Nestlé Purina Petcare Co. v. Blue Buffalo Co.

• Decision Date: 19 April 2016
• Docket Number: Case No. 4:14 CV 859 RWS
• Citation: 181 F.Supp.3d 618
• Parties: Nestlé Purina Petcare Company, Plaintiff/Counterclaim Defendant, v. The Blue Buffalo Company Ltd., Defendant/Counterclaim Plaintiff, and Related Actions
• Court: U.S. District Court — Eastern District of Missouri

181 F.Supp.3d 618

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 April 19, 2016

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

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

MEMORANDUM AND ORDER

RODNEY W. SIPPEL, UNITED STATES DISTRICT JUDGE

This false advertising pet food case is before me on two motions to dismiss Diversified Ingredients' crossclaims and third-party complaint: Wilbur-Ellis Company, William Haning, Oliver Harwell, and Henry Rychlik's motion to dismiss Diversified Ingredients' crossclaims, and Custom Ag and Troy Geraci's motion to dismiss Diversified Ingredients' third party claims. The motions are fully briefed and ready for review. After careful consideration, I will grant in part and deny in part the motions to dismiss.

Background

Plaintiff Nestle Purina Petcare Company brought this case against The Blue Buffalo Company, alleging that Blue Buffalo falsely advertises its pet foods as free of poultry by-product meal and meeting other nutritional claims in violation of the Lanham Act, 15 U.S.C. § 1125. Blue Buffalo has since admitted 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 high quality chicken and turkey meal. Blue Buffalo brought third-party claims for indemnity and contribution against Wilbur-Ellis and Diversified, alleging that they are liable to it for any harm Blue Buffalo is found to have committed against Purina, as well as for additional damages under other legal theories.

After being named as a third-party defendant, Diversified brought its own crossclaims against Wilbur-Ellis and third-party claims against Wilbur-Ellis' current or former employees William Haning, Oliver Harwell, and Henry Rychlik ("Wilbur-Ellis Defendants"). Diversified also brought third-party claims against Custom Ag and its employee Troy Geraci ("Custom Ag Defendants"). Custom Ag is also an ingredient broker, and brokered the sale of the poultry by-product meal at-issue between Wilbur-Ellis and Diversified (and ultimately, Blue Buffalo). Diversified brings claims against the Wilbur-Ellis and Custom Ag Defendants under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c), 1962(d), 1964(c), as well as various claims for breach of contract, fraud, and violations of other state trade and consumer protection laws.

The Wilbur-Ellis and Custom Ag Defendants have both filed motions to dismiss Diversified's crossclaims and third-party complaint ("Complaint") as it pertains to each of them.¹ For the reasons that follow, I will grant in part and deny in part both motions 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). Unlike state courts which often require detailed statements of fact in a petition, however, the federal rules require only notice pleading. Under Fed. R. Civ. P. 8(a) :

[A] complaint must include only a short and plain statement of the claim showing that the pleader is entitled to relief. Such a statement must simply give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests. This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.

Romine v. Acxiom Corp. , 296 F.3d 701, 711 (8th Cir.2002).

Discussion

1. RICO (Count 1)

In Count 1, Diversified brings a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c), 1962(d), 1964(c), against the Wilbur-Ellis and Custom Ag Defendants ("RICO Defendants"). Diversified alleges that the RICO Defendants conspired to and violated RICO by forming an illegal association-in-fact enterprise to manufacture, market, mislabel, and sell adulterated ingredients over the course of more than four years. In the alternative to the association-in-fact enterprise, Diversified alleges that the RICO Defendants colluded with the common purpose of taking over Custom Ag as an enterprise. Diversified alleges that the RICO Defendants sold the mislabeled and adulterated meal at inflated prices as though it were unadulterated meal, and that they accomplished this by falsifying bills of lading, invoices, and ingredient certifications. Diversified alleges that these acts constitute the chargeable predicate RICO offenses of wire and mail fraud. Additionally, Diversified alleges that the RICO Defendants devised this enterprise to defraud the entire pet food and livestock food industries, including Diversified as the ingredient broker between the RICO Defendants and Blue Buffalo, who ultimately purchased Wilbur-Ellis' products. Diversified's Second Amd. Crossclaims and Third Amd. Compl. [# 525] at ¶¶ 45-59.

RICO prohibits "any person employed by or associated with any enterprise engaged in ... interstate ... commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). To establish a civil claim under RICO, plaintiffs must show that the defendants engaged in "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." H & Q Properties, Inc. v. Doll , 793 F.3d 852, 855–56 (8th Cir.2015) (internal citations omitted). As the United States Court of Appeals for the Eighth Circuit has repeatedly cautioned, "RICO, however, ‘does not cover all instances of wrongdoing. Rather, it is a unique cause of action that is concerned with eradicating organized, long-term, habitual criminal activity.’ " Id. (internal citations and quotations omitted). "Failure to present sufficient evidence on any one element of a RICO claim means the entire claim fails." Craig Outdoor Advert., Inc. v. Viacom Outdoor, Inc. , 528 F.3d 1001, 1028 (8th Cir.2008).

Federal Rule of Civil Procedure 9(b) applies to RICO claims. H & Q Properties, Inc. v. Doll , 793 F.3d 852, 855 (8th Cir.2015) (internal citations and quotations omitted). Under FRCP 9(b), "[i]n alleging fraud ... a party must state with particularity the circumstances constituting fraud." The "[c]ircumstances" of the fraud include "such matters as the time, place and contents of false representations, as well as the identity of the person making the misrepresentation and what was obtained or given up thereby."' Id. at 855–56 (internal citations and quotations omitted). "[C]onclusory allegations that a defendant's conduct was fraudulent and deceptive are not sufficient to satisfy the rule." Drobnak v. Andersen Corp. , 561 F.3d 778, 783 (8th Cir.2009) (internal quotations omitted). Additionally, "[a]llegations pleaded on information and belief usually do not meet Rule 9(b)'s particularity requirement." Id. (internal citations omitted). But "[w]hen the facts constituting the fraud are peculiarly within the opposing party's knowledge, [ ] such allegations may be pleaded on information and belief." Id. at 783–84.

Both the Wilbur-Ellis Defendants and the Custom Ag Defendants have moved to dismiss the RICO claims against them for failure to state a claim under FRCP 12(b)(6) and 9(b). The Wilbur-Ellis Defendants argue that Diversified has failed to sufficiently allege or plead the existence of a RICO enterprise, participation in the conduct of an enterprise's affairs, the existence of a pattern of racketeering activity, or that the individual defendants engaged in a pattern of racketeering activity by committing two or more predicate acts. The Custom Ag Defendants argue that Diversified has failed to state its claims with particularity, and that it has failed to sufficiently plead the existence of a RICO enterprise, predicate acts, or a pattern of racketeering activity.

a) Participation in the Conduct of an Enterprise

"The definition of a RICO ‘enterprise’ includes ‘any union or group of individuals associated in fact although not a legal entity.’ " 18 U.S.C. § 1961(4) ; United States v. Henley , 766 F.3d...