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In re Syngenta AG MIR162 Corn Litigation

United States District Court, D. Kansas

August 13, 2019

IN RE SYNGENTA AG MIR 162 CORN LITIGATION
v.
Watts Guerra, LLP, et al., This Document Relates To: Kellogg, et al. No. 18-2408-JWL

          MEMORANDUM AND ORDER

          John W. Lungstrum United States District Judge

         This matter again comes before the Court on the motion to dismiss filed by defendants Watts Guerra, LLP (“Watts Guerra”), Mikal Watts, and Francisco Guerra (Doc. # 140), in which most of the other defendants have joined (Doc. ## 142, 143, 144, 146).[1]Defendant Lowe Eklund Wakefield Co., LPA (“Lowe”) has also filed a motion to dismiss (Doc. # 149), in which it joins the other defendants' motion and asserts additional bases for dismissal. For the reasons set forth below, the Court grants the motions in part and denies them in part. The motions are granted with respect to Counts I, IV, V, VI, IX, X, XI, XII, and XIV of the amended complaint, and with respect to Count XIII to the extent based on an underlying fraud claim, and those claims are hereby dismissed. The motion is denied with respect to the other remaining counts.

         This matter also comes before the Court on plaintiffs' motions for certification of a question to the Minnesota Supreme Court (Doc. # 197) and for certification for interlocutory appeal or remand (Doc. # 203). For the reasons set forth below, the Court denies those motions.

         Finally, because claims remain in this case, the motion by Joanna and John Burke for reconsideration or review of the Magistrate Judge's order denying their motion to intervene in the action (Doc. # 167) is no longer moot. Any response to that motion shall be filed on or before August 26, 2019, and any reply brief shall be filed on or before September 9, 2019.

         I. Background

         This action has been transferred into multi-district litigation (MDL), over which this Court presides, involving claims by farmers and others in the corn industry against various related entities known collectively as Syngenta. On December 7, 2018, the Court certified a settlement class and approved a global settlement[2] of claims against Syngenta, including claims that had been pending in the MDL, in a similar consolidated proceeding in Minnesota state court, and in federal court in Illinois. See In re Syngenta AG MIR 162 Corn Litig., 357 F.Supp.3d 1094 (D. Kan. 2018), appeals filed. The Court also awarded one third of the settlement fund as attorney fees. See Id. On December 31, 2018, the Court allocated the attorney fee award among various pools of attorneys (with further allocation within the pools to be completed by the three courts). See In re Syngenta AG MIR 162 Corn Litig., 2018 WL 6839380 (D. Kan. Dec. 31, 2018), appeals filed. In so doing, the Court allocated a portion of the fee award to a pool to compensate individually-retained private attorneys (IRPAs), and it held that any attorney representing a client on a contingent fee basis relating to the settled claims could recover attorney fees only from the Court's fee award and the allocation pools. See id.

         Watts Guerra and various associated counsel filed individual lawsuits against Syngenta in Minnesota state court on behalf of a large number of clients. Those clients were generally excluded from the litigation classes certified in the MDL and in Minnesota state court. Watts Guerra agreed to the settlement, however, and its clients were included in the settlement class. Watts Guerra and associated counsel have been awarded attorney fees from the Minnesota pool allocation, see In re Syngenta AG MIR 162 Corn Litig., 2019 WL 3203356 (D. Kan. July 16, 2019), and they seek further awards of fees from the IRPA pool allocation.

         In the present suit (Kellogg), plaintiffs are six sets of corn growers who were formerly represented by Watts Guerra and associated counsel in the Syngenta litigation. Plaintiffs assert claims against those attorneys, including claims under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, Minnesota statutes, and Minnesota common law. Plaintiffs also seek to assert those claims on behalf of a class of approximately 60, 000 farmers who signed retainer agreements with defendants relating to the Syngenta litigation. In general, plaintiffs allege that defendants engaged in a fraudulent scheme to maximize their attorney fees, in which defendants pursued individual lawsuits while misrepresenting or failing to disclose the possibility and benefits of participating in class actions.

         On March 1, 2019, the Court dismissed this action in its entirety for lack of standing. See In re Syngenta AG MIR 162 Corn Litig. (Kellogg), 2019 WL 1002352 (D. Kan. Mar. 1, 2019). On May 21, 2019, however, the Court reconsidered that decision, and it vacated the dismissal with respect to plaintiffs' state-law claims, while reaffirming its dismissal of plaintiffs' claims under federal law for lack of standing. See In re Syngenta AG MIR 162 Corn Litig. (Kellogg), 2019 WL 2184863 (D. Kan. May 21, 2019). Accordingly, the Court must now consider the alternative arguments for dismissal raised by defendants in their motions to dismiss, which arguments the Court did not consider in its prior orders.[3]

         II. Motions to Dismiss

         A. Governing Standards

         The Court will dismiss a cause of action for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) when the factual allegations fail to “state a claim to relief that is plausible on its face.” See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The complaint need not contain detailed factual allegations, but a plaintiff's obligation to provide the grounds of entitlement to relief requires more than labels and conclusions; a formulaic recitation of the elements of a cause of action will not do. See Id. at 555. The “[f]actual allegations must be enough to raise a right to relief above the speculative level.” See id.

