Opinion
Case No. 22-CV-2067
2022-12-30
GREEN PLAINS TRADE GROUP, LLC, et al., Plaintiffs, v. ARCHER DANIELS MIDLAND CO., Defendant.
John Ernst Tangren, Adam J. Levitt, Mark Stanley Hamill, DiCello Levitt Gutzler LLC, Chicago, IL, David A. Domina, Domina Law Group PC LLO, Omaha, NE, Greg Garrel Gutzler, DiCello Levitt Gutzler LLC, New York, NY, Saul Cohen, DiCello Levitt Gutzler LLC, Washington, DC, for Plaintiffs. Stephen V. D'Amore, Maureen L. Rurka, Reid Franklin Smith, Samantha M. Lerner, Scott P. Glauberman, Winston & Strawn LLP, Chicago, IL, John P. Passarelli, Maggie L. Ebert, Kutak Rock LLP, Omaha, NE, for Defendant.
John Ernst Tangren, Adam J. Levitt, Mark Stanley Hamill, DiCello Levitt Gutzler LLC, Chicago, IL, David A. Domina, Domina Law Group PC LLO, Omaha, NE, Greg Garrel Gutzler, DiCello Levitt Gutzler LLC, New York, NY, Saul Cohen, DiCello Levitt Gutzler LLC, Washington, DC, for Plaintiffs. Stephen V. D'Amore, Maureen L. Rurka, Reid Franklin Smith, Samantha M. Lerner, Scott P. Glauberman, Winston & Strawn LLP, Chicago, IL, John P. Passarelli, Maggie L. Ebert, Kutak Rock LLP, Omaha, NE, for Defendant. ORDER COLIN S. BRUCE, UNITED STATES DISTRICT JUDGE
Plaintiffs, Green Plains Trade Group, LLC, et al., individually and on behalf of all others similarly situated, filed their Complaint (#1) in this matter on October 26, 2021. Defendant, Archer Daniels Midland Co. ("ADM"), filed its Motion to Dismiss (#88) on May 20, 2022, to which Plaintiffs filed their Response (#90) on June 3, 2022. ADM filed its Reply (#91) on June 10, 2022.
BACKGROUND
In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court accepts as true the well-pleaded facts in the complaint and draws from those allegations all reasonable inferences in the plaintiff's favor. Park Pet Shop, Inc. v. City of Chicago, 872 F.3d 495, 499 (7th Cir. 2017).
Procedural Background
The path to this Order has been a long and winding one. Plaintiffs first sued ADM in the District of Nebraska in July 2020 (Case No. 20-CV-2332), in a class action suit, alleging that ADM manipulated the benchmark price of ethanol downward in violation of the Commodity Exchange Act ("CEA") (7 U.S.C. § 1 et seq.). Plaintiffs also alleged a claim of tortious interference with contract under Nebraska common law. On November 6, 2020, the Nebraska district court granted ADM's motion to transfer the case to this court. On August 16, 2021, this court entered an Order (#99 in 20-CV-2332) dismissing Plaintiffs' CEA claim with prejudice and relinquishing supplemental jurisdiction over Plaintiffs' Nebraska tortious interference claim.
Less than three months later, on October 26, 2021, Plaintiffs filed the instant suit (Case No. 22-CV-2067), again in the District of Nebraska, based on the exact same allegations as the prior suit, but this time claiming only Nebraska tortious interference with contract. The new Complaint (#1) was alleged under diversity jurisdiction, and has dropped the class action certification request. ADM moved to dismiss the case for failure to plead the elements of a plausible tortious interference claim. ADM also filed a motion to transfer the case to this court. The motion to dismiss was pending and fully briefed when the Nebraska court granted the transfer motion and transferred the case to this court on March 18, 2022. ADM has renewed its Motion to Dismiss (#88) in this court, and it is now fully briefed.
Factual Background
The factual allegations in this case are nearly identical to those in AOT, et al., v. ADM, 19-CV-2240, and other related cases, all of which concern ADM's alleged manipulation of ethanol prices at the Argo Terminal. The court will not repeat and recount all of the allegations from Plaintiffs' 50-page Complaint, nor the allegations from the related ADM ethanol cases. To do so would be a waste of time and judicial resources. Instead, the court will focus on those allegations specific to Plaintiffs and relevant to the tortious interference claim, as identified by the parties in their filings.
