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

Filing 756

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Wilbur-Ellis Company, William Haning, Oliver Harwell, and Henry Rychliks motion to dismiss Diversified Ingredients crossclaims 508 is GRANTED in part and DENIED in part in accordance with the terms o f this Memorandum and Order. IT IS FURTHER ORDERED that Custom Ag Commodities, LLC and Troy Geracis motion to dismiss Diversified Ingredients third party claims 557 is GRANTED in part and DENIED in part in accordance with the terms of this Memoran dum and Order. IT IS FURTHER ORDERED that Diversified Ingredients shall file an amended crossclaim and third-party complaint in accordance with the terms of this Memorandum and Order no later than May 20, 2016. Signed by District Judge Rodney W. Sippel on 4/19/16. (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’ crossclaims and third-party complaint: Wilbur-Ellis Company, William Haning,
Oliver Harwell, and Henry Rychlik’s motion to dismiss Diversified Ingredients’ crossclaims, and
Custom Ag and Troy Geraci’s motion to dismiss Diversified Ingredients’ third party claims. The
motions are fully briefed and ready for review. After careful consideration, I will grant in part
and deny in part the motions 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 by-product
meal and meeting other nutritional claims in violation of the Lanham Act, 15 U.S.C. § 1125.
Blue Buffalo has since admitted that poultry by-product was in some of its pet foods. However,
it claims that its ingredient supplier, Wilbur-Ellis, and ingredient broker, Diversified Ingredients,
deceived Blue Buffalo when they sold it by-product meal instead of high quality chicken and

turkey meal. Blue Buffalo brought third-party claims for indemnity and contribution against
Wilbur-Ellis and Diversified, alleging that they are liable to it for any harm Blue Buffalo is
found to have committed against Purina, as well as for additional damages under other legal
theories.
After being named as a third-party defendant, Diversified brought its own crossclaims
against Wilbur-Ellis and third-party claims against Wilbur-Ellis’ current or former employees
William Haning, Oliver Harwell, and Henry Rychlik (“Wilbur-Ellis Defendants”). Diversified
also brought third-party claims against Custom Ag and its employee Troy Geraci (“Custom Ag
Defendants”). Custom Ag is also an ingredient broker, and brokered the sale of the poultry byproduct meal at-issue between Wilbur-Ellis and Diversified (and ultimately, Blue Buffalo).
Diversified brings claims against the Wilbur-Ellis and Custom Ag Defendants under the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962(c), 1962(d),
1964(c), as well as various claims for breach of contract, fraud, and violations of other state trade
and consumer protection laws.
The Wilbur-Ellis and Custom Ag Defendants have both filed motions to dismiss
Diversified’s crossclaims and third-party complaint (“Complaint”) as it pertains to each of them.1
For the reasons that follow, I will grant in part and deny in part both motions to dismiss.

1

At the time that Wilbur-Ellis filed its motion to dismiss, Wilbur-Ellis’ motion sought dismissal of Diversified’s
first amended crossclaims and third-party claims. Afterwards, Diversified amended its complaint and filed its
Second Amended Crossclaims and Third Party Complaint without leave of the court. See [#525]. In Diversified’s
opposition to Wilbur-Ellis’ motion to dismiss, it argues that it was justified in amending its complaint because its
amendment was in response to Blue Buffalo’s amended pleading. It also asks that, if I find leave of the court was
required, that I grant it leave under FRCP 15. Wilbur-Ellis argues that Diversified’s second amended complaint is
not properly before the court and that I should only consider its allegations in its first amended complaint. However,
Wilbur-Ellis does address the new allegations in Diversified’s second amended complaint in its reply brief. While
Diversified should have sought leave of the Court to file its Second Amended Crossclaims and Third Party
Complaint, because leave to amend is to be freely granted under FRCP 15, I find that it is properly before the Court
now and will consider it to be the controlling pleading. Additionally, because Wilbur-Ellis addressed the
amendments in its reply brief, no further briefing is necessary and will rule on Wilbur-Ellis’ motion as though it
were brought against Diversified’s Second Amended Crossclaims and Third Party Complaint.
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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 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
1. RICO (Count 1)
In Count 1, Diversified brings a claim under the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. §§ 1962(c), 1962(d), 1964(c), against the Wilbur-Ellis
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and Custom Ag Defendants (“RICO Defendants”). Diversified alleges that the RICO
Defendants conspired to and violated RICO by forming an illegal association-in-fact enterprise
to manufacture, market, mislabel, and sell adulterated ingredients over the course of more than
four years. In the alternative to the association-in-fact enterprise, Diversified alleges that the
RICO Defendants colluded with the common purpose of taking over Custom Ag as an enterprise.
Diversified alleges that the RICO Defendants sold the mislabeled and adulterated meal at
inflated prices as though it were unadulterated meal, and that they accomplished this by
falsifying bills of lading, invoices, and ingredient certifications. Diversified alleges that these
acts constitute the chargeable predicate RICO offenses of wire and mail fraud. Additionally,
Diversified alleges that the RICO Defendants devised this enterprise to defraud the entire pet
food and livestock food industries, including Diversified as the ingredient broker between the
RICO Defendants and Blue Buffalo, who ultimately purchased Wilbur-Ellis’ products.
Diversified’s Second Amd. Crossclaims and Third Amd. Compl. [#525] at ¶¶ 45-59.
RICO prohibits “any person employed by or associated with any enterprise engaged in . .
. interstate . . . commerce, to conduct or participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962(c). To establish
a civil claim under RICO, plaintiffs must show that the defendants engaged in “(1) conduct (2) of
an enterprise (3) through a pattern (4) of racketeering activity.” H & Q Properties, Inc. v. Doll,
793 F.3d 852, 855-56 (8th Cir. 2015) (internal citations omitted). As the United States Court of
Appeals for the Eighth Circuit has repeatedly cautioned, “RICO, however, ‘does not cover all
instances of wrongdoing. Rather, it is a unique cause of action that is concerned with eradicating
organized, long-term, habitual criminal activity.’” Id. (internal citations and quotations omitted).
“Failure to present sufficient evidence on any one element of a RICO claim means the entire

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claim fails.” Craig Outdoor Advert., Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001, 1028 (8th Cir.
2008).
Federal Rule of Civil Procedure 9(b) applies to RICO claims. H & Q Properties, Inc. v.
Doll, 793 F.3d 852, 855 (8th Cir. 2015) (internal citations and quotations omitted). Under FRCP
9(b), “[i]n alleging fraud ... a party must state with particularity the circumstances constituting
fraud.” The “[c]ircumstances” of the fraud include “such matters as the time, place and contents
of false representations, as well as the identity of the person making the misrepresentation and
what was obtained or given up thereby.'” Id. at 855-56 (internal citations and quotations
omitted). “[C]onclusory allegations that a defendant's conduct was fraudulent and deceptive are
not sufficient to satisfy the rule.” Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir. 2009)
(internal quotations omitted). Additionally, “[a]llegations pleaded on information and belief
usually do not meet Rule 9(b)'s particularity requirement.” Id. (internal citations omitted). But
“[w]hen the facts constituting the fraud are peculiarly within the opposing party's knowledge, []
such allegations may be pleaded on information and belief.” Id. at 783-84.
Both the Wilbur-Ellis Defendants and the Custom Ag Defendants have moved to dismiss
the RICO claims against them for failure to state a claim under FRCP 12(b)(6) and 9(b). The
Wilbur-Ellis Defendants argue that Diversified has failed to sufficiently allege or plead the
existence of a RICO enterprise, participation in the conduct of an enterprise’s affairs, the
existence of a pattern of racketeering activity, or that the individual defendants engaged in a
pattern of racketeering activity by committing two or more predicate acts. The Custom Ag
Defendants argue that Diversified has failed to state its claims with particularity, and that it has
failed to sufficiently plead the existence of a RICO enterprise, predicate acts, or a pattern of
racketeering activity.

