Kruger v. Lely N. Am., Inc.

518 F.Supp.3d 1281

Jared KRUGER, Plaintiff,

v.LELY NORTH AMERICA, INC., Lely Industries N.V., Lely International N.V., Lely Holding B.V., and Maasland N.V., Defendants.

Case No. 20-CV-629 (NEB/DTS)

United States District Court, D. Minnesota.

Signed February 10, 2021

Arend R. Tensen, Pro Hac Vice, Cullenberg & Tensen, PLLC, Lebanon, NH, Bradley T. Wilders, Pro Hac Vice, Jillian R. Dent, Pro Hac Vice, Patrick Stueve, Pro Hac Vice, Stueve Siegel Hanson LLP, Kansas City, MO, Daniel Charles Perrone, III, Pro Hac Vice, Perrone Law PLLC, Staten Island, NY, Matthew James Barber, William R. Sieben, Schwebel Goetz & Sieben, P.A., Minneapolis, MN, for Plaintiff.

Aaron R. Wegrzyn, Pro Hac Vice, Foley & Lardner LLP, Milwaukee, WI, Andrew Casimir Gresik, Michael D. Leffel, Pro Hac Vice, Roberta F. Howell, Pro Hac Vice, Stephan J. Nickels, Foley & Lardner LLP, Madison, WI, for Defendants Lely North America, Inc., Lely Industries N.V., Lely International N.V., Lely Holding B.V.

Aaron R. Wegrzyn, Foley & Lardner LLP, Milwaukee, WI, for Defendant Maasland N.V.

ORDER ON MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

Nancy E. Brasel, United States District Judge

Plaintiff Jared Kruger purchased a Lely Astronaut A4 robotic milking system that he alleges contained latent defects that ruined his milk and caused infections in his cows. (ECF No. 47 ("Am. Compl.") ¶¶ 183, 193–95, 198–202.) Kruger, on behalf of himself and a putative class, sued several Lely entities: Lely Holding B.V. ("Lely Holding"), Maasland N.V. ("Maasland"), Lely International N.V. ("Lely International"), Lely Industries N.V. ("Lely Industries"), and Lely North America, Inc. ("Lely N.A.") (collectively, "Lely"). (Am. Compl.) Lely moved the Court to dismiss for lack of personal jurisdiction and, separately, for failure to state a claim.¹ (ECF Nos. 55, 61.) The Court previously denied the motion to dismiss for lack of personal jurisdiction and ordered limited jurisdictional discovery. (ECF No. 95.) The Court now considers Lely's motion to dismiss for failure to state a claim, and for the reasons that follow, dismisses only Kruger's breach of contract claim.

BACKGROUND

In March 2015, Kruger, a dairy farmer who lives in Wabasha, Minnesota, contracted with Dairyland Equipment Services² ("Dairyland"), a dealer of Lely products, to purchase an Astronaut A4 milking system. (Am. Compl. ¶ 40; ECF No. 31-4 ("Customer Agreement").) The Customer Agreement between Kruger and Dairyland contained a Limited Product Warranty, which warranted that the A4 system would be free from defects in material and workmanship. (Customer Agreement at 28–29.³ )

In November 2015, Kruger began using the A4 system to milk his cows. (Am. Compl. ¶ 192.) In spring 2016, Kruger noticed a heightened somatic cell count⁴ in his cows’ milk, which, by August, was high enough that the milk could no longer be certified as Grade A.⁵ (Id. ¶ 193.) Kruger claims this spike in somatic cell count was due to infection of his cows’ udders caused by defects in the A4 system. (Id. )

Kruger contacted Dairyland and told it that the A4 system was not performing as warranted. (Id. ¶ 196.) Specifically, he noted, the system was not detecting mastitis, properly examining milk quality, or separating contaminated milk. (Id. ) Dairyland sent personnel to examine the A4. (Id. ¶ 197.) Despite the Dairyland personnel washing the system and checking the vacuum pump, the A4 continued to malfunction. (Id. ) Due to the A4's continued defects, in December 2016, Kruger ceased using it and reverted to his old milking system. (Id. ¶¶ 198, 202.)

Kruger, along with three other dairy farmers who had purchased A4 systems, sued Lely in a purported class action. (ECF No. 1.) The other dairy farmers later voluntarily dismissed their claims (ECF Nos. 44–46), leaving Kruger as the sole plaintiff. Kruger then filed the Amended Class Action Complaint, including claims for breach of contract, breaches of express and implied warranties, negligence, strict liability, and fraudulent concealment. (Am. Compl. ¶¶ 257–335.) The Amended Complaint also includes claims that Lely violated three Minnesota statutes: the False Statement in Advertising Act, the Prevention of Consumer Fraud Act, and the Minnesota Deceptive Trade Practices Act. (Id. ¶¶ 336–58.)

