Lang Pharma Nutrition, Inc.
Filing
29
MEMORANDUM AND ORDER denying 12 Motion to Dismiss for Failure to State a Claim; denying as moot 18 Motion to Strike ; denying without prejudice to refiling 24 Motion to Intervene. So Ordered by Chief Judge William E. Smith on 8/3/2017. (Jackson, Ryan)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
)
)
Plaintiff,
)
)
v.
)
)
AENOVA HOLDING GMBH,
)
)
Defendant.
)
___________________________________)
LANG PHARMA NUTRITION, INC.,
C.A. No. 16-371 S
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
Lang Pharma Nutrition, Inc. (“Plaintiff”), a distributor of
private label dietary supplement products to national retailers,
is
suing
manufacturer
Aenova
and
misrepresentation.
Holding
GmbH
supplier
of
(“Defendant”),
dietary
a
German
supplements,
for
Before the Court are (1) Defendant’s Motion
to Dismiss the Complaint for failure to state a claim upon which
relief may be granted pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure and failure to join Swiss Caps, Inc.
(Defendant’s subsidiary) as a required party pursuant to Rules
12(b)(7) and 19 (ECF No. 12); (2) Plaintiff’s Motion to Strike a
declaration
Dismiss
(ECF
filed
No.
by
18);
Defendant
and
(3)
in
support
Swiss
Caps,
of
its
Motion
to
Inc.’s
Motion
to
Intervene (ECF No. 24).
For the reasons set forth below, the
Motion to Dismiss is DENIED, the Motion to Strike is DENIED AS
MOOT, and the Motion to Intervene is DENIED WITHOUT PREJUDICE.
I. Background
The Court summarizes the communications between the parties
and
the
events
Plaintiff,
favor. 1
leading
with
up
to
reasonable
the
litigation
inferences
drawn
as
in
alleged
by
Plaintiff’s
In November 2013, Defendant sent marketing materials to
Plaintiff promoting its softgel technology, EnteriGelTM.
After
Plaintiff inquired about Defendant’s capability to manufacture
EnteriGelTM softgels using Plaintiff’s fish oil, Defendant sent
samples to Plaintiff and assured Plaintiff that it was ready to
manufacture EnteriGelTM softgels on a commercial scale.
Based on
information Defendant provided to Plaintiff, Plaintiff secured a
deal
with
Sam’s
Club
to
“launch
a
private
label
supplement in EnteriGelTM softgels” in January 2015. 2
some
manufacturing
(operated
by
its
issues
subsidiary
at
Defendant’s
Swiss
Caps),
fish
oil
Despite
Miami
facility
Defendant
assured
Plaintiff that it would be able to manufacture the millions of
softgel
capsules
that
Plaintiff
1
had
promised
to
Sam’s
Club.
Coll. Hill Properties, LLC v. City of Worcester, 821 F.3d
193, 195 (1st Cir. 2016).
2
Compl. ¶ 22.
2
Continued manufacturing problems created a delay for the launch
- the product was not actually launched at Sam’s Club until July
2015
-
and
then
caused
Defendant
to
completely
manufacturing the EnteriGelTM softgels in August 2015.
offered
refunds
to
many
customers
who
cease
Plaintiff
experienced
unpleasant
side effects from the EnteriGelTM softgels as well as replacement
supplements manufactured by a different company.
Sam’s
Club
pulled
Plaintiff’s
product
from
Eventually,
its
shelves
and
returned all of its stock to Plaintiff.
II. Discussion
A. Rule 12(b)(6)
“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.’” 3
plausibility
allows
the
when
court
the
to
plaintiff
draw
the
pleads
“A claim has facial
factual
reasonable
content
inference
defendant is liable for the misconduct alleged.” 4
that
that
the
In addition to
reviewing the allegations stated in the complaint, the Court may
consider
documents
that
are
discussed
in
the
complaint
and
3
Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
4
Iqbal, 556 U.S. at 678.
3
included
with
fraudulent
the
complaint
representation
exhibits. 5
as
is
alleged,
When
the
a
false
complaint
or
must
“specify the who, what, where, and when of the allegedly false
or fraudulent representation.” 6
According
to
Defendant,
the
Complaint
fails
to
state
a
claim upon which relief may be granted because (1) it does not
set
forth
the
prima
misrepresentation;
and
Plaintiff’s
ability
dispute
about
American
is
(2)
to
the
companies.
facie
elements
of
economic
loss
the
recover
under
commercial
Instead,
sale
tort
of
Defendant
a
claim
for
doctrine
bars
law
because
the
goods
between
two
contends,
this
case
should be governed by contract law principles and the Uniform
Commercial Code.
