Nestlé Purina Petcare Co. v. Blue Buffalo Co., Case No. 4:14 CV 859 RWS.

• Court: U.S. District Court — Eastern District of Missouri
• Writing for the Court: RODNEY W. SIPPEL, District Judge.
• Citation: Nestlé Purina Petcare Co. v. Blue Buffalo Co., 129 F.Supp.3d 787 (E.D. Mo. 2015)
• Decision Date: 08 September 2015
• Docket Number: Case No. 4:14 CV 859 RWS.
• Parties: NESTLÉ PURINA PETCARE COMPANY, Plaintiff/Counterclaim Defendant, v. The BLUE BUFFALO COMPANY LTD., Defendant/Counterclaim Plaintiff, And Related Actions.

129 F.Supp.3d 787

NESTLÉ PURINA PETCARE COMPANY, Plaintiff/Counterclaim Defendant,

v.The BLUE BUFFALO COMPANY LTD., Defendant/Counterclaim Plaintiff,

And Related Actions.

Case No. 4:14 CV 859 RWS.

United States District Court, E.D. Missouri, Eastern Division.

Signed Sept. 8, 2015.

Carmine R. Zarlenga, III, Kristina M. Portner, Mayer Brown LLP, Washington, DC, Lori A. Zahalka, Richard M. Assmus, Mayer Brown LLP, Chicago, IL, David A. Roodman, Emma C. Harty, Jason Scott Meyer, Nick E. Williamson, Bryan Cave LLP, St. Louis, MO, for Plaintiff/Counterclaim Defendant.

David H. Luce, Gerard T. Carmody, Sarah J. Klebolt, Tina N. Babel Carmody Macdonald P.C., St. Louis, MO, Jonah M. Knobler, Melissa Rae Ginsberg, Patterson and Tyler LLP, Martin Flumenbaum, Robert A. Atkins, Paul And Weiss, Adeel A. Mangi, Steven A. Zalesin, Patterson and Belknap, New York, NY, for Defendant/Counterclaim Plaintiff.

MEMORANDUM AND ORDER

RODNEY W. SIPPEL, District Judge.

This matter is before me on third-party defendant Wilbur–Ellis' motion to dismiss the Blue Buffalo Company, Ltd.'s claims against. Blue Buffalo's third-party claims against Wilbur–Ellis arise out of an underlying action in which Nestle Purina Petcare Company alleges that Blue Buffalo falsely advertised its pet foods as free of poultry by-product meal in violation of the Lanham Act, 15 U.S.C. § 1125. Blue Buffalo now admits that poultry by-product was in some of its pet foods. However, it claims that its ingredient supplier, Wilbur–Ellis, and ingredient broker, Diversified Ingredients, deceived Blue Buffalo when they sold it by-product meal instead of chicken and turkey meal. Blue Buffalo brings third-party claims against Wilbur–Ellis and Diversified, alleging that the ingredient suppliers are liable to it for indemnity and contribution for any harm Blue Buffalo is found to have committed against Purina, as well as for additional damages under theories of breach of contract, breach of warranty, fraud, misrepresentation, negligence, unjust enrichment, unfair competition, and other statutory violations.

Wilbur–Ellis now moves to dismiss Claims 4–7 and 10–12 under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. For the reasons that follow, I will grant in part and deny in part Wilbur–Ellis' motion to dismiss.

Legal Standard

In ruling on a motion to dismiss brought under Fed.R.Civ.P. 12(b)(6), I must accept as true all factual allegations in the complaint and view them in the light most favorable to the plaintiff. Kohl v. Casson, 5 F.3d 1141, 1148 (8th Cir.1993). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (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." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. While a court must accept factual allegations as true, it is "not bound to accept as true a legal conclusion couched as a factual allegation." Carton v. Gen. Motor Acceptance Corp., 611 F.3d 451, 454 (8th Cir.2010) (internal citations omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (internal citations omitted).

Discussion

Wilbur–Ellis argues that I should dismiss certain of Blue Buffalo's third-party claims against it because a) the economic loss doctrine bars Blue Buffalo's tort claims arising out the parties' contractual relationship, b) Blue Buffalo's claims under California's Unfair Competition Law lack a sufficient nexus to California, and c) Blue Buffalo cannot seek indemnity or contribution for any Lanham Act liability as a matter of law.

A. Choice of Law and the Economic Loss Doctrine

Wilbur–Ellis argues that I should dismiss Blue Buffalo's third-party claims for intentional/fraudulent misrepresentation (Claim 4), negligent misrepresentation (Claim 5), fraud in the inducement (Claim 6), and negligence (Claim 7) because they are barred by the economic loss doctrine under Missouri law. Blue Buffalo contends that I should not dismiss these claims because there is a choice of laws issue that is not yet ripe for review. Blue Buffalo also argues that even if there were no choice of law issue, application of the economic loss doctrine is premature because I must determine the enforceability and scope of the contracts as a threshold issue, which is in dispute. Despite Wilbur–Ellis' arguments otherwise, I agree with Blue Buffalo that dismissal of these claims would be premature at this stage of the case and as a result I will deny Wilbur–Ellis' motion to dismiss these claims without prejudice.

