1 U.S. DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 2 Jan 16, 2024 3 SEAN F. MCAVOY, CLERK 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF WASHINGTON 8 9 SUNDANCE SLOPE, LLC, a Washington 10 limited liability company, No. 2:23-CV-00083-SAB 11 Plaintiff, 12 v. ORDER DENYING MOTION TO 13 TROUT-BLUE CHELAN-MAGI, LLC, a DISMISS AFPA CLAIM 14 Washington limited liability corporation; 15 EDWARD JOHNSON, former chief 16 executive officer of Trout-Blue Chelan- 17 MAGI, Inc. and Trout-Blue Chelan-MAGI, 18 LLC, 19 Defendants. 20 21 Before the Court is Defendant Trout-Blue Chelan-MAGI’s Motion to 22 Dismiss, ECF No. 32. This dispute concerns Plaintiff Sundance Slope LLC’s 23 desire to grow the patented SugarBee® apple variety (“SugarBee”), which is 24 sublicensed by Defendant Trout-Blue Chelan-MAGI, LLC (“Chelan Fruit”). As 25 detailed in Plaintiff’s Second Amended Complaint for Damages and for 26 Declaratory Judgment, ECF No. 23, Chelan Fruit allegedly violated, among other 27 claims, the federal Agricultural Fair Practices Act of 1967 (“AFPA”) (7 U.S.C. § 28 2301 et seq.). The present motion seeks to dismiss Plaintiff’s AFPA claims against 1 Chelan Fruit. Based on the briefing and applicable law, the Court denies Chelan 2 Fruit’s partial motion to dismiss. 3 Factual Background 4 The following facts are drawn from Plaintiff’s Second Amended Complaint 5 for Damages and for Declaratory Judgment, ECF No. 23. 6 Plaintiff Sundance Slope, LLC (“Plaintiff”) is a company engaged in the 7 business of growing, processing, and selling apples. Defendant Trout-Blue Chelan- 8 MAGI, LLC, f/k/a Trout-Blue Chelan-MAGI, Inc., d/b/a (“Chelan Fruit”) is a 9 company principally engaged in the business of packing and shipping fruit. Former 10 association Trout-Blue Chelan-Magi, Inc. (“CFC”) was a cooperative association 11 organized under chapter 23.86 RCW (“CFC” signifies the entity prior to the 12 merger that later created Chelan Fruit). Plaintiff was a member of CFC at the time 13 it entered the contracts at issue. Chelan Fruit was formed by the sale and merger of 14 CFC and its assets by International Farming Corporation, LLC (“IFC”) in 15 December 2021. Plaintiff was a member of the cooperative prior to the alleged 16 conversion. Chelan Fruit sublicenses the right to grow certain exclusive fruit 17 varieties. 18 Non-party Regal Fruit International LLC (“Regal”) holds a license to a 19 patented apple variety commonly known as SugarBee. Regal sublicensed the rights 20 to grow and market SugarBee to Chelan Fruit and to non-party Gebbers Farms. 21 Chelan Fruit was able to further sublicense the right to grow SugarBee to growers 22 who contracted with Chelan Fruit. 23 In 2020, Plaintiff submitted applications to CFC for the right to grow the 24 SugarBee varietal under a sublicense from CFC. CFC’s Board granted at least 25 some of the applications which allowed Plaintiff to grow the SugarBee varietal 26 (collectively referred to as the “CFC Sublicense”). In 2020, Plaintiff signed 27 agreements with CFC connected to approximately 16,000 SugarBee trees under the 28 CFC Sublicense. In reliance on the CFC Board’s approval, Plaintiff purchased 1 additional acreage to produce the SugarBee varietal and, in 2020, removed all 2 other fruit from its orchards to grow only the SugarBee varietal. 3 As Plaintiff prepared to produce the SugarBee varietal apple, Plaintiff 4 alleges that Chelan Fruit presented Plaintiff with “side letters” which proposed 5 different terms than those in the CFC Sublicense approved by the CFC Board. 6 When Plaintiff did not agree to these new terms, Chelan Fruit allegedly diverted 7 28,500 SugarBee varietal trees that Plaintiff had contracted to purchase pursuant to 8 its approval by the CFC Board to an IFC affiliate. After subsequent alleged 9 coercions and intimidations by Chelan Fruit, Plaintiff provided a notice of 10 termination of its Sales Marketing Contract on February 28, 2023. Plaintiff further 11 alleges that Chelan Fruit threatened to remove Plaintiff’s SugarBee varietals and 12 seek treble damages for infringement if Plaintiff did not deliver an additional 23.5 13 acres of an acceptable alternate variety. According to Plaintiff, the contracts 14 Chelan Fruit sought to bind Plaintiff to are a cooperative marketing agreement, its 15 dependent sublicenses, and amendments and replacements of the same. 16 From this dispute, Plaintiff alleges two instances of conduct by Chelan Fruit 17 that purportedly violated the AFPA. Plaintiff alleges that Chelan Fruit (1) 18 attempted to coerce Plaintiff into signing or complying with “side letters” with 19 Chelan Fruit for SugarBee varietal apples, and (2) attempted to coerce Plaintiff into 20 not moving its business to Gebbers Farms. 