Exergy Development Group of Idaho, LLC v. Fagen, Inc. et al

Filing 37

MEMORANDUM DECISION AND ORDER It is hereby ORDERED that Defendants' Motions to Dismiss (Dkt. 19 , 24 ) are GRANTED. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

EXERGY DEVELOPMENT GROUP
OF IDAHO, LLC, and Idaho limited
liability company,
Case No. 1:15-CV-00566-EJL-CWD

Plaintiff,

MEMORANDUM DECISION AND
ORDER

v.
FAGEN, INC., a Minnesota corporation;
MIDWEST ETHANOL TRANSPORT,
LLC, a Minnesota limited liability
company, BIG BLUE WIND FARM,
LLC, a Minnesota limited liability
company, and JOHN AND JANE DOES
1-10,
Defendants.

INTRODUCTION
Pending before the Court are Defendants' Motions to Dismiss. (Dkt. 19, 24.) The parties
filed responsive briefing and the motions are now ripe. Having fully reviewed the record herein,
the Court finds that the facts and legal arguments are adequately presented in the briefs and
record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively
finds that the decisional process would not be significantly aided by oral argument, the Motions
shall be decided on the record before this Court without oral argument. The Court grants
Defendants’ Motions.

MEMORANDUM DECISION AND ORDER - 1

FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff, Exergy Development Group of Idaho, LLC (“Exergy”), is in the business of
renewable energy. (Dkt. 13.) Between 2006 and 2012, Exergy was developing and assembling a
wind-power renewable energy generation project in Minnesota, known as the Big Blue Project.
(Dkt. 13.) Defendant, Big Blue Wind Farm, LLC (“Big Blue”), owned all assets of that project.
(Dkt. 13.)1 From 2006 to 2011, Exergy advanced money to Big Blue to fund development of the
project. (Dkt. 13.) Promissory Notes were signed annually from 2006 to 2011 memorializing the
amounts Exergy advanced for development of the project. (Dkt. 13.) No promissory note was
signed in 2012. (Dkt. 13.)
Defendant Fagen, Inc. (“Fagen”) began advancing funds to Exergy for the Big Blue
Project in 2011 through a series of Term Loans. (Dkt. 13.) In 2012, Exergy requested more
financing, which led to Fagen and Exergy signing a Purchase Agreement, among other
documents. (Dkt. 13.) The Agreement required Exergy to convey 99 of the 100 units of
membership in Exergy Minnesota in exchange for Fagen reducing the principal and accrued
interest due under the Term Loans by $11,447,503.03. In addition to the Purchase Agreement,
the parties also signed a Member Control Agreement that gave Exergy a repurchase option. (Dkt.
13.) When Exergy did not exercise the repurchase option, the final unit of Exergy Minnesota was
transferred and Fagen assumed managerial control over Exergy Minnesota and ownership of Big

1

Big Blue Wind Farm, LLC was wholly owned by Exergy Minnesota, which was a
wholly owned subsidiary of Exergy during this time frame.

MEMORANDUM DECISION AND ORDER - 2

Blue. (Dkt. 13.) Fagen transferred ownership of Big Blue to Defendant Midwest Ethanol
Transport, LLC (“MET”) in late 2012.
Fagen and Exergy entered into a Memorandum of Understanding (“MOU”) on December
20, 2011, which related to several projects including the Big Blue Project.2 (Dkt. 13.) In the
MOU, Exergy agreed to continue using Fagen as the contractor on its projects. (Dkt. 13, 19.)
Exergy then began developing a collection of projects with Fagen as its contractor.3 (Dkt. 13.)
Fagen ceased performance on further financing under the MOU when Exergy failed to pay Fagen
for its work. (Dkt. 13, 19.) Fagen and MET sued Exergy in Minnesota federal district court for
its failure to pay, which remains pending4.
On December 4, 2015, Exergy filed a Complaint in this matter and then later filed its
Amended Complaint alleging: (1) breach of contract against all named defendants; (2) unjust
enrichment/quantum meruit against all defendants; (3) breach of contract against Fagen; and (4)
breach of fiduciary duties against Fagen. Defendants filed a Motion to Dismiss all counts on
various theories, which the Court now takes up.