1. Misrepresentation Claim
Defendant argues that Plaintiff fails to properly allege
any
of
the
elements
misrepresentation.
for
either
Specifically,
negligent
Defendant
or
intentional
argues
that
the
allegations in the Complaint cannot amount to misrepresentations
5
Guerra-Delgado v. Popular, Inc., 774 F.3d 776,
(1st Cir. 2014) (citing Giragosian v. Ryan, 547 F.3d 59,
Cir. 2008)); Fed. R. Civ. P. 10(c) (“A copy of a
instrument that is an exhibit to a pleading is part
pleading for all purposes.”).
6
780 n.3
65 (1st
written
of the
Alternative Sys. Concepts, Inc. v. Synopsys, Inc., 374
F.3d 23, 29 (1st Cir. 2004) (citation omitted).
4
of
fact
Caps’
because
-
Defendant’s
representatives
–
or
merely
as
Defendant
provided
estimates
promises about what would happen in the future.
argues
that
Plaintiff
has
failed
to
claims,
allege
and
Swiss
made
Defendant also
any
justifiable
reliance on Defendant’s statements.
Plaintiff responds that it has specifically alleged all of
the
required
Plaintiff
elements
argues
that
for
the
its
claim
of
statements
misrepresentation.
at
issue
include
Defendant’s assertion that it had the present ability to provide
Plaintiff
with
a
commercial
Plaintiff
also
argues
that
volume
whether
of
its
EnteriGelTM
reliance
capsules.
on
any
of
Defendant’s statements was reasonable or justifiable is an issue
of fact, not law.
The tort of negligent misrepresentation has four elements:
(1) a misrepresentation of a material fact; (2) the
representor must either know of the misrepresentation,
must make the misrepresentation without knowledge as
to
its
truth
or
falsity
or
must
make
the
representation under circumstances in which he ought
to have known of its falsity; (3) the representor must
intend the representation to induce another to act on
it; and (4) injury must result to the party acting in
justifiable reliance on the misrepresentation. 7
7
Cruz v. DaimlerChrysler Motors Corp., 66 A.3d 446, 453
(R.I. 2013) (quoting Manchester v. Pereira, 926 A.2d 1005, 1012
(R.I. 2007)); see also Mallette v. Children’s Friend and
Service, 661 A.2d 67, 69 (R.I. 1995); Francis v. American
Bankers Life Assurance Co. of Florida, 861 A.2d 1040, 1046 (R.I.
2004); Zarrella v. Minnesota Mutual Life Insurance Co., 824 A.2d
1249, 1257 (R.I. 2003).
5
“[T]he general rule is that mere unfulfilled promises to do a
particular
thing
in
the
future
do
not
misrepresentation] in and of themselves.” 8
promises are not considered factual.” 9
constitute
[a
“Future events or
The Court is not clear
whether Plaintiff intends to pursue negligent misrepresentation,
intentional
elements
misrepresentation,
are
the
same,
or
except
both.
that
to
Regardless,
prove
an
the
intentional
misrepresentation, the second element is limited to a knowing
misrepresentation of fact. 10
The Court notes at the outset that Plaintiff has set forth
a
detailed
array
of
allegations
in
its
Complaint
about
its
communications with Defendant, including dates, the individuals
involved,
statements
and
the
that
content.
could
be
Some
of
considered
the
allegations
Defendant’s
reflect
estimates
or
promises to meet an objective in the future, but the Complaint
also reflects allegations of present production capabilities in
8
Cote v. Aiello, 148 A.3d 537, 548 (R.I. 2016) (quoting 37
Am. Jur. 2d Fraud and Deceit § 87 at 122 (2013)).
9
Id. at 549 (citing 37 C.J.S. Fraud § 76 at 263-64 (2008)
(“[T]o give rise to a liability for negligent misrepresentation,
an alleged misrepresentation must be factual and not promissory
or related to future events.”)).
10
See id.
