McArthur Diary, LLC v. Mccowtree Brothers Dairy, Inc. et al
ORDER granting in part and denying in part 17 Counter-Defendants' Motion to Dismiss. Signed by Judge Marcia G. Cooke on 5/27/2011. (jbn)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 09-62033-CIV-COOKE/TURNOFF
MCARTHUR DAIRY, LLC,
MCCOWTREE BROTHERS DAIRY, INC., et al.
DEAN FOODS COMPANY,
ORDER GRANTING IN PART AND DENYING IN PART
MCARTHUR DAIRY, LLC’S AND DEAN FOODS COMPANY’S
MOTION TO DISMISS COUNTERCLAIMS AND THIRD-PARTY CLAIMS
THIS MATTER is before me on Plaintiff/Counter-Defendant McArthur Dairy, LLC’s
and Third-Party Defendant Dean Foods Company’s Motion to Dismiss Counterclaims and ThirdParty Claims (ECF No. 17). I have reviewed the record, the arguments and the relevant legal
authorities. For the reasons explained below below, the motion to dismiss is granted in part.
This case involves the production, processing, bottling and distribution of Grade A milk.2
Plaintiff/Counter-Defendant McArthur Dairy, LLC (“McArthur”) is in the business of producing,
These facts are taken from the Plaintiff’s Complaint. See Beck Deloitte & Touche, 144 F.3d
732, 735 (11th Cir. 1998) (“In evaluating the sufficiency of a complaint, a court must accept the
well pleaded facts as true and resolve them in the light most favorable to the plaintiff.”).
Milk contains nine essential nutrients and vitamins, including protein, vitamins A, D, and B12,
calcium potassium, phosphorus, riboflavin, niacin, zinc, and magnesium. Milk is the only drink
in the world that contains such a large range of naturally occurring nutrients.
processing, distributing and selling dairy products.
Brothers Dairy, Inc. (“McCowtree Brothers”) is a milk distributor involved in the milk
distribution business to retailers in South Florida. Defendant/Counter-Plaintiff Anthony Meyer
(“Meyer”) is the president of McCowtree. (McCowtree Brothers and Meyer are collectively
referred to as “McCowtree”). Third-Party Defendant Dean Foods Company (“Dean Foods”),
McArthur’s parent organization, is a food and beverage company that purchases, processes and
ships milk throughout the country.
Prior to 2001, Suiza Foods Corporation, a Texas based dairy company, and Dean Foods
were known to be the two largest processed milk bottlers in the United States. In late 2001,
Suiza Foods and Dean Foods merged and continued to operate under Dean Foods. In order to
facilitate the Dean-Suiza merger, the Department of Justice (“DOJ”) required Suiza Foods and
Dean Foods to divest eleven milk bottling plants in eight states (Alabama, Florida, Indiana,
Kentucky, Ohio, South Carolina, Virginia, and Utah) to National Dairy Holdings (“NDH”), an
entity controlled by Dairy Farmers of America (“DFA”), the nation’s largest milk cooperative.3
The Suiza Food dairies that were divested included Velda Farms in Miami, Florida and Velda
Farms in Winter Haven, Florida. As a condition allowing for the Dean-Suiza merger to proceed,
the DOJ also required Suiza Foods to modify its full-supply agreement with DFA to ensure that
the merged entity’s plants would actively compete to buy their raw milk.
Dean Foods is currently the largest processed milk bottler in the Southeast. Together,
Dean Foods and NDH operate 33 of the 51 (64.7%) of the processed milk bottling plants
operating in the region. McCowtree alleges that Dean Foods failed to execute the DOJ’s
directive and have instead entered into exclusive supply agreements with DFA and NDH to
Milk was delivered in glass bottles until plastic containers were invented in 1964.
