Ronnoco Coffee, LLC, et al. Plaintiffs-Appellees
Westfeldt Brothers, Inc. Defendant-Appellant
Submitted: April 16, 2019
from United States District Court for the Eastern District of
Missouri - St. Louis
LOKEN, WOLLMAN, and STRAS, Circuit Judges.
principal issue in this case is whether a corporation that
acquires substantially all the assets of an unrelated
competitor at a secured creditor's private foreclosure
sale, in an agreement that declines to assume the
competitor's liabilities, is nonetheless liable as the
competitor's successor for unpaid pre-acquisition
inventory purchases from a third party. Finding no prior case
imposing successor liability in these circumstances, and
prevailing law to the contrary, we affirm the district
court's grant of summary judgment.
Background Facts and Procedural History.
2013, Scott Meader, CEO of Ronnoco Coffee, LLC, a
Missouri-based coffee roasting company, traveled to Iowa to
discuss a potential acquisition of U.S. Roasterie, Inc.
("USR"), an established roasting company based in
Des Moines. USR's President, Howard Fischer
("Fischer"), expressed interest. Ronnoco's due
diligence during 2014 negotiations revealed that USR was
substantially in debt to various creditors, including its
principal coffee supplier, Westfeldt Brothers, Inc.
("Westfeldt"), a Louisiana corporation based in New
began selling coffee to USR in 2010. By August 2012, USR owed
Westfeldt over $3 million on open account coffee sales.
Though aware of USR's financial difficulties, Westfeldt
continued to sell coffee on unsecured credit. In April 2013,
Westfeldt advised USR it would ship only upon payment of an
amount greater than the value of the new shipment. Westfeldt
applied subsequent USR payments to old unpaid invoices,
reducing USR's debt to approximately $2.9 million by
August 2013. However, USR refused to secure its outstanding
debt, and Westfeldt never obtained a purchase money security
interest in coffee shipped to USR.
October 2014, Great Western Bank declined to extend over $5
million in maturing secured loans to USR. Great Western
foreclosed its security interests when USR did not comply
with the Bank's demand for repayment in full. Great
Western's security interests included green coffee sold
to USR by unpaid vendor Westfeldt.
on its due diligence, Ronnoco was unwilling to purchase
assets directly from USR. Aware of USR's default on Great
Western loans, Ronnoco discussed the purchase of USR assets
at a Great Western private foreclosure sale and formed
Mid-America Roasterie, LLC for this purpose. On February 9,
2015, Great Western sold its USR collateral at a private sale
to Mid-America, consistent with the terms of the loans and
the Iowa Uniform Commercial Code. Mid-America paid Great
Western $2,098,670.80 for the former USR assets (plus $35,000
for vehicles). It is undisputed this was a commercially
reasonable transaction. See Iowa Code Ann. §
554.9610.2. After the foreclosure sale, approximately
$3,150,000 of USR's secured debt to Great Western and
$2,690,000 of its unsecured debt to Westfeldt remained
February 2015 Sale Agreement expressly provided that Ronnoco
and Mid-America (collectively "Ronnoco") did not
assume USR liabilities or obligations. After purchasing the
former USR assets, Ronnoco continued coffee roasting
operations at USR's Iowa location, retained most USR
employees, employed USR's former President Fischer for
some ten months, and employed its former CFO, Chris Hodgson,
for approximately six months. The USR corporate entity was
not dissolved immediately after Great Western's
commenced this action seeking a declaration that Ronnoco is
not liable to Westfeldt for USR's debt and did not assume
USR's obligation to perform alleged future coffee supply
contracts. Westfeldt filed counterclaims against Ronnoco,
asserting claims of successor liability, breach of the future
contracts, unfair trade practices, conversion, and unjust
enrichment. Westfeldt also asserted third party claims
against two Ronnoco corporate officers, Meader and Eric
Bomball, for tortious interference with contract and
conspiracy to commit tortious interference. The parties
disputed whether these claims should be determined under Iowa
or Louisiana law. The district court applied Iowa law to
Westfeldt's successor liability and unjust enrichment
claims, and Louisiana law to the unfair trade practices,
conversion, and tortious interference claims.
district court initially dismissed the "futures
contracts" and tortious interference claims for failure
to state a claim. It then entered a final summary judgment
dismissing Westfeldt's counterclaims for successor
liability, unfair trade practices, conversion, and unjust
enrichment, primarily on the ground that Westfeldt failed to
submit evidence that the foreclosure and asset sale were
anything but bona fide business transactions. Westfeldt
appeals these decisions. Reviewing the grant of summary
judgment, the Rule 12(b)(6) dismissals, and the district
court's choice of law determinations de novo, we
affirm. See Campbell v. Davol, Inc., 620 F.3d 887,
891 (8th Cir. 2010) (summary judgment); Casazza v.
Kiser, 313 F.3d 414, 418 (8th Cir. 2002) (12(b)(6)
dismissal); St. Paul Fire and Marine Ins. Co. v. Bldg.
Constr. Enters., Inc., 526 F.3d 1166, 1168 (8th Cir.
2008) (choice of law).
Ronnoco's Successor Liability.