As the forum state, Missouri's choice of law rules govern the determination of which state's laws apply. Eggleton v. Plasser & Theurer Exp. Von Bahnbaumaschinen Gesellschaft, MBH, 495 F.3d 582, 585 (8th Cir.2007). Under Missouri law, the first step in a choice of law analysis is to examine whether the different states' laws at issue actually conflict. Leisman v. Archway Med., Inc., 53 F.Supp.3d 1144, 1147 (E.D.Mo.2014). Blue Buffalo argues that Texas or California law, rather than Missouri law, likely applies to Blue Buffalo's claims against Wilbur–Ellis.

1. Conflict of Law Analysis

a. Intentional Tort Claims

Here, there is a conflict between how Missouri courts and California and Texas courts apply the economic loss doctrine to intentional torts. In Missouri, the economic loss doctrine bars fraud-related claims that seek to recover for economic losses unless the claims are based on misrepresentations that are independent of the contract. AKA Distrib. v. Whirlpool Corp., 137 F.3d 1083, 1086 (8th Cir.1998). By contrast, Texas courts have held that intentional fraud claims, even when only seeking "purely economic losses identical to those recoverable under a breach of contract theory" and based on misrepresentations covered by the contract are not barred because "there is an independent legal duty not to commit the intentional tort of fraud." Eastman Chem. Co. v. Niro, Inc., 80 F.Supp.2d 712, 717 (S.D.Tex.2000) (emphasis in original). Likewise, California courts will not bar tort claims for economic losses based on alleged misrepresentation of contract terms for fraud claims that are independent actions based in tort. See Robinson Helicopter Co. v. Dana Corp., 34 Cal.4th 979, 993, 22 Cal.Rptr.3d 352, 102 P.3d 268 (2004). As a result, the states' different treatment of the economic loss doctrine creates a choice of law issue impacting Blue Buffalo's claims for intentional/fraudulent misrepresentation (Claim 4) and fraud in the inducement (Claim 6) against Wilbur–Ellis.

b. Negligence Claims

Blue Buffalo has alleged its negligence claims under two theories: first, that Wilbur–Ellis was negligent in connection with representations made regarding its contracts with Wilbur–Ellis, and second (and in the alternative), that Wilbur–Ellis was negligent in connection with representations made regarding Wilbur–Ellis' contracts with Diversified, to which Blue Buffalo was an alleged third-party beneficiary.

To the extent that Blue Buffalo's claims for negligent misrepresentation and negligence are based on representations around the formation of and in the text of the contracts between Blue Buffalo and Wilbur–Ellis, there is no choice of law issue. Missouri, California, and Texas all bar recovery for negligence claims when the claims are based in contract and there is no economic injury independent of contract damages. See D.S.A., Inc. v. Hillsboro Indep. Sch. Dist., 973 S.W.2d 662, 663 (Tex.1998) ; Dubinsky v. Mermart, LLC, 595 F.3d 812, 819 (8th Cir.2010) ; Robinson Helicopter Co. v. Dana Corp., 34 Cal.4th 979, 993, 22 Cal.Rptr.3d 352, 102 P.3d 268 (Cal.2004). As a result, if, upon review of the contracts, I determine that Blue Buffalo's negligence claims are based in contract and there is no economic injury independent of contract damages, they will be barred.

To the extent Blue Buffalo's negligence claims are based on the theory that it was a third-party beneficiary to Wilbur–Ellis' and Diversified's contracts, there is a choice of law issue. As discussed above, all three states bar recovery for negligence claims when the claims are based in contract and there is no economic injury independent of contract damages. See D.S.A., Inc. v. Hillsboro Indep. Sch. Dist., 973 S.W.2d 662, 663 (Tex.1998) ; Dubinsky v. Mermart, LLC, 595 F.3d 812, 819 (8th Cir.2010). However, California recognizes an exception to the economic loss doctrine when there is a "special relationship" present. See Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F.Supp.2d 1048, 1056 (N.D.Cal.2004). Under California's special relationship exception, "a defendant's negligent performance of a contractual obligation resulting in damage to the property or economic interests of a person not in privity [can] support recovery if the defendant was under a duty to protect those interests." Id. at 1052 (citing Aas v. San Diego Cty. Superior Ct., 24 Cal.4th 627, 643–44, 101 Cal.Rptr.2d 718, 12 P.3d 1125 (2000) ) (internal citations omitted) (emphasis added). As a result, there is a choice of law issue regarding Blue Buffalo's negligence claims brought under its alternative theory.

2. Choice of Law Analysis

Ordinarily, once it is established that there is a choice of law issue, the next step is to determine which state's law applies. When tort claims are at issue, the applicable law is "the local law of the state which, as to that issue, has the most significant relationship to the occurrence and the parties." Thompson by Thompson v. Crawford, 833 S.W.2d 868, 870 (Mo.1992) (citing Restat...