decrease competition for processed milk and have refrained from competing for milk sales to
grocery retailers. As a result, McCowtree claims to be dependent on Dean Foods for much of its
On January 3, 2005, McArthur and McCowtree entered into a Non-Exclusive Wholesale
Distribution Agreement (the “Agreement”) whereby Dean Foods, operating through its wholly
owned subsidiary McArthur, promised competitive pricing and consistent milk products and
services. On November 20, 2009, McArthur filed a complaint in the Circuit Court for the
Seventeenth Judicial Circuit in and for Broward County, Florida, alleging causes of action
against McCowtree for breach of contract (Count I), account stated (Count II), goods sold and
delivered (Count III), and open account (Count IV). McArthur alleges that McCowtree is in
default of the contract terms and owes McArthur over one million dollars in goods sold, interest,
attorney’s fees and other collection costs. On December 28, 2009, McCowtree removed the case
to this Court and simultaneously filed a counterclaim against McArthur and Dean Foods for
various violations of the Sherman Act, 15 U.S.C. § 1, et al., including violation of agreement not
to compete (Count I), conspiracy to unreasonably restrain trade (Count II), unlawful
monopolization (Count III), attempt to monopolize (Count IV), conspiracy to monopolize (Count
V), breach of contract (Count VI), fraudulent inducement (Count VII), tortuous interference with
advantageous business relationship (Count VIII), and violation of the Florida Antitrust Act
(Count IX). McCowtree claims that McArthur and Dean Foods strategically sold and acquired
milk processing plants in and attempt to “maintain and extend monopoly power in the relevant
market” which “foreclosed a substantial share of the market for processed milk in South
Florida.” (Counterclaim, ¶ 91). McCowtree also alleges that McArthur breached the contract
and other business standards.
“A pleading that states a claim for relief must contain … a short and plain statement of
the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A plaintiff must
articulate “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007) (abrogating Conley v. Gibson, 355 U.S. 41 (1957)). “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw a reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 129 S. Ct. 1937 (2009). Detailed factual allegations are not required, but a pleading that
offers “labels and conclusions” or “a formulaic recitation of the elements of the cause of action
will not do.” Id. at 1949 (quoting Twombly, 550 U.S. at 555). A complaint’s factual allegations
must be enough to raise a right to relief above the speculative level. Id.
When considering a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, the court must accept all of the plaintiff’s allegations as true and construe them in the
light most favorable to the plaintiff. Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir.
2008). A complaint is subject to dismissal under Rule 12(b)(6) “when the allegations – on their
face – show that an affirmative defense bars recovery on the claim.” Marsh v. Butler Cnty., Ala.,
268 F.3d 1014, 1022 (11th Cir. 2001).
“A court’s review on a motion to dismiss is limited to the four corners of the complaint,”
and any attachments incorporated into the complaint. Wilchombe v. TeeVee Toons, Inc., 555
F.3d 949, 959 (11th Cir. 2009); see Fed. R. Civ. P. 10(c) (“[a] copy of a written instrument that is
an exhibit to a pleading is part of the pleading for all purposes.”). “[A] document need not be
physically attached to a pleading to be incorporated by reference to it; if the document’s contents
are alleged in a complaint and no party questions those contents, [a court] may consider such a
document if that document is central to the plaintiff’s claims.” Daewoo Motor Am., Inc. v. Gen.
Motors, 459 F.3d 1249, 1266 n. 11 (11th Cir. 2006); see also Day v. Taylor, 400 F.3d 1272, 1276
(11th Cir. 2005) (explaining that “a court may consider a document attached to a motion to
dismiss without converting the motion into one for summary judgment if the attached document
is (1) central to the plaintiff’s claim and (2) undisputed,” i.e. “the authenticity of the document is
not challenged”). If a document that is appended pursuant to Rule 10(c) forecloses recovery as a
matter of law, dismissal is appropriate. Griffin Indus., Inc. v. Irvin, 496 F.3d 1189, 1206 (11th
A. Counts I and II: Violation of Section 1 of the Sherman Act, 15 U.S.C. § 1
Section 1 of the Sherman Act prohibits “[e]very contract, combination …, or conspiracy,
in restraint of trade or commerce.” 15 U.S.C. § 1.