2

The MOU also identified the Idaho Six Winds Project and seven Exergy Project
Companies, including Lava Beds Wind Park, LLC, Notch Butte Wind Park, LLC, Cottonwood
Wind Park, LLC, Deep Creek Wind Park, LLC, Salmon Creek Wind Park, LLC, Rogerson Flats
Wind Park, LLC, and Jack Ranch Wind Park, LLC. (Dkt. 19).
3

Those projects included Jack Ranch and the Lava Beds project.

4

Fagen, Inc. v Exergy Development Group of Idaho, LLC, 12-cv-2703 (D. Minn.).

MEMORANDUM DECISION AND ORDER - 3

DISCUSSION
1.

Defendants' Motion to Dismiss Breach of Contract claim under 12(b)(3)
In Count I, Exergy claims Defendants committed a breach of contract by failing to pay

back the full principal and interest owed under the Promissory Notes when Fagen transferred
ownership of Big Blue to MET.5 Defendants seek to dismiss Exergy's claim under Rule 12(b)(3)
arguing the venue provision of the Promissory Note requires any claims arising from the Notes
be brought in a state court in Ada County. (Dkt. 19, 24.) In reply, Exergy contends venue is
proper because Idaho law will be applied, this Court is in Ada County, and the venue provision
does not limit venue to a state court. (Dkt. 25, 26.)
A. Standard of Law
"A motion to enforce a forum selection clause is treated as a motion to dismiss pursuant
to Rule 12(b)(3); pleadings need not be accepted as true, and facts outside the pleadings may be
considered." Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir. 2009)(citing Argueta v. Banco
Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996)).
"[B]ecause enforcement of a forum clause necessarily entails interpretation of the clause
before it can be enforced, . . . federal law applies to interpretation of forum selection clauses."

5

Exergy relies on the following section of the Promissory Note signed on
December 30, 2008: “On the earlier of 1 February 2019 or on any change in ownership of
greater than fifty percent (50%) member or ownership interest in Big Blue Windfarm, any
of its affiliates or successors, the Debtor shall pay to the Creditor all remaining principal
and interest balances due under this Note.” (Dkt. 1.)

MEMORANDUM DECISION AND ORDER - 4

Doe v. Network Solutions, LLC, 2008 WL 191419 *5 (quoting Manetti-Farrow, Inc. v. Gucci
America, Inc., 858 F.2d 509, 513 (9th Cir. 1988)).
Under federal law, the general principles for interpreting contracts guide the court and
"[c]ontract terms are to be given their ordinary meaning . . . [and w]henever possible, the plain
language of the contract should be considered first." Klamath Water Users Protective Ass'n v.
Patterson, 204 F.3d 1206, 1210 (9th Cir. 1999)). "The fact that the parties dispute a contract's
meaning does not establish that the contract is ambiguous; it is only ambiguous if reasonable
people could find its terms susceptible to more than one interpretation." Id. at 1210 (citing
Kennewick Irrigation Dist. v. United States, 880 F.2d 1018, 1032 (9th Cir. 1989)).
“A contractual forum selection clause is 'prima facie valid and should be enforced unless
enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances.'"
Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 763 (9th Cir. 1989)(quoting M/S Bremen
v. Zapata Offshore Co., 407 U.S. 1, 10 (1972)).
B. Analysis
Before the Court is a question of interpretation. The forum selection clause reads: “The
courts of Idaho shall have exclusive jurisdiction, and Ada County is the proper venue." (Dkt. 1,
Ex. A.)
Exergy contends the words "the courts of Idaho" refers to both federal and state courts in
Idaho while Defendants argue the phrase refers only to state courts in Idaho. (Dkt. 19, 24, 25,
26.) The Court holds that the forum selection clause refers only to state courts in Idaho.

