JEAN C. HAMILTON, District Judge.
This matter is before the Court on the Motion to Dismiss of Plaintiffs/Counterclaim Defendants Ronnoco Coffee, LLC and Mid-America Roasterie, LLC, and Third-Party Defendants Scott Meader and Eric Bomball. (ECF No. 18). The motion is fully briefed and ready for disposition.
Westfeldt Brothers, Inc. ("Westfeldt") is a corporation organized and existing under the laws of the State of Louisiana, with its principal place of business in New Orleans, Louisiana. (Counter-Claims and Third Party Complaint ("Counterclaim"), ¶ 1). Westfeldt is in the business of importing green coffee to supply to coffee roasters. (Id., ¶ 9).
Sometime in 2010, U.S. Roasterie, Inc. ("U.S. Roasterie") became a customer of Westfeldt. (Counterclaim, ¶ 10). Throughout their course of dealing, Westfeldt and U.S. Roasterie entered into futures contracts for the purchase of green coffee. (Id., ¶ 11). Over time, U.S. Roasterie became delinquent in its payments due under the terms of the futures contracts. (Id., ¶ 12).
In the late summer or fall of 2014, U.S. Roasterie and Counterclaim Defendant Ronnoco Coffee, LLC ("Ronnoco Coffee") entered into negotiations for the sale of U.S. Roasterie's assets to Ronnoco Coffee. (Counterclaim, ¶¶ 2, 13). In conducting due diligence during the negotiations, Ronnoco Coffee became aware of the substantial debt that Westfeldt had allowed U.S. Roasterie to incur. (Id., ¶ 14). Ronnoco Coffee ultimately did not complete the purchase of U.S. Roasterie's assets.
At some subsequent point U.S. Roasterie's lender, Great Western Bank, took control of the assets of U.S. Roasterie. (Counterclaim, ¶ 17). All of U.S. Roasterie's assets then were formally acquired by Counterclaim Defendants Ronnoco Coffee and Mid-America Roasterie, LLC ("Mid-America")
On or around the day after the asset sale closing, a telephone conference took place between Ronnoco Coffee, U.S. Roasterie's former CEO and CFO, and Westfeldt. (Counterclaim, ¶ 30). According to Westfeldt, Ronnoco Coffee expressly agreed during the conference to assume certain futures contracts that were previously in place between Westfeldt and U.S. Roasterie. (Id.). Westfeldt maintains that although Ronnoco Coffee/Mid-America (collectively "Ronnoco") initially took delivery of the coffee subject to the futures contracts, it later informed Westfeldt that it would not continue taking delivery in fulfillment of the remaining assumed futures contracts. (Id., ¶ 33). Westfeldt further alleges that as of September, 2016, the value of the outstanding futures contracts assumed by Ronnoco was $145,776.88. (Id., ¶ 34).
Westfeldt filed its Counterclaim against Ronnoco on September 22, 2016. (ECF No. 9).
As noted above, Ronnoco, Meader and Bomball (collectively "Movants") filed the instant Motion to Dismiss on October 20, 2016, asserting all Westfeldt's counterclaims and third-party claims must be dismissed for failure to state a claim upon which relief can be granted. (ECF No. 18).
In ruling on a motion to dismiss, the Court must view the allegations in the complaint in the light most favorable to plaintiff. Eckert v. Titan Tire Corp., 514 F.3d 801, 806 (8
In their Motion to Dismiss, Movants first ask that the Court apply Iowa law to Counts I and II of Westfeldt's Counterclaim. (Memorandum in Support of Motion to Dismiss of Movants ("Movants' Memo in Support"), PP. 10-11). "A district court sitting in diversity must apply the conflict of law rules for the state in which it sits." Inacom Corp. v. Sears, Roebuck and Co., 254 F.3d 683, 687 (8
In order to determine which state has the most significant relationship with a particular issue, the Court must consider Restatement (Second) of Conflict of Laws § 6, which provides in relevant part as follows:
For contract claims, the Court further considers § 188, which provides in relevant part as follows:
As noted above, Counts I and II of Westfeldt's Counterclaim attempt to hold Ronnoco liable on a theory of successor liability. (Counterclaim, ¶¶ 35-54). Specifically, the issue raised is whether Ronnoco can be held liable as a successor to U.S. Roasterie by virtue of its purchase of U.S. Roasterie's assets from Great Western Bank. By the terms of Westfeldt's Counterclaim, this issue requires the Court to consider whether Ronnoco assumed the liabilities by virtue of the Sale Agreement (Counterclaim, ¶¶ 39, 49), whether Ronnoco is a "mere continuation" of U.S. Roasterie (Id., ¶¶ 40-42, 50-52), and/or whether the sale of assets was a transaction entered into in order to escape liability (Id., ¶ 43, 53).
