Nestle Purina PetCare Company v. The Blue Buffalo Company Ltd.

Filing 1055

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Diversified Ingredients' Motion to Dismiss Third-party Complaint of Wilbur-Ellis 921 is GRANTED in part and DENIED in part. IT IS FURTHER ORDERED that David Dressel, Dean H. Hiller and Edward J . Wanner's Motion to Dismiss the Third-party Complaint of Wilbur-Ellis 919 is GRANTED. David Dressel, Dean H. Hiller and Edward J. Wanner shall be DISMISSED from this suit without prejudice. IT IS FURTHER ORDERED that Wilbur-Ellis shall file an amended third-party complaint to bring it into compliance with the terms of this Memorandum and Order no later than 10/10/2016. Signed by District Judge Rodney W. Sippel on 9/27/16. (CAR)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
NESTLÉ PURINA PETCARE COMPANY,
Plaintiff/Counterclaim Defendant,
vs.
THE BLUE BUFFALO COMPANY LTD.,
Defendant/Counterclaim Plaintiff,

AND RELATED ACTIONS

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Case No. 4:14 CV 859 RWS

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MEMORANDUM AND ORDER
This false advertising pet food case is before me on two motions to dismiss: Diversified
Ingredients’ motion to dismiss the third-party complaint of Wilbur-Ellis Company, and David
Dressel, Dean H. Hiller and Edward J. Wanner (the “Individual Defendants”)’s motion to
dismiss the third-party complaint of Wilbur-Ellis. The Individual Defendants are Diversified’s
owners, officers, and directors, and are being sued on a piercing the veil theory. The issues are
fully briefed and ready for review.1 For the reasons that follow, I will grant in part and deny in
part Diversified’s motion to dismiss, and I will grant the Individual Defendants’ motion to
dismiss.
Background
Plaintiff Nestle Purina Petcare Company brought this case against The Blue Buffalo
Company, alleging that Blue Buffalo falsely advertises its pet foods as free of poultry byproduct
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On September 15, 2016, I granted in part Wilbur-Ellis, Diversified Ingredients, and the Individual Defendants’
consent motion to give effect to pleadings and motions affected by Diversified Ingredients’ renewed third-amended
crossclaim. See Order #[1014]. As a result, while Blue Buffalo and Diversified have filed amended
answers/complaints since these motions were filed, because the substance of the claims at issue have not changed,
my rulings in this Memorandum and Order will apply to the current, operative pleadings.

meal and meeting other nutritional claims in violation of the Lanham Act, 15 U.S.C. § 1125.
Blue Buffalo has since admitted that poultry byproduct was in some of its pet foods. However,
Blue Buffalo claims that its ingredient supplier, Wilbur-Ellis, and ingredient broker, Diversified
Ingredients, deceived Blue Buffalo when they sold it byproduct meal instead of high quality
chicken and turkey meal. Blue Buffalo has brought several third-party claims against Diversified
and Wilbur-Ellis, and alleges that they are liable for Blue Buffalo’s damages, among other
things.
After being joined in the case, Diversified brought crossclaims against Wilbur-Ellis,
alleging that it was unknowingly defrauded by Wilbur-Ellis, and that Diversified believed it had
been procuring and delivering byproduct-free poultry meal to Blue Buffalo. Wilbur-Ellis has
since filed its own crossclaims against Diversified, arguing that Wilbur-Ellis provided poultry
“blends” in accordance with its contracts, and alleging that Diversified did and should have
known Wilbur-Ellis was providing it with product that contained byproduct. Wilbur-Ellis further
alleges that Diversified mislabeled the byproduct meal as poultry meal when it re-sold it to Blue
Buffalo. Wilbur-Ellis seeks indemnity and contribution from Blue Buffalo for any liability it is
found to owe to Blue Buffalo.
Wilbur-Ellis has also brought third-party claims against the Individual Defendants,
arguing that they are the alter ego of Diversified, and piercing the corporate veil is warranted so
that Wilbur-Ellis may collect against the Individual Defendants for any judgment for which
Diversified may be found liable.
Legal Standard
In ruling on a motion to dismiss brought under Fed. R. Civ. P. 12(b)(6), I must accept as
true all factual allegations in the complaint and view them in the light most favorable to the

