Alabama Court Grants Defendant’s Motion for Summary Judgment in Part Concerning Plaintiff’s Fraudulent Suppression Claims
March 6, 2022, Northern District of Alabama – The opinion concerns disputes between various people and entities in the poultry processing industry. Plaintiffs Gemstone Foods, LLC, and RCF, LLC, sought relief against Defendants AAA Foods Enterprises, Inc., A&M Consulting Firm, LLC, Portioning Partners, Farm Fresh Foods, LLC, Cooper, Hill & LeCroix, CPA, and various owners and employees of these companies under the Racketeer Influenced and Corrupt Organizations Act (RICO) for violations of 18 USC §§ 1962(a), (c), and (d) and the Computer Fraud and Abuse Act, for alleged breach of contract, tortious breach of contract, tortious interference with contractual relations, breach of fiduciary duty, fraud, misrepresentation, conversion, negligence, gross negligence, and wantonness, civil conspiracy, breach of duty of good faith and fair dealing, conversion, unjust enrichment, and money paid by mistake. Gemstone and RCF also demanded compensatory damages, treble damages, punitive damages, a constructive trust, accounting, attorney fees and expenses, interests, and injunctive relief.
Gemstone and RCF argued that some Defendants allegedly committed fraud under state law because they failed to discharge their duties to RCF and Gemstone diligently, allegedly made misrepresentations and nondisclosures, and defrauded Plaintiffs under various schemes, including invoicing scheme, the Dallas USA scheme, and the creation of Farm Fresh Foods, et al. The Plaintiffs alleged millions of dollars in damages, including overbilling, lost profits and lost business.
The Court found that the Dallas USA scheme, under which some Defendants allegedly diverted business from Gemstone to Dallas USA in 2013 and 2014, and the Farm Fresh scheme did not involve affirmative representations of material facts. Instead, the Court stated that those schemes concerned the Defendants’ alleged failure to communicate to Gemstone and RCF material facts that the Defendants had a duty to disclose. Accordingly, the Court granted the Defendants’ motions for summary judgment except on the count that Defendants, Ms. Carr, AAA, Mr. Ensley, A&M, Mr. Wester, Mr. Pass, Mr. Welborn, and Eddie Hill fraudulently suppressed material information from Gemstone and RCF in violation of Ala. Code 6-5-102.
The Court also found that because neither Mr. Ensley nor the managerial defendants had non-compete agreements with Gemstone or RCF, they had no duty to disclose their plans to operate a competing portioning business after leaving Gemstone. Therefore, the Court held that a suppression claim concerning the formation of Farm Fresh failed as a matter of law. Next, the Court found that some Defendants consciously violated several duties encompassed in Gemstone’s state law claims, knowing that doing so would injure Gemstone and RCF. The Court denied the Defendants’ motions for summary judgment as to that count. Finally, on the unjust enrichment claim, the Court concluded that since Gemstone and RCF did not include factual allegations in the complaint suggesting that Mr. Ensley (or A&M) received payments from Gemstone to which he (it) was not entitled, it will grant the Defendants’ motion for summary judgment.
Gemstone Foods, LLC v. AAA Foods Enters., 2022 US Dist. LEXIS 33984