Ceres Protein, LLC et al v. Thompson Mechanical & Design et al

Filing 86

MEMORANDUM OPINION AND ORDER signed by Senior Judge Thomas B. Russell on 10/17/16; granting in part and denying in part 74 Motion to Dismiss for Failure to State a Claim; granting 78 Motion to Amend/Correct ; granting 81 Motion for Leave to File: Telephonic Status Conference set for 11/10/2016 at 1:30 PM before Senior Judge Thomas B. Russell. Counsel must call 1 [phone], then give the Access Code 2523122 and #, then when prompted press # again to join the call. cc: Counsel(DJT)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:14-CV-00491-TBR-LLK
CERES PROTEIN, LLC, et al.,

Plaintiffs,

v.
THOMPSON MECHANICAL & DESIGN, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER
In 2014, Ceres Protein, LLC and Roger Shannon filed this action against Barry
and Robert Thompson, along with their Ohio partnership Thompson Mechanical &
Design, alleging claims for defamation and for intentional interference with a prospective
business relationship. More than a year later, Ceres Protein, LLC was administratively
dissolved for failing to file an annual report, and, on the Thompsons’ motion, Roger
Shannon and Michael Tarullo, Jr., the members of Ceres Protein, LLC, were substituted
in its stead. Now, pursuant to Federal Rule of Civil Procedure 12(b)(6), the Thompsons
ask the Court to dismiss this action in its entirety. Roger Shannon and Michael Tarullo,
Jr. not only oppose that motion, but also seek leave to substitute the recently-reinstated
Ceres Protein, LLC back into the fold. For reasons explained in detail below, Roger
Shannon and Michael Tarullo, Jr.’s Motion to Amend, [R. 78], is GRANTED, and the
Thompsons’ Motion to Dismiss, [R. 74], is GRANTED IN PART and DENIED IN
PART.
I.
A.
In 2013, Roger Shannon and Michael Tarullo, Jr. formed Ceres Protein, LLC to
pursue business opportunities relating to repurposing “whole stillage,” or distillery waste,
1

generated by distilleries in Kentucky and Tennessee. [R. 63 at 5, ¶ 14 (First Amended
Complaint); see also R. 78-2 at 4, ¶ 13 (Proposed Second Amended Complaint).] Ceres
Protein, LLC helps distilleries reduce the expense of removing spent distillers’ grains,
known as “slop,” which result from the distilling process. [R. 63 at 1–2, ¶ 1; see also R.
78-2 at 1, ¶ 1.] Through a “comprehensive process that separates and de-waters usable
solid grains,” Ceres Protein, LLC transforms distiller’s slop into a product called “wet
cake,” which is then sold to farmers for livestock feed. [R. 63 at 2, ¶ 1; see also R. 78-2
at 1–2, ¶ 1.]
In early 2013, Ceres Protein, LLC cultivated two business relationships necessary
to offer slop processing services to distilleries. First, Ceres Protein approached Vincent
Corporation, a manufacturer of screw presses, about providing it with the equipment
needed to de-water distillers’ slop and create wet cake. [R. 63 at 5, ¶¶ 15–16; see also R.
78-2 at 4–5, ¶ 14–15.] Second, Ceres Protein, LLC contracted with Land o’ Lakes Purina
Feed LLC to distribute the wet cake generated from its slop processing for use as
livestock feed. [R. 63 at 5, ¶¶ 15, 17; see also R. 78-2 at 4–5, ¶¶ 14, 16.]
Sometime around mid-2013, Michael Tarullo, Sr. (Michael Tarullo, Jr.’s father)
and Barry Thompson approached Roger Shannon and Michael Tarullo, Jr. about a
possible business arrangement. [R. 63 at 5, ¶ 18; see also R. 78-2 at 5, ¶ 17.] The pair
proposed developing a “stage two” process whereby “wet cake could be dried to create
dried distillers’ grains,” a product with a “lower moisture content, a longer shelf-life, and
better transportability.” [R. 63 at 5–6, ¶ 18; see also R. 78-2 at 5, ¶ 17.] Barry
Thompson holds U.S. Patent No. 8,561,315, which protects a grain-drying system that
“utilizes solar energy to pass heated air through a convention crop silo or bin” for the

2

purpose of drying grain. [R. 63 at 6, ¶ 19; see also R. 78-2 at 5, ¶ 18.] Though no one
had used that patented method to process stillage before, Barry Thompson claimed that it
could be adapted for Ceres Protein, LLC’s uses. [R. 63 at 6, ¶ 20; see also R. 78-2 at 5–
6, ¶ 19.] Michael Tarullo, Sr. and Barry Thompson offered to license that intellectual
property to Ceres Protein, LLC and to contribute the capital needed during the start-up
phase of the venture in exchange for a membership interest in Ceres Protein, LLC. [R. 63
at 6, ¶ 21; see also R. 78-2 at 6, ¶ 20.]
Between July and October 2013, the parties attempted to negotiate such an
arrangement. [R. 63 at 6, ¶ 22; see also R. 78-2 at 5, ¶ 21.] However, no agreement
resulted, in part because the patented technology had not been demonstrated to work for
processing wet distillery waste. [R. 63 at 6, ¶¶ 22–23; see also R. 78-2 at 5, ¶¶ 21–22.]
Ceres Protein, LLC moved on and continued pursing business opportunities related to
wet cake processing. [R. 63 at 9, ¶ 30; see also R. 78-2 at 8, ¶ 29.] It never “marketed or
disclosed any aspect of Barry Thompson’s proprietary technology” to any potential
distillery customer. [R. 63 at 9, ¶¶ 30–31; see also R. 78-2 at 8–9, ¶¶ 29–30.]
Following the breakdown in negotiations, Barry and Robert Thompson, his son,
supposedly “fabricated an invoice” to Ceres Protein, LLC in February 2014, demanding
$175,000 for “work and materials” related to the development of the “stage two” drying
process. [R. 63 at 9, ¶ 32; see also R. 78-2 at 9, ¶ 31.] Ceres Protein, LLC claimed,
however, that it never asked the Thompsons to do anything of the sort. [R. 63 at 10, ¶ 35;
see also R. 78-2 at 10, ¶ 34.] It refused to pay the invoice. [R. 63 at 10, ¶ 36; see also R.
78-2 at 10, ¶ 35.]

3

Subsequently, the Thompsons engaged in a pattern of conduct designed, in Ceres
Protein, LLC’s estimation, to extort payment on that invoice.