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plaintiff. Kohl v. Casson, 5 F.3d 1141, 1148 (8th Cir. 1993). “To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility 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. While a court must accept factual
allegations as true, it is “not bound to accept as true a legal conclusion couched as a factual
allegation.” Carton v. Gen. Motor Acceptance Corp., 611 F.3d 451, 454 (8th Cir. 2010) (internal
citations omitted). “Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678 (internal citations omitted).
Unlike state courts which often require detailed statements of fact in a petition, however, the
federal rules require only notice pleading. Under Fed. R. Civ. P. 8(a):
[A] complaint must include only a short and plain statement of the claim showing
that the pleader is entitled to relief. Such a statement must simply give the
defendant fair notice of what the plaintiff's claim is and the grounds upon which it
rests. This simplified notice pleading standard relies on liberal discovery rules
and summary judgment motions to define disputed facts and issues and to dispose
of unmeritorious claims.
Romine v. Acxiom Corp., 296 F.3d 701, 711 (8th Cir. 2002).
Discussion
A. Intentional Tortfeasor Rule
In Counts 1 and 2, Wilbur-Ellis seeks contribution and equitable indemnity from
Diversified for any harms to Blue Buffalo for which Wilbur-Ellis is found liable and for which
Diversified is also at fault.
Diversified argues that Wilbur-Ellis is not entitled to contribution or equitable indemnity
for any underlying intentional conduct because such recovery is barred by the intentional
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misconduct rule. Under the “intentional misconduct rule,” Missouri courts prohibit claims for
contribution or indemnity among willful joint tortfeasors. Missouri Pac. R. Co. v. Whitehead &
Kales Co., 566 S.W.2d 466, 469 (Mo. 1978). As a result, Diversified argues that Wilbur-Ellis’
claims for contribution and indemnity that stem from Blue Buffalo’s underlying claims of
intentional/fraudulent misrepresentation and fraud in the inducement should be dismissed.
Diversified also seeks dismissal of Wilbur-Ellis’ contribution claim to the extent it seeks
contribution for any intentional conduct Wilbur-Ellis is found to have committed under the
Connecticut Unfair Trade Practices Act (“CUPTA”).2
Wilbur-Ellis argues that there is a choice of law issue making a decision on this question
premature because it is not yet decided whether Missouri or California law should apply to this
dispute, and while it is undisputed that Missouri courts apply the intentional misconduct rule,
Wilbur-Ellis argues that California courts do not. Wilbur-Ellis is correct that there is a difference
between California and Missouri law because California permits intentional tortfeasors to
recover in equitable indemnity against other intentional tortfeasors. Baird v. Jones, 21 Cal. App.
4th 684, 691 (1993). Wilbur-Ellis has not provided any authority, however, and I have not found
any, to suggest that California courts allow intentional tortfeasors to recover contribution from
other intentional tortfeasors. In fact, the opposite is true – in California, there is no right to
contribution in favor of any tortfeasor who has committed an intentional tort. Cal. Civ. Proc.
Code § 875 (West).
As a result, there is no conflict or choice of law issue regarding Wilbur-Ellis’ claim for
contribution. Because both Missouri and California law provide that intentional tortfeasors may
not recover contribution from other intentional tortfeasors, Wilbur-Ellis’ claims for contribution

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Diversified does not challenge Wilbur-Ellis’ contribution claim to the extent it seeks contribution for negligent
conduct. See Diversified’s Reply [#979] at 3.
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for any underlying intentional torts it is found to have committed are barred as a matter of law
and will be dismissed. This includes the CUPTA claim to the extent a finding of liability under
CUPTA is based on intentional conduct.
As Wilbur-Ellis argues, however, when the underlying causes of action are “broad
enough to encompass both intentional and negligent conduct,” the intentional misconduct rule
might not apply. See Charter Express, Inc. v. United S. Assur. Co., 1990 US. Dist. LEXIS
10301, at *4 (W.D. Mo. July 30, 1990). In keeping with this principle, my ruling is limited as
follows. To the extent the claims encompass negligent conduct, they will remain. To the extent
they are based on intentional conduct, which is clearly the case for the underlying intentional
torts discussed above, they will be dismissed.
As discussed above, there is a conflict in the laws of Missouri and California on whether
an intentional tortfeasor may recover equitable indemnity from another tortfeasor, as Missouri
courts do not and California courts do allow such recovery.3 Missouri Pac. R. Co. v. Whitehead
& Kales Co., 566 S.W.2d 466, 469 (Mo. 1978); Baird v. Jones, 21 Cal. App. 4th 684, 691 (1993).
Determining which state’s law applies to these disputes depends upon which state has “the most
significant relationship to the occurrence and the parties,” which requires factual determinations.
Thompson by Thompson v. Crawford, 833 S.W.2d 868, 870 (Mo. 1992) (citing Restatement
(Second) of Conflict of Laws § 145, (1971)). For the same reasons stated in the Court’s
Memorandum and Order of September 8, 2016, [#450] at 5-6, I am unable to determine, based
on the existing factual record, whether Missouri or California law should apply to this claim. As

