Montana Merchandising v. Dave’s Killer Bread

VENUE: Transfer of organic wheat contract dispute from Montana to Oregon under first-to-file rule denied where “red flags” exist as to anticipatory suit in Oregon in apparent attempt to forum shop… Morris.

Dave’s Killer Bread produces organic bread products at its main facility in Milwaukie, Ore. DKB asked Montana Merchandising to procure organic wheat and provide milling. DKB reps Ron Milio and John Tucker traveled to Great Falls 10/25/13 to meet with 30 wheat growers and solicit them to provide wheat. Hinebaugh Grain and OCC-O’Connor Crops attended. Milio spoke at the Montana Organic Association conference in Kalispell in 12/13 discussing DKB’s need for Montana wheat. MM began working with suppliers to build a new mill to serve DKB. DKB and MM entered into a contract 1/5/14 whereby MM agreed to procure, and DKB agreed to purchase, millions of pounds of organic wheat. MM separately entered into 94 agreements with Montana growers on DKB’s behalf, and DKB and MM entered into a contract 1/17/14 whereby MM agreed to mill most of the wheat in Montana. Milio traveled to Montana twice in 2014 where MM asserts that he reaffirmed his promise to purchase millions of pounds of wheat and represented that DKB would need increasing amounts and all of MM’s milling capacity. Milio and other DKB reps flew to Great Falls in 6/15 to film 4 farming operations and an MOA farm tour to promote DKB’s use of Montana organic wheat. MM asserts that Milio again represented that DKB would need Montana wheat well beyond the 3-year term of the contracts. In 9/15, Flowers Foods, a Georgia corporation, acquired DKB, which emerged as a wholly owned subsidiary. MM asserts that shortly thereafter, DKB/Flowers refused to honor its commitments to MM and the Montana growers. DKB/Flowers claims that disagreements arose as to information about and volume of wheat DKB was bound to accept, the length of time for which it was bound, and shipping conditions. Milio and Flowers’s rep Miles Dennis flew to Great Falls in 11/15 to meet with MM. They attended the MOA conference in Bozeman in 12/15 where Dennis was the dinner speaker. MM Pres/CEO Greg Thayer and employee Sam Schmidt traveled to Oregon in 2/16 to meet with Milio. Milio, Dennis, and another Flowers employee, Craig Parr, met with MM in Great Falls in 5/16. Thayer sent an email to Dennis and Parr 10/25/16 informing them that MM would seek legal assistance in recovering damages for DKB/Flowers’s failure to perform if the parties could not agree. They failed to settle at mediation in Great Falls 1/24/17. Counsel for DKB/Flowers traveled to Great Falls 2/10/17 to review MM’s agreements with the growers and discuss a possible resolution. MM’s counsel informed DKB/Flowers’s counsel that MM would immediately sue if it did not agree to pay for the wheat it was refusing to take. MM asserts that DKB/ Flowers’s counsel never contended that MM had breached the agreements, and that counsel for DKB/Flowers never threatened litigation. MM alleges that DKB/Flowers’s counsel advised that she would check again with her clients and inform MM if the matter could be resolved. The next day, 2/11/17, counsel for DKB/Flowers filed an action against MM in the District of Oregon. DKB/ Flowers’s counsel contends that she “never deceived” Plaintiffs and did not file the Oregon case “surreptitiously” or state that her clients would wait to file a suit. 10 days after DKB/Flowers filed in Oregon, MM, Hinebauch, and OCC filed this suit in Great Falls. DKB/Flowers moves to transfer this case to Oregon based on the first-to-file rule or to stay this case pending resolution of the Oregon case.

DKB/Flowers argues that Oregon provides a proper venue, transfer would serve the interests of justice, and Oregon proves more convenient for the parties and witnesses. A court may “transfer, stay, or dismiss” the 2nd-filed action to advance the interests of justice where there exists a similar and 1st-filed complaint in another district court. 28 USC 1404(a). DKB negotiated the agreements from its Oregon headquarters and transacted with MM under those agreements from Oregon for multiple years. DKB argues that this litigation will impact its 250 employees in Oregon, many of whom may be witnesses in this case. However, the events giving rise to the claims occurred in Montana and weigh in favor of resolving the dispute in Montana.Jones (9th Cir. 2000).

DKB/Flowers argues that it filed the Oregon case 10 days before Plaintiffs filed this case and that the similarity of the parties and issues support transfer. Alltrade (9th Cir. 1991). Plaintiffs suggest that DKB/ Flowers filed an anticipatory suit in Oregon in a bad faith attempt to forum shop. Id. The Court exercises its discretion to decline to apply the first-to-file rule based on the notion that it is “not a rigid or inflexible rule to be mechanically applied.” Pacesetter (9th Cir. 1982). The cases sufficiently differ. This case includes additional plaintiffs, defendants, and claims. The Court has not yet determined if it can exercise jurisdiction over the Dahl/ Goode Defendants, but they be important additions beyond the Oregon case. The Oregon case fails to include Hinebauch and OCC, which seems to assert important interests to be addressed through this litigation. The Oregon case would not completely settle all disputes. Although DKB/Flowers moves to dismiss a number of claims, a number of claims are not contested at this time that extend beyond the scope of Oregon case. Further, it appears that DKB/Flowers filed an anticipatory suit in Oregon as an apparent attempt to forum shop. A dispute exists as to whether it misled Plaintiffs into believing that settlement efforts would continue. The Court declines to rely exclusively on DKB/Flowers’s counsel’s assertion that she did not promise Plaintiffs that she would not file suit. However, it stands undisputed that the parties — all represented — contemplated litigation. The “red flags” noted in Boatmen’s FNB (8th Cir. 1995) appear where DKB/Flowers filed the 1st suit after MMI had given notice of intent to sue and the 1st action seeks a declaratory judgment as to interpretation of the contracts. The case should be tried here. DKB appears to have initiated numerous significant, purposeful contacts with Montana leading to execution of the contracts and after.

The Court further declines to stay this action pending resolution of the Oregon case. DKB/Flowers has failed to make “a clear case of hardship or inequity in being required to go forward.” Landis (US 1936). The McCullough factors (a stay is favored where it would not be indefinite, plaintiff seeks only money damages, resolution in other action would assist in resolving the stayed action, a stay would promote docket efficiency and fairness to parties) do not outweigh the Court’s determination that this case would be better resolved in Montana.

Montana Merchandising, Hinebauch Grain, and OCC-O’Connor Crops v. Dave’s Killer Bread/Flowers Foods and Dahl/Goode, 44 MFR 75, 6/9/17.

Zander Blewett & Anders Blewett (Hoyt & Blewett), Great Falls, for Plaintiffs; Ian McIntosh, Peter Habein, and Bradford Brown (Crowley Fleck), Bozeman, and Kristin Zinsmaster, Annamarie Daley, and Gregory Hanthorn (Jones Day), Minneapolis, for DKB/Flowers; Matthew Hayhurst & Thomas Leonard (Boone Karlberg), and Daniel Brooks (Scarola Malone & Zubatov), NY, for Dahl/Goode.