ST. LOUIS — U.S. District Judge Jean Hamilton of the Eastern District of Missouri has dismissed a counterclaim against Ronnoco Coffee LLC and Mid-America Roasterie by a Louisiana coffee importer.
The ruling comes after Westfeldt Brothers Inc., a Louisiana company that imports green coffee, accused Ronnoco of numerous offenses, including breach of contract, unfair trade practices, unjust enrichment and civil conspiracy to commit conversion.
The conflict began in 2010 after Ronnoco negotiated with Iowa-based U.S. Roasterie Inc., for the purchase of its assets. At the time, Ronnoco had incurred substantial debt to Westfeldt in futures contracts.
Before Ronnoco could purchase U.S. Roasterie's assets, however, Great Western Bank foreclosed on the company's assets. Mid-America Roasterie, a subsidiary of Ronnoco, then purchased U.S. Roasterie from Great Western.
At the time of the asset sale, U.S. Roasterie owed Westfeldt approximately $2,690,000 in unsecured credit, the court said. According to court documents, the sale agreement expressly said that Mid-America was not assuming any of the liabilities of U.S. Roasterie in connection with the sale.
After Westfeldt filed its first counter-claim against Ronnoco on March 6, 2017, Ronnoco filed an instant Motion for Summary Judgment on Dec. 1, 2017. Ronnoco said in court documents that, “there is no genuine dispute as to any material fact, and it is entitled to judgment as a matter of law on all of Westfeldt’s remaining claims.”
The court "may grant a motion for summary judgment if, ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law," court documents stated.
According to Iowa law, “a corporation that purchases the assets of another corporation assumes no liability for the transferring corporation’s debts and liabilities," court documents said.
The only four exceptions to this law are when the buyer agrees to be held liable, the two corporations consolidate or merge, the buyer is a ‘mere continuation’ of the seller, or the transaction amounts to fraud.
Westfeldt said the third and fourth exceptions apply in this case.
In regards to the “mere continuation” exception, the court said it looks for a continuity of management and ownership, such as “a common identity of the officers, directors and stockholders in the selling and purchasing of corporations.”
The court said it doesn’t need to consider continuity of management in this case because “Westfeldt fails to establish a genuine issue of material fact with respect to continuity of ownership.”
“The Court agrees with Ronnoco that both ownership and management or control are necessary, and Iowa courts have never applied the mere continuation exception where the buying and selling corporations had different owners,” court documents stated.
In regards to whether or not fraud is committed, the court previously said there could be reason to believe the transaction amounted to fraud.
“Ronnoco and U.S. Roasterie formulated a mutually beneficial plan so that Ronnoco could acquire all of U.S. Roasterie’s assets free and clear of the substantial debt owed to Westfeldt, and U.S. Roasterie’s management and employees could all maintain their employment at the new contemplated successor company,” court documents stated.
After review, however, the court said Westfeldt didn’t prove its fraud claim because Ronnoco didn’t purchase U.S. Roasterie’s assets from the company itself, but from U.S. Roasterie’s secured lender, Great Western, who had foreclosed on the property.
“Counterclaim defendants Ronnoco Coffee, LLC and MidAmerica Roasterie, LLC’s Motion for Summary Judgment is granted and judgment is entered in their favor on Westfeldt’s counterclaims,” the court said. “A separate Judgment will accompany this order.”