Case: 1:19-cv-00134-SNLJ Doc. #: 33 Filed: 06/24/20 Page: 1 of 8 PageID #: 175
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MISSOURI
`SOUTHEASTERN DIVISION
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`L&F BRANDS, INC.,
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` Plaintiff,
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`CROWN VALLEY WINERY, INC.,
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` Defendant.
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`Case No. 1:19-CV-134-SNLJ
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`MEMORANDUM AND ORDER
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`Plaintiff L&F Brands, Inc. filed this lawsuit against defendant Crown Valley
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`Winery, Inc. on August 12, 2019. Defendant moved to dismiss [#17], and plaintiff
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`responded by filing an amended complaint [#23]. Defendant now moves to dismiss
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`Counts V, VI, and VII of the amended complaint [#26].
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`I.
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`Factual Background
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`For the purposes of this motion to dismiss, the facts alleged in the complaint are
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`presumed true. Plaintiff L&F markets, sells, and distributes adult beverages or alcohol
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`products. Defendant Crown Valley is a winery, brewery, and distillery. On March 28,
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`2018, the parties entered into a Manufacturing Agreement under which defendant
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`produced certain adult beverages to be marketed and sold by plaintiff. Those beverages
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`included “chocolate and cream based wine blends and later a cream and coffee based
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`alcohol blend.” [#23 at ¶ 5.]
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`L&F alleges that in July 2018, Crown Valley produced 3,136 cases of “Els Iced
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`Coffee” for L&F. At an August 2018 taste test, it was discovered that the flavor was
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MISSOURI
`SOUTHEASTERN DIVISION
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`L&F BRANDS, INC.,
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` Plaintiff,
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`CROWN VALLEY WINERY, INC.,
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` Defendant.
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`Case No. 1:19-CV-134-SNLJ
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`MEMORANDUM AND ORDER
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`Plaintiff L&F Brands, Inc. filed this lawsuit against defendant Crown Valley
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`Winery, Inc. on August 12, 2019. Defendant moved to dismiss [#17], and plaintiff
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`responded by filing an amended complaint [#23]. Defendant now moves to dismiss
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`Counts V, VI, and VII of the amended complaint [#26].
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`I.
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`Factual Background
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`For the purposes of this motion to dismiss, the facts alleged in the complaint are
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`presumed true. Plaintiff L&F markets, sells, and distributes adult beverages or alcohol
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`products. Defendant Crown Valley is a winery, brewery, and distillery. On March 28,
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`2018, the parties entered into a Manufacturing Agreement under which defendant
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`produced certain adult beverages to be marketed and sold by plaintiff. Those beverages
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`included “chocolate and cream based wine blends and later a cream and coffee based
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`alcohol blend.” [#23 at ¶ 5.]
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`L&F alleges that in July 2018, Crown Valley produced 3,136 cases of “Els Iced
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`Coffee” for L&F. At an August 2018 taste test, it was discovered that the flavor was
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`Case: 1:19-cv-00134-SNLJ Doc. #: 33 Filed: 06/24/20 Page: 2 of 8 PageID #: 176
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`wrong, and Crown Valley told L&F it could safely and legally adjust the taste by adding
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`an additional ingredient. L&F alleges this was not true; in fact, the additional ingredient
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`caused an improper pH level in the product, leading to “product failure.” L&F also states
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`that Crown Valley concealed that information from L&F. By the time L&F discovered
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`what had happened, however, half of the cases of the product had already been
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`distributed to various markets. L&F learned in October 2018 that Crown Valley had used
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`substitute ingredients in producing that product, instead of ingredients specified in the
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`Agreement and provided by L&F.
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`Crown Valley produced another batch of product in September 2018. By October
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`2018, L&F discovered many of those cases were contaminated with bacteria, again
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`causing product failure. L&F alleges that this failure was caused by an unsanitary
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`production environment. L&F could not sell over 6,000 cases of the product as a result.
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`Also, in September 2018, Crown Valley told L&F that it had additional “Coffee
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`Cream ingredient” that would be available for future blending, and L&F agreed to
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`purchase 12 “totes” of that ingredient. Although L&F paid Crown Valley over $38,000,
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`Crown Valley never ordered, received, or used the ingredient in any future L&F product.
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`L&F’s amended complaint includes the following counts:
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`Count I: breach of contract for the Manufacturing Agreement
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`Count II: breach of contract for the Coffee Cream Agreement
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`Count III: breach of express warranty
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`Count IV: breach of implied warranty of good faith
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`Case: 1:19-cv-00134-SNLJ Doc. #: 33 Filed: 06/24/20 Page: 3 of 8 PageID #: 177
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`Count V: fraud
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`Count VI: unjust enrichment
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`Count VII: money had and received.
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`Crown Valley has moved to dismiss Counts V-VII.