Upon consideration of the foregoing, the Court finds that Iowa law controls the successor liability issue in this case, as Iowa clearly has the most significant contacts with the transaction at issue. As noted by Ronnoco, the issue of whether it can be held liable as a successor to U.S. Roasterie "implicate[s] only an Iowa transaction that involved the sale of assets located in Iowa, previously owned by an Iowa company [i.e., U.S. Roasterie], sold in accordance with Iowa law, pursuant to a Sale Agreement containing an Iowa choice-of-law provision." (Reply Memorandum in Support of Motion to Dismiss ("Movants' Reply"), P. 4). Iowa thus has a significant relationship with the transaction allegedly creating the successor liability, whereas Louisiana would appear to have little interest in the sale of assets from U.S. Roasterie (through Great Western Bank) to Ronnoco. John Q. Hammons Hotels, Inc. v. Acorn Window Systems, Inc., 2003 WL 21397710, at *5 (N.D. Iowa Feb. 11, 2003). The Court therefore will apply Iowa law to determine which liabilities, if any, were conveyed when Ronnoco purchased the assets of U.S. Roasterie from Great Western Bank. See Id.
Under Iowa law, the basic principle of corporate successor liability is that "a corporation that purchases the assets of another corporation assumes no liability for the transferring corporation's debts and liabilities. Exceptions arise only in four circumstances: (1) the buyer agrees to be held liable; (2) the two corporations consolidate or merge; (3) the buyer is a `mere continuation' of the seller; or (4) the transaction amounts to fraud." Lumley v. Advanced Data-Comm, Inc., 2009 WL 2514084, at *1 (Iowa App. Aug. 19, 2009) (citations omitted). In its response brief, Westfeldt contends that the third and fourth exceptions apply in this case. (Westfeldt's Memorandum in Opposition to Movants' Motion to Dismiss ("Westfeldt's Opp."), PP. 12-16).
With respect to exception four, "Iowa courts have not elaborated on the elements of such a claim." Grand Laboratories, Inc. v. Midcon Labs of Iowa, 32 F.3d 1277, 1281 (8
Id. at 1281-82 (internal quotations and citations omitted).
With respect to this claim, Westfeldt alleges in relevant part as follows:
(Counterclaim, ¶¶ 16-17, 29, 43). Upon consideration the Court finds that with these allegations, Westfeldt successfully has pled a claim for successor liability on the basis that the transaction at issue amounted to fraud.
In Counts III and IV of its Counterclaim, Westfeldt attempts to hold Ronnoco liable for U.S. Roasterie's nearly three million dollar debt on the theory of single business entity and/or alter ego. (Counterclaim, ¶¶ 55-95). Upon consideration, however, the Court finds that Westfeldt's claims are pled in too conclusory a manner to permit consideration of the grounds for dismissal raised in Movants' motion. For example, the Court notes that in Count III Westfeldt alleges, inter alia, that Ronnoco effectively controlled U.S. Roasterie; that there was unified administrative control of the two entities; that Ronnoco financed or effectively financed U.S. Roasterie; that U.S. Roasterie was inadequately capitalized; and that U.S. Roasterie did not comply with corporate formalities. (Id., ¶¶ 60, 62, 64-65, 67). Westfeldt offers no support for these allegations in its background section, however; instead, Westfeldt seemingly acknowledges that rather than controlling U.S. Roasterie's actions throughout, Ronnoco only became aware of the significant debt U.S. Roasterie had incurred while conducting due diligence in connection with a potential asset purchase. (Id., ¶¶ 13-14). Under these circumstances, the Court finds Westfeldt's claims of single business entity/alter ego inadequately pled, and subject to dismissal. The Court will, however, grant Westfeldt's request for leave to amend its Counterclaims.
