US Herbs LLC et al v. Riverside Partners, LLC et al
Memorandum of Opinion and Order: This matter is before the Court upon Defendant Rocket Farms Herbs, Inc.'s Motion for Summary Judgment (Doc. 45 ) and Plaintiffs' Motion for Summary Judgment (Doc. 49 ). This is a breach of contract dispute. Plaintiffs' Motion for Summary Judgment is DENIED and Defendant Rocket Farms Herbs, Inc.'s Motion for Summary Judgment is GRANTED. Judge Patricia A. Gaughan on 1/19/17. (LC,S)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
US Herbs, Inc., et al.,
Riverside Partners, LLC, et al.,
CASE NO. 1:15 CV 2557
JUDGE PATRICIA A. GAUGHAN
Memorandum of Opinion and Order
This matter is before the Court upon Defendant Rocket Farms Herbs, Inc.’s Motion for
Summary Judgment (Doc. 45) and Plaintiffs’ Motion for Summary Judgment (Doc. 49). This is
a breach of contract dispute. For the reasons that follow, Plaintiffs’ Motion for Summary
Judgment is DENIED and Defendant Rocket Farms Herbs, Inc.’s Motion for Summary Judgment
Plaintiffs, US Herbs, LLC, Matt Karni, Karni Family Farm, LLC, and US Herbs Co.,
LLC (collectively, “US Herbs”) brought this action against defendants, Riverside Partners, LLC,
2003 Riverside Capital Appreciation Fund, L.P., (collectively, “Riverside Defendants”) and
Rocket Farms Herbs, Inc. (“Rocket Farms”) alleging wrongdoing in connection with a supply
agreement. The Court previously dismissed the Riverside Defendants.
1. Agreements between US Herbs and Herb Thyme, Inc. (“Herb Thyme”)
In August of 2010, US Herbs entered into a supply and licensing agreement (“Supply
Agreement”) pursuant to which Herb Thyme agreed to act as US Herbs’s exclusive supplier of
fresh packaged herbs. The Supply Agreement provides, in relevant part:
TERMS OF SALE OBJECTIVES
It is understood and agreed to by both parties that the intent of this Agreement is
to accomplish the following:
Protect [US Herb’s] brand with its current customers.
Consolidate [US Herb’s] supply chain to use [Herb Thyme’s] operations.
Provide a one year window of opportunity for [US Herbs] to recover accounts that
it has previously lost.
Provide opportunity for [US Herbs] to sell [Herb Thyme] products in markets that
are not currently served and supported by [Herb Thyme’s] current sales staff
Provide the platform in which [US Herbs] can grow its ongoing sales and increase
its current market penetration
Provide the platform for a smooth transition to [Herb Thyme] at a time that [US
Herbs] decides to sell the business
The Supply Agreement also contains a noncompete provision that outlines the parties’
rights and obligations to sell to certain customers in the event the Supply Agreement is
terminated in a specific way. US Herbs alleges that the Supply Agreement was in fact
Subsequently, in July of 2011, US Herbs and Herb Thyme entered into a new agreement.
(“Second Contract”). In part, the impetus for the Second Agreement appears to be a $180,000
outstanding debt that US Herbs owed Herb Thyme from other transactions. Pursuant to the
Second Agreement, Herb Thyme was to pay US Herbs a monthly payment. The monthly
payment was applied in part to the outstanding debt. In the first “whereas” clause in the Second
Agreement, the parties define the term “Customers” to be “customers, including the customers
identified on ‘Exhibit B’ that became customers of [Herb Thyme] through [US Herbs].” In
addition to the whereas clause, the parties agreed to Section 3.1, which provides:
[US Herbs] agrees that it shall not and shall not permit any of its agents
(including but not limited to Mati Kami) to contact any [Herb Thyme] customer
(including but not limited to any Customer listed on Exhibit B) on behalf of [US Herbs]
with respect to herbs during the term of this Agreement, except in response to a telephone
message or other communication initiated by the customer. [Herb Thyme] has provided a
list of [Herb Thyme] customers as of June 29, 2011, in Exhibit E, which may be amended
from time to time.
The Second Agreement also contains a termination provision. That provision provides as
Term and Termination.