In March 2014, for

example, the Thompsons wrote to the senior executives of Distillery A,1 a potential client
with which Ceres Protein, LLC had been negotiating, accusing Ceres Protein, LLC of
patent infringement. [R. 63 at 11–12, ¶¶ 41–43; see also R. 78-2 at 11–12, ¶¶ 40–42.]
One month later, Robert Thompson informed Distillery A’s executives that Ceres
Protein, LLC was pursuing a business relationship with Distillery B. [R. 63 at 12, ¶ 44;
see also R. 78-2 at 12, ¶ 43.] While Distillery A and Ceres Protein, LLC signed a
nonbinding letter of intent in April 2014, Ceres Protein, LLC alleges that the Thompsons’
conduct delayed the execution of that document, “causing economic harm to Ceres
[Protein, LLC].” [R. 63 at 11–12, ¶¶ 42, 45; see also R. 78-2 at 11–12, ¶¶ 41, 44.]
Distillery A’s Chief Operating Officer told Roger Shannon and Michael Tarullo, Jr. that
it would not finalize the arrangement unless Ceres Protein agreed to indemnify Distillery
A, or until the Thompsons’ dispute had been resolved. [R. 63 at 12, ¶ 45; see also R. 782 at 12, ¶ 44.]
Moreover, between March 31 and April 17, the Thompsons contacted Steel
Technologies LLC, for which Roger Shannon is the Chief Financial Officer and
Treasurer, on four occasions. [R. 63 at 13, ¶ 47; see also R. 78-2 at 13, ¶ 46.] In a letter
to Michael Carroll, the Chief Executive Officer of Steel Technologies, LLC, Barry
Thompson accused Roger Shannon of having “committed ‘serious ethical breaches,
possible patent infringement, and fraudulent activity.’” [R. 63 at 13, ¶ 47; see also R. 782 at 13, ¶ 46.] A few weeks later, Barry Thompson faxed a letter to the Board of
1

Ceres Protein, LLC refers to potential distillery customers anonymously in order to comply with
its confidentiality and nondisclosure obligations. [R. 76 at 4 n.2 (Response).]

4

Directors of Steel Technologies, LLC, and to the CEOs and Boards of Directors of Mitsui
& Co. (U.S.A.) Inc. and Nucor Corporation, joint-venture partners in the entity which
owns Steel Technologies, LLC, [R. 63 at 14, ¶ 50; see also R. 78-2 at 13, ¶ 49], claiming
that Roger Shannon had been “‘evasive’ and ‘deceptive’ in [his] dealings with the
Thompsons” and would “likely be the target of unspecified ‘criminal charges,’” [R. 63 at
14, ¶ 51; see also R. 78-2 at 14, ¶ 50]. Those communications caused Michael Carroll
“to question [Roger] Shannon’s commitment” to Steel Technologies, LLC. [R. 63 at 13,
¶ 49; see also R. 78-2 at 13, ¶ 48.]
B.
On April 21, 2014, Ceres Protein, LLC and Roger Shannon filed this action in
Jefferson Circuit Court against Barry and Robert Thompson, along with their Ohio
partnership Thompson Mechanical & Design, bringing claims for defamation and for
intentional interference with a prospective business relationship. [R. 1-1 at 12, 23–26, ¶¶
4–8, 53–73 (Complaint).] The Thompsons timely removed that action to this Court. [R.
1 at 1–3, ¶¶ 1–9 (Notice of Removal).] More than a year later, Ceres Protein, LLC was
administratively dissolved for failing to file an annual report. [See R. 57-1 at 2–3
(Kentucky Secretary of State Records).] Upon the Thompsons’ motion, [see R. 54 at 1
(Motion for Joinder of Real Party in Interest)], the Court ordered Ceres Protein, LLC and
Roger Shannon to amend their complaint to substitute Michael Tarullo, Jr. in Cere
Protein, LLC’s stead, [see R. 59 at 1–3 (Memorandum Opinion and Order)]. Now, the
Thompsons seek to dismiss this action pursuant to Federal Rule of Civil Procedure
12(b)(6). [R. 74 at 1 (Motion to Dismiss).] Because the Kentucky Secretary of State
recently reinstated Ceres Protein, [R. 78-1 at 2 (Certificate of Existence)], Roger Shannon

5

and Michael Tarullo, Jr. ask for leave to file an amended complaint to add Ceres Protein
back into the fold, [R. 78 at 1–3 (Motion to Amend)].
II.
A.
Under Federal Rule of Civil Procedure 15(a)(2), the Court should freely allow a
party to amend its pleading when justice so requires. Leave to amend is liberally granted,
except where there is “undue delay in filing, lack of notice to the opposing party, bad
faith by the moving party, repeated failure to cure deficiencies by previous amendments,
undue prejudice to the opposing party, or futility of the amendment.” Brumbalough v.
Camelot Care Ctrs., Inc., 427 F.3d 996, 1001 (6th Cir. 2005) (citing Coe v. Bell, 161 F.3d
320, 341–42 (6th Cir. 1998)); see also Foman v. Davis, 371 U.S. 178, 182 (1962). A
proposed amendment is futile “where it would not withstand a motion to dismiss under
Fed. R. Civ. P. 12(b)(6) for failure to state a claim.” Kreipke v. Wayne State Univ., 807
F.3d 768, 782 (6th Cir. 2015) (citing Rose v. Hartford Underwriters Ins. Co., 203 F.3d
417, 420 (6th Cir. 2000)), reh’g en banc denied, No. 15-1139 (6th Cir. Feb. 19, 2016),
petition for cert. docketed, No. 15-1419 (U.S. May 19, 2016). Ultimately, the decision to
grant or deny leave “is committed to [this Court’s] sound discretion.” Moore v. City of
Paducah, 790 F.3d 557, 559 (6th Cir. 1989); see also Ruschel v. Nestlé Holdings, Inc., 89
F. App’x 518, 521 (6th Cir. 2004).
B.
A complaint 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). In order to survive a motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6), a party must “plead enough

6

‘factual matter’ to raise a ‘plausible’ inference of wrongdoing.” 16630 Southfield Ltd.
P’ship v. Flagstar Bank, F.S.B., 727 F.3d 502, 504 (6th Cir. 2013) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)). A claim becomes plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007)). Should the well-pleaded facts support no “more
than the mere possibility of misconduct,” then dismissal is warranted. Id. at 679. The
Court may grant a motion to dismiss “only if, after drawing all reasonable inferences
from the allegations in the complaint in favor of the plaintiff, the complaint still fails to
allege a plausible theory of relief.” Garceau v. City of Flint, 572 F. App’x 369, 371 (6th
Cir. 2014) (citing Iqbal, 556 U.S. at 677–79).
III.
Pursuant to Federal Rule of Civil Procedure 12(b)(6), the Thompsons ask the
Court to dismiss this action in its entirety. [See R. 74 at 1.] While the Thompsons’
motion to dismiss remained outstanding, however, Roger Shannon and Michael Tarullo,
Jr. sought leave to substitute Ceres Protein, LLC back into this litigation. [See R. 78 at
1–4.] Consequently, the Court must first decide whether to grant leave to amend before
turning to the Thompsons’ motion to dismiss. See Ellison v. Ford Motor Co., 847 F.2d
297, 300 (6th Cir. 1988); Marks v. Shell Oil Co., 830 F.2d 68, 70 (6th Cir. 1987).
A.
Roger Shannon and Michael Tarullo, Jr. seek leave to substitute the recentlyreinstated Ceres Protein, LLC in Michael Tarullo, Jr.’s stead.