In Counts V, VI and VII of its Counterclaim, Westfeldt attempts to assert claims for unfair trade practices, conversion/civil conspiracy to commit conversion, and unjust enrichment. (Counterclaim, ¶¶ 96-111). In its Motion to Dismiss Ronnoco asserts the claims are wholly conclusory, and lack sufficient factual support. (Movants' Memo in Support, P. 17). Ronnoco states: "Westfeldt alleges unfair trade practices without alleging what specific conduct of Plaintiffs was immoral, unethical, oppressive, unscrupulous, or unlawfully injurious to Westfeldt. Westfeldt alleges conversion without alleging what property Plaintiffs converted. Westfeldt alleges unjust enrichment without alleging what detriment it suffered or what benefit Plaintiffs received." (Id.).
Upon consideration the Court agrees with Ronnoco's assessment that Westfeldt's claims are inadequately pled. As one example, the Court notes it is unclear whether with these claims Westfeldt seeks to hold Ronnoco liable for the entire amount of money it is allegedly owed (nearly three million dollars), or only for the approximately $85,000 Westfeldt claims U.S. Roasterie sent to it, but then stopped payment on under the direction of Ronnoco. This portion of Movants' Motion to Dismiss will therefore be granted. Again, however, the Court will grant Westfeldt's request for leave to amend its Counterclaims, in order to attempt to cure the deficiencies.
In its Counterclaim, Westfeldt provides the following background information with respect to the futures contracts:
(Counterclaim, ¶¶ 30-33). Westfeldt's breach of futures contracts claim then states as follows:
(Id., ¶¶ 113-114). In its Motion to Dismiss, Ronnoco asserts it may not be held liable under this Count, as it assumed responsibility for the futures contracts neither by virtue of the Sale Agreement nor through any verbal agreement.
In support of its claim that Ronnoco expressly assumed the futures contracts, Westfeldt points to the Sale Agreement between U.S. Roasterie, Great Western Bank, and Ronnoco, which lists the assets subject to the Agreement. (See ECF No. 9-1). In particular, Westfeldt notes the Sale Agreement provides that the assets include "[a]ll documents, instruments, investment property, letter of credit rights and supporting obligations." (Id., P. 19). Ronnoco counters that the Sale Agreement expressly disavows any assumption of U.S. Roasterie's debts and obligations on its part, as follows: "Ronnoco is not assuming and will have no obligation to assume, perform, or discharge any liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise, of [U.S. Roasterie]....all of which will remain the sole responsibility and obligation of [U.S. Roasterie]." (Id., P. 2).
Upon consideration, the Court agrees with Ronnoco that the Sale Agreement cannot be interpreted to constitute an agreement on the part of Ronnoco to assume U.S. Roasterie's obligations with respect to the futures contracts.
As stated above, in its Counterclaim Westfeldt asserts that during a telephone conference that took place on or around the day after the asset sale closing, Ronnoco verbally agreed to assume the futures contracts previously in place between Westfeldt and U.S. Roasterie. Westfeldt continues to assert that the verbal assumption was confirmed by the parties through an email exchange.
The Iowa statute of frauds states in relevant part as follows:
Iowa Code § 554.2201.
In its response to Ronnoco's Motion to Dismiss, Westfeldt relies on subsection 2 of § 554.2201. Specifically, Westfeldt asserts that after Ronnoco verbally agreed to assume the futures contracts, Westfeldt sent written confirmation of the assumption via email, and because Ronnoco "failed to object to the contents of this written confirmation, the defense of statute of frauds is negated." (Westfeldt's Opp., P. 22 n. 10).
Upon consideration, the Court agrees with Ronnoco that Westfeldt's futures contracts claim fails under the Iowa statute of frauds. It is undisputed that no writing exists evidencing Ronnoco's alleged assumption of U.S. Roasterie's futures contracts with Westfeldt. While subsection two of § 554.2201 permits enforcement when a writing in confirmation of the contract is sent within a reasonable time, the writing must be "sufficient against the sender." Here, Westfeldt's email stated only that those at Westfeldt "look forward to working with Ronnoco on the existing futures contracts we had w/USR." (ECF No. 19-1, P. 5).