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While Blue Buffalo has never brought claims for intentional misconduct against Diversified, Wilbur-Ellis has
alleged that Diversified acted intentionally to mislabel the byproduct meal as poultry meal, which is sufficient at this
stage to support its claim for equitable indemnity.

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a result, a choice of law determination would be premature and I will not dismiss Wilbur-Ellis’
equitable indemnity claim based on the intentional tortfeasor rule at this time.

B. Sufficiency of the Pleadings (Counts 2 and 3 against Diversified)
1. Contribution
Diversified also briefly argues that Wilbur-Ellis’ claims for contribution should be
dismissed because Wilbur-Ellis has not sufficiently pleaded that Diversified is originally liable to
Blue Buffalo. To support this argument, Diversified cites to three paragraphs under Count 1
(Contribution) in Wilbur-Ellis’ crossclaim. A review of the crossclaim as a whole, however,
shows that Wilbur-Ellis has alleged that Diversified is originally liable to Blue Buffalo for
alleged negligent conduct and misrepresentations to Blue Buffalo. See Wilbur-Ellis Compl.,
[#849] at ¶¶ 216-17, 254. This is sufficient to state a claim for contribution under federal notice
pleading standards. Romine v. Acxiom Corp., 296 F.3d 701, 711 (8th Cir. 2002).
2. Equitable Indemnity
Diversified also argues that Wilbur-Ellis’ equitable indemnity claim should be dismissed
as insufficiently pleaded. Diversified argues that Wilbur-Ellis has failed to allege that
Diversified and Wilbur-Ellis owed identical obligations to Blue Buffalo or the existence of a
special relationship or circumstances justifying equitable indemnity. Diversified also contends
that because a contract exists between the parties, any claim for equitable indemnity is barred.
Finally, Diversified argues that Wilbur-Ellis cannot recover equitable indemnity because it has
unclean hands.
“[I]ndemnity is a right which inures to a person who has discharged a duty which is owed
by him, but which, as between himself and another, should have been discharged by the other, so

