The New London Tobacco Market, Inc. v. Philip Morris USA, Inc.

Filing 13

MEMORANDUM AND OPINION as set forth in following order. Signed by District Judge R Leon Jordan on 5/15/13. (ABF)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE

THE NEW LONDON TOBACCO
MARKET, INC.,

)
)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
PHILIP MORRIS USA INC.,

Defendant.

No. 3:13-CV-081

MEMORANDUM OPINION
This civil action was removed from the Chancery Court of Jefferson County,
Tennessee on February 14, 2013, on the basis of diversity jurisdiction. Now before the court
is defendant’s motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. Plaintiff has responded in opposition to the motion, and defendant has submitted
a reply. For the reasons that follow, defendant’s motion will be granted, and this case will
be dismissed.
I.
Background1
Plaintiff is engaged in the business of lending to farmers. From 2009 through
2011, plaintiff loaned money to the following related persons and entities: Grace M. Manley;

1

The court’s factual recitation is taken from plaintiff’s complaint, the contents of which
must be accepted as true at this stage of the proceedings.

James Todd Manley; Stephen K. Manley; Manley Farms; and Manley’s Farm (collectively,
“the Manleys”). The loans were evidenced by promissory notes and security agreements
granting plaintiff a security interest in the Manleys’ crops. Plaintiff in turn gave defendant
notice of those security interests.
Defendant purchased crops from the Manleys in 2009, 2010, and 2011 which
were encumbered by security interests in favor of plaintiff. Despite its awareness of the
liens, defendant did not pay plaintiff the value of its security interests before paying the
Manleys. The loans have not been repayed, and the Manleys are now insolvent.
On December 20, 2012, plaintiff filed its “Complaint for Conversion and
Voiding of Security Interest” in the Jefferson County Chancery Court. As is suggested by
the title of that pleading, plaintiff alleges a state law claim for conversion but does not raise
any claims under federal law.
II.
Applicable Legal Standards
The Federal Rules authorize dismissal for “failure to state a claim upon which
relief can be granted.” Fed. R. Civ. P. 12(b)(6). To survive a Rule 12(b)(6) motion, “a
pleading must contain a ‘short and plain statement of the claim showing that the pleader is
entitled to relief.’” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Fed. R. Civ. P.
8(a)). “[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’ . . . A claim has facial plausibility when the

2

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 (citing and quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007)). While factual allegations are
to be credited, “courts are not bound to accept as true a legal conclusion couched as a factual
allegation.” Twombly, 550 U.S. at 555 (citing and quoting Papasan v. Allain, 478 U.S. 265,
286 (1986) (internal quotation omitted)).
III.
Analysis
A. Preemption
As noted, plaintiff’s complaint contains a single count: state law conversion.
By its motion to dismiss, defendant argues that this state law claim is preempted by the Food
Security Act of 1985, 7 U.S.C. § 1631 (“FSA”). Defendant is correct.
With exceptions not relevant to the issue of preemption, the FSA provides that
“notwithstanding any other provision of Federal, State, or local law, a buyer who in the
ordinary course of business buys a farm product from a seller engaged in farming operations
shall take free of a security interest created by the seller, even though the security interest is
perfected; and the buyer knows of the existence of such interest.” 7 U.S.C. § 1631(d)
(emphasis added).2 Congress enacted the FSA “to protect farm products purchasers from
2

It appears that the crop at issue in this case is tobacco. Tobacco is a “farm product”
(continued...)

3

double payment.” Farm Credit Midsouth v. Farm Fresh Catfish, 371 F.3d 450, 452 (8th Cir.
2004).
[T]he exposure of purchasers of farm products to double payment inhibits free
competition in the market for farm products . . . and this exposure constitutes
a burden on and an obstruction to interstate commerce in farm products. The
purpose of [the FSA] is to remove such burden on and obstruction to interstate
commerce in farm products.
7 U.S.C. § 1631(a)(3)-(4), (b). Tennessee law recognizes that “[a] buyer in ordinary course
of business buying farm products from a person engaged in farming operations would take
free of a security interest created by the buyer’s seller as provided in Section 1324 of the
federal Food Security Act of 1985, 7 U.S.C. § 1631.” Tenn. Code § 47-9-320(a).
The complaint in this case alleges that defendant, with knowledge of plaintiff’s
perfected security interests, purchased and sold the Manleys’ crops without paying plaintiff
the value of its liens. That is the precise factual circumstance covered by the FSA,
“notwithstanding any other provision of Federal, State, or local law . . . .” 7 U.S.C. §
1631(d). Plaintiff’s state law conversion claim is therefore preempted by the FSA. See
United States of America v. Winter Livestock Comm’n, 924 F.2d 986, 993 n. 8 (10th Cir.
1991) (noting preemptive effect of FSA on conversion claims); Farm Credit Servs. of Mid
Am. v. Rudy, Inc., No. C-3-93-271, 1995 WL 1622801, at *6 (S.D. Ohio, Mar. 8, 1995) (The
FSA “is intended to preempt state law . . . to the extent necessary to achieve the goals of the

2

(...continued)
covered by the Food Security Act. See 9 C.F.R. § 205.206(a).