MEMORANDUM DECISION AND ORDER - 5

In Doe 1, the issue was the meaning of a forum selection clause that read in pertinent
part, the parties "expressly agree that exclusive jurisdiction for any claim or dispute . . . resides in
the courts of Virginia." 552 F.3d at 1080. On appeal, the court rejected the district court's
interpretation of the clause as referring to state and federal courts. The Doe 1 court interpreted
the contractual clause by focusing on the word “of.” Id. at 1081. Which Black’s Law Dictionary
defines as "denoting that from which anything proceeds; indicating origin, source, descent, and
the like. . . ." Id. at 1081(quoting Black's Law Dictionary 1080 (6th ed. 1990)). Looking at the
plain meaning, the court reasoned the phrase "courts 'of' Virginia" refers to courts proceeding
from, with their origin in, Virginia -- i.e., the state courts of Virginia. Federal district courts, in
contrast, proceed from, and find their origin in, the federal government." Id. at 1082.6
The forum selection clause at issue in this case parallels the language of the forum
selection clause in Doe 1. Applying the Doe 1 court’s reasoning, this Court finds "the courts of
Idaho" refers to Idaho state courts and not to federal courts in Idaho. "[W]hen the proper forum is
a state court, upon the determination that the case was not brought in the proper forum, the
court's only option is to dismiss the case." Professional Courier & Logistics, Inc. v. NICA, Inc.,
2012 WL 1120675, at *4 (E.D. Cal. 2012).

6

See also Dixon v. TSE Int'l Inc., 330 F.3d 396, 398 (5th Cir. 2003)(interpreting "Courts
of Texas, U.S.A." to mean Texas state courts; holding that federal district courts are not of Texas,
but in Texas); LFC Lessors, Inc. v. Pac. Sewer Maint. Corp., 739 F.2d 4, 7 (1st Cir. 1984).

MEMORANDUM DECISION AND ORDER - 6

Accordingly, Defendants’ Motions to Dismiss Count I of Exergy's Amended Complaint
under Rule 12(b)(3) are granted.7
2.

Defendants' Motions to Dismiss Unjust Enrichment/Quantum Meruit Claim (Count
II)

In Count II, Exergy argues "Defendants have been unjustly enriched at the expense of
Exergy to the extent Defendants received the use and/or benefit of the funds advanced by Exergy
on behalf of the Big Blue Project during 2012, distinct from those obligations contained in the
Promissory Notes executed between 2006 and 2011." (Dkt. 13.) Defendants have brought two
separate motions to dismiss this claim. (Dkt. 19, 24.)

A. Defendants Fagen’s and MET’s Motion under Res Judicata
Fagen and MET assert Exergy's unjust enrichment claim should be dismissed under res
judicata because the claim is identical to Exergy’s counterclaim against them in a case between
the parties pending in Minnesota. (Dkt. 19.) Defendants contend even though there is no final
judgment in the Minnesota case, the Court should dismiss the claim in favor of judicial economy
and to avoid potential inconsistent results or duplicate recoveries for Exergy. (Dkt 19.)
Exergy opposes Defendants' motion arguing that res judicata cannot apply because there
is no final judgment in the Minnesota case. (Dkt. 25.) In addition, Exergy asserts the Court

7

Because the Court finds that the breach of contract claim under the Promissory Notes
must be dismissed under Rule 12(b)(3), it need not address Defendants' alternative argument that
Defendants are not parties to the Notes.
MEMORANDUM DECISION AND ORDER - 7

should not dismiss its claim as duplicative because its unjust enrichment claim in the case before
this Court is different than its unjust enrichment claim in the Minnesota case. (Dkt. 25.)

i.