[R. 78 at 1.]

The

Thompsons oppose that request. [See R. 79 at 1–2 (Response to Motion to Amend).]

7

They do not argue that Roger Shannon and Michael Tarullo, Jr.’s request is untimely or
made in bad faith, nor do the Thompsons explain how or why it would cause them undue
prejudice.

[See id. at 1–10.]

Instead, the Thompsons maintain that the proposed

substitution of Ceres Protein, LLC is futile because its claims for defamation and for
intentional interference with a prospective business relationship are either not actionable
or barred by Kentucky’s statute of limitations. [Id. at 3–10.] The Court, however,
disagrees, and will grant Roger Shannon and Michael Tarullo, Jr. leave to substitute
Ceres Protein, LLC in Michael Tarullo, Jr.’s place.
1.
To begin, the Thompsons maintain that none of the three statements identified in
the proposed second amended complaint will support an actionable claim for
defamation.2 [Id. at 5–8.] Those statements, as recited in the proposed second amended
complaint, accuse Ceres Protein, LLC and Roger Shannon of “committ[ing] ‘serious
ethical breaches, possible patent infringement, and fraudulent activity.’” [R. 78-2 at 14, ¶
54.] The proposed second amended complaint is futile—or so the Thompsons say—since
those statements cannot plausibly state a claim for defamation. [R. 79 at 5–8.] Taking
the well-pleaded allegations in the proposed second amended complaint as true, however,
the Thompsons are mistaken.

2

Though the Thompsons identified a handful of other statements too, [see R. 79 at 3–5 (Response
to Motion to Amend)], it does not appear as though Ceres Protein, LLC bases its defamation claim on them,
[see R. 78-2 at 14–15, ¶ 54 (Proposed Second Amended Complaint); R. 80 at 2, 8–9 (Reply in Support of
Motion to Amend)]. Consequently, the Court need not—and will not—address the Thompsons’ liability, if
any, arising from those statements.

8

A prima facie case for defamation—whether as an action for libel or for
slander3—requires proof of “[1] defamatory language [2] about the plaintiff [3] which is
published [4] and which causes injury to reputation.” Stringer v. Wal-Mart Stores, Inc.,
151 S.W.3d 781, 793 (Ky. 2004) (citing Columbia Sussex Corp. v. Hay, 627 S.W.2d 270,
273 (Ky. Ct. App. 1981)), overruled on other grounds by Toler v. Sud-Chemie, Inc., 458
S.W.3d 276, 287 (Ky. 2014), as corrected (Ky. Apr. 7, 2015), and reh’g denied (Ky.
May 14, 2015); accord Gahafer v. Ford Motor Co., 328 F.3d 859, 861 (6th Cir. 2003).
With regard to the first element, defamatory language is broadly defined as that which
“tends to (1) bring a person into public hatred, contempt or ridicule; (2) cause him to be
shunned or avoided; or, (3) injure him in his business or occupation.” McCall v. CourierJournal & Louisville Times Co., 623 S.W.2d 882, 884 (Ky. 1981); see also 13 David J.
Leibson, Kentucky Practice: Tort Law § 15:2 (2015 ed.), Westlaw (databased updated
December 2015). The alleged defamatory words must be construed as a whole according
to “their natural meaning and in the sense in which they would be understood by those to
whom addressed.” Gahafer, 328 F.3d at 861 (quoting Towles v. Travelers Ins. Co., 137
S.W.2d 1110, 1111 (Ky. 1940)); accord McCall, 623 S.W.2d at 884.

Kentucky

differentiates between two types of actionable language: language which is actionable per
se, and language which is actionable per quod. Stringer, 151 S.W.3d at 793; accord
CMI, Inc. v. Intoximeters, Inc., 918 F. Supp. 1068, 1083 (W.D. Ky. 1995), appeal
dismissed, 95 F.3d 1168, 1996 WL 490647 (Fed. Cir. 1996) (unpublished table decision).

3

“Libel is the publication of a written, defamatory, and unprivileged statement,” McCall v.
Courier-Journal & Louisville Times Co., 623 S.W.2d 882, 884 (Ky. 1981), while “slander” involves the
same but communicated in “oral” form, Gahafer v. Ford Motor Co., 328 F.3d 859, 861 (6th Cir. 2003).

9

In a defamation per se action, the statement is “actionable on [its] face—without
proof of extrinsic facts or explicatory circumstances.” Stringer, 151 S.W.3d at 794
(quoting David A. Elder, Kentucky Tort Law: Defamation and the Right of Privacy § 1.06
(1983)). Statements of that sort include “those which attribute to someone a criminal
offense, a loathsome disease, serious sexual misconduct, or conduct which is
incompatible with his business, trade, profession, or office.” Gilliam v. Pikeville United
Methodist Hosp. of Ky., Inc., 215 S.W.3d 56, 61 (Ky. Ct. App. 2006) (citing Restatement
(Second) of Torts § 570 (Am. Law Inst. 1977)). If a statement is defamatory per se, then
there is a conclusive presumption of both injury to reputation and malice; no proof of
special damages is necessary. Toler, 458 S.W.3d at 282.
In a defamation per quod action, by contrast, the statement is “not actionable on
[its] face, ‘but may be so in consequence of extrinsic facts.’” Disabled Am. Veterans,
Dep’t of Ky., Inc. v. Crabb, 182 S.W.3d 541, 547 (Ky. 2005) (quoting Pangallo v.
Murphy, 243 S.W.2d 496, 497 (Ky. 1951)). Put differently, the focus is not “upon the
actual meaning of the words,” but upon the extrinsic facts which explain the defamatory
meaning of the statement. Id. (quoting CMI, Inc., 918 F. Supp. at 1083). To establish an
action for defamation per quod, there must be an allegation and proof of special damages.
Gilliam, 215 S.W.3d at 61 (citing Walker v. Tucker, 295 S.W. 138, 139 (Ky. 1927)).
Special damages are “those beyond mere embarrassment which support actual economic
loss.” Rich for Rich v. Ky. Country Day, Inc., 793 S.W.2d 832, 838 (Ky. Ct. App. 1990)
(quoting Columbia Sussex Corp., 627 S.W.2d at 274).
Here, Ceres Protein, LLC and Roger Shannon’s allegations plausibly state a claim
for defamation. The Thompsons accused Ceres Protein, LLC and Roger Shannon of

