Opinion

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

MOUNTAIN MEADOWS PET PRODUCTS, INC. PLAINTIFF

V. CASE NO. 5:24-CV-5200

NT CONSULTING, LLC; NATHAN

THOMAS; and SETH KAUFMAN DEFENDANTS

V.

GARY TURCO THIRD-PARTY DEFENDANT

MEMORANDUM OPINION AND ORDER

TABLE OF CONTENTS

I. FACTS ........................................................................................................................ 2

II. MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION ....................... 6

A. Legal Standard ..................................................................................................... 6

B. Discussion ............................................................................................................ 8

III. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM .................................. 16

A. Legal Standard ................................................................................................... 16

B. Discussion .......................................................................................................... 17

IV. CONCLUSION ........................................................................................................ 22

Now before the Court are Third-Party Defendant Gary Turco’s Motion to Dismiss

for Lack of Personal Jurisdiction (Doc. 85) and Plaintiff Mountain Meadows Pet Products’

and Gary Turco’s joint Motion to Dismiss for Failure to State a Claim (Doc. 87). For the

reasons that follow, the Motion to Dismiss for Lack of Personal Jurisdiction (Doc. 85) is

GRANTED and the Motion to Dismiss for Failure to State a Claim (Doc. 87) is GRANTED

IN PART AND DENIED IN PART.

I. FACTS

This is a dispute about proprietary pet food ingredients. Mountain Meadows Pet

Products (“MMPP”) is a pet food manufacturer. It is wholly owned by a single shareholder,

Gary Turco, who is also MMPP’s President and CEO. (Doc. 79, ¶ 5). MMPP is

incorporated and headquartered in Montana, and Mr. Turco is domiciled in Utah. Id. ¶¶

4–5.

NT Consulting is an Arkansas limited liability company whose sole member is

Nathan Thomas, an Arkansas domiciliary. Id. ¶¶ 1–2. Mr. Thomas is a pet product

formulator. Id. ¶ 10. Seth Kaufman, an Illinois domiciliary, works in marketing in the pet

care industry. Id. ¶¶ 3, 11. Mr. Thomas and Mr. Kaufman met while working in the pet food

industry in 2008, and in 2010 they decided to strike out on their own to formulate pet food

ingredients. Id. ¶ 15. Mr. Thomas had previously worked with Mr. Turco and brought him

on board, too. Id. ¶¶ 13, 16. At that time, both Mr. Thomas and Mr. Kaufman lived in

Arkansas. Mr. Kaufman moved to Illinois in July 2011.

NT Consulting, Thomas, and Kaufman (collectively, “NT Defendants”) say that in

2011 they reached an agreement with Turco under which Mr. Thomas and Mr. Kaufman

would develop pet food ingredient formulas, MMPP would manufacture and distribute pet

foods containing these ingredients, and each of the three men would own “a personal,

one-third ownership right” in the formulas. Id. ¶¶ 17–18. MMPP would have the exclusive

right to use the formulas and would pay Thomas and Kaufman (via NT Consulting) a

licensing fee for the use of the formulas. Id. ¶ 18. When this case was filed in Montana,

Mr. Thomas and Mr. Kaufman filed sworn declarations that they “developed proprietary

technical ingredient formulas in Utah, Arkansas, and Illinois.” (Doc. 5-1, ¶ 13 (Kaufman

decl.); Doc, 5-2, ¶ 12 (Thomas decl.)). They also declared that they went to Utah “on

several occasions to test formula samples with Gary [Turco].” (Doc. 5-1, ¶14; Doc. 5-2,

¶ 13). After the case was transferred to this Court, Mr. Kaufman filed a new declaration

swearing that the formulas were “developed and created in Arkansas” and “all that work

was completed by Mr. Thomas in Arkansas.” (Doc. 93-1, ¶¶ 4, 6). Mr. Thomas did not file

a new declaration contradicting his previous declaration or claiming that he worked on the

formulas exclusively in Arkansas as Mr. Kaufman now claims.

Mr. Thomas and Mr. Kaufman finished developing and began licensing their first

ingredient formula to MMPP in 2014. (Doc. 79, ¶ 21). They have now developed seven

proprietary ingredient formulas which MMPP uses in the pet foods it manufactures. Id.

¶ 68. In parts of their third-party complaint and counterclaim (as amended), NT

Defendants assert that the licensing fee was set on a per-pound-of-end-product-sold (not

per-pound-of-formula-used) basis and ranged from $0.46 to over $2.00 per pound for

different products. Id. ¶¶ 23–24. In other parts of their complaint, they allege that the

agreed fee was actually the entire profit from pet food sold, “with two-thirds of the profits

distributed to NT Consulting and one-third to Mr. Turco.” Id. ¶ 39.