6
the written materials it sent to Plaintiff in November 2013. 11
In addition, Plaintiff alleges that Defendant represented “it
was
ready
EnteriGelTM
Defendant’s
to
manufacture
softgels,”
Miami
and
facility
commercial
that
in
production
when
Plaintiff
February
2014,
runs
of
visited
Defendant
represented that it could produce 400-500 million capsules per
year by May 2014. 12
Plaintiff alleges that these statements were
false when Defendant made them because Defendant had not yet
produced the EnteriGelTM capsules commercially. 13
Plaintiff also
alleges that Defendants made the statements with the intent to
induce Plaintiff into a commercial business transaction with it,
that Plaintiff relied on Defendant’s statements by entering into
a business relationship with Sam’s Club whereby Plaintiff was to
be the exclusive seller of these capsules, and that Plaintiff
was harmed by Defendant’s false statements. 14
The Court agrees with Plaintiff that whether its reliance
on Defendant’s representations was justifiable is an issue of
fact that is not appropriate to consider in the current posture
11
Compl. ¶ 10, ECF No. 1.
12
Id. ¶¶ 11, 14.
13
Id. ¶ 35.
14
Id. ¶¶ 24, 25, 36-38.
7
of this case.
At this pleading stage, Plaintiff must simply
provide a plausible allegation that it relied on the statements
that Defendant made.
The merits of its allegations will be
tested after the parties have engaged in discovery.
The Court concludes that Plaintiff has plausibly pleaded
sufficient
reasonable
facts
from
inference
which
a
trier
that
of
fact
Defendant
could
is
liable
misrepresentation, either intentional or negligent. 15
also
“specif[ied]
the
who,
what,
where,
and
draw
when
the
for
Plaintiff
of
the
allegedly false or fraudulent representation,” as required by
Rule 9. 16
business
The Court turns next to Defendant’s argument that the
relationship
between
the
parties
precludes
Plaintiff
from any potential to prevail on its misrepresentation claim.
2. Economic Loss Doctrine
Defendant argues that the economic loss doctrine precludes
Plaintiff from its attempt to turn its contract dispute into a
tort action when it seeks purely economic damages, especially
when Plaintiff attached a signed Exclusive Sales Agreement to
the
Complaint.
Plaintiff
counters
that
this
doctrine
is
inapplicable in this case because the parties did not finalize
or sign a supply agreement.
Plaintiff also argues that its
15
See Iqbal, 556 U.S. at 678.
16
See Alternative Sys. Concepts, 374 F.3d at 29.
8
Complaint is based on “technology and process shortcomings” and
is therefore not a contract dispute. 17
“Economic loss is defined as ‘costs associated with repair
and-or replacement of a defective product, or loss of profits
consequent thereto.’” 18
The economic loss doctrine preserves the line between
tort and contract, providing that: If tort claims are
based on duties that are imposed by contract, then
under the economic-loss rule, contract law provides
the remedies for economic losses. The economic-loss
doctrine forbids a party from suing or recovering in
tort for economic or pecuniary losses that arise only
from breach of contract or are associated with the
contract relationship. In other words, tort damages
are generally not recoverable unless the plaintiff
suffers an injury that is independent and separate
from the economic losses recoverable under a breachof-contract claim. 19
This Court acknowledged many times that the Rhode Island Supreme
Court
has
applies
17
to
not
addressed
claims
for
whether
the
economic
misrepresentation,
and
loss
has
doctrine
previously
Opp’n to Mot. 16, ECF No. 16.
18
Gail Frances, Inc. v. Alaska Diesel Elec., Inc., 62 F.
Supp. 2d 511, 517 (D.R.I. 1999) (quoting Hart Engineering Co. v.
FMC Corp., 593 F. Supp. 1471, 1481 n.11 (D.R.I. 1984)).
19
Sheet Metal Workers Local No. 20 Welfare & Benefit Fund
v. CVS Health Corp., 221 F. Supp. 3d 227, 237-38 (D.R.I. Nov. 1,
2016) (quoting 74 Am. Jur. 2d Torts § 24 (2015)).
9
considered
this
issue
on
a
developed
record
at
the
summary
judgment stage. 20
For
example,
in
Gail
Frances,
Inc.
v.
Alaska
Diesel
Electric, Inc., a buyer sued a seller under several theories,
including
breach
of
contract
and
negligent
misrepresentation.
In the absence of controlling Rhode Island law, the Court looked
to
other
summary
states’
judgment
precluded
laws
for
about
Plaintiff’s
guidance
whether
negligent
the
to
resolve
economic
the
loss
misrepresentation
issue
at
doctrine
claim.