4.1 Unless sooner terminated according to its terms, this Agreement shall
commence on the Effective Date and expire on June 30, 2015, except for [Herb
Thyme’s] obligation to make a final payment of Earned Margin to [US Herbs] on
or before July 15, 2015.
This Agreement shall automatically terminate immediately if [US Herbs]
violates the restrictions of paragraph 3.l or 3.2. In the event of such a termination,
within 15 days after the termination date, [Herb Thyme] shall make a final
payment to [US Herbs] of any Earned Margin owed based on amounts received
from Customers before the termination date.
This Agreement shall automatically terminate immediately if [Herb
Thyme] fails to make any payment hereunder within 30 days from the date that
the payment is due.
4.4 Either Party, at its option, without prejudice to any and all rights and
remedies it may have under this Agreement or under applicable law, may
terminate this Agreement, effective immediately, by providing the other party
with written notice of termination, if such other party becomes insolvent or is the
subject of any liquidation, receivership, bankruptcy, reorganization or other
creditor's proceedings, either voluntary or involuntary.
It appears that Herb Thyme made monthly payments up through and including November
of 2012. It is undisputed that Herb Thyme did not make the December 2012 payment.
2. Rocket Farms’s acquisition of Herb Thyme
In December of 2012, Rocket Farms, Herb Thyme, and a number of other entities
(including Herb Thyme’s secured creditors) entered into an asset purchase agreement (“AP
Agreement”). Pursuant to the AP Agreement, Rocket Farms purchased certain assets from the
secured creditors and Herb Thyme, in lieu of a private foreclosure sale. Rocket Farms paid
nearly $6 million for these assets. According to Rocket Farms, it did not purchase the assets
directly from the shareholders of Herb Thyme. Herb Thyme retained certain assets after the
purchase. In addition, Rocket Farms assumed certain liabilities of Herb Thyme. The AP
Agreement indicates, however, that Rocket Farms did not assume any liability “arising out of or
related to the Contracts other than the Safeway Contract or the Real Properly Lease for any
Company Facility.” AP Agreement § 2.3(b).
After the acquisition, Rocket Farms began selling herbs to customers, including former
customers of US Herbs and Herb Thyme. Rocket Farms made no payments to US Herbs.
Thereafter, US Herbs filed the instant lawsuit asserting seven claims for relief. Counts
six and seven were previously dismissed. Accordingly, counts one through five remain pending
against Rocket Farms. Counts one and two assert claims for tortious interference with contract.
Count three is a claim for tortious interference with business relationship. Count four is a claim
for breach of contract and count five asserts unjust enrichment.
The parties cross-move for summary judgment and each opposes the other’s motion.
STANDARD OF REVIEW
Rule 56(a) of the Federal Rules of Civil Procedure, as amended on December 1, 2010,
provides in relevant part that:
A party may move for summary judgment, identifying each claim or defense—or the part
of each claim or defense—on which summary judgment is sought. The court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.
Fed .R.Civ.P. 56(a).
Rule 56(e) provides in relevant part that “[i]f a party fails to properly support an assertion
of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the
court may ... consider the fact undisputed for purposes of the motion ... [and] grant summary
judgment if the motion and supporting materials—including the facts considered
undisputed-show that the movant is entitled to it.” Fed.R.Civ.P. 56(e).
Although Congress amended the summary judgment rule, the “standard for granting
summary judgment remain unchanged” and the amendment “will not affect continuing
development of the decisional law construing and applying” the standard. See, Fed.R.Civ.P. 56,
Committee Notes at 31.
Accordingly, summary judgment is appropriate when no genuine issues of material fact
exist and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986) (citing Fed. R. Civ. P. 56(c)); see also LaPointe v. UAW, Local
600, 8 F.3d 376, 378 (6th Cir. 1993). The burden of showing the absence of any such genuine
issues of material facts rests with the moving party:
[A] party seeking summary judgment always bears the initial
responsibility of informing the district court of the basis for its
motion, and identifying those portions of “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with affidavits,” if any, which it believes demonstrates the
absence of a genuine issue of material fact.