10

“committ[ing] ‘serious ethical breaches . . . and fraudulent activity.’” [R. 78-2 at 14, ¶
54.] Those two statements—which variously and “directly or indirectly import[] fraud,
dishonesty, or sharp or unethical practices”—are actionable per se.4 White v. Hanks, 255
S.W.2d 602, 603 (Ky. 1953); accord Marcus & Millichap Real Estate Inv. Brokerage Co.
v. Skeeters, 395 F. Supp. 2d 541, 554–55 (W.D. Ky. 2005). In other words, their
damaging effect seems plausible without the need to resort to extrinsic facts or
explicatory circumstances.
The same appears to be true of the Thompsons’ accusations of “possible patent
infringement,” though the Court is not entirely sure on that point. Compare Adobe Sys.
Inc. v. Christenson, 891 F. Supp. 2d 1194, 1210–11 (D. Nev. 2012) (holding accusations
of “software piracy” to be defamatory per se), aff’d, 809 F.3d 1071 (9th Cir. 2015), and
Iroko Partners Ltd. v. Devace Integrated LLC, No. 1:12-CV-01194-SCJ, 2014 WL
11716168, at *8–9 (N.D. Ga. Jan. 6, 2014) (holding accusations of “copyright
infringement” to be defamatory per se), and Smith v. Summit Entm’t LLC, No.
3:11CV348, 2011 WL 2200599, at *4 n.2 (N.D. Ohio June 6, 2011) (noting that a “false
claim that an artistic work infringes another’s copyright might be defamatory per se”),
with CMI, Inc., 918 F. Supp. at 1084 (“The Court cannot say that simply stating that a
corporation violates a legal patent will constitute defamation per se.”). It seems plausible
enough at this procedural juncture to say that charges of that ilk could tend to “prejudice”

4

The Thompsons seem to suggest that Ceres Protein, LLC and Roger Shannon cannot state a
claim for defamation, in part, because the Thompsons’ statement accusing them of “fraudulent activity” is
not pleaded with particularity under Federal Rule of Civil Procedure 9(b). [R. 79 at 8.] The Thompsons’
misinterpret Civil Rule 9(b). Civil Rule 9(b) only requires particularity when a complaint “alleg[es] fraud
or mistake.” Fed. R. Civ. P. 9(b). It does not “impose a heightened pleading standard,” however, when a
complaint alleges defamation based on a false accusation of fraud. Scheser v. Island Hosp., Inc., No. 3:09CV-961-S, 2010 WL 1742532, at *1 (W.D. Ky. Apr. 28, 2010). Consequently, ordinary notice-pleading
principles under Federal Rule of Civil Procedure 8(a) control.

11

Ceres Protein, LLC in its “profession, trade, or business.” Pa. Iron Works Co. v. Henry
Voght Mach. Co., 96 S.W. 551, 553 (Ky. 1906).
The Thompsons respond, however, that accusations of “serious ethical breaches”
and of “possible patent infringement” are non-actionable statements of opinion. [R. 79 at
5–8.]

True enough, a “pure” expression of opinion, “as opposed to a defamatory

statement of fact, is entitled to an absolute privilege.” Biber v. Duplicator Sales & Servs.,
Inc., 155 S.W.3d 732, 737 (Ky. Ct. App. 2004). A communication is a pure expression
of opinion where it “states the facts on which the opinion is based, or where both parties
to the communication know or assume the exclusive facts on which the comment is
clearly based.” Yancey v. Hamilton, 786 S.W.2d 854, 857 (Ky. 1989) (citing Restatement
(Second) of Torts § 566 cmt. b). A “mixed” expression of opinion, in contrast, enjoys no
such absolute privilege. Id. A communication is a mixed expression of opinion “if it
implies the allegation of undisclosed defamatory fact as [its] basis.”

Id. (quoting

Restatement (Second) of Torts § 566). If the “recipient draws the reasonable conclusion”
that the opinion is “based on undisclosed defamatory facts,” then the opinion is
actionable. Id. (quoting Restatement (Second) of Torts § 566 cmt. c).
Even if the accusations of “serious ethical breaches” and of “possible patent
infringement” expressed the Thompsons’ opinion, those declarations might be “mixed,”
rather than “pure,” expressions of opinion. Nothing is certain since the pleadings do not
contain copies of the Thompsons’ communications.

Yet, drawing all reasonable

inferences in Ceres Protein, LLC’s favor, it is plausible to assume that the Thompsons’
allegations implied the existence of undisclosed defamatory facts. The accusations of
“serious ethical breaches” and of “possible patent infringement,” then, would be

12

actionable. See Marcus & Millichap, 395 F. Supp. 2d at 554–55 (finding statement
which implied that employee left his job because of his employer’s “unethical practices”
to be actionable). Accordingly, on the limited record before it, the Court finds that the
proposed second amended complaint plausibly states a claim for defamation.
2.
That notwithstanding, the Thompsons point to Kentucky’s statute of limitations as
an absolute bar to Ceres Protein, LLC’s claims for defamation as well as for intentional
interference with a prospective business relationship. [R. 79 at 9–10; see also R. 77 at 4–
5 (Reply in Support of Motion to Dismiss).] There is no dispute that Ceres Protein,
LLC’s defamation and tortious interference claims were, as originally pleaded, timely.
Following the commencement of this action, however, Ceres Protein, LLC was
administratively dissolved for failing to file an annual report, and, on the Thompsons’
motion, Roger Shannon and Michael Tarullo, Jr. were substituted in its stead. [See R. 59
at 1–3.] While Ceres Protein has since been reinstated, [see R. 78-1 at 2–3], and seeks to
carry on this action, the Thompsons argue that the limitations period of Ky. Rev. Stat. §
413.140(1)(d) resumed upon Ceres Protein, LLC’s dissolution and now bars it from
maintaining those claims, [see R. 79 at 9–10; see also R. 77 at 4–5]. The Court is not so
sure.
Under Kentucky law, an action for defamation and—at least on these facts—for
intentional interference with a prospective business relationship5 must be “commenced”
5

Though Kentucky has not established an exact limitations period for claims of intentional
interference with a prospective business relationship, “a statute of limitations which specifically mentions a
recognized tort applies to all actions founded on that tort regardless of the method by which it is claimed
the tort has been committed.” Lashlee v. Sumner, 570 F.2d 107, 109 (6th Cir. 1978) (citing Skaggs v.
Stanton, 532 S.W.2d 442 (Ky. 1975)). Here, Ceres Protein, LLC’s claim for intentional interference with a
prospective business relationship is founded on its claim for defamation. [Compare R. 78-2 at 14–15, ¶¶
53–55, with id. at 15–16, ¶¶ 56–62.] Accordingly, the one-year limitations period of Ky. Rev. Stat. §

13

within one year “after the cause of action accrue[s].” Ky. Rev. Stat. § 413.140(1)(d). An
action “commence[s]” on “the date of the first summons or process issued in good faith
from the court having jurisdiction [over] the cause of action.” Ky. Rev. Stat. § 413.250;
see also Eades v. Clark Distrib. Co., 70 F.3d 441, 442 (6th Cir. 1995). A claim for
defamation accrues when the allegedly defamatory statement is published or made,
Caslin v. Gen. Elec. Co., 608 S.W.2d 69, 70 (Ky. Ct. App. 1980), as does a claim for
intentional interference with a prospective business relationship when founded on the
same conduct, though Kentucky law is not altogether clear on that point, see Kindoll v.
Gonterman, Nos. 2003-CA-002561-MR, 2003-CA-002638-MR, 2005 WL 386880, at
*2–3 (Ky. Ct. App. Feb. 18, 2005).
Even assuming that the statute of limitations otherwise bars Ceres Protein, LLC’s
claims, it appears as though the motion to amend “is in the nature of a substitution of the
real party in interest.” Warpar Mfg. Corp. v. Ashland Oil, Inc., 102 F.R.D. 749, 751
(N.D. Ohio 1983). The real party in interest is “the person who is entitled to enforce the
right asserted under governing substantive law.” Certain Interested Underwriters at
Lloyd’s, London, Eng. v. Layne, 26 F.3d 39, 42–43 (6th Cir. 1994). Since Ceres Protein,
LLC holds the right to bring this action for defamation and intentional interference with a
prospective business relationship under Kentucky law, it is the “real party in interest” as
to those claims. See Turner v. Andrew, 413 S.W.3d 272, 276 (Ky. 2013); cf. Ky. Rev.
Stat. § 275.155 (“A member of a limited liability company shall not be a proper party to a

