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stating that a court may rely on extrinsic evidence in considering a motion to dismiss “if the documents are central to Plaintiff claim or are sufficiently referred to in the [c]omplaint”
Summary of this case from Clement v. Spartanburg Steel Prods.Opinion
Civil Action No. 2:18-CV-109
2019-04-04
TRIPLE R RANCH, LLC, and Eric Hedrick, Plaintiffs, v. PILGRIM'S PRIDE CORPORATION, Defendant.
Amanda Hitt, Pro Hac Vice, Jack A. Kolar, Pro Hac Vice, Karen J. Gray, Pro Hac Vice, Government Accountability Project, Inc., Keith Lively, Doyle, Barlow & Mazard, PLLC, Washington, DC, J. Dudley Butler, Pro Hac Vice, Butler Farm & Ranch Law Group, PLLC, Benton, MS, for Plaintiffs. Benjamin L. Stewart, Pro Hac Vice, Clayton E. Bailey, Pro Hac Vice, Bailey Brauer PLLC, Dallas, TX, Peter G. Zurbuch, Busch, Zurbuch & Thompson, PLLC, Elkins, WV, for Defendant.
Amanda Hitt, Pro Hac Vice, Jack A. Kolar, Pro Hac Vice, Karen J. Gray, Pro Hac Vice, Government Accountability Project, Inc., Keith Lively, Doyle, Barlow & Mazard, PLLC, Washington, DC, J. Dudley Butler, Pro Hac Vice, Butler Farm & Ranch Law Group, PLLC, Benton, MS, for Plaintiffs.
Benjamin L. Stewart, Pro Hac Vice, Clayton E. Bailey, Pro Hac Vice, Bailey Brauer PLLC, Dallas, TX, Peter G. Zurbuch, Busch, Zurbuch & Thompson, PLLC, Elkins, WV, for Defendant.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS
JOHN PRESTON BAILEY, UNITED STATES DISTRICT JUDGE
Pending before this Court are, inter alia , Defendant's Motion to Dismiss [Doc. 19] and Defendant's Motion to Stay Discovery Pending Resolution of its Motion to Dismiss [Doc. 30]. Both Motions have been fully briefed and are ripe for decision. For the reasons stated below, the Motion to Dismiss will be granted in part and denied in part, while the Motion for Stay will be denied as moot.
The Complaint in this case contains six separate counts. Count I alleges a violation of the Packers and Stockyards Act, 7 U.S.C. § 192(a) and (b) ("PSA"), claiming that the defendant used its power over the plaintiffs to retaliate against them as a result of their activities on behalf of poultry growers in West Virginia, including membership in the Contract Poultry Growers Association of the Virginias ("CPGAVA").
Count II alleges that the defendant violated the Agricultural Fair Practices Act, 7 U.S.C. § 2303, claiming that the defendant refused to deliver birds to plaintiffs in retaliation for plaintiffs’ activities in the CPGAVA.
Count III alleges fraud, in that the defendant in 2006 represented to the plaintiffs that as long as they grew good birds, they would continue to receive replacements of baby chicks. Yet in October 2016, the defendant refused to provide any additional birds.
Count IV alleges a breach of contract, claiming that the defendant deliberately and maliciously refused to honor the requirements of their contract to continue to place birds on the farm.
Count V alleges that the defendant breached the implied covenant of good faith and fair dealing by taking actions to destroy plaintiff's business by alleging baseless defaults, imposing arbitrary restrictions and obligations on plaintiff, and intentionally causing plaintiff to rank at the bottom of the tournament system.
Count VI alleges negligent, willful and reckless misrepresentation in connection with the refusal of the defendant to place birds on plaintiff's farm.
