United States District Court, E.D. Missouri, Eastern Division
RONNOCO COFFEE, LLC, and MID-AMERICA ROASTERIE, LLC, Plaintiffs/Counterclaim Defendants,
WESTFELDT BROTHERS, INC., Defendant/Counterclaim Plaintiff/ Third-Party Plaintiff,
SCOTT MEADER and ERIC BOMBALL, Third-Party Defendants.
MEMORANDUM AND ORDER
C. HAMILTON UNITED STATES DISTRICT JUDGE
matter is before the Court on the Motion to Dismiss Amended
Counterclaims and Third-Party Complaint of
Plaintiffs/Counterclaim Defendants Ronnoco Coffee, LLC and
Mid-America Roasterie, LLC, and Third-Party Defendants Scott
Meader and Eric Bomball. (ECF No. 49). The motion is fully
briefed and ready for disposition.
Brothers, Inc. (“Westfeldt”) is a corporation
organized and existing under the laws of the State of
Louisiana, with its principal place of business in New
Orleans, Louisiana. (First Amended Counter-Claims and First
Amended Third-Party Complaint (“Amended
Counterclaim”), ¶ 1). Westfeldt is in the business
of importing green coffee to supply to coffee roasters.
(Id., ¶ 9).
in 2010, U.S. Roasterie, Inc. (“U.S. Roasterie”)
became a customer of Westfeldt. (Amended Counterclaim, ¶
10). Throughout their course of dealing, Westfeldt and U.S.
Roasterie entered into futures contracts for the purchase of
green coffee. (Id., ¶ 11). Over time, U.S.
Roasterie became delinquent in its payments due under the
terms of the futures contracts. (Id., ¶ 12).
late summer or fall of 2014, U.S. Roasterie and Counterclaim
Defendant Ronnoco Coffee, LLC (“Ronnoco Coffee”)
entered into negotiations for the sale of U.S.
Roasterie's assets to Ronnoco Coffee. (Amended
Counterclaim, ¶¶ 2, 13). In conducting due
diligence during the negotiations, Ronnoco Coffee became
aware of the substantial debt that Westfeldt had allowed U.S.
Roasterie to incur. (Id., ¶ 14). Ronnoco Coffee
ultimately did not complete the purchase of U.S.
subsequent point U.S. Roasterie's lender, Great Western
Bank, took control of the assets of U.S. Roasterie. (Amended
Counterclaim, ¶ 17). All of U.S. Roasterie's assets
then were formally acquired by Counterclaim Defendants
Ronnoco Coffee and Mid-America Roasterie, LLC
(“Mid-America”), pursuant to a Sale Agreement
dated February 9, 2015. (Id., ¶¶ 3, 26).
That same day Westfeldt received two nearly identical
letters, one from Ronnoco Coffee and one from Dixon Avenue
Holdings, LLC, notifying it that the assets of U.S.
Roasterie had been taken over by Great Western Bank and then
sold to Mid-America, a subsidiary of Ronnoco Coffee, and that
no invoices prior to the asset sale would be paid because
Ronnoco Coffee did not assume any of U.S. Roasterie's
liabilities. (Id., ¶ 28).
around the day after the asset sale closing, a telephone
conference took place between Ronnoco Coffee, U.S.
Roasterie's former CEO and CFO, and Westfeldt. (Amended
Counterclaim, ¶ 30). According to Westfeldt, Ronnoco
Coffee expressly agreed during the conference to assume
certain futures contracts that were previously in place
between Westfeldt and U.S. Roasterie. (Id., ¶
32). Westfeldt maintains that although Ronnoco
Coffee/Mid-America (collectively “Ronnoco”)
initially took delivery of the coffee subject to the futures
contracts, it later informed Westfeldt that it would not
continue taking delivery in fulfillment of the remaining
assumed futures contracts. (Id., ¶ 39).