413.140(1)(d) applies to Ceres Protein, LLC’s claim for intentional interference with a prospective business
relationship too. See Kindoll v. Gonterman, Nos. 2003-CA-002561-MR, 2003-CA-002638-MR, 2005 WL
386880, at *2 (Ky. Ct. App. Feb. 18, 2005); accord Tucker v. Heaton, No. 5:14-CV-00183-TBR, 2015 WL
3935883, at *12 (W.D. Ky. June 26, 2015); McIntosh v. E-Backgroundchecks.com, Inc., No. 5:12-310DCR, 2013 WL 1187038, at *4 (E.D. Ky. Mar. 20, 2013).

14

proceeding by or against a limited liability company, solely by reason of being a member
of the limited liability company . . . .”).
When an action is maintained by someone other than the real party in interest,
Federal Rule of Civil Procedure 17(a)(3), in conjunction with Federal Rule of Civil
Procedure 15(c)(1), allows that party to be substituted for the original. See Fed. R. Civ.
P. 15(c)(1), 17(a)(3); Corbin v. Blankenburg, 39 F.3d 650, 654–55 (6th Cir. 1994) (en
banc). In such cases, the “stepping in” of the real party in interest “relates back to the
time when the original party” filed the action. Corbin, 39 F.3d at 654; accord Ratner v.
Sioux Nat. Gas Corp., 770 F.2d 512, 520 (5th Cir. 1985); Hess v. Eddy, 689 F.2d 977,
980–81 (11th Cir. 1982), abrogated on other grounds by Wilson v. Garcia, 471 U.S. 261
(1985); see also 6A Charles A. Wright et al., Federal Practice and Procedure § 1555 (3d
ed.), Westlaw (database updated April 2016).
The Court sees no reason to prohibit Ceres Protein, LLC from taking Michael
Tarullo, Jr.’s place in light of its reinstatement. Cf. Gomba Music, Inc. v. Avant, 62 F.
Supp. 3d 632, 642 (E.D. Mich. 2014) (finding substitution of sole owner for his defunct
company appropriate). The Thompsons will suffer no prejudice. The claims asserted in
the proposed second amended complaint are, after all, the same as those asserted in the
first amended complaint, [compare R. 63 at 14–17, ¶¶ 54–70, with R. 78-2 at 14–17, ¶¶
53–69], and the Thompsons have been aware of those claims, and of Ceres Protein,
LLC’s interest in pursuing them, since the inception of this action. The policies behind
the statute of limitations will not be undermined by allowing Ceres Protein, LLC to
prosecute this action either. See Chaplake Holdings, LTD v. Chrysler Corp., 766 A.2d 1,
6–8 (Del. 2001). Perhaps more to the point, it seems inequitable for the Thompsons to

15

obtain an order instructing Ceres Protein, LLC to substitute its members, purportedly “to
allow this action to move forward with the proper parties present and properly aligned,”
[R. 58 at 2 (Reply in Support of Motion for Joinder of Real Party in Interest)], then seek
dismissal because those members are not “proper part[ies] to [this] proceeding,” [R. 74 at
11–12], all the while opposing efforts to correct that defect, [R. 79 at 8–10]. The Federal
Rules of Civil Procedure “should not be used to bar a party from pursuing a cause of
action because of technical infirmities” caused by an opponent’s gamesmanship.
Chaplake Holdings, LTD, 766 A.2d at 8. In sum, because the substitution of Ceres
Protein, LLC as the real party in interest relates back to the filing of the original
complaint, Ky. Rev. Stat. § 413.140(1)(d) poses no obstacle to Ceres Protein, LLC
maintaining its claims for defamation and for intentional interference with a prospective
business relationship.
3.
In summary, Ceres Protein, LLC has plausibly stated a claim for defamation. The
Thompsons’ accusations of unethical behavior, fraud, and patent infringement appear to
be actionable per se and not privileged as pure expressions of opinion. Likewise, since
the substitution of Ceres Protein, LLC relates back to the filing of the original complaint,
Ky. Rev. Stat. § 413.140(1)(d) does not prohibit Ceres Protein, LLC from maintaining its
claims for defamation and intentional interference with a prospective business
relationship. The Court will, accordingly, grant leave for Ceres Protein, LLC to rejoin in
the prosecution of this action.

16

B.
With the motion to amend resolved, the Court turns now to the Thompsons’
motion to dismiss.6 The Thompsons challenge, on a variety of grounds, Ceres Protein,
LLC and Roger Shannon’s claim for defamation and claims for intentional interference
with their prospective business relationships. [See R. 74 at 7–16.] For the most part, the
Court finds the Thompsons’ arguments unpersuasive.
1.
First, the Thompsons maintain that Ceres Protein, LLC and Roger Shannon’s
defamation claim must fail, in part, because the allegations of “possible patent
infringement” fall under the protection of the judicial statements privilege. [See R. 74 at
15–16; R. 77 at 3–4.] The judicial statements privilege “is one that has been long
adhered to in [Kentucky] and is rooted in public policy ‘which looks to the free and
unfettered administration of justice, though, as an incidental result, it may, in some
instances, afford . . . immunity to the evil-disposed and malignant slanderer.’” Halle v.
Banner Indus. of N.E., Inc., 453 S.W.3d 179, 184 (Ky. Ct. App. 2014) (quoting Schmitt v.
Mann, 291 S.W.2d 281, 284 (Ky. 1942)); see also Smith v. Hodges, 199 S.W.3d 185,
189–93 (Ky. Ct. App. 2005) (discussing history of the judicial statements privilege in
Kentucky). The doctrine, if applicable, prohibits the use of “privileged communications
to sustain a cause of action,” including a claim for defamation. Halle, 453 S.W.3d at 184.
In order for the privilege to take hold, the statement (1) must not only be “made
‘preliminary to a proposed judicial proceeding, or in the institution of, or during the
6

In light of the reinstatement and re-addition of Ceres Protein, LLC to this action, the Thompsons’
arguments regarding the capacity of members to maintain an action on behalf of an LLC, [R. 77 at 11
(Reply in Support of Motion to Dismiss)], as well as the statute of limitations as applied to those members,
[R. 74 at 11–12 (Motion to Dismiss)]], are moot.

