Monsanto Company v. Hensel Seed Solutions LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

SOUTHEASTERN DIVISION

MONSANTO COMPANY, )

)

Plaintiff, )

)

v. ) Case No. 4:18-CV-1812-SNLJ

)

HENSEL SEED SOLUTIONS LLC, )

)

Defendant. )

MEMORANDUM AND ORDER

This matter is before the Court on plaintiff Monsanto Company’s motion to

dismiss defendant Hensel Seed Solution LLC’s Second Amended Counterclaims.

I. Factual Background

Plaintiff Monsanto manufactures crop seeds which it sells to farmers through

dealers. Defendant Hensel is or was a seed dealer for plaintiff. Plaintiff and defendant

entered into Monsanto Brand Seed Dealer Agreement (“MBSD”) that sets forth the terms

of the parties’ relationship. Plaintiff filed this lawsuit seeking damages for defendant’s

alleged breach of the MBSD and of the parties’ credit agreement and for unjust

enrichment.

Hensel filed an answer with affirmative defenses and counterclaims for (I) price

discrimination under Section 2(a) the Robinson Patman Act, and (II) for breach of

contract. This Court granted Monsanto’s motion to dismiss Hensel’s counterclaim for

breach of contract but granted defendant leave to file an amended counterclaim. Hensel

filed the amended counterclaim on September 23, 2019, again bringing both Count I for

price discrimination and Count II for breach of contract. Monsanto now seeks dismissal

of both counts.

II. Motion to Dismiss Counterclaim

The purpose of a Rule 12(b)(6) motion to dismiss is to test the legal sufficiency of

a complaint so as to eliminate those actions “which are fatally flawed in their legal

premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial

and trial activity.” Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001)

(quoting Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). A complaint, or counterclaim

in this case, must be dismissed for failure to state a claim upon which relief can be

granted if it does not plead “enough facts to state a claim to relief that is plausible on its

face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) (abrogating the prior “no

set of facts” standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Courts

“do not require heightened fact pleading of specifics, but only enough facts to state a

claim to relief that is plausible on its face.” Id. at 555. A complaint must set forth factual

allegations which are enough to “raise a right to relief above the speculative level.” Id. at

555. However, where a court can infer from those factual allegations no more than a

“mere possibility of misconduct,” the complaint must be dismissed. Cole v. Homier

Distributing Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010) (citing Ashcroft v. Iqbal, 556

U.S. 662 (2009)).

A. Count I

Hensel’s Count I is brought under Section 2(a) of the Robinson-Patman Act, 15

U.S.C. § 13(a). The Act was originally enacted to curb localized price-cutting tactics

and was amended in response to the advent of large chain stores and their perceived

ability to obtain lower prices for goods than smaller competitors could demand. See

Volvo N. Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 175 (2006). In its current

form, Section 2(a) provides in relevant part:

It shall be unlawful for any person engaged in commerce ... to discriminate

in price between different purchasers of commodities of like grade and

quality, ... where the effect of such discrimination may be substantially to

lessen competition or tend to create a monopoly in any line of commerce, or

to injure, destroy, or prevent competition with any person who either grants

or knowingly receives the benefit of such discrimination, or with customers

of either of them ....

15 U.S.C. § 13(a). Hensel’s claim is a “secondary-line” case, which involves “price

discrimination that injures competition among the discriminating seller’s customers…;

cases in this category typically refer to ‘favored’ and ‘disfavored’ purchasers.” Volvo

Trucks N. Am., Inc., 546 U.S. at 176. Hensel asserts it and other small independent

dealers are “disfavored” purchasers, whereas large chain retailers are “favored.” To

establish a claim, Hensel must show that (1) the relevant seed sales were made in

interstate commerce; (2) the seeds were of “like grade and quality”; (3) Monsanto

discriminated in price between Hensel and another purchaser of such Monsanto seeds;

and (4) the “effect of such discrimination may be …to injure, destroy, or prevent

competition” to the advantage of a favored purchaser. Id. at 546 U.S. at 176-77. Hensel

must also show antitrust injury. See J. Truett Payne Co. v. Chrysler Motors Corp., 441

U.S. 557, 568 (1981).