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a) Participation in the Conduct of an Enterprise
“The definition of a RICO ‘enterprise’ includes ‘any union or group of individuals
associated in fact although not a legal entity.’” 18 U.S.C. § 1961(4); United States v. Henley,
766 F.3d 893, 906 (8th Cir. 2014) cert. denied sub nom. Peteet v. United States, 135 S. Ct. 1516,
191 L. Ed. 2d 449 (2015) and cert. denied, 135 S. Ct. 2065, 191 L. Ed. 2d 968 (2015). “[A]n
association-in-fact enterprise must have at least three structural features: a purpose,2 relationships
among those associated with the enterprise, and longevity sufficient to permit these associates to
pursue the enterprise's purpose.”3 Boyle v. United States, 556 U.S. 938, -----, 129 S.Ct. 2237,
2244, 173 L.Ed.2d 1265 (2009); see also United States v. Henley, 766 F.3d 893, 906 (8th Cir.
2014) (“[T]o prove the existence of a RICO enterprise the government must offer proof of (1) a
common or shared purpose that animates the individuals associated with it, (2) a formal or
informal organization of the participants in which they function as a unit, including some
continuity of both structure and personnel, and (3) an ascertainable structure distinct from that
inherent in the conduct of a pattern of racketeering activity.”). The RICO “enterprise” must be
distinct from the “person” who operates or manages the enterprise. Cedric Kushner Promotions,
Ltd. v. King, 533 U.S. 158, 160, 121 S. Ct. 2087, 2089, 150 L. Ed. 2d 198 (2001). And that
“person” must have “conducted or participated in the conduct of the ‘enterprise's affairs,’ not just

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“Evidence of a common purpose may ‘be circumstantial, as by evidence that the group of individuals functions as
a continuing unit in an informal or formal organization engaged in a course of conduct directed toward the
accomplishment of the common purpose alleged.’” United States v. Henley, 766 F.3d at 906 (internal citation
omitted).
3
“Continuity of structure exists where there is an organizational pattern or system of authority that provides a
mechanism for directing the group's affairs on a continuing, rather than an ad hoc, basis.” United States v.
Kragness, 830 F.2d 842, 856 (8th Cir. 1987) (internal citations omitted). However, “[w]hile the group must function
as a continuing unit and remain in existence long enough to pursue a course of conduct, nothing in RICO exempts an
enterprise whose associates engage in spurts of activity punctuated by periods of quiescence.” Boyle v. United
States, 556 U.S. 938, 948, 129 S. Ct. 2237, 2245, 173 L. Ed. 2d 1265 (2009).
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[its] own affairs.”4 Reves v. Ernst & Young, 507 U.S. 170, 185, 113 S.Ct. 1163, 122 L.Ed.2d 525
(1993) (emphasis in original).
1) The Wilbur-Ellis and Custom Ag Enterprise
The Wilbur-Ellis Defendants argue that Diversified has not sufficiently alleged the
existence of a RICO enterprise or their participation in the conduct of a RICO enterprise. The
Wilbur-Ellis Defendants point to the United States Court of Appeals for the Seventh Circuit’s
opinion in Walgreen for support, arguing that here, like in Walgreen, the plaintiff has merely
alleged that defendants had a commercial relationship through which they pursued their own
self-interests, “as opposed to acting on behalf of a distinct enterprise” as required by RICO.
United Food & Commercial Workers Unions & Employers Midwest Health Benefits Fund v.
Walgreen Co., 719 F.3d 849, 854-56 (7th Cir. 2013).
In Walgreen, the plaintiff alleged that “the members of the enterprise associated for the
common purpose of profiting from illegally substituting Par's more expensive dosage forms of
ranitidine and fluoxetine for the cheaper dosage forms actually prescribed.” Walgreen, 719 F.3d
at 854. The Seventh Circuit found that these allegations were insufficient to state a RICO claim,
reasoning that the complaint merely alleged activities consistent with the existence of a business
partnership, even if they were fraudulent or illegal. Id. at 854-55. The court distinguished such
allegations from those that would be more suggestive of a RICO enterprise, such as allegations
that “officials from either company involved themselves in the affairs of the other,” that “profits
from the illegal [] scheme were siphoned off to the [] enterprise or to individual enterprise
members,” or allegations that “accused individual corporate personnel of improperly hijacking
4

Under RICO, “to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs,’ §
1962(c), one must participate in the operation or management of the enterprise itself.” Reves v. Ernst & Young, 507
U.S. 170, 185, 113 S. Ct. 1163, 1173, 122 L. Ed. 2d 525 (1993). “RICO liability is not limited to those with primary
responsibility for the enterprise's affairs,” nor is it “limited to those with a formal position in the enterprise, but some
part in directing the enterprise's affairs is required.” Id. at 179.
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the business operations of their companies for illicit ends.” Id. “Instead,” the court held, “the
activities the complaint describes are entirely consistent with Walgreens and Par each going
about its own business, with Par manufacturing generic drugs and marketing its products to
pharmacies, and Walgreens purchasing drugs and filling prescriptions.” Id.
Diversified argues that it has expressly alleged a coordinated effort by the RICO
Defendants because it alleged that Haning, Rychlik, Harwell, and Wilbur-Ellis purchased,
blended, and mislabeled feather meal; that Haning and Geraci coordinated the effort between
Wilbur-Ellis and Custom Ag to present the adulterated and mislabeled meal as genuine meal and
to inflate the prices; and that the RICO Defendants coordinated their efforts to falsify the product
certifications, bills of lading, and invoices to Diversified and Blue Buffalo. Diversified also
argues that neither entity could have accomplished its scheme without the other, so therefore the
defendants were acting on behalf of the enterprise.
Diversified’s allegations here are on par with those in Walgreen. And like the Walgreen
Court, I also conclude that Diversified has failed to sufficiently allege participation as well as a
common purpose distinct from that inherent in the conduct of a pattern of racketeering activity.
Even when taking its allegations to be true, Diversified merely alleges the existence of a
commercial partnership that would benefit each defendant’s own self-interests. In the WilburEllis Defendants’ case, that would be the purpose of supplying poultry and poultry byproduct
meal to ingredient brokers like Custom Ag, and in the Custom Ag Defendants’ case, that purpose
would be acting as an ingredient broker and purchasing for re-sale pet food ingredients. Like
Walgreen, the Complaint here does not allege that officials from either company inserted
themselves in the affairs of the other. There is no allegation, for example, that Custom Ag or
Geraci were involved in Wilbur-Ellis’ manufacturing process, or that Wilbur-Ellis and its

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employees were involved in creating Custom Ag’s bills of lading of certifications. In fact, the
complaint never alleges that Custom Ag or Geraci certified compliance with Blue Buffalo’s
ingredient specifications. Instead, the complaint states that when Custom Ag was asked if the
product would meet Blue Buffalo’s specifications, Custom Ag directed the question to WilburEllis, who then answered directly to Diversified.
Diversified has also failed to sufficiently allege continuity of structure or “relationships
among those associated with the enterprise [] and longevity sufficient to permit these associates
to pursue the enterprise's purpose.” Boyle v. United States, 556 U.S. 938. First, Diversified’s
allegations about continuity of structure are merely conclusory statements. Diversified alleges,
in conclusory fashion, that the RICO Defendants carried out the alleged scheme through their
roles in the respective companies, and that the RICO Defendants earned and shared illegal profits
from this alleged scheme. Diversified also alleges in conclusory fashion that the RICO
Defendants “coordinated inflated prices” because Custom Ag knowingly resold byproduct,
which it had purchased at below-market price, as though it were genuine poultry meal and for a
marked-up price.5 These types of conclusory allegations do not suffice under Rules 12(b)(6) and
9(b). Iqbal, 556 U.S. at 678; Carton, 611 F.3d at 454.
Second, Diversified’s argument that the Wilbur-Ellis and Custom Ag Defendants could
not have accomplished the scheme without each other, so therefore they were acting on behalf of
the enterprise, also fails to establish continuity of structure or participation in an enterprise.