The
Court concluded that Defendant was entitled to judgment as a
matter of law on this claim based on its reasoning that, if
given
likely
the
opportunity,
hold
that
misrepresentation
the
claim
the
Rhode
economic
when
the
Island
loss
Supreme
doctrine
parties
had
Court
precluded
signed
a
would
the
sales
agreement. 21
In contrast, the Court much more recently concluded that a
manufacturer of a product was not precluded from recovering pure
financial losses under a theory of negligent misrepresentation
when the plaintiff had also alleged several contract claims and
had entered into an exclusive sales agreement with the product’s
20
See, e.g., T.G. Plastics Trading Co. Inc., v. Toray
Plastics (America), Inc., 958 F. Supp. 2d 315, 329 (D.R.I.
2013); Gail Frances, 62 F. Supp. 2d at 517.
21
Gail Frances, 62 F. Supp. 2d at 518.
10
distributor. 22
The Court noted that, when a contract between the
parties exists and a claim for negligent misrepresentation is
made, the injured party can recover only expectation damages. 23
In addition, the Court has held that the economic loss doctrine
did not bar plaintiffs’ claims that a defendant had orchestrated
a fraudulent scheme that violated the pharmaceutical industry’s
standards, but acknowledged that the argument could be revisited
during
summary
judgment
if
discovery
revealed
that
the
only
basis for the claim was in contract. 24
Here, while Plaintiff’s alleged injury stems from a failed
business
legal
venture
claim
as
with
one
Defendant,
that
it
focuses
has
chosen
exclusively
to
on
frame
its
Defendant’s
alleged misrepresentations that Defendant made to Plaintiff to
initiate
and
develop
the
business
relationship.
Moreover,
Plaintiff has only claimed a single count of misrepresentation,
and
as
noted
pursuing
earlier,
it
negligent
misrepresentation, or both.
is
not
clear
whether
misrepresentation,
Plaintiff
intentional
Of course, time and discovery will
soon reveal the precise nature of Plaintiff’s claim.
22
is
But for
T.G. Plastics, 958 F. Supp. 2d at 330.
23
Id. at 328 (citing Gupta v. Customerlinx Corp., 385 F.
Supp. 2d 157, 162 (D.R.I. 2005)).
24
Sheet Metal Workers, 221 F. Supp. 3d at 238.
11
now, it is simply too early in the litigation cycle to determine
whether the economic loss doctrine precludes Plaintiff’s claim
for misrepresentation.
may
be
revisited
As in Sheet Metal Workers, this issue
during
summary
judgment
after
additional
information and evidence has been gathered during the discovery
phase of this litigation. 25
B. Rule 12(b)(7)
A defendant may move to dismiss a claim if a plaintiff
fails to join a required party pursuant to Rule 19. 26
Defendant
argues that the Complaint fails to name the proper defendant
because the statements that Plaintiff alleges were involved in
the
misrepresentations
were
made
by
individuals
employed
by
Swiss Caps, not by Aenova. [Mot. to Dismiss 1, 2, ECF No. 12-1]
In
addition,
Defendant
asserts
that
the
production
of
the
supplements at issue was done entirely at a Swiss Caps facility,
and Swiss Caps was the contracting party with Plaintiff. [Mot.
to Dismiss 17] Defendant submitted a Declaration from the Vice
President
averred
and
that
Plaintiff
had
Chief
Commercial
all
of
the
the
Aenova
Officer
marketing
logo
with
of
Swiss
materials
Swiss
Caps
Caps,
provided
USA
who
to
clearly
printed next to it, and that all of Plaintiff’s interactions
25
26
Id.
Fed. R. Civ. P. 12(b)(7); J & J Sports Prods. Inc. v.
Cela, 139 F. Supp. 3d 495, 499 (D. Mass. 2015).
12
about the EnteriGelTM product were with Swiss Caps employees.
