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Rigby v. Philip Morris USA Inc.

United States District Court, Southern District of Georgia, Mancross Division

March 19, 2015




Plaintiff Julian Rigby, a tobacco grower and owner of Plaintiff Georgia/Florida Tobacco Exchange, brings claims of breach of contract, fraud, price fixing, promissory estoppel, attorney's fees, and punitive damages against Defendant Philip Morris USA, Inc. and its affiliate, Altria Client Services, Inc. Presently before the Court is Defendants' partial motion to dismiss Plaintiffs' first amended complaint, excepting the breach of contract claims. Dkt. no. 23. Because Plaintiffs' claims for price fixing and promissory estoppel for the events occurring in Georgia were not adequately pleaded, the Court GRANTS in part and DENIES in part Defendants' motion.


I. The Georgia Allegations

Plaintiff Julian Rigby owns and operates the Georgia/Florida Tobacco Exchange ("Georgia/Florida") in Alma, Georgia. Dkt. no. 22, ¶¶ 13-14. Plaintiff Rigby also grew tobacco himself until 2011. Id. ¶ 15. Plaintiff Rigby and other growers would enter into "Growers Contracts" with Defendant Philip Morris, under which Philip Morris would agree to purchase a certain amount of flue cured tobacco at certain prices for particular grades. Id. ¶¶ 17-18. The growers would also enter into such contracts with Altria Client Services, Inc. {"Altria"), an affiliate of Philip Morris. Id. ¶ 20. Plaintiff Rigby entered into growers contracts with Philip Morris each crop year from 2000 to 2012. Id. ¶ 18. He also operated Georgia/Florida as a receiving station where he and other growers would deliver their crop to be graded and delivered to Philip Morris or Altria. Id. ¶ 19.

Customarily, Defendants Philip Morris or Altria would publish "price sheets" each December or January, before the crop season, indicating what price they would pay for certain grades of tobacco produced during the following crop season. Id. ¶ 21. Also, before the growing season, Defendants would determine how much tobacco they would purchase from Georgia/Florida, and this "poundage" was allocated among the various growers based on historical production. Id. ¶¶ 23, 33. The growers would use this information to determine how much tobacco they would grow the following year, and they would prepare their fields accordingly. Id. ¶¶ 25, 35. Particularly, these preparations would require the growers to apply chemicals on their land that would prevent anything except tobacco from growing. Id. ¶¶ 26, 36.

Each year after the growers had reaped their crop, they would bring it to Georgia/Florida to be graded by individuals employed by Defendants. Id. ¶ 27. These graders assigned grades to the tobacco ranging from first quality (the best) down to fourth quality. Id. Philip Morris or Altria would then pay the allocated price for that quality of tobacco.

Plaintiffs allege that Philip Morris and/or Altria published a price sheet reflecting the prices they would pay for the various grades of tobacco for the 2009 crop in "early 2009." Id. ¶ 28. However, "[s]ometime shortly thereafter, Defendants Philip Morris and/or [Altria] lowered the prices it would pay for tobacco, and transmitted new price sheets reflecting these lower prices. Upon information and belief, these new 'lower' price sheets were prepared after Phillip [sic] Morris and/or [Altria] representatives spoke with representatives of a competing tobacco company, Universal Leaf." Id. ¶ 29. Plaintiff alleges that Defendants changed the price sheet twice, later than the usual time for publishing price sheets, "due in part to [their] negotiations with Universal Leaf regarding pricing ..." Id. ¶¶ 30-33.

Based on Defendants' initial indications of how much tobacco they would purchase and how much they would pay, Plaintiff Rigby and other growers prepared their fields for those anticipated purchases. Id. ¶ 37. Plaintiffs allege that Defendants knew that they would rely on these promises. Id. However, after the price changes, Defendants allegedly only purchased about half of the tobacco that they represented they would buy before the crop season. Id. ¶ 38.

Additionally, after the crop was harvested in 2010, Plaintiffs allege that Defendants instructed the graders to "significantly reduce the amount of crops graded as Third Quality and to grade such crops as Fourth Quality." Id. ¶ 39. Plaintiffs allege that Defendants intentionally manipulated the grading process to avoid contractual obligations to purchase the tobacco. Id. ¶ 40.

II. The Tennessee Allegations

Plaintiffs had to shut down the Georgia/Florida receiving station in 2010. Id. ¶ 52. Plaintiffs allege that Defendants then induced Plaintiffs to establish a receiving station in Midway, Tennessee, to receive burley tobacco. Id. ¶ 43-44. Specifically, Defendants allegedly promised that Georgia/Florida's new receiving station would be Defendants' exclusive source of burley tobacco in Tennessee. Id. ¶ 50.

Plaintiffs allege that Defendants, through their agent Craig Shirrah, included two additional requirements for the Midway receiving station outside of the written contract: first, Plaintiff Rigby would have to buy a farm in Tennessee to establish his presence within the Tennessee burley farming community; second, either Plaintiff Rigby or Ben Swain (who is otherwise not mentioned or identified in the complaint) would have to be in Tennessee at all times, even when the receiving station was not open. Id. ¶ 45. Additionally, the written contract with Plaintiff Georgia/Florida required a duty of absolute loyalty from Plaintiffs, including "(a) only dealing with growers who had contracts with [Altria]; and (b) using the receiving station as a single purpose entity, solely for Defendants' benefit." Id. ¶ 46. Plaintiffs allege that this duty "created a reciprocal duty of good faith owed by the Defendants to the Plaintiffs." Id. ¶ 47. However, in 2011, Defendants allegedly violated this duty by purchasing about six million pounds of tobacco from the Tennessee Burley Cooperative. Id.

Plaintiffs allege that, as with the receiving station in Georgia, Defendants improperly graded the tobacco at Plaintiffs' receiving station in Tennessee. Id. ¶ 48. Additionally, Defendants failed to give Plaintiffs 30 day's written notice before terminating the contract, as the contract required. Id. ¶ 49.

Plaintiffs allege that Defendants promised that they would deal exclusively with Georgia/Florida for all of their burley tobacco purchases in Tennessee. Id. ¶ 50. Plaintiffs further allege that they relied on this promise in expending the funds necessary to establish a receiving station in Tennessee, but Defendants failed to live up to their promise. Id. ¶¶ 50-51.


In September 2013, Plaintiffs filed suit in the State Court of Bacon County, Georgia, against Defendants. Dkt. no. 1-1. The next month, Defendants removed the case to federal court, whose jurisdiction lies in diversity. Dkt. nos. 1; 1-9.

In October 2013, Defendants filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Dkt. no. 5. In responding to Defendants' motion, Plaintiffs asked the Court to afford them "the opportunity to file an amended complaint to address" any deficiencies found by the Court, pursuant to Rule 15 of the Federal Rules of Civil Procedure. Dkt. no. 10, at 9-10; see also Dkt. no. 18, at 9.

The Court denied Defendants' motion as to the breach of contract claims, granted Plaintiffs' request to file an amended complaint, and denied as moot Defendants' motion to dismiss the ...

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