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These already tenuous allegations rest upon another even more tenuous allegation: that when Diversified inquired
about purchasing chicken meal from Wilbur-Ellis, Haning told Diversified it had to go through Custom Ag because
Wilbur-Ellis had already sold all of its available inventory, but Custom Ag might still have some of Wilbur-Ellis’
contracted-for chicken meal available. Diversified alleges on information and belief that there was no contract in
place at that time, and Wilbur-Ellis steered Diversified’s business towards Custom Ag to add a layer of insulation
between itself and Diversified. Following Diversified’s theory, this alleged fraud is at the root of the scheme
because it allowed Wilbur-Ellis to manipulate the product labels and certifications Diversified ultimately received
because Custom Ag placed its own labels on the shipments.

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Much like the Walgreen court found, it is “far from obvious” that Wilbur-Ellis could not have
accomplished the alleged scheme by itself, by simply mislabeling its shipments on its own.
Walgreen, 719 F.3d at 856. Additionally, any cooperation that was required for the RICO
Defendants to execute the scheme as alleged would have been the type of cooperation that is
already required by their ordinary business relationship as ingredient suppliers and brokers. It
was not the type of cooperation that falls outside the bounds of the parties’ normal relationships.
See id.
Moreover, noticeably absent from the complaint is any allegation that the individual
RICO defendants knew of each other’s existence. The only specific relationship alleged is
between Haning and Geraci, and there all Diversified alleges is that they were longtime friends
and hunting companions. Even under the more relaxed standards of Boyle, this is insufficient.
As the Walgreen Court held, while Diversified’s allegations “do not entirely rule out the
inference that [the RICO Defendants] were acting in concert on behalf of a shadow enterprise
while maintaining the outward appearance of a normal commercial relationship, there is
ultimately not enough in this complaint to elevate that inference from a “sheer possibility” to
something that is “plausible on its face.” United Food & Commercial Workers Unions &
Employers Midwest Health Benefits Fund v. Walgreen Co., 719 F.3d 849, 855 (7th Cir. 2013)
(citing Iqbal, 556 U.S. at 678, 129 S.Ct. 1937). This is especially true where FRCP 9(b) requires
that the circumstances constituting fraud be plead with particularity and the bulk of Diversified’s
more specific allegations are pleaded “on information and belief.” See H & Q Properties, Inc. v.
Doll, 793 F.3d 852, 855-56 (8th Cir. 2015); Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th
Cir. 2009) (internal quotations omitted).

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2) The “Custom Ag Enterprise”
In addition to alleging an association-in-fact enterprise consisting of the Wilbur-Ellis and
Custom Ag Defendants, Diversified pleads, in the alternative, that the RICO Defendants
“colluded with the common purpose of taking over Custom Ag as an Enterprise through which
the Defendants illegitimately controlled and operated a racketeering scheme for the common
purpose of manufacturing, marketing, mislabeling, and selling adulterated ingredients over the
course of more than four years in violation of state and federal law.” [#525] at ¶ 47. Diversified
also alleges that, “Custom Ag, the Enterprise, also may have functioned as a legitimate
corporation that sold properly labeled and unadulterated commodities and existed independent of
the Defendants’ illegal racketeering scheme.” Id.
The Custom Ag Defendants argue that Diversified’s alternative theory of the RICO
Defendants taking over Custom Ag as the enterprise is impermissible as a matter of law because
a RICO enterprise must be distinct from a named defendant. See Anatian v. Coutts Bank
(Switzerland) Ltd., 193 F.3d 85, 89 (2d Cir. 1999). However, Diversified alleges that the
Wilbur-Ellis and Custom Ag Defendants comprise the “Custom Ag Enterprise,” which
Diversified alleges is a separate entity from Custom Ag, the legitimate business. With the
inclusion of the Wilbur-Ellis Defendants, Diversified has pleaded that the “Custom Ag
Enterprise” is distinct from any of the “persons,” i.e., Custom Ag and any associated employees,
named in the complaint.
Diversified’s alternative enterprise theory ultimately fails, however, for the same reasons
set out above in relation to the alleged association-in-fact enterprise. As above, here, too,
Diversified’s complaint does not sufficiently allege participation or that there was a common
purpose distinct from that inherent in the conduct of a pattern of racketeering activity. Nor does

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it sufficiently allege continuity of structure or “relationships among those associated with the
enterprise [] and longevity sufficient to permit these associates to pursue the enterprise's
purpose.” Boyle, 556 U.S. at 938; Iqbal, 556 U.S. at 678. “RICO [] ‘does not cover all instances
of wrongdoing. Rather, it is a unique cause of action that is concerned with eradicating
organized, long-term, habitual criminal activity.’” H & Q Properties, Inc. v. Doll, 793 F.3d 852,
855-56 (8th Cir. 2015) (internal citations and quotations omitted).
3) RICO Conspiracy
Diversified’s failure to adequately allege that the RICO Defendants participated in the
conduct of an enterprise is also fatal to its RICO conspiracy claim under § 1962(d). To allege a
RICO conspiracy, a plaintiff must first establish a right to relief under § 1962(c), and then allege
“either that a defendant personally agreed to commit two predicate acts in furtherance of the
enterprise or that a defendant ‘agree[d] to participate in the conduct of the enterprise with the
knowledge and intent that other members of the conspiracy would commit at least two predicate
acts in furtherance of the enterprise.’” United States v. Henley, 766 F.3d 893, 908 (8th Cir.
2014). Because Diversified has failed to allege the existence of an enterprise, it has also failed to
allege that they agreed to participate in the conduct of an enterprise or that they actually
committed the requisite predicate acts in furtherance of the enterprise.
For all of these reasons, I conclude that Diversified has failed to state a claim for a RICO
violation or a RICO conspiracy, and these claims will be dismissed against all parties. See Fed.
R. Civ. P. 12(b)(6).6

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The RICO Defendants also argue that Diversified has failed to sufficiently allege the existence of a pattern of
racketeering activity for each defendant. Because the “[f]ailure to present sufficient evidence on any one element of
a RICO claim means the entire claim fails,” Craig Outdoor Advert., Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001,
1028 (8th Cir. 2008), I need not and therefore will not address these additional arguments for dismissal.
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2. Texas Deceptive Trade Practices Act (Count 2)
In Count 2, Diversified alleges that Wilbur-Ellis and Custom Ag violated the Texas
Deceptive Trade Practices Act (“DTPA”), Tex. Bus. & Com. Code §§ 17.41 et seq. Both
Wilbur-Ellis and Custom Ag move to dismiss this claim, arguing that it is barred by the DTPA.
Only a “consumer” may bring a claim under the DTPA. Tex. Bus. & Com. Code
§ 17.50. Although “consumer” is defined in the DTPA to include a corporation under narrow
circumstances, see id. § 17.45(4), the DTPA specifies that “[n]othing in this subchapter shall
apply to a cause of action arising from a transaction, a project, or a set of transactions relating to
the same project, involving total consideration by the consumer of more than $500,000, other
than a cause of action involving a consumer’s residence.” Id. § 17.49(g). The purpose of this
limitation is to “maintain the DTPA as a viable source of relief for consumers in small
transactions and to remove litigation between businesses over large transactions from the scope
of the DTPA.” E. Hill Marine, Inc. v. Rinker Boat Co., 229 S.W.3d 813, 820 (Tex. App. 2007).
Several courts have held that an ongoing series of transactions of the same kind involving
consideration of more than $500,000 fall outside the scope of the Act. See, e.g., Obermeyer
Hydro Accessories, Inc. v. CSI Calendering, Inc., No. 14-CV-00184-RM-KMT, 2015 WL
506896, at *2-4 (D. Colo. Feb. 5, 2015).
Wilbur-Ellis and Custom Ag argue that Diversified’s DTPA claim falls outside the scope
of the Act because Diversified itself alleges that it participated in an ongoing series of
transactions of the same kind (to purchase chicken and turkey meal) for which it paid over $63
million, well in excess of the DTPA’s $500,000 limit. See [#525] at ¶¶ 54, 69, 105. Diversified
contends that dismissal at this time would be premature because the question of whether there
was a series of ongoing related transactions constituting a project worth over $500,000 is an

