J.D. Heiskell Holdings, LLC v. Willard Dairy, LLC et al

Filing 75

MEMORANDUM OPINION AND ORDER by District Judge Judith C. Herrera DENYING Defendant Tiverton Advisors, LLC's Motion to Dismiss 32 and OVERRULING Defendant Tiverton Advisors, LLC's Objections to Magistrate's Decision Denying Motion to Stay Discovery 65 . (baw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO

J.D. HEISKELL HOLDINGS, LLC d/b/a
J.D. HEISKELL & COMPANY,
Plaintiff,
v.

Civ. No. 23-854 JCH/JFR

WILLARD DAIRY, LLC,
VALLEYVIEW DAIRY, LLC, and
TIVERTON ADVISORS, LLC,
Defendants.

MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendant Tiverton Advisors, LLC’s Motion to Dismiss
[Docs. 32 and 33]. Plaintiff has filed a response [Doc. 39], and Tiverton has filed a reply [Doc.
48]. After reviewing the foregoing briefs as well as the relevant legal authorities, the Court
concludes that the motion to dismiss should be denied.
BACKGROUND
According to the allegations of the Amended Complaint, Plaintiff J.D. Heiskell Holdings,
LLC (“JDH”) sells dairy feed and other agricultural commodities. Amended Complaint, Doc. 24
at ¶¶ 1, 12. Defendants Willard Dairy, LLC (“Willard”) and Valleyview Dairy, LLC
(“Valleyview”), together the “dairy defendants,” both long-term customers of JDH, executed
written credit applications and agreements to purchase grains and feed from JDH. Id. at ¶¶ 20,
24, and 36. Both companies purchased and paid for agricultural products according to those
agreements. In July of 2022, the third Defendant, Tiverton Advisors, LC, (“Tiverton”), entered

into a “refinancing endeavor” with Willard and Valleyview. Id. at ¶ 50. The Amended Complaint
refers to this agreement as the “Tiverton Deal.” Id. JDH alleges that after this time, Tiverton took
control of deciding which of the dairy defendants’ creditors would be paid. Id. at ¶ 52, 103. In
2023, both Willard and Valleyview stopped paying their invoices for products provided to them
by JDH. Despite JDH’s demands for payment, the dairy defendants have not paid for products
received. JDH alleges claims for breach of contract (and alternatively, breach of implied contract
and unjust enrichment) against Willard and Valleyview, id. at ¶¶ 56-99.
With regard to Tiverton, JDH alleges that Tiverton directed the dairy defendants not to
pay their outstanding balances owed to JDH. Id. at ¶ 104. It further alleges that by refusing to
permit Willard and Valleyview to pay their debts to JDH, Tiverton “improperly interfered with
the contractual and business relationship between the dairy defendants on one hand, and JDH, on
the other.” Id. at ¶ 55. Similarly, it alleges that despite knowing about the debts owed to JDH,
“Tiverton improperly interfered with JDH’s rights under the Willard and Valleyview
Agreements.” Id. at ¶ 105. Thus, JDH’s seventh cause of action is one against Tiverton for
tortious interference with contractual and business relations. Id. at ¶¶ 100-107.
DISCUSSION
I.

The Parties’ Arguments
Tiverton argues that JDH’s claim for tortious interference with contract should be

dismissed because it failed to properly allege the fifth element of the claim, that Tiverton acted
without justification or privilege in refusing to allow Willard and Valleyview to pay money owed
to JDH for goods received as required under their contract. Tiverton points out that the Amended
Complaint does not specifically aver that it acted “without justification or privilege” in refusing
to allow payment with improper motive or by improper means. Tiverton argues that the facts

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alleged by JDH actually support the opposite—that Tiverton was justified in refusing to allow
Willard and Valleyview to use its money to pay JDH because under the terms of the Tiverton
Deal it was a secured lender exercising its contractual rights over its collateral, the money in
Willard and Valleyview’s bank accounts. In support of its argument, Tiverton attaches to its
motion “relevant excerpts” [Doc. 33 at 4] of the “Tiverton Deal.” Tiverton contends that the
agreement is central to JDH’s complaint, so the Court may consider it without converting the
motion to dismiss to a motion for summary judgment. Tiverton then argues, with specific
references to that agreement, that it was justified in exercising control over Willard and
Valleyview’s funds and other collateral. Finally, Tiverton argues that JDH should not be
permitted to amend its complaint, as doing so would be futile.
In response, JDH argues that it has properly pled its tortious interference claim, noting
that although it did not use the words “justification” or “privilege,” it did allege that Tiverton
“improperly interfered” with JDH’s contractual relationship with Willard and Valleyview, and
that this is sufficient. It also argues that whether the interference was justified or privileged is not
for the plaintiff to prove, but rather falls to the defendant to prove. JDH also asserts that the
Tiverton Deal itself may constitute an improper act of interference. However, JDH asserts that
the question of whether Tiverton’s act was justified or privileged cannot be resolved on a motion
to dismiss, but rather is a fact-intensive inquiry more properly decided after discovery. In that
vein, JDH contends that the Court should neither consider excerpts to the loan agreement
submitted by Tiverton nor convert the motion to one for summary judgment for three reasons: (1)
the exhibit is not central to JDH’s claim, but rather to Tiverton’s defense; (2) JDH did not have
notice of the specific contents of the loan agreement before Tiverton filed its response brief; and

