Red Bone Alley Foods, LLC v. Nat'l Food & Beverage, Inc.
| Decision Date | 14 March 2014 |
| Docket Number | Case No.: 4:13-cv-3590-PMD |
| Court | U.S. District Court — District of South Carolina |
| Parties | Red Bone Alley Foods, LLC, Plaintiff, v. National Food and Beverage, Inc., Defendant. |
This matter is before the Court upon Defendant National Food and Beverage, Inc.'s ("Defendant") Motion to Dismiss or, in the Alternative, to Stay or Transfer ("Motion"). For the reasons that follow, the Court denies Defendant's Motion.
Plaintiff Red Bone Alley Foods, LLC ("Plaintiff") operates a South Carolina business that manufactures and sells sauces and marinades to grocery stores and other retail establishments for resale to the public. Defendant is a Texas corporation that specializes in processing and packaging sauces and condiments for customers like Plaintiff.
Plaintiff and Defendant entered into an ongoing business relationship in 2011 whereby Defendant produced and delivered certain goods to Plaintiff, and Plaintiff provided to Defendant the instructions for its product's formulations (including ingredients), packaging, and processing. At the beginning of the business relationship, Defendant produced two lines of spray marinadesfor Plaintiff. Defendant then solicited Plaintiff to move all of its product lines to Defendant for production, and Plaintiff began to do so in 2012.
After moving a significant portion of its product lines to Defendant for production, Plaintiff began to receive product with numerous quality assurance problems that resulted in Plaintiff being unable to supply its customers with product. Also, Plaintiff received product with incorrect labeling that made shipment of the product impossible. In late 2012, Plaintiff was going to change the bottle size of its aioli sauces from ten ounces to twelve ounces. Defendant was responsible for purchasing the new bottles, caps, labels, and shrink bands associated with the change in bottle size. Plaintiff undertook the necessary paperwork with its customers to prepare them to receive the new twelve-ounce sized items. However, Defendant failed to acquire the new bottles, caps, labels, and shrink bands in time for production. Defendant's failure to acquire the appropriate materials resulted in a multiple-month delay during which Plaintiff was unable to supply approximately 2,500 stores with its products.
In exchange for production by Defendant, Plaintiff was to pay for the goods within a term of sixty to ninety days. This arrangement allowed for Plaintiff to receive the manufactured product in South Carolina, deliver the product to its customers across the country, and receive payment from the customers upon the sale of the product. However, disruptions in Plaintiff's cash flow resulted in an accumulation of accounts receivable to Defendant. In late 2012, Defendant notified Plaintiff that due to the outstanding accounts receivable, Defendant would not package any more products for Plaintiff until the matter had been addressed. On December 7, 2012, Plaintiff executed a promissory note in order to memorialize the debt, structure payments on the outstanding balance, and have Defendant continue to produce product so that cash flow could continue to Plaintiff. Dale Barth, a member of Plaintiff's LLC, executed a guarantyagreement, guaranteeing Plaintiff's performance under the promissory note. The promissory note and guaranty agreement allowed the parties to continue to do business together.
On April 25, 2013, Defendant contacted Plaintiff by email regarding a request by the federal Food and Drug Administration ("FDA") to recall Plaintiff's wasabi aioli. In this email, Defendant told Plaintiff that the FDA was recalling the wasabi aioli because "the item has no content of Wasabi" and therefore the label was misbranded. Apr. 25, 2013 Email, ECF 8-2. Prior to this time, Plaintiff had investigated whether actual wasabi content was required to label the product as wasabi, and Plaintiff believed that it was not. When Plaintiff informed Defendant that Plaintiff intended to challenge the FDA recall based on the mislabeling of wasabi content, Defendant revealed that the real reason the FDA requested a recall was because Defendant had used a wrong ingredient in the wasabi aioli. Instead of using the all-natural horseradish ingredient specified by Plaintiff, Defendant had been using a horseradish ingredient with metabisulfite preservative. Because such preservatives can cause severe adverse health risks in persons allergic to sulfites, the FDA requires products containing preservatives to warn about the potential health hazards. Since Plaintiff's wasabi aioli was not supposed to have any sulfite preservatives in it, the label did not warn of the health hazards associated with sulfites.
