Nestl Purina Petcare Co. v. Blue Buffalo Co.

Citations: 129 F. Supp. 3d 787; 2015 WL 5226483Docket: Case No. 4:14 CV 859 RWS

Court: District Court, E.D. Missouri; September 8, 2015; Federal District Court

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Wilbur-Ellis has filed a motion to dismiss claims brought by Blue Buffalo Company, which arise from an underlying lawsuit by Nestle Purina PetCare Company. Purina alleges that Blue Buffalo falsely advertised its pet foods as free from poultry by-product meal, a violation of the Lanham Act. Blue Buffalo admits to the presence of poultry by-product in its products and claims that Wilbur-Ellis and Diversified Ingredients misled them by supplying by-product meal instead of chicken and turkey meal. Blue Buffalo seeks indemnity and contribution from Wilbur-Ellis for any liabilities to Purina, along with damages based on multiple legal theories, including breach of contract and fraud. 

Wilbur-Ellis seeks to dismiss specific claims under Federal Rule of Civil Procedure 12(b)(6), asserting that Blue Buffalo's tort claims are barred by the economic loss doctrine, that its claims under California's Unfair Competition Law lack sufficient connection to California, and that legal indemnity for Lanham Act liability is not applicable. 

The court outlines the legal standard for evaluating a motion to dismiss, emphasizing that factual allegations in the complaint must be accepted as true and that claims must be plausible. Wilbur-Ellis contends that the economic loss doctrine should preclude Blue Buffalo's claims for misrepresentation and negligence; however, Blue Buffalo argues that the choice of law issue is not ready for resolution and that determining the enforceability of contracts is a prerequisite to applying the economic loss doctrine.

Wilbur-Ellis' motion to dismiss claims brought by Blue Buffalo is denied without prejudice, as dismissal would be premature at this stage. Missouri's choice of law rules apply, necessitating an examination of conflicting state laws. A conflict arises regarding the economic loss doctrine as it pertains to intentional tort claims: Missouri bars fraud-related claims for economic losses unless based on independent misrepresentations, while Texas and California allow such claims even when they relate to contractual misrepresentations. This discrepancy affects Blue Buffalo's claims for intentional/fraudulent misrepresentation and fraud in the inducement. 

In their negligence claims, Blue Buffalo alleges two theories: Wilbur-Ellis' negligence regarding its own representations in contracts with Blue Buffalo, and alternatively, its negligence concerning representations related to contracts with Diversified, where Blue Buffalo claims to be a third-party beneficiary. If the negligence claims are based purely on contractual representations without independent economic injury, they will be barred under the laws of Missouri, Texas, and California. However, California provides an exception to the economic loss doctrine if a "special relationship" exists. Thus, a choice of law issue emerges regarding the negligence claims based on the third-party beneficiary theory.

Under California law, a defendant may be liable for negligence to a non-privity party if they have a duty to protect that party's property or economic interests, as outlined in Platte Anchor Bolt, Inc. v. IHI, Inc. and Aas v. San Diego Cty. Superior Ct. This raises a choice of law issue concerning Blue Buffalo's negligence claims. The applicable law is determined by the state with the most significant relationship to the case, based on factors such as the location of the injury and conduct, as well as the parties' domiciles and business locations.

Blue Buffalo claims Wilbur-Ellis defrauded it by misrepresenting quality control expertise and supplying defective products. Key facts include that Wilbur-Ellis operates a plant in Texas, is incorporated in California, and has a contract with a Missouri company, Diversified, which includes a California choice of law clause. Blue Buffalo asserts it faced potential liability due to consumer lawsuits related to this issue. However, the court finds the current factual record inadequate to resolve the choice of law issue, particularly regarding where the injury and conduct occurred.