Plaintiffs and ADM are ethanol producers who sell ethanol at prices tied to pricing benchmarks determined or otherwise impacted by S & P Global Platts and OPIS. Plaintiffs allege that, during the relevant period of manipulation, ADM routinely acquired financial derivative contracts that went up in value if the price for physical ethanol at the Argo Terminal (which was the mechanism for setting the Chicago Benchmark Price, i.e., the pricing index or Pricing Benchmark) went down. Plaintiffs allege that ADM's uneconomic downward manipulation of the pricing index caused ethanol sales contracts tied to that index to price at artificially low values, causing damage to Plaintiffs and those who used the index as a pricing mechanism for their ethanol sales contracts.
Plaintiffs allege that most physical sales and deliveries of ethanol occur outside of the Argo Terminal, including sales contracts that are priced based on the Argo Terminal "Market-on-Close" ("MOC") window pricing mechanism. However, these physical ethanol sales are overwhelmingly tied to sales contracts that are priced based on Argo Terminal pricing. Thus, Plaintiffs allege, when ADM employed its manipulation strategy, it knew that its actions inevitably reduced the prices that ethanol producers received for sales under those contracts. Plaintiffs allege that ADM harmed producers such as themselves through tortious interference of lowering the Argo Terminal-based price index, which ADM knew producers used as the pricing mechanism for their sales contracts, depriving producers of the benefits of contracting/pricing free from tortious interference.
The Argo Terminal price for ethanol influences the prices of ethanol sold at other terminals, as well as the prices that private parties negotiate in non-terminal ethanol sales. Critically, to everyone from producers to consumers, the Argo Terminal serves as the key indicator for the underlying value of ethanol as a commodity. Plaintiffs routinely enter into contracts for the physical sale of ethanol in which the per-gallon price is set by reference to the Chicago Benchmark Price plus or minus a small additional amount determined by location basis. Plaintiffs allege that ADM's manipulation caused all physical sales of ethanol by Plaintiffs and other producers tied to the Chicago Benchmark Price to occur at a lower price than they would have in the absence of such manipulation.
Plaintiffs allege that they had valid contractual relationships that were tied to OPIS, Platts, the Chicago Benchmark, and other pricing benchmarks determined or impacted by Platts Chicago Terminal ethanol assessments (the Pricing Benchmarks) that were affected by ADM's unlawful manipulation. Plaintiffs allege that ADM was aware of these valid contractual relationships of Plaintiffs that were tied to the Pricing Benchmarks. Plaintiffs allege that ADM and Plaintiffs are parties to contracts with one another in which price paid and received is tied to the Pricing Benchmarks. Plaintiffs allege that ADM, through its unlawful manipulation, intentionally interfered with these valid contractual relationships of Plaintiffs that were tied to the Pricing Benchmarks. Plaintiffs do not allege that any of their contracts with third parties were breached or terminated, but rather that "ADM caused the contractual relations of Plaintiffs that were tied to the Pricing Benchmarks to be less profitable, which made their performance more expensive."
ANALYSIS
ADM argues that this case should be dismissed because: (1) Plaintiffs did not identify any contracts; (2) Plaintiffs did not allege that ADM knew about their specific contracts; and (3) Plaintiffs admitted that ADM did not cause a breach of contract.
Plaintiffs respond that they have plead a plausible tortious interference claim, in that: (1) the Complaint sufficiently identifies the existence of valid contracts that were detrimentally affected by ADM's illegal activity; (2) the Complaint sufficiently alleges ADM's knowledge of the contracts based on standard industry practice, and, further, ADM's knowledge of that standard industry practice is corroborated by its own contracts with Plaintiffs; and (3) in accordance with Nebraska law and Restatement of Torts (Second) § 766A, Plaintiffs sufficiently alleged tortious interference based on ADM's illegal manipulation impairing Plaintiffs' performance of their sales contracts.