21 Chelan Fruit argues Plaintiff was in breach because it had not signed a 22 sublicense enforcing Chelan Fruit’s own subcontracts. Plaintiff disagrees with this 23 characterization. Plaintiff alleges that Chelan Fruit injured it when 28,500 24 SugarBee trees were diverted to another producer, depriving Plaintiff of multiple 25 years’ profits and causing Plaintiff to incur substantial reliance damages. Plaintiff 26 further alleges that Chelan Fruit’s response to Plaintiff’s termination of its Sales 27 Marketing Contract with CFC threatened additional injury if Plaintiff did not 28 1 comply with Chelan Fruit’s “side letter” demands. Among other allegations, 2 Plaintiff alleges Chelan Fruit violated the AFPA. 3 In the present motion, Chelan Fruit argues that (1) the AFPA is inapplicable 4 and (2) Plaintiff has not alleged any cognizable AFPA violation. Chelan Fruit 5 states that neither of Plaintiffs alleged AFPA violations are legally viable claims 6 because the dispute had nothing to do with Plaintiff’s freedom of choice about 7 whether or not to join a cooperative which Chelan Fruit argues is the applicable 8 function of the AFPA. Chelan Fruit goes on to state that Plaintiff’s AFPA claim 9 also fails because it does not plausibly allege any form of statutory violation, 10 because the Second Amended Complaint contains no factual allegations that 11 Plaintiff was coerced by Chelan Fruit into doing anything. 12 Plaintiff replies they properly pled an AFPA claim. Plaintiff argues that the 13 statute’s mission is to prohibit intimidation against a producer’s free choice when 14 contracting with associations and handlers. Plaintiff goes on to state that the 15 alleged facts pled in the Second Amended Complaint, when accepted as true, allow 16 a reasonable inference to support a legally viable claim under the AFPA. 17 Legal Standard 18 An amended complaint must contain “a short and plain statement of the 19 claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Rule 20 12(b)(6) allows a party to move for dismissal if the plaintiff has failed to state a 21 claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Dismissal under 22 this rule is only proper if there is either a “lack of a cognizable legal theory” or 23 “the absence of sufficient facts alleged under a cognizable legal theory.” Taylor v. 24 Yee, 780 F.3d 928, 935 (9th Cir. 2015); Balistreri v. Pacifica Police Dep’t, 901 25 F.2d 696, 699 (9th Cir. 1990). When considering a 12(b)(6) motion, the court 26 accepts the allegations in the complaint as true and construes the pleading in the 27 light most favorable to the party opposing the motion. Lazy Y Ranch Ltd. v. 28 Behrens, 546 F.3d 580, 588 (9th Cir. 2008).
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1 U.S. DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 2 Jan 16, 2024 3 SEAN F. MCAVOY, CLERK 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF WASHINGTON 8 9 SUNDANCE SLOPE, LLC, a Washington 10 limited liability company, No. 2:23-CV-00083-SAB 11 Plaintiff, 12 v. ORDER DENYING MOTION TO 13 TROUT-BLUE CHELAN-MAGI, LLC, a DISMISS AFPA CLAIM 14 Washington limited liability corporation; 15 EDWARD JOHNSON, former chief 16 executive officer of Trout-Blue Chelan- 17 MAGI, Inc. and Trout-Blue Chelan-MAGI, 18 LLC, 19 Defendants. 20 21 Before the Court is Defendant Trout-Blue Chelan-MAGI’s Motion to 22 Dismiss, ECF No. 32. This dispute concerns Plaintiff Sundance Slope LLC’s 23 desire to grow the patented SugarBee® apple variety (“SugarBee”), which is 24 sublicensed by Defendant Trout-Blue Chelan-MAGI, LLC (“Chelan Fruit”). As 25 detailed in Plaintiff’s Second Amended Complaint for Damages and for 26 Declaratory Judgment, ECF No. 23, Chelan Fruit allegedly violated, among other 27 claims, the federal Agricultural Fair Practices Act of 1967 (“AFPA”) (7 U.S.C. § 28 2301 et seq.). The present motion seeks to dismiss Plaintiff’s AFPA claims against 1 Chelan Fruit. Based on the briefing and applicable law, the Court denies Chelan 2 Fruit’s partial motion to dismiss. 3 Factual Background 4 The following facts are drawn from Plaintiff’s Second Amended Complaint 5 for Damages and for Declaratory Judgment, ECF No. 23. 