Eggs v. Rembrandt Enters., Inc.

• Decision Date: 29 May 2019
• Docket Number: No. 3:19-cv-00031-JMS-MPB,3:19-cv-00031-JMS-MPB
• Citation: 392 F.Supp.3d 965
• Parties: REXING QUALITY EGGS, Plaintiff, v. REMBRANDT ENTERPRISES, INC., Defendant.
• Court: U.S. District Court — Southern District of Indiana

392 F.Supp.3d 965

REXING QUALITY EGGS, Plaintiff,

v.REMBRANDT ENTERPRISES, INC., Defendant.

No. 3:19-cv-00031-JMS-MPB

United States District Court, S.D. Indiana, Evansville Division.

Signed May 29, 2019

James D. Johnson, Spencer W. Tanner, Jackson Kelly PLLC, Evansville, IN, for Plaintiff.

Dirck H. Stahl, Ziemer Stayman Weitzel & Shoulders, Evansville, IN, Matthew R. Veenstra, Pro Hac Vice, Kutak Rock LLP, Minneapolis, MN, for Defendant.

ORDER

Hon. Jane Magnus-Stinson, Chief Judge, United States District Court

Apparently egged on by its lack of success in Rexing Quality Eggs v. Rembrandt Enterprises, Inc. (Rexing I ), 360 F. Supp. 3d 817 (S.D. Ind. 2018), also pending before the undersigned under cause number 3:17-cv-00141-JMS-MPB, Plaintiff Rexing Quality Eggs ("Rexing") has brought this follow-on suit against Rembrandt Enterprises, Inc. ("Rembrandt"). In this suit, to which the Court will refer as Rexing II , Rexing brings what it characterizes as distinct and separate claims for conversion and deception after Rembrandt allegedly failed to return certain egg packing materials, collectively called EggsCargoSystem. The problem, according to Rembrandt, is that these claims should have been brought, if at all, in Rexing I . Rexing scrambled that opportunity, and the prohibition on claim splitting means that Rexing cannot put the yolk back in the shell via this separate lawsuit. Therefore, for the reasons described below, the Court GRANTS Rembrandt's Motion to Dismiss. [Filing No. 20.]¹

I. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a claim that does not state a right to relief. Ordinarily, defenses such as res judicata (of which claim preclusion and claim splitting are "component[s]," see Alvear-Velez v. Mukasey , 540 F.3d 672, 678 (7th Cir. 2008) ) need not be anticipated in a complaint and cannot be resolved until after the close of pleadings. See, e.g. , Parungao v. Cmty. Health Sys., Inc. 858 F.3d 452, 457 (7th Cir. 2017) ; Carr v. Tillery , 591 F.3d 909, 913 (7th Cir. 2010). But where, as here, everyone agrees that the Court has all the information "needed in order to be able to rule on the defense," it may do so without unnecessarily prolonging matters by waiting until after the defendant has filed an answer. Carr , 591 F.3d at 913.

Evaluating the sufficiency of a complaint under Rule 12(b)(6) requires the Court to accept all well-pled facts as true and draw all permissible inferences in favor of the plaintiff. See Active Disposal Inc. v. City of Darien , 635 F.3d 883, 886 (7th Cir. 2011). In addition to such factual allegations, the Court may also consult facts that are properly the subject of judicial notice under Federal Rule of Evidence 201. Parungao , 858 F.3d at 457. In general, this includes "court filings and other matters of public record when the accuracy of those documents reasonably cannot be questioned." Id. See generally In re Lisse , 905 F.3d 495 (7th Cir. 2018) (Easterbrook, J., in chambers) (describing the proper procedure for and subjects of judicial notice). "When it is clear from the face of the complaint, and matters of which the court may take judicial notice, that the plaintiff's claims are barred as a matter of law, dismissal is appropriate." Parungao , 858 F.3d at 457 (internal quotation omitted).

II. BACKGROUND

The background of Rexing and Rembrandt's commercial relationship (predominantly as egg buyers and sellers, respectively) is detailed at length in Rexing I , 360 F. Supp. 3d at 822-32. In short, Rexing and Rembrandt reached a deal for Rembrandt to supply Rexing with 12 loads of cage free eggs per week for at least one year. See id. ; [Filing No. 1-3 at 6-7; Filing No. 22-1 at 8-14 (purchase agreement) ]. That relationship soured approximately eight months into the deal, when Rexing repudiated the agreement and refused to accept any further loads of eggs. [Filing No. 1-3 at 6-7 ]; Rexing I , 360 F. Supp. 3d at 828-30. In this case, Rexing seeks damages for Rembrandt's alleged failure to return the plastic flats, dividers, and pallets that Rembrandt used (and Rexing purchased) to load eggs for Rexing to pick up. [Filing No. 1-3 at 6.] These materials are known as "EggsCargoSystem." [Filing No. 1-3 at 6.]