“An agreement to restrain trade may be
unlawful even though it does not entirely exclude its victims from the market.” Assoc. Gen.
Contractors of Cal., Inc. v. Cal. State Council of Carpenters, et al., 459 U.S. 519, 528 (1983)
(citing Assoc. Press v. United States, 326 U.S. 1, 17 (1945)). “Coercive activity that prevents its
victims from making free choices between market alternatives is inherently destructive of
competitive conditions and may be condemned even without proof of its actual market effect.”
Id. A plaintiff claiming conspiracy to restrain trade, however, must establish (1) an agreement or
conspiracy among two or more persons or distinct business entities, (2) by which the persons or
entities intend to harm or restrain competition, (3) that actually restrains competition.
Aquatherm Indus., Inc. v. Fla. Power & Light Co., 145 F.3d 1258, 1262 (11th Cir. 1998).
In their motion to dismiss, McArthur and Dean Foods urge the Court to conjunctively
dismiss Count I and Count II because both claims “are based on an alleged conspiracy between
McArthur and [Dean Foods].” (Mot. to Dismiss, ECF No. 18 at 1). Specifically, McArthur and
Dean Foods assert that, as a matter of law, “an alleged conspiracy between a parent corporation
and its wholly owned subsidiary is not actionable under the antitrust laws.”
Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768-69 (1984)). Under the
Copperweld intra-corporate conspiracy doctrine, “[t]he officers of a single firm are not separate
economic actors pursuing separate economic interests, so agreements among them do not
suddenly bring together economic power that was previously pursuing divergent goals.”
Copperweld, 467 U.S. at 769. The criteria measuring the “separateness” of a subsidiary from its
parent company to determine whether there is an exception to the “single entity” test include
whether the subsidiary has separate control of its day-to-day operations, separate officers,
separate corporate headquarters, and so forth. Id. at 772 n.18. Entities that do not share a unity
of interest may be found liable for conspiratory antitrust conduct. See American Needle, Inc. v.
Nat’l Football League, 130 S. Ct. 2201, 2215 (2010). “[W]hen a subsidiary is wholly owned,
however, these facts are not sufficient to describe a separate economic entity” for purposes of a
conspiracy to restrain trade under the Sherman Act. Id. See also Photovest Corp. v. Fotomat
Corp., 606 F.2d 704 (7th Cir. 1979), cert. denied, 447 U.S. 917; Domed Stadium Hotel, Inc. v.
Holiday Inns, Inc., 732 F.2d 480 (5th Cir. 1984); Broadway Delivery Corp. v. United Parcel
Serv. of America, Inc., 651 F.2d 122 (2d Cir. 1981).
Count I alleges that McArthur and Dean Foods “agreed to lessen competition for sales of
processed milk to retailers in South Florida, and have, pursuant to such agreement, refrained
from competing for such sales to distributors and retail stores.” (Counterclaim, ECF No. 1, ¶
71). Count II alleges that McArthur and Dean Foods “entered into exclusive supply agreements
with, and have actively conspired with one another through the means described above, for the
purpose of lessening competition among independent milk producers and cooperatives…” (Id., ¶
78). In stating “the means described above,” McCowtree refers to the allegations that Dean
Foods, DFA and NDH “entered into an agreement to lessen competition of sales of processed
milk,” (Id., ¶ 48), that Dean Foods “attempted to suppress and restrain competition” through “a
series of full-supply agreements” with DFA, (Id., ¶ 52-53), and that McCowtree was forced to
“compete head to head with other independent McArthur and Velda distributors in an effort to
put them out of business (solely for [Dean Foods’] and McArthur’s benefit),” (Id., ¶ 65). As
pled, the Counterclaim fails to clearly identify which entities – Dean Foods, McArthur, DFA,
NDH – purportedly violated the Sherman Act. Accordingly, Counts I and II fails to state a cause
of action for violation 15 U.S.C. § 1 and are dismissed without prejudice.