17

course and as part of a judicial proceeding,’” (2) but also must be material, pertinent, and
relevant to that proceeding, or “to a proceeding that is contemplated in good faith and
under serious consideration.” Gen. Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1127
(6th Cir. 1990) (first quoting Restatement (Second) of Torts § 587; then quoting
Restatement (Second) of Torts § 587 cmts. c & e); accord Morgan & Pottinger,
Attorneys, P.S.C. v. Botts, 348 S.W.3d 599, 602 (Ky. 2011), as modified on denial of
reh’g (Ky. Oct. 27, 2011).
The Court cannot say, at this juncture, that the privilege necessarily shields the
Thompsons from liability. Since it does not seem as though the Thompsons ever filed a
patent infringement action against Ceres Protein, LLC or Roger Shannon, their
accusations of patent infringement were not made “in the institution of, or during the
course and as part of a judicial proceeding.” Gen. Elec. Co., 916 F.2d at 1127 (quoting
Restatement (Second) of Torts § 587).

Likewise, there is no indication that the

Thompsons made their accusations of patent infringement “preliminary to a proposed
judicial proceeding.” Id. (quoting Restatement (Second) of Torts § 587). Instead, and
taking all of Ceres Protein, LLC and Roger Shannon’s well-pleaded allegations as true,
the Thompsons published their accusations solely “to extort Ceres [Protein, LLC] into
paying the Thompsons’ bogus invoice.” [R. 78-2 at 12, ¶ 42.] “The bare possibility that
[a] proceeding might be instituted [cannot] be used as a cloak to provide immunity for
defamation when the possibility is not seriously considered.” Restatement (Second) of
Torts § 587 cmt. e. Accordingly, the judicial statements privilege does not prohibit Ceres
Protein, LLC and Roger Shannon from using the Thompsons’ allegations of patent
infringement to maintain a cause of action for defamation.

18

2.
Next, the Thompsons seek to dismiss Ceres Protein, LLC’s claim for intentional
interference with a prospective business relationship. [See R. 74 at 9–10, 12–15; R. 77 at
3.]

In Kentucky, an action for intentional interference with a prospective business

relationship requires (1) the existence of a valid business relationship or its expectancy,
(2) knowledge thereof, (3) an intentional act of interference, (4) taken with an improper
motive, (5) which caused (6) special damages. Halle, 453 S.W.3d at 187; accord Griffin
v. Jones, ––– F. Supp. 3d ––––, ––––, 2016 WL 1092879, at *7 (W.D. Ky. 2016); Ventas,
Inc. v. Health Care Prop. Inv’rs, Inc., 635 F. Supp. 2d 612, 621 (W.D. Ky. 2009) (Ventas
I), aff’d sub nom. Ventas, Inc. v. HCP, Inc., 647 F.3d 291 (6th Cir. 2011) (Ventas II).
According to the Thompsons, Ceres Protein, LLC’s claim fails not only because the
Thompsons’ accusations of “possible patent infringement” are protected under the
Noerr–Pennington doctrine, [see R. 74 at 14–15], but also because Ceres Protein, LLC
has not plausibly alleged improper conduct which caused special damages, [see id. at 9–
10, 12–14; R. 77 at 3]. Though a close call, the Court disagrees at this stage in the
proceeding.
a.
To start, the Thompsons maintain that their accusations of “possible patent
infringement” are protected under the Noerr–Pennington doctrine. [See R. 74 at 14–15.]
The Noerr–Pennington doctrine emanates from the First Amendment right “to petition
the Government for a redress of grievances,” U.S. Const. amend. I, and shields those who
petition the government from litigation in connection with that protected conduct, see
VIBO Corp. v. Conway, 669 F.3d 675, 683–84 (6th Cir. 2012). Though originating in the

19

antitrust arena, see E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S.
127 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965), it has
evolved into a protean doctrine whose boundaries are far from clear. Over the past few
decades, federal and state courts, including those in Kentucky,7 have expanded the
Noerr–Pennington doctrine to more broadly protect petitioning activities from a number
of claims brought under federal and state law, including business torts. See, e.g., Grand
Cmtys., Ltd. v. Stepner, 170 S.W.3d 411, 415–16 (Ky. Ct. App. 2004) (extending the
Noerr–Pennington doctrine to protect against a claim for intentional interference with
contractual relations arising from a litigant’s decision to appeal a rezoning decision); see
also Campbell v. PMI Food Equip. Grp., Inc., 509 F.3d 776, 790 (6th Cir. 2007)
(discussing, though declining to resolve, whether the Noerr–Pennington doctrine applied
to “state common law claims sounding in tortious interference”).
Regardless of its precise contours, however, the Noerr–Pennington doctrine is
subject to a “sham” exception. Generally speaking, the sham exception “encompasses
situations in which persons use the governmental process—as opposed to the outcome of
that process—as an anticompetitive weapon.”

City of Columbia v. Omni Outdoor

Advert., Inc., 499 U.S. 365, 380 (1991). Under the sham exception, there is no immunity
afforded to petitioning activities which amount to nothing more than (1) an “objectively
baseless” attempt (2) “to interfere directly with the business relationships of a
competitor.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., ––– U.S. ––––, ––––,
7

The doctrine has been the subject of few state and federal cases in Kentucky. More than a
decade ago, the Kentucky Court of Appeals and the Kentucky Supreme Court declined to reject or adopt
the Noerr–Pennington doctrine. See Simpson v. Laytart, 962 S.W.2d 392, 396 (Ky. 1998); E. Ky. Res. v.
Arnett, 892 S.W.2d 617, 618–19 (Ky. Ct. App. 1995). Yet, more recently, the Kentucky Court of Appeals
has adopted the doctrine. Grand Cmtys., Ltd. v. Stepner, 170 S.W.3d 411, 415 (Ky. Ct. App. 2004); White
v. Ashland Park Neighborhood Ass’n, Inc., No. 2008-CA-001303-MR, 2009 WL 1974750, at *5–8 (Ky. Ct.
App. July 10, 2009). The Kentucky Supreme Court has not spoken on the issue.