Motion to Dismiss Standard
Under Federal Rule of Civil Procedure 8(a)(2), a pleading stating a claim for relief must contain "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" Fed. R. Civ. P. 8(a)(2). Federal Rule of Civil Procedure 12(b)(6) allows for dismissal of a pleading if it fails "to state a claim upon which relief can be granted[.]" Fed. R. Civ. P. 12(b)(6). "Dismissal for failure to state a claim under Rule 12(b)(6) is proper 'when the allegations in a complaint, however true, could not raise a claim of entitlement to relief.' " Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011), quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 558, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "[T]he complaint must contain allegations that 'state a claim to relief that is plausible on its face' or it is subject to dismissal under Rule 12(b)(6)." Virnich, 664 F.3d at 212, quoting Ashcroft v. Iqbal, 556 U.S. 662, 663, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The complaint's factual allegations must be enough to raise a right to relief above the speculative level, meaning the complaint must contain allegations plausibly suggesting, not merely consistent with, an entitlement to relief. Virnich, 664 F.3d at 212. "A claim has facial plausibility when the plaintiff pleads 'factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.' " Virnich, 664 F.3d at 212, quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
While, in reviewing a plaintiff's claim, the court must accept the well-pleaded facts in the complaint as true and draw all reasonable inferences in the plaintiff's favor, the court is not bound to accept legal conclusions as true, and conclusory allegations merely reciting the elements of the claim are similarly not entitled to the presumption of truth. Burger v. County of Macon, 942 F.3d 372, 374 (7th Cir. 2019); Virnich, 664 F.3d at 212.
Tortious Interference With Contract Under Nebraska Law
The parties agree that, at least for purposes of the instant Motion, Nebraska law applies to Plaintiffs' tortious interference claim. See ADM's Motion (#89) at p. 3 n.2; Plaintiffs' Response (#90), at p. 3 n.1.
Under Nebraska law, in order to establish a claim for tortious interference with contract, also known as tortious interference with a business relationship or expectancy, "a claimant must prove (1) the existence of a valid business relationship or expectancy, (2) knowledge by the interferer of the relationship or expectancy, (3) an unjustified intentional act of interference on the part of the interferer, (4) proof that the interference caused the harm sustained, and (5) damage to the party whose relationship or expectancy was disrupted." The Lamar Co., LLC v. City of Fremont, 278 Neb. 485, 771 N.W.2d 894, 905 (2009). ADM argues that Plaintiff has failed to sufficiently plead the first, second, and fifth elements of the tort.
Existence of a Valid Contract
ADM argues that Plaintiffs' Complaint does not sufficiently identify what specific contracts ADM allegedly interfered with. ADM argues that Plaintiffs need to identify the specific contracts at issue, the names of the parties to the contracts, and the pricing terms. Instead, ADM argues, Plaintiffs' Complaint "makes vague references to 'sales contracts,' 'contractual relations,' and 'contractual relationships,' " leaving ADM without "notice of what contracts it supposedly interfered with and how it supposedly interfered with them."
Plaintiffs respond that they have sufficiently alleged the existence of valid contracts that were detrimentally affected by ADM's alleged price manipulation, specifically their allegations that: (1) Plaintiffs routinely enter into contracts for the physical sale of ethanol in which the price pergallon is set by reference to the Chicago Benchmark Price; (2) the Argo Terminal price for ethanol influences the prices of ethanol sold at other terminals, as well as the prices that private parties negotiate in non-terminal ethanol sales; and (3) Plaintiffs' contracts, where sales price is tied to the Chicago Benchmark Price, follow an "industry standard," whereby producers routinely use the same pricing mechanism. Plaintiffs argue that they have alleged that valid contractual relationships were tied to the Chicago Benchmark Price that were affected by ADM's unlawful manipulation, and that ADM was aware of these valid contractual relationships. Thus, Plaintiffs argue that other terms of the contracts, such as the identity of the parties, have no bearing on liability and are not necessary at this stage. Even if these terms were needed, Plaintiffs argue, "ADM is on notice of the standard industry terms that are reflected in, for example, the contracts between Plaintiffs and ADM."
In order to plead a claim for tortious interference with contract, a plaintiff must plead that a valid contract existed between the plaintiff and a third party. Vande Guchte v. Kort, 13 Neb.App. 875, 703 N.W.2d 611, 623 (2005). This court has previously found that a plaintiff must allege specific contracts with which a defendant interfered for a tortious interference claim to move forward. United Wisconsin Grain Producers, LLC v. Archer Daniels Midland Co., 20-CV-2314 (#32), at p. 19, citing In re Keurig Green Mt. Single-Serve Coffee Antitrust Litigation, 383 F.Supp.3d 187, 252-53 (S.D.N.Y. 2019).
