Case 1:19-cv-01334-RGA-CJB Document 319 Filed 09/24/21 Page 1 of 11 PageID #: 5205
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`MIDWEST ENERGY EMISSIONS CORP.,
`and MES INC.,
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`Plaintiffs,
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`v.
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`ARTHUR J. GALLAGHER & CO., et al.,
`Defendants.
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`Civil Action No. 19-cv-1334-RGA
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`MEMORANDUM ORDER
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`The Magistrate Judge filed a Report and Recommendation (“the Report”) (D.I. 279) on
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`Defendants’ Motion to Dismiss the First and Second Amended Complaints (D.I. 272) and
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`Defendants’ Renewed Motion to Dismiss Operative Complaint (D.I. 273).
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`In Report is lengthy and involves over twenty-seven Defendants, which the Report sorts
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`into several groups. In brief, the Report recommends: (1) dismissing claims against a subset of
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`Defendants on “group pleading”/”lumping” grounds but declining to dismiss the remaining
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`Defendants on the same grounds; (2) declining to dismiss Plaintiffs’ claims for lack of standing;
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`(3) dismissing the pre-suit indirect infringement claims regarding the original asserted patents as
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`to the “CERT Defendants” for lack of pre-suit knowledge; (4) declining to dismiss the remaining
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`induced infringement claims against Defendants; (5) declining to dismiss the remaining
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`contributory infringement claims against the CERT Defendants; (6) declining to dismiss the
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`“Moving Refined Coal” Defendants’ motion to dismiss with respect to contributory
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`infringement; (7) dismissing Plaintiffs’ “joint infringement” theory; (8) dismissing Plaintiffs’
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`single-actor direct infringement claims with respect to claim 25 of the ‘114 Patent and claim 1 of
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`the ‘430 Patent, while declining to dismiss the remaining direct infringement claims; (9)
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`dismissing Plaintiffs’ willful infringement claims except those dating from July 29, 2020; and
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`(10) dismissing certain specified claims with prejudice while permitting further amendment on
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`other claims after Plaintiffs submit a motion for leave to amend. (D.I. 279 at 12, 16, 26, 29-30,
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`32, 39, 41-42).
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`Both parties have filed Objections and Responses to sections of the Report. (D.I. 284,
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`286, 287, 288). I will ADOPT the Report’s recommendations to which there is no objection.
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`I will review each objection in turn.
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`I.
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`BACKGROUND
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`The instant case involves five patents directed to “methods for reducing mercury
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`emissions at coal-fired power plants” and “methods of separating mercury from a mercury-
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`containing gas.” (D.I. 279 at 2-3). Midwest Energy Emissions Corp. and MES, Inc. (collectively
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`“Plaintiffs” or “MES”) assert various infringement claims against operators of coal-fired power
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`plants and providers of refined coal. The relevant Defendants are collectively referred to as
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`“Moving Defendants” unless a more specific subset is identified.
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`The procedural and factual history of this case is complex, and it is set forth in the Report
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`(D.I. 279) and a previous Report and Recommendation (D.I. 110). I will not repeat the Report’s
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`discussion of the relevant facts or law. I review all pending objections de novo. 28 U.S.C. §
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`636(b)(1).
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`II.
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`DISCUSSION
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`A. Plaintiffs’ Objections
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`1. Dismissal of AJG Defendants
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`MES contends that the Report erred in dismissing the AJG Defendants. (D.I. 284 at 4).
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`The Report recommended dismissing the AJG Defendants on group pleading grounds, stating
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`Case 1:19-cv-01334-RGA-CJB Document 319 Filed 09/24/21 Page 3 of 11 PageID #: 5207
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`that the pleading “leaves the Court and Defendants to guess at what is the theory of liability that
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`is being asserted here.” (D.I. 279 at 9). MES asserts that this analysis is inconsistent with the
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`Federal Circuit’s 2018 decision in Nalco. (D.I. 284 at 4 (citing Nalco Co. v. Chem-Mod, LLC,
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`883 F.3d 1337, 1355 (Fed. Cir. 2018))).