Celotex, 477 U.S. at 323 (citing Fed. R. Civ. P. 56(c)). A fact is “material only if its resolution
will affect the outcome of the lawsuit.” Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986).
Once the moving party has satisfied its burden of proof, the burden then shifts to the
nonmoving party. The court must afford all reasonable inferences and construe the evidence in
the light most favorable to the nonmoving party. Cox v. Kentucky Dep’t. of Transp., 53 F.3d
146, 150 (6th Cir. 1995) (citation omitted); see also United States v. Hodges X-Ray, Inc., 759
F.2d 557, 562 (6th Cir. 1985). However, the nonmoving party may not simply rely on its
pleading, but must “produce evidence that results in a conflict of material fact to be solved by a
jury.” Cox, 53 F.3d at 150.
Summary judgment should be granted if a party who bears the burden of proof at trial
does not establish an essential element of his case. Tolton v. American Biodyne, Inc., 48 F.3d
937, 941 (6th Cir. 1995) (citing Celotex, 477 U.S. at 322). Accordingly, “the mere existence of a
scintilla of evidence in support of plaintiff’s position will be insufficient; there must be evidence
on which the jury could reasonably find for the plaintiff.” Copeland v. Machulis, 57 F.3d 476,
479 (6th Cir. 1995) (quoting Anderson, 477 U.S. at 52 (1986)). Moreover, if the evidence is
“merely colorable” and not “significantly probative,” the court may decide the legal issue and
grant summary judgment. Anderson, 477 U.S. at 249-50 (citation omitted).
The Court will address all claims, but not in the order asserted in the complaint.
1. Breach of contract (count four)
US Herbs argues that Rocket Farms breached the Second Agreement by failing to make
monthly margin payments thereunder. According to US Herbs, Rocket Farms is liable as a
successor in interest to Herb Thyme. In response, Rocket Farms argues that the Second
Agreement was properly terminated and, therefore, Rocket Farms could not be in breach of the
agreement. Alternatively, Rocket Farms claims that because the AP Agreement is an asset
purchase, it is not liable as a successor in interest to Herb Thyme.
Upon review, the Court finds that Rocket Farms is entitled to summary judgment on US
Herbs’s breach of contract claim. Pursuant to the plain language in the Second Agreement,
termination occurred automatically if either US Herbs contacted any Herb Thyme customer
(including those identified in Exhibit B), or Herb Thyme failed to remit a monthly payment.
Here, it is undisputed–and in fact alleged–that Herb Thyme failed to remit the December 2012
payment. Thus, the Second Agreement terminated automatically within thirty days of the date
the payment was due. Thus, by the end of January 2013, the Second Agreement was no longer
Plaintiff argues in essence that by upholding the termination provision, US Herbs is
unfairly treated because it is not compensated for the work it performed in cultivating the
customer relationships. Rather, Rocket Farms obtained the benefit of continuing to service US
Herbs’s customers without remitting the monthly payment to US Herbs. This argument is
flawed in at least two respects. First, US Herbs points to nothing in the Second Agreement
supporting its position that the customers at issue “belong” to US Herbs. On the contrary, the
clear language of the Second Agreement demonstrates that the parties to the Second Agreement
understood that the customers were in fact customers of Herb Thyme. See, First Whereas
Clause1; Section 3.1.2 Second, US Herbs mistakenly construes the Second Agreement to be a
“supply agreement” pursuant to which Herb Thyme somehow agreed to supply customers of US
Herbs with freshly packaged herbs. Once again, however, US Herbs cites to no provision in the
Second Agreement supporting its position. Rather, unlike the Supply Agreement, it appears that
the Second Agreement is a variation on a noncompete agreement. Pursuant to its terms, US
Herbs agreed not to contact customers in exchange for a monthly payment. US Herbs cites to no
other consideration it provided supporting the Second Agreement. The noncompete provision,
however, does not survive termination. Thus, 30 days after the failure of Herb Thyme to remit
the December 2012 payment, US Herbs was free to contact any customer–including those
appearing on Exhibit B to the Second Agreement. US Herbs points to nothing supporting its
position that the Second Agreement somehow survived Herb Thyme’s failure to remit the
December 2012 payment. Rather, by its terms, the Second Agreement terminated automatically
thirty days after the payment was due.