20

134 S. Ct. 1749, 1757 (2014) (quoting Prof’l Real Estate Inv’rs, Inc. v. Columbia
Pictures Indus., Inc., 508 U.S. 49, 60–61 (1993)); accord VIBO Corp., 669 F.3d at 685–
86; Racetech, LLC v. Ky. Downs, LLC, ––– F. Supp. 3d ––––, ––––, 2016 WL 1057279,
at *5 (W.D. Ky. 2016).
Taking all of Ceres Protein, LLC and Roger Shannon’s well-pleaded allegations
as true, the Thompsons’ communications fall under the sham exception to the Noerr–
Pennington doctrine.8

Ceres Protein, LLC and Roger Shannon’s proposals to, and

negotiations with, potential distillery customers were limited to a single-stage dewatering process for distillers’ slop—not a two-stage grain drying process involving
Barry Thompson’s patented technology. [See R. 78-2 at 2, 7, 9, ¶¶ 1, 25, 30.] In fact,
neither Ceres Protein, LLC nor Roger Shannon “marketed or disclosed any aspect of
Barry Thompson’s proprietary technology” to any third-party at any point. [Id. at 8, ¶
29.] Roger Shannon communicated that information to Robert Thompson in November
2013. [Id. at 7, ¶ 25.] Yet, just months later, the Thompsons accused Ceres Protein, LLC
and Roger Shannon of having committed patent infringement. [Id. at 15, ¶ 58.] Taking
those allegations at face value, the Thompsons had no objectively reasonable basis to
conclude that Ceres Protein, LLC was infringing on Barry Thompson’s patent. Instead,
the Thompsons’ accusations were knowingly and maliciously intended to injure Ceres
Protein, LLC’s relationships with potential customers, such as Distillery A. [See id., ¶¶

8

The Court assumes, arguendo, that the Thompsons’ allegations were pre-litigation
communications deserving of protection under the Noerr–Pennington doctrine. Compare Racetech, LLC v.
Ky. Downs, LLC, ––– F. Supp. 3d ––––, ––––, 2016 WL 1057279, at *5 (W.D. Ky. 2016) (accepting, in
dicta, the Noerr–Pennington doctrine as a bar to common-law claims arising from pre-litigation
communications), with Cardtoons, L.C. v. Major League Baseball Players Ass’n, 208 F.3d 885, 890–91
(10th Cir. 2000) (en banc) (rejecting the Noerr–Pennington doctrine as a bar to common-law claims arising
from pre-litigation communications). See generally 8 Robert A. Matthews, Jr., Annotated Patent Digest §
34:4, Westlaw (database updated September 2016).

21

60–61.] In this procedural posture, the Noerr–Pennington doctrine does not shield the
Thompsons from Ceres Protein, LLC’s claim for intentional interference with a
prospective business relationship. See Alt. Electrodes, LLC v. Empi, Inc., 597 F. Supp.
2d 322, 330–31 (E.D.N.Y. 2009); ICOS Vision Sys. Corp., N.V. v. Scanner Techs. Corp.,
No. 05 CIV. 6322 (DC), 2006 WL 838990, at *3–5 (S.D.N.Y. Mar. 29, 2006).
b.
For much the same reason, Ceres Protein, LLC has plausibly pleaded improper
interference on the Thompsons’ part. Generally speaking, interference is improper when
an actor demonstrates “malice,” engages in “significantly wrongful conduct,” or acts in
the absence of a “justification.” Nat’l Collegiate Athletic Ass’n ex rel. Bellarmine Coll. v.
Hornung, 754 S.W.2d 855, 859 (Ky. 1988); accord Ventas II, 647 F.3d at 306. To
determine if an actor’s conduct amounts to improper interference, a number of factors
must be balanced, including:
[(1)] the nature of the actor’s conduct, [(2)] the actor’s motive, [(3)] the
interest of the other with which the actor’s conduct interferes, [(4)] the
interests sought to be advanced by the actor, [(5)] the social interests in
protecting the freedom of action of the actor and the contractual interests
of the other, [(6)] the proximity or remoteness of the actor’s conduct to the
interference and [(7)] the relations between the parties.
Harrodsburg Indus. Warehousing, Inc. v. MIGS, LLC, 182 S.W.3d 529, 534 (Ky. Ct.
App. 2005) (quoting Restatement (Second) of Torts § 767); accord Ventas II, 647 F.3d at
306; EAT BBQ LLC v. Walters, 47 F. Supp. 3d 521, 533–34 (E.D. Ky. 2014). “Under
Kentucky

law,

significantly

wrongful

conduct

certainly

includes

fraudulent

misrepresentation, deceit, coercion, threats of illegal conduct, and physical violence,
which are specifically highlighted as improper acts.” Ventas I, 635 F. Supp. 2d at 622
(citing Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 487 (Ky. 1991)). The
22

ultimate question, though, is “whether the actor’s conduct was fair and reasonable under
the circumstances.” Id. (quoting Restatement (Second) of Torts § 767 cmt. j). Of course,
even if otherwise actionable, “the party whose interference is alleged to have been
improper may escape liability by showing that he acted in good faith to assert a legally
protected interest of his own.” Hornung, 754 S.W.2d at 859; accord Dennison v. Murray
State Univ., 465 F. Supp. 2d 733, 756–57 (W.D. Ky. 2006); see also Restatement
(Second) of Torts § 773.
Taking the well-pleaded allegations as true, which the Court must, the
Thompsons’ communications improperly interfered with Ceres Protein, LLC’s
prospective business relationship with Distillery A. According to Ceres Protein, LLC,
the Thompsons published accusations of patent infringement to Distillery A for the sole
purpose of extorting payment from Ceres Protein, LLC on a substantial invoice—not in
an effort to protect Barry Thompson’s intellectual property rights. [R. 78-2 at 15, ¶ 59.]
Those allegations sufficiently allege improper conduct on the Thompsons’ part.9 See
Time Warner Cable Midwest LLC v. Pennyrile Rural Elec. Coop. Corp., No. 5:15-CV45-TBR, 2015 WL 4464105, at *5 (W.D. Ky. July 21, 2015) (holding conduct intended
to coerce cable provider into paying a disputed rate to be improper).
c.

9

Though the Thompsons claim to enjoy an absolute right to communicate concerns about the
potential infringement of Barry Thompson’s patent, [see R. 74 at 12–14 (discussing Hildebrand v. Steck
Manufacturing Co., 279 F.3d 1351, 1353 (Fed. Cir. 2002), and Virginia Panel Corp. v. MAC Panel Co.,
133 F.3d 860, 863 (Fed. Cir. 1997)], their argument misses the mark for the same reasons discussed supra
Part III.B.2.a. Cf. Restatement (Second) of Torts § 767 cmt. c (Am. Law Inst. 1977) (describing, as an
example of improper conduct, a situation “in which the actor threatens the other’s prospective customers
with suit for the infringement of his patent” when he “does not believe in the merit of his claim”);
Harrodsburg Indus. Warehousing, Inc. v. MIGS, LLC, 182 S.W.3d 529, 534 (Ky. Ct. App. 2005) (“The
institution or threatened institution of a groundless lawsuit may, of course, . . . [be] considered improper
interference.”).

23

Likewise, Ceres Protein, LLC has plausibly alleged “special damages” caused by
the Thompsons’ improper conduct.

As discussed above, an action for intentional

interference with a prospective business relationship requires, among other things,
allegation and proof of “special damages,” CMI, Inc., 918 F. Supp. at 1080 (citing
Henkin, Inc. v. Berea Bank & Tr. Co., 566 S.W.2d 420, 425 (Ky. Ct. App. 1978)), as well
as causation, Ventas I, 635 F. Supp. 2d at 624.