Plaintiffs have alluded to various contracts with which ADM's alleged manipulations interfered, but Plaintiffs have not identified the specific contracts at issue. Plaintiffs have not identified the third parties with whom they had the contracts, any other terms of those contracts, or what specific losses they suffered. Plaintiffs' argument that their allegations, as they currently stand, are enough to satisfy Rule 12(b)(6) and Rule 8, are unavailing. At this stage, Plaintiffs' factual allegations must be enough to raise a right to relief above the speculative level, meaning their Complaint must contain allegations plausibly suggesting, not merely consistent with, an entitlement to relief. See Virnich, 664 F.3d at 212. Plaintiffs must plead enough factual content that allows the court to draw the reasonable inference that ADM is liable for the misconduct alleged. See Virnich, 664 F.3d at 212, quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Plaintiffs' generalized, conclusory allegations that merely recite the elements of the claim are not entitled to the presumption of truth. See Burger, 942 F.3d at 374. Moreover, the generalized allegations of a valid contract, as opposed to alleging the specific contracts at issue, do not give ADM fair notice of the factual basis for Plaintiffs' tortious interference claims, necessary to survive a Rule 12(b)(6) motion. See Primerica Life Insurance Co. v. Wright-Delaine, 2022 WL 1987999, at *1 (N.D. Ill. June 6, 2022), citing Adams v. City of Indianapolis, 742 F.3d 720, 728-29 (7th Cir. 2014). Therefore, ADM's Motion to Dismiss is granted on this ground.
ADM's Knowledge of the Contracts
Plaintiffs must also sufficiently plead that ADM had knowledge of the contracts with which they allegedly interfered. See Vande Guchte, 703 N.W.2d at 623. Plaintiffs have pled that ADM had knowledge of the contracts based on "standard industry practice" and ADM's own contracts with Plaintiffs. However, for the same reasons cited above, Plaintiffs' allegations are too conclusory, generalized, and speculative, and therefore are insufficient to survive a motion under Rule 12(b)(6). As ADM argues in its Motion, how can it have knowledge of contracts that Plaintiffs have not specifically pled existed? Further, the argument that ADM had knowledge of its own contracts with Plaintiffs is a non-starter, as "a party cannot interfere with its own contract." See Huff v. Swartz, 258 Neb. 820, 606 N.W.2d 461, 467 (2000). ADM's Motion is granted on this ground.
Whether Nebraska Recognizes Restatement (Second) of Torts § 766A
One of the basic elements of tortious interference with contract under Nebraska law is an intentional act which induces or causes a breach or termination of the contractual relationship. Pettit v. Paxton, 255 Neb. 279, 583 N.W.2d 604, 609 (1998). ADM argues, and Plaintiffs concede, that Plaintiffs have not alleged that ADM's interference caused a breach or termination of a contractual relationship. Instead, Plaintiffs have only alleged that ADM's interference caused them to perform their contracts for a lesser value. Plaintiffs argue that actual breach or termination of a contract is not a required element of the tort. In support, Plaintiffs cite to Restatement (Second) of Torts § 766A. Section 766A states:
One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person, by preventing the other from performing the contract or causing his performance to be more expensive or burdensome, is subject to liability to the other for the pecuniary loss resulting to him.Restatement (Second) of Torts § 766A.
ADM argues that Nebraska has never adopted or recognized § 766A as a valid cause of action for tortious interference with contract under Nebraska law, and thus Plaintiffs' claim must be dismissed on this ground. Plaintiffs respond that Nebraska does recognize a cause of action based on § 766A because the Nebraska Supreme Court has discussed its application without ever explicitly rejecting it.
In support of their respective positions, the parties both cite to the Nebraska Supreme Court's 1998 decision in Pettit. In that case, the buyers of a ranch brought an action against other prospective buyers alleging intentional interference with a business relationship. The plaintiffs, Pettit and Kemp, alleged that the defendants, the Paxtons, intentionally and improperly interfered with Pettit and Kemp's purchase agreement with the Corporation by offering to purchase the ranch and by attempting to induce the Corporation or some of its shareholders to breach the purchase agreement.