Standard of Law

"Res judicata is comprised of claim preclusion (true res judicata) and issue preclusion
(collateral estoppel)." Hindmarsh v. Mock, 57 P.3d 803, 805 (Idaho 2002)(citing Aldape v. Akins,
668 P.2d 130, 132 (Id. Ct. App. 1983)). "[I]n order for res judicata to bar litigation, the
following requirements must be met: (1) the same claim or cause of action arising out of the
same facts must be involved in both suits; (2) there must be a final judgment on the merits in the
prior action; and (3) the parties in the instant action must be the same as or in privity with the
parties in the prior action in question." Coeur d'Alene Tribe v. Asarco Inc., 280 F. Supp.2d 1094,
1118 (D. Idaho 2003)(citations omitted). "The purposes of these judicially created rules are to
conserve judicial resources, protect litigants from multiple lawsuits, and foster certainty and
reliance in legal relations." Coeur d'Alene Tribe, 280 F. Supp.2d at 1118.8

8

The Idaho Supreme Court has also recognized that the three fundamental purposes
served by res judicata are:
First, it "[preserves] the acceptability of judicial dispute resolution against the
corrosive disrespect that would follow if the same matter were twice litigated to
inconsistent results." Second, it serves the public interest in protecting the courts
against the burdens of repetitious litigation; and third, it advances the private
interest in repose from the harassment of repetitive claims. The doctrine of
claim preclusion bars not only subsequent relitigation of a claim previously
asserted, but also subsequent relitigation of any claims relating to the same
cause of action which were actually made or which might have been made.

MEMORANDUM DECISION AND ORDER - 8

ii.

Analysis

The Court denies the Defendants' request to dismiss Count II under a theory of res
judicata because there is no final judgment on the merits; the case in Minnesota is still pending.
The Court, however, will exercise its discretion and broad latitude to dismiss Exergy's claim for
unjust enrichment because the Court finds the claim is duplicative to the claim in the Minnesota
case.
"[A] federal suit may be dismissed for reasons of wise judicial administration, as a
general rule, whenever it is duplicative of a parallel action already pending in another federal
court." Ridge Gold Standard Liquors, Inc. v. Joseph E. Seagram & Sons, Inc., 572 F.Supp. 1210,
1213 (N.D. Ill. 1983)(citing Colorado River Water Conservation District v. United States, 424
U.S. 800, 817-18 (1976)). "[D]istrict courts are to be accorded a great deal of latitude and
discretion" when determining if a suit is duplicative of another. Id. at 1213. "Generally a suit is
duplicative if the 'claims, parties, and available relief do not significantly differ between the two
actions.'" Cooper v. City of Tucson, 2015 WL 1522198, at *3 (D. Ariz. 2015)(quoting Foster v.
Arcata Associates, Inc., 772 F.2d 1453, 1458 (9th Cir. 1985))(internal quotations omitted).

Lohman v. Flynn, 78 P.3d 379, 386 (Idaho 2003).

MEMORANDUM DECISION AND ORDER - 9

Here, the parties are the same in the two suits9 and the relief available and pled for is
identical. Exergy is making the same claim for unjust enrichment in this case, in an amount of
$5,266,831.82, as it incorporated in a broader claim on its face in the Minnesota case.
Exergy's Amended Complaint in this case reads: "Defendants have been unjustly
enriched at the expense of Exergy to the extent Defendants received the use and/or benefit of the
funds advanced by Exergy on behalf of the Big Blue Project during 2012, distinct from those
obligations contained in the Promissory Notes executed between 2006 and 2011." (Dkt. 13.) In
its Motion for Summary Judgment in the Minnesota case, Exergy states: "Exergy invested six
years and in excess of $18 million dollars in costs developing the Big Blue Project. Fagen took
ownership of the Big Blue Project, but failed to pay Exergy back any of those costs. As such,
Fagen is liable to Exergy for these costs in unjust enrichment." 10 (Dkt. 19, Ex. AA, p. 43.)
"Included within this amount is approximately . . . (b) $5,266,831.82 in funds advanced to/on
behalf of Big Blue Windfarm, LLC in 2012." (Dkt. 19, Ex. AA, p. 18, ¶ 76.)