In April 2016, the three men started another business venture together, Blue Sky

Mining Partners, LLC (“BSM Partners”), an Arkansas limited liability company that would

provide consulting services in the pet care industry and market MMPP’s products to its

clients. Id. ¶¶ 27–28.

With respect to the formulas, the parties never committed the purported “Licensing

Agreement” to writing. From 2016 through 2022, attempts were made to do so, but no

contract was ever signed. Id. ¶ 30. “In December 2016, the parties discussed setting up

a new entity called ‘NewCo’ to collect the licensing fees from Mountain Meadows, and the

parties negotiated a written agreement” which, NT Defendants allege, memorialized the

existing Licensing Agreement. Id. ¶ 32. Mr. Kaufman sent Mr. Turco an email for proposed

definitions including a definition for “License Fees” to which Mr. Turco responded, “OK.”

(Doc. 79-1). Mr. Kaufman also sent Turco and Thomas an “Intellectual Property License

and Royalty Agreement,” which purportedly also described the existing Licensing

Agreement but which they concede Mr. Turco never signed. (Doc. 79, ¶ 34; Doc. 79-2).

In 2017, Mr. Turco’s son Adam began working as an accountant for MMPP. (Doc.

79, ¶ 36). After Adam started working for MMPP, “the frequency of the monthly summaries

provided to Mr. Thomas and Mr. Kaufman of sales volumes and weight of the Mountain

Meadows Products utilizing each of the NT Formulas began to decrease.” Id. ¶ 37. Prior

to June 2018, MMPP provided the monthly summaries in Excel spreadsheets which

included sales weight information and formulas for how the monthly licensing fees were

calculated. Id. ¶ 38. “However, in June 2018, Mountain Meadows began providing the

monthly summaries in PDF format, which did not include any formulas for the calculations

or any other meta data.” Id.

In December 2018, the parties again discussed a transaction to restructure MMPP,

Turco, and NT Defendants’ business relationship. (Doc. 79-4). Mr. Turco signed a

Nondisclosure Agreement in his individual capacity as part of this discussion. (Doc. 79,

p. 9 n.3). Mr. Turco’s letter discussing this transaction was written on his personal

letterhead. (Doc. 79-4). This transaction, too, was never finalized. (Doc. 79, ¶ 47).

In April 2019, Adam Turco sent an email to Mr. Kaufman asserting that the

payments from MMPP to NT Consulting were commission payments, not licensing fees;

Mr. Kaufman responded and disagreed with this characterization. Id. ¶¶ 53, 55; Doc. 79-

5. In May 2019, MMPP provided the last monthly summary listing pounds of products

sold. Id. ¶ 41. Mr. Thomas and Mr. Kaufman repeatedly requested monthly summaries

with sales weights in pounds, but MMPP refused to provide them. Id. ¶ 44. The omitted

information, NT Defendants say, was “necessary to confirm that the licensing payments

to NT Consulting were calculated in accordance with the Licensing Agreement.” Id. ¶ 97.

They allege that MMPP “unilaterally and materially changed the way it calculates the

licensing payments due to NT Consulting around this time.” Id.

The payments from MMPP to NT Consulting “declined each year from 2020 to

2023” although sales of products utilizing the formulas “were as high or higher than they

had ever been.” Id. ¶¶ 57, 59. MMPP continued refusing to provide information about the

weight of product sold. Id. ¶ 57. Mr. Thomas and Mr. Kaufman attempted, unsuccessfully,

“to discuss the decline in payments with Mr. Turco.” Id. ¶¶ 60–61. At an October 2023

meeting between the three men, Mr. Turco told Mr. Thomas and Mr. Kaufman that, on

Adam’s recommendation, MMPP had switched from calculating the licensing fees on a

per-pound-of-end-product-sold basis to a profit basis. Id. ¶ 66. MMPP made its final

payment to NT Consulting in October 2023 for August 2023 sales. Id. ¶ 62. After October,

Mr. Thomas and Mr. Kaufman attempted to discuss the relationship with Mr. Turco and

Adam, but their efforts were unsuccessful, so on February 14, 2024, counsel for NT

Consulting sent MMPP and Turco a cease-and-desist letter. Id. ¶ 71. Mr. Turco responded

on February 27, 2024, with an email purporting to terminate the licensing agreement

between the parties. Id. ¶ 72. MMPP filed this litigation the next day. Id. ¶ 73. MMPP

continues to sell products that use the formulas at issue. Id. ¶ 76.

NT Defendants assert breach of contract and related counterclaims against MMPP

and also charge MMPP with misappropriation of trade secrets. They bring the same

claims against Mr. Turco individually as a third-party defendant because, they contend,

he is MMPP’s alter ego. Id. ¶¶ 77–89. Mr. Turco moves to dismiss the third-party complaint

against him for lack of personal jurisdiction under Rule 12(b)(2). MMPP and Mr. Turco

jointly move to dismiss NT Defendants’ claims for failure to state a claim under Rule

12(b)(6).

II. MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

Third-Party Defendant Gary Turco moves to dismiss NT Defendants’ third-party

claims against him because he is not subject to personal jurisdiction in Arkansas in this

case. (Doc. 85).

A. Legal Standard

A plaintiff must state enough facts in a complaint to support a reasonable inference

that the defendant is subject to the jurisdiction of the forum. “When personal jurisdiction

is challenged by a defendant, the plaintiff bears the burden to show that jurisdiction

exists.” Fastpath, Inc. v. Arbela Tech. Corp., 760 F.3d 816, 820 (8th Cir. 2014). “[T]he

plaintiff's prima facie showing must be tested, not by the pleadings alone, but by the

affidavits and exhibits presented with the motions and in opposition thereto.” Dever v.

Hentzen Coatings, Inc., 380 F.3d 1070, 1072 (8th Cir. 2004) (internal quotation marks

omitted).

“Federal courts apply the long-arm statute of the forum state to determine the

existence of personal jurisdiction over the parties,” subject to the dictates of due process.

Kaliannan v. Liang, 2 F.4th 727, 733 (8th Cir. 2021) (quoting Whaley v. Esebag, 946 F.3d

447, 451 (8th Cir. 2020)). Arkansas's long-arm statute permits personal jurisdiction to the

full extent permitted by the Fourteenth Amendment, so the due process analysis is

dispositive. Ark. Code Ann. § 16-4-101; Yanmar Co., Ltd. v. Slater, 2012 Ark. 36, *5. “[T]he

due process analysis depends on whether personal jurisdiction is alleged to be general

or specific.” Kendall Hunt Publ'g Co. v. Learning Tree Publ'g Corp., 74 F.4th 928, 930 (8th

Cir. 2023) (quotation marks and citation omitted). Here, no one contends the Mr. Turco is

subject to general personal jurisdiction in Arkansas.

“In analyzing whether specific jurisdiction comports with due process,” the court

“must decide whether the defendant has certain minimum contacts with the forum state

and whether the plaintiffs’ claims ‘arise out of or relate to the defendant’s contacts.’”

Kaliannan, 2 F.4th at 733 (quoting Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 592 U.S.

351, 359 (2021)). The inquiry focuses on “the defendant’s contacts with the forum [s]tate

itself, not the defendant’s contacts with persons who reside there.” Kaliannan, 2 F.4th at

733 (alteration in original) (quoting Walden v. Fiore, 571 U.S. 277, 284 (2014)). “[T]he

defendant’s conduct and connection with the forum State (must be) such that he should

reasonably anticipate being haled into court there.” Mountaire Feeds, Inc. v. Agro Impex,

S.A., 677 F.2d 651, 654-55 (8th Cir. 1982) (quoting World-Wide Volkswagen Corp. v

Woodson, 444 U.S. 286, 295, 297 (1977)). “The unilateral activity of those who claim

some relationship with a nonresident defendant cannot satisfy the requirement of contact

with the forum State.” Mountaire Feeds, Inc., 677 F.2d at 654 (quoting Hanson v. Denckla,

357 U.S. 235, 253); see Walden, 571 U.S. at 286 (“[A] defendant’s contacts with the forum

State may be intertwined with his transactions or interactions with the plaintiff or other

parties. But a defendant’s relationship with a plaintiff or third party, standing alone, is an

insufficient basis for jurisdiction.”).

The Eighth Circuit analyzes specific personal jurisdiction under a five-factor

totality-of-the-circumstances test with the first three factors being of “primary importance”:

“(1) the nature and quality of [the nonresident’s] contacts with the forum state; (2) the

quantity of such contacts; (3) the relation of the cause of action to the contacts; (4) the

interest of the forum state in providing a forum for its residents; and (5) convenience of

the parties.” Kaliannan, 2 F.4th at 733 (quoting Whaley, 946 F.3d at 452). “The third factor

speaks to the particular question of specific jurisdiction,” akin to the Supreme Court's

arise-out-of-or-relate-to requirement, Whaley, 946 F.3d at 452, while the fourth and fifth

factors “are not determinative” in the analysis. Mountaire Feeds, 677 F.2d at 654 (quoting

Aaron Ferer & Sons Co. v. American Compressed Steel Co., 564 F.2d 1206, 1210 n.5

(8th Cir. 1977)).

B. Discussion

With respect to the first two factors, Mr. Turco asserts that he has few contacts with

Arkansas, that most of these contacts were undertaken in his corporate capacity as

President/CEO of MMPP, and that, with respect to third factor, any individual capacity

contacts are not related to this litigation. NT Defendants assert that Mr. Turco was

MMPP’s alter ego and that all MMPP’s contacts via Mr. Turco should be imputed to him

for personal jurisdiction purposes but that in any event, he also has sufficient contacts in

his individual capacity to justify specific jurisdiction.