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`II.
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`Legal Standard
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`The purpose of a Rule 12(b)(6) motion to dismiss is to test the legal sufficiency of
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`a complaint so as to eliminate those actions “which are fatally flawed in their legal
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`premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial
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`and trial activity.” Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001)
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`(quoting Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). In addressing a motion to
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`dismiss, a court must view the allegations of the complaint in the light most favorable to
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`the plaintiff. United States ex rel. Ambrosecchia v. Paddock Laboratories, LLC., 855
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`F.3d 949, 954 (8th Cir. 2017). A complaint must be dismissed for failure to state a claim
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`upon which relief can be granted if it does not plead “enough facts to state a claim to
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`relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
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`(2007) (abrogating the prior “no set of facts” standard set forth in Conley v. Gibson, 355
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`U.S. 41, 45-46 (1957)). Courts “do not require heightened fact pleading of specifics, but
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`only enough facts to state a claim to relief that is plausible on its face.” Id. at 555. A
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`complaint must set forth factual allegations which are enough to “raise a right to relief
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`above the speculative level.” Id. at 555. However, where a court can infer from those
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`factual allegations no more than a “mere possibility of misconduct,” the complaint must
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`Case: 1:19-cv-00134-SNLJ Doc. #: 33 Filed: 06/24/20 Page: 4 of 8 PageID #: 178
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`be dismissed. Cole v. Homier Distributing Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010)
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`(citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)).
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`III. Discussion
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`Each of the subject counts is discussed below.
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`A.
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`Count V: Fraud
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`Defendant moves to dismiss Count V for fraud because it is barred by the
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`economic loss doctrine. “The economic loss doctrine prohibits a plaintiff from seeking to
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`recover in tort for economic losses that are contractual in nature.” Trademark Medical,
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`LLC v. Birchwood Laboratories, Inc., 22 F.Supp.3d 998, 1002 (E.D. Mo.2014). Here,
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`plaintiff alleges economic or commercial losses related to the following alleged
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`misrepresentations:
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`• That defendant had failed to disclose the misblending or use of incorrect
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`ingredients [#23 at ¶ 76].
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`• That defendant falsely represented to plaintiff that it could safely, legally,
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`and properly add an additional ingredient to adjust the flavor without
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`causing or increasing risk of an improper pH level [id. ¶ 77].
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`• That defendant falsely represented that it was producing products in a
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`clean, sanitary, and sterile environment [id. ¶ 79].
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`• That defendant falsely represented that it could purchase an additional
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`ingredient (the “coffee cream”) for future use, but, despite being paid to
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`Case: 1:19-cv-00134-SNLJ Doc. #: 33 Filed: 06/24/20 Page: 5 of 8 PageID #: 179
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`order it, defendant never ordered, received, or used the ingredient [id. at ¶
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`81].
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`Defendant contends that these allegations are all related to the contract and thus may only
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`be actionable under contract theories, not in tort.
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`“A fraud claim independent of the contract is actionable, but it must be based upon
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`a misrepresentation that was outside of or collateral to the contract, such as many claims
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`of fraudulent inducement. That distinction has been drawn by courts applying traditional
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`contract and tort remedy principles.” AKA Distrib. Co. v. Whirlpool Corp., 137 F.3d
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`1083, 1086 (8th Cir.1998). This Court has identified two “critical factors in examining
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`whether a fraud claim is independent of a contract claim under the economic loss
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`doctrine,” including
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`(1) whether the subject matter of the alleged misrepresentations was
`incorporated into the parties' contract (see AKA Distrib., 137 F.3d at 1087
`(alleged misrepresentations concerned “a term of the contract” and were
`therefore not actionable)) and (2) whether the plaintiff suffered additional
`damages outside the contract as a result of the alleged fraud (see
`Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 20
`(2d Cir.1996) (citing cases) (to be actionable a fraud claim must “seek special
`damages that are caused by the misrepresentation and unrecoverable as
`contract damages”)).
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`Compass Bank v. Eager Rd. Associates, LLC, 922 F. Supp. 2d 818, 827 (E.D. Mo. 2013).
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`None of plaintiff’s fraud allegations survive this analysis. The allegation that
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`defendant failed to disclose its improper blending, that it could fix the problem it created,
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`and that it was producing the products in a sanitary environment all seem to be just
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`another way of saying that defendant breached the contract—the damages are the same.
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`Case: 1:19-cv-00134-SNLJ Doc. #: 33 Filed: 06/24/20 Page: 6 of 8 PageID #: 180
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`Although plaintiff contends that it suffered additional damages from the alleged fraud by
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`the delay and by way of damage to its reputation, “the economic loss doctrine
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`encompasses consequential economic loss such as loss of profits and loss of good will or
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`business reputation.” Trademark Med., LLC v. Birchwood Laboratories, Inc., 22 F.
