Triple S Farms, LLC v. DeLaval Inc.

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Triple S Farms, LLC; Green Acres Dairy, LLC; Charles Fry and Emily Snyder; and Rocky Point Farms, Inc.; Plaintiffs, v. DeLaval Inc.; West Agro, Inc.; DeLaval International AB; DeLaval Holding BV; DeLaval Holding AB; and Tetra Laval International SA; Defendants.

No. 22-cv-1924 (KMM/DTS)

United States District Court, D. Minnesota

March 27, 2024

ORDER

KATHERINE MENENDEZ UNITED STATES DISTRICT JUDGE

INTRODUCTION

Plaintiffs Triple S Farms, LLC (“Triple S”), Green Acres Dairy (“Green Acres”), LLC, Charles Fry and Emily Snyder (collectively “Fry”), and Rocky Point Farms, Inc. (“Rocky Point”) are dairy farmers who purchased a robotic system to automate the process of milking their cows. That system is the DeLaval VMS V300, which was released in the United States in 2018 and allegedly promoted by the Defendants as a major upgrade over an earlier model the DeLaval VMS Classic. In a previous lawsuit, Bishop et al. v. DeLaval Inc., et al., Case No 5:19-cv-06129-SRN (W.D. Mo.), a class of farmers claimed the Classic was defective. The Bishop case ultimately ended in a $50 million class-action settlement.

According to the Plaintiffs in this case, although the marketing of the V300 promised it could properly and efficiently perform the essential functions of milking dairy farmers' livestock, the V300, like the Classic before it, is defectively designed, defectively manufactured, fails to conform to express and implied warranties, and fails to perform as promised. The Plaintiffs also allege that the Defendants deceived them into believing that the machine could do it job through affirmative misrepresentations and omissions.

Based on these allegations, Plaintiffs are pursuing causes of action for breach of contract; breach of implied warranty of merchantability; breach of implied warranty of fitness for a particular purpose; breach of express warranty; strict products liability; negligence; fraudulent inducement; negligent misrepresentation; fraudulent concealment or omission; violation of Washington's Consumer Protection Act, RCW § 19.86, et seq.; and violation of Maryland's Consumer Protection Act, M.D. Comm. L. Code § 13-101, et seq.^[1] [Am. Compl., Dkt. 199.]

After Triple S filed its initial Complaint, the Defendants filed several motions to dismiss raising a variety of challenges including failure to state a claim and lack of personal jurisdiction. The Court addressed the substance of motions to dismiss for failure to state a claim filed by Defendants DeLaval Inc. and West Agro, Inc., granting their motions in part and denying them in part. The Court noted that Triple S attempted to plead alter-ego claims and to allege an alter-ego theory of personal jurisdiction with respect to several of the Defendants, but it had done so without the ability to include information in the original Complaint that the Bishop plaintiffs had uncovered during that litigation. Triple S, represented here by the same counsel that represented the Bishop class, pled the original alter-ego claims with one hand tied behind its back due to the provisions of a protective order from the Bishop case that precluded use of the information in other litigation. So, the Court gave the Plaintiffs an opportunity to replead once they obtained relief from the protective order from the Bishop court.

Plaintiffs filed their First Amended Class Action Complaint (“Amended Complaint”) on March 23, 2023, which includes significantly greater detail concerning their alter-ego theory than could be found in the original Complaint. In other words, Plaintiffs have now taken their best shot at stating the factual basis for their alter-ego theories. As expected, Defendants renewed their motions to dismiss for failure to state a claim and for lack of personal jurisdiction. Specifically, this matter is before the Court on the Motion to Dismiss filed by Defendants DeLaval International AB (“DLI”), DeLaval Holding BV (“DHBV”), DeLaval Holding AB (“DHAB”) (collectively the “Foreign DeLaval Entities”), and West Agro, Inc. (“West Agro”), [Doc. 210], and Defendant Tetra Laval International SA's Motion to Dismiss [Doc. 218]. For the reasons that follow, Tetra Laval International SA's motion is granted, and the Foreign DeLaval Entities' motion is granted in part and denied in part.