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evidentiary question. Diversified also half-heartedly argues that dismissal is improper because
the Wilbur-Ellis Defendants have plead that there was not a contract in this case, and the Custom
Ag Defendants have not admitted that a contract with Diversified existed.
In ruling on a motion to dismiss brought under FRCP 12(b)(6), I must accept as true all
factual allegations in the complaint and view them in the light most favorable to the plaintiff.
Kohl v. Casson, 5 F.3d 1141, 1148 (8th Cir. 1993). Thus, the fact that Wilbur-Ellis and Custom
Ag have not pleaded the existence of a contract is of no import. To the contrary, because
Diversified’s complaint pleads that such contracts existed, I must accept that fact as true. See
[#525] at ¶ 105 (“Diversified entered into a series of supply contracts with Custom Ag and
Wilbur-Ellis from 2011 to 2014 for chicken and turkey meal”).
Additionally, despite Diversified’s argument otherwise, I do not need to make a factual
determination about whether the parties engaged in an ongoing project worth over $500,000
because Diversified’s pleading, even when taken in the light most favorable to it, alleges that
they did. Diversified pleads that there was a “pattern of false bills of lading, certifications and
invoices and paid the inflated prices from Custom Ag (for chicken meal and for a period of time,
turkey meal) and Wilbur-Ellis (for turkey meal) totaling more than $63 million over more than
four years.” [#525] at ¶ 54. Diversified also explicitly alleges that Wilbur-Ellis and Custom Ag
had a “sustained course of action in selling the Adulterated Meal as high-quality and singleingredient chicken or turkey meal for four years.” Id. at ¶ 69. These statements amount to an
allegation that Wilbur-Ellis and Custom Ag engaged in “a transaction, a project, or a set of
transactions relating to the same project, involving total consideration by the consumer of more
than $500,000, other than a cause of action involving a consumer’s residence.” Tex. Bus. &
Com. Code § 17.49(g); see also Obermeyer Hydro Accessories, Inc. v. CSI Calendering, Inc.,

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No. 14-CV-00184-RM-KMT, 2015 WL 506896, at *2-4 (D. Colo. Feb. 5, 2015) (granting
motion to dismiss DTPA claims because pleading alleged series of related transactions involving
consideration of over $500,000). As a result, I will dismiss Diversified’s claim under the Texas
Deceptive Trade Practices Act (Count 2) from the complaint.
3. Washington Consumer Protection Act (Count 3)
In Count 3, Diversified alleges that Wilbur-Ellis violated the Washington Consumer
Protection Act (“WCPA”), Wash. Rev. Code §§ 19.86.010, et seq., because of the alleged
ingredient misrepresentations discussed above.
To prevail in a WCPA claim, a plaintiff must establish: (1) an unfair or deceptive act or
practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in
his or her business or property; and (5) causation. Hangman Ridge Training Stables, Inc. v.
Safeco Title Ins. Co., 105 Wash. 2d 778, 780 (1986); Wash. Rev. Code § 19.86.020.
Wilbur-Ellis argues that this claim should be dismissed because Diversified has failed to
sufficiently allege an unfair or deceptive act or practice and public interest impact.
Proof of an unfair or deceptive act or practice occurring in trade or commerce:
may be established by a showing that (1) an act or practice which has a capacity
to deceive a substantial portion of the public (2) has occurred in the conduct of
any trade or commerce. Alternatively, these two elements may be established by a
showing that the alleged act constitutes a per se unfair trade practice. A per se
unfair trade practice exists when a statute which has been declared by the
Legislature to constitute an unfair or deceptive act in trade or commerce has been
violated.
Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash. 2d 778, 785-86, 719
P.2d 531, 535 (1986). Diversified pleaded that Wilbur-Ellis’ alleged misrepresentations had the
capacity to deceive a substantial portion of the public through trade or commerce because the
mislabeled ingredients were used in Blue Buffalo products and distributed to consumers in

15

Washington. [#525] at ¶ 83-93. This is sufficient to show that the “act or practice [] has a
capacity to deceive a substantial portion of the public” under federal notice pleading standards.
See id.7
Wilbur-Ellis also argues that Diversified has failed to plead a public interest impact. A
plaintiff may establish a public interest impact for private disputes, as opposed to consumer
transactions, if it shows “the likelihood that additional plaintiffs have been or will be injured in
exactly the same fashion.” Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105
Wash. 2d 778, 790, 719 P.2d 531, 538 (1986).
Factors indicating public interest in this context include: (1) Were the alleged acts
committed in the course of defendant's business? (2) Did defendant advertise to
the public in general? (3) Did defendant actively solicit this particular plaintiff,
indicating potential solicitation of others? (4) Did plaintiff and defendant occupy
unequal bargaining positions? As with the factors applied to essentially consumer
transactions, not one of these factors is dispositive, nor is it necessary that all be
present.
Id. at 790-91.
Diversified alleges that there is a public interest impact because the mislabeled product
sold to Diversified was incorporated into Blue Buffalo’s pet food products and delivered to
consumers. Although Diversified has not pleaded that additional plaintiffs have been or will be
injured in exactly the same fashion as it has been, nor has Diversified addressed the four factors
indicating public interest in the private dispute context, I conclude that Diversified has pleaded
enough to state a claim under federal notice pleading standards. As the Hangman Ridge court
stated in setting out this factor-based inquiry, “whether the public has an interest in any given
action is to be determined by the trier of fact from several factors, depending upon the context in
7

Diversified also argues (though it has not pleaded) that Wilbur-Ellis violated AAFCO and Washington state
statute, which it argues would establish a per se unfair trade practice. See id. at 11-14, 76-77; see also Wash. Rev.
Code § 15.53.901(2); Wash. Rev. Code § 15.53.902. Because I have already concluded that Diversified has pleaded
that the act has a capacity to deceive a substantial portion of the public, I need not determine whether Diversified’s
argument that there was a per se unfair trade practice is meritous.

16

which the alleged acts were committed.” Id. at 789-90. Moreover, “not one of these factors is
dispositive, nor is it necessary that all be present.” Id. at 791. The federal rules only require
notice pleading. Diversified’s pleading gives Wilbur-Ellis fair notice of what its claim is and the
grounds upon which it rests. See Romine v. Acxiom Corp., 296 F.3d 701, 711 (8th Cir. 2002).
That is sufficient to overcome Wilbur-Ellis’ motion to dismiss.
Finally, and in the alternative to dismissing the WCPA claim for failure to plead the
elements, Wilbur-Ellis asks me to stay Diversified’s claim pending the Washington Supreme
Court’s decision on the extraterritorial applicability of the Washington statute, which question
was certified to that court in Thornell v. Seattle Serv. Bureau, Inc., No. C14-1601 MJP, 2015 WL
999915, at *3 (W.D. Wash. Mar. 6, 2015). Wilbur-Ellis contends that the WCPA does not apply
to Diversified’s claims because it is meant to protect Washington consumers from in-state
activities and defendants. After this motion was briefed, the Washington Supreme Court
answered the certified question regarding the exterritorial applicability of the WCPA, holding
that “the CPA supports a cause of action for an out-of-state plaintiff to sue an out-of-state
defendant for the allegedly deceptive acts of its in-state agent.” Thornell v. Seattle Serv. Bureau,
Inc., 184 Wash. 2d 793, 796, 363 P.3d 587, 589 (2015). In reaching its holding, the Thornell
court emphasized that a broad reading of the WCPA is proper. Id. at 800-802.
Diversified is a citizen of the state of Missouri and Wilbur-Ellis is a California company
with most of its challenged conduct occurring in Texas. However, Diversified alleges that the
Feed Division of Wilbur-Ellis is located in Vancouver, Washington, and that the Division
Quality Manager of the Feed Division of Wilbur-Ellis, Eric Johansen, made misrepresentations
as to the ingredients from his Washington office. [#525] at ¶ 76. Diversified also alleges that
these misrepresentations “were in the form of Ingredient Information Request Forms from Blue

