Kyline Potato Co. v. Tan–O–On Mktg., Inc.

• Decision Date: 04 July 2012
• Docket Number: No. CIV 10–0698 JB/RHS.,CIV 10–0698 JB/RHS.
• Citation: 879 F.Supp.2d 1228
• Parties: SKYLINE POTATO COMPANY, INC., A Colorado Corporation, Plaintiff, v. TAN–O–ON MARKETING, INC. d/b/a TMI; a Colorado corporation with a principal place of business in New Mexico, Hi–Land Potato Company, Inc., a Colorado corporation; Gerald R. Anderson, in his individual capacity and As Director/Shareholder of Tan–O–On Marketing Inc., Julie A. Anderson, in her individual capacity and as Director/Shareholder of Tan–O–On Marketing Inc., Mark Lounsbury, in his individual capacity and as Director/Shareholder of Tan–O–On Marketing Inc., Bill Metz, in his individual capacity and As Director/Shareholder of Tan–O–On Marketing Inc., and Carl Worley, in his individual capacity, as Director/Shareholder of Tan–O–On Marketing Inc., and as Director/Shareholder Hi Land Potato Company, Defendants, and Folson Farm Corporation, Potandon Produce, L.L.C., Mart Produce Corporation, Billingsley Produce Sales, Inc., Alsum Produce, Inc., and Peterson Bros. River Valley Farms, Inc., Intervening Plaintiffs, v. Tan–O–On Marketing, Inc. d/b/a TMI, and Hi–Land Potato Company, Inc., Defendants, and Tan–O–On Marketing, Inc. d/b/a TMI; Gerald R. Anderson, Julie A. Anderson, Third–Party Plaintiffs, v. Hi–Land Potato Company, Inc.; and Carl Worley, RPE, Inc. and Russell Wysocki, Third–Party Defendants.
• Court: U.S. District Court — District of New Mexico

879 F.Supp.2d 1228

SKYLINE POTATO COMPANY, INC., A Colorado Corporation, Plaintiff,

v.TAN–O–ON MARKETING, INC. d/b/a TMI; a Colorado corporation with a principal place of business in New Mexico, Hi–Land Potato Company, Inc., a Colorado corporation; Gerald R. Anderson, in his individual capacity and As Director/Shareholder of Tan–O–On Marketing Inc., Julie A. Anderson, in her individual capacity and as Director/Shareholder of Tan–O–On Marketing Inc., Mark Lounsbury, in his individual capacity and as Director/Shareholder of Tan–O–On Marketing Inc., Bill Metz, in his individual capacity and As Director/Shareholder of Tan–O–On Marketing Inc., and Carl Worley, in his individual capacity, as Director/Shareholder of Tan–O–On Marketing Inc., and as Director/Shareholder Hi Land Potato Company, Defendants,andFolson Farm Corporation, Potandon Produce, L.L.C., Mart Produce Corporation, Billingsley Produce Sales, Inc., Alsum Produce, Inc., and Peterson Bros. River Valley Farms, Inc., Intervening Plaintiffs,

v.Tan–O–On Marketing, Inc. d/b/a TMI, and Hi–Land Potato Company, Inc., Defendants,andTan–O–On Marketing, Inc. d/b/a TMI; Gerald R. Anderson, Julie A. Anderson, Third–Party Plaintiffs,

v.Hi–Land Potato Company, Inc.; and Carl Worley, RPE, Inc. and Russell Wysocki, Third–Party Defendants.

No. CIV 10–0698 JB/RHS.

United States District Court,

D. New Mexico.

July 4, 2012.

James T. Burns, Heather S. Jaramillo, Patrick J. Griebel, Albuquerque Business Law, P.C., Justin P. Pizzonia, Johanna A. Pickel, Gonzalez & Pizzonia LLC, Albuquerque, NM, for Plaintiff.

Justin P. Pizzonia, Gonzalez & Pizzonia LLC, Albuquerque, NM, Katy Koestner Esquivel, Meuers Law Firm, PL, Naples, FL, for Intervening Plaintiffs Folson Farm Corporation; Potandon Produce, L.L. C.; Mart Produce Corporation; Billingsley Produce Sales, Inc.; Alsum Produce, Inc.; and Peterson Bros. River Valley Farms, Inc.

