Rigby et al v. Philip Morris USA Inc. et al

Filing 19

ORDER denying in part in regard to Plaintiffs' claim for breach of contract (or promissory estoppel in the alternative) and mooting in part because Plaintiffs' request to ament the complaint is granted re Defendants' 5 Motion to Dismiss. Plaintiffs' have leave to amend their complaint within 21 days of this Order's filing. Signed by Chief Judge Lisa G. Wood on 7/2/2014. (ca)

3n the Entteb Statto Jitrttt Court
for the boutbern Bitritt of deorgia
apero Jibiion
JULIAN RIGBY and
GEORGIA/FLORIDA TOBACCO
EXCHANGE, INC., itself and
d/b/a TENNESSEE VALLEY TOBACCO
SERVICES,
Plaintiffs,
CV 513-110

VS.

PHILIP MORRIS USA INC. and
ALTRIA CLIENT SERVICES INC.,
Defendants.

ORDER

Presently before the Court is Defendants' Motion to
Dismiss. Dkt. No. 5. Upon due consideration, Defendants'
motion is DENIED in regard to Plaintiffs' claim for breach of
contract (or promissory estoppel in the alternative) . The
motion in regard to the other claims is MOOT because Plaintiffs'
request to amend the complaint is GRANTED.

Plaintiffs have

leave to amend their complaint within 21 days of this Order's
filing. Defendants are permitted to file a motion to dismiss
the amended complaint thereafter, if desired.

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I. Factual Background'

A. Customary Business Relationship
Julian Rigby operated a tobacco receiving station and,
until 2011, farmed tobacco. Dkt. No. 1-1 ¶ 11. For many years,
Rigby, the Georgia/Florida Tobacco Exchange, Inc., 2 and other
Georgia farmers have sold tobacco to Philip Morris USA Inc. Id.
¶ 12. In later years, sales were made to Philip Morris's
affiliate, Altria Client Services Inc. (collectively, "the
tobacco buyers") . Id. To facilitate these sales, the tobacco
buyers hired individuals to "grade" tobacco, which can range
from "First Quality" (the highest grade) to "Fourth Quality"
(the lowest grade) . Id. ¶ 13.
The grade assigned to tobacco affects the terms of an
exchange between farmers and the tobacco buyers. In December of
each year, the tobacco buyers customarily publish the next
year's purchase price for each grade of tobacco. Id. ¶ 14. The