In analyzing the claim, the Nebraska Supreme Court set forth the five elements of intentional interference with a contract (or business relationship) under Nebraska law listed above, and noted that "one of the basic elements of tortious interference with a business relationship requires an intentional act which induces or causes a breach or termination of the relationship." Pettit, 583 N.W.2d at 609 (emphasis added). Therefore, before the court could proceed to an extensive analysis of the plaintiffs' arguments, the court found it "only logical to determine whether or not the evidence supports a finding or inference that any wrongful act induced or caused a breach or termination of the relationship between Pettit and Kemp and the Corporation." Pettit, 583 N.W.2d at 609 (emphasis in original).
Analyzing the facts, in which the defendants were alleged to have interfered with the third party Corporation, thus causing its failure to perform, the court concluded that no breach or termination of the contractual relationship had occurred. Pettit, 583 N.W.2d at 609-10. "Thus, one of the critical elements of the tort of intentional interference with business relationships is not supported by the evidence." Pettit, 583 N.W.2d at 610.
Anticipating this finding, the plaintiffs argued that actual breach is not a required element of intentional interference with contract under Nebraska law, and in support cited to § 766A of the Restatement. The Nebraska Supreme Court found the plaintiffs' reliance on § 766A to be misplaced, because that provision did not apply to the circumstances of the case in Pettit. Sections 766 and 766A are distinguishable, with the "crucial distinction" being "the party toward whom the allegedly intentional interference is directed." Pettit, 583 N.W.2d at 610. The court found that § 766 applied where, as in Pettit, the plaintiff alleged "that the defendant interfered with the third party (the party with whom the plaintiff contracted[,]" whereas § 766A applied "where the plaintiff allege[d] that the defendant interfered with the plaintiff's own performance of the contract." Pettit, 583 N.W.2d at 610 (emphasis added). Because Pettit and Kemp claimed that the Paxtons intentionally interfered with the Corporation, not that the Paxtons intentionally interfered with Pettit or Kemp, § 766 applied and governed the case, requiring the plaintiffs to prove breach or termination of the contractual relationship. Pettit, 583 N.W.2d at 610.
Having found that § 766A did not apply to the facts of the case before it, the court went on to discuss the reason for the distinction between §§ 766 and 766A, finding it to be "readily apparent:"
When, as described by § 766A, the interference is directed at the plaintiff and makes his or her performance more difficult, it will be possible for the plaintiff to establish causation. The plaintiff should be able to show that the defendant's actions directly caused the plaintiff's performance of the contract to be more difficult, thereby resulting in damages. However, when the defendant's interference is directed toward the third party, with whom the plaintiff has contracted, and the interference did not cause the third party to breach the contract, it is difficult to conceive how the plaintiff would prove causation. If the defendant was not interfering directly with the plaintiff, then whatever "damages" the plaintiff incurred were necessarily incurred as a matter of choice on the part of the plaintiff.Pettit, 583 N.W.2d at 610.
The only other Nebraska case cited by the parties that discusses § 766A is another Nebraska Supreme Court opinion, Recio v. Evers, 278 Neb. 405, 771 N.W.2d 121 (2009). In setting out the plaintiff Recio's allegations, the court wrote that "[i]t is not entirely clear, in this case, whether Recio is claiming that Evers' act of interference was directed at Creighton [the third party] or at Recio [the plaintiff]—in other words, whether Evers' alleged act of interference made Creighton breach its employment relationship with Recio or made Recio's performance of her employment obligations more difficult." Recio, 771 N.W.2d at 131-32. Clearly, the former is a § 766 scenario while the latter is a § 766A scenario. The court concluded that "[f]or purposes of our analysis, we assume that Recio stated a claim for relief with respect to breach of the employment relationship, even though Creighton has clearly not terminated Recio's employment and Recio only pled that her performance of her obligations under that agreement had been made more difficult." Recio, 771 N.W.2d at 132. The court found that it "need not resolve this ambiguity, because we conclude that in any event, Evers' alleged act of interference was justified." Recio, 771 N.W.2d at 134.
The court later cites