Gordon H. Rowe III, The Rowe Law Firm, P.C., Henry M. Bohnhoff, Leslie McCarthy Apodaca, Melanie B. Stambaugh, Rodey Dickason Sloan Akin & Robb, P.A., Albuquerque, NM, for Defendants and Third–Party Defendants Hi–Land Potato Company, Inc. and Carl Worley.

Gordon H. Rowe III, The Rowe Law Firm, P.C., Albuquerque, NM, for Defendants Mark Lounsbury and Bill Metz.

Shannon Robinson, Albuquerque, NM, for Defendants and Third–Party Plaintiffs Tan–O–On Marketing Inc., Gerald Anderson, and Julie Anderson.

Benjamin F. Feuchter, William Spencer Reid, Keleher & McLeod, Albuquerque, NM, for Defendants and Third–Party Defendants RPE, Inc. and Russell Wysocki.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on: (i) Tan–O–On Marketing Inc.'s Motion to Amend Third Party Complaint for Fraud and Theft of Trade Secrets and Unjust Enrichment, filed February 2, 2012 (Doc. 105) (“Motion to Amend”); and (ii) Defendants Hi–Land Potato Company, Inc.'s and Carl Worley's Motion to Dismiss Fraud and Fraud–Related Claims in Third Party Complaint and to Dismiss Claims Filed by Gerald and Julie Anderson in Their Individual Capacities, filed February 7, 2012 (Doc. 109) (“Feb. 7, 2012 MTD”). The Court held a hearing on April 13, 2012. The primary issues are: (i) whether there are sufficient allegations in Defendant Tan–O–On Marketing, Inc.'s Third Party Complaint for Fraud and Theft of Trade Secrets and Unjust Enrichment at 2–10, filed October 14, 2011 (Doc. 72) (“Amended Third–Party Complaint”), to satisfy rule 9(b) of the Federal Rules of Civil Procedure's heightened pleading standards with regards to a common-law fraud claim; (ii) whether Tan–O–On Marketing has adequately pled a common-law fraudulent-conveyance claim in its Amended Third–Party Complaint; (iii) whether Tan–O–On Marketing has adequately pled a fraudulent-transfer claim in its Amended Third Party claim; (iv) whether the Court should grant Tan–O–On Marketing leave to amend to present additional allegations and claims against Third–Party Defendants RPE, Inc. and Russell Wysocki (the “RPE, Inc. Parties”); and (v) whether the Court should grant Tan–O–On Marketing leave to amend to present additional allegations and claims against Defendants Hi–Land Potato Company and Carl Worley (the “Hi–Land Potato Parties”). The Court will grant in part and deny in part the Feb. 7, 2012 MTD. There are not sufficient allegations in the Amended Third–Party Complaint to satisfy rule 9(b)'s heightened pleading standards with regards to a common-law fraud claim. There are sufficient allegations in the Amended Third–Party Complaint for a fraudulent-conveyance claim to satisfy rule 12(b)(6)'s standards and rule 9(b)'s heightened pleading standards. There are sufficient allegations in the Amended Third–Party Complaint regarding the claim under the New Mexico Uniform Fraudulent Transfer Act, N.M.S.A. 1978, §§ 56–10–14 to –25 (“UFTA”), that Tan–O–On Marketing asserts against the Hi–Land Potato Parties to survive dismissal under rule 12(b)(6) and rule 9(b). The Court will grant in part and deny in part the Motion to Amend. Consistent with the agreement between Tan–O–On Marketing and the RPE, Inc. Parties at the hearing on April 13, 2012, the Court will grant Tan–O–On Marketing leave to amend its claims for unjust enrichment and theft of trade secrets asserted against the RPE, Inc. Parties, but will deny leave to amend the remaining claims it seeks to assert against the RPE, Inc. Parties. The Court will also deny Tan–O–On Marketing leave to amend regarding its common-law fraud and claims under the New Mexico Unfair Practices Act, N.M.S.A. 1978, §§ 57–12–1 to –26 (“UPA”), that Tan–O–On Marketing seeks to assert against the Hi–Land Potato Parties, because permitting leave to amend would be futile and unfairly prejudicial to the Hi–Land Potato Parties. The Court will grant leave to amend regarding the fraudulent-conveyance claims which Tan–O–On Marketing seeks to assert against Hi–Land Potato, given that the additional allegations primarily flesh out allegations which were already in Tan–O–On Marketing's prior pleadings. The Court will grant leave to amend the claims for unjust enrichment and theft of trade secrets asserted against the Hi–Land Potato Parties in light of the agreement the parties reached at the hearing on April 13, 2012.