In regard to Mr. Turco’s individual capacity contacts with Arkansas, NT Defendants

allege the following: (1) Mr. Turco entered into the Licensing Agreement with NT

Defendants in his individual capacity, at least one party to the Agreement (Thomas) was

an Arkansas resident, and the object of the Agreement was intellectual property at least

partly developed in Arkansas; (2) Mr. Turco entered into a Nondisclosure Agreement, one

of the parties to the Agreement was an Arkansas resident, and the Agreement was made

in contemplation of a transaction with an Arkansas resident undertaken by Mr. Turco in

his individual capacity; and (3) Mr. Turco was a member of an Arkansas limited liability

company, BSM Partners, which provided consulting services and marketed the pet foods

at issue to its clients.

To start, “[m]erely entering into a contract with a forum resident does not provide

the requisite contacts between a (nonresident) defendant and the forum state.” Id.

(quoting Iowa Elec. Light & Power Co. v. Atlas Corp., 603 F.2d 1301, 1303 (8th Cir. 1979));

see also K-V Pharm. Co. v. Uriach & CIA, S.A., 648 F.3d 588, 593 (8th Cir. 2011) (“A

contract between a plaintiff and an out-of-state defendant is not sufficient in and of itself

to establish personal jurisdiction over the defendant in the plaintiff’s forum state.”). When

looking to a contractual relationship to “determine[e] whether the defendant purposefully

established minimum contacts within the forum,” the Supreme Court has “emphasized

. . . a ‘highly realistic’ approach that” focuses on “the real object of the business

transaction,” and considers “factors [such as] prior negotiations and contemplated future

consequences, along with the terms of the contract and the parties’ actual course of

dealing.” K-V Pharm Co., 648 F.3d at 593 (quoting Burger King Corp. v. Rudzewicz, 471

U.S. 462, 478–79 (1980)).

Here, the Licensing Agreement entitled Mr. Turco individually to one-third of the

licensing fees owed under the Agreement. The formulas licensed under the Agreement

were purportedly developed in Arkansas (among other places), but the basis for the fees

was MMPP’s sale of products using the formulas. The products were manufactured in

Montana and sold and distributed nationwide. Entry into a contract to receive licensing

fees for use of proprietary formulas originally developed in Arkansas, but manufactured

and sold elsewhere, is not enough to establish that Mr. Turco “purposefully established

minimum contacts” in Arkansas. K-V Pharm Co., 648 F.3d at 593 (quoting Burger King,

471 U.S. at 478-79).

The Nondisclosure Agreement was signed by Mr. Turco in contemplation of a

transaction that never materialized. The discussion of such transaction was undertaken

by Mr. Turco in his individual capacity as owner of MMPP. The transaction did not happen,

and entry into the Nondisclosure Agreement as part of failed negotiations is not related to

claims for breach of an entirely separate contract. This contact cannot satisfy the third

factor for specific personal jurisdiction.

With respect to both Agreements, the underlying proprietary information is

connected with Arkansas insofar as NT Defendants now assert that the formulas were

developed in Arkansas. But the geographic provenance of a trade secret is not, to the

Court’s knowledge, the kind of information that businesses are generally expected to

know. It cannot, therefore, create a connection with a state “such that [a defendant] should

reasonably anticipate being haled into court there.” Burger King, 471 U.S. at 474 (citation

omitted). Nor was NT’s development of formulas in Arkansas contractually mandated—

instead, Mr. Thomas unilaterally decided to develop the formulas in Arkansas, or, if his

own declaration is to be believed, in Arkansas, Illinois, and Utah. (Doc. 5-2, ¶ 11).

Finally, Mr. Turco’s membership in BSM Partners likely constitutes purposeful

availment “of the privilege of conducting activities within the forum State, thus invoking

the benefits and protections of its laws.” Burger King, 471 U.S. at 475. However, NT

Defendants have not identified a relationship between Mr. Turco’s activities as a member

of BSM Partners and MMPP’s failure to pay licensing fees. Because “the third factor . . .

distinguishes between specific and general jurisdiction,” with “specific jurisdiction

refer[ing] to jurisdiction over causes of action arising from or related to a [party’s] actions

within the forum state,” Mr. Turco’s contacts with Arkansas through BSM Partners cannot

support a finding of specific personal jurisdiction over Mr. Turco to adjudicate NT

Defendants’ unrelated breach of contract and trade secret claims. Burlington Indus., Inc.

v. Maples Indus., Inc., 97 F.3d 1100, 1103 (1996) (citation omitted).

Taken together, Mr. Turco’s contacts with Arkansas are insufficient to establish

specific personal jurisdiction. The Eighth Circuit’s decision in Mountaire Feeds is

instructive. There, an out-of-state buyer purchased animal feed from an Arkansas seller.