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In support of their Motion to Dismiss, Defendants have provided copies of
contracts between the parties, which purportedly are at the center of this
case. Dkt. Nos. 5-2 to -4. Plaintiffs argue that the Court should not
consider these contracts in ruling on Defendants' Motion to Dismiss because
they are incomplete and do not encompass the entirety of the contractual
relationships between the parties. Dkt. No. 18, at 1-3. The Court declines
to consider these documents in deciding Defendants' motion and instead will
rely on the pleading. Although the Court recognizes that this necessarily
forecloses many of Defendants' arguments, nothing precludes Defendants from
raising them again in a later motion.
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The complaint never explicitly identifies the relationship between Rigby and
Georgia/Florida Tobacco Exchange, Inc. However, the Georgia Secretary of
State's website reveals that Rigby is the corporation's CEO and CFO. Search:
Georgia-Florida Tobacco Exchange, Inc., Georgia Secretary of State,
Corporations Division Website.
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tobacco buyers communicate the prices through a written price
sheet. Id. ¶ 15.
B. Assurances and Prices for the 2010 Crop Season
In December 2009, the tobacco buyers prepared an initial
price sheet for certain grades of tobacco in 2010. Id. ¶ 16.
Plaintiffs allege that, soon thereafter, the tobacco buyers
spoke "with representatives of a competing tobacco company,
Universal Leaf," and "agreed to lower the prices [they] would
offer farmers." Id. ¶ 17. Therefore, the tobacco buyers
rescinded their initial price sheets and "replaced them with one
containing lower prices." Id. ¶ 18. Plaintiffs claim that the
tobacco buyers published the "price sheets at a time later than
customary" partially because of the "negotiations with Universal
Leaf regarding pricing." Id. ¶ 19.
Despite the delay in providing a price sheet, the tobacco
buyers did provide certain information that farmers purportedly
relied upon. For example, the tobacco buyers provided "a
poundage limit" on what amount they would purchase through the
receiving station. Id. ¶ 22. The tobacco buyers allocated a
limit among farmers only after the farmers contracted with the
tobacco buyers. Id. The limit was based on historical
production. Id.
In addition, Plaintiffs claim that they sought and received
assurances from the tobacco buyers that the tobacco buyers would
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purchase all of the tobacco that the farmers intended to grow.
See id. ¶ 23. Plaintiffs claim that the tobacco buyers made
such promises "consistently . . . for many years." Id. "The
representations were made to Plaintiff by Defendants as well as
by other agents and representations [sic.] of Defendants.
Specifically, Defendants' representative, Craig Shirrah, told
farmers to let the government buy this tobacco through crop
insurance." Id. Plaintiffs allege that the tobacco buyers
"knew that Plaintiff and other farmers were relying upon their
promises in deciding to prepare their land to grow the amount of
crops they stated." Id. ¶ 24.
"Even though a price sheet had not yet been issued,
Plaintiffs Rigby and Georgia/Florida Tobacco Exchange and other
farmers had to start preparing their land to grow the [next]
year's tobacco crop." Id. ¶ 20. Preparation "included, among
other things, applying certain chemicals to the land," which
"prevented the land from being used to grow anything but
tobacco." Id. ¶ 21. These efforts were "based upon the usual
customary acts between Plaintiffs and [the tobacco buyers]."
Id. ¶ 20.
C. Failure to Purchase and Alleged Price Manipulation
Despite the tobacco buyers' purported promise to buy all
Plaintiffs' tobacco crop, the tobacco buyers refused and
"ultimately only purchased approximately one-half of the
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tobacco." Id. 91 25. Plaintiffs also claim that, after the 2010
tobacco harvest, the tobacco buyers instructed its graders to
significantly reduce the amount of crops graded as "Third
Quality," and instead graded them as "Fourth Quality." Id.
¶ 26. Plaintiffs believe that this constituted improper
manipulation of the tobacco grading to avoid purchasing tobacco
at a higher price, or at all. Id. 91 27.
D. Tennessee Receiving Facility
Finally, Plaintiffs claim that in 2010 "Defendants shutdown
Plaintiffs' receiving station in Georgia." Id. ¶ 47.
Afterward, "Defendants induced [Rigby] to set up a receiving
station in Midway, Tennessee" to receive burley tobacco. Id.
9191 47-48. Plaintiffs claim that a representative of one of the
defendants, Shirrah, "required Plaintiffs to do two things
outside of Defendant's contract with Plaintiffs": (1) buy a
Tennessee farm "to incorporate more into the burley tobacco
farming community" and (2) force "either Julian Rigby or [a
person not identified elsewhere in the complaint named] Ben
Swain to be in Tennessee even in off times when their receiving
station is not open." Id. ¶ 49.
Through a contract between Plaintiffs and Defendants,
Plaintiffs believe that they owed a "duty of absolute loyalty"
to Defendants, which included "only dealing with growers who had
contacts with Altria" and "using the receiving station as a
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single purpose entity, solely for Defendant's benefit." Id.
¶ 50. In turn, "Defendant had a duty of loyalty to Plaintiffs,"
which purportedly was violated in 2011 when "Defendants
contracted with the Tennessee Burley Cooperative to buy
approximately 6 million pounds of tobacco." Id. ¶ 51.
Plaintiffs believe that the "tobacco should have been purchased
by Altria through Plaintiff's receiving station." Id.
Furthermore, despite an obligation for "Defendant" to "give
Plaintiff 30 [days'] written notice of termination" after
"Defendant required Plaintiff to continue to work after the
purported end of its contract with Plaintiff," this "was never
done." Id. ¶ 52.
E. Damages
As a result of the aforementioned facts, Plaintiffs claim
that they have been harmed, both in their capacities as farmers
and tobacco receivers. Id. 191 28, 53.
II. Procedural Background

In September 2013 Plaintiffs Julian Rigby and
Georgia/Florida Tobacco Exchange, Inc. filed suit in the State
Court of Bacon County against Defendants Philip Morris USA Inc.
and Altria Client Services Inc. Dkt. No. 1-1. The next month,
Defendants removed the case to federal court, whose jurisdiction
lies in diversity. Dkt. Nos. 1; 1-9.