Monsanto argues that Hensel has not sufficiently pleaded that the seeds at issue

are of “like grade and quality.” Hensel pleads that Monsanto sold its “DeKalb Corn

Seeds…incorporating or involving Smart Stax Rib and/or VT2 Pro RIB technologies” at

prices $100 less per bag to large chain retailers than the prices it sold to small retailers

like Hensel. (#42 at ¶¶ 12, 15.) It states

Every month for the years 2014 to 2017, Monsanto sold these same seeds,

which are of like grade and quality, to the Large Chain Retailers at prices of

at least $100 per bag lower, and at least 25% lower per bag, than the prices

which Monsanto was selling them to Hensel Seed and other Independent

Dealers.

(#42 at ¶ 14.) Defendant counters that because there are over 200 varieties of

Dekalb branded corn seeds, and “almost 90” varieties have the technologies Hensel

identifies, Hensel’s pleading lacks the specificity required under Twombly, 550 U.S. at

555. Monsanto argues that this case is like Tires Inc. of Broward v. Goodyear Tire &

Rubber Co., 295 F. Supp. 2d 1349, 1353 (S.D. Fla. 2003), in which the plaintiff claimed

price discrimination by a tire manufacturer among competing tire retailers but did not

identify which specific tires were allegedly sold to others at lower prices. That court

required plaintiff to identify the specific tires by make and model sold by Goodyear to a

particular competitor. Id.

This case is distinguishable. In determining whether the DeKalb corn seeds sold

to competitors were “of like grade and quality,” it seems enough simply to identify a

category of seeds that have specific traits, like the Smart Stax Rib and/or VT2 Pro RIB

technologies here. Although there are supposedly 90 or so varieties of these specially

traited seeds, they presumably don’t differ fundamentally. That is why they are

varieties—varieties of seeds of like grade and quality. And surely the rule doesn’t

require the plaintiff to mix or match 90 varieties of specially traited corn seeds in the

pleading stage.

Next, Monsanto argues that Hensel has not pleaded “competitive injury,” showing

that Hensel lost a specific sale to a specific customer to a specific competitor because of

the alleged price discrimination. The Robinson–Patman Act does not “ban all price

differences charged to different purchasers of commodities of like grade and quality.”

Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 220 (1993).

Rather, the Act requires injury to competition. Id. “A hallmark of the requisite

competitive injury…is the diversion of sales or profits from a disfavored purchaser to a

favored purchaser.” Volvo Trucks N. Am., Inc., 546 U.S. at 177. Alternatively, “a

permissible inference of competitive injury may arise from evidence that a favored

competitor received a significant price reduction over a substantial period of time.” Id.

Monsanto insists that Hensel was required to identify the loss of a specific sale to

a specific customer to a competitor. To the extent such specifics are required at the

motion to dismiss stage, Hensel has complied. Indeed, Monsanto’s version of the record

is very misleading: Despite Monsanto’s representation that Hensel has not identified any

lost customers, Hensel identified “West Central FS” as a major customer it lost to a

“Large Chain Retailer.” The chain retailers, Hensel explains, had bought the seeds from

Monsanto at a 25% discount, and therefore were able “to sell the seeds at an amount

below what Hensel Seed was able to purchase the seeds for at wholesale.” Furthermore,

those chain retailers in direct competition with Hensel specifically included Nutrien Ag

Solutions, FS Seed, and Crop Production Services. Hensel thus pleads both diversion of

sales or profits to favored purchasers at the expense of independent seed dealers like

itself, as well as least three years of significant price reductions. Hensel has pleaded

competitive injury to withstand Monsanto’s motion to dismiss.