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`The Report takes issue with paragraph 212 of the Second Amended Complaint (“SAC”),
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`which states:
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`Each of Arthur J. Gallagher & Co., Gallagher Clean Energy, LLC, and AJG Coal,
`LLC; DTE REF Holdings, LLC, DTE REF Holdings II LLC; CERT Coal
`Holdings LLC, CERT Holdings LLC, CERT Holdings 2018, LLC, CERT
`Operations LLC, CERT Operations II LLC, CERT Operations III LLC, CERT
`Operations IV LLC, CERT Operations V LLC, CERT 32 Operations RCB LLC;
`AJG Iowa Refined Coal LLC, Joppa Refined Coal LLC, Thomas Hill Refined
`Coal LLC, Wagner Coaltech LLC, Walter Scott Refined Coal LLC, Louisa
`Refined Coal, LLC, Belle River Fuels Company, LLC, Arbor Fuels Company,
`LLC, Portage Fuels Company, LLC, Brandon Shores Coaltech, LLC, Senescence
`Energy Products, LLC, Rutledge Products, LLC, Alistar Enterprises, LLC and
`John Doe LLCs operate at least one Accused RC Facility either by directly
`owning the facility, directly controlling the facility, or indirectly exercising
`control of the facility through a subsidiary that is either named above or referred
`to as a John Doe LLC. For example, Arthur J. Gallagher & Co. owns and controls
`Walter Scott Refined Coal LLC which directly operates a refined coal facility at a
`power plant that directly infringes by supplying bromine-containing refined coal
`to a combustion chamber and injecting activated carbon sorbent downstream of
`the combustion chamber.
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`(D.I. 218-1 ¶ 212) (emphasis added). Paragraph 212 lays out the basis for liability of AJG and
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`several other Defendants. The Report explained that the allegations are insufficient because the
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`fact that “a company is the parent of a subsidiary, that does not (without more) mean that the
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`parent is automatically liable for patent infringement committed by the subsidiary.” (D.I. 279 at
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`9).
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`MES objects, because, to make out a claim of indirect infringement, one does not have to
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`allege alter ago or an agency theory of liability. (D.I. 284 at 6). MES’ statement of the law is
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`correct, but it sidesteps the fact that its theory of liability as to the AJG Defendants remains
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`Case 1:19-cv-01334-RGA-CJB Document 319 Filed 09/24/21 Page 4 of 11 PageID #: 5208
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`unclear. Does it allege that the AJG Defendants induced infringement by operating an infringing
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`subsidiary? Or, that one of its subsidiaries induces the infringement of a power plant and AJG is
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`responsible? (D.I. 279 at 9). If AJG induces the infringement of its subsidiary, then MES need
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`not plead some theory of vicarious liability. See A. Stucki Co. v. Worthington Indus., Inc., 849
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`F.3d 593, 597 (Fed. Cir. 1988). However, if its theory of liability is merely that AJG owns a
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`subsidiary that is an induced infringer, that is insufficient.
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`Thus, I agree with the Report that the theory of liability asserted against the AJG
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`Defendants is unclear, as demonstrated by paragraph 212. Adverio Pharma GmbH v. Alembic
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`Pharm. Ltd., 2019 WL 581618, at *6 (D. Del. Feb. 13, 2019) (explaining “allegations lumping
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`multiple defendants together without providing allegations of individual conduct are frequently .
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`. . insufficient to satisfy the notice pleading standard”).
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`Contrary to MES’ suggestion, Nalco does not address this issue. Group pleading does
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`not appear to have been at issue in Nalco and the Court upheld the induced infringement claims
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`where the complaint “alleg[ed] that Defendants acted with specific intent to induce infringement
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`of [Asserted Patent] by the Refined Coal LLCs and other downstream customers of the Chem–
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`Mod Solution.” Nalco, 883 F.3d at 1356.
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`Even analyzing the claims under the assumption that MES actually intended to assert a
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`theory of induced infringement, as MES argues in its Objections, the pre-suit induced
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`infringement claims still fail. As the Report explains in the context of the CERT Defendants, the
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`SAC fails to allege pre-suit knowledge of the Asserted Patents. (D.I. 279 at 16-20). The
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`allegations of pre-suit knowledge against AJG are substantively identical to those against CERT,
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`which MES does not challenge. (See D.I. 218-1 ¶¶ 192-204). MES’ Objections do not address
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`any pre-suit/post-suit distinction with respect to the AJG Defendants.
