N. Bottling Co. v. Henry's Foods, Inc.

474 F.Supp.3d 1016

NORTHERN BOTTLING CO., INC., Plaintiff,

v.HENRY'S FOODS, INC., Defendant.

Case No. 1:19-cv-021

United States District Court, D. North Dakota.

Signed July 22, 2020

James M. Ragain, Ragain & Clark, PC, Michelle M. Sullivan, Sullivan Miller Law PLLC, Billings, MT, Rodney E. Pagel, Pagel Weikum, PLLP, Bismarck, ND, for Plaintiff.

Kirsten H. Tuntland, Larry L. Boschee, Pearce & Durick, Bismarck, ND, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

Daniel L. Hovland, District Judge

Before the Court is the Defendant's motion to dismiss filed on March 15, 2019. See Doc. No. 4. On April 29, 2019, the Plaintiff filed a response in opposition. See Doc. No. 9. On May 28, 2019, the Defendant filed a reply brief. See Doc. No. 12. For the reasons set forth below, the Defendant's motion to dismiss is granted.

I. BACKGROUND

Northern Bottling Co., Inc. ("Northern")—a North Dakota corporation with its principal place of business in Minot, North Dakota—is a bottler and distributor of Pepsi-Cola brand soft drinks in certain parts of North Dakota and South Dakota. Northern and non-party PepsiCo, Inc. are parties to a series of agreements, called Exclusive Bottling Appointments ("EBA" or "EBAs"). Each EBA appoints Northern as PepsiCo's "exclusive bottler, to bottle and distribute" a specific PepsiCo soft drink, such as Pepsi-Cola or Mountain Dew, in a designated geographic territory. See Doc. Nos. 1, ¶ 2; 1-2, p. 1; 1-4, p. 1. According to the complaint, PepsiCo produces the concentrate—the flavor base for the beverages—and sells it to independent bottlers. The independent bottlers, such as Northern, manufacture, sell, and deliver the finished soft drinks to retailers in their geographic territory, who, in turn, sell the products directly to the consuming public. The EBAs provide that PepsiCo is the owner of the beverage trademarks and Northern does not have "any right or interest" in the trademarks. See Doc. Nos. 1-2, ¶ 14 and 1-4, ¶ 15.

Henry's Foods, Inc. ("Henry's")—a Minnesota corporation with its principal place of business in Alexandria, Minnesota—is a vendor of food and beverages to retail sales outlets, including gas and convenience stores. Among the items Henry's sells are Pepsi-Cola products. Northern alleges Henry's is a third-party transshipper of PepsiCo products. Third-party transshipping as defined in the complaint is "the distribution or sale of PepsiCo products in a bottler's exclusive territory by anyone other than the licensed bottler."

See Doc. No. 1, ¶ 11. Specifically, the complaint provides that Henry's has transshipped PepsiCo products to six gas stations or convenience stores located within the geographic territory established in the Northern-PepsiCo EBAs. See Doc. No. 1, ¶ 96. Northern maintains throughout its complaint that Henry's’ sales of PepsiCo soft drinks to these retailers are unlawful.

The complaint also alleges Henry's implicitly represented the following false or misleading facts while selling and promoting the sale of PepsiCo products to various gas station and convenience stores: Henry's was licensed or authorized to manufacture, sell, and distribute PepsiCo products; Henry's’ sales were conducted in association with, or with the approval of, PepsiCo and/or Northern; Henry's’ products were of the same quality or freshness as Northern's; Henry's’ "pricing was legitimate"; and Henry's’ "poor customer service" was caused or condoned by Northern. See Doc. No. 1, ¶¶ 88, 97-98, 127-131. The complaint does not provide any explicit representation made by Henry's to any gas station or convenience store. Instead, the complaint provides that Henry's made the above implicit representations by: "calling on [Northern's] exclusive customer base," selling PepsiCo brand soft drinks to Northern's customers, "using and handling" PepsiCo trademarks, and listing PepsiCo soft drinks for sale in promotional brochures. See Doc. No. 1, ¶¶ 88, 97.