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(3) JDH disputes the authenticity of the exhibit. Finally, JDH contends that amending its
complaint would not be futile.
II.

Consideration of Tiverton’s Exhibits
Tiverton asks the Court to consider excerpts from its contracts with the dairy defendants,

attached to its motion as Docs. 33-1 and 33-2. When reviewing a motion to dismiss under Rule
12(b)(6), the court generally may not look beyond the four corners of the complaint. Waller v.
City and Cnty. of Denver, 932 F.3d 1277, 1286 n.1 (10th Cir. 2019) (“The nature of a Rule
12(b)(6) motion tests the sufficiency of the allegations within the four corners of the complaint
after taking those allegations as true, and we will not consider evidence or allegations outside the
four corners of the complaint in reviewing the district court’s Rule 12(b)(6) dismissal.”
(quotations and citations omitted)). The Tenth Circuit has recognized the following three
exceptions to the four corners of the complaint rule: (1) “documents that the complaint
incorporates by reference”; (2) “documents referred to in the complaint if the documents are
central to the plaintiff's claim and the parties do not dispute the documents’ authenticity”; and (3)
matters “which a court may take judicial notice.” Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir.
2010) (internal quotation marks and citations omitted). Otherwise, to consider a matter outside
the pleadings, the court must convert the Rule 12(b)(6) motion into one for summary judgment
under Rule 56. Fed. R. Civ. Pro. 12(d).
Tiverton argues that the Tiverton Deal documents satisfy the second exception, asserting
the deal is referred to in the complaint and the documents are central to JDH’s claim. Doc. 33 at
4 n.1. That exception does not apply here for two reasons. First, the documents are not central to
JDH’s claim, but rather to Tiverton’s defense. JDH’s interference with contract claim against
Tiverton does not arise out of a breach of the contract between Tiverton and the two dairy

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defendants, but rather out of the breach of the contracts that JDH had with the dairy defendants.
Therefore, the Tiverton Deal contract documents are not central to JDH’s claim against Tiverton.
Notably, Tiverton asserts that the Tiverton deal documents demonstrate that it was justified and
privileged to prevent the dairy defendants from paying the money owed to JDH. Therefore, the
documents are relevant to Tiverton’s defense rather than to Plaintiff’s claim. See Burke v.
Holdman, 750 Fed. Appx. 616, 622-23 (10th Cir. Sept. 13, 2018) (concluding that on a motion to
dismiss, district court could not consider contract that was the source of defendant’s immunity
claim but not plaintiff’s negligence claim without converting the motion to summary judgment).
Second, the Court declines to apply the exception because the documents’ authenticity is not
undisputed. JDH asserts, and Tiverton does not dispute, that JDH did not have a copy of the
contracts between Tiverton and the dairy defendants until they were attached to Tiverton’s
motion to dismiss because Tiverton had refused to produce them to JDH in discovery.
Furthermore, the documents that Tiverton did attach to its motion were excerpts of the
agreements, not the entirety of the documents. As a result, JDH was not on notice of the Tiverton
Deal documents, does not have the complete agreements, and does not agree that they are
authentic. Therefore, the exception does not apply.
Because there is no applicable exception, the Court will not consider the Tiverton Deal
documents and will not convert the motion to one for summary judgment. Rather, the Court will
analyze the motion under Rule 12(b)(6) standards set forth below, considering only the four
corners of the Amended Complaint.
III.

