Downing et al v. Riceland Foods, Inc.
MEMORANDUM AND ORDER. (see order for details) IT IS HEREBY ORDERED that plaintiffs' motion for leave to file an amended class action complaint [# 27 ; # 5219 ] is granted, and the proposed amended complaint is deemed filed today. IT IS FURTHER ORDERED that defendant's motion to dismiss for lack of subject-matter jurisdiction [# 38 ; # 5237 ] is denied. Signed by District Judge Catherine D. Perry on 03/31/2014. (CBL)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
DON M. DOWNING, et al.,
RICELAND FOODS, INC.,
) Case No. 4:13CV321 CDP
ORDER AND MEMORANDUM
This case comes before me on two related motions. Riceland seeks
dismissal of the case on the grounds that the court lacks subject-matter jurisdiction,
because CAFA’s 100-plaintiff threshold has not been met. Plaintiffs seek leave to
amend their complaint to substitute named plaintiffs and add two claims by
Trustees on behalf of the common benefit trust fund that I ordered established to
compensate those who had provided legal services as part of the genetically
modified rice litigation. Riceland opposes the amendment; it asserts the same
CAFA argument and also alleges that the Trustees lack standing to bring the
amended claims. Because Riceland fails to show that there are fewer than 100
plaintiffs, and because I find that the Trustees have power under the Trust to bring
the two amended claims, I will deny Riceland’s motion to dismiss and will grant
plaintiffs’ motion to amend the complaint.1
In 2006, the USDA announced that the rice supply in the United States had
been contaminated by Bayer’s genetically modified rice. Thousands of rice
producers and non-producers filed suit against various Bayer entities in federal and
state court. The Judicial Panel on Multidistrict Litigation transferred all pending
federal cases to this court, and I appointed Don Downing and Adam Levitt as CoLead Counsel of a leadership group of attorneys. Over the course of the next
several years, the leadership group and various other attorneys and firms invested
considerable time and resources into these cases, providing substantial benefits to
other plaintiffs in the litigation.
In the MDL case, I ordered that a common benefit trust fund (the Fund) be
established to compensate attorneys for services rendered on behalf of all the
plaintiffs.2 This order required that a portion of any recovery obtained by plaintiffs
in federal court be set aside and contributed to the Fund. It also allowed
contributions to the Fund to be made in state court cases if ordered by the state
court or if plaintiffs in those cases agreed to the contributions.
Plaintiffs’ motion to dismiss Riceland’s counterclaim remains pending.
See In re Genetically Modified Rice Litigation, 4:06MD1811, 2010 WL 716190 (E.D. Mo. Feb.
In coordination with my order establishing the Fund, a trust deed was
executed establishing the Genetically Modified Rice Common Benefit Qualified
Settlement Fund (the Trust). The Trust named Don Downing and Adam Levitt as
trustees (the Trustees) and set forth the purpose of the Trust:
[t]o provide for the compensation and litigation-related expenses of
attorneys who have provided services for the common benefit of all
plaintiffs in the [Multi-District Genetically Modified Rice] Litigation,
. . . [and] to provide for the payment of any excess administrative
costs and expenses of the [Fund] established by this same Court.
The purpose of the [Trust] is limited to the matters set forth herein,
and this Agreement shall not be construed to confer on the Trustee
any authority to carry on any business or activity for profit.
The Trust also listed five express powers of the Trustees: pay taxes and
expenses, manage the assets of the Fund, hire accountants, execute documents of
transfer and conveyance, and ensure compliance with Internal Revenue Code §
468B. Additional powers could be ordered by the court after hearing upon notice
to all parties.
Riceland was a plaintiff in both Arkansas state court and as part of the
federal MDL. However, it did not consent to contribute to the Fund in its state
court cases. The leadership group brought this class action against Riceland on
behalf of all persons and entities that provided or paid for common benefit services
or expenses. The complaint alleges that Riceland benefited at the expense of the
class by using common benefit services during its state court claims and asserts
claims against Riceland for unjust enrichment and quantum meruit.
Plaintiffs now seek to amend their class action complaint to add counts for
unjust enrichment and quantum meruit by the Trustees on behalf of the Trust and
to substitute named class plaintiffs. Riceland opposes the amendment of the claim
on the grounds that (1) the court lacks subject-matter jurisdiction to hear the
complaint in its entirety; (2) the co-trustees lack standing because the amended
counts represent a collateral attack on an earlier order by the court;3 (3) the
amended counts exceed the powers granted to the co-trustees and are, therefore,
ultra vires; and (4) the co-trustees lack standing because Riceland’s recovery
against Bayer is not trust property and so the trustees cannot assert a property right
against that recovery.