17

Buffalo and the Wilbur-Ellis responses to questionnaires which were relied upon by Diversified
and Blue Buffalo.” Id. at ¶ 77. These allegations are sufficient to support the inference that
Wilbur-Ellis has an agent in Washington, which may provide a basis for extraterritorial
application of the WCPA under Thornell. As a result, I will not dismiss the WCPA claim on this
ground, either.
4. Fraudulent Misrepresentation (Count 4)
In Count 4, Diversified alleges that the Wilbur-Ellis and Custom Ag Defendants made
material misrepresentations to Diversified and others about the type, quality, and characteristics
of the chicken and turkey meal it purchased from 2011 to 2014. Diversified alleges that it relied
on these misrepresentations when it purchased the chicken and turkey meal from the defendants,
and that its damages total over $63 million.
The Wilbur-Ellis Defendants argue that this claim should be dismissed because it is
barred by the economic loss doctrine under Missouri law. In the alternative, the Wilbur-Ellis
Defendants argue that the claim should be dismissed under Rule 9(b) because Diversified has not
sufficiently alleged two of the elements of a fraudulent misrepresentation claim: that the
individual defendants knew the representations were false, or that they intended for Diversified
to rely upon the representations.
“The economic loss doctrine prohibits a commercial buyer of goods ‘from seeking to
recover in tort for economic losses that are contractual in nature.’” Dannix Painting, LLC v.
Sherwin-Williams Co., 732 F.3d 902, 905-06 (8th Cir. 2013) (citing Autry Morlan, 332 S.W.3d at
192). “‘[D]istinguished from harm to person or damage to property,’ economic, or commercial,
‘loss includes cost of repair and replacement of defective property which is the subject of the
transaction, as well as commercial loss for inadequate value and consequent loss of profits or

18

use.’” Id. at 905 (internal quotations omitted) (quoting Groppel Co. v. U.S. Gypsum Co., 616
S.W.2d 49, 55 n. 5 (Mo.Ct.App.1981)). Economic loss also includes “‘the diminution in the
value of the product because it is inferior in quality and does not work for the general purposes
for which it was manufactured and sold.’” Id. (internal quotations omitted).
Under the economic loss doctrine, Missouri courts will bar tort claims that seek to
recover for economic losses unless the claims are based on misrepresentations that are
independent of the contract. AKA Distrib. v. Whirlpool Corp., 137 F.3d 1083, 1086 (8th Cir.
1998). Two key factors in examining whether a fraud claim is independent of a contract claim
under the economic loss doctrine are: (1) whether the subject matter of the alleged
misrepresentations was incorporated into the parties’ contract; and (2) whether the plaintiff
suffered additional damages outside the contract as a result of the alleged fraud. Compass Bank
v. Eager Road Associates, LLC, 922 F.Supp.2d 818, 827 (E.D.Mo.2013) (internal citations
omitted); see also Trademark Med., LLC v. Birchwood Labs., Inc., 22 F. Supp. 3d 998, 1003
(E.D. Mo. 2014). The economic loss doctrine applies to bar claims of negligence as well as
fraud. See Marvin Lumber & Cedar Co. v. PPG Indus., Inc., 223 F.3d 873, 878 (8th Cir. 2000).
The Missouri Supreme Court has yet to decide whether the economic loss doctrine bars
fraudulent misrepresentation claims related to defective products. Therefore, I must “predict
how [that court] would resolve the issue if confronted with it.” Jackson v. Anchor Packaging
Co., 994 F.2d 1295, 1301 (8th Cir. 1993).
Diversified’s fraudulent misrepresentation claim alleges that the Wilbur-Ellis and Custom
Ag Defendants made material false representations to Diversified and others about the type,
quality, and characteristics of the chicken and turkey meal it purchased from 2011 to 2014.
These are the same misrepresentations that Diversified alleges as the basis of its contract-based

19

claims. See [#525] at ¶¶ 116-138 (alleging that Diversified entered into contracts with the
defendants for the sale of chicken and turkey meal, for the purpose of re-selling the meal to Blue
Buffalo, that Diversified contracted to purchase high-quality chicken and turkey meal that
contained no byproduct, that the defendants agreed to meet Diversified’s ingredient
specifications, but they did not, and instead produced adulterated chicken and turkey meal
byproduct).
Diversified argues that a decision on whether the economic loss doctrine applies is
premature at this stage, when the contract is not before the Court. Diversified also argues that it
has only alleged that it had a contract with Wilbur-Ellis for turkey meal and, for a short time,
chicken meal. Accordingly, Diversified contends that its allegations of fraudulent
misrepresentation that go to the sales of chicken meal outside of the contract are not barred by
the economic loss doctrine. Finally, Diversified argues that even if the economic loss doctrine
applies here, its claims fall within the public duty exception to the doctrine and should not be
barred.
The Eighth Circuit has held that where a representation concerns the quality or safety of
the goods sold, the economic loss doctrine bars the fraud claims because they are “substantially
redundant” with warranty claims. Marvin Lumber and Cedar Co. v. PPG Industries, Inc., 223
F.3d 873, 885 (8th Cir.2000). Here, even though the contract is not before me, Diversified has
alleged that it has a contract with Wilbur-Ellis and that the contract was breached because of
misrepresentations about the quality of the product sold. Reliance on what Diversified has
alleged is proper at the motion to dismiss stage. See Fed. R. Civ. P. 12(b)(6). Accordingly,
application of the doctrine is not premature, and I conclude that the economic loss doctrine

20

applies to bar Diversified’s fraudulent misrepresentation claim because they are substantially
redundant of its contract claims.
Furthermore, the economic loss doctrine extends to bar claims relating to all of the
chicken meal at issue. Although Diversified’s contracts for chicken meal were only in place with
Wilbur-Ellis for some of the time it is alleged to have been misled, Diversified asserts the
fraudulent misrepresentation and breach of contract claims against both the Wilbur-Ellis and
Custom Ag Defendants, and seeks to recover jointly and severally for any contract breaches,
making its fraudulent misrepresentation claims about the chicken meal substantially redundant of
its contract claims.
Additionally, I conclude that the public duty exception does not apply here. Diversified
argues that Missouri courts created a public duty exception for negligent misrepresentation in
B.L. Jet Sales. In that case, the plaintiff bought a used airplane plagued by fuel tank corrosion.
724 S.W.2d at 670. The plaintiff sued the seller and the company that serviced the plane for
failing to log or disclose previous fuel tank repairs. Id. There was no privity of contract or direct
dealings between the plaintiff and the service company. Id. The Missouri Court of Appeals held
that plaintiff had stated a claim for negligent misrepresentation against the service company
despite the fact that plaintiff alleged only economic loss. Id. at 672. In reaching its conclusion,
the court noted that the service company had a public duty created by federal aviation regulations
to disclose the repairs. Id. at 672–73. The court also relied on the Restatement (Second) of Torts
§ 552 and negligent representation cases “from Missouri and other jurisdictions,” although it
failed to mention or discuss those cases. Id. at 673. The plaintiff relied on B.L. Jet Sales in
Judge Limbaugh's Bruce Martin Construction case and made the same arguments in opposition
to dismissal that plaintiff makes here. Judge Limbaugh rejected these arguments and refused to

21

adopt the state court's reasoning because of the “state court's ambiguous legal analysis, [and] . . .
the disparity of the factual issues presented.” Id. at *4. Like Judge Limbaugh, I also decline to
apply B.L. Jet Sales because the facts of this case differ substantially from those in B.L. Jet Sales
and the state court failed to support its decision with any case law. Id.; see also Dannix Painting,
LLC, 2012 WL 6013217, at *2-3.
Finally, I note that the Custom Ag Defendants filed a separate motion to dismiss in which
they also seek dismissal of Diversified’s fraud claims. The Custom Ag Defendants do not argue,
however, that the claims should be dismissed because of the economic loss doctrine. As stated
above, the economic loss doctrine “prohibits a commercial buyer of goods ‘from seeking to
recover in tort for economic losses that are contractual in nature.’” Dannix Painting, 732 F.3d at
905-06. Although the Custom Ag Defendants did not assert this argument, because Diversified
also alleges that a contract existed with Custom Ag concerning the same subject matter as its
fraud claims, I must conclude that its fraudulent misrepresentation claim against Custom Ag is
also barred, as a matter of law, by the economic loss doctrine, and I will dismiss the claim in its
entirety.8
5. Fraudulent Concealment (Count 5)
In Count 5, Diversified alleges a claim for “fraudulent concealment” against the WilburEllis and Custom Ag Defendants. As an initial matter, Missouri courts have not recognized a
separate claim of fraudulent concealment. Rather, in cases where misrepresentation is alleged to
have occurred by nondisclosure, “a party’s silence in the face of a legal duty to speak replaces
the first element [of a fraudulent misrepresentation claim]: the existence of a representation.