Westfeldt further alleges that as of September, 2016, the
value of the outstanding futures contracts assumed by Ronnoco
was $145, 776.88. (Id., ¶ 40).
filed its initial Counterclaims and Third-Party Complaint
against Ronnoco, Meader and Bomball (collectively
“Movants”) on September 22, 2016. (ECF No.
Movants filed a Motion to Dismiss on October 20, 2016,
asserting all Westfeldt's counterclaims and third-party
claims should be dismissed for failure to state a claim upon
which relief can be granted. (ECF No. 18). In a Memorandum
and Order entered February 16, 2017, the Court granted in
part and denied in part Movants' motion. (ECF No. 43).
The Court further granted Westfeldt leave to file a First
Amended Counterclaims and Third Party Complaint.
filed its First Amended Counter-claims and First Amended
Third-Party Complaint against Movants on March 6, 2017. (ECF
No. 46). In its Amended Counterclaim, Westfeldt asserts the
following claims against Ronnoco: Breach of
Contract/Successor Liability (Count I); Open
Account/Successor Liability (Count II); Breach of
Contract/Single Business Entity/Alter Ego (Count III); Open
Account/Single Business Entity (Count IV); Unfair Trade
Practices (Count V); Conversion/Civil Conspiracy to Commit
Conversion (Count VI); Unjust Enrichment (Count VII); and
Breach of Futures Contracts (Count VIII). Westfeldt also
asserts a claim for Conspiracy to Tortiously Interfere with
Contractual Relations against Third-Party Defendants Scott
Meader and Eric Bomball. (Count IX).
noted above, Movants filed the instant Motion to Dismiss
Amended Counterclaims and Third-Party Complaint on April 3,
2017, asserting all Westfeldt's counterclaims and
third-party claims must be dismissed for failure to state a
claim upon which relief can be granted. (ECF No. 49).
FOR MOTION TO DISMISS
ruling on a motion to dismiss, the Court must view the
allegations in the complaint in the light most favorable to
plaintiff. Eckert v. Titan Tire Corp., 514 F.3d 801,
806 (8th Cir. 2008). The Court, “must accept
the allegations contained in the complaint as true and draw
all reasonable inferences in favor of the nonmoving
party.” Coons v. Mineta, 410 F.3d 1036, 1039
(8th Cir. 2005) (citation omitted). The
complaint's factual allegations must be sufficient
“to raise a right to relief above the speculative
level, ” however, and the motion to dismiss must be
granted if the complaint does not contain “enough facts
to state a claim to relief that is plausible on its
face.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555, 570 (2007) (abrogating the “no set of
facts” standard for Fed.R.Civ.P. 12(b)(6) found in
Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
Furthermore, “the tenet that a court must accept as
true all of the allegations contained in a complaint is
inapplicable to legal conclusions. Threadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Ashcroft v.
Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing
Twombly, 550 U.S. at 555 (pleading offering only
“labels and conclusions” or “a formulaic
recitation of the elements of a cause of action” will
Successor Liability (Counts I-II)
Iowa law, the basic principle of corporate
successor liability is that “a corporation that
purchases the assets of another corporation assumes no
liability for the transferring corporation's debts and
liabilities. Exceptions arise only in four circumstances: (1)
the buyer agrees to be held liable; (2) the two corporations
consolidate or merge; (3) the buyer is a ‘mere
continuation' of the seller; or (4) the transaction
amounts to fraud.” Lumley v. Advanced Data-Comm,
Inc., 2009 WL 2514084, at *1 (Iowa App. Aug. 19, 2009)
(citations omitted). In its response brief, Westfeldt
contends that the third and fourth exceptions apply in this
case. (Westfeldt's Memorandum in Opposition to
Movants' Second Motion to Dismiss (“Westfeldt's
Opp.”), PP. 2-8).