677 F.2d at 652. After several shipments, “a dispute arose concerning the quality of the

feed,” and the buyer refused to pay. Id. All communications between buyer and seller had

occurred “by mail or telephone,” and the buyer had never “visit[ed] Arkansas to negotiate

or execute the transactions.” Id. The Eighth Circuit concluded that the buyer was not

subject to personal jurisdiction in Arkansas. Id. at 655.

Here, too, “[a]lthough the [formulas] did apparently originate in Arkansas” and “the

parties did make telephone calls [and] exchange correspondence” about the licensing of

the formulas and potential transactions concerning the formulas, the Agreement “did not

require performance in Arkansas,” Mr. Turco did not “enter[ ] Arkansas in connection with

the . . . contract[ ] at issue,” and Mr. Turco did not “supervise [NT Defendants’]

performance in Arkansas.” Id. at 655–56. In short, Mr. Turco’s contacts tie him to NT

Defendants “but not to Arkansas.” Id. at 655. His contacts with NT Defendants are not of

the nature, quality, or quantity necessary to establish specific personal jurisdiction in

Arkansas in this matter.

The fourth and fifth factors “carry less weight and are not dispositive.” Kaliannan,

2 F.4th at 733 (citation modified). They cannot overcome NT Defendants’ failure to show

a constitutionally adequate basis for the Court’s exercise of personal jurisdiction. But, in

keeping with the Eighth Circuit’s dictate, the Court nonetheless considers them. The

fourth factor—the interest of Arkansas in establishing a forum for its residents—weighs in

favor of exercising jurisdiction, at least with respect to NT Consulting and Mr. Thomas,

who are Arkansas residents. The fifth factor—the convenience of the parties—is neutral

because trial in Arkansas would be convenient for NT Consulting and Mr. Thomas, but

inconvenient for everyone else, while trial outside Arkansas would be inconvenient for Mr.

Thomas. Under the totality of the circumstances, NT Defendants have failed to show that

Mr. Turco has sufficient individual contacts with Arkansas to subject him to specific

personal jurisdiction in this case.

NT Defendants also argue that Mr. Turco and MMPP are alter egos, so all of

MMPP’s contacts should be imputed to Mr. Turco for personal jurisdiction purposes. The

Eighth Circuit applies state law “to determine whether and how to pierce the corporate

veil.” Epps v. Stewart Info. Servs. Corp., 327 F.3d 642, 649 (8th Cir. 2003). Under

Arkansas law,1 “[i]t is a nearly universal rule that a corporation and its stockholders are

separate and distinct entities, even though a stockholder may own the majority of the

stock.” Quinn-Matchet Partners, Inc. v. Parker Corp., 85 Ark. App. 143, at 148 (2004)

1 Both parties argue Arkansas law in their briefing, so the Court does not consider whether

the alter ego law of a different state like Montana, MMPP’s state of incorporation, should

apply.

(citing First Com. Bank v. Walker, 333 Ark. 100 (1998)). However, “[i]n special

circumstances,” courts may “disregard the corporate facade when the corporate form has

been illegally abused to the injury of a third party.” Anderson v. Stewart, 366 Ark. 203, at

206 (2006) (citation omitted). “The doctrine of piercing the corporate veil is grounded in

equity and is applied when the facts warrant its application to prevent an injustice.” Id. at

207 (citation omitted). “Piercing the fiction of a corporate entity should be applied with

great caution.” Id. (citation omitted).

“The conditions under which the corporate entity may be disregarded or looked

upon as the alter ego of the principal stockholder vary according to the circumstances of

each case.” Id. at 206–07 (citation omitted). “Common instances where the corporate

form may be disregarded include when the entity attempted to hinder, delay, or defraud

creditors, evade a contract obligation, or perpetuate fraud and injustice generally.”

AgriFund, LLC v. Regions Bank, 2020 Ark. 246, at 8 (2020).

Here, NT Defendants have failed to allege facts supporting the application of the

alter-ego doctrine. Something more than sole ownership and control of a closely held

corporation is required to establish personal jurisdiction under an alter ego theory. Epps,

327 F.3d at 650. Beyond Mr. Turco’s ownership and control of MMPP, NT Defendants

allege that Mr. Turco once proposed a transaction (never consummated) using his

personal letterhead and that he “commingled his personal funds and the funds of

Mountain Meadows by . . . receiving, transferring, depositing, and/or routing the licensing

fee payments intended for him personally (as one-third ownership right in the NT

Formulas) by and through Mountain Meadows without regard to corporate or legal

formalities.” (Doc. 79, ¶¶ 84, 87). NT Defendants point to no other instances in their

decade-plus relationship with Mr. Turco and MMPP where Mr. Turco failed to observe

corporate formalities.

