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Montana Merchandising, Inc. v. Dave's Killer Bread, Inc.

United States District Court, D. Montana, Great Falls Division

June 21, 2017

MONTANA MERCHANDISING, INC., d/b/a MONTANA MILLING, INC., HINEBAUCH GRAIN, INC., and OCC-O'CONNOR CROPS AND CATTLE, LLC, Plaintiffs,
v.
DAVE'S KILLER BREAD, INC., GLENN DAHL, Individually and as Trustee of Glenn Dahl Family Trust, DAVID J. DAHL, Individually and as Trustee of the David Dahl Family Trust, SHOBI L. DAHL, Individually and as Trustee of the Shobi L. Dahl Family Trust, FLOWERS FOODS, INC., and GOODE PARTNERS, LLC, Defendants.

          ORDER ON GOODE/DAHL DEFENDANTS' MOTION TO DISMISS

          Brian Morris United States District Court Judge.

         Defendants Glenn Dahl, individually and as Trustee of the Glenn Dahl Family Trust, David J. Dahl, individually and as Trustee of the David Dahl Family Trust, Shobi L. Dahl, individually and as Trustee of the Shobi Dahl Family Trust, and Goode Partners, LLC (collectively, “Dahl/Goode Defendants”), move this Court to dismiss the First Amended Complaint (Doc. 18) for lack of personal jurisdiction over them. (Doc. 44 at 2.) In the alternative, the Dahl/Goode Defendants move to strike “immaterial, impertinent and scandalous matter” from the First Amended Complaint. Id.

         I. BACKGROUND

         Plaintiffs Montana Merchandising, Inc. (“MMI”), Hinebauch Grain, Inc. (“Hinebauch”), and OCC-O'Connor Crops and Cattle, LLC (“OCC”) allege in the First Amended Complaint that Defendants Dave's Killer Bread, Inc. (“DKB”), an Oregon corporation that produces organic bread products at its main bakery facility in Milwaukie, Oregon (see Doc. 14 at 9), and Flowers Foods, Inc. (“Flowers”), a publicly traded Georgia corporation that acquired DKB in 2015 (see Doc. 14-2 at 3), failed to perform under two 2014 contracts. (Doc. 18 at 6.) Plaintiffs further contend that DKB/Flowers reneged on oral promises to purchase all of the organic wheat that MMI could procure from Montana organic wheat farmers. Id.

         David J. Dahl is an individual and a Trustee of the David Dahl Family Trust. (Doc. 18 at 2.) In 2004, David rejoined his family bread business after having served 15 years in prison. Id. He attempted to remake his life and the life of the family business, which became known as DKB. Id. Under David's guidance, DKB's sales of organic bread jumped from $3, 000, 000 to $53, 000, 000, with most of the growth limited to Oregon and Washington. Id. at 2-3.

         Glenn Dahl is an individual and a Trustee of Glenn Dahl Family Trust. Shobi L. Dahl is an individual and Trustee of the Shobi L. Dahl Family Trust. Id. Plaintiffs assert that David, Glenn, and Shobi (“the Dahls”) owned the controlling shares of stock of DKB during the part of the time period alleged in the Complaint. Plaintiffs allege that the Dahls worked together in the expansion of DKB's growth and promises to purchase the organic wheat in Montana. Id.

         In 2013, David, the President of DKB, decided to expand DKB's presence in a number of states, including Montana. Id. at 3. DKB entered into a partnership with Goode Partners, LLC (“Goode”), a New York based private equity firm, to help guide DKB's growth into the new markets, including Montana. Id. Plaintiffs allege that David traveled to Montana in early 2013, on behalf of DKB, to meet with MMI and tour MMI's plant. Plaintiffs contend that David commenced substantive discussions with MMI's representatives that led DKB to promise to purchase all the organic wheat from MMI that Montana growers of organic wheat could produce. Id.

         Plaintiffs seek to pierce DKB's corporate veil. Id. Plaintiffs allege that DKB served as “a mere agent and/or alter ego, ” acting on behalf of the Dahls. Id. Plaintiffs claim that once the Dahls decided to expand DKB with a vast amount of Montana organic wheat, “they advanced their own personal interests above the interests of the corporation.” Id. Plaintiffs further assert that the Dahls “chose to use the corporate cloak to justify their wrongs and to perpetrate fraud.” Id.

         Plaintiffs contend the Dahls “exercised complete control over the conduct and activities of DKB in all particulars and, specifically, in the venture regarding the Montana organic wheat.” Id. Plaintiffs assert that the Dahls entered into a partnership with Goode, “for their own personal interest and not the interest of the corporation, and embarked on a course of conduct to perpetuate fraud on MMI and the Montana organic wheat farmers.” Id.

         Plaintiffs allege that the Dahls, as the individual controlling shareholders of DKB, acted to defraud its creditor, MMI. Id. at 4. Plaintiffs claim that the Dahls “failed and/or refused to tell Flowers Foods, Inc., about their promises to purchase the Montana organic wheat, which purchase was one of the important reasons for the expansion of the worth of DKB.” Id.

         Plaintiffs assert that the Dahls and DKB sent agents to Montana to meet with MMI and Montana wheat farmers on multiple occasions. Plaintiffs contend that these visits to Montana resulted in written and oral agreements between the parties for the production of organic wheat and milling services. Id. at 4-6.

         II. LEGAL STANDARDS

         A. Motion to Dismiss

         Federal courts generally look to state law to determine the bounds of their jurisdiction over parties. Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (internal quotation and citation omitted). Montana follows a two-step test for determining whether a Montana court may exercise personal jurisdiction over a nonresident defendant. Milky Whey, Inc. v. Dairy Partners, 342 P.3d 13, 17 (Mont. 2015). First, a party may be “found within the state of Montana” and subject to general jurisdiction. Id. Second, specific ...


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