Riceland also filed a motion to dismiss the complaint in its entirety for lack
of subject-matter jurisdiction. This motion also alleges that the court would lack
subject-matter jurisdiction over Counts III and IV of the proposed amended
complaint. This order will first address the subject-matter jurisdiction over the
Riceland makes no substantive argument on this point but merely cites my Order of February
11, 2011, in which I declined to enforce the terms of the Trust over Riceland’s claims against
Bayer in state court. See In re Genetically Modified Rice Litig., No. 4:06MD1811 CDP, 2011
WL 601627 (E.D. Mo. Feb. 11, 2011) (Doc. 4033). There, the issue was one of jurisdiction,
whereas here, the issues deal with independent actions for unjust enrichment and quantum
meruit. Because the issues are not identical to those decided in that Order, collateral estoppel is
case as a whole and will then examine the parties’ arguments relative to the
proposed amended complaint.
Motion to Dismiss for Lack of Subject-matter Jurisdiction
Under the Class Action Fairness Act of 2005 (CAFA), district courts have
original jurisdiction over any civil class action in which there is (1) an aggregate
amount in controversy of at least $5,000,000, exclusive of interest and costs, and
(2) minimal diversity, that is, where at least one plaintiff and one defendant are
citizens of different states. 28 U.S.C. § 1332(d)(2), (6). CAFA also establishes
narrow exceptions to its jurisdiction, only one of which is relevant here: a court
does not have jurisdiction where “the number of members of all proposed plaintiff
classes in the aggregate is less than 100.” 28 U.S.C. § 1332(d)(5); see also
Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736, 740 n.1 (2014)
(noting exceptions to CAFA). The number of proposed class members may be
determined from the face of the complaint. See Brown v. Mortg. Elec. Registration
Sys., Inc., 738 F.3d 926, 932 (8th Cir. 2013).
CAFA retained the general rule that the proponent of federal jurisdiction
bears the burden of establishing jurisdiction. See Westerfeld v. Indep. Processing,
LLC, 621 F.3d 819, 822 (8th Cir. 2010). Once CAFA’s initial jurisdictional
requirements have been established, the objecting party bears the burden of
proving the applicability of any exception. See id. Any doubts as to the
applicability of an exception are resolved against the party seeking to establish an
exception to jurisdiction. Id.
Plaintiffs bring a class action claim on behalf of “all persons or entities that
provided or paid for common benefit services, materials, and/or related expense
items . . . .” A district court may take judicial notice of its own orders and records.
Cravens v. Smith, 610 F.3d 1019, 1029 (8th Cir. 2010). As I have previously
stated that there are “approximately five thousand plaintiffs” in the MDL,4 I will
take judicial notice that the number of potential class members exceeds 100.5
Plaintiffs have carried their initial burden of establishing subject-matter
Riceland contends that the class must have fewer than 100 members because
any rice producer that settled with Bayer necessarily released all claims against
Riceland, including those brought in this action. However, a release is a contractbased affirmative defense, and an affirmative defense does not strip a court of its
subject-matter jurisdiction. See Jerez v. Holder, No. 10-CV-4498 (JRT/LIB), 2011
WL 7637808, at *14 (D. Minn. Sept. 1, 2011) (“Just like parties cannot confer
federal jurisdiction through a contract, parties cannot limit a court’s jurisdiction
through a contract) (citing Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de
See In re Genetically Modified Rice Litig., 4:06 MD 1811 CDP, 2010 WL 716190 (E.D. Mo.
Feb. 24, 2010) (Doc. # 2574).
Because I find that the number of class members exceeds 100 when counting MDL plaintiffs
alone, I need not make findings as to the number of attorneys that compose the class.
Guinee, 456 U.S. 694, 702 (1982) (“[N]o action of the parties can confer subjectmatter jurisdiction upon a federal court . . . .”)). Moreover, Riceland does not
provide any evidence – even when excluding producers who signed releases – that
the number of proposed class members is less than 100. Riceland has failed to
carry its burden of showing that there are fewer than 100 plaintiffs in the proposed
class, and I will deny Riceland’s motion to dismiss under CAFA.
Motion to Amend Complaint
Rule 15(a) of the Federal Rules of Civil Procedure vests the court with
discretion whether or not to grant leave to amend. Zenith Radio Corp. v. Hazeltine
Research, Inc., 401 U.S. 321, 330–32 (1971). Factors to consider in determining
whether leave to amend should be granted include, but are not limited to, (1)
whether the motion was filed in bad faith or with dilatory motive; (2) whether the
motion was filed with undue delay; (3) whether leave to amend would be unduly
prejudicial to the opposing parties; and (4) whether the proposed amendment
would be futile. See Bell v. Allstate Life Ins. Co., 160 F.3d 452, 454 (8th Cir.
1998) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)); Williams v. Little Rock
Mun. Water Works, 21 F.3d 218, 224 (8th Cir. 1994). A determination that an
amendment is futile means the court has reached the legal conclusion that the
amended complaint could not withstand a motion to dismiss under Rule 12(b)(6) of
the Federal Rules of Civil Procedure. Cornelia I. Crowell GST Trust v. Possis
Med., Inc., 519 F.3d 778, 781–82 (8th Cir. 2008).
