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Dickinson Frozen Foods, Inc. v. J.R. Simplot Co.

Supreme Court of Idaho

February 13, 2019

DICKINSON FROZEN FOODS, INC., an Idaho corporation, Plaintiff-Appellant,
v.
J.R. SIMPLOT COMPANY, a Nevada corporation; THOMPSON COBURN, LLP, a Missouri limited liability partnership; YARMUTH WILSDON, PLLC, a Washington professional limited liability company; and MARK MC KELLAR, an individual, Defendants-Respondents, and JOHN DOE I-X, unknown individuals and entitites, Defendants.

          Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada County. Hon. Lynn G. Norton, District Judge.

         District court grant of summary judgment on breach of contract, affirmed in part, reversed and remanded in part.

          Trout Law, PLLC, Boise, for appellant Dickinson Frozen Foods, Inc. Kim Trout argued.

          Gjording Fouser, Boise, for respondent J.R. Simplot Company and Mark McKellar. Bobbi K. Dominick argued.

          Hepworth Holzer, Boise, for respondent Thompson Coburn, LLP. John J. Janis argued.

          Byrnes Keller Cromwell LLP, Seattle, for respondent Yarmuth Wilsdon, PLLC. Bradley Keller argued.

          BURDICK, Chief Justice.

         This action arises out of Ada County and involves statements made in a complaint and amended complaint that were filed in U.S. District Court for the Western District of Washington (the Washington litigation). In December 2016, the J.R. Simplot Company (Simplot) commenced the Washington litigation by filing suit related to the dissolution of a business relationship between Simplot and two entities Simplot co-owned with Frank Tiegs (Tiegs). Dickinson Frozen Foods (DFF), also operated by Tiegs, was not named as a party in the Washington litigation; however, the complaint contained allegedly defamatory statements about DFF. In March 2017, DFF filed suit in Ada County district court alleging defamation per se against Simplot and its Food Group President Mark McKellar (McKellar), as well as the two law firms who represented Simplot in the Washington litigation-Yarmuth Wilsdon, PLLC (Yarmuth) and Thompson Coburn, LLP (Thompson). DFF also claimed breach of contract against Simplot, claiming Simplot had breached a non-disclosure agreement (NDA).

         Counsel for Yarmuth and Thompson made special appearances so that they could contest personal jurisdiction, and simultaneously moved for dismissal on that basis. Yarmuth, Thompson, McKellar, and Simplot also sought dismissal or partial summary judgment on the basis of the litigation privilege. The district court dismissed DFF's claims for defamation per se against all defendants, determining the statements were protected by the litigation privilege. However, the district court declined to rule on Yarmuth and Thompson's motions to dismiss for lack of jurisdiction in light of its rulings on the merits. Later, the district court granted Simplot's motion for summary judgment on DFF's breach of contract claim. DFF timely appealed and we affirm in part, and reverse and remand in part.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         In December 2016, Simplot filed the Washington litigation related to the dissolution of a business relationship between Simplot and two companies owned by Frank Tiegs. Simplot co-owned two food processing businesses, Pasco Processing, LLC (Pasco), and Gem State Processing, LLC (Gem State). The other co-owner of Pasco was the Washington Potato Company (WPC), while the other co-owner of Gem State was the Oregon Potato Company (OPC). Tiegs is the principal owner of both WPC and OPC, and WPC and OPC are the managers of Pasco and Gem State. Simplot contended WPC, OPC, and Tiegs had mismanaged Pasco and Gem State, and thus Simplot filed the Washington litigation seeking a "business divorce."

         Tiegs is also the president of DFF. DFF was not named as a party in either the complaint or the amended complaint that were filed in the Washington litigation; however, the complaint and amended complaint contained statements about DFF that DFF alleged were defamatory. The Washington complaint also attached a confidential audit report that contained damaging information about DFF. The Washington complaint, along with the attached report, were later sent to Northwest Farm Credit Services (NFCS) by Simplot.

         In March 2017, DFF filed suit in Ada County district court against Simplot, McKellar, Yarmuth, and Thompson alleging defamation per se against all respondents for statements made in the complaint in the Washington litigation. DFF also claimed breach of contract against Simplot, contending Simplot breached the NDA when it sent the complaint with the attached report to NFCS.

         DFF's complaint did not attach the Washington complaint that DFF alleged contained defamatory statements about it. However, the DFF complaint included quotes from the Washington complaint. The DFF complaint contained the following statements that DFF alleged were defamatory:

• "In the [Washington] Complaint, Simplot wrongfully, maliciously, unlawfully, intentionally, recklessly, and falsely asserted that 'on or about December 1, 2015, in yet another incident, OSHA cited [DFF], another Tiegs affiliate located in Sugar City, Idaho, for a serious release of anhydrous ammonia' . . . and that DFF held a '. . . widespread disregard for safety laws and standards.'"
• "In the [Washington] Complaint, Simplot wrongfully, maliciously, recklessly, intentionally misleadingly and falsely asserted, that on 'May 25, 2016, OSHA cited and fined DFF again for willful violations of safety laws . . . .'"
• "In the [Washington] Complaint, Simplot wrongfully, maliciously, recklessly, intentionally misleadingly and falsely asserted, that on 'May 31, 2016, OSHA cited and fined DFF again for willful violations of safety laws, including but not limited to, those found by OSHA through its investigations of the December 2015 incident.'"
• "DFF had been 'cited' with a major violation of [FSSC 22000] . . . 'after observing DFF's repeated failure to provide hot water in its plant's restrooms . . . .'"