[Carlson Decl., ECF No. 13] As an alternative to dismissing the
Complaint, Defendant requests that the Court order the joinder
of Swiss Caps pursuant to Rule 19(a)(2). 27
Plaintiff contends that Swiss Caps is not a required party
because the question of liability may be resolved without it,
especially
because
Aenova,
as
the
parent
company,
could
adequately protect its subsidiary’s interest in the outcome of
the case. [Opp’n to Mot. 5, 7, ECF No. 16] Plaintiff also argues
that the corporate representatives it dealt with held themselves
out as representatives of Aenova, demonstrated by Hans Engels’
signature
on
Aenova/Swiss
the
Caps,”
Exclusive
the
Sales
email
Agreement
addresses
being
made
from
as
“CEO
“aenova-
group.com,” and the logo reflecting “Aenova” in larger font than
“swiss caps.” [Opp’n to Mot. 7-8]
“Rule 19 addresses situations where a lawsuit is proceeding
without a party whose interests are central to the suit. The
Rule provides for joinder of required parties when feasible . .
. and for dismissal of suits when joinder of a required party is
27
As previously stated, Swiss Caps has also filed a Motion
to Intervene.
13
not feasible and that party is indispensable.” 28
“A party is a
necessary party within the purview of Rule 19(a)(1)(A) only if,
‘in
that
relief
person’s
among
meaningfully
absence,
existing
resolves
affected parties.” 29
the
parties.’
the
court
cannot
Relief
contested
is
matter
accord
complete
as
complete
when
between
it
the
“As long as a party’s absence does not
prevent the district court from affording complete relief, Rule
19(a)(1)(A) does not mandate that party’s continuing presence.” 30
In addition, “an absent party’s interests cannot be harmed or
impaired if they are identical to those of a present party.” 31
Rule 19(a)(1)(B) requires joinder when a
person claims an interest relating to the subject of
the action and is so situated that disposing of the
action in the person’s absence may:
(i) as a practical matter impair or impede
person’s ability to protect the interest; or
the
(ii) leave an existing party subject to a substantial
risk of incurring double, multiple, or otherwise
inconsistent obligations because of the interest.
28
Unetixs Vascular, Inc. v. CorVascular Diagnostics, LLC,
217 F. Supp. 3d 537, 539–40 (D.R.I. 2016) (citing Bacardi Int'l
Ltd. v. V. Suarez & Co., Inc., 719 F.3d 1, 9 (1st Cir. 2013)).
29
Watchtower Bible & Tract Soc’y of N.Y., Inc. v.
Municipality of San Juan, 773 F.3d 1, 13 (1st Cir. 2014)
(quoting Fed. R. Civ. P. 19).
30
Id.
31
Bacardi Int’l, 719 F.3d at 11 (citation omitted).
14
The Court concludes that Plaintiff has named the proper
Defendant
for
its
alleged
claim
of
misrepresentation.
Regardless of which entity technically employed the corporate
representatives
who
communications
worked
between
with
the
Plaintiff,
parties
the
reflect
email
that
the
representatives named in the Complaint had “@aenova-group.com”
email addresses. 32
the
marketing
In addition, the corporate logo featured on
materials
presented
to
Plaintiff
predominantly
shows either the “aenova” name on its own, or with “swiss caps”
in
smaller
contrary
font
to
under
Defendant’s
the
parent
company’s
representation,
the
name. 33
Also,
Exclusive
Sales
Agreement that the parties signed is clearly between “Aenova
Holding
GmbH”
and
Lang
Pharma
Nutrition,
Inc.
(not
between
Plaintiff and Swiss Caps), and is signed by Hans Engel, as “CEO
Aenova Swiss Caps, Inc.” 34
In sum, Swiss Caps is not a required
party under Rule 19 and its interest in the outcome of this
litigation
will
be
protected
by
the
fact
that
the
named
Defendant is its corporate parent.
32
Compl. Exs. C, F, H, I, ECF Nos. 1-3, 1-6, 1-8, 1-9.
33
See, e.g., Compl. Exs. C, D, ECF No. 1-3, 1-4.
34
Compl. Ex. J, Exclusive Sales Agreement 5, ECF No. 1-10.
15
III. Conclusion
For
the
reasons
stated
herein,
Dismiss (ECF No. 12) is DENIED.
Defendant’s
Motion
to
Intervene
(ECF
to
Plaintiff’s Motion to Strike
Affidavit (ECF No. 18) is DENIED AS MOOT.
Inc.’s
Motion
No.
24)
Swiss Caps USA,
is
DENIED
WITHOUT
PREJUDICE to refiling after Defendant files its answer to the
Complaint.
IT IS SO ORDERED.
William E. Smith
Chief Judge
Date: August 3, 2017
16
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