9

The Court acknowledges that Big Blue is not a party to the Minnesota cause of action;
however, this does not change the Court’s analysis.The Court is not dismissing the unjust
enrichment claim against Big Blue as duplicative, but is only dismissing the unjust enrichment
claim against Fagen and MET under this theory and they are the same parties as in the Minnesota
case.
10

The Court takes judicial notice of the filings from the Minnesota case submitted as
Exhibits with Defendants Motion to Dismiss. "The Ninth Circuit has consistently held that courts
may take judicial notice of documents filed in other court proceedings to establish the fact of
such litigation and face of averments made, but not to establish the truth of the matters asserted."
Thomason v. Moeller, 2017 WL 241322, at *5 (D. Idaho 2017)(citing M/V Am. Queen v. San
Diego Marine Constr. Corp., 708 F.2d 1483, 1491 (9th Cir. 1983)). See also, U.S. v. Wilson, 631
F.2d 118, 119 (9th Cir. 1980).
MEMORANDUM DECISION AND ORDER - 10

In the interest of judicial economy and wise judicial administration, the Court therefore
grants Defendants Fagen’s and MET’s Motion to Dismiss Count II as duplicative. The cause of
action in Minnesota preceded this case and is further along. The claim should be litigated in one
case so as to avoid a duplicative award or any inconsistency with the Minnesota court’s findings.

B. Defendant Big Blue’s Motion under Rule 12(b)(6)
The above claim in Count II is also raised against Defendant Big Blue. (Dkt. 13.) Big
Blue contends the Court should dismiss Count II under Rule 12(b)(6) for four reasons. First, Big
Blue argues that it was not mentioned in the unjust enrichment claim, which was pled before it
was added as a defendant and there are no factual or legal allegations that it was unjustly
enriched. (Dkt. 24.) Second, Big Blue maintains Count II does not "firmly and clearly state" an
unjust enrichment claim as required by Rule 8. (Dkt. 24.) Third, Big Blue asserts Exergy's unjust
enrichment claim is barred because Exergy has a legal remedy precluding equitable relief with its
breach of contract claim. (Dkt. 24.) Fourth, Big Blue argues to prove unjust enrichment Exergy
must prove Big Blue acted unfairly or wrongfully and no such allegation was made or exists.
(Dkt. 24.)
Exergy contends Big Blue's motion to dismiss should be denied because its claim is
sufficiently pled under Rule 8; it has stated enough facts to give rise to a claim for relief that is
plausible on its face; its claim is plausible as an alternative theory of recovery if the breach of
contract claim fails; and Big Blue misstates the elements of an unjust enrichment claim. (Dkt.
26.)

MEMORANDUM DECISION AND ORDER - 11

i.

Standard of Law

A motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the
sufficiency of a party’s claim for relief. When considering such a motion, the Court’s inquiry is
whether the allegations in a pleading are sufficient under applicable pleading standards. Federal
Rule of Civil Procedure 8(a) sets forth minimum pleading rules, requiring only a “short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
In general, a motion to dismiss will only be granted if the complaint fails to allege
“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged. The plausibility standard is not akin to a ‘probability requirement,’ but it
asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (citations omitted). Although “we must take all of the factual
allegations in the complaint as true, we are not bound to accept as true a legal conclusion
couched as a factual allegation.” Twombly, 550 U.S. at 555. Therefore, “conclusory allegations
of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to
state a claim.” Caviness v. Horizon Comm. Learning Cent., Inc., 590 F.3d 806, 811-12 (9th Cir.
2010) (citation omitted).

"A prima facie case of unjust enrichment consists of three

elements: (1) there was a benefit conferred upon the defendant by the plaintiff; (2) appreciation
by the defendant of such benefit; and (3) acceptance of the benefit under circumstances that
would be inequitable for the defendant to retain the benefit without payment to the plaintiff for
the value thereof." Headwaters Const. Co. v. National City Mortg. Co., 720 F. Supp.2d 1182,
1187 (D. Idaho 2010).
MEMORANDUM DECISION AND ORDER - 12

"Unjust enrichment does not apply 'where there is an enforceable express contract
between the parties which covers the same subject matter.'" U.S. Welding, Inc. v. Battelle Energy
Alliance, LLC, 728 F. Supp.2d 1110, 1116 (D. Idaho 2010)(quoting Vanderford Co., Inc. v.
Knudson, 165 P.3d 261, 271 (Idaho 2007)). However "[t]he mere existence of a contract
governing the dispute does not automatically invalidate an unjust enrichment alternative theory
of recovery. A theory of unjust enrichment is unavailable only to a plaintiff if that plaintiff has
already received the benefit of [its] contractual bargain." Adelman v. Christy, 90 F. Supp.2d
1034, 1045 (D. Arizona 2000).

ii.

