Rice v. Interfood, Inc. et al

Filing 102

OPINION MEMORANDUM AND ORDER 61 78 ( Response to Court due by 2/6/2015.)IT IS HEREBY ORDERED that Defendants Motion for SummaryJudgment, [Doc.61], is granted. IT IS FURTHER ORDERED that Plaintiffs Motion for Summary Judgment, [Doc. No. 78 ], is denied. IT IS FURTHER ORDERED that Defendants shall, within 14 days from the date of this Opinion, Memorandum and Order, submit a detailed statement of the rates, times expended and subject matter of their attorneys fees to the Court for review. IT IS FURTHER ORDERED Plaintiff shall, within 7 days from the filing of Defendants statement, file any objections he may have. Signed by District Judge Henry Edward Autrey on 1/23/15. (CLA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

LARRY RICE,

)
)
)
)
)
)
)
)
)

Plaintiff,
vs.
INTERFOOD, INC, et al.,
Defendants.

Case No. 4:13CV1171 HEA

OPINION, MEMORANDUM AND ORDER
This matter is before the Court on Defendants=/Counterclaim Plaintiffs’
(hereinafter Defendants), Motion for Summary Judgment on their Counterclaim for
Breach of Contract, [Doc. No. 61], and Plaintiff’s Motion for Summary Judgment on
Defendants’ Counterclaim, [Doc. No. 78]. A hearing on these motions was held on
January 21, 2015. For the reasons set forth below, Defendants’ Motion is granted
and Plaintiff’s Motion is denied.
Defendants filed their counterclaim seeking damages for Plaintiff’s breach of
a Settlement Agreement and Release entered into by the parties. The Agreement
contains a release and covenant not to sue each of the Interfood Parties. Defendants
seek attorneys’ fees as damages for the breach. In relevant part, the Settlement
Agreement provides:
1

The Settlement Agreement and Release provides as follows:
The parties hereby fully and completely release and covenant not
to sue one another on all actual or potential claims between the
parties based upon any fact that existed on December 11, 2009, the
date on which the settlement agreement was executed. These
mutual releases and covenants not to sue cover the parties, their
subsidiaries and affiliates, their successors and assignees, and their
officers, directors, agents and employees.
Plaintiff’s Complaint alleged the following:
Interfood, Inc. was incorporated in Delaware in September 2006 by Steven E.
Pozaric. Interfood is a wholly owned subsidiary of Interfood Holding B.V.
Holding was a foreign business entity formed and existing under the laws of the
Netherlands. Holding is the sole owner and sole Director of Tepco, B.V. Tepco is
a foreign business entity formed and existing under the laws of the Netherlands.
Tepco and Plaintiff were shareholders in Waltepco Holding Company, an
Indiana corporation which owns 100% of an Indiana corporation formed in 1994
named Interfood, Inc. (Interfood-IN).
Since 1994, Interfood-IN has been in the business of the distribution,
marketing, sourcing, and sale of milk, milk powders, milk protein concentrates,
anhydrous milk fat and blends, buttermilk, butter, cheese, lactose, whey powders,
whey protein concentrates, whey protein isolates, casein, caseinate, and other dairy
goods, products, and ingredients. Since that time, Interfood-IN has provided a
number of services, including acting as a broker of the dairy goods, acting as a trader
2

of the dairy goods, purchasing the dairy goods, and entering into contracts for the
purchase of the dairy goods from suppliers and then sells the dairy goods at a profit.
Interfood is also engaged in the dairy business.
Tepco and Plaintiff entered into a AShareholders Agreement@ dated June 1,
2003, which requires anyone in the AGroup@ (Holding owned companies similar to
Interfood around the world) who wishes to buy and/or sell something in the United
States or Canada, or to buy and/or sell U.S. or Canadian products anywhere, to do so
through Interfood-IN. The Shareholders Agreement gives Interfood-IN exclusive
rights for the entire Group. The contract was signed by van Stipdonk representing
Tepco and Jack Engels representing Holding.
After forming AInterfood, Inc.@ in Delaware, Neerhoff and van Stipdonk
focused their efforts on establishing the business of the new company, Interfood Inc.
of Delaware, which was a competitor of Interfood-IN in the dairy business, and
diverted Interfood-IN=s opportunities to Interfood, Inc. of Delaware in breach of
their fiduciary duties as Directors of Interfood-IN, which they claimed to be.
Plaintiff alleged that he became aware of this alleged breach in early 2004 and
tried to resolve them with van Stipdonk and Neerhoff.
The Complaint further alleged that in August 2006, the Interfood-IN board
removed van Stipdonk as a director leaving Rice and Husmann as the entire board of