8

Having concluded that the claim is barred under the economic loss doctrine, I need not and therefore will not
address the defendants’ arguments that the claim should be dismissed for failure to state a claim under Rules
12(b)(6) and 9(b).
22

Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 765 (Mo. 2007) (citing Andes v.
Albano, 853 S.W.2d 936, 943 (Mo. banc 1993)).
Wilbur-Ellis argues that, whatever its label, this claim is also barred by the economic loss
doctrine for the same reasons set out above regarding Diversified’s claim for fraudulent
misrepresentation.
In Count 5, Diversified alleges that “Defendants concealed material facts about the
ingredients, type, and character of the Adulterated Meal, specifically that it contained significant
amounts of byproducts and feather meal. Defendants knew Diversified was ignorant of and did
not have an equal opportunity to discover the true facts.” [#525] at ¶ 104. Like the allegations in
the fraudulent misrepresentation claim, these allegations also allege misconduct substantially
redundant of Diversified’s contract claims through which Diversified seeks to recover in tort for
economic losses that are contractual in nature. As a result, the claim is barred by the economic
loss doctrine and will be dismissed against all defendants.9
6. Fraud in the Inducement (Count 6)
In Count 6, Diversified alleges a claim for fraud in the inducement against the WilburEllis and Custom Ag Defendants. Wilbur-Ellis again argues that this claim is barred by the
economic loss doctrine because the subject matter of the claims is substantially redundant of its
breach of contract claims. In general, fraud in the inducement, necessarily prior to the contract,
is independent of the contract and therefore not barred by the economic loss doctrine. See
Marvin Lumber and Cedar Co. v. PPG Industries, Inc., 223 F.3d 873, 885 (8th Cir.2000).
However, when alleged misrepresentations concern the same subject matter that is incorporated
into the parties’ contract, even though they were made prior to contract formation, the claim is

9

Having concluded that the claim is barred under the economic loss doctrine, I need not and therefore will not
address the defendants’ other arguments for dismissal.
23

not independent of the contract and therefore is barred by the economic loss doctrine. See
Compass Bank v. Eager Rd. Associates, LLC, 922 F. Supp. 2d 818, 827 (E.D. Mo. 2013).
Here, Diversified has alleged that the defendants made material misrepresentations before
it entered into the contracts to induce Diversified to enter into the contracts, including
“statements that Wilbur-Ellis chicken meal and turkey meal met and would continue to meet the
specifications of Diversified’s customers, including the product specifications of Blue Buffalo.”
See [#525] at ¶¶ 111-112. These allegations concern the same subject matter encompassed by
the contract (as alleged by Diversified). Additionally, Diversified does not seek relief for
damages outside of the contract. As a result, Diversified’s claim for fraud in the inducement is
barred by the economic loss doctrine and will be dismissed against all defendants.10
7. Breach of Contract (Count 7)
In Count 7, Diversified brings a breach of contract claim against Wilbur-Ellis and
Custom Ag. Custom Ag moves to dismiss this claim against it, arguing that Diversified has not
alleged that it was party to a contract or at least to the terms of the contract agreeing to meet Blue
Buffalo’s specifications. A review of the complaint, however, shows that Diversified has alleged
that a contract existed with both Wilbur-Ellis and Custom Ag, and that both companies agreed to
provide Diversified with high-quality chicken and turkey meal that contained no byproduct or
feathers. See [#525] at ¶¶ 117-19; 28-29.
Custom Ag also argues that the breach of contract claim is subsumed by Diversified’s
warranty claims. The Missouri Supreme Court has held:
Under Missouri law, remedies for economic loss sustained by reason of damage
to or defects in products sold are limited to those under the warranty provisions of
the UCC. The UCC recognizes that breach of contract and breach of warranty are
10

Again, having concluded that the claim is barred under the economic loss doctrine, I need not and therefore will
not address the defendants’ other arguments for dismissal.

24

not the same cause of action. The remedies for breach of contract are set forth in
section 2–711 and are available to a buyer “[w]here the seller fails to make
delivery or repudiates or the buyer rightfully rejects or justifiably revokes
acceptance.” § 400.2–711.1. The remedies for breach of warranty are set forth in
section 2–714 and are available to a buyer who has finally accepted goods, but
discovers that the goods are defective in some manner. § 400.2–714; see also 1
White & Summers, UCC 702–3 (“We believe that only buyers who have accepted
and neither rightfully rejected nor effectively revoked can use 2–714.”). Here, the
plaintiffs do not assert that Great Plains failed to make delivery or repudiated or
that Crush rightfully rejected or justifiably revoked acceptance. There is no
dispute that Crush accepted delivery of the T1055 and notified Great Plains about
the machine's inability to perform terrain leveling adequately. Accordingly,
Renaissance and TEAM cannot recover under section 400.2–711 for breach of
contract. Their contract claims are subsumed by their breach of warranty claims
for damages under section 400.2–714, which already have been addressed above.
Plaintiffs' breach of contract claims fail as a matter of law.
Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 130-31 (Mo. 2010) (internal
citations omitted).
Here, Diversified expressly alleges that it “accepted Corporate Defendants’ goods” and
that those goods did not conform to the contracts. [#525] at ¶ 121. Diversified does not allege
that defendants failed to make delivery or that it rejected acceptance. As a result, its breach of
contract claim is subsumed by its warranty claims as a matter of law. Renaissance Leasing,
LLC, 322 S.W.3d at 130-31. Moreover, because it is barred as a matter of law, it is not proper
for Diversified to even plead it in the alternative, as it argues in opposition to dismissal. The
only case Diversified cites for that principle in inapposite, which merely held that express and
implied warranty claims may be pleaded in the alternative, but not that a breach of contract claim
is available under similar facts. See Trien v. Croasdale Const. Co., Inc., 874 S.W.2d 478, 480
(Mo. 1994). Furthermore, although Wilbur-Ellis has not moved to dismiss this claim against
itself, because I find that the breach of contract claim is barred as a matter of law, I will also
dismiss the breach of contract claim as against Wilbur-Ellis.

25

8. Breach of Express Warranties (Count 8)
In Count 8, Diversified alleges that Wilbur-Ellis and Custom Ag breached their express
warranties to provide Diversified with high-quality chicken and poultry meal that met Blue
Buffalo’s specifications. UCC § 2-313. Custom Ag moves to dismiss this claim, arguing that
Diversified has not met the pleading requirements of Iqbal because it does not allege sufficient
facts supporting the existence of a contract with Custom Ag or its agreement to meet
specifications.
“An express warranty is created by any ‘affirmation of fact or promise made by the seller
to the buyer which relates to the goods and becomes part of the basis of the bargain . . . that the
goods shall conform to the affirmation or promise.’” RSMo. § 400.2–313.1(a). Renaissance
Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 122 (Mo. 2010). In Missouri:
The elements for a breach of express warranty claim are: (1) the defendant sold
goods to the plaintiff; (2) the seller made a statement of fact about the kind or
quality of those goods; (3) the statement of fact was a material factor inducing the
buyer to purchase the goods; (4) the goods did not conform to that statement of
fact; (5) the nonconformity injured the buyer; and (6) the buyer notified the seller
of the nonconformity in a timely fashion.”
Id. (citing Stefl v. Medtronic, Inc., 916 S.W.2d 879, 882–83 (Mo.App.1996)).
Diversified alleges that defendants “affirmed by descriptions and other statements of fact
or promise that the goods Diversified purchased [] would conform to definitions and
specifications of chicken meal and turkey meal of Diversified’s customers.” [#525] at ¶ 126.
Additionally, throughout its complaint, Diversified more specifically alleges that Custom Ag
affirmed descriptions of the goods as “chicken meal,” “chicken meal blend,” and “turkey meal,”
which Diversified also alleges were material terms that do not provide for the inclusion of byproduct. See id. at ¶¶ 98, 104, 111. Finally, Diversified alleges that the meal did not meet the

