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Kingsburg Apple Packers, Inc. v. Ballantine Produce Co.

July 16, 2010

KINGSBURG APPLE PACKERS, INC. D/B/A KINGSBURG ORCHARDS, ET. AL. PLAINTIFFS,
v.
BALLANTINE PRODUCE CO., INC., ET. AL., DEFENDANTS.
WAGON WHEEL FARMS, INC., A CALIFORNIA CORPORATION, INTERVENOR PLAINTIFF,
v.
BALLANTINE PRODUCE CO., INC. ET. AL. DEFENDANTS.



ORDER GRANTING DEFENDANT VIRGIL RASMUSSEN'S MOTION TO DISMISS (Doc. No. 172)

This case comes before the Court on Defendant Virgil Rasmussen's ("Rasmussen") motion to dismiss plaintiff intervenor Wagon Wheel Farms, Inc.'s ("Wagon Wheel") claims brought under the Perishable and Agricultural and Commodities Act ("PACA") and related state claims against various defendants. For the reasons that follow, the motion to dismiss will be granted.

FACTUAL HISTORY*fn1

Wagon Wheel alleges that, in 2008, it entered into an oral contract with Ballantine Produce Co. ("Ballantine"), where Ballantine was to be the "exclusive commission merchant and sales broker for all of Plaintiff's fruit produced during the 2008-2009 season." See FAC ¶17. Throughout the 2008-2009 harvest season, Wagon Wheel performed its obligations by delivering marketable fruit to Ballantine for packing and marketing. As of April 2009, Plaintiff had delivered fruit to Ballantine worth $1,048,727.52, but Ballantine had only paid Wagon Wheel $30,421.30, leaving a balance of $1,018,306.22. Wagon Wheel alleges that throughout the 2008-2009 harvest season, "Defendants continued to assure Plaintiff on multiple occasions that Plaintiff would be paid in full for all fruit delivered to Ballantine." See FAC ¶21. Wagon Wheel alleges that defendants continued to take fruit from Wagon Wheel even though Ballantine was insolvent. Wagon Wheel alleges that various defendants used the proceeds received from Wagon Wheel's fruits for its own uses, including paying off preferred creditors. Wagon Wheel contends that the monies paid by Ballantine to defendant Bank of the West ("Bank") were wrongfully converted because the proceeds were impressed with a California producer's lien (California Food and Agriculture Code § 55631), which is superior in priority to the liens or security of all other creditors, including Bank.

Wagon Wheel's Alter Ego and Personal Liability Allegations Wagon Wheel alleges that Rasmussen is now and at all relevant times, was, the principal investor, manager, the chief executive officer, and part-owner of Ballantine. Wagon Wheel alleges that there exists a unity of interest and ownership between Ballantine, Redwood Farms, Inc., ("Redwood Farms"), Babijuice Corporation of California ("Babijuice") (collectively "Corporate Defendants") and David Albertson ("David"), Eric Albertson ("Eric"), and Rasmussen (collectively "Individual Defendants"), as the owners of these Corporate Defendants. Wagon Wheel alleges that "each named Defendant and each fictitiously named Defendant acted as an agent, employee, subsidiary, alter ego, or representative, of each other Defendant..." See First-Amended Complaint ("FAC") ¶12. Wagon Wheel alleges that any individuality and separateness between these Corporate Defendants and the other Individual Defendants has ceased to exist, and the Corporate Defendants are the alter egos of these Individual Defendants. Wagon Wheel alleges that Ballantine, Redwood, Babijuice were inadequately capitalized and lacked the financial resources to satisfy their obligations as they became due. Wagon Wheel contends that the Corporate Defendants were "mere shells without capital assets, and/or were conceived, intended, and/or used by Defendants David, Eric, and Rasmussen, as devices to avoid individual liability and for the purpose of substituting a financially insolvent corporate entity in place of themselves." See FAC ¶14. Wagon Wheel alleges that to adhere to the fiction of the separate existence of these Corporate Defendants would produce an inequitable result. See FAC ¶15. Wagon Wheel alleges that "defendants received the proceeds from the sale of Plaintiff's cosigned farm products and intentionally commingled the funds with defendants' general corporate accounts." See FAC ¶22.

PROCEDURAL BACKGROUND

On October 29, 2009, Wagon Wheel filed a motion to determine the validity of its PACA claims. On February 9, 2010, the Court found that Wagon Wheel did not have a valid PACA claim because it had failed to preserve its trust assets. On February 5, 2010, Wagon Wheel filed its FAC. The FAC alleges the following claims for relief: (1) Breach of Contract against defendants Ballantine, David, Eric, Graham, and Rasmussen; (2) Enforcement of PACA Trust, 7 U.S.C. §499 (e)(c)(4) against defendants Ballantine, David, Eric, Graham, Rasmussen, and Bank*fn2 ; (3) Violation of PACA, 7 U.S.C. § 499b(4) - Failure to Account and Pay Promptly against defendants Ballantine, David, Eric, Graham, and Rasmussen; (4) Violation of PACA, 7 U.S.C. § 499b(4) - False and Misleading Statement Relating to a PACA transaction against defendants Ballantine, David, Eric, Graham, and Rasmussen; (5) Breach of Fiduciary Duty against defendants Ballantine, David, Eric, Graham, and Rasmussen; (6) Conversion against defendants Ballantine, David, Eric, Graham, Rasmussen, and Bank; (7) Constructive Fraud against defendants Ballantine, David, Eric, Graham, and Rasmussen; (8) Constructive Trust and Accounting against all defendants; (9) Quantum Meruit against defendants Bank, Redwood Farms, and Babijuice; and (10) Enforcement of California Producers' Lien (Cal. Food & Ag. Code § 55631) against all defendants.

Rasmussen now moves to dismiss Wagon Wheels' FAC relief for failure to state a claim. On March 12, 2010, Wagon Wheel filed an opposition. On March 22, 2010, Rasmussen filed a reply.

On March 24, 2010, the court took the matter under submission without oral argument.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6),a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. Marceau v. Blackfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). The Court must also assume that general allegations embrace the necessary, specific facts to support the claim. Smith v. Pacific Prop. and Dev. Corp., 358 F.3d 1097, 1106 (9th Cir. 2004); Peloza v. Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th Cir. 1994). But, the Court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Although they may provide the framework of a complaint, legal conclusions are not accepted as true and "[t]hreadbare recitals of elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009); see also Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003). Furthermore, Courts will not assume that plaintiffs "can prove facts which [they have] not alleged, or that the defendants have violated . . . laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court has explained:

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, to "avoid a Rule 12(b)(6) dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949; see Twombly, 550 U.S. at 570; see also Weber v. Department of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

The plausibility standard is not akin to a 'probability requirement,' but it asks more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of 'entitlement to relief.' . . .

Determining whether a complaint states a plausible claim for relief will . . . be a context specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the ...


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