The principal issue with NT Defendants’ argument is that they have made no

showing that the alter-ego doctrine must be applied to prevent an injustice. NT

Defendants assert that, as sole owner of MMPP, Mr. Turco personally profited from MMPP

sales made in violation of the Licensing Agreement, so “allowing Mr. Turco to evade

personal liability while reaping the rewards [of the alleged violations] is the exact type of

injustice the alter-ego doctrine is purposed to prevent.” Id. ¶ 86. But that cannot be what

“injustice” means in this context. NT’s formulation would render the clearly erroneous

result that courts may disregard the corporate form every time a single owner, closely

held corporation is accused of breach of contract. See Quinn-Matchet Partners, 85 Ark.

App. at 146, 149–50 (no veil-piercing to reach “sole shareholder, officer and director” in

breach of contract action). They do not assert that MMPP is undercapitalized such that it

would be unable to pay a judgment should NT prevail. They do not allege that Mr. Turco

misused MMPP to evade contractual obligations imposed on him individually, or vice

versa. They do not accuse Mr. Turco of taking assets out of MMPP to his benefit and the

corporation’s detriment. In fact, they allege the opposite—that Mr. Turco contributed his

personal funds to MMPP’s treasury.

Moreover, while they claim that MMPP fraudulently abused the corporate form by

refusing to provide the sales figures necessary for NT to determine how much money it

was owed under the Licensing Agreement, that refusal was out in the open, not concealed

by falsified sales numbers that could be characterized as fraud. NT Defendants went over

five years without receiving this information and still did not file suit. “Such a delay militates

against a finding of injustice.” Id. at 150 (citing Padgett v. Haston, 279 Ark. 367 (1983)).

Finally, NT Defendants argue that it would be inefficient for the Court to dismiss

their claims against Mr. Turco because they will then be forced to consider parallel

litigation in a different federal court. While “the interstate judicial system's interest in

obtaining the most efficient resolution of controversies” is a proper consideration, the

inefficiency of parallel litigation rests squarely at NT Defendants’ feet. Burger King, 471

U.S. at 477 (citation omitted). “[E]ven if the forum State is the most convenient location

for litigation,” or the most efficient, “the Due Process Clause, acting as an instrument of

interstate federalism, may sometimes act to divest the State of its power to render a valid

judgment.” World-Wide Volkswagen, 444 U.S. at 294.

NT Defendants also ask the Court to order jurisdictional discovery instead of

dismissing their third-party claims. Jurisdictional discovery may be warranted in cases

where “facts necessary to resolving the jurisdictional inquiry are either unknown or

disputed.” Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., KG, 646 F.3d 589,

598 (8th Cir. 2011) (citation omitted). “Courts look to decisions under Rule 56 for guidance

in determining whether to allow discovery on jurisdictional facts.” Johnson v. United

States, 534 F.3d 958, 965 (8th Cir. 2008). “To request discovery under Rule 56(f), a party

must file an affidavit describing,” among other things, “what facts are sought.” Id. NT

Defendants have not done so. Even accepting their allegations as true to the extent they

are not contradicted by Thomas and Kaufman’s earlier declarations, they have failed to

state facts from which the Court could reasonably infer that Mr. Turco is subject to

personal jurisdiction in Arkansas.

Accordingly, the Court concludes that it lacks specific personal jurisdiction over Mr.

Turco in this case. His Motion to Dismiss (Doc. 85) is GRANTED, and Defendants’ third

party claims against him (Counts II, IV, VI,VIII, X, and XIII2) are DISMISSED WITHOUT

PREJUDICE.

III. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

MMPP also moves to dismiss NT Defendants’ counterclaims for failure to state a

claim under Rule 12(b)(6). (Doc. 87). NT Defendants assert counterclaims against MMPP

for breach of contract (Count I), violation of the Arkansas Trade Secrets Act (Count III),

misappropriation of trade secrets under the Federal Defend Trade Secrets Act (Count V),

unjust enrichment/quantum meruit (Count VII), promissory estoppel (Count IX),

declaratory judgment (Count XI), and violation of the Montana Uniform Trade Secrets Act

(Count XII). (Doc. 79). MMPP primarily challenges these claims on the ground that they

are time-barred.

NT Defendants agree that the statute of limitations for each of their claims is three

years. (Doc. 92, p. 8). NT Defendants’ claims were first raised in their Answer,

Counterclaim, and Third-Party Complaint (Doc. 29) filed November 8, 2024, so claims

that accrued before November 8, 2021, would ordinarily be time-barred. The parties

disagree about when NT Defendants’ claims accrued and whether the limitations period

should be tolled based on fraudulent concealment.

A. Legal Standard

To survive dismissal under Rule 12(b)(6), the “complaint must contain sufficient

factual matter, accepted as true, to state a claim to relief that is plausible on its face.”