Lely brought two motions to dismiss: one for lack of personal jurisdiction over several defendants (ECF No. 55) and one for failure to state a claim. (ECF No. 61.) This Order addresses the second motion, and the Court dismisses only Kruger's breach of contract claims.

ANALYSIS

Rule 12(b)(6) of the Federal Rules of Civil Procedure requires that the Court dismiss a complaint for failure to state a claim upon which relief can be granted if it fails to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). When reviewing a Rule 12(b)(6) motion, a court must "tak[e] all facts alleged in the complaint as true, and mak[e] reasonable inferences in favor of the nonmoving party." Smithrud v. City of St. Paul , 746 F.3d 391, 397 (8th Cir. 2014). Although the factual allegations need not be detailed, they "must be enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The facial plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully." Id. Thus, where a complaint alleges "facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’ " Id. (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ).

Ordinarily, a court may not consider matters outside of the pleadings without converting a motion to dismiss into one for summary judgment. Fed. R. Civ. P. 12(d). "[D]ocuments necessarily embraced by the complaint," however, are not considered to be "matters outside the pleadings." Ashanti v. City of Golden Valley , 666 F.3d 1148, 1151 (8th Cir. 2012). Because the Customer Agreement and the Dealer Agreement are embraced by the Complaint, the Court may consider them without converting this motion into one for summary judgment. (E.g. , Am. Compl. ¶¶ 183, 211–13, 221.)

I. Breach of Contract

Lely contends that Kruger's breach of contract claims should be dismissed because Kruger has not alleged that he is a party to a contract with any of the Lely entities, and he is not a third-party beneficiary of the Dealer Agreement between Lely and Dairyland. (ECF No. 63 at 5–10.)

A. Breach of the Customer Agreement

Under Minnesota law, if a plaintiff cannot plead the existence of a contract between himself and the defendant, the breach of contract claim will fail. See Lyon Fin. Servs., Inc. v. Ill. Paper & Copier Co. , 848 N.W.2d 539, 543 (Minn. 2014) (setting forth the elements of a breach of contract claim).

The Customer Agreement is between Dairyland and Kruger; Lely is not a party to it. Knowing this, Kruger's first theory is that Dairyland was acting as Lely's agent when it entered into the Customer Agreement. (ECF No. 70 at 5–6.) Kruger's primary support for this contention is that Dairyland was obligated, under the Dealer Agreement, to extend Lely's product warranty to Dairyland's customers. (ECF No. 70 at 6; Am. Compl. ¶ 268; ECF No. 31-1 ("Dealer Agreement") at 2.) Because Dairyland has express authority to extend this warranty, Kruger argues, Dairyland was acting as an agent for Lely, and so he may sue Lely for breach of contract.

This argument is mistaken. A dealer is not a manufacturer's agent simply by virtue of being a dealer of that manufacturer's goods. See Jurek v. Thompson , 308 Minn. 191, 241 N.W.2d 788, 792 & n.6 (1976) (distinguishing between an agent and a buyer). Further, for an agency relationship to exist, there must be a right of control and a fiduciary relationship between the principal and agent. Id. at 793. Kruger has not alleged that Lely controlled Dairyland or that Lely and Dairyland were in a fiduciary relationship. Because Kruger has not alleged that Dairyland is an agent of Lely, his actual authority agency theory fails.

Kruger next argues that Dairyland had apparent authority to act as Lely's agent, because the Customer Agreement, in Kruger's view, required Lely to provide ongoing support to the purchaser. (ECF No. 70 at 7.) This argument also fails. An agent has apparent authority to bind the principal when the principal holds the agent out as having authority or knowingly allows the agent to act on the principal's behalf. Powell v. MVE Holdings, Inc. , 626 N.W.2d 451, 457 (Minn. Ct. App. 2001). In other words, to assess whether an alleged agent had apparent authority to bind a principal, the focus is on the principal's actions, not the agent's. See id. Here, Kruger has not alleged what actions Lely took that would have caused Kruger to conclude that Dairyland had authority to bind Lely. The single allegation that Dairyland received support from Lely is insufficient to create a contract between Lely and Kruger on a theory of apparent authority. Additionally, the Dealer Agreement contradicts Kruger's agency theory; it specifies that the relationship between Lely and Dairyland is that of a buyer and seller and that Dairyland does not have the authority to bind Lely. (Dealer Agreement at 9.)

Kruger's third theory is that Lely created a contract with Kruger by making express warranties about its products. (ECF No. 70 at 7–10.) Specifically, Kruger points to Lely's marketing materials and says that these materials contained false promises and affirmations of fact, constituting express warranties as to the capabilities and quality of Lely's products. (Id. at 7–8.) In...