B. Count II: Violation of Section 3 of the Clayton Act
Section 3 of the Clayton Act makes it unlawful to sell goods on the “condition,
agreement, or understanding” that the purchaser refrain from dealing with competitors of the
seller if the effect “may be able to substantially lessen competition or tend to create a monopoly
in any line of commerce.” 15 U.S.C. § 14. Section 3 may be used to challenge restrictions on
competition in the form of tying arrangements and exclusive dealing arrangements. Gulf Oil
Corp. v. Copp Paving Co., Inc., 419 U.S. 186, 194 (1974). “A tying arrangement is ‘an
agreement by a party to sell one product but only on the condition that the buyer also purchases a
different (or tied) product, or at least agrees that he will not purchase that product from any other
supplier.’” Southern Card & Novelty, Inc. v. Lawson Mardon Label, Inc., 138 F.3d 869, 874
(11th Cir. 1998) (quoting Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 462
(1992). In contrast, an exclusive dealing arrangement is an agreement by which a seller agrees to
sell all of its output of a commodity to a particular buyer, or when a buyer agrees to purchase its
requirements of a particular commodity exclusively from a particular seller.
Id. at 876.
Exclusive dealing arrangements do not violate § 3 of the Clayton Act unless there is a probability
that the agreement will foreclose competition “in a substantial share of the line of commerce
affected.” Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961) (quoting Standard
Oil Co. v. United States, 337 U.S. 293, 317 (1949)).
McCowtree’s § 3 claims arise from the exclusive supply agreements for the purchase of
raw milk between Dean Foods, DFA and NDH.4 (Counterclaim, ¶¶ 78-82). Courts employ a
three-part inquiry to determine whether a plaintiff has established that an exclusive dealing
agreement foreclosed competition in the relevant market. First, the relevant product market must
be identified. See Tampa Elec. Co., 365 U.S. at 327. The relevant market establishes the
backdrop against which to measure economic power and includes both the geographical market
and the product market. T. Harris Young & Assoc., Inc. v. Marquette Elec., Inc., 931 F.2d 816,
823 (11th Cir. 1991), cert. denied, 502 U.S. 1013 (1991). The geographic market encompasses
the area in which the defendant effectively competes and extends to the area of effective
competition where buyers can turn for alternate sources of supply. Otter Tail Power Co. v.
United States, 410 U.S. 366, 377 (1973). “The outer boundaries of a product market are
determined by the reasonable interchangeability of use of the cross-elasticity of demand between
the product itself and substitutes for it.” T. Harris Young & Assoc., Inc., 931 F.2d at 824. The
relevant geographic market must be identified “by carful selection of the market area in which
the seller operates.”. Tampa Elec. Co., 365 U.S. at 327. Finally, a plaintiff must show that the
“competition foreclosed by the arrangement constitutes a ‘substantial share of the relevant
McArthur is not alleged to be a party to the exclusive supply agreements.
market.’” Id. at 328 That is, “the opportunities for other traders to enter into or remain in that
market must be significantly limited.” Id.
The relevant product and geographic markets at issue involve processed milk in South
Florida. McCowtree alleges that the supply agreements “constitute unreasonable restraints on
trade in the market for raw milk” which has in turn “resulted in substantial harm to competition
for the sale of processed milk” in South Florida.5 (Counterclaim, ¶¶ 80-81). Dean Foods does
not challenge the existence of the supply agreements.
Rather, Dean Foods argues that
McCowtree lacks standing to bring a § 3 claim.6 Under section 4 of the Clayton Act, “any
person who shall be injured in his business or property by reason of anything forbidden in the
antitrust laws” may recover “threefold the damages by him sustained, and the cost of suit,
including a reasonable attorney’s fee.” 15 U.S.C. § 15(a). To recover damages, the injured party
must demonstrate an antitrust violation and an “injury of the type the antitrust laws were
intended to prevent and that flows from that which makes the defendants’ acts unlawful.” MCA
Television Ltd. v. Public Interest Corp., 171 F.3d 1265, 1279 (11th Cir. 1999) (quoting
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). “In addition to
showing antitrust injury, the plaintiff must be an efficient enforcer of the antitrust laws.”