Discussion
With respect to Count I of the Complaint, the defendant urges this Court to reconsider its ruling in the case of M & M Poultry Company v. Pilgrim's Pride Corp. , Civil Action No. 2:15-CV-32, 2015 WL 13841400 (N.D. W. Va. Oct. 26, 2015), in which this Court held that "anticompetitive effect is not an essential element that need be alleged to state a claim for violation of § 192(a) - (b)." This Court has reexamined the authorities relied upon in the past and reviewed the newer authorities presented in the defendant's briefing and is unwilling to change its position. This Court will not reiterate its thinking in reaching this position. Reference to the M & M decision is suggested.
Nor will this Court stop the progress of this case to certify the question to the Fourth Circuit. There will be ample time to challenge this Court's rulings after the trial in this case.
This Court finds that Triple R Ranch has alleged sufficient facts to permit the cause of action set forth in Count I to go forward. Simply stated, Triple R alleges that the defendant, in light of the plaintiffs participation in the CPGAVA and other activities, took steps to assure that Triple R failed in its business venture. These include delivery of substandard feed, delivery of diseased chicks, failure to deliver needed medication, and unwarranted delay in weighing the chickens.
With respect to Count II of the Complaint, the plaintiffs allege that the decision to stop providing birds was intended to stop the plaintiff's activities on behalf of the CPGAVA and other growers and to intimidate other growers who were or may become members of the CPGAVA, in violation of the Agricultural Fair Practices Act, 7 U.S.C. § 2303. The plaintiffs also allege that defendant decided to cease providing chicks to Triple R as of October 28, 2016.
In doing so, the plaintiffs conveniently fail to attach a copy of the October 28, 2016, letter from Pilgrim's Pride to Triple R which states, in part, that "[O]n Monday, October 3, 2016, Pilgrim's received an email from your email address stating that Triple R Ranch LLC ‘will not be taking any more chicks after this flock we have now is finished. We are closing our doors.’ ... Accordingly, per Triple R Ranch LLC's request and representation that it is ‘closing [its] doors,’ no further chicks will be delivered to the farm's poultry houses now that the current flock has been removed for processing."
The plaintiffs also failed to include the October 3 email as well as Pilgrim's immediate response. On October 3, 2016, Eric Hedrick sent an email to Pilgrim's Pride stating that they would not be taking any more chicks after the flock which they had was finished and stating that they were closing their doors. The next day, Pilgrim's Pride confirmed receipt of the request that Pilgrim's no longer place chicks at Triple R Ranch after the current flock is removed for processing and that, per the request, would not slot the farm to receive chicks in the future.
This Court is well aware that "[M]atters outside of the pleadings are generally not considered in ruling on a Rule 12 Motion." Williams v. Branker , 462 F. App'x 348, 352 (4th Cir. 2012). "Ordinarily, a court may not consider any documents that are outside of the Complaint, or not expressly incorporated therein, unless the motion is converted into one for summary judgment." Witthohn v. Fed. Ins. Co. , 164 F. App'x 395, 396 (4th Cir. 2006). However, the Court may rely on extrinsic evidence if the documents are central to Plaintiffs’ claim or are sufficiently referred to in the Complaint. Id . at 396-97. "When a document is properly considered in the context of a motion to dismiss and it conflicts with the bare allegations of the complaint, the document prevails." Tinsley v. Onewest Bank, FSB , 4 F.Supp.3d 805, 819 (S.D. W. Va. 2014) (Chambers, CJ) (citing Fare Deals Ltd. v. World Choice Travel.Com, Inc. , 180 F.Supp.2d 678, 683 (D. Md. 2001) and Fayetteville Investors v. Commercial Builders, Inc. , 936 F.2d 1462, 1465 (4th Cir. 1991) ).
The fact that the plaintiffs informed Pilgrim's that it would not take new chicks and was ceasing business takes the cause of action in Count II for failure to send chicks out of the plausible range.
In addition, there is an obvious statute of limitations problem. While normally the statute of limitations is a highly fact-intensive issue precluding its application on a motion to dismiss, Courts may dismiss claims based on a statute of limitations defense when the face of the Complaint shows the limitations period has run. Dean v. Pilgrim's Pride Corp. , 395 F.3d 471, 474 (4th Cir. 2005) ; Johnston v. Berryhill , 2018 WL 4677870, at *2 (N.D. W. Va. Jan. 3, 2018).