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`Lastly, MES argues that dismissal is prohibited under Federal Rule of Civil Procedure
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`12(g). (D.I. 284 at 7). The Report addresses this argument by providing citations to the Record
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`wherein Defendants previously raised the group pleading issue. (D.I. 279 at 6 n.4). MES does
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`not explain why the Report’s conclusion is wrong when it appears plain that the issue was
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`previously raised.1
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`For the reasons set forth above, I will ADOPT the Report’s conclusions as to the AJG
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`Defendants.
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`2. “Single Actor” Direct Infringement
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`MES argues that the Report’s analysis of direct infringement committed a legal error.
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`(D.I. 284 at 2, 7). The Report concluded that the SAC “sufficiently establish[ed] that the Moving
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`Defendants perform these steps of the claimed methods in the course of Section 45 certification
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`testing.” (D.I. 279 at 38). However, the Report then examined MES’ allegations with respect to
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`two exemplary claims of the ‘430 Patent and the ‘114 Patent. (Id.). Finding those allegations
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`insufficient, the Report recommended dismissal of only those specific exemplary claims. (Id. at
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`38-39).
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`I agree that, in light of the Report’s conclusion that the pleading sufficiently alleges that
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`the Moving Defendants perform the claimed steps, there is no basis to dismiss specific
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`exemplary allegations. Defendants do not object to the Report’s conclusion that the SAC’s
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`1 MES notes that the Court did not address AJG’s dismissal in its previous Report, and that the
`AJG Defendants did not raise a “lack of control” defense but rather argued against group
`pleading. (D.I. 284 at 3). One of the failures of group pleadings is that it does not give adequate
`notice. One of the consequences is that the other party is prejudiced in knowing how to respond.
`Any failure to identify an issue in the first round of pleadings is the fault of MES, not of
`Defendants.
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`Case 1:19-cv-01334-RGA-CJB Document 319 Filed 09/24/21 Page 6 of 11 PageID #: 5210
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`infringement allegations, based on Section 45 Certification Testing, are enough to put the
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`Moving Defendants on notice.
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`On a motion to dismiss, “the complaint must place the ‘potential infringer . . . on notice
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`of what activity . . . is being accused of infringement.” Nalco, 883 F.3d at 1350 (quoting K-Tech
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`Tele., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1284 (Fed. Cir. 2013)). In responding to
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`MES’ arguments about the applicable pleading standard, the Report explained that the discussion
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`of pleading in Nalco was dicta and further relies on a case that considered pleading under Form
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`18. (D.I. 279 at 35 n.24). Maybe so, but the Federal Circuit has reached a similar conclusion
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`more recently under the Twombly/Iqbal framework:
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`Under Iqbal/Twombly, [Plaintiff] was required to “state a claim to relief that is
`plausible on its face.” Twombly, 550 U.S. at 570. This plausibility standard is met
`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 (citing Twombly, 550 U.S. at 556). “Specific facts are not
`necessary; the statement need only ‘give the defendant fair notice of what the ...
`claim is and the ground upon which it rests.’” Erickson v. Pardus, 551 U.S. 89, 93
`(2007) (alteration in original) (internal quotation marks omitted) (quoting
`Twombly, 550 U.S. at 555).
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`Disc Disease Sols. Inc. v. VGH Solutions, Inc, 888 F.3d 1256, 1260 (Fed. Cir. 2018) (redundant
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`citations omitted). The Report’s initial conclusion on the sufficiency of the SAC’s allegations
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`makes it clear that the SAC satisfies this standard. As such, I will decline to adopt the Report’s
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`findings dismissing the direct infringement claims as to ‘114 Patent claim 25 and ‘430 Patent
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`claim 1.
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`B. Moving Defendants’ Objections
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`1. Substantial Non-Infringing Use
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`Moving Defendants argue that the Report misinterpreted the law of substantial non-
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`infringing use. (D.I. 286 at 1). First, Moving Defendants argue that the Report misreads the test
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`by focusing on the buyer’s perspective rather than that of the seller. (Id.). Second, Moving
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`Defendants assert that the Report ignores the fact that the SAC includes substantial non-
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`infringing uses. (Id. at 4).