26

promised description, it was unable to detect the nonconformity,11 and as a result, it was injured.
Id. at ¶¶ 127, 99, 104-06, 111-13, 121, 128. These allegations are sufficient to state a claim for
breach of express warranties under federal notice pleading standards. Fed. R. Civ. P. 8(a). As a
result, I will deny Custom Ag’s motion dismiss this claim.
9. Breach of Implied Warranty of Fitness for Particular Purpose (Count 9)
In Count 9, Diversified alleges that Wilbur-Ellis and Custom Ag breached the implied
warranty of fitness for particular purpose by providing it with the allegedly adulterated meal
containing byproduct and feathers. [#525] at ¶¶ 129-134. Under UCC § 2-315 and
RSMo. § 400.2-315, an implied warranty that goods are fit for a particular purpose arises
“[w]here the seller at the time of contracting has reason to know any particular purpose for which
the goods are required and that the buyer is relying on the seller’s skill or judgment to select or
furnish suitable goods.”
Custom Ag moves to dismiss this claim, arguing that Diversified merely pleads legal
conclusions and that Diversified has failed to and cannot plead the requisite element of reliance.
Custom Ag argues that because Diversified alleges that it referred all questions about the
meaning of the blend term to Wilbur-Ellis, and that Diversified discussed that term with WilburEllis and Wilbur-Ellis alone, it cannot plausibly allege that it relied on Custom Ag’s skill or
judgment in selecting or furnishing suitable goods. A review of Diversified’s Complaint,
however, shows that it has sufficiently alleged reliance and stated a claim for implied warranty of
fitness for particular purpose against Custom Ag.
In its Complaint, Diversified alleges that it had a contract with Custom Ag for AAFCOdefined unadulterated chicken and turkey meal and that Custom Ag, through Troy Geraci, told
Diversified that they were getting “low-ash chicken meal and regular chicken meal samples for
11

Until 2014, at which point it notified defendants of the alleged breach. [#525] at ¶ 121.
27

Blue Buffalo and falsely represented that the “samples will exact [sic] what they will b gettin
[sic] on contract once they Agree. They [Wilbur-Ellis] will send a contract. 2 me [sic] my
contract at that point will b forward 2 U !!” [#525] at ¶ 31. Diversified also alleges that on June
13, 2011, Geraci forwarded an email from Doug Haning with the test results for “Reg chicken
meal blend” and “Low ash chicken meal blend.” Id. at ¶ 32. Finally, Diversified alleges that
Custom Ag paid lower market prices for the adulterated meal and marked it up as though it were
unadulterated meal. [#525] at ¶¶ 28- 44. Under these facts, it is reasonable to infer that such
acts, if true, were done to conceal the nature of the product being delivered and were undertaken
because Diversified was relying upon Wilbur-Ellis and Custom Ag’s representations that the
product met its specifications. As a result, Diversified has sufficiently alleged reliance and stated
a claim for breach of implied warranty of fitness for particular purpose against Custom Ag.
10. Beach of Implied Warranty of Merchantability
In Count 10, Diversified alleges that Wilbur-Ellis and Custom Ag breached the implied
warranty of merchantability under UCC § 2-314. Under UCC § 2-314 and RSMo. 400.2-314(1),
“a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller
is a merchant with respect to goods of that kind.”
Custom Ag moves to dismiss Count 10 for failure to state a claim, arguing that
Diversified merely pleads conclusory allegations. Custom Ag also argues that the claim fails
because it turns on the “blend” contract language, which Custom Ag argues was not misleading,
but rather, was properly used to represent that the product included a blend of ingredients from
various suppliers. Although Diversified’s pleadings under Count 10 are thin, Diversified
incorporates by reference all of its earlier factual allegations, of which there are many, and which
upon review provide sufficient basis for its claim under federal notice pleading standards.

28

Romine, 296 F.3d at 711. Additionally, although Custom Ag’s argument that the “blend”
terminology was properly used may be a useful defense at trial, at this stage I must take
Diversified’s allegations to be true, and here, Diversified alleges that the blend terminology was
used to mislead Diversified into thinking the goods were unadulterated when in fact they
contained byproduct.
Custom Ag also argues that Diversified has failed to sufficiently plead that Custom Ag
was a “merchant with respect to goods of that kind.” In paragraph 130 of its Complaint (which
Diversified incorporates by reference into Count 10), Diversified alleges that “Corporate
Defendants are merchants with the definition of Section 2-104 of the Uniform Commercial
Code.” UCC § 2-104(1) defines “merchant” to “mean[] a person who deals in goods of the kind
or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the
practices or goods involved in the transaction or to whom such knowledge or skill may be
attributed by his employment of an agent or broker or other intermediary who by his occupation
holds himself out as having such knowledge or skill.” Although earlier in the Complaint
Diversified merely alleges that Custom Ag “is primarily a wholesaler of fresh fruits and
vegetables,” [#525] at ¶ 2, its allegations throughout the complaint sufficiently plead that Custom
Ag “deals in goods of the kind” “involved in the transaction.” See id. at ¶¶ 25, 29, 39 (alleging
that Custom Ag contracted over several years to supply chicken and turkey meal to Diversified
and others in the pet food industry). As a result, Custom Ag’s motion to dismiss Count 10 will
be denied.
11. Unjust Enrichment (Count 11)
In Count 11, Diversified alleges that Wilbur Ellis and Custom Ag were unjustly enriched
through the alleged mislabeling scheme. Custom Ag moves to dismiss the claim, arguing that it

29

is derivative of Diversified’s other substantive claims and because Diversified’s other claims fail,
so too must this claim.
Although several of Diversified’s other claims do fail, as discussed above, I have already
ruled that its breach of warranty claims are sufficiently pleaded, so Custom Ag’s argument that
the unjust enrichment claim fails because all other claims fail is moot and its motion to dismiss
as it relates to Count 11 will be denied.
12. Indemnity (Count 12)
In Count 12, Diversified seeks indemnity from all defendants, arguing that they caused
the claims and damages Blue Buffalo has alleged against Diversified in this case. Diversified
alleges that it is entitled to indemnity under two theories: implied-in-fact (or implied contractual
indemnity), or, in the alternative, implied-in-law (equitable) indemnity.
a) Implied-in-fact Indemnity
Implied-in-fact contractual indemnity stems from the existence of a binding
contract between two parties that necessarily implied the right of indemnification.
The party asserting such indemnity must show that the parties to the contract
“intended the indemnitor to be responsible for the loss.” Thus, a claim of impliedin-fact indemnity asserts a contractual right to indemnity, even though no express
contract for indemnity exists.
Am. Nat. Prop. & Cas. Co. v. Ensz & Jester, P.C., 358 S.W.3d 75, 84 (Mo. Ct. App. 2011)
(internal citations omitted).
William Haning, Oliver Harwell, and Henry Rychlik (the “Individual Wilbur-Ellis
Defendants”) move to dismiss the implied-in-fact indemnity claim as against them, arguing that
Diversified fails to state a claim because no contract has been alleged between the Individual
Wilbur-Ellis Defendants and Diversified. Diversified does not address this point in its response
brief, and the Individual Wilbur-Ellis Defendants are correct that the complaint is devoid of any
allegation that a contract exists between them and Diversified. Carton, 611 F.3d at 454. As a