The Court's holding is bolstered by its finding that even Westfeldt apparently believed that in order to be enforceable, the contracts between itself and Ronnoco had to be in writing and signed. In his February 10, 2015, email, Ryan Mckinnon of Westfeldt wrote Robert Carpenter and Scott Meader of Ronnoco, and stated in relevant part as follows: "In the meantime I will have your credit application sent to our bank for approval along with the previous [U.S. Roasterie] contracts converted to be under the name of Ronnoco Roasterie, LLC." (ECF No. 19-1, P. 5). On February 19, 2015, Mr. Mckinnon continued the email exchange as follows: "Also, can you please send us back the signed contracts? As you can imagine our attorneys and bank are very worried with us moving forward w/these contracts given the fact that [U.S. Roasterie] stole such a large amount of green coffee from us." (Id., P. 2 (emphasis added)). In light of the foregoing, the Court finds Westfeldt clearly anticipated entering into written contracts; in fact, Westfeldt drafted the contracts itself and forwarded them to Ronnoco for signature, but the record reveals they were never signed by Ronnoco. (See ECF No. 9-5). Under these circumstances, Westfeldt's alleged writing in confirmation of the contract fails to satisfy the Iowa statute of frauds, and this portion of Movants' Motion to Dismiss must be granted.
In the final count of its Counterclaim, Westfeldt asserts tortious interference with contractual relations/conspiracy to tortiously interfere with contractual relations against Eric Bomball and Scott Meader. (Counterclaim, ¶¶ 115-123). As noted above, "Missouri has adopted the Restatement (Second) of Conflict of Laws which uses the `most significant relationship' test to determine which state's laws govern." Taylor v. Cottrell, Inc., 2015 WL 8021729, at *1 (citations omitted). In order to determine which state has the most significant relationship with a particular issue, the Court must consider Restatement (Second) of Conflict of Laws § 6, which provides in relevant part as follows:
For tort claims, the Court further considers § 145, which provides in relevant part as follows:
While admittedly a close call, the Court will apply Louisiana law to this claim. "Missouri courts apply the law of the state where the injury occurred unless some other state has a more significant relationship with the occurrence or some overriding interest." Taylor, 2015 WL 8021729, at *1 (citation omitted). Here, it is undisputed that the place where the injury occurred was Louisiana. Taking the other factors into consideration does not alter the applicable law, because although the conduct causing the injury may have occurred outside Louisiana, Westfeldt's place of incorporation and place of business is Louisiana, and it can be argued the relationship between the parties, if any, is centered in Louisiana as well. Under these circumstances, the Court finds Louisiana has the most significant relationship with the issues raised in Westfeldt's tort claim, and so its law will apply.
"Historically, a cause of action for tortious interference with a contract was not available in Louisiana." Healthcare Management Serv., Inc. v. Vantage Healthplan, Inc., 748 So.2d 580, 582 (La. App. 1999) (citing Kline v. Eubanks, 109 La. 241, 33 So. 211 (1902)). In 9 to 5 Fashions, Inc. v. Spurney, however, the Louisiana Supreme Court recognized a limited cause of action for tortious interference with contractual relations. See 538 So.2d 228 (La. 1989). Specifically, the Court recognized "only a corporate officer's duty to refrain from intentional and unjustified interference with the contractual relation between his employer and a third person." Spurney, 538 So.2d at 234.
Since Spurney, Louisiana courts consistently have limited the cause of action recognized in Spurney to its facts. See, e.g., Vantage Healthplan, 748 So.2d at 583 (citation omitted) ("In Louisiana, this court has limited the application of 9 to 5 Fashions, Inc. v. Spurney, supra, to its facts. Where the interference alleged is beyond the cause of action created in that decision, the trial court is correct in denying the claim"); Boudreaux v. OS Restaurant Serv., L.L.C., 58 F.Supp.3d 634, 638 (E.D. La. 2014) (internal quotations and citations omitted) ("Louisiana courts and the Fifth Circuit have consistently refused to extend the action for tortious interference beyond the limited scope recognized in Spurney....In sum, the Louisiana Supreme Court has recognized a cause of action for intentional interference with contractual relations only against a corporate officer.").
As noted above, Westfeldt's tortious interference with contractual relations claim is directed against Eric Bomball and Scott Meader. According to Westfeldt, both Bomball and Meader were corporate officers of Ronnoco, not U.S. Roasterie (the company alleged to have breached the contracts with Westfeldt). (Counterclaim, ¶¶ 116-118). By their own terms then, Westfeldt's allegations do not assert a claim for tortious interference with contractual relations as recognized under Louisiana law. This portion of Movants' Motion to Dismiss must therefore be granted.
Accordingly,