It is only logical that any acts of retaliation or other acts designed to harm the plaintiff's business occurred prior to the date upon which Triple R informed Pilgrim's that it would take no more chicks and was closing its doors, which was October 3, 3016. The plaintiffs have certainly failed to identify any such actions occurring after October 3, 2016. The statute of limitations for an action under the Agricultural Fair Practices Act is two years. 7 U.S.C. § 2305(c). Accordingly, any action under the AFPA would have to have been filed on or before October 3, 2018. Court records disclose that this case was filed on October 25, 2018, more than two years later.
In their briefing, the plaintiffs raise the issues of equitable tolling and the discovery rule, yet present no facts to support such theories. The plaintiffs have failed to point to any improper actions of the defendant which were not known to the plaintiffs at least by October 3, 2016. In order to raise equitable tolling, the plaintiffs must allege that (1) Pilgrim's fraudulently concealed facts that are the basis of plaintiffs’ claims and (2) plaintiffs failed to discover those facts within the statutory period (3) despite the exercise of due diligence. Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, Inc. , 71 F.3d 119, 122 (4th Cir. 1995). Further, fraudulent concealment must be pleaded with particularity under Rule 9(b); thus, plaintiffs must allege the circumstances of the how, when, and in what manner Pilgrim's fraudulently concealed its alleged wrongdoing from plaintiffs. See, e.g. , Mullinax v. Radian Gty. Inc. , 311 F.Supp.2d 474, 488-499 (M.D. N.C. 2004) (citing Weinberger v. Retail Credit Co. , 498 F.2d 552, 555 (4th Cir. 1974) ) and Detrick v. Panalpina, Inc. , 108 F.3d 529, 541 (4th Cir. 1997). This Court can find no basis upon which the discovery rule or the equitable tolling doctrines could apply to this case.
Count II of the Complaint is time-barred.
As noted above, Count III alleges fraud, in that the defendant in 2006 represented to the plaintiffs that as long as they grew good birds, they would continue to receive replacements of baby chicks. Yet in October 2016, the defendant refused to provide any additional birds. On October 3, 2016, Triple R informed the defendant that it would no longer accept new flocks of birds. The allegations of this Count are belied by the documents considered above. It clearly was Triple R that refused to accept birds. In their briefing, the plaintiffs do not contest that fact. In addition, whatever faults on the part of Pilgrim's Pride that led to the decision to refuse additional birds and close its doors obviously occurred prior to October 3 and is therefore barred by the statute of limitations.
Count III fails to state a claim and is barred by the applicable two year statute of limitations.
As noted above, Count IV alleges a breach of contract, claiming that the defendant deliberately and maliciously refused to honor the requirements of their contract to continue to place birds on the farm. Given the fact that the Triple R provided notice that it refused to accept new flocks of birds, an action based upon the failure of the defendant to provide additional birds is hardly plausible. Count IV will be dismissed due to the failure to state a claim upon which relief could be granted.
Count V alleges that the defendant breached the implied covenant of good faith and fair dealing by taking actions to destroy plaintiff's business by alleging baseless defaults, imposing arbitrary restrictions and obligations on plaintiff, and intentionally causing plaintiff to rank at the bottom of the tournament system. In West Virginia, a claim for a breach of the covenant of good faith and fair dealing is not a cognizable claim. Rather, it is part of a claim for breach of contract. Highmark W. Va., Inc. v. Jamie , 221 W.Va. 487, 655 S.E.2d 509, 514 (2007) ; Weber v. Wells Fargo Bank, N.A. , 2014 WL 198661, at *4 (N.D. W. Va. Jan. 15, 2014) ("a stand-alone bad faith claim ... is not recognized in West Virginia"). West Virginia law implies a covenant of good faith and fair dealing in every contract, but not as a stand-alone cause of action separate from a breach of contract claim. Corder v. Countrywide Home Loans, Inc. , 2011 WL 289343, *4 (S.D. W. Va. Jan 26, 2011) (Copenhaver, J). A claim for breach of the implied covenant of good faith and fair dealing can only survive if the borrower pleads an express breach of contract claim. See Clendenin v. Wells Fargo Bank, N.A. , 2009 WL 4263506, *5 (S.D. W. Va. Nov. 24, 2009) (Goodwin, J) (holding that a bad faith claim "will live or die by the [express] breach-of-contract claim ....").