30

result, Diversified has failed to state a claim for implied-in-fact indemnity against the Individual
Wilbur-Ellis Defendants.
The Custom Ag Defendants also move to dismiss the implied-in-fact indemnity claim,
arguing that Diversified has failed to plead any facts showing the parties intended there to be an
indemnity provision in their contract. Indeed, the only allegation Diversified makes in regard to
this element is that “The contracting parties intended that, in such a situation, Corporate
Defendants would be responsible for any liability resulting from their wrongful conduct.” [#525]
at ¶ 147. Such conclusory allegations are insufficient to state a claim. Iqbal, 556 U.S. at 678.
As a result, I will also dismiss Diversified’s claim for implied-in-fact indemnity against the
Custom Ag Defendants.
b) Implied-in-Law Indemnity
In contrast to implied-in-fact indemnity, a claim for implied-in-law indemnity does not
assert that a contractual right to indemnity exists. “[R]ather, such a party is asserting that, given
the special nature of the case's circumstances, equity demands that one party indemnify the
other.” Am. Nat. Prop. & Cas. Co. v. Ensz & Jester, P.C., 358 S.W.3d 75, 84 (Mo. Ct. App.
2011).
The Individual Wilbur-Ellis Defendants argue that Diversified has failed to state a claim
for implied-in-law indemnity because Diversified has not alleged, and there is not, any special
relationship between the parties or any other special circumstances justifying such equitable
relief. Diversified contends that because it alleged that all defendants “knew or should have
known that selling out-of-spec adulterated meal to Diversified” would damage its relationship
with Blue Buffalo, it has sufficiently pleaded its claim.

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Special relationships are typically found in an employer-employee, attorney-client, or
agent-principal scheme, for example. In contrast, when a typical business relationship is alleged,
courts generally find that there is no special relationship. See, e.g., Best Buy Stores, L.P. v.
Walters Acquisitions, Inc., No. 2:14-CV-04299-NKL, 2015 WL 545569, at *5 (W.D. Mo. Feb. 9,
2015).
Here, Diversified has not sufficiently alleged the existence of special circumstances or a
special relationship between the Individual Wilbur-Ellis Defendants and itself. Nor is there any
other basis in the complaint for concluding that such a relationship existed. Diversified is a
sophisticated business entity; the Individual Wilbur-Ellis Defendants, in contrast, are individual
employees. Moreover, Diversified has not alleged that the Individual Wilbur-Ellis Defendants
made promises to or conducted business with Diversified in anything other than their capacities
as officers or managers of Wilbur-Ellis. As a result, Diversified’s claim for implied-in-law
indemnity will be dismissed as against the Individual Wilbur-Ellis Defendants.
The Custom Ag Defendants also move to dismiss Diversified’s claim for implied-in-fact
indemnity, arguing that Diversified cannot plead this claim where it has already alleged that a
contract exists. Diversified may, however, plead this theory in the alternative, which is precisely
what it did, so this argument fails. See FRCP 8(d).
The Custom Ag Defendants also argue that the claim fails for lack of a special
relationship or special circumstances requiring indemnification. Diversified’s allegations against
Custom Ag are far from robust, as it merely alleges the existence of a relationship between two
sophisticated business entities. Unlike its claim against the Individual Wilbur-Ellis Defendants,
who were merely employees, however, I cannot say that Diversified’s claim for indemnity-inlaw against Custom Ag fails as a matter of law. The special circumstances of the parties’

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relationship as alleged throughout the Complaint allow me to draw the reasonable inference that
equitable relief may be proper. I will, however, dismiss the claim for indemnity-in-law as
against Troy Geraci for the same reasons I articulated above regarding the Individual WilburEllis Defendants. As a result, Diversified may maintain its claim for implied-in-law indemnity
against Custom Ag but the claim will be dismissed as against Troy Geraci.
13. Contribution (Count 13)
In Count 13, Diversified brings a claim for contribution against all defendants, alleging
that they “had a duty to exercise care regarding the supplying, manufacturing, labeling, selling,
hauling, shipping, or brokering of materials and goods for or to Diversified, including to provide
Diversified with chicken meal and turkey meal without animal byproducts and feathers as
specified by Blue Buffalo, which is the subject of Blue Buffalo’s Third-Party Complaint in this
matter.” [#525] at ¶ 155.
For a right to contribution to exist under Missouri law, defendants must be jointly and
severally liable to the plaintiff for the same indivisible harm. Gibson v. City of St. Louis, 349
S.W.3d 460, 466 (Mo. Ct. App. 2011). “An indivisible injury results when two or more causes
combine to produce an injury incapable of division on any reasonable basis and each is a
substantial factor in bringing about the harm.” Id. (internal citations omitted).
The Individual Wilbur-Ellis Defendants seek dismissal of the contribution claim, arguing
that Diversified has failed to plead that they could be personally and directly liable to Blue
Buffalo along with Diversified. While Diversified does allege that all defendants had a duty of
care to provide goods to Diversified that conformed to Blue Buffalo’s specifications, it never
explains the basis for that allegation in regards to the Individual Wilbur-Ellis Defendants, as
opposed to Wilbur-Ellis Company, whose alleged duty ostensibly arises from its contracts and

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business relationship with Diversified. Nor does Diversified provide any support for its
argument that the Individual Wilbur-Ellis Defendants owed a duty to it or Blue Buffalo in its
opposition brief. At best, Diversified provides a conclusory allegation, and this is insufficient to
survive the motion to dismiss. Carton, 611 F.3d at 454. As a result, Diversified’s claim for
contribution will be dismissed as against the Individual Wilbur-Ellis Defendants.
The Custom Ag Defendants also move to dismiss the claim for contribution, arguing that
Diversified has failed to plead any facts that could make them directly liable to Blue Buffalo or
Purina because neither Blue Buffalo nor Purina are alleged to have relied upon representations
made by the Custom Ag Defendants. Specifically, the Custom Ag Defendants argue that Blue
Buffalo and Purina could not have relied on the blend language that Diversified complains is
misleading because there is no allegation that they ever saw or relied on that term. Although
they don’t specify the basis for their reliance argument, I assume the Custom Ag Defendants’
argument about reliance refers to Diversified’s claim for breach of implied warrant of fitness for
a particular purpose. As discussed above, however, Diversified has stated a claim for breach of
implied warranty of fitness for a particular purpose. Additionally, in its contribution claim,
Diversified alleges that the Custom Ag Defendants had a duty to provide goods to Diversified
that conformed to Blue Buffalo’s specifications, of which all defendants knew, and that
Diversified and Blue Buffalo were injured as a direct and proximate result of defendants’ failure
to provide conforming goods. Because elsewhere in the complaint Diversified alleges a proper
basis from which Custom Ag’s duty to provide conforming goods stems, I conclude that it has
stated a claim for contribution against Custom Ag. I will, however, dismiss the claim for
contribution as against Troy Geraci, who is not alleged to have personally contracted with
Diversified for the allegedly nonconforming sales.

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14. Severance
Finally, the Custom Ag Defendants ask me to sever and hold in abeyance any of
Diversified’s surviving claims so that they can be tried, if at all, only after a finding of liability
against Diversified. I am going to reserve ruling on this issue as I am considering many
strategies for how to best manage this case.
Accordingly,
IT IS HEREBY ORDERED that Wilbur-Ellis Company, William Haning, Oliver
Harwell, and Henry Rychlik’s motion to dismiss Diversified Ingredients’ crossclaims #[508] is
GRANTED in part and DENIED in part in accordance with the terms of this Memorandum and
Order.
IT IS FURTHER ORDERED that Custom Ag Commodities, LLC and Troy Geraci’s
motion to dismiss Diversified Ingredients’ third party claims #[557] is GRANTED in part and
DENIED in part in accordance with the terms of this Memorandum and Order.
IT IS FURTHER ORDERED that Diversified Ingredients shall file an amended
crossclaim and third-party complaint in accordance with the terms of this Memorandum and
Order no later than May 20, 2016.

_________________________________
RODNEY W. SIPPEL
UNITED STATES DISTRICT JUDGE
Dated this 19th day of April, 2016.

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