4

legislation.”) (citation omitted); Tallahatchie County Bank v. Marlow (In re Julien Co.), No.
90-20283-B, 1992 WL 65723, at *3 (Bankr. W.D. Tenn. Apr. 3, 1992) (noting the
preemptive effect of the FSA over matters addressed therein); First Nat’l Bank & Trust v.
Miami County Coop. Ass’n, 897 P.2d 144, 151 (Kan. 1995) (The FSA “preempts the Kansas
Uniform Commercial Code provisions and any other federal, state, or local law governing
security interests in agricultural products and production of agricultural products.”); State
Bank of Cherry v. CGB Enters., 964 N.E.2d 604, 608 (Ill. App. Ct. 2012) (“Section 1631(d)
is a clear expression of an intent to preempt state law.”).
Because plaintiff’s single-count state law complaint is preempted by federal
law, the complaint must be dismissed. See, e.g., Allis-Chalmers Corp. v. Lueck, 471 U.S.
202, 220 (1985) (ERISA); Monroe Retail, Inc. v. RBS Citizens, N.A., 589 F.3d 274, 277-78,
281 (6th Cir. 2009) (National Banking Act); Broyde v. Gotham Tower, Inc., 13 F.3d 994 (6th
Cir. 1994) (Federal Communications Act). Defendant’s motion to dismiss will accordingly
be granted.
B. Amendment of Complaint
After responding in opposition to the motion to dismiss, plaintiff moved to
amend its complaint. “The court should freely give leave [to amend a complaint] when
justice so requires.” Fed. R. Civ. P. 15(a)(2). Despite this lenient standard, leave should not
be granted in instances where the proposed amendment would be futile. See Foman v. Davis,
371 U.S. 178, 182 (1962). “Amendment of a complaint is futile when the proposed
5

amendment would not permit the complaint to survive a motion to dismiss.” Miller v.
Calhoun County, 408 F.3d 803, 817 (6th Cir. 2005).
It is first noted that plaintiff did not attach to its motion a proposed amended
complaint as is required by this court’s Local Rule 15.1. That fact alone is grounds to deny
the motion.
More importantly, the amendment suggested by plaintiff would be futile.
Plaintiff’s motion to amend (along with briefing found on the last page of the response to the
motion to dismiss) allude only to perhaps producing an amended complaint with more facts
and exhibits. No mention is made of amending the complaint to add a claim under the
preemptive FSA.3
In sum, plaintiff moves only for leave to file an expanded state law conversion
complaint, which would still be preempted by the FSA. Plaintiff’s suggested amendment
would be futile. The motion to amend will be denied.

3

Even less persuasive is plaintiff’s statement that “it would ask for leave to amend the
Complaint in the event the Court considers it insufficient for any reason.” [Doc. 8, p.12]. That is
merely an openended request for legal advice, and this court does not give legal advice to its
litigants. Plaintiff is not “entitled to an advisory opinion from the Court pointing out the deficiencies
in the complaint and allowing [it] a free opportunity to cure them.” Azzolini v. Corts Trust II for
Provident Fin. Trust I (In re UnumProvident Corp. Sec. Litig.), 396 F. Supp. 2d 858, 900 (E.D.
Tenn. 2005). Moreover, this court “will not approve of any [motion to amend] whose sole purpose
is to avoid or circumvent” a ruling on a motion to dismiss. Id. at 901 n.19.

6

C. Remaining Issues Moot
In addition to the issues discussed herein, the parties dispute: the necessary
contents of a notice under the FSA’s direct notice exception; whether the FSA requires strict,
or merely substantial, compliance with the requirements of its direct notice exception; and
whether the FSA is subject to equitable defenses such as estoppel and course of performance.
The court’s rulings in the two preceding sections of this opinion render all of the parties’
remaining disputes moot.
IV.
Conclusion
For the reasons stated herein, defendant’s motion to dismiss will be granted and
plaintiff’s motion to amend will be denied. This civil action will be dismissed. An order
consistent with this opinion will be entered.

ENTER:

s/ Leon Jordan
United States District Judge

7