On September 6, 2013, Defendant filed suit in Texas state court ("the Texas Suit") alleging breach of contract related to the promissory note and guaranty, and seeking a declaratory judgment and injunctive relief related to the issues surrounding the wasabi aioli recall. On November 20, 2013, Plaintiff commenced this suit in South Carolina state court ("the South Carolina Suit"), alleging two claims for breach of contract and two claims for negligence arising from the wasabi aioli recall and the failure to acquire new twelve-ounce packaging materials; one count of breach of contract accompanied by a fraudulent act arising from the April25, 2013 email; and one claim for violation of the South Carolina Unfair Trade Practices Act. On November 26, 2013, Defendant served the Texas Suit on a former employee of Plaintiff who had previously served as the registered agent for Plaintiff in Texas, but whose authority had been revoked by Plaintiff in 2008. On December 12, 2013, the Texas Secretary of State was served with the South Carolina Suit. On December 17, 2013, five days after the South Carolina Suit had been served on the Texas Secretary of State, Plaintiff was served with the Texas Suit.
On December 26, 2013, Defendant removed the South Carolina Suit to this Court. Defendant filed the instant Motion on January 2, 2014. Plaintiff filed a response, and Defendant filed its reply. The Motion is now ripe for review.
This Court has subject matter jurisdiction over this matter based on 28 U.S.C. § 1332, as there is complete diversity of the parties and the amount in controversy exceeds $75,000. Plaintiff is a South Carolina limited liability company with members who are all residents of South Carolina. Defendant is a Texas corporation with its principal place of business in Texas. Finally, Plaintiff seeks damages in excess of $75,000. Therefore, this Court has diversity jurisdiction over this case.
Defendant first moves to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2). When personal jurisdiction is challenged by the defendant, the plaintiff has the burden of showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997). When the court addresses the issue of jurisdiction on the basis of motion papers and supporting legal memoranda without an evidentiary hearing, "the burden on the plaintiff is simply to make aprima facie showing of a sufficient jurisdictional basis in order to survive the jurisdictional challenge." Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). "[T]he court must take all disputed facts and reasonable inferences in favor of the plaintiff." Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). In deciding the jurisdictional issue, the court may consider pleadings, affidavits, and other evidentiary materials. Magic Toyota, Inc. v. Se. Toyota Distribs., Inc., 784 F. Supp. 306, 310 (D.S.C. 1992).
"[T]o validly assert personal jurisdiction over a non-resident defendant, two conditions must be satisfied." Christian Sci. Bd. of Dirs. of the First Church of Christ v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001). First, the exercise of jurisdiction must be authorized by the long-arm statute of the forum state, and second, the exercise of personal jurisdiction must not "overstep the bounds" of Fourteenth Amendment due process. Anita's N.M. Style Mexican Food, Inc. v. Anita's Mexican Foods Corp., 201 F.3d 314, 317 (4th Cir. 2000). South Carolina's long-arm statute has been construed to extend to the outer limits allowed by the Due Process Clause. Foster v. Arletty 3 Sarl, 278 F.3d 409, 414 (4th Cir. 2002). Thus, the scope of the court's inquiry is whether defendants have "certain minimum contacts" with the forum, such that "maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citations omitted).
A defendant has minimum contacts with a jurisdiction if "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Under this standard, "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958).Accordingly, the defendant's actions must have been "directed at the forum state in more than a random, fortuitous, or attenuated way." Mitrano v. Hawes, 377 F.3d 402, 407 (4th Cir. 2004) (internal citation omitted). In determining the existence of minimum contacts, the court is mindful that it must draw all reasonable inferences from both parties' pleadings, even if they conflict, in the Plaintiff's favor. See, e.g., Precept Med. Prods., Inc., v. Klus, 282 F. Supp. 2d 381, 385 (W.D.N.C. 2003) ()...
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