         DFF claimed the statements in the Washington complaint were not relevant or material to the claims alleged or relief sought by Simplot.

         Following DFF's filing of its complaint, McKellar and Simplot filed a Rule 12(b)(6) motion to dismiss or alternatively, a Rule 12(c) motion for partial judgment, claiming the alleged defamatory statements were protected by the litigation privilege. McKellar and Simplot contended the litigation privilege barred DFF's defamation per se claims because the statements in the Washington complaint were made in the course of judicial proceedings and were reasonably related to the Washington litigation. They stated, "Tiegs' affiliate food processing companies were discussed . . . as evidentiary support favoring the appointment of a third-party receiver for . . . Pasco and Gem State." Yarmuth and Thompson also both filed motions to dismiss claiming the statements were protected by the litigation privilege and that the district court did not have personal jurisdiction over them, as they were both out of state law firms. Prior to the district court ruling on the motions to dismiss, DFF filed a motion for summary judgment arguing the litigation privilege did not apply and filed a motion to amend its complaint.

         In June 2017, the district court granted McKellar, Simplot, Yarmuth, and Thompson's motions to dismiss the defamation per se claims, determining the alleged defamatory statements were protected by the litigation privilege. The district court determined the statements were reasonably related to the Washington litigation so as to be privileged. The court noted it was making its determination only on the four corners of DFF's complaint. The court went on to say that because it was dismissing all claims against Yarmuth and Thompson, it would not consider the arguments as to personal jurisdiction. The district court held that DFF's breach of contract claim against Simplot was not dismissed. The district court then struck DFF's motion to amend its complaint and motion for partial summary judgment as moot.

         Following the district court's decision, DFF moved for reconsideration and filed a second motion for leave to amend its complaint. The district court denied DFF's motion for reconsideration, reiterating that the statements DFF alleged as defamatory were protected by the litigation privilege. The court also noted that the litigation privilege was not waived when the Washington litigation complaint was published to NFCS because NFCS is a creditor of Pasco, and as such, Pasco had an interest in informing its creditors of pending lawsuits.

         The district court also denied DFF's second motion for leave to amend its complaint. In its memorandum decision, the court addressed both DFF's original motion for leave to amend that had previously been stricken as moot, and its second motion for leave to amend. The court reaffirmed that it did not err in prohibiting DFF from amending its complaint the first time. The court also denied DFF's second motion for leave to amend its complaint stating DFF had not set forth any claims that would cure the underlying problem.

         The district court then granted Simplot's motion for summary judgment on DFF's breach of contract claim that alleged Simplot breached the NDA. The court stated the NDA was unambiguous and did not govern the disclosure alleged by DFF in its claim. Later, the district court awarded attorney fees and some costs to McKellar, Thompson, and Simplot. DFF timely appealed.

         II. ISSUES ON APPEAL

         1. Whether this Court has personal jurisdiction over Yarmuth and Thompson.

         2. Whether the district court properly determined the alleged defamatory statements were protected by the litigation privilege and that it correctly dismissed DFF's defamation claim.

         3. Whether the district court abused its discretion when it denied DFF's motions for leave to amend its complaint.

         4. Whether the district court erred in granting Simplot's motion for summary judgment on DFF's breach of contract claim.

         5. Whether the district court abused its discretion in awarding attorney fees and certain costs below and whether any party is entitled to attorney fees on appeal.

         III. STANDARDS OF REVIEW

         Motion to Amend:

         "A district court's denial of a plaintiff's motion to amend their complaint is governed by an abuse of discretion standard of review." Elliott v. Murdock, 161 Idaho 281, 286, 385 P.3d 459, 464 (2016) (citing Thomas v. Med. Ctr. Physicians, P.A., 138 Idaho 200, 210, 61 P.3d 557, 567 (2002)). When this Court reviews whether a trial court has abused its discretion, the four-part inquiry is "[w]hether the trial court: (1) correctly perceived the issue as one of discretion; (2) acted within the outer boundaries of its discretion; (3) acted consistently with the legal standards applicable to the specific choices available to it; and (4) reached its decision by the exercise of reason." Lunneborg v. My Fun Life, 163 Idaho 856, 864, 421 P.3d 187, 194 (2018).

         Motion to Dismiss and Summary Judgment:

         A claim can be dismissed pursuant to Idaho Rule of Civil Procedure 12(b)(6) when it "fail[s] to state a claim upon which relief can be granted." "The issue is not whether the plaintiff will ultimately prevail, but whether the party is 'entitled to offer evidence to support the claims.'" BHA Investments, Inc. v. State, 138 Idaho 348, 350, 63 P.3d 474, 476 (2003) (citation omitted).

When this Court reviews an order dismissing an action pursuant to I.R.C.P. 12(b)(6), we apply the same standard of review we apply to a motion for summary judgment. A 12(b)(6) motion looks only at the pleadings to determine whether a claim for relief has been stated. On review of a dismissal this Court determines whether the non-movant has alleged sufficient facts in support of his claim, which if true, would entitle him to relief. In doing so, the Court draws all reasonable inferences in favor of the non-moving party.

Savage v. Scandit Inc., 163 Idaho 637, 640, 417 P.3d 234, 237 (2018) (quoting Hammer v. Ribi, 162 Idaho 570, 573, 401 ...


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