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`Moving Defendants assert a confusing argument in which they state, (1) the Report was
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`incorrect for analyzing the accused products “as sold and delivered,” and (2) the correct test
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`examines the accused products “as sold and delivered.” (Id. at 2). Regardless, the applicable
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`inquiry for contributory infringement “focuses on whether the accused products can be used for
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`purposes other than infringement.” In re Bill of Lading Trans. & Processing Sys. Patent Litig.,
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`681 F.3d 1323, 1338 (Fed. Cir. 2012). The Court in Bill of Lading further explained that, “The
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`fact that a product may be unavailable for simultaneous noninfringing uses while being used to
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`infringe, is not determinative. Where the product is equally capable of, and interchangeably
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`capable of both infringing and substantial non-infringing uses, a claim for contributory
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`infringement does not lie.” Id.
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`Here, the Report considered whether the pleadings sufficiently alleged that the refined
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`coal provided by Moving Defendants has no substantial non-infringing use. (D.I. 279 at 27-28).
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`I do not agree that the Report considered only whether the receiving plant would be “interested”
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`in other uses of the Accused Products. (D.I. 286 at 7). The Report cited allegations in the SAC
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`which state: (1) Moving Defendants provide “refined coal on a conveyance leading to the
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`combustion change of a coal-fired power plant with an activated carbon injection system;” (2)
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`Moving Defendants “know that this refined coal has been specifically tailored and certified for
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`that plant;” and (3) “the provided refined coal has no substantial non-infringing use (i.e., it
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`cannot reasonably be used for purposes other than to be combusted at the plant where sorbent
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`comprising activated carbon will later be injected).” (D.I. 218-1 ¶ 106; see D.I. 279 at 28
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`(discussing the same)).
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`Moving Defendants argue that, as in Bill of Lading, MES has pleaded itself out of its
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`contributory infringement claim. (D.I. 286 at 3). In support, Moving Defendants cite to two
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`portions of the Asserted Patents that describe “methods for reducing mercury that use bromine
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`without any mention of activated carbon” and the “use of non-carbon base sorbents and a
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`combination of carbon and non-carbon base sorbents.” (Id. at 4, citing ‘114 Patent 2:60-3:8,
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`10:4-8). As MES points out, however, none of these statements contradict the allegation that the
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`Accused Products in this case are “specifically formulated to infringe.” (D.I. 288 at 3).
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`Moving Defendants also point to paragraph 107 of the SAC which states, in part, even if
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`“the refined coal is only certified for a particular plant (i.e., a plant that uses activated carbon), it
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`is reasonable to infer that they require the coal plant to combust the provided refined coal or at
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`least some significant portion of it in accordance with those expectations, i.e., not in some non-
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`infringing way.” (D.I. 218-1 ¶ 107). While this paragraph does appear to acknowledge the
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`possibility that the Accused Products could be used in a non-infringing way, I agree with the
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`Report’s conclusion that this paragraph does not amount to the disclosure of a substantial non-
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`infringing use. (D.I. 279 at 29). Cf. Bill of Lading, 681 F.3d at 1338 (finding no contributory
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`infringement where “Appellees' products do not need to be used to practice the patented method,
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`and [Appellant’s] own allegations make clear that they can be used for multiple other purposes”).
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`For the reasons stated above, I will ADOPT the Report’s conclusions as to contributory
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`infringement.
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`2. Dismissal with Prejudice
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`Moving Defendants argue that the claims dismissed on lumping/group pleading grounds
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`should be dismissed with prejudice. (D.I. 286 at 7-8). The Report recommended dismissing
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`these claims without prejudice because it was the first time the Court had addressed the issue and
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`thus “it is a little harder for the Court to say it would be clearly futile for Plaintiffs to attempt to
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`overcome such deficiencies in the future.” (D.I. 279 at 42). However, the Report also
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`recommended the MES should be required to submit a motion for leave to amend before being
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`allowed to submit a new amended complaint. (Id.).
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`Moving Defendants assert that MES’ claims are clearly futile because they have been on
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`notice of the objections to the group pleading since the original complaint. (D.I. 286 at 8). MES
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`did not “cure” this deficiency in response to the previous dismissal or the Moving Defendants’
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`subsequent briefing. The previous Report (D.I. 110) did not address group pleading, and the
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`Court did not rule on the sufficiency of the First Amended Complaint before the SAC was
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`submitted, which Moving Defendants did not oppose. (D.I. 279 at 5 n.3; see also D.I. 215).