BACKGROUND

Plaintiffs' factual allegations concerning the flaws in the V300 and the Defendants' actions in marketing the newer robotic milking system, taken as true for purposes of the pending motions, are discussed in the Court's March 2, 2023 Order on the motions to dismiss and to strike class allegations brought by DeLaval Inc. and West Agro. [Doc. 189 at 3-8.] For purposes of this Order, those facts have not substantially changed with the filing of the Amended Complaint, so the Court will not repeat them in detail here. Generally, Plaintiffs allege that the V300 cannot safely and effectively milk their cows, the V300 does not conform to the manufacturer's express warranties, and one or more of the Defendants made material misrepresentations intended to induce Plaintiffs to purchase the V300s. As a result, Plaintiffs allege that they have suffered substantial losses through their inability to produce quality milk, being forced to build entirely new barns or retrofitting existing structures to house the largely ineffective V300 systems, and harm to their livestock.

The Foreign DeLaval Entities' motions focus predominantly on the sufficiency of Plaintiffs' “alter-ego” allegations in the Amended Complaint, both for purposes of determining whether the amended pleading states a claim for relief and for establishing personal jurisdiction. Therefore, the Court describes those allegations below, which are set forth in granular detail in Paragraphs 24 through 98 of the Amended Complaint.

Alleged Disregard of Corporate Form and Control

DeLaval Inc. is a Delaware corporation with a principal place of business in Missouri, that designs, manufactures, advertises markets, and installs robotic milking systems in the animal husbandry industry. West Agro is a Delaware corporation, also with a principal place of business in Missouri, that runs a similar business, and is a wholly owned subsidiary of DeLaval Inc.

Tetra Laval International SA (“TLI” or “Tetra Laval”) is a Swiss company collectively owned by three members of the “Rausing Family.” It is the controlling owner of the DeLaval Group, and is the corporate parent, grandparent, or great-grandparent of the Foreign DeLaval Entities, DeLaval Inc., and West Agro.

DeLaval International AB (“DLI”) is a Swedish company that is a wholly owned subsidiary of DeLaval Holding BV (“DHBV”). DLI allegedly “controls and directs the content of all marketing and sales information provided to dairy farmers by coordinating with employees of DeLaval Inc., including in Missouri.” [Doc. 199 ¶ 20.]

DHBV is the parent company of DeLaval Inc. and DLI and owns all shares of both companies. It is founded under the laws of the Netherlands. DeLaval Holding AB (“DHAB”) is a Swedish company that is DHBV's corporate parent. DHAB is a wholly owned subsidiary of TLI.

Plaintiffs allege that all the Defendants are controlled by one board, act as a single economic unit, do not observe corporate separateness, and have collectively implemented a fraudulent scheme to market and sell the V300s to Plaintiffs and the putative classes, while siphoning funds away from DeLaval Inc. that would otherwise be available to compensate the class members for their losses. Defendants allegedly operate as a non-legal entity referred to as “DeLaval Group,” “DeLaval,” or “One DeLaval.” Each company is treated as a mere division of this group. TLI allegedly asserts operational control over all Defendants throughout the group, including as it relates to the design, manufacture, sale, and distribution of the V300.

All Defendants operate under the “Tetra Laval Group Board” and the “DeLaval Group Management Team.” The Group Board and Group Management allegedly have decision-making authority that supersedes that of the management or directors of each of the individual Defendant entities. The Group Board is responsible for the overall strategy of TLI, and allegedly “directs, mandates and controls the business operations of each Defendant.” Nine individuals sit on the Group Board, three of whom are members of the family that collectively owns TLI. Several of the members of the Group Board also sit on the boards of directors of other Defendants.

The members of the Group Management are appointed by the Group Board. Group Management members purportedly exert day-to-day control over Defendants' operations, including the design, manufacture, sale, marketing and distribution of the V300. The CEO of the DeLaval Group is on the Board of Directors of both DHAB and DLI, is allegedly employed by DLI, but serves as the CEO without distinguishing between or among any of the Defendants. Plaintiffs claim that the CEO was involved in the design of the V300 through participation in projects and studies in the United States and was involved in the marketing of the V300 in the United States. The CFO of DeLaval Group is allegedly employed by DHBV or a subsidiary and serves in those roles without distinguishing between them. Other members of the Group Management are claimed to be employed by DLI, except for the Executive Vice President of Cluster Americas, who is employed by DeLaval Inc., and they too serve in their roles without distinguishing between technical legal entities.

Plaintiffs assert that the Group Board and Group Management control or dominate each individual Defendant's operation and management. All Defendants allegedly have the same directors or officers because the Group Management team and the Group...