleges that the representations that ODURF made in the Services Agreement were false, because ODURF "had not developed the Technology to create the Specialty Chemicals... or that the process was not ready for commercialization as [ODURF] had falsely represented." Id . ¶ 45. In August and September 2012, Dr. Hatcher also provided Aqua Terra with financial information estimating the potential value and profitability of the project, and informed Aqua Terra that he had run out of funding for the project. Id . ¶ 53.

Once production began, Aqua Terra discovered "that the system did not work as promised, the Technology did not exist, and that the Production Facility was incapable of producing the Specialty Chemicals." Id . ¶ 57. When Aqua Terra attempted to follow up on the deficiencies, it did not receive satisfactory responses from ODURF. Id . ¶¶ 58-61. Aqua Terra alleges that ODURF knew that it could not produce the Specialty Chemicals, the facility could not operate on the production schedule outlined in the Services Agreement, and ODURF withheld a 115 page report indicating that there were production ...


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