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`Supp. 3d 998, 1004 (E.D. Mo. 2014). Plaintiff argues that defendant’s representation that
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`it could legally fix the mistake is sufficiently outside the contract, but defendant’s attempt
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`to remedy its failures under the contract still pertain to the contract. They do not
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`constitute an independent fraud claim.
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`As for the representation that defendant could purchase the coffee cream,
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`defendant’s duty to procure the coffee cream was incorporated into the contract. It
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`cannot form the basis of a fraud claim because “the pre-contract misrepresentations
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`became part of the final contract, and the plaintiff alleged no damages outside of what
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`was due under the contract itself.” OS33 v. CenturyLink Communications, L.L.C., 350 F.
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`Supp. 3d 807, 816 (E.D. Mo. 2018). Plaintiff’s damages from the alleged “fraud” are
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`exactly its damages as a result of the breach of contract.
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`The economic loss doctrine therefor bars plaintiff’s fraud claims. Count V will be
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`dismissed.
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`B.
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`Counts VI and VII: Unjust Enrichment and Money Had and Received
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`To state a claim for unjust enrichment, plaintiff must allege “(1) that the defendant
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`was enriched by the receipt of a benefit; (2) that the enrichment was at the expense of the
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`plaintiff; and (3) that it would be unjust to allow the defendant to retain the benefit.”
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`Case: 1:19-cv-00134-SNLJ Doc. #: 33 Filed: 06/24/20 Page: 7 of 8 PageID #: 181
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`Dubinsky v. Mermart LLC, 4:08-CV-1806 (CEJ), 2009 WL 1011503, at *5 (E.D. Mo.
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`Apr. 15, 2009), aff'd, 595 F.3d 812 (8th Cir. 2010) (quoting Executive Bd. of Missouri
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`Baptist Convention v. Windermere Baptist Conf. Ctr., 280 S .W.3d 678, 697 (Mo. App.
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`2009)). Similarly, a claim for money had and received requires that “(1) the defendant
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`received or obtained possession of the plaintiff's money; (2) the defendant thereby
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`appreciated a benefit; and (3) the defendant's acceptance and retention of the money was
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`unjust.” Gerke v. City of Kansas City, 493 S.W.3d 433, 438 (Mo. App. W.D. 2016).
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`“It is a well-settled principle of law that implied contract claims [such as unjust
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`enrichment] arise only where there is no express contract.” Lowe v. Hill, 430 S.W.3d 346,
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`349 (Mo. App. W.D. 2014). “Accordingly, a plaintiff cannot recover under an equitable
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`theory when she has entered into an express contract for the very subject matter for which
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`she seeks to recover.” Id.; see also Grisham v. Mission Bank, 531 S.W.3d 522, 538–39
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`(Mo.App. W.D. 2017) (quoting id.). Defendant thus contends that these two equitable
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`claims are unavailable to plaintiff and must be dismissed.
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`Plaintiff responds that Counts VI and VII are alternatives to L&F’s breach of
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`contract claims. Indeed, “a party may plead claims both for breach of contract, and on
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`equitable theories which are only available in the absence of a contract.” Steelhead
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`Townhomes, L.L.C. v. Clearwater 2008 Note Program, LLC, 537 S.W.3d 855, 863
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`(Mo.App. W.D. 2017). However, plaintiff does not plead these counts in the alternative.
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`Plaintiff relies on Owen v. General Motors Corp., in which the court denied a motion to
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`dismiss equitable claims because “[t]he fact that a plaintiff cannot simultaneously recover
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`Case: 1:19-cv-00134-SNLJ Doc. #: 33 Filed: 06/24/20 Page: 8 of 8 PageID #: 182
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`damages for both breach of an express contract and unjust enrichment does not preclude
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`that plaintiff from pleading both theories in her complaint.” 06-4067 CV CNKL, 2006
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`WL 2808632, at *2 (W.D. Mo. Sept. 28, 2006). That court, however, noted that it must
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`accept that “allegations necessary to the unjust enrichment count are also true, namely
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`that there was no valid contract.” Id. Plaintiff’s pleading here makes no such allegation;
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`rather, the equitable counts adopt all previous allegations, including the existence of a
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`valid contract. As a result, this Court will dismiss Counts VI and VII because they are
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`improperly pleaded.
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`Accordingly,
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`IT IS HEREBY ORDERED that defendant’s motion to dismiss [#17] is
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`DENIED as moot.
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`IT IS FURTHER ORDERED that defendant’s partial motion to dismiss [#26] is
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`GRANTED, and Counts V, VI, and VII are dismissed.
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`Dated this 24th day of June, 2020.
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`_____________________________________
`STEPHEN N. LIMBAUGH, JR.
`UNITED STATES DISTRICT JUDGE
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