Analysis

The Court acknowledges that Exergy's pleading in the alternative is not improper under
Federal Rule 8.11 In order for the Court to determine if unjust enrichment is an appropriate
remedy it must first consider if there is an enforceable contract that covers the same subject
matter that offers a remedy to the plaintiff. See U.S. Welding, Inc., 728 F. Supp.2d at 1116.
Because the Court has found that the breach of contract claim under the Promissory
Notes was brought in the wrong court and must be dismissed, the unjust enrichment claim out of
the same must follow. As such, the Court grants Big Blue's Motion to Dismiss as to Count II.

11

"[A]n unjust enrichment claim may be brought in the alternative, subject to a single
recovery, so long as the unjust enrichment claim does not seek to relieve the plaintiff of the
effects of an express provision in the contract." Cliffton Equities, Inc. v. Summerlin Asset
Management III, LLC, 2012 WL 6570940, at *2 (D. Ariz. 2012)(quoting U.S. Bank Nat'l Ass'n v.
Casa Grande Regional Medical Center, 2006 WL 1698288, at *6 (D. Ariz. 2006)(internal
quotations omitted)).
MEMORANDUM DECISION AND ORDER - 13

3. Defendants' Motion to Dismiss Under Rule 13(a)
Exergy asserts claims of breach of contract and breach of fiduciary duty in Counts III and
IV. (Dkt. 13.) Exergy argues Fagen "breached the terms of the MOU by (a) refusing to advance
funds necessary to develop the projects contemplated by the MOU, (b) attaching oppressive and
unilaterally dictated conditions not contemplated by the MOU to those funds that Fagen did
advance, (c) failing to tender contractor services under the EPC Contract for all projects
contemplated by the MOU,12 and (d) subsequently withdrawing all financial support for Exergy's
development activities. (Dkt. 13.)
Fagen contends these claims must be dismissed as compulsory counterclaims under Rule
13(a) because Exergy should have brought them as counterclaims or affirmative defenses in one
of the six prior lawsuits brought in Idaho state court.13 (Dkt. 19.) Exergy does not address the
13(a) argument.

12

Fagen and Exergy signed a Balance of Plant Engineering, Procurement and
Construction Services Agreement (EPC Contract) for the Idaho Six Winds Project, which was
one of the projects named in the MOU.
13

Fagen sued for breach of contract under the MOU for Exergy’s failure to pay in a six
lawsuits, five of which were consolidated. Fagen, Inc. v. Lava Beds Wind Park, LLC; Exergy
Development Group of Idaho, LLC; XRG Development Partners, LLC; Tabor Wind Farms, LLC;
and “John Does 1-10," Case No. CV 2013-261; Fagen, Inc. v. Rogerson Flats Wind Park, LLC,
Cottonwood Wind Park, LLC, Salmon Creek Wind Park, LLC, Deep Creek Wind Park, LLC,
Notch Butte Wind Park, LLC, Exergy Development Group of Idaho, LLC, XRG Development
Partners, LLC, and “John Does 1-10," Case No. CV 2013-573.

MEMORANDUM DECISION AND ORDER - 14

A. Standard of Law
I.R.C.P. 13(a) provides that
A pleading must state as a counterclaim any claim that, at the time
of its service, the pleader has against an opposing party if the
claim: (A) arises out of the transaction or occurrence that is the
subject matter of the opposing party's claim; and (B) does not
require adding another party over whom the court cannot acquire
jurisdiction.