Accordingly, this claim will be dismissed for failure to state a claim upon which relief may be granted.
Finally, as noted above, Count VI alleges negligent, willful and reckless misrepresentation in connection with the refusal of the defendant to place birds on plaintiff's farm. As noted above, the evidence unquestionably establishes that it was Triple R that refused any further birds. This claim also fails due to the two year statute of limitations. Any misrepresentations necessarily predated the October 3, 2016, email and would be barred.
For the reasons stated above, Counts II, III, IV, V, and VI are DISMISSED .
This leaves the issue as to some of the parameters of the claim stated in Count I. Both parties agree that attorneys fees may not be recovered in a PSA action.
In addition, this Court finds that Eric Hedrick, in his individual capacity, may not maintain a claim under the PSA. First, plaintiff Hedrick's claim he may sue Pilgrim's under the PSA and AFPA is fundamentally flawed because he fails to acknowledge that his limited liability company, Triple R, is the named party under the 2012 BPA with Pilgrim's, and controlling West Virginia statutory law establishes that a limited liability company is separate and distinct from its members. W. Va. Code § 31B-2-201. Accordingly, no matter how much gloss plaintiff Hedrick may apply to support his assertion that he is a "person" under PSA §§ 182(1) and 209(a), he cannot cover up the fact that plaintiff Triple R is the party raising broilers for purposes of the PSA. Thus, Triple R, not Hedrick, has standing to assert claims for any purported violations.
Second, Mr. Hedrick fails to cite, and Pilgrim's could not find, any case law holding that a member of a limited liability company has standing to sue under the PSA.
Third, Mr. Hedrick lacks standing to sue under the PSA because he falls outside the zone of interests to be protected under both statutes. As plaintiffs concede in their Response, the " ‘chief evil’ " Congress sought to address in the PSA was the " ‘monopolistic practices of the packers, ‘enabling them unduly and arbitrarily to lower prices to the shipper, who sells, and unduly and arbitrarily to increase the price to the consumer, who buys.’ " [Doc. 26, p. 11 (citations omitted) (emphasis added) ]. Here, Plaintiff Hedrick is not the shipper who is selling. Rather, the shipper who is selling in this case is Triple R.
On the other hand, to interpret the PSA in the manner Plaintiff Hedrick proposes would violate one of the organizing principles of West Virginia limited liability company law—i.e., the separation that exists between a limited liability company and its members. W. Va. Code § 31B-2-201. Moreover, Plaintiff Hedrick's broad interpretation of the PSA and would improperly expand the scope of potential litigants and open the floodgates of litigation—a result at least one other court has refused to allow. See City of Clinton, Ark. v. Pilgrim's Pride Corp. , 653 F.Supp.2d 669, 671-74 (N.D. Tex. 2009) (holding a city is not a "person" under PSA §§ 182(1) and 209(a) and thus dismissing the city's PSA § 192 claims). Indeed, if the Court were to accept Plaintiff Hedrick's interpretation, virtually any person working on or providing services to a party under contract with a chicken company to raise broilers would have standing to sue.