Palmyra Park Hosp. Inc. v. Phoebe Putney Memorial Hosp., 604 F.3d 1291, 1299 (11th Cir.
2010). Although there is no bright-line rule, courts are directed to consider a variety of factors
including the directness and remoteness of the injury, whether other plaintiffs were better suited
Milk costs more than gasoline in many areas of the United States.
The cases relied upon by Dean Foods, Transource Intern., Inc. v. Trinity Indus., Inc., 725 F.2d
274 (5th Cir. 1984) and Southern Concrete Co. v. U.S. Steel Corp., 535 F.2d 313 (5th Cir. 1976),
are inapplicable to the standing analysis in this case. In both cases, the parties were vertical
competitors and, as a result, the Fifth Circuit was obligated to employ a “rule of reason” standing
analysis. Under such an analysis, “standing is limited to purchasers, lessees and competitors of
the supplier.” Transource Int’l, 725 F.2d at 284.
to vindicate the harm, whether the damages are speculative, the potential for duplicative
recoveries and whether the plaintiff would be able to effectively enforce the judgment. See
Assoc. Gen. Contractors of Cal., Inc., 459 U.S. at 528; Todorov v. DCH Healthcare Auth., 921
F.2d 1438, 1448 (11th Cir. 1991).
McCowtree alleges injuries that are “of the type the antitrust laws were intended to
prevent.” McCowtree claims that the Dean Foods’ exclusive supply agreements have resulted in
higher prices for raw and processed milk, and fewer choices for consumers. This is precisely the
type of harm McCowtree should be allowed to vindicate through the antitrust laws. Moreover,
McCowtree is an efficient enforcer of the antitrust laws. The injuries alleged are direct, not
remote, and are not speculative. McCowtree has a strong incentive to sue and is well vindicated
the harm alleged. In addition, allowing McCowtree to sue Dean Foods does not create a risk for
duplicative recoveries. McCowtree’s damages flow directly from the actions of Dean Foods and
its wholly owned subsidiary McArthur. Dean Foods is a large corporation with significant
financial and legal resources. McCowtree would certainly be able to effectively enforce any
judgment obtained against Dean Foods. Considering the dynamics of the process milk market,
the injuries alleged and the redress sought, McCowtree has antitrust standing to pursue its claims
against Dean Foods.
C. Counts III, IV and V: Violation of Section 2 of the Sherman Act, 15 U.S.C. § 2
Monopoly power is “the power to raise prices to supra-competitive levels or ... the power
to exclude competition in the relevant market either by restricting entry of new competitors or by
driving existing competitors out of the market.” U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7
F.3d 986, 994 (11th Cir. 1993) (citing American Key Corp. v. Cole Nat'l Corp., 762 F.2d 1569,
1581 (11th Cir. 1985)). “The most direct method of establishing monopoly power is through
economic proof, namely, demand and supply curves.” Bailey v. Allgas, Inc., 284 F.3d 1237,
1246 (11th Cir. 2002). The principal measure of monopoly power, however, is market share. Id.
(citing U.S. Anchor Mfg., Inc., 7 F.2d at 999). “A market share at or less than 50% is inadequate
as a matter of law to constitute monopoly power.” Id. at 1251.
Congress passed the antitrust laws to promote competition and to prevent the
unauthorized use of monopoly power. See Gulf Oil Corp., 419 U.S. at 204 (citation omitted). In
addition to restrictions against contracts and conspiracies that restrain trade, § 2 of the Sherman
Act outlaws monopolization, attempts to monopolize and conspiracies to monopolize. 15 U.S.C.
§ 2. The Counterclaim alleges that Dean Foods and McArthur have acquired, attempted to
acquire and/or conspired to acquire monopoly power in violation of § 2 of the Sherman Act.