US Herbs does, however, argue that the Court should not construe the Second Agreement
Plaintiff argues that courts have routinely held that “whereas”
clauses contained in contracts are not enforceable terms. While
this may be true, in this case, the parties defined the term
“Customers” in the whereas clause. That term is then used by the
parties in other provisions of the Second Agreement. Moreover, as
noted, the First Whereas Clause is not the only place in the Second
Agreement clarifying that the customers belong to Herb Thyme.
The affidavit of Matt Karni does not create an issue of fact. There,
he avers that Exhibit B contains a list of US Herbs’s customers.
This legal conclusion, however, is belied by the clear and
unambiguous contractual language.
in such a way so as to render it illusory. It appears that US Herbs may be arguing that since
either party could terminate the Second Agreement at will, it is illusory. The Court disagrees.
Here, the Second Agreement required performance on the part of US Herbs. Thus, for example
if US Herbs performed by refraining from contacting Herb Thyme’s customers, then Herb
Thyme owes US Herbs the monthly fee. Thus, the existence of the termination provision does
not render the Second Agreement illusory.
To the extent the Second Agreement could be considered illusory, the Second Agreement
is simply unenforceable. Plaintiff asks the Court to construe the Second Agreement to contain a
term requiring Herb Thyme to use its “best efforts” to supply herbs to US Herbs’s customers. As
an initial matter, as set forth above, plaintiff points to no provision in the Second Agreement
indicating that the customers belonged to US Herbs. Moreover, in asking the Court to impose a
“best efforts” clause, plaintiff is in reality asking the Court to read out of the Second Agreement
the termination provision. US Herbs does not claim that Herb Thyme failed to use its best
efforts. Rather, US Herbs’s true complaint is that Herb Thyme failed to remit the monthly
payment, which triggered the termination provision. The parties expressly agreed to that
provision and there is no claim that any part of the Second Agreement is ambiguous. The Court
will not rewrite the Second Agreement in such a manner that wholly ignores the termination
provision and in essence “creates” a supply agreement. Thus, to the extent the termination
provision renders the Second Agreement illusory, it is unenforceable.
Based on the foregoing, the Court finds that the Second Agreement terminated by its
terms no later than January of 2013. Accordingly, no breach of contract action lies after this date
regardless of whether successor liability exists on behalf of Rocket Farms.
The Court will, however, address successor liability. There appears to be no dispute that
US Herbs performed under the Second Agreement by refraining from contacting Herb Thyme’s
customers up to and including December of 2012, and that the failure to remit payment due in
exchange for US Herbs’s performance constitutes a breach of the Second Agreement. A
question remains, however, as to whether Rocket Farms can be held liable for this breach.3
Under Ohio law, a successor corporation may be liable if one of the following occurs:
(1) the buyer expressly or impliedly assumes such liability;
(2) the transaction amounts to a de facto merger;
(3) the buyer corporation is merely a continuation of the seller corporation; or
(4) the transaction is entered into fraudulently for the purpose of escaping liability.
Welco Indus., Inc. v. Applied Cos., 67 Ohio St. 3d 344, 346 (1993).
US Herbs argues that Rocket Farms may be held liable because Rocket Farms impliedly
assumed the Second Agreement. According to US Herbs, the Second Agreement provides that it
is binding on all entities that purchase substantially all of the assets of Herb Thyme. According
to Herb Thyme, Rocket Farms possessed the Second Agreement during its due diligence period.
In addition, according to US Herbs, Herb Thyme “listed US Herbs as an account receivable” in
documents provided to Rocket Farms. Rocket Farms continued to use labels identified in the
Second Agreement, but substituted its own name. In addition, Rocket Farms continued to
service “US Herbs’s” customers and collected substantial funds. In response, Rocket Farms
This is so because Rocket Farms purchased the assets at issue on
December 9, 2012, and the payment was not due until December
15, 2012. Thus, the Court must determine whether Rocket Farms
is a successor in interest for purposes of the December 2012
points out that the AP Agreement expressly identifies the liabilities assumed by Rocket Farms.
