Lyvly, Inc., and Tutus Holdings, Inc. v. Lift Bridge Brewing Technologies LLC

Background

Lyvly, Inc., and Tutus Holdings, Inc. allege that Lift Bridge Brewing Technologies LLC misappropriated trade secrets involving manufacturing processes and recipes for cannabinoid-infused carbonated beverages. Plaintiffs also assert a fraudulent-misrepresentation claim, alleging that Lift Bridge misrepresented its ownership of trade secrets to induce Lyvly to issue Lift Bridge an ownership interest.

The parties’ alleged business relationship began with an April 27, 2022 Letter of Intent. Plaintiffs allege that Lift Bridge agreed to contribute certain beverage formulations, recipes, quality systems, manufacturing information, and trade secrets to a new entity that later became Lyvly. Plaintiffs further allege that Lift Bridge formally transferred specified assets to Lyvly in a May 9, 2022 board resolution, and that Lift Bridge later used Lyvly’s trade secrets to manufacture and sell cannabinoid-infused beverages.

Before ruling on the motion in this case, the Court considered a verdict from a separate Washington County, Minnesota, lawsuit involving Lift Bridge and other plaintiffs. In that case, a jury found Lift Bridge liable for fraud and breach of fiduciary duty and awarded $1.8 million in compensatory damages. The verdict occurred after Lift Bridge filed its summary-judgment motion here but before Plaintiffs filed their opposition.

Motions and Parties’ Arguments

Lift Bridge moved for summary judgment on Plaintiffs’ trade-secret and fraud claims. Summary judgment is a decision without a trial that is appropriate when the record shows no genuine dispute over facts that could affect the result.

The Court construed Plaintiffs’ opposition memorandum as a request under Federal Rule of Civil Procedure 56(d). That rule allows a court to defer or deny a summary-judgment motion, permit additional discovery, or issue another appropriate order when the opposing party shows through a declaration or affidavit that it cannot yet present facts needed to oppose the motion.

Plaintiffs submitted declarations from their attorney, Timothy Sullivan, and Lyvly’s chief executive officer, Jon Wood. They stated that testimony in the Washington County trial revealed information Plaintiffs had not previously known, including alleged backdating of the May 9, 2022 resolution, the later creation of the asset list, the possible nonexistence of some listed assets on the resolution’s date, and alleged tax-related reasons for the backdating. Plaintiffs also said the trial testimony concerned Lift Bridge’s newer BELIEVER line of cannabinoid-infused beverages and exposed gaps in Lift Bridge’s discovery responses.

Plaintiffs requested an opportunity to supplement their opposition after a transcript of the Washington County trial became available and to conduct additional discovery concerning the trial testimony. Lift Bridge disputed Plaintiffs’ characterization of the testimony and argued that Plaintiffs already knew about the issues or could have pursued related discovery earlier. Lift Bridge asked the Court to rule on its summary-judgment motion.

Court’s Analysis

The Court held that Plaintiffs’ declarations satisfied Rule 56(d). Plaintiffs identified specific facts they sought, indicated that the information existed, and explained why the information was important to opposing summary judgment. The Court also found that the parties did not appear to have delayed their earlier discovery efforts.

The Court found that the Washington County trial involved overlapping factual and legal issues. It determined that testimony from that trial was relevant to this case and appeared to contradict some testimony already in the record. Lift Bridge’s disagreement with Plaintiffs’ account of the testimony, the Court explained, further showed that material factual issues remained to be explored.

The Court concluded that Plaintiffs had not received a full and fair opportunity to obtain and present relevant facts opposing summary judgment. It therefore determined that Rule 56(d) relief was appropriate.

Disposition

The Court denied without prejudice Lift Bridge’s Motion for Summary Judgment. It granted Plaintiffs’ opposition memorandum, construed as their Motion for Relief Under Rule 56(d). The Court cancelled the hearing on Lift Bridge’s motion and ordered the parties to contact Magistrate Judge Bullard’s chambers to schedule a status conference and establish a schedule for additional discovery limited to issues and testimony raised in the Washington County trial. After that discovery, the parties may file new dispositive motions based on a more complete record.