FACTUAL BACKGROUND

In the current pleading, the Tan–O–On Parties assert claims for fraud, unjust enrichment, and theft of trade secrets against the Hi–Land Potato Parties and the RPE, Inc. Parties. See Amended Third–Party Complaint at 2–10. Tan–O–On Marketing engaged in interstate commerce regarding the sale of produce with Skyline Potato and the Intervening Plaintiffs.¹See Amended Third–Party Complaint ¶¶ 12–13, at 3. “On June 15, 2010, the Secretary of Agriculture of the United States Department of Agriculture issued a reparation order and award which provided that Tan–O–On Marketing is indebted to Skyline Potato in the amount of $81,282.39....” Amended Third–Party Complaint ¶ 14, at 3. In February 2006, Shannon Casey and Shawna Casey purchased Tan–O–On Marketing from Defendants Gerald Anderson and Julie Anderson through a stock purchase agreement. See Amended Third–Party Complaint at ¶¶ 15–16, at 4. Before the Caseys' purchase of Tan–O–On Marketing, the company “had a long standing reputation in the industry for prompt payments to all growers of potatoes immediately upon receipt of payments for potatoes delivered by Tan–O–On Marketing.” Amended Third–Party Complaint ¶ 17, at 4.

In late 2009, Shannon Casey resigned from and closed Tan–O–On Marketing. See Amended Third–Party Complaint ¶¶ 18, 20, at 5. After closing Tan–O–On Marketing, the Caseys relocated to Monte Vista, Colorado, where Hi–Land Potato locates its business. See Amended Third–Party Complaint ¶ 20, at 5. Although the Caseys represented that they had abandoned their positions with Tan–O–On Marketing, they later established a new bank account for the company in Monte Vista. See Amended Third–Party Complaint ¶ 21, at 5–6. The Caseys deposited approximately $1.8 million of Tan–O–On Marketing's receivables into the new account and then paid those proceeds to Hi–Land Potato instead of paying Tan–O–On Marketing's Perishable Agricultural Commodities Act, 7 U.S.C. §§ 499a–499t (“PACA”), trust creditors, such as Skyline Potato and the Intervening Plaintiffs. See Amended Third–Party Complaint ¶ 21, at 6. At the time this transfer of funds occurred, the Hi–Land Potato Parties were aware of Tan–O–On Marketing's “insolvency, and the Casey's plan to strip the company of its assets.” Amended Third–Party Complaint ¶ 21, at 6. “This [conduct] was [all] part of a scheme to defraud [Tan–O–On Marketing] and Gerald R. Anderson and Julie Anderson and was intentional and known....” Amended Third–Party Complaint ¶ 24, at 7.

Before January 2010, Hi–Land Potato did not broker sales of potatoes, because it relied on Tan–O–On Marketing to sell its product. See Amended Third–Party Complaint ¶ 22, at 6. At the time Shannon Casey shut down Tan–O–On Marketing, the company was the largest potato supplier in the country to The Kroger Co., a national grocery chain. See Amended Third–Party Complaint ¶ 18, at 5. Kroger Co. does not transact business with a potato broker unless the broker has a Kroger Co. vendor number. See Amended Third–Party Complaint ¶ 18, at 5. Hi–Land Potato transferred customer relationships, monthly orders from Kroger Co., and other proprietary information, without authority, permission, or compensation to RPE, Inc. See Amended Third–Party Complaint ¶ 25, at 7. After the transfer of Tan–O–On Marketing assets to RPE, Inc., RPE, Inc. announced the opening of a Monte Vista sales division and hired Shannon Casey as the operation's director. See Amended Third–Party Complaint ¶ 26, at 7. RPE, Inc. now handles the sales of potatoes from Hi–Land Potato, including the sales relationship with Kroger Co. See Amended Third–Party Complaint ¶ 27, at 7–8. When Shannon Casey shut down Tan–O–On Marketing, neither Hi–Land...