Additionally, even if a choice of law analysis were possible, it would be premature to determine whether Blue Buffalo's claims could be dismissed under the economic loss doctrine. This doctrine's applicability hinges on whether the tort claims are distinct from contractual agreements. The enforceability and terms of Blue Buffalo's contracts with Wilbur-Ellis are contested, with Blue Buffalo claiming a direct relationship based on signed specifications. However, these contracts are not currently available for review, leaving questions about their enforceability and scope unresolved. Blue Buffalo also claims to be a third-party beneficiary of contracts between Diversified and Wilbur-Ellis.

Blue Buffalo contends that Wilbur-Ellis and Diversified each created their own contracts for ingredient shipments, leading to ambiguity over which contract governs due to conflicting terms. Notably, Diversified's contract lacks a clause on damage exposure, while Wilbur-Ellis's contract seeks to limit such exposure. Additionally, Diversified's contract specifies Missouri law, contrasting with Wilbur-Ellis's choice of California law. Although Blue Buffalo's negligence and possibly intentional tort claims may be obstructed by the economic loss doctrine, the court cannot yet determine the contracts' enforceability and scope. Consequently, Blue Buffalo has presented a plausible claim for relief, and Wilbur-Ellis's motion to dismiss Blue Buffalo's third-party claims for intentional/fraudulent misrepresentation, negligent misrepresentation, fraud in the inducement, and negligence is denied without prejudice.

Regarding California’s Unfair Competition Law (UCL), which prohibits unlawful, unfair, or deceptive business practices, Wilbur-Ellis argues for dismissal based on Blue Buffalo being an out-of-state party with alleged misconduct outside California. Although non-California plaintiffs can sue under the UCL for actions occurring in California, the claim must have a substantial connection to the state. The court finds that Blue Buffalo has not substantiated any unlawful conduct or injuries in California, as allegations only relate to Wilbur-Ellis's incorporation and headquarters there. The remaining allegations pertain to events in Texas and injuries in Missouri and Connecticut. Thus, Blue Buffalo's UCL claim is dismissed without prejudice.

For the indemnity and contribution claims, Wilbur-Ellis asserts that there is no right to such claims for Lanham Act violations. The court agrees, stating that Blue Buffalo's claims for indemnity and contribution regarding potential Lanham Act liability are legally barred, as there is no federal common law basis for these claims.

No express right of contribution or indemnity exists under the Lanham Act, as indicated by 15 U.S.C. § 1117. Courts have consistently ruled against implying such rights, as seen in Wagner v. Circle W. Mastiffs. The court agrees with this reasoning and will not imply a right to indemnity or contribution in Purina's Lanham Act claim against Blue Buffalo. Additionally, Wilbur-Ellis contends that Blue Buffalo cannot seek indemnity or contribution for potential liability under Purina’s claims for unjust enrichment and unfair competition, arguing these are intentional torts. Under Missouri's "intentional misconduct rule," claims for indemnity or contribution are barred among willful joint tortfeasors, as established in Missouri Pac. R. Co. v. Whitehead, Kales Co. However, if the underlying claims encompass both intentional and negligent conduct, the rule may not apply, as noted in Charter Express, Inc. v. United S. Assur. Co. In this case, Purina's claims are broad enough to potentially include both types of conduct, and Blue Buffalo's assertion that the byproduct was present in its food without its knowledge must be accepted as true at this stage. The determination of Blue Buffalo's liability is still pending. Therefore, the court cannot dismiss Blue Buffalo's claim for indemnity or contribution regarding Purina's unjust enrichment and unfair competition claims. Consequently, Wilbur-Ellis' motion to dismiss is granted in part and denied in part. Blue Buffalo is ordered to file an amended third-party complaint by September 25, 2015. Regarding Wilbur-Ellis' argument on the application of Fed. R. Civ. P. 9(b) to Blue Buffalo's fraud and negligent misrepresentation claims, the court finds that Blue Buffalo has adequately stated a claim, and since it has not plausibly alleged a violation of the UCL, further dismissal arguments by Wilbur-Ellis will not be addressed.