6 Plaintiff Sundance Slope, LLC (“Plaintiff”) is a company engaged in the 7 business of growing, processing, and selling apples. Defendant Trout-Blue Chelan- 8 MAGI, LLC, f/k/a Trout-Blue Chelan-MAGI, Inc., d/b/a (“Chelan Fruit”) is a 9 company principally engaged in the business of packing and shipping fruit. Former 10 association Trout-Blue Chelan-Magi, Inc. (“CFC”) was a cooperative association 11 organized under chapter 23.86 RCW (“CFC” signifies the entity prior to the 12 merger that later created Chelan Fruit). Plaintiff was a member of CFC at the time 13 it entered the contracts at issue. Chelan Fruit was formed by the sale and merger of 14 CFC and its assets by International Farming Corporation, LLC (“IFC”) in 15 December 2021. Plaintiff was a member of the cooperative prior to the alleged 16 conversion. Chelan Fruit sublicenses the right to grow certain exclusive fruit 17 varieties. 18 Non-party Regal Fruit International LLC (“Regal”) holds a license to a 19 patented apple variety commonly known as SugarBee. Regal sublicensed the rights 20 to grow and market SugarBee to Chelan Fruit and to non-party Gebbers Farms. 21 Chelan Fruit was able to further sublicense the right to grow SugarBee to growers 22 who contracted with Chelan Fruit. 23 In 2020, Plaintiff submitted applications to CFC for the right to grow the 24 SugarBee varietal under a sublicense from CFC. CFC’s Board granted at least 25 some of the applications which allowed Plaintiff to grow the SugarBee varietal 26 (collectively referred to as the “CFC Sublicense”). In 2020, Plaintiff signed 27 agreements with CFC connected to approximately 16,000 SugarBee trees under the 28 CFC Sublicense. In reliance on the CFC Board’s approval, Plaintiff purchased 1 additional acreage to produce the SugarBee varietal and, in 2020, removed all 2 other fruit from its orchards to grow only the SugarBee varietal. 3 As Plaintiff prepared to produce the SugarBee varietal apple, Plaintiff 4 alleges that Chelan Fruit presented Plaintiff with “side letters” which proposed 5 different terms than those in the CFC Sublicense approved by the CFC Board. 6 When Plaintiff did not agree to these new terms, Chelan Fruit allegedly diverted 7 28,500 SugarBee varietal trees that Plaintiff had contracted to purchase pursuant to 8 its approval by the CFC Board to an IFC affiliate. After subsequent alleged 9 coercions and intimidations by Chelan Fruit, Plaintiff provided a notice of 10 termination of its Sales Marketing Contract on February 28, 2023. Plaintiff further 11 alleges that Chelan Fruit threatened to remove Plaintiff’s SugarBee varietals and 12 seek treble damages for infringement if Plaintiff did not deliver an additional 23.5 13 acres of an acceptable alternate variety. According to Plaintiff, the contracts 14 Chelan Fruit sought to bind Plaintiff to are a cooperative marketing agreement, its 15 dependent sublicenses, and amendments and replacements of the same. 16 From this dispute, Plaintiff alleges two instances of conduct by Chelan Fruit 17 that purportedly violated the AFPA. Plaintiff alleges that Chelan Fruit (1) 18 attempted to coerce Plaintiff into signing or complying with “side letters” with 19 Chelan Fruit for SugarBee varietal apples, and (2) attempted to coerce Plaintiff into 20 not moving its business to Gebbers Farms. 21 Chelan Fruit argues Plaintiff was in breach because it had not signed a 22 sublicense enforcing Chelan Fruit’s own subcontracts. Plaintiff disagrees with this 23 characterization. Plaintiff alleges that Chelan Fruit injured it when 28,500 24 SugarBee trees were diverted to another producer, depriving Plaintiff of multiple 25 years’ profits and causing Plaintiff to incur substantial reliance damages. Plaintiff 26 further alleges that Chelan Fruit’s response to Plaintiff’s termination of its Sales 27 Marketing Contract with CFC threatened additional injury if Plaintiff did not 28 1 comply with Chelan Fruit’s “side letter” demands. Among other allegations, 2 Plaintiff alleges Chelan Fruit violated the AFPA. 3 In the present motion, Chelan Fruit argues that (1) the AFPA is inapplicable 4 and (2) Plaintiff has not alleged any cognizable AFPA violation. Chelan Fruit 5 states that neither of Plaintiffs alleged AFPA violations are legally viable claims 6 because the dispute had nothing to do with Plaintiff’s freedom of choice about 7 whether or not to join a cooperative which Chelan Fruit argues is the applicable 8 function of the AFPA. Chelan Fruit goes on to state that Plaintiff’s AFPA claim 9 also fails because it does not plausibly allege any form of statutory violation, 10 because the Second Amended Complaint contains no factual allegations that 11 Plaintiff was coerced by Chelan Fruit into doing anything. 