2 NT Defendants’ pleading has two claims labeled as Count XII, likely accidentally. The

Court will refer to the second Count XII which begins on page 53 as Count XIII.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation marks omitted). In ruling, the Court

must “accept as true all facts pleaded by the non-moving party and grant all reasonable

inferences from the pleadings in favor of the nonmoving party.” Gallagher v. City of

Clayton, 699 F.3d 1013, 1016 (8th Cir. 2012) (quotation marks omitted). However, “courts

‘are not bound to accept as true a legal conclusion couched as a factual allegation.’” Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Papasan v. Allain, 478 U.S. 265,

286 (1986)). A claim is plausible on its face when “the plaintiff pleads factual content that

allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Iqbal, 556 U.S. at 678.

“As a general rule, the possible existence of a statute of limitations defense is not

ordinarily a ground for Rule 12(b)(6) dismissal unless the complaint itself establishes the

defense.” Joyce v. Armstrong Teasdale, LLP, 635 F.3d 364, 367 (8th Cir. 2011) (citation

modified).

B. Discussion

In their breach of contract counterclaim, NT Defendants assert that MMPP

“materially breached the terms of the Licensing Agreement by failing to pay licensing fees

for the seven NT Formulas . . . in accordance with the weight and sales volume of each

Mountain Meadows Product sold from at the latest, 2022 to present” and “by failing to pay

any licensing fees whatsoever from November 2023 to present.” (Doc. 79, ¶¶ 107, 109).

Beginning around May 2019, MMPP “stopped providing the weight and sales volume

information necessary to confirm that the licensing payments to NT Consulting were

calculated in accordance with the Licensing Agreement.” Id. ¶ 97. NT Defendants allege

that MMPP “unilaterally and materially changed the way it calculates the licensing

payments due to NT Consulting around this time.” Id. They contend that this change

resulted in underpayments for some period before payments stopped in 2023, but that

they cannot determine when the underpayments began without the sales weight

information MMPP stopped providing. They plead alternative quasi-contract claims for

unjust enrichment/quantum meruit and promissory estoppel in the event the Court finds

no enforceable contract exists.

NT Defendants also assert trade secret claims under federal and Arkansas law (or,

in the alternative, Montana law) based on MMPP’s use of the formulas “without the

payment of the agreed upon compensation.” (Doc. 79, ¶ 155). Finally, they ask for a

declaratory judgment that the contract between the parties was a licensing agreement,

that the payments to NT Consulting were licensing fees, not commissions, and that Mr.

Kaufman and Mr. Thomas are two-thirds owners of the NT Formulas. Id. ¶ 312–18.

The statute of limitations for oral contract and quasi-contract claims in Arkansas is

three years. Ark. Code Ann. § 16-56-105(1), (3). The statute of limitations for contract and

quasi-contract claims “begins to run when there is a complete and full cause of action,

and in the absence of concealment or wrong, when the injury occurs, not when it is

discovered.” Quality Optical of Jonesboro, Inc. v. Trusty Optical, L.L.C., 365 Ark. 106, 110

(2006) (citations omitted). MMPP asserts that the breach, as alleged by NT Defendants,

occurred in 2019 when MMPP stopped providing sales weights, well outside the

limitations period. NT Defendants say each monthly underpayment or nonpayment of

licensing fees constitutes a new breach, and “they only assert claims from 2022 to

present.” (Doc. 92, p. 10).

With respect to NT Defendants’ breach of contract claim, the Court agrees that

Pennington v. BHP Billiton Petroleum (Fayetteville), LLC, 2021 Ark. 179 (2021), is directly

on point. There, the Arkansas Supreme Court concluded that each monthly

underpayment of oil-and-gas royalties based on “improper deductions of costs”

“constituted a separate cause of action for breach of contract.” Id. at 5–6. “The existence

of monthly underpayments of royalties outside the limitations period does not bar recovery

for underpayments within the limitations period under Arkansas law.” Id. at 6.

Here, the Licensing Agreement is equivalent in all material respects to the royalty

agreement at issue in Pennington. The “alleged breach happened during the monthly

calculation and payment remittance. The damage element of breach of contract would

have been established monthly and, potentially, in a different amount each month.” Id.

The Court therefore concludes that each monthly underpayment or nonpayment

constitute “separate and singular breaches under Arkansas law,” so claims based on

underpayment or nonpayment on or after November 8, 2021, are not time-barred. Id.

Accordingly, MMPP’s Motion (Doc. 87) is DENIED with respect to Count I.

The Court is not persuaded, however, that NT Defendants’ quasi-contract claims

fall within the Pennington rule. Arkansas law does not recognize continuing torts as a

basis for extending the statute of limitations—the clock starts when the wrong giving rise

to the claim first occurs, even if the alleged violation is continuing and the damages from

that claim are increasing over time. Graham v. Catamaran Health Sols. LLC, 940 F.3d

401, 408–09 (8th Cir. 2017); Quality Optical, 365 Ark. at 373 (“[T]here is no dispute that

this [wrongful use of information] first occurred more than three years prior to the filing of

the action, and despite the fact that the information is continuing to be used, this [implied

contract] cause of action is also barred by the applicable three year statute of

limitations.”); Hampton v. Wells Fargo Bank, N.A., 2022 WL 798120, at *11–12 & n.218

(E.D. Ark. Mar. 15, 2022). Here, NT Defendants allege that MMPP “unilaterally and

materially changed the way it calculate[d] the licensing payments due to NT Consulting

around” 2019, resulting in the alleged underpayments. (Doc. 79, ¶ 244). NT Defendants’

right to commence an action based on their quasi-contract claims came into being at that

time, two years outside the limitations period, and their unjust enrichment and promissory

estoppel claims are now time barred.