In order to prove unlawful monopolization, a plaintiff must show possession of monopoly
power in the relevant market that was willfully acquired or maintained, and not merely acquired
because of superior products, business acumen, or historical accident. See Pacific Bell Tel. Co.
v. Linkline Commc’n, Inc., 555 U.S. 438 (2009) (citing United States v. Grinnell Corp., 384 U.S.
563, 570-71 (1966); Levine v. Cent. Fla. Med. Affiliates, Inc., 72 F.3d 1538, 1555 (11th Cir.
1996), cert. denied, 519 U.S. 820 (1996). McArthur and Dean argue that the Counterclaim fails
to allege a “specific allegation concerning market share” in the South Florida market. I disagree.
McCowtree alleges that McArthur and Dean control approximately seventy-seven percent (77%)
of the processed milk market in Southeast Region of the United States and that they control the
majority of the processed milk market in South Florida. (Counterclaim, ¶¶ 42, 43, 57, 61).
McCowtree also alleges that McArthur and Dean Foods have willfully taken steps “to acquire
and maintain market power in the market for processed milk sold to retail outlets in the
Southeast” and South Florida. (Id., ¶¶ 51, 91). These factual allegations sufficiently state a cause
of action for monopolization in violation of 15 U.S.C. § 2.
2. Attempt to Monopolize
To state a claim for attempted monopolization under § 2 of the Sherman Act, a plaintiff
must allege (1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a
specific intent to monopolize and (3) a dangerous probability of achieving monopoly power. See
U.S. Anchor Mfg., Inc., 7 F.3d at 993 (citing Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447,
455 (1993)). McCowtree claims that McArthur and Dean Foods attempted to use exclusionary
and predatory conduct including, but not limited to, the purchase and closing of fourteen (14)
bottling plants in the South Florida area. (Counterclaim, ¶¶ 51, 99). McCowtree’s claims
contain a sufficiently developed description of McArthur’s and Dean Food’s intent to
monopolize through the sales and acquisitions of milk processing plants and a dangerous
probability of achieving monopoly power.
3. Conspiracy to Monopolize
A conspiracy to monopolize requires (1) an agreement to restrain trade, (2) deliberately
entered into with the specific intent of achieving a monopoly rather than a legitimate business
purpose, (3) which could have had an anticompetitive effect, and (4) the commission of at least
one overt act in furtherance of the conspiracy. Seagood Trading Corp. v. Jerrico, Inc., 924 F.2d
1555, 1576 (11th Cir. 1991). McArthur and Dean Foods argue that, as a matter of law, the
Copperweld intra-corporate conspiracy doctrine precludes McCowtree from establishing the
existence of a conspiracy. Although Copperweld specifically analyzes conspiracy claims filed
under 15 U.S.C. § 1, the Eleventh Circuit has found that the intra-corporate conspiracy doctrine
applies equally to §1 and § 2 Sherman Act conspiracy claims. See Bolt v. Halifax Hosp. Med.
Ctr., 891 F.2d 810, 817 n.9 (11th Cir. 1990), rev’d on other grounds, 980 F.2d 1381 (11th Cir.
Count V alleges that McArthur and Dean Foods “agreed among themselves and
otherwise conspired to obtain and/or maintain monopoly power in the market for processed
milk.” (Counterclaim, ¶ 105). The claim also alleges that “[t]he overt acts done in furtherance
of such conspiracy include the agreement between [Dean Foods and McArthur] not to compete
for the sales of processed milk to distributors, like [McCowtree] and retail stores, as well as
[Dean Foods’] entry into full-supply agreements.
(Counterclaim, ¶ 107).
involvement of an entity with separate and distinct corporate interests, McCowtree’s claims fall
squarely within the purview of Copperweld and thus fail as a matter of law.