The Second Agreement is not listed therein. Moreover, the AP Agreement provides that Rocket
Farms is not assuming liabilities “arising out of or related to any Contracts other than the
Safeway Contract or the Real Property Lease for Any Company Facility...” Rocket Farms
further notes that neither Herb Thyme nor US Herbs, as the only two parties to the Second
Agreement, could impose in that agreement an obligation on a third party purchaser of the assets
of Herb Thyme.
Upon review, the Court agrees with Rocket Farms. The AP Agreement expressly
provides that Rocket Farms is not assuming any liability for contracts, with the exception of the
Safeway Contract and the Lease. Thus, not only did Rocket Farms not expressly assume the
Second Agreement, it expressly disclaimed liability thereunder. Moreover, the fact that Rocket
Farms knew of the Second Agreement through due diligence, yet opted to expressly forego
assumption of the agreement, bolsters the Court’s conclusion that Rocket Farms did not
impliedly assume the liability. And, on the facts of this case, the Court is not convinced that two
parties to an agreement can bind a potential asset purchaser. Thus, the language purporting to
bind any future asset purchaser does not mandate a finding of express or implied assumption.
The remaining argument raised by US Herbs once again relies on a fundamental
misunderstanding of the Second Agreement. US Herbs claims that Rocket Farms impliedly
assumed the Second Agreement because it continued to service “US Herb’s” customers. Not so.
As set forth above, there is no evidence that these customers somehow “belonged” to US Herbs.
Rather, the clear language in the Second Agreement provides that US Herbs agreed to forego
contact with Herb Thyme’s customers in exchange for a monthly fee.4 The Second Agreement is
not a supply agreement. Thus, Rocket Farms was free to sell herbs to any customers with no
duty to US Herbs. There is no evidence or suggestion that Rocket Farms impliedly assumed any
obligation to pay the monthly fee or made any attempt to prevent US Herbs from contacting any
customer of its choosing. Therefore, Rocket Farms is entitled to summary judgment on the issue
of express or implied assumption.
The Court also rejects US Herbs’s argument that the AP Agreement resulted in a de facto
merger. “A de facto merger is a transaction that results in the dissolution of the predecessor
corporation and is in the nature of a total absorption of the previous business into the successor.”
Welco, 67 Ohio St.3d 349.
The hallmarks of a de facto merger include (1) the continuation of the previous business
activity and corporate personnel, (2) a continuity of shareholders resulting from a sale of
assets in exchange for stock, (3) the immediate or rapid dissolution of the predecessor
corporation, and (4) the assumption by the purchasing corporation of all liabilities and
obligations necessary to continue the predecessor’s business operations. One court has
indicated that a transfer of assets for stock is the sine qua non of a de facto merger.
Id. (Emphasis added).
Here, the Court finds that Rocket Farms is entitled to summary judgment. As an initial
matter, it is undisputed that Rocket Farms purchased the assets in a secured party asset sale.
There is no evidence indicating that the assets were transferred for stock, as is the “sine qua non”
of a de facto merger. Nor is there any evidence that Herb Thyme “immediately or rapidly”
dissolved. Although plaintiff points to emails discussing a possible bankruptcy filing on behalf
of Herb Thyme, there is no evidence that a bankruptcy filing actually occurred or that it resulted
It would be a strange setup indeed if US Herbs agreed to refrain
from contacting its own customers.
in the dissolution of the entity. Although plaintiff notes that Rocket Farms continued in the
previous business and maintained corporate personnel,5 this is insufficient to warrant a finding
that the transaction resulted in a de facto merger. See, id. (De facto merger did not occur where
transaction involved assets purchased for cash as opposed to stock and the previous entity
remained in existence as a shell, even though new entity continued same line of business as
previous entity). The evidence presented by Herb Thyme is not sufficient to create a genuine
issue of material fact and the Court will not impose successor liability on Rocket Farms.
Nor does the “mere continuation” theory require an imposition of successor liability. The
Ohio Supreme Court held that:
[T]he “basis for this theory is the continuation of the corporate entity, not the business
operation, after the transaction. Such would be the case when one corporation sells its
assets to another corporation with the same people owning both corporations. Thus, the
acquiring corporation is just a new hat for, or reincarnation of, the acquired corporation.
This is actually a reorganization.