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that if the second does not reimburse the first, the second is unjustly enriched to the extent that
his liability has been discharged.” Glob. Petromarine v. G.T. Sales & Mfg., Inc., 577 F.3d 839,
846 (8th Cir. 2009) (quoting State ex rel. Manchester Ins. & Indem. Co. v. Moss, 522 S.W.2d
772, 774 (Mo.1975) (en banc)). To establish a claim for equitable indemnity, a plaintiff must
prove:
(1) the discharge of an obligation by the plaintiff; (2) the obligation discharged by
the plaintiff is identical to an obligation owed by the defendant; and (3) the
discharge of the obligation by the plaintiff is under such circumstances that the
obligation should have been discharged by the defendant, and defendant will be
unjustly enriched if the defendant does not reimburse the plaintiff to the extent
that the defendant's liability has been discharged.
Beeler v. Martin, 306 S.W.3d 108, 111 (Mo. Ct. App. 2010) (internal quotations and citations
omitted).
After reviewing Wilbur-Ellis’ crossclaim as a whole, I find that Wilbur-Ellis has stated a
claim for equitable indemnity under federal notice pleading standards. First, Wilbur-Ellis has
pleaded identical obligations based on the parties’ potential obligations to Blue Buffalo for its
overlapping claims against Wilbur-Ellis and Diversified, alleging that both parties promised to
provide Blue Buffalo with high quality poultry meal, that both failed to do so, Blue Buffalo was
harmed by these failures, and Blue Buffalo seeks indemnity from both parties for these harms.
Second, Wilbur-Ellis’ claim also sufficiently alleges the existence of special circumstances, both
based on the nature of the case as a whole and because it alleges that Wilbur-Ellis was dependent
upon Diversified, as the ingredient broker, to make sure its product was not mislabeled once it
left Wilbur-Ellis’ facilities.
Diversified’s other arguments for dismissal of the claim for equitable indemnity also fail
at this stage of the case. Diversified argues that the existence of a contract between Diversified
and Wilbur-Ellis bars the claim for equitable relief. As Wilbur-Ellis argues, however, the duty
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Diversified allegedly breached, as pleaded, does not stem from the contract Diversified is alleged
to have with Wilbur-Ellis – it is the duty Diversified allegedly owed to Blue Buffalo to provide it
with conforming and accurately labeled ingredients. Likewise, Diversified’s argument that
Wilbur-Ellis’ unclean hands bars any claim to equitable indemnity must fail because such a
finding would require me to assume that Blue Buffalo’s and Diversified’s allegations are true, an
entirely inappropriate assumption given that in reviewing Wilbur-Ellis’ motion to dismiss I must
take Wilbur-Ellis’ factual allegations to be true.
As a result, I find that Wilbur-Ellis has sufficiently pleaded its claim for equitable
indemnity under federal notice pleading standards and I will not dismiss it for failure to state a
claim.
C. Piercing the Corporate Veil (Count 3 against the Individual Defendants)
Wilbur-Ellis’ sole claim against the Individual Defendants is one for piercing the
corporate veil. Wilbur-Ellis alleges that the Individual Defendants, as Diversified’s owners and
operators, have kept Diversified on the brink of insolvency to protect Diversified’s assets from
the reach of its potential creditors. Accordingly, Wilbur-Ellis argues that it should be able to
pierce Diversifeid’s corporate veil if Diversified is found to be liable to Wilbur-Ellis for
indemnity and contribution but uses its undercapitalized state to shield the company from any
such judgment.
The Individual Defendants argue that Diversified has failed to state a claim for piercing
the veil and that it should be dismissed.
Missouri law presumes that corporations are separate entities, and courts do not lightly
disregard the corporate form to hold one corporation liable for the behavior of another. MidMissouri Tel. Co. v. Alma Tel., 18 S.W.3d 578, 582 (Mo. Ct. App. 2000); Hibbs v. Berger, 430

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S.W.3d 296, 306 (Mo. Ct. App. 2014). However, “[a] court may, pursuant to its equitable
powers, ‘disregard the separate legal entity of the corporation and the individual where the
separateness is used as a subterfuge to defraud a creditor.’” Fleming Companies, Inc. v. Rich,
978 F. Supp. 1281, 1302–03 (E.D. Mo. 1997) (citing Gevers Heating & Air Conditioning v. R.
Webbe Corp., 885 S.W.2d 771, 773 (Mo.App.1994) (internal quotations omitted). Missouri
courts will “pierce the corporate veil” and hold a defendant liable for the torts of another
corporation under the “instrumentality” or “alter ego” rule if the plaintiff can establish:
(1) Control, not mere majority or complete stock control, but complete
domination, not only of finances, but of policy and business practice in respect
to the transaction attacked so that the corporate entity as to this transaction
had at the time no separate mind, will or existence of its own; and
(2) Such control must have been used by the defendant to commit fraud or wrong,
to perpetrate the violation of a statutory or other positive legal duty, or
dishonest and unjust act in contravention of plaintiff's legal rights; and
(3) The aforesaid control and breach of duty must proximately cause the injury or
unjust loss complained of.
Radaszewski v. Telecom Corp., 981 F.2d 305, 306 (8th Cir. 1992) (citing Collet v. American Nat.
Stores, Inc., 708 S.W.2d 273, 284 (Mo. Ct. App. 1986).
“In order to determine whether or not the corporate veil should be pierced, the courts
consider a number of different indicators which they believe ‘justify the inference that they [the
indicators] occurred for an improper purpose.’” Fleming Companies, Inc. v. Rich, 978 F. Supp.
1281, 1303 (E.D. Mo. 1997) (internal citations and quotations omitted). “These indicators
include but are not limited to, operating a corporation without sufficient funds to meet its
obligations, the transfer by the debtor corporation of its property to a second corporation when
both are controlled by the same person, and/or the manipulation or stripping of assets to avoid
the demands of creditors. Id. (internal citations omitted).