Northern filed suit against Henry's on January 23, 2019, for tortious interference with business expectancy, violation of the Lanham Act, and declaratory relief. Henry's now moves to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

II. STANDARD OF REVIEW

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a pleading to contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8 (a)(2). Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates the dismissal of a claim if there has been a failure to state a claim upon which relief can be granted. In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must contain "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quotes omitted). A plaintiff must show that success on the merits is more than a "sheer possibility." Id. A complaint does not need detailed factual allegations, but it must contain more than labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

The court must accept all factual allegations of the complaint as true, except for legal conclusions or "formulaic recitation of the elements of a cause of action." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. A complaint does not "suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ " Id. The determination of whether a complaint states a claim upon which relief can be granted is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937.

III. LEGAL DISCUSSION

A. Tortious Interference With Business Expectancy

North Dakota recognizes a tort claim for unlawful interference with business. Trade ‘N Post, L.L.C. v. World Duty Free Americas, Inc., 628 N.W.2d 707, 717 (N.D. 2001). In order to prevail on such a claim, the plaintiff must prove the following essential elements: (1) the existence of a valid business relationship or expectancy; (2) knowledge by the interferer of the relationship or expectancy; (3) an independently tortious or otherwise unlawful act of interference by the interferer; (4) proof that the interference caused the harm sustained; and (5) actual damages to the party whose relationship or expectancy was disrupted. Id. Henry's contends Northern has failed to plead elements three, four, and five.

Element three of the claim for unlawful interference with business requires the plaintiff to prove "an independently tortious or otherwise unlawful act of interference by the interferer." Id.; see also Schmitt v. MeritCare Health Sys., 834 N.W.2d 627, 634 (N.D. 2013) (stating " ‘otherwise unlawful act of interference’ meant ‘otherwise in violation of state law.’ "). Northern claims it has pled three violations of North Dakota law: (1) deceit, (2) false advertising, and (3) the consumer sales fraud prevention statute.

1. Deceit

Rule 9(b) of the Federal Rules of Civil Procedure requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). Henry's contends the heightened pleading requirements of Rule 9(b) apply to a claim for deceit, and Northern has not objected to such an application.

Under North Dakota law, "[o]ne who willfully deceives another with intent to induce that person to alter that person's position to that person's injury or risk is liable for any damage which that person thereby suffers." N.D. Cent. Code § 9-10-03. Deceit is defined as:

1. The suggestion as a fact of that which is not true by one who does not believe it to be true;

2. The assertion as a fact of that which is not true by one who has no reasonable ground for believing it to be true;

3. The suppression of a fact by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; or

4. A promise made without any intention of performing.

N.D. Cent. Code § 9-10-02.

North Dakota has recognized that fraud and deceit are similar concepts; fraud applies only when there is a contract between the parties, while deceit applies when there is no contract between the parties. See Nagel v. Sykes Realty, Inc., 400 F.Supp.2d 1198, 1202 (D.N.D. 2005). The Eighth Circuit Court of Appeals has held that claims grounded in fraud must meet the heightened pleading requirements under Rule 9(b), Streambend Props. II, LLC v. Ivy Tower Minneapolis, LLC, 781 F.3d 1003, 1010 (8th Cir. 2015), including North Dakota's tort of deceit. Olin v. Dakota Access, LLC, 910 F.3d 1072, 1076 (8th Cir. 2018). Accordingly, Northern's claim of deceit must meet the heightened pleading requirements under Rule 9(b).

"In order to satisfy the pleading requirements of Rule 9(b), the complaint must plead such facts as the time, place, and content of the defendant's false representations, as well as the details of the defendant's fraudulent acts, including when the acts occurred, who engaged in them, and what was obtained as a result." Id. at 1075. Therefore, the plaintiff must typically identify the "who, what, where, when, and how" of the alleged fraud. United States ex rel. Costner v. URS Consultants, Inc., 317 F.3d 883, 888 (8th Cir. 2003). "This requirement is designed to enable defendants to respond ‘specifically, at an early stage of the case, to potentially damaging allegations of immoral and criminal conduct.’ " Abels v. Farmers Commodities Corp., 259 F.3d 910, 920 (8th Cir. 2001). "Allegations pleaded on information and belief usually do not meet Rule 9(b) ’s particularity requirement."

Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir. 2009).

In Olin , the Court dismissed the fraud claim, in part, because the plaintiffs failed to allege the "who" and "when" of the alleged fraud with the requisite specificity required under Rule 9(b) :

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