Plaintiff Hedrick's interpretation is also contradicted by the Complaint's allegations, which show he has not been injured directly and independently of Triple R. Indeed, the Complaint's allegations upon which the PSA claims are based relate solely to Pilgrim's purported acts toward Triple R. (See, e.g., Compl. ¶¶ 57 (furnishing "substandard food for the chicks"); 58 (furnishing "diseased chicks"); 59 (failing "to provide needed medication for the chicks"); 60 ("delay in weighing the birds that resulted in reduced live weight"); 61 (imposing "arbitrary and unjustified requirements on Plaintiff under threat of refusing to furnish chickens unless additional expenditures were made"); 62 ("PPC did not abide by its own terms imposed in the Agreement"); 69 ("Then Hedrick made the fatal mistake of speaking out against the Companies at the Department of Justice/Department of Agriculture Town Hall Meeting on Capitol Hill in DC in 2010. After this, settlements started going down drastically. Triple R began losing anywhere from $17K to $30K a flock"); 69 ("Triple R had to refinance to be able to keep up with its mortgage payments and operating expenses"); 69 ("After nine years of providing grow-out services for PPC, Triple R owed more than when it first started. Triple R was left approximately $2.3M in debt. This debt has continued to increase")).
Mr. Hedrick's failure to allege any direct injury independent of Triple R's purported injuries similarly dooms his intentional and negligent misrepresentation causes of action pleaded in the Complaint. The only way Plaintiff Hedrick may avoid the limitations of the limited liability company member standing rule is to allege facts showing he has been injured directly and independently of Triple R. See Shell Petroleum, NV v. Graves , 709 F.2d 593, 595 (9th Cir. 1983) ("To have standing to maintain an action, a shareholder must assert more than personal economic injury resulting from a wrong to the corporation"); see also Woods View II, LLC v. Kitsap Cty. , 484 F. App'x 160 (9th Cir. 2012) (applying Shell to members of a limited liability company).
Here, the Complaint's allegations show Mr. Hedrick's loss derives from his membership in Triple R. Indeed, he fails to allege facts showing he suffered an injury distinct from those of any other member of Triple R. Just because Hedrick may have been "the actual recipient of the misrepresentations" and allegedly "relied on them" does not afford him standing, particularly since he received the purported representations in his role as a member of Triple R.
Finally, Plaintiffs fail to provide adequate case law permitting the Court to rule contrary to West Virginia statutory law expressly recognizing a distinction between Triple R and Hedrick. See W. Va. Code § 31B-2-201. For instance, Plaintiffs rely on a Ninth Circuit Court of Appeals opinion - Hinojos v. Kohl's Corporation - and an opinion from the District Court for the Western District of Texas - Barraza v. Bank of America, N.A. - for the proposition that Mr. Hedrick has standing to sue Pilgrim's for alleged intentional and negligent misrepresentations. However, neither Hinojos nor Barraza concern, let alone address, a limited liability company's member's right to sue. See generally Hinojos , 718 F.3d 1098 (9th Cir. 2013) ; Barraza , 2012 WL 12886438 (W.D. Tex. Aug. 13, 2012). Rather, both opinions concern individual plaintiffs’ rights to seek redress for direct injuries they incurred. See Hinojos , 718 F.3d at 1103-1105 (purchaser of good from department store had standing to sue under California state statute prohibiting unfair advertisement of goods as being marked down from a fictitious "original" or "regular price"); Barraza , 2012 WL 12886438 at *3-6 (determining spouse had standing to sue mortgagor for breach of contract and negligent misrepresentation because she signed a deed of trust). Neither case is instructive because they are factually inapposite.
For the above reasons, Mr. Hedrick will be dismissed from this action.
Pursuant to paragraph § H.17 of the Broiler Production Agreement effective March 16, 2012, this case will proceed as a bench trial, with no jury.
Also pending is Defendant's Motion to Stay Discovery Pending Resolution of its Motion to Dismiss [Doc. 30]. Inasmuch as the Motion to Dismiss is now resolved, this Motion is denied as moot.
Accordingly, Defendant's Motion to Dismiss [Doc. 19 ] is GRANTED IN PART and DENIED IN PART and Defendant's Motion to Stay Discovery Pending Resolution of its Motion to Dismiss [Doc. 30 ] is DENIED AS MOOT .
It is so ORDERED .