Legal Standard on a Motion to Dismiss for Failure to State a Claim
Under Rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon

which relief can be granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, a

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complaint must contain sufficient factual matter, accepted as true and interpreted in the light
most favorable to the non-moving party, to state a claim to relief that is plausible on its face.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). A claim is not plausible on its face “if [the allegations] are so general that they
encompass a wide swath of conduct, much of it innocent,” and the plaintiff has failed to “nudge
[the] claims across the line from conceivable to plausible.” Robbins v. Oklahoma, 519 F.3d 1242,
1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 570). Determining whether a complaint
contains well-pleaded facts sufficient to state a claim is “a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Ashcroft, 556 U.S. at 679
(2009). The standard remains a liberal pleading standard, and “a well-pleaded complaint may
proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a
recovery is very remote and unlikely.” Dias v. City & Cnty. of Denver, 567 F.3d 1169, 1178 (10th
Cir. 2009) (internal quotations and citation omitted).
IV.

Analysis
Tortious interference with contract is a common law tort claim controlled by state law in

New Mexico.1 The elements of the tort of interference with contractual relations are that (1) the
defendant had knowledge of the contract between plaintiff and a third party, (2) performance of

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 This Court sits in diversity jurisdiction, so it must look to the forum state—in this case, New

Mexico—for choice-of -law rules to determine which state’s substantive law applies. Pepsi-Cola
Bottling Co. of Pittsburg v. PepsiCo., Inc., 431 F.3d 1241, 1255 (10th Cir. 2005). New Mexico
applies “the doctrine of lex loci delicti commissi,” or the law of the place where the wrong
occurred. Torres v. State, 119 N.M. 609, 613, 894 P.2d 386, 390 (1995). Here, Willard,
Valleyview, and Villalpando are New Mexico limited liability companies with their principal
places of business in New Mexico. From the Amended Complaint, it appears that Willard and
Valleyview accepted delivery of JDH’s products in New Mexico, and then failed to pay monies
owed while in New Mexico. Therefore, under the applicable choice-of-law rules, New Mexico
law applies to JDH’s claim for tortious interference with contract. Based on the briefs, which rely
on New Mexico tort law, it appears that the parties agree.
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the contract was refused, (3) defendant played an active and substantial part in causing plaintiff
to lose the benefits of his contract, (4) damages flowed from the breached contract, and (5)
defendant induced the breach “without justification or privilege to do so.” Ettenson v. Burke,
2001-NMCA-003 at ¶ 14, 130 N.M. 67, 73 (Ct. App. 2000) (citing Wolf v. Perry, 65 N.M. 457,
461-62, 339 P.2d 679, 681-82 (1959)). Not every interference leading to a breach of contract
amounts to an unlawful act or a civil action; tort liability attaches only when the interference is
without “justification or privilege.” Williams v. Ashcraft, 72 N.M. 120, 121, 381 P.2d 55, 56
(1963). To be held liable for causing one to lose the benefits of a contract, the tortfeasor must act
either with an improper motive or by use of improper means. See Diversey Corp. v. Chem-Source
Corp., 1998-NMCA-112, ¶ 20, 125 N.M. 748, 965 P.2d 332.
Tiverton argues that JDH has failed to adequately plead the fifth element of its tortious
interference claim—that Tiverton induced the dairy defendants to breach their contracts without
justification or privilege to do so. According to Tiverton, JDH’s allegations on this element are
conclusory and fail to allege adequate facts to support that element. The relevant allegations in
the Amended Complaint are:


“…Tiverton entered into a refinancing endeavor with Willard and Valleyview (the
‘Tiverton Deal’).” Doc. 24 at ¶ 50.



“Following the Tiverton Deal, Tiverton took control of deciding which creditors
of Willard and Valleyview would be paid.” Id. at ¶ 52.



“…Tiverton knew about JDH’s contractual and business relationship with Willard
and Valleyview.” Id. at ¶ 102.

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

“Simultaneously with the Tiverton Deal, Willard and Valleyview fell behind and
ultimately ceased making payments of their respective Outstanding Balances to
JDH.” Id. at ¶ 53.



“Representatives of Willard and Valleyview acknowledge that they owed
Outstanding Balances to JDH and informed Tiverton of this fact. Willard and
Valleyview representative requested that Tiverton discuss the Outstanding
Balances with JDH so they could be paid.” Id. at ¶ 54.



“…Tiverton directed Willard and Valleyview not pay the Outstanding Balances
due and owing to JDH.” Id. at ¶ 104.



“Tiverton refused to permit payments of the Outstanding Balances to be paid to
JDH. Tiverton, therefore, improperly interfered with the contractual and business
relationship between Willard and Valleyview, on one hand, and JDH, on the
other.” Id. at ¶ 55.