Welco, 67 Ohio St. 3d at 350 (citations and quotations omitted).
Here, US Herbs points to a number of facts that it claims satisfy this theory of liability.
By way of example, US Herbs notes that Rocket Farms continued in the same line of business
Rocket Farms objects to nearly all of the documentary evidence
offered by US Herbs. According to Rocket Farms, US Herbs
engaged in no deposition discovery in this matter and cannot
authenticate any of the documents it presents. Because the Court
finds that Rocket Farms is entitled to summary judgment even
considering the evidence presented by US Herbs, the Court need
not address Rocket Farm’s admissibility objections. The Court
notes, however, that it is doubtful that some of US Herb’s evidence
is properly before the Court. By way of example, in support of its
claim that Rocket Farms retained Herb Thyme’s personnel, US
Herbs relies on a press release. That press release constitutes
and maintained the same employees and officers as Herb Thyme. These facts, however, do not
relate to the standard “mere continuation” theory. Rather, those factors relate to the “expanded
mere-continuation theory.” See, Welco, 67 Ohio St. 3d at 348 (noting that sharing “same
physical plant, officers, employees, and product line” are relevant only to the expanded merecontinuation theory of successor liability). The Ohio Supreme Court, however, expressly
rejected application of the expanded mere-continuation theory to contracts cases. See, Id. Here,
because there is no evidence suggesting that there is any overlap in ownership between Herb
Thyme and Rocket Farms or that Rocket Farms is a continuation of the corporate existence of
Herb Thyme, successor liability cannot be based on the mere-continuation theory.
The Court further rejects any argument that the AP Agreement was entered into
fraudulently for the purpose of escaping liability. To the contrary, it is undisputed that the AP
Agreement arose as a result of Herb Thyme’s default with respect to its secured party lenders,
who are parties to the AP Agreement. There is simply no evidence that places the “propriety of
the sale into doubt or otherwise suggest[s] that the sale occurred to evade liabilities” as required
under Welco. The Court rejects any argument by US Herbs
that the AP Agreement is not
supported by adequate consideration. Rocket Farms paid nearly $6 million for the assets and
US Herbs wholly fails to establish through any evidence that this amount is inadequate.
Based on the foregoing, the Court finds that US Herbs fails to present evidence sufficient
to create a genuine issue of material fact on the issue of successor liability. As such, Rocket
Farms cannot be held liable for failing to make the December 2013 payment.6
Because the Court finds that Rocket Farms is not a successor in
interest, it bears no liability for the Second Agreement even if the
agreement was not terminated.
2. Unjust enrichment (count five)
Where “a party retains money or a benefit that in equity or justice belongs to another,” he
will be liable for unjust enrichment. Eyerman v. Mary Kay Cosmetics, Inc., 967 F.2d 213, 222
(6th Cir. 1992) (citing Hummel v. Hummel, 14 N.E.2d 923 (Ohio 1938)). The elements of a
claim for unjust enrichment include (1) a benefit conferred by a plaintiff upon a defendant; (2)
knowledge by the defendant of the benefit; and (3) retention of the benefit by the defendant
circumstances where it would be unjust to do so without payment. Hambleton v. R.G. Barry
Corp., 465 N.E.2d 1298, 1302 (Ohio 1984) (citing Hummel). Under this theory of recovery,
“civil liability may be imposed where one party retains a benefit from another’s labors.”
Guardian Technology, Inc. v. Chelm Properties, Inc., 2002 WL 31087415 at *2 (Ohio App. 8th
Dist. Sept. 19, 2002) (citing Shaw v. J. Pollock & Co., 612 N.E.2d 1295 (Ohio App. 9th Dist.
Here, US Herbs alleges that its unjust enrichment claim is based on Rocket Farms’s
failure to remit payments from sales it made to “US Herbs’s customers.” The Court finds that
Rocket Farms is entitled to summary judgment on this claim. As an initial matter, the payments
made by the customers were not conferred by US Herbs on Rocket Farms. Thus, an unjust
enrichment claim does not exist as it pertains to those amounts. In the course of the parties’
briefing, US Herbs also appears to argue that it conferred the benefit of its “substantial customer
development” on Rocket Farms. There is no evidence, however, supporting a conclusion that
US Herbs conferred this benefit on Rocket Farms. As set forth throughout this Opinion, the
Second Agreement makes clear that the customers at issue are no longer customers of US Herbs.