A party's failure to plead a claim that arises out of the same transaction or occurrence
under Rule 13(a) forecloses that party from bringing those claims in a subsequent action. See
Blaser v. Cameron, 776 P.2d 462, 464 (Idaho Ct. App. 1989). I.R.C.P. 13(a) is "essentially
identical" to Federal Rule 13(a). Stilwyn, Inc. v. Rokan Corp., 353 P.3d 1067, 1077 (Idaho 2015).
"The purpose of Rule 13(a) is to prevent multiplicity of litigation and to promptly bring
about resolution of disputes before the court." Mitchell v. CB Richard Ellis Long Term Disability
Plan, 611 F.3d 1192, 1201 (9th Cir. 2010). "Rule 13(a), moreover is 'particularly directed against
one who failed to assert a counterclaim in one action and then instituted a second action in which
that counterclaim becomes the basis on the complaint.'" Id. (quoting Local Union No. 11, Int'l
Brotherhood Electrical Workers v. G.P. Thompson Electric, Inc., 363 F.2d 181, 184 (9th Cir.
1966)).
The crux of a Rule 13(a) analysis is whether the claim arises out of the same "transaction
or occurrence." There are four tests that have been suggested by courts as to what constitutes a
"transaction or occurrence" and "[o]f the four tests, the logical relationship test is the most
widely recognized." Schoeman v. New York Life Ins. Co., 726 P.2d 1, 6-7 (Wash. 1986). The
Ninth Circuit has adopted the logical relationship test. See Moore v. Old Canal Financial Corp.,
MEMORANDUM DECISION AND ORDER - 15

2006 WL 851114 (D. Idaho 2006); Pochiro v. Prudential Ins. Co. of America, 827 F.2d 1246
(9th Cir. 1987).
The logical relationship test is a flexible approach to Rule 13 that analyzes “whether the
essential facts of the various claims are so logically connected that considerations of judicial
economy and fairness dictate that all the issues be resolved in one lawsuit." Pochiro, 827 F. 2d at
1249 (internal quotations omitted, quoting Harris v. Steinem, 571 F.2d 119, 123 (2d Cir. 1978)).
"In making this determination courts commonly consider 1) whether substantially the same
evidence will be used to try the claim and the counterclaim and 2) whether there is any logical
relation between the claim and the counterclaim." Moore, 2006 WL 851114, at *2 (citing Wright
& Miller, Federal Practice and Procedure: Civil § 1410 at 41-47 (2d ed. 1985)).
B. Analysis
The claims in this case arise out of the same transactions or occurrences—Fagen’s work
as Exergy’s contractor under the MOU—and rely on the same evidence as the state cases
brought by Fagen in Idaho. Fagen’s state case claims relied upon the MOU and EPC Contract to
support its Motions for Summary Judgment. So too here, Exergy relies on the MOU, the EPC
Contract, and Fagen's conduct as its contractor on the projects referenced in the MOU.
Under the logical relationship test, Exergy's breach of contract claims against Fagen arise
from the same transactions or occurrences that was the subject matter of the previous suits
litigated and resolved in the Idaho state courts. Exergy is relying on the same or similar evidence
as was available in prior lawsuits, namely the MOU and EPC Contract, as the basis for both

MEMORANDUM DECISION AND ORDER - 16

claims, i.e. that Fagen breached the MOU and the MOU created a fiduciary relationship.14
Exergy’s breach claims here are logically related to the claims of the previous lawsuits. As such,
Count III and IV must be dismissed as compulsory counterclaims under Rule 13(a).
CONCLUSION

For these reasons, the Motions to Dismiss are granted.

ORDER

NOW THEREFORE IT IS HEREBY ORDERED that Defendants’ Motions to Dismiss
(Dkt. 19, 24) are GRANTED.

DATED: March 22, 2017

_________________________
Edward J. Lodge
United States District Judge

14

Exergy maintains that the MOU created a partnership between it and Fagen, which in
turn created a fiduciary relationship between the parties. (Dkt. 25.)
MEMORANDUM DECISION AND ORDER - 17