Next, Monsanto contends that Hensel failed to plead antitrust injury. In contrast to

competitive injury, “[a]ntitrust injury is the threshold issue that plaintiffs must establish

in order to have standing to sue under the antitrust laws.” Fischer v. NWA, Inc., 883 F.2d

594, 597 n.5 (8th Cir. 1989). The plaintiff must have been “the target of the

anticompetitive activity, not one who has merely suffered indirect, secondary, or remote

injury. … In short, consequential injury is not an antitrust injury.” Lovett v. Gen. Motors

Corp., 975 F.2d 518, 520-21 (8th Cir. 1992) (internal quotations omitted) (quoting

Midwestern Waffles, Inc. v. Waffle House, Inc., 734 F.2d 705, 710-11 (11th Cir.1984)).

The focus of “antitrust injury” is on whether the challenged conduct has actually caused

harm to the plaintiff. J. Truett Payne, 451 U.S. at 561-62. Such “antitrust injury” should

be “the type of loss that the claimed violations would be likely to cause.” Brunswick

Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).

Monsanto argues that Hensel has only conclusorily pleaded that its claimed

injuries are attributable to any alleged price discrimination by Monsanto. This Court

finds that Hensel has sufficiently pleaded antitrust injury. The injuries of which Hensel

complains—lost sales due to an inability to compete with Monsanto’s favored

purchasers—are indeed the injuries one would expect from alleged price discrimination.

Hensel pleads that such was the case.

B. Count II

This Court dismissed Hensel’s First Amended Counterclaim’s Count II for breach

of contract with leave to replead because, as it pertained to fraud allegations,

Hensel alleged nothing more than Monsanto “lied about” and “concealed”

critical facts and provided no “who, what, where, when, and how” details

required by Rule 9(b). Although the allegations are insufficient at this point,

Hensel will be permitted to replead this claim with particularity.

(#37). Monsanto again moves to dismiss Count II for failure to plead allegations of

“lying” and “dishonesty” properly. Specifically, Monsanto contends that Hensel’s new

allegations regarding misrepresentations made by Monsanto employees fail both Federal

Rules of Civil Procedure 8 and 9(b). Hensel added to its allegations a series of facts

involving Bill Hensel repeatedly asking identified Monsanto employees how a certain

large chain retailer could sell Monsanto corn seed for a certain price. Hensel alleges that

the employee “falsely stated that [he or she] did not know how that was possible” when

in fact he or she knew the large chain retailer’s “incredibly low prices were possible only

because Monsanto was engaged in massive price discrimination.” [#42 at ¶¶ 21-25.]

Hensel pleads dates and locations for these alleged misrepresentations.

Notwithstanding Hensel’s new allegations, Monsanto insists that there was no

falsity, and thus no breach, unless the employees had knowledge. That is, Monsanto

argues Hensel did not even plead enough facts to satisfy Rule 8, which requires Hensel to

plead sufficient factual matter to make the Monsanto employees’ knowledge of their

dishonesty plausible. See Igbal, 556 U.S. at 678.

This Court disagrees. Again, Monsanto’s analysis is misleading. Hensel did plead

that the Monsanto employees knew the falsity of their representations. For example,

Hensel pleaded

these Monsanto employees knew that the Large Chain Retailers’ incredibly

low retail prices were possible only because Monsanto was engaged in

massive price discrimination (over $100 per bag) in favor of Large Chain

Retailers and against smaller independent dealers like Hensel Seed.

[#42 at | 25.] Hensel thus pleaded the misrepresentations comprising its breach of

contract claim with particularity and in satisfaction of both Rules 8 and 9(b).

Accordingly,

IT IS HEREBY ORDERED that plaintiff Monsanto’s motion to dismiss

counterclaims is DENIED.

Dated this 30th day of April, 2020.

$$$ ——__—__—__

STEPHEN N. LIMBAUGH, JR. *

UNITED STATES DISTRICT JUDGE