US Herbs, LLC v. Riverside Partners, LLC

711 F. App'x 321
CourtCourt of Appeals for the Sixth Circuit
DecidedOctober 18, 2017
Docket17-3154
StatusUnpublished

This text of 711 F. App'x 321 (US Herbs, LLC v. Riverside Partners, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
US Herbs, LLC v. Riverside Partners, LLC, 711 F. App'x 321 (6th Cir. 2017).

Opinion

DAMON J. KEITH, Circuit Judge.

US Herbs was a company that grew, packaged, and shipped herbs to various grocery stores throughout the country. Herb Thyme, Inc. (“Herb Thyme”) entered into an agreement with US Herbs to become US Herbs’ exclusive herb supplier. Herb Thyme agreed to make monthly payments to US Herbs. Later, Herb Thyme’s assets were sold to Rocket Farms Herbs, Inc. (“Rocket Farms”). Immediately following the sale, US Herbs stopped receiving monthly payments. Thereafter, suit was brought by Mati Kar-ni (US Herbs’ owner), Karni Family Farm, LLC, US Herbs, LLC, and US Herbs Co., LLC (collectively, “Plaintiffs”) against Rocket Farms for breach of contract, unjust enrichment, tortious interference with a business relationship, and two counts of tortious interference with a contract. Following discovery, Rocket Farms and Plaintiffs filed cross motions for summary judgment. The district court denied Plaintiffs’ motion and granted Rocket Farms’ motion. This timely appeal followed. For the reasons that follow, we AFFIRM.

I. BACKGROUND

A. Contract

US Herbs grew, packaged, and shipped herbs to various grocery stores throughout the country from 1997-2010. In August 2010, US Herbs and Herb Thyme entered into a Supply and Licensing Agreement (the “Contract”) for the purpose of transitioning Herb Thyme in as the operator of the business, in anticipation of US Herbs eventually selling the business to Herb Thyme. Under the Contract, Herb Thyme became US Herbs’ exclusive supplier of packaged herb products, meaning that Herb Thyme began filling the orders for US Herbs’ customers.

B. Modification

Between May and June of 2011, US Herbs terminated the Contract and Herb Thyme accepted that termination. In July 2011, the two parties entered into a second agreement (the “Modification”), which was a modified version of the original Contract.

The first “Whereas” clause of the Modification recognized that, due to the arrangements made under the Contract, US Herbs’ customers had effectively become Herb Thyme’s customers.

In Sections 1 and 2 of the Modification, Herb Thyme agreed to pay US Herbs a certain percentage of its sales every month, which the Modification defined as “Earned Margin.” These payments would be due on or before the 15th’of each month, and would be based upon Herb Thyme’s sales from the previous month.

In Section 3, US Herbs agreed that neither it nor any of its agents would contact any Herb Thyme customer, including those that were previously customers of US Herbs.

In Section 4, the parties agreed that the Modification would expire on June 30, 2015, unless it was terminated earlier by some breach. The parties also agreed that the Modification would automatically terminate if Herb Thyme failed to make any Earned Margin payment within 30 days of the due date.

In Section 5, Herb Thyme agreed that its packaging labels would identify US Herbs in the same, or a substantially similar, way as US Herbs’ labels had.

Section 7 stated that the Modification superseded any prior agreement between the parties, including the Contract. It also stated that the Modification would be “binding on any successor to [Herb Thyme] or any purchaser of all or substantially all of [Herb Thyme’s] stock or assets.” The parties also agreed that Ohio law would govern interpretation and enforcement of the Modification.

C.Asset Purchase Agreement

Thereafter, Herb Thyme made its monthly Earned Margin payments consistently, including the payment that was due in November 2012. During that time period, however, Herb Thyme defaulted on loan agreements it had made with third parties. As a result, Herb Thyme and its lenders agreed to sell most of Herb Thyme’s assets to Rocket Farms through a secured party-sale. On or about December 7, 2012, Herb Thyme and Rocket Farms entered into an Asset Purchase Agreement (“APA”) to effect the sale.

In Section 2.3 of the APA, Rocket Farms disclaimed any liability arising before the closing date of the APA, any liability arising out of or related to previous contracts, or any liability arising out of or related to third party claims against Herb Thyme.

Section 12.21 of the APA defined the term “Assumed Liabilities,” which refers to the list of Herb Thyme’s liabilities that Rocket Farms would be assuming. Herb Thyme’s liabilities under the Modification were not included in that list.

D. Breach and Suit

Herb Thyme failed to make the Earned Margin payment due in December 2012. US Herbs has not received any further monthly payments as outlined in the Modification.

In December 2015, Plaintiffs brought suit against Rocket Farms, claiming breach of contract, unjust enrichment, tor-tious interference with a business relationship, and two counts of tortious interference with a contract. In November 2016, Plaintiffs and Rocket Farms filed cross motions for summary judgment. In January 2017, the district court denied Plaintiffs’ motion and granted Rocket Farms’ motion. In February 2017, Plaintiffs appealed.

II. DISCUSSION

A. Standard of Review

“We review a grant or denial .of summary judgment de novo, using the same Rule 56[ ] standard as the district court.” Williams v. Mehra, 186 F.3d 685, 689 (6th Cir. 1999). Federal Rule of Civil Procedure 56 states, “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56. Here, Plaintiffs and Rocket Farms have moved for summary judgment, and the record does not show any genuine dispute as to any material fact. Therefore, our task is to determine which movant is entitled to judgment as a matter of law.

B. Breach of Contract

Plaintiffs first claim that Rocket Farms breached the terms of the Modification by not remitting monthly Earned Margin payments to US Herbs. Plaintiffs argue that, despite not being a party to the Modification, Rocket Farms is nevertheless bound by its terms under Ohio law.

The Ohio Supreme Court has stated, “[A] corporation that purchases the assets of another corporation is not liable for the contractual liabilities of its predecessor corporation unless (1) the buyer expressly or impliedly agrees to assume such liability; (2) the transaction amounts to a de facto consolidation or merger; (3) the buyer corporation is merely a continuation of the seller corporation; or (4) the transaction is entered into fraudulently for the purpose of escaping liability.” Welco Indus., Inc. v. Applied Cos., 67 Ohio St.3d 344, 617 N.E.2d 1129, 1133 (1993).

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Bluebook (online)
711 F. App'x 321, Counsel Stack Legal Research, https://law.counselstack.com/opinion/us-herbs-llc-v-riverside-partners-llc-ca6-2017.