“Tiverton improperly interfered with JDH’s rights under the Willard and
Valleyview Agreements.” Id. at ¶ 105.

According to Tiverton, these allegations that it acted “improperly” lack the requisite specificity
and are too conclusory to survive scrutiny under Rule 12(b)(6). Tiverton also argues that JDH
cannot allege that Tiverton acted without justification or privilege because it was acting in
accordance with its own contractual rights under the Tiverton Deal. Tiverton correctly notes that
under New Mexico law, a party with a contract of its own is privileged to prevent performance of
the contract of another which threatens his economic interest. Doc. 33 at 7-8 (citing Williams v.
Ashcraft, 72 N.M. 120, 122, 1963-NMSC-080, ¶ 5. According to Tiverton, therefore, the mere

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fact that it too has a contractual relationship with Willard and Valleyview “defeats Plaintiff’s
claim for tortious interference.” Doc. 33 at 10.
The Court disagrees for several reasons. First, it is true that to ultimately prove liability
for tortious interference with contract a plaintiff must demonstrate that the defendant acted
without privilege or justification, but that does not reach the question of what facts a party is
required to plead at the initial stage of the litigation. The New Mexico state court cases cited by
Tiverton all require proof of lack of privilege or justification at the summary judgment and trial
stages of a case; they do not state that a plaintiff must allege facts regarding privilege or
justification with specificity in the complaint.2
Furthermore, the Court is unpersuaded by the federal district court cases (which are not
binding authority on this Court) Tiverton cites. For example, in its reply Tiverton leans on a
decision from this district, Firebird Structures, LCC v. United Bhd. Of Carpenters & Joiners of
Am., Loc. Union No. 1505, 252 F. Supp. 3d 1132, 1166 (D.N.M. 2017), to assert that a plaintiff
“must also allege the defendants acted with either an improper motive or improper means …”
Doc. 48 at 7 (emphasis added). The Court is unpersuaded by Firebird Structures for two reasons.
First, the Court does not believe that assertion in Firebird Structures to be an accurate statement
of the law. Improper motive and improper means are avenues of proving lack of justification or
privilege; not pleading requirements. Further, Firebird Structures cites Martin v. Franklin

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See, e.g., Martin v. Franklin Cap. Corp., 145 N.M. 179, 2008-NMCA-152, ¶ 7, 15 (listing
elements that a plaintiff must prove and stating the plaintiff must bring forth evidence of
improper motive to survive summary judgment); Fikes v. Furst, 134 N.M. 602, 2003-NMSC033, ¶ 24-25 (discussing evidence vis-à-vis creation of a genuine issue of material fact on
summary judgment); LensCrafters, Inc. v. Kehoe, 282 P.3d 758, 2012-NMSC-020, ¶ 41 (same);
Williams v. Ashcraft, 72 N.M. 120, 1963-NMSC-080 (same); Wolf v. Perry, 65 N.M. 457, 461,
1959-NMSC-044 (discussing whether evidence at trial was sufficient to support tortious
interference claim); Ettenson v. Burke, 2001-NMCA-003 at ¶ 14, 130 N.M. 67, 73 (Ct. App.
2000) (same).
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Capital on this point, but that case does not support Firebird Structures’ statement regarding
what a plaintiff must plead. As noted above, in the cited passage the Martin court was discussing
what a plaintiff needed to prove to survive summary judgment, not what it needed to allege to
survive a motion to dismiss. Border Area Mental Health, Inc. v. United Behavioral Health, Inc.,
331 F. Supp. 3d 1308, 1318 (D.N.M. 2018) is distinguishable on its facts—the complaint in that
case contained contradictory allegations undermining plaintiff’s assertion that the defendant used
improper means. The Court is also not persuaded by President and Fellows of Harvard College
v. Elmore, 222 F. Supp. 3d 1050 (D.N.M. 2016) because the Elmore court did not reach
Tiverton’s claim that JDF must plead specific facts supporting privilege and justification. Id. at
1062-63. Royal Pac. Ltd. v. Faith Elec. Man. Co., 322 F. Supp. 3d 1178 (D.N.M. 2018) involved
a claim of interference with prospective contract, a harder claim to plead and prove than
interference with existing contract.
Second, particularly where a plaintiff like JDH—still without the benefit of discovery—is
at a disadvantage in obtaining the details of the relationship between its contractual partner and
the third party it is suing for tortious interference, it is unreasonable to expect that plaintiff
always to be in a position to allege specific facts regarding the third party’s contractual rights or
his motives for acting in a particular way. It is enough at this stage for JDH to allege that
Tiverton improperly interfered with its contractual relationship with the dairy defendants; the
fact that something is improper means that it is without justification, and therefore JDH’s claim
is plausible.
Third, whether Tiverton acted in accordance with its rights under the Tiverton Deal is not
something that can be resolved on a motion to dismiss, at least under the circumstances of this
case. Justification or privilege is most often raised by the defendant as a defense at summary

