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Cargill, Inc. v. HF Chlor-Alkali, LLC

United States District Court, D. Minnesota

December 15, 2016

Cargill, Incorporated, and Cargill Financial Services International, Inc., Plaintiffs,
v.
HF Chlor-Alkali, LLC, Defendant. HF Chlor-Alkali, LLC, Plaintiff,
v.
Cargill, Incorporation and U.S. Bank National Association, Defendants.

          John F. Baughman, Esq. and Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Kathryn J. Bergstrom, Esq. and Gray Plant Mooty, counsel for plaintiffs.

          Alejandro H. Cruz, Esq., Elena Steiger Reich, Esq., Peter C. Harvey, Esq. and Patterson Belknap Webb & Tyler LLP, and Tracy J. Van Steenburgh, Esq. and Nilan Johnson Lewis P.A., counsel for defendant HF Chlor-Alkali, LLC.

          Peter D. Stiteler, Esq. and Christine N. Lindblad, Esq. and Fox Rothschild LLP, counsel for third-party defendant U.S. Bank National Association.

          ORDER

          David S. Doty, Judge.

         This matter is before the court upon the motion to dismiss counterclaim by plaintiffs Cargill, Inc. and Cargill Financial Services International, Inc. (CFSI), [1] the motion to dismiss third-party complaint by third-party defendant U.S. Bank National Association, and the motion for a preliminary injunction by defendant HF Chlor-Alkali, LLC. Based on a review of the file, record, and proceedings herein, and for the following reasons, the motions to dismiss are granted and the motion for a preliminary injunction is denied.

         BACKGROUND

         Defendant HF Chlor-Alkali, LLC (HFCA) was formed in November 2012 to build and operate a chlor-alkali manufacturing facility that produces hydrochloric acid, caustic soda, and bleach. Compl. ¶ 10. Cargill assisted HFCA in obtaining $80 million in bond financing through the Iowa Finance Authority. Id. ¶ 12. As part of the bond financing agreement, U.S. Bank issued a letter of credit, guaranteeing payment to the bond trustee, and HFCA agreed to reimburse U.S. Bank for payments made under the letter of credit (Reimbursement Agreement). Id. ¶¶ 15-17. Relatedly, Cargill agreed that it would purchase the rights and obligations of U.S. Bank under the Reimbursement Agreement if HFCA defaulted (Put Agreement). Id. ¶ 18. HFCA also obtained over $52 million in financing from CFSI, which it was obligated to repay with interest (Prepayment Agreement). Id. ¶ 35. The Prepayment Agreement provides that CFSI shall “receive any and all amounts due under this Agreement from Cargill, Incorporated on behalf of [HFCA] via the Assignment Agreement.” Harvey Decl. Ex. 1 § 2.08, ECF No. 87-1. Under the Assignment Agreement, HFCA agreed to assign a portion of its rights to payment from Cargill under the Chemical Supply Agreement. Id. Ex. 2 at 1. In the Chemical Supply Agreement, Cargill agreed that it would purchase all of the caustic soda and hydrochloric acid produced by HFCA's facility. Compl. ¶ 34.

         On March 1, 2016, HFCA failed to make a bond interest payment. Id. ¶ 21. Under the letter of credit, U.S. Bank made the bond interest payment, but HFCA did not reimburse U.S. Bank. Id. ¶ 23. HFCA also failed to pay quarterly fees to U.S. Bank in March and June. Id. ¶¶ 23-24. On July 15, U.S. Bank declared default under the Reimbursement Agreement, causing the bond trustee to declare the total amount under the bond financing, $80, 051, 125.68, due immediately. Id. ¶ 28. U.S. Bank paid off the bonds pursuant to the letter of credit. Id. ¶ 30. On July 21, pursuant to the Put Agreement, Cargill paid U.S. Bank $81, 447, 000.12 in exchange for U.S. Bank's rights and remedies against HFCA under the Reimbursement Agreement. Id. ¶¶ 31-32. Cargill now claims that HFCA owes in excess of $81, 447, 000.12 under the Reimbursement Agreement. Id. ¶ 33. Cargill further claims that HFCA defaulted under the Prepayment Agreement by failing to make a principal payment in June and quarterly interest payments in December, March, and June and, therefore, owes an additional $51, 776, 432.21. Id. ¶¶ 40, 43, 102.

         On July 25, 2016, Cargill filed this suit alleging breach of contract under the Reimbursement and Prepayment Agreements and unjust enrichment under the Prepayment Agreement. Shortly thereafter, Cargill moved for a preliminary injunction in the form of an appointment of receiver, which the court denied on September 12. See ECF No. 60.

         In its answer, HFCA asserts a counterclaim against Cargill for tortiously interfering with the Reimbursement Agreement. See Answer ¶¶ 269-75, ECF No. 22. HFCA, as third-party plaintiff, also brings claims against U.S. Bank for: (1) aiding and abetting Cargill in its tortious interference with the Reimbursement Agreement; (2) civil conspiracy; and (3) breach of the implied covenant of good faith and fair dealing. See Id. ¶¶ 276-91. The answer also asserts a number of affirmative defenses including that the force majeure provisions of the parties' agreements suspended HFCA's obligations to make payments under the Reimbursement and Prepayment Agreements. Id. ¶¶ 124-43. Subsequently, U.S. Bank and Cargill brought the instant motions to dismiss the third-party claims and counterclaim.

         On October 28, Cargill advised HFCA that, pursuant to the Prepayment and Assignment Agreements, it would divert funds owed to HFCA under the Chemical Supply Agreement to CFSI. CFSI would apply those funds to the balance owed to it by HFCA under the Prepayment Agreement. In response, HFCA filed this motion for a preliminary injunction seeking to: (1) enjoin Cargill from diverting funds pursuant to the Prepayment and Assignment Agreements and (2) require Cargill to return previously diverted funds to HFCA.

         DISCUSSION

         I. Motion to Dismiss

         A. Standard of Review

         To survive a motion to dismiss for failure to state a claim, “‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff [has pleaded] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Although a complaint need not contain detailed factual allegations, it must raise a right to relief above the speculative level. Twombly, 550 U.S. at 555. “[L]abels and conclusions or a formulaic recitation of the elements of a cause of action” are not sufficient to state a claim. Iqbal, 556 U.S. at 678 (citation and internal quotation marks omitted).

         The court does not consider matters outside the pleadings under Rule 12(b)(6). Fed.R.Civ.P. 12(d). The court may, however, consider matters of public record and materials that are “necessarily embraced by the pleadings.” Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (citation and internal ...


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