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Plaintiffs claim relief under four causes of action: breach
of contract (or promissory estoppel in the alternative), Dkt.
No. 1-1 IT 29-37; fraud (or negligent misrepresentation in the
alternative), Id. 191 38-44; price fixing, id. IT 45-46; and
breach of duty of loyalty, Id. ¶91 47-53. The first three arise
from Defendants' failure to purchase tobacco and purported grade
manipulation in Georgia, and the last arises from the events in
Tennessee. Plaintiffs also seek punitive damages. Id. at 12.
In October 2013 Defendants filed a motion to dismiss
pursuant to Rule 12(b) (6) of the Federal Rules of Civil
Procedure. Dkt. No. 5. Their motion is fully briefed. Dkt.
Nos. 1-1; 10; 12; 18.
III. Legal Standard

When ruling on a motion to dismiss brought pursuant to Rule
12(b) (6), a district court must construe the plaintiff's
complaint in the light most favorable to the plaintiff and
accept all well-pleaded facts alleged in the complaint as true.
Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir.
2009) . Although a complaint need not contain detailed factual
allegations, it must contain sufficient factual material "to
raise a right to relief above the speculative level." Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007) . At a minimum, a
complaint should "contain either direct or inferential

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allegations respecting all the material elements necessary to
sustain a recovery under some viable legal theory." Fin. Sec.
Assurance, Inc. v. Stephens, Inc., 500 F.3d 1276, 1282-83 (11th
Cir. 2007) (per curiam) (quoting Roev. Aware Woman Ctr. for
Choice, Inc., 253 F.3d 678, 683 (11th Cir. 2001)).
IV. Discussion

A. Breach of Contract
The complaint's first cause of action is for breach of
contract (or promissory estoppel in the alternative) . Dkt. No.
1-1 9191 29-37. "The elements for a breach of contract claim in
Georgia are the (1) breach and the (2) resultant damages (3) to
the party who has the right to complain about the contract being
broken." Uhlig v. Darby Bank & Trust Co., 556 F. App'x 883, 887
(11th Cir. 2014) (per curiam) (quoting Norton v. Budget Rent A
Car Sys. Inc., 307 Ga. App. 501, 502 (2010)). "A breach occurs
if a contracting party fails to perform the engagement as
specified in the contract." Id. (ellipses omitted) (quoting
UWork.com , Inc. v. Paragon Techs., Inc., 321 Ga. App. 584, 590
(2013)). Thus, "to assert a claim for breach of contract, the
party against whom the claim is brought must have been a party
to the contract." Id. (quoting UWork.com , Inc., 321 Ga. App. at
590)
Of course, a prerequisite to a breach of contract is the
contract's existence. At a minimum, there are four essential
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elements to a valid contract: "(1) parties able to contract; (2)
consideration; (3) agreement by the parties to the terms of the
contract, the essence of which is a meeting of the minds; and
(4) a subject matter on which the contract can operate." Id.
(citing O.C.G.A. § 13-3-1).
The complaint makes out a claim for breach of contract.
Taking its allegations as true, Plaintiffs contracted with
Defendants for the purchase of all Plaintiffs' tobacco crop and
manipulated tobacco grading to avoid their obligations. Dkt.
No. 1-1 9191 12, 18-24, 29-34. Thereafter, Defendants failed to
purchase the entire crop, causing financial injury to
Plaintiffs. Id. 191 25-28, 35-36. All required elements are
satisfied. Therefore, as to the portion of Defendants' motion
pertaining to breach of contract (and promissory estoppel in the
alternative), Defendants' motion is DENIED.
B. The Other Claims
In addition to the claim for breach of contract, the
complaint asserts claims for fraud (or negligent
misrepresentation in the alternative), price fixing, and breach
of duty of loyalty ("the other claims") . Dkt. No. 1-1 191 38-53.
In responding to Defendants' motion, Plaintiffs asked the Court
to afford them "the opportunity to file an amended complaint to
address" any deficiencies found by the Court, pursuant to Rule
15 of the Federal Rules of Civil Procedure. Dkt. No. 10, at 9AO 72A
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10; see also Dkt. No. 18, at 9. Because the complaint was
drafted for state court, this request is GRANTED, and
Defendants' motion in regard to the other claims is MOOT.
Plaintiffs shall have 21 days from the date of this Order's
filing to amend their complaint.
V. Conclusion

For the aforementioned reasons, Defendants' Motion to
Dismiss is MOOT IN PART and DENIED IN PART.

Dkt. No. 5.

Plaintiffs' request to amend their complaint is GRANTED.
Plaintiffs have leave to amend their complaint within 21 days of
this Order's filing.

SO ORDERED, this 2ND day of July, 2014.

LISA GODBEY OOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA

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