EggsCargoSystem played a role in Rexing I . For starters, the purchase agreement between Rexing and Rembrandt required Rembrandt to "supply all required materials (i.e., without limitation, all pallets, flats, boards) necessary to packing and shipping the Shell Eggs for Purchaser hereunder." [Filing No. 22-1 at 10.] In its Rexing I Complaint, filed in state court on August 16, 2017, Rexing alleged that its continued performance was excused by force majeure and that Rembrandt breached the express warranties in the Purchase Agreement. [Filing No. 22-1 at 4-5 ( Rexing I Complaint).] Rexing sought damages, including consequential and incidental damages, suffered as a result of Rembrandt's breach. [Filing No. 22-1 at 5-6.] In its summary judgment response brief, Rexing argued that the purchase agreement's remedies clause was unenforceable in part because it failed to compensate Rexing for its "substantial upfront costs in preparation for its obligations under the Purchase Agreement."² [ Rexing I , Filing No. 90 at 34.] In support, Rexing cited to the declaration of Dylan Rexing, [ Rexing I , Filing No. 89-10 at 1-8 ], which, in turn, cited what the declaration described as accurate evidence of its expenses. One such spreadsheet appended to the declaration listed "EggsCargoSystem" under a "Material Investment" heading. [ Rexing I , Filing No. 89-10 at 10.] Another spreadsheet, offered by Rexing to support its claim of commercial impracticability, [ Rexing I , Filing No. 90 at 19 ], included EggsCargoSystem as a "Start-up Cost[ ]," along with a "Diamond Loader/Preloader" and other expenses, [ Rexing I , Filing No. 72-6 at 1 ]. Finally, in response to an interrogatory asking Rexing to "[s]tate the factual basis for [y]our claim ... that Rembrandt is liable to [y]ou for ‘start-up costs incurred’ in the amount of $997,650," Rexing responded that it "incurred preparation expenses in reliance of the terms of Supply Agreement, which, most importantly, were necessary for Rexing Eggs to incur in order to meet its obligations under the Supply Agreement.... Specifically, Rexing Eggs made the following purchases: ... 2) the ‘EggsCargoSystem’ ...." [Filing No. 30-2 at 20.]

Rexing I remains ongoing. On December 21, 2018, the Court entered summary judgment for Rembrandt on Rexing's claims for excusal and breach of express warranties, as well as partial summary judgment on Rembrandt's breach of contract counterclaim. 360 F. Supp. 3d 817. No partial final judgment has issued, and trial remains set for October 2019. [See Rexing I , Filing No. 123.]

Rexing II was filed on January 29, 2019, just a month after the Court's summary judgment entry in Rexing I and just days before the Rexing I parties convened for what proved to be an unfruitful settlement conference. [ Rexing I , Filing No. 121.] In relevant part, Rexing alleges that it purchased the EggsCargoSystem to facilitate its contractual relationship with Rembrandt. [Filing No. 1-3 at 6-7.] Rembrandt would load the eggs onto the EggsCargoSystem, and Rexing then retrieved the eggs. [Filing No. 1-3 at 7.] According to Rexing, Rembrandt retained possession of "thousands of" the EggsCargoSystem materials, even after the relationship ended. [Filing No. 1-3 at 7.] The timeline of the end of the relationship, as articulated in the Rexing I and Rexing II pleadings, is as follows:

• No later than June 5, 2017, Rexing told Rembrandt it would no longer take egg loads. [Filing No. 22-1 at 4; Filing No. 1-1 at 3 ]; Rexing I , 360 F. Supp. 3d at 830.

• Rexing made unqualified demands for return of the EggsCargoSystem on June 8 and June 12, 2017. [Filing No. 1-3 at 7.]

• On June 16, 2017, Rexing filed its Rexing I Complaint in state court, setting forth the claims described above. [Filing No. 22-1 at 3-7.]

• On August 17, 2017, Rexing made another unqualified demand for return of the EggsCargoSystem. [Filing No. 1-3 at 7.]

• The Rexing I pleading amendment deadline expired on March 11, 2018. [ Rexing I , Filing No. 22 at 4.]

• In November and December 2018, Rembrandt returned some, but not all, of the EggsCargoSystem materials. [Filing No. 1-3 at 7.] Rexing seeks compensation for Rembrandt's failure to timely return these materials. [Filing No. 1-3 at 8-9.]

On February 14, 2019, Rembrandt removed Rexing II from state court. [Filing No. 1.] On March 25, 2019, Rembrandt filed its Motion to Dismiss. [Filing No. 20.] Rembrandt's Motion is fully briefed and ripe for consideration.

III. DISCUSSION

Rembrandt argues that the Rexing II claims fail because the Court's summary judgment order in Rexing I raises the res judicata bar and because Rexing improperly split its claims between two cases. The Court addresses each in turn.

A. Res Judicata

Before turning to the merits of Rembrandt's res judicata arguments, the Court must first address a choice of law issue. In Rexing I , the Court applied Iowa law, which both parties agreed was mandated by the choice of law provision in the purchase agreement. 360 F. Supp. 3d at 832. Here, despite the fact that the issue of who was to pay for shipping materials was covered in the purchase agreement (and notwithstanding Rexing's characterization of its claims as torts), [see Filing No. 22-1 at 10 ], the parties agree that Indiana law applies. In support of this proposition, both parties cite to cases stating the general rule that, in diversity cases, a federal court applies the law of preclusion of the state in which the court is located. [See Filing No. 21 at 5 (citing Harmon v. Gordon , 712 F.3d 1044, 1054 (7th Cir. 2013) ); Filing No. 24 at 3 (citing Infra-Metals Co. v. 3600 Mich. Co., Ltd. , 2009 WL 5322948, at *3 (N.D. Ind. 2009) ).] That, however, is an incomplete statement of the law....