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`I am not convinced that the fact that MES was on notice of the Defendants’ objections is
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`sufficient to establish futility. As of this Report, MES is on notice that its pleading against the
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`twelve grouped Defendants is legally insufficient and must be addressed. I agree with the
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`Magistrate Judge’s conclusion that, in light of the circumstances, one cannot necessarily infer
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`futility from the fact that MES chose not to previously amend its complaint to address group
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`pleading. (D.I. 279 at 42). Thus, I will ADOPT the Report’s recommendation as to the nature of
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`the dismissal of the group pleading claims.
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`3. RC Defendants’ Arguments as to Pre-Suit Knowledge
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`With the exception of the CERT Defendants, the Report recommends against dismissal of
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`the induced infringement claims, concluding that the SAC plausibly alleges specific intent and
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`knowledge of infringement. (D.I. 279 at 24, 26). In their Objections, Moving Defendants claim
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`that the Report erred in not addressing the RC Defendants’ arguments as to pre-suit knowledge.
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`(D.I. 286 at 9).
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`MES replies that Rule 12(g)(2) bars consideration of the RC Defendants’ argument on
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`this point. (D.I. 288 at 5). I agree. It does not appear that the RC Defendants raised the lack of
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`pre-suit knowledge in their first motion to dismiss the original complaint. (See D.I. 56 at 10-12).
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`The closest the original motion came to challenging pre-suit knowledge is a footnote referring to
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`allegations of pre-suit knowledge against AJG, DTE, and CERT as “thin.” (Id. at 12 n.9). In
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`their brief on the instant motion, considered by the Magistrate Judge in preparing the Report, the
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`RC Defendants “adopt[ed] the CERT Defendants’ argument relating to the FAC’s failure to
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`plead the knowledge and intent required for induced, contributory, and willful infringement.”
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`(D.I. 177 n.12).
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`The Moving Defendants do not allege that the FAC or SAC contained new factual
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`material related to pre-suit knowledge that would justify the consideration of their arguments on
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`a successive motion to dismiss. See Sourovelis v. City of Philadelphia, 246 F. Supp. 3d 1058,
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`1077 (E.D. Pa. 2017) (declining to consider new arguments on a successive motion to dismiss
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`that did not relate to the new material appearing in the amended complaint). Accordingly, I find
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`that the treatment of induced infringement with respect to the RC Defendants in the Report was
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`proper. I will ADOPT the Report’s findings on that point.
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`III. CONCLUSION
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`For the reasons stated above, the Report and Recommendation (D.I. 279) is ADOPTED
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`as to: (1) the dismissal of the eleven Defendants listed in Paragraph 212 of the SAC and Chem-
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`Mod on group pleading/lumping grounds; (2) MES’ standing to sue; (3) induced infringement;
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`(4) contributory infringement; (5) MES’ joint infringement theory; (6) willful infringement; and
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`(7) the nature of the dismissal. I will not adopt the Report and Recommendation’s findings as to
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`single-actor direct infringement.
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`Case 1:19-cv-01334-RGA-CJB Document 319 Filed 09/24/21 Page 11 of 11 PageID #: 5215
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`Plaintiffs’ Objections (D.I. 284) are GRANTED in part and DENIED in part. Moving
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`Defendants’ Objections (D.I. 286) are DENIED.
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`Accordingly, the allegations against Arthur J. Gallagher & Co., Gallagher Clean Energy,
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`LLC, AJG Coal, LLC, DTE REF Holdings, LLC, DTE REF Holdings II LLC, CERT Coal
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`Holdings LLC, CERT Holdings, LLC, CERT Holdings 2018, LLC, CERT Operations, LLC,
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`CERT Operations II, LLC, CERT Operations III LLC, and Chem-Mod are DISMISSED without
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`prejudice. The pre-suit indirect infringement allegations regarding the Original Asserted Patents
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`against the CERT Defendants are DISMISSED with prejudice. The joint infringement
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`allegations are DISMISSED with prejudice. The willful infringement allegations are
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`DISMISSED with prejudice except as to allegations dating from June 29, 2020. Otherwise,
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`Moving Defendants’ motions are DENIED.
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`IT IS SO ORDERED this 24th day of September 2021.
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`/s/ Richard G. Andrews
`United States District Judge
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`11
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