If the court lacks subject-matter jurisdiction, it cannot rule on a motion to
amend. See Buttram v. Cent. States, Se. & Sw. Areas Health & Welfare Fund,
781 F. Supp. 1429, 1431 (E.D. Mo. 1992) (citing Pressroom Unions-Printers
League Income Sec. Fund v. Cont’l Assur. Co., 700 F.2d 889, 893–94 n.9 (2d Cir.
1983)). Article III of the Constitution limits federal jurisdiction to cases or
controversies; if a plaintiff lacks standing to sue, the district court has no subjectmatter jurisdiction. ABF Freight Sys., Inc. v. Int’l Broth. of Teamsters, 645 F.3d
954, 958 (8th Cir. 2011). To establish standing, a plaintiff must show (1) an
injury-in-fact that (2) can be fairly traced to the defendant’s action and (3) will
likely be redressed by a favorable court decision. Id. (citing Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560–61 (1992)).
The proposed amended complaint substitutes the named plaintiffs in Counts
I and II. In its opposition to those counts, Riceland reasserts the CAFA arguments
I rejected above. The analysis remains largely the same, and I find that I would
retain jurisdiction under CAFA as to Counts I and II of the Amended Complaint.
Riceland next contends that I should deny plaintiffs’ attempts to add Counts
III and IV. It bases this argument on the premise that the trustees lack standing to
bring their unjust enrichment and quantum meruit claims, because such claims are
ultra vires – that is, that they go beyond the powers granted by the trust.
The Trust was established primarily “to provide for the compensation and
litigation-related expenses of attorneys who have provided services for the
common benefit of all plaintiffs” in the MDL, with the proviso that the Trust did
not confer on the Trustee the authority to carry on business for profit. The Trust
provided that it would be funded in accordance with an order I entered, which
required all MDL plaintiffs to contribute a share of their recovery to the Fund. The
Trust’s property would also derive from any related state case where the parties
were ordered or agreed to make contributions, as well as from funds contributed
pursuant to subsequent orders by this court.
Missouri law sets forth general powers that trustees may exercise except
where limited by the terms of the trust. These include “(a) all powers over the trust
property which an unmarried competent owner has over individually owned
property; (b) any other powers appropriate to achieve the proper investment,
management, and distribution of the trust property; and (c) any other powers
conferred by [Missouri law].” R.S. Mo. § 456.8-815. Included among other
powers granted by Missouri law is the ability to “prosecute or defend an action,
claim, or judicial proceeding in any jurisdiction to protect trust property and the
trustee in the performance of the trustee’s duties.” R.S. Mo. § 456.8-816 (24).
The only clause in the Trust that might be read to affirmatively limit the
powers of a trustee is one that limits the purpose of the trust as discussed above
and prohibits Trustees from “carry[ing] on any business or activity for profit.”
However, the unjust enrichment and quantum meruit claims alleged by the
Trustees further the Trust’s purpose, because they would bolster the Trust’s ability
to compensate the beneficiaries. Moreover, the Trustees will only “profit” from
this suit insofar as they are also beneficiaries of the Trust, as they provided
common-benefit litigation services in the MDL. The Trust does not expressly
prohibit a Trustee from bringing a claim to protect trust property, and so, under
Missouri law, the Trustees have the power to bring the claims on behalf of the
Riceland also contends that by bringing those claims, the Trustees are
changing the nature of the use of the trust property. However, the Trustees are not
changing the use of the property; rather, they are performing their statutory duty by
attempting to increase the res. See § 456.8-809 (“A trustee shall take reasonable
steps to take control of and protect the trust property . . . .”); see also Cent. States,
Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 572 (1985)
(noting common law duty of asset preservation includes determining what property
forms the subject matter of the trust) (quotation omitted) (citing G. Bogert & G.
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Bogert, Law of Trusts and Trustees § 582, p. 355 (2d rev. ed. 1980)). The
Trustees’ actions are not ultra vires.
Riceland argues that the proceeds of its settlement with Bayer are not trust
property, and so the Trust was not injured through Riceland’s failure to contribute
a portion of the settlement. But the Trustees do not assert that Riceland’s
settlement proceeds are trust property; rather, the complaint alleges that the facts
underlying the unjust enrichment and quantum meruit claims form the basis of the
Trust’s injury. In other words, the Trustees do not seek the actual money paid to
Riceland by Bayer; they seek “an amount equal to 10%” of the gross recovery. As
discussed above, the Trustees have standing to bring those claims on behalf of the
IT IS HEREBY ORDERED that plaintiffs’ motion for leave to file an
amended class action complaint [# 27; # 5219] is granted, and the proposed
amended complaint is deemed filed today.
IT IS FURTHER ORDERED that defendant’s motion to dismiss for lack
of subject-matter jurisdiction [# 38; # 5237] is denied.
Dated this 31st day of March, 2014.
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
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