The term “special damages” is

synonymous with pecuniary damages.10 Acuity Brands, Inc. v. Bickley, ––– F. Supp. 3d –
–––, ––––, 2016 WL 1178360, at *16 (E.D. Ky. 2016); CMI, Inc., 918 F. Supp. at 1081.
Lost profit, for example, is “an ascertainable measure” of special damages. CMI, Inc.,
918 F. Supp. at 1081 (quoting Carmichael-Lynch-Nolan Advert. Agency, Inc. v. Bennett
& Assocs., Inc., 561 S.W.2d 99, 102 (Ky. Ct. App. 1977)). The special damages must be
proximately caused by the improper conduct too. Ventas I, 635 F. Supp. 2d at 624. That
is, the improper action “must be ‘a substantial factor in bringing about the harm’”
complained of. Id. (quoting Bailey v. N. Am. Refractories Co., 95 S.W.3d 868, 871 (Ky.
Ct. App. 2001)).
Here, Ceres Protein, LLC has plausibly alleged that the Thompsons’ improper
conduct caused it, in substantial part, to sustain a financial loss.

In the main, the

Thompsons’ actions directly and adversely affected Ceres Protein, LLC’s relationship
with Distillery A, its potential customer. [See R. 78-2 at 12, 15, ¶¶ 44, 60.] On account
of the Thompsons’ communications, Distillery A has refused to enter into a contractual
relationship with Ceres Protein, LLC until the Thompsons’ dispute has been resolved.
10

Under Federal Rule of Civil Procedure 9(g), special damages must be pleaded with some
measure of particularity. See Fed. R. Civ. P. 9(g). Though there is no “hard and fast formula,” the object
of Civil Rule 9(g) is to provide the opposing party fair notice of the damages sought. Time Warner Cable
Midwest LLC v. Pennyrile Rural Elec. Coop. Corp., No. 5:15-CV-45-TBR, 2015 WL 4464105, at *6 (W.D.
Ky. July 21, 2015) (quoting Action Repair, Inc. v. Am. Broad. Cos., 776 F.2d 143, 150 (7th Cir. 1985)).

24

[Id. at 15, ¶ 60.] Ceres Protein, LLC’s allegations of “economic harm” occasioned by the
loss or delay of that deal make the showing required at this stage. See Time Warner
Cable, 2015 WL 4464105, at *6 (holding “allegation of lost customers and lost profits” to
satisfy pleading requirement for claim of intentional interference with a prospective
business relationship).
The Thompsons posit that conduct which simply delays the eventual execution of
a contract does not cause “special damages” recoverable through an action for intentional
interference with a prospective business relationship. [R. 74 at 10.] In support of that
proposition, the Thompsons rely on Texas Disposal Systems Landfill, Inc. v. Waste
Management Holdings, Inc., 219 S.W.3d 563 (Tex. App. 2007).11 There, the Court of
Appeals of Texas affirmed summary judgment on a claim for intentional interference
with a prospective business relationship because the plaintiff had, in fact, been awarded
the contracts at the heart of its claim. Id. at 590. In such a situation, a claim for
intentional interference with a prospective contract will not lie under Texas law (and
logically so). Id. Affording Ceres Protein, LLC the benefit of all reasonable inferences,
though, the Thompsons’ conduct has not just delayed, but has prevented, the execution of
a contract with Distillery A.

[R. 78-2 at 12, ¶ 44.]

Texas Disposal, then, is

distinguishable. Ceres Protein, LLC’s claim for intentional interference does not falter on
account of any failure to plead special damages.

11

The other authorities on which the Thompsons rely, [see R. 74 at 10 n.6], are plainly
distinguishable. Each of those cases involved claims for intentional interference with a contractual
relationship, which requires the improper conduct to cause a breach of contract. See Brooklyn Historic Ry.
Ass’n v. N.Y.C., 7 N.Y.S.3d 152, 156 (App. Div. 2015); Alavian v. Zane, 101 A.D.3d 475, 476, 956
N.Y.S.2d 10, 11 (App. Div. 2012); Temporaries, Inc. v. Krane, 472 A.2d 668, 674 (Pa. Super. Ct. 1984).

25

3.
Last but not least, the Thompsons seek to dismiss Roger Shannon’s claim that the
Thompsons intentionally interfered with his at-will employment relationship with Steel
Technologies, LLC. [See R. 74 at 7; see also R. 79 at 4–5.] Though Kentucky has not
squarely addressed the issue, it seems widely accepted that an at-will employment
relationship can be the subject of an action for intentional interference with a business
relationship. See Fowler v. Coast to Coast Health Care Servs., Inc., No. 15-71-GFVT,
2016 WL 502057, at *4 (E.D. Ky. Feb. 8, 2016). Despite that, the Thompsons point out
that Roger Shannon has not pleaded any special damages resulting from the publication
of those statements. [See R. 74 at 7; see also R. 79 at 4–5.] In the absence of any wellpleaded allegations of special damages, the Thompsons maintain, Roger Shannon’s claim
for intentional interference must fail. [See R. 74 at 7; see also R. 79 at 4–5.] On that
point, the Thompsons are right.
Here, Roger Shannon has not identified any special or pecuniary damages
attributable to the Thompsons’ conduct. [See R. 78-2 at 16–17, ¶¶ 63–69.] While the
Thompsons’ accusations caused certain executives “to question [his] commitment” to
Steel Technologies, LLC, [R. 78-2 at 16, ¶ 67], Shannon does not explain how that
resulted in any type of economic harm to him, [see R. 76 at 13–14], such as his
termination or a reduction in pay. Consequently, Roger Shannon has not plausibly stated
a claim against the Thompsons for intentional interference with a prospective business
relationship.

26

4.
In summary, taking all of Ceres Protein, LLC and Roger Shannon’s well-pleaded
allegations as true, the judicial statements privilege does not defeat Ceres Protein, LLC
and Roger Shannon’s claim for defamation. Likewise, at least in this procedural posture,
the Noerr–Pennington doctrine does not shield the Thompsons from Ceres Protein,
LLC’s plausibly pleaded claim for intentional interference with a prospective business
relationship. However, Roger Shannon has not stated a claim for intentional interference
with his at-will employment relationship since he cannot identify any special or
pecuniary damages attributable to the Thompsons’ conduct.
IV.
IT IS HEREBY ORDERED that Ceres Protein, LLC, Roger Shannon, and
Michael Tarullo, Jr.’s Motion to Amend, [R. 78], is GRANTED. The Clerk of the Court
is DIRECTED to docket the attached Second Amended Complaint, [R. 78-2].
IT IS FURTHER ORDERED that Thompson Mechanical & Design’s Motion
for Leave to File a Surreply, [R. 81], is GRANTED.
IT IS FURTHER ORDERED that Thompson Mechanical & Design’s Motion to
Dismiss, [R. 74], is GRANTED IN PART and DENIED IN PART.
A Telephonic Status Conference is SET for November 10, 2016 at 1:30 p.m.
EST. Counsel must call 1 [phone], then give the Access Code 2523122 and #,
then when prompted press # again to join the call.
IT IS SO ORDERED.
Date:

October 17, 2016

cc:

Counsel of Record

27