12 Plaintiff replies they properly pled an AFPA claim. Plaintiff argues that the 13 statute’s mission is to prohibit intimidation against a producer’s free choice when 14 contracting with associations and handlers. Plaintiff goes on to state that the 15 alleged facts pled in the Second Amended Complaint, when accepted as true, allow 16 a reasonable inference to support a legally viable claim under the AFPA. 17 Legal Standard 18 An amended complaint must contain “a short and plain statement of the 19 claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Rule 20 12(b)(6) allows a party to move for dismissal if the plaintiff has failed to state a 21 claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Dismissal under 22 this rule is only proper if there is either a “lack of a cognizable legal theory” or 23 “the absence of sufficient facts alleged under a cognizable legal theory.” Taylor v. 24 Yee, 780 F.3d 928, 935 (9th Cir. 2015); Balistreri v. Pacifica Police Dep’t, 901 25 F.2d 696, 699 (9th Cir. 1990). When considering a 12(b)(6) motion, the court 26 accepts the allegations in the complaint as true and construes the pleading in the 27 light most favorable to the party opposing the motion. Lazy Y Ranch Ltd. v. 28 Behrens, 546 F.3d 580, 588 (9th Cir. 2008). However, this does not require the 1 Court “to accept as true legal conclusions couched as factual allegations.” Parents 2 for Privacy v. Barr, 949 F.3d 1210, 1221 (9th Cir. 2020). 3 To survive a motion to dismiss, the plaintiff must allege “enough facts to 4 state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 5 U.S. 544, 570 (2007); see also Levitt v. Yelp!, Inc., 765 F.3d 1123, 1135 (9th Cir. 6 2014) (requirements of notice pleading are met if plaintiff makes a short and plain 7 statement of their claims). A claim is plausible on its face when “the plaintiff 8 pleads factual content that allows the court to draw the reasonable inference that 9 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 10 678 (2009). The allegations must be enough to raise the right to relief above a 11 speculative level. Twombly, 550 U.S. at 555. It is not enough that a claim for relief 12 be merely “possible” or “conceivable;” instead, it must be “plausible on its face.” 13 Id. at 556. 14 Applicable Law 15 “Congress enacted the [] (AFPA) to rectify a perceived imbalance in 16 bargaining position between producers and processors.” Mich. Canners & Freezers 17 Ass’n v. Agric. Mktg. & Bargaining Bd., 467 U.S. 461, 464 (1984). The AFPA 18 intends to protect agricultural producers’ rights to choose whether or not to join an 19 association of producers (commonly referred to as an agricultural cooperative) and 20 from coercion by associations of producers. Id. at 473-474 and 464. The AFPA 21 applies to conduct which allowed producer’s associations to “wield the power to 22 coerce producers to sell their products according to terms established by the 23 association.” Id. at 477. 24 The AFPA outlines and prohibits multiple unfair practices. The AFPA 25 makes it unlawful for any handler knowingly to engage or permit any employee or 26 agent to “coerce or intimidate any producer to enter into, maintain, breach, cancel, 27 or terminate a … marketing contract with an association of producers or a contract 28 with a handler.” 7 U.S.C. § 2303(c). Under the AFPA, “coerce” should be given “its ordinary and natural meaning” and that “pressure is not the same as coercion.” 2|| Bybee Farms, LLC v. Snake River Sugar Co., 563 F. Supp. 2d 1184, 1196 (E.D. Wash. 2008). Discussion 5 Chelan Fruit’s Partial Motion to Dismiss is dismissed. When considering the pleadings in the light most favorable to Plaintiff, Plaintiff has connected their allegations with enough facts that could be plausible on their face. Plaintiff linked their alleged injury of the lost 28,500 SugarBee varietal trees to Defendants’ alleged 7 U.S.C. § 2303(c) AFPA violations. At this early stage, this dispute will require further inquiry and fact finding as to the events surrounding the various contracting between Plaintiff and Defendants and the nature of the alleged coercion and intimidation. Therefore, due to Plaintiff's plausible linkages between their assertions and alleged facts in the Second Amended Complaint, the Court denies Chelan Fruit’s Partial Motion to Dismiss. 15 Accordingly, IT IS HEREBY ORDERED: 16 1. Defendant Chelan Fruit’s Partial Motion to Dismiss, ECF No. 31, is 17|| DENIED. 18 IT IS SO ORDERED. The District Court Executive is hereby directed to file this Order and provide copies to counsel. 20 DATED this 16th day of January 2024. 21 22) 23 Sfrckyld Secrear Stanley A. Bastian 26 Chief United States District Judge 27 28
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