3

Interfood-IN, which filed suit in Franklin County, Missouri in March 2006 to stop
alleged violations of the Shareholders Agreement.
On March 10, 2014, the Court granted Defendants’ Motion to Dismiss for
Failure to State a Claim. The Court found that Count I was barred by the applicable
statute of limitations. Count II was dismissed because Defendants were not parties
to the Shareholders Agreement which Plaintiff alleged was breached. Count III, the
conspiracy count, was dismissed because there was no viable underlying cause of
action.
Defendants seek summary judgment on their counterclaim arguing they are
entitled to their attorneys’ fees as damages for Plaintiff’s filing of his action, in
violation of the Settlement Agreement and Release, which contained the covenant
not to sue one another on all actual or potential claims between the parties based on
any fact that existed on December 11, 2009.
Initially, Plaintiff argues that Defendants’ Motion should be denied because
the record establishes that there has been no breach of the covenant not to sue.
Plaintiff’s argument, however, is belied by his pleading. Relying on the single
phrase found in the Complaint, “starting in at least 2009, Defendants conspired. . .,”
Plaintiff argues that his claims are outside the perimeters of the Settlement
Agreement, and therefore there has been no breach of the covenant not to sue. This

4

phrase, however, can be interpreted as encompassing time prior to 2009, and further,
all of 2009 prior to December 11, 2009, the end date of the covenant. The actions
detailed in Plaintiff’s complaint, and of which Plaintiff complains, clearly establish
that Plaintiff’s claims rest on actions which occurred prior to December 11, 2009.
With respect to Defendants’ claim for attorneys’ fees as damages for
Plaintiff’s breach of the agreement in filing this action, Plaintiff confuses the
“American Rule” and Defendants’ prayer for their damages, which happen to be the
attorneys’ fees incurred in bringing this action to enforce the covenant not to sue.
While the Court agrees that the American Rule, which provides that each
party pays its own fees and costs absent a specific statutory or contractual provision,
Monarch Fire Protection v. Freedom Consulting, 678 F. Supp. 2d 927, 938 (E.D.
Mo. 2009), ordinarily precludes an award of attorneys’ fees to a prevailing party, the
philosophical basis for the Rule is not applicable in this breach of the covenant not to
sue action now before this court. Attorney’s fees fall within the category of “costs
of litigation” and not damages. In the instant matter however, the attorneys’ fees
are the damages for Plaintiff’s breach of the Agreement. Dallas Gas Partners, L.P.
v. Prospect Energy Corp, 733 F.3d 148, 158-9 (5th Cir. 2013).
Furthermore, even assuming that the attorneys’ fees were not actual damages
incurred as a result of the breach of the covenant, the attorneys’ fees in this action

5

fall within the exceptions to the American Rule.
A successful litigant may be awarded attorney fees under one of the
exceptions to the American Rule if the litigant demonstrates the existence of
special circumstances surrounding the litigation. Grewell v State Farm Mut.
Auto Ins. Co., 162 S.W.3d 503, 507 (Mo.App.W.D. 2005). Some examples of
special circumstances include “where very unusual circumstances exists so it
may be said equity demands a balance of the benefits” and “where the
attorney fees are incurred because of involvement in collateral litigation.” Lett
v. City of St. Louis, 24 S.W.3d 157, 162 (Mo.App.E.D. 2000).
Motor Control Specialties, Inc. v. Labor and Indus. Relations Com’n, 323 S.W.3d
843, 854 (Mo.App.W.D. 2010). Moreover, it is not necessary that there be a
showing of third-party litigation. “Collateral litigation with a third-party is not
mentioned, but rather collateral litigation as a ‘natural and proximate’ result of a
wrong or breach of duty is required for the exception.” Id., at 855. The
counterclaim for breach of the covenant not to sue was brought as a “natural and
proximate” result of Plaintiff’s bringing the original action, and therefore an
exception to the American Rule applies. The attorneys’ fees requested as damages
herein were incurred because of need to bring the counterclaim.

Defendants’

Motion for Summary Judgment on their counterclaim will be granted.
Defendants seek a total of $90,615.81 in fees and costs. Defendants,
however, have not detailed these fees and costs such that the Court can determine the
reasonableness of the fees and costs. To do so, the Court requires a more detailed
documentation of the rate at which the fees are billed, the subject matter of the
6

charges and the amount of time per task. Plaintiff will be given an opportunity to
file any objections to the amount of attorneys’ fees submitted to the Court.
Accordingly,
IT IS HEREBY ORDERED that Defendants’ Motion for Summary
Judgment, [Doc.61], is granted.
IT IS FURTHER ORDERED that Plaintiff’s Motion for Summary
Judgment, [Doc. No. 78], is denied.
IT IS FURTHER ORDERED that Defendants shall, within 14 days from
the date of this Opinion, Memorandum and Order, submit a detailed statement of the
rates, times expended and subject matter of their attorneys’ fees to the Court for
review.
IT IS FURTHER ORDERED Plaintiff shall, within 7 days from the filing of
Defendants’ statement, file any objections he may have.
Dated this 23rd day of January, 2015.

________________________________
HENRY EDWARD AUTREY
UNITED STATES DISTRICT JUDGE

7