D. Counts VI, VII, and VIII: Common Law Counterclaims7
1. Breach of Contract (Count VI)
Under Florida law, a breach of contract claim must allege the existence of a valid
contract, a material breach of that contract and damages. See Beck v. Lazard Freres & Co.,
LLC, 175 F.3d 913, 914 (11th Cir. 1999). McCowtree alleges that McArthur breached the
parties’ Agreement by: (1) failing to regularly provide the milk products and services promised
to McCowtree; (2) requiring McCowtree to purchase and distribute non-milk products from
McArthur; (3) requiring McCowtree to compete with other milk distributors; (4) routinely
changing the price of milk charged to McCowtree; (5) requiring “bogus milk rebates”; and (6)
cutting off McCowtree’s milk supply in late 2009. (Counterclaim, ¶¶ 65-69). McArthur and
Dean Foods argue that McCowtree’s breach of contract cause of action is explicitly contradicted
by the terms and conditions of the Agreement. This is an issue of ambiguity in the contract,
which is more appropriate for summary judgment.
See Bridge Capital Investors, II v.
Dean Foods is not a named defendant in any of the common law counterclaims (Counts VI, VII
Susquehanna Radio Corp., 458 F.3d 1212, 1220 n.1 (11th Cir. 2006) (citing Monahan v. Comm’r,
321 F.3d 1063, 1068 (11th Cir. 2003) (ambiguity in contract language calls into question the
intent of the parties, and thus puts extrinsic evidence, which must usually be considered by a
jury, at issue). At this stage of the litigation proceedings, Count VI does indeed state a cause of
action for breach of contract.
2. Fraudulent Inducement (Count VII)
A cause of action for fraud in the inducement requires: (1) a false statement concerning a
material fact; (2) known to be false; (3) made with the intent to induce another to act upon it; and
(4) reliance on the representation. See Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11th
Cir. 2001); Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir.
1997). McArthur argues that Count VII fails as a matter of law for two reasons. First, McArthur
claims that the Agreement contains a merger clause that prohibits any allegation of inducement
against McArthur. Second, McArthur claims that the economic loss rule bars McCowtree’s
fraudulent inducement cause of action.
a. The Merger Clause Does Not Prohibit Fraudulent Inducement
Under Florida law, “[t]he existence of a merger or integration clause, which purports to
make oral agreements not incorporated into the written contract unenforceable, does not affect
oral representations which are alleged to have fraudulently induced a person to enter into the
agreement.” Mejia v. Jurich, 781 So.2d 1175, 1178 (Fla. Dist. Ct. App. 2001); Nobles v. Citizens
Mortgage Corp., 479 So. 2d 822 (Fla. Dist. Ct. App. 1985) (“oral agreements or representations
may be introduced into evidence to prove that a contract was procured by fraud notwithstanding
such a merger clause.”). McCowtree alleges that McArthur made false representations with the
requisite intent for McCowtree to enter into the Agreement based on those representations.
(Counterclaim, ¶ 115-118). Accordingly, McCowtree’s allegations of fraudulent inducement fall
well within the merger clause exception.
b. The Economic Loss Rule Does Not Bar McCowtree’s Claims
The economic loss rule is a judicially created doctrine that precludes certain tort actions
where the only damage suffered by the plaintiff are economic losses. Indemnity Ins. Co. of N.
Am. v. Am. Aviation, Inc., 891 So. 2d 532, 536 (Fla. 2004) (“Where a contract exists, a tort action
will lie for either intentional or negligent acts considered to be independent from the acts that
breached the contract.”) (citations omitted).
The rule applies “where the parties are in
contractual privity and one party seeks to recover damages in tort for matters arising from the
contract.” Id. There is a distinction between claims for fraud in the performance of a contract,
which are barred by the economic loss rule, and for fraudulent inducement. A plaintiff has a
cause of action for fraud if the fraud is perpetrated to induce the plaintiff to enter the contract.
La Pesca Grande Charters, Inc. v. Moran, 704 So. 2d 710, 712 (Fla. Dist. Ct. App. 1998). “If
there is no fraud inducing someone to enter into a contract, but the contract is breached, the
cause of action sounds in contract and contract remedies are available.” Moran, 704 So. 2d at
712. The economic loss rule does not, however, bar tort actions based on fraudulent inducement
and negligent misrepresentation. Allen v. Stephen Co., 784 So. 2d 456, 457 (Fla. Dist. Ct. App.