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judgment or at trial, as noted in the cases cited by Tiverton. As the Court has explained, it will
not consider the Tiverton Deal documents on this motion to dismiss. Therefore, the question of
whether there is a genuine issues of material fact that Tiverton acted justifiably and in
accordance with the Tiverton Deal documents is a mixed question of law and fact that should be
addressed in a motion for summary judgment after JDH has been given the complete documents
and has had an opportunity to conduct discovery. At that point, the Tiverton Deal documents,
along with the question of Tiverton’s justification or privilege, will be properly before the Court.
Therefore, the Court will deny Tiverton’s motion to dismiss.
V.

Tiverton’s Objections to Magistrate Judge’s Order
Soon after filing its motion to dismiss, Tiverton filed a motion for protective order [Doc.

43] arguing that the court should stay discovery pending a decision on the motion to dismiss. The
magistrate judge entered an order [Doc. 63] denying Tiverton’s motion for stay. Two weeks later,
Tiverton filed objections [Doc. 65] to the magistrate’s order, to which JDH filed a response [Doc.
72]. Now that the Court has ruled on Tiverton’s motion to dismiss, Tiverton’s objections [Doc.
65] to the magistrate judge’s denial of its motion to stay discovery are moot. However, as
discussed below the objections also fail on the merits.
When a party objects to a magistrate judge’s order, the Court must consider such
objections and modify or set aside any portion of the order found to be clearly erroneous or
contrary to law. Fed. R. Civ. Pro. 72(a); see also 28 U.S.C. § 636(b)(1)(A). “The clearly
erroneous standard is intended to give the magistrate a free hand in managing discovery issues.”
R. Marcus & E. Sherman, Complex Litigation at 643 (1985). To be found erroneous, the Court
must have a “definite and firm conviction that a mistake has been committed.” Ocelot Oil Corp.
v. Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir. 1988); see also Parts & Elec. Motors, Inc. v.

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Sterling Elec., Inc., 866 F.2d 228, 233 (7th Cir. 1988) (providing that a decision “must strike us
as more than just maybe or probably wrong; it must ... strike us as wrong with the force of a fiveweek-old, unrefrigerated dead fish”).
“The power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants. How this can best be done calls for the exercise of judgment, which
must weigh competing interests and maintain an even balance.” Landis v. N. Am. Co., 299 U.S.
248, 254–255 (1936) (citation omitted). To accomplish this balance, the magistrate judge
considered all five factors in a test often applied by judges in this district: (1) the plaintiff’s
interests in proceeding expeditiously with the civil action and the potential prejudice to plaintiff
of a delay; (2) the burden on the defendants; (3) the convenience to the court; (4) the interests of
persons not parties to the civil litigation; and (5) the public interest.
Here, the magistrate judge carefully considered all factors in the five-part balancing test,
giving particular thought to the facts of this case. After considering each of these factors in some
detail, the magistrate judge balanced the factors and concluded that a stay of discovery was not
warranted. In its objections, Tiverton disagrees with the way in which the magistrate judge
evaluated and balanced each of the factors. Tiverton then revisits each factor, citing cases with
different facts in which other magistrate judges in the District of New Mexico have applied the
balancing test and granted a stay of discovery. In this Court’s estimation, the cases Tiverton cites
merely show that the application of the five-factor case is highly fact-specific, and that good
jurists exercising their judgment in good faith can reach different conclusions as to when it is
appropriate to impose a stay in cases with different facts. None of Tiverton’s arguments or
citations to other decisions remotely suggest that the magistrate judge’s decision to deny a stay

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was clearly erroneous, and the Court does not have the firm conviction that the magistrate judge
erred. Accordingly, the Court will overrule Tiverton’s objections the merits as well.
IT IS THEREFORE ORDERED that:
(1)

Defendant Tiverton Advisors, LLC’s Motion to Dismiss [Doc. 32] is DENIED; and

(2)

Defendant Tiverton Advisors, LLC’s Objections to Magistrate’s Decision Denying Motion

to Stay Discovery [Doc. 65] are OVERRULED.

_______________________________________
SENIOR UNITED STATES DISTRICT JUDGE

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