NT Defendants assert that the statute of limitations should be tolled based on

fraudulent concealment. To toll the statute of limitations on the ground of fraudulent

concealment, NT Defendants “[a]re required to show something more than a continuation

of a prior nondisclosure.” Martin v. Arthur, 339 Ark. 149, 154 (1999) (citation omitted).

They must allege “some positive act of fraud, something so furtively planned and secretly

executed as to keep the plaintiff's cause of action concealed, or perpetrated in a way that

it conceals itself.” Id. at 155. Here, NT Defendants have not alleged any positive act of

fraud. They have alleged that MMPP stopped providing information necessary for the

calculation of the licensing fees owed—an action that NT Defendants were aware of and

complained about to MMPP at that time. The allegations that MMPP failed “to inform or

disclose” do not “rise to the level of a positive act of fraud.” Id. NT Defendants’ pleading

fails to state facts that raise their claim for tolling based on fraudulent concealment beyond

mere speculation. Accordingly, the Motion (Doc. 87) is GRANTED with respects to NT

Defendants’ unjust enrichment (Count VII) and promissory estoppel (Count IX) claims,

and they are DISMISSED WITHOUT PREJUDICE.3

3 MMPP asks the Court to dismiss NT Defendants’ claims with prejudice. It is possible

that, in the course of discovery on their remaining claims, NT Defendants may discover

some positive act of fraud that could entitle them to tolling, so the Court declines to do so.

The trade secret claims are also subject to a three-year statute of limitations. Ark.

Code Ann. § 4-75-603; 18 U.S.C. § 1836(d); Mont. Code Ann. § 30-14-407. But unlike

contract claims, trade secret claims are subject to the “discovery” rule—they accrue when

the misappropriation “is discovered or, by the exercise of reasonable diligence, should

have been discovered.” Ark. Code Ann. § 4-75-603; 18 U.S.C. § 1836(d); Mont. Code

Ann. § 30-14-407. MMPP asserts that NT Defendants knew or should have known about

MMPP’s alleged misappropriation of the formulas by mid-2019 at the latest. At that point,

NT Defendants were aware that MMPP was not providing sales weight information and

that MMPP was claiming the payments were commissions, rather than licensing fees.

NT Defendants assert that they could not have discovered the misappropriation

until 2022 when payments declined drastically but, in any event, “due diligence in the

statute of limitations context is ordinarily a question of fact.” (Doc. 92, p. 13 (quoting Klehr

v. A.O. Smith Corp., 87 F.3d 231, 235 (8th Cir. 1996), aff'd, 521 U.S. 179 (1997))). “Where

the evidence leaves no room for reasonable minds to differ on the issue, however, the

court may properly resolve the issue as a matter of law.” Klehr, 87 F.3d at 235. The Court

will not resolve the question of when NT Defendants should have discovered the alleged

misappropriation on a 12(b)(6) motion without the benefit of such evidence. The Motion

(Doc. 87) is accordingly DENIED with respect to NT Defendants’ trade secret claims

(Counts III, V and XII).

Finally, MMPP asks the Court to dismiss NT Defendants’ declaratory judgment

claim (Count XI). MMPP is correct that “[a] claim for declaratory judgment is not a

separate cause of action but a remedy for a viable underlying cause of action.” Allied

Servs., LLC v. Smash My Trash, LLC, 153 F.4th 600, 610 (8th Cir. 2025). Count XI is

therefore DISMISSED. As requested in their prayer for relief, NT Defendants may of

course continue to seek a declaratory judgment with respect to their underlying claims.

IV. CONCLUSION

For these reasons, Mr. Turco’s Motion to Dismiss for Lack of Personal Jurisdiction

(Doc. 85) is GRANTED, and Counts Il, IV, VI, VIll, X and XIII of the Second Amended

Counterclaim and Second Amended Third-Party Complaint (Doc. 79) are DISMISSED

WITHOUT PREJUDICE. MMPP'’s Motion to Dismiss for Failure to State a Claim (Doc.

87) is GRANTED IN PART AND DENIED IN PART, and Counts VII and IX are

DISMISSED WITHOUT PREJUDICE.

IT IS SO ORDERED on this 23" day of February, 2026.

CHIEF UNITED STATES DISTRICT JUDGE

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