respect to exception four, “Iowa courts have not
elaborated on the elements of such a claim.” Grand
Laboratories, Inc. v. Midcon Labs of Iowa, 32 F.3d 1277,
1281 (8th Cir. 1994). “Authorities suggest,
however, that ‘the fraud exception to the nonliability
of successors is merely an application of the law of
fraudulent conveyances.'” Id. (citations
omitted). After concluding that the Iowa law of fraudulent
conveyances applied to the claim before it, the Eighth
Circuit in Grand Laboratories continued as
A fraudulent conveyance is…a transaction by means of
which the owner of real or personal property has sought to
place the land or goods beyond the reach of his creditors, or
which operates to the prejudice of their legal or equitable
rights. To recover on a fraudulent conveyance claim, a
plaintiff-creditor must first show that the transferor
actually owned the property that it allegedly fraudulently
transferred. Moreover, the plaintiff-creditor must show that
it was prejudiced by a transfer of assets. Prejudice requires
the creditor to show that [it] would have received something
which has become lost to [it] by reason of the conveyance.
Id. at 1281-82 (internal quotations and citations
earlier Order, the Court found the following allegations
sufficient to set forth a claim for successor liability on
the basis that the transaction at issue amounted to fraud:
16. Upon information and belief, Ronnoco and U.S. Roasterie
formulated a mutually beneficial plan so that Ronnoco could
acquire all of U.S. Roasterie's assets free and clear of
the substantial debt owed to Westfeldt, and U.S.
Roasterie's management and employees could all maintain
their employment at the new contemplated successor company.
17. Pursuant to this plan, the parties caused or allowed U.S.
Roasterie's lender, Great Western Bank, to “take
control” of the assets of U.S. Roasterie so that U.S.
Roasterie's assets would be sold to Ronnoco by the bank
at a lesser cost rather than being sold directly by U.S.
29. After the asset sale was finalized, Howard Fischer, the
former CEO of U.S. Roasterie, and Scott Meader, Ronnoco's
CEO, gave a joint statement to VendingMarketWatch in which
Mr. Fischer stated that the sale of U.S. Roasterie to Ronnoco
was part of his “exit strategy, ” and noted that
“people at U.S. Roasterie will continue in their
current roles” and “all blends, packaging and
outstanding customer service remain the same.”…
43. ….[B]ecause the sale of the assets of U.S.
Roasterie was a transaction entered into to escape liability,
Ronnoco/Mid-America is liable to Westfeldt for the debts of
U.S. Roasterie via successor liability….
(See ECF No. 43, P. 8, quoting Initial Counterclaim,
¶¶ 16-17, 29, 43). The Court recognized that
Westfeldt had a long way to go to prove that the sales
transaction was fraudulent, especially in light of the fact
that Ronnoco purchased U.S. Roasterie's assets not from
the company itself, but from U.S. Roasterie's secured
lender, Great Western Bank, who had foreclosed on the
property. (See Id., P. 8 n. 10, citing Grand
Laboratories, 32 F.3d at 1282 (holding plaintiff's
claim for successor liability on the basis of a fraudulent
transfer of assets failed, as plaintiff presented no evidence
that the seller had no other creditors, that plaintiff was
entitled to priority over other creditors to any extent, or
that the assets the seller transferred were unencumbered)).
The Court nevertheless declined to dismiss Westfeldt's
successor liability claims, finding consideration of the
issue to be more appropriate on summary judgment, when the
Court had a full record before it. (Id.).
their Motion to Dismiss, Movants acknowledge the Court
previously declined to dismiss Counts I and II of
Westfeldt's Counterclaim. (Movants' Memorandum in
Support of Motion to Dismiss, P. 15). Movants maintain,
however, that new allegations and evidence provided by
Westfeldt “contradict the core of its fraud theory and
warrant reconsideration of the issue.” (Id.).
consideration, the Court finds that while Westfeldt's new
allegations and evidence potentially render its successor
liability claims even less plausible, they do not
“contradict the core of its fraud theory, ” such
that dismissal is appropriate at this stage. Rather, the
Court remains unwilling to jettison the claims at the heart
of Westfeldt's Amended Counterclaim ...