         B. Common-Law Fraud Claims - Lack of Pecuniary Loss

         Defendants argue that plaintiffs have not plausibly alleged that they suffered any pecuniary loss, and that therefore they cannot maintain the following “fraud-based claims”: fraudulent misrepresentation (Count IX), negligent misrepresentation (Count X), fraudulent inducement (Count XI), aiding and abetting (to the extent based on fraud) (Count XIII), and civil conspiracy to commit fraud (Count XIV).[4] As defendants point out, and plaintiffs do not dispute, each of those claims under Minnesota law[5] requires a showing of pecuniary loss. See Hoyt Props., Inc. v. Production Resource Group, L.L.C., 736 N.W.2d 313, 318 (Minn. 2007) (fraudulent misrepresentation); Valspar Refinish, Inc. v. Gaylord's, Inc., 764 N.W.2d 359, 368, 369 (Minn. 2009) (fraudulent inducement, negligent misrepresentation); Rilley v. MoneyMutual, LLC, 2017 WL 3822727, at *10 (D. Minn. Aug. 30, 2017) (aiding and abetting and civil conspiracy claims require underlying tort) (citing cases).

         The Court agrees that these claims are subject to dismissal on this basis. As the Court explained in its prior opinions concerning standing, because defendants are prohibited by Court order from recovering fees under any retainer contracts with plaintiffs, and because plaintiffs (and all Syngenta settlement claimants) will recover on the same basis, whether or not they were represented by counsel, plaintiffs have not plausibly alleged that they have suffered or will suffer any pecuniary loss as a result of the alleged misconduct by defendants. See Kellogg, 2019 WL 1002352, at *2-5; Kellogg, 2019 WL 2184863, at *4-6. Nor have plaintiffs identified any such injury in their briefs. Indeed, in opposing defendants' motions to dismiss, plaintiffs have not directly addressed this issue of a lack of pecuniary loss, instead arguing injury only in the context of standing. As the Court recently concluded, the only injury plausibly alleged by plaintiffs is the mere fact that defendants breached their fiduciary duties to them, as recognized in the Perl cases. See Kellogg, 2019 WL 2184863, at *3. Thus, Perl is the blueprint for the present case, and in that case, all claims requiring proof of damages were summarily dismissed. See Rice v. Perl, 320 N.W.2d 407, 410 (Minn. 1982). Similarly here, plaintiffs cannot maintain any claim that requires proof of a pecuniary loss, as they have been unable to identify any such loss here.

         Accordingly, the Court dismisses plaintiffs' claims for fraudulent misrepresentation (Count IX), negligent misrepresentation (Count X), and fraudulent inducement (Count XI). In addition, plaintiffs have based their civil conspiracy claim (Count XIV) on underlying claims of fraud, and thus the Court dismisses that claim as well. Finally, plaintiffs have based their aiding and abetting claim (Count XIII) on both fraud and breach of fiduciary duty; thus, the Court dismisses that claim only to the extent based on an underlying claim of fraud.

         C. Minnesota Statutory Claims - No. Public Benefit

         Plaintiffs have asserted claims for violations of three Minnesota consumer-protection statutes: the Minnesota Consumer Fraud Act (MCFA), Minn. Stat. § 325F.69 (Count IV); the Minnesota False Statement in Advertisement Act (MFSAA), Minn. Stat. § 325F.67 (Count V); and the Minnesota Uniform Deceptive Trade Practices Act (MUDTPA), Minn. Stat. § 325D.44 (Count VI). In each case, plaintiffs assert a claim for a violation of the statute pursuant to Minnesota's private attorney general statute, Minn. Stat. § 8.31, which provides a private right of action for persons injured by business practices in violation of certain statutes. The Minnesota Supreme Court has held that a plaintiff may maintain an action under Section 8.31 only if it demonstrates that its cause of action benefits the public. See Ly v. Nystrom, 615 N.W.2d 302, 314 (Minn. 2000). Defendants argue that plaintiffs' claims under these statutes lack the necessary public benefit.

         The Court addressed this issue in ruling on Syngenta's motion to dismiss in the main litigation in this MDL. See In re Syngenta AG MIR 162 Corn Litig., 131 F.Supp.3d 1177, 1229-31 (D. Kan. 2015). In dismissing claims by the corn producer plaintiffs for violations of two Minnesota consumer-protection statutes, the Court discussed and applied the applicable considerations as follows:

Minnesota courts have not set forth a clear test for determining when a claim benefits the public for this purpose. See Buetow v. A.L.S. Enters., Inc., 888 F.Supp.2d 956, 960 (D. Minn. 2012). In making that determination, however, Minnesota courts have considered “the form of the deceptive practice and the type of relief sought.” See Summit Recovery, LLC v. Credit Card Reseller, ...

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