In fact, US Herbs can enforce the Second Agreement only if it refrains from contacting these
customers. There is simply no evidence that US Herbs conferred the benefit of “substantial
customer development” directly on Rocket Farms. This is so because Rocket Farms sold herbs
to these customers long after the termination of the Supply Agreement.
3. Tortious interference (counts one through three)
In count one, US Herbs alleges that Rocket Farms tortiously interfered with the Second
Agreement. According to US Herbs, by purchasing substantially all of the assets of Herb
Thyme, Rocket Farms left Herb Thyme unable to comply with is obligations under the Second
Agreement. In response, Rocket Farms argues that the AP Agreement makes clear that Herb
Thyme was in default of its loan documents and its lenders were preparing a private foreclosure
sale. It is with this backdrop that Rocket Farms purchased certain assets of Herb Thyme.
Rocket Farms points out that the Second Agreement did not prohibit Herb Farms exiting the herb
business or ceasing payments to US Herbs. Therefore, because the Second Agreement could be
terminated at any time by Herb Thyme’s decision to stop making monthly payments, Rocket
Farms’s purchase of assets belonging to Herb Thyme, with security interests held by its lenders,
is not tortious interference with contract.
Upon review, the Court finds that Rocket Farms is entitled to summary judgment. “In
order to prove a claim of tortious interference with contractual relationships under Ohio law, one
must show (1) the existence of a contract, (2) the wrongdoer's knowledge of the contract, (3) the
wrongdoer's intentional procurement of the contract's breach, (4) the lack of justification, and (5)
resulting damages.” Georgia-Pacific Consumer Products LP v. Four-U-Packaging, Inc., 701
F.3d 1093,1102 (6th Cir. 2012)(citations and quotations omitted). Here, it is undisputed that
Herb Thyme was in default of its loan documents and its lenders were prepared to sell Herb
Thyme’s assets at a foreclosure sale. Rocket Farms purchased some of those assets through a triparty transaction with Herb Thyme and its lenders. There is no evidence that the purpose or
intent of the transaction was to procure a breach of the Second Agreement. Moreover, although
Herb Thyme had financial difficulties, there is no evidence that Herb Thyme could not have
complied with making the December 2012 payment. Thereafter, Herb Thyme was wholly free to
terminate the Second Agreement. As such, the Court finds that plaintiff produced no evidence
suggesting that Rocket Farms intentionally procured Herb Thyme’s breach of the Second
Agreement with regard to the December 2012 payment. Because the contract no longer existed
after Herb Thyme’s proper termination 30 days thereafter, Rocket Farms could not have
interfered after that date.
In count two, US Herbs asserts a second claim for tortious interference with contract.
According to the complaint, Rocket Farms tortiously interfered with the contracts that US Herbs
had with its customers. Rocket Farms is entitled to summary judgment with respect to count two
for the simple reason that US Herbs fails to point to any contracts between it and any customer.
Accordingly, no claim for tortious interference with contract is available.
In count three, US Herbs alleges that Rocket Farms tortiously interfered with the
relationships US Herbs maintained with its customers. To state a claim for tortious interference
with business relations, a plaintiff must allege: (1) a business relationship; (2) the tortfeasor's
knowledge of the relationship; (3) an intentional interference causing a breach or termination of
the relationship; and (4) damages. Dolan v. Glouster, 173 Ohio App. 3d 617, 630 (Ohio Ct. App.
2007). As set forth thoroughly herein, there is no evidence that US Herbs maintained
relationships with herb purchasers at the time Rocket Farms began selling herbs to customers.
Nor is there any evidence that Rocket Farms caused any breach or termination of any such
customer relationship. Accordingly, Rocket Farms is entitled to summary judgment with respect
to count three.
For the foregoing reasons, Plaintiffs’ Motion for Summary Judgment is DENIED and
Defendant Rocket Farms Herbs, Inc.’s Motion for Summary Judgment is GRANTED.
IT IS SO ORDERED.
/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
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