McCowtree has alleged sufficient facts that McArthur’s wrongful conduct induced
McCowtree to enter into the Agreement, and were not related to the performance of the
3. Tortious Interference with Advantageous Business Relationship (Count VIII)
“Under Florida law, the elements of an interference with a business relationship claim
are: (1) the existence a business relationship, (2) the defendant's knowledge of that relationship,
(3) an intentional and unjustified interference with the relationship, and (4) injury resulting from
the interference of the relationship.” Dunn v. Air Line Pilots Ass'n, 193 F.3d 1185, 1191 (11th
“A thwarted business relationship need not be evidenced by an enforceable
contract.” Nautica Int’l, Inc. v. Intermarine USA, LP, 5 F. Supp. 2d 1333, 1344 (S.D. Fla. 1998)
(citing United Yacht Brokers, Inc. v. Gillespie, 377 So. 2d 668 (Fla. 1979)). “An action for
intentional interference is appropriate even though it is predicated on an unenforceable
agreement, if the jury finds that an understanding between the parties would have been
completed had the defendant not interfered.” Id. (citing F.T. Laundry v. Hornstein, 462 So. 2d
844, 846 (Fla. Dist. Ct. App. 1985).
McCowtree alleges that McArthur “unjustifiably interfered” with McCowtree’s customer
business relationships by cutting off McCowtree’s milk supply, assuming McCowtree’s milk
delivery routes, hiring McCowtree’s drivers to drive those delivery routes, collecting
McCowtree’s own accounts receivable, and telling McCowtree’s customers that McCowtree was
out of business and should conduct all future business with McArthur. (Counterclaim, ¶ 122).
McArthur argues that McCowtree’s claim fails because McCowtree has not alleged the existence
of a business relationship under which McCowtree has legal rights. I disagree. The right to
secure business relationships and to reap the profits resulting from the performance of contracts
or agreements relating to those relationships is a property right that entitles a party to protection
Smith v. Ocean Bank, 335 So. 2d 641 (Fla. Dist. Ct. App. 1976).
McCowtree has adequately pled the existence business relationships to which they have a legal
right, McArthur’s knowledge of those relationships, unjustified interference with the
relationships and damages. McArthur’s motion to dismiss Count VIII is denied.
E. Count IX
Federal and Florida antitrust laws are analyzed under the same rules and case law. Fla.
Stat. § 542.32 (“It is the intent of the Legislature that, in construing this chapter, due
consideration and great weight be given to the interpretations of the federal courts relating to
comparable federal antitrust statutes.”). See also St. Petersburg Yacht Charters, Inc. v. Morgan
Yacht, Inc., 457 So.2d 1028, 1032 (Fla. Dist. Ct. App. 1984) (“the Florida legislature has, in
effect, adopted as the law of Florida the body of antitrust law developed by the federal courts
under the Sherman Act.”); Fla. Stat. §§ 542.16 (Florida antitrust laws complement federal
antitrust laws), 542.18 (analogous to § 1 of the Sherman Act). For purposes of this Order, the
legal analysis pertaining to McCowtree’s federal antitrust claims is equally applicable to the
Florida antitrust claims. Therefore, because Counts I, II and V fail to survive the Motion to
Dismiss, they will fail under the Florida antitrust laws as well.
For the reasons set forth in this Order, McArthur’s and Dean Foods’ Motion to Dismiss
(ECF No. 17) is GRANTED in part and DENIED in part.
Count I and Count II are
DISMISSED without prejudice. Count V is DISMISSED with prejudice. The Motion to
Dismiss is DENIED as to Counts III, IV, VI, VII, VIII and is GRANTED in part as to Count
IX, consistent with Section E of this Order.
DONE and ORDERED in chambers at Miami, Florida this 27th day of May 2011.
Copies furnished to:
Counsel of Record
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