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Here, assuming that the challenged “wrong” that Wilbur-Ellis argues justifies piercing the
veil is Diversified’s alleged mislabeling of the poultry byproduct meal as poultry meal, WilburEllis has failed to sufficiently allege the requisite elements of control and proximate cause. As
stated above, before a court will take the drastic measure of piercing the corporate veil, the
plaintiff must establish that the entity it wishes to reach had “[c]ontrol, not mere majority or
complete stock control, but complete domination, not only of finances, but of policy and
business practice in respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own.” Radaszewski v.
Telecom Corp., 981 F.2d 305, 306 (8th Cir. 1992). Moreover, the entity’s “control and breach of
duty must proximately cause the injury or unjust loss complained of.” Id.
Even when taking Wilbur-Ellis’ factual allegations to be true, Wilbur-Ellis’s claim fails
because it never alleges that the Individual Defendants themselves controlled anything other than
Diversified’s finances. There is simply no allegation that the Individual Defendants controlled
Diversified’s business practices or policies, let alone that they had “complete domination” of
Diversified’s business decisions “in respect to the transaction attacked.” Id. In fact, the only
individual Wilbur-Ellis alleges to have engaged in the allegedly harmful transaction is not one of
the named Individual Defendants but rather, a separate Diversified employee.
In its opposition, Wilbur-Ellis argues the wrong that justifies piercing the veil is that
Diversified is undercapitalized and will not satisfy any judgment that might be entered against it.
First, a review of the complaint demonstrates that the true harm Wilbur-Ellis alleges it has
suffered is that Diversified is responsible for mislabeling its product before re-selling it to Blue
Buffalo. Second, even an allegation that the harmful transaction is the fact that Diversified is
undercapitalized fails because Wilbur-Ellis has not pleaded facts supporting such a conclusion.

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Wilbur-Ellis alleges that Diversified is undercapitalized because the Individual Defendants have
retained the company’s earnings that were in excess of what the company needed to maintain its
operations budget. Wilbur-Ellis also alleges that the Individual Defendants then loan capital
back to Diversified as needed and at interest. Wilbur-Ellis then argues that there could be no
reason for such actions except to profit the Individual Defendants and to shield money from
potential creditors. As the Individual Defendants argue, however, and Wilbur-Ellis concedes,
such behavior does not violate any statutory or other legal provision. Nor is such behavior
inconsistent with how S-corporations may operate under corporate or tax laws. Moreover,
Wilbur-Ellis’ allegations on this point are wholly hypothetical. There is no allegation that
Diversified has defrauded or failed to satisfy any debts, including to Wilbur-Ellis. Taken in the
context of Wilbur-Ellis’ claims for indemnity and contribution, which are also purely
hypothetical and depend upon not only Blue Buffalo being held liable to Purina, but also on Blue
Buffalo prevailing on its claims for contribution and indemnity against Wilbur-Ellis, WilburEllis’ allegations for piercing the veil are insufficient to state a plausible claim that it is entitled
to such relief.
For these reasons, Wilbur-Ellis has failed to state a claim for piercing the corporate veil
against the Individual Defendants. As a result, I will dismiss Wilbur-Ellis’ claim for piercing the
veil, and will dismiss without prejudice the Individual Defendants from this suit.
Accordingly,
IT IS HEREBY ORDERED that Diversified Ingredients’ Motion to Dismiss Thirdparty Complaint of Wilbur-Ellis #[921] is GRANTED in part and DENIED in part.
IT IS FURTHER ORDERED that David Dressel, Dean H. Hiller and Edward J.
Wanner’s Motion to Dismiss the Third-party Complaint of Wilbur-Ellis #[919] is GRANTED.

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David Dressel, Dean H. Hiller and Edward J. Wanner shall be DISMISSED from this suit
without prejudice.
IT IS FURTHER ORDERED that Wilbur-Ellis shall file an amended third-party
complaint to bring it into compliance with the terms of this Memorandum and Order no later
than October 10, 2016.

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RODNEY W. SIPPEL
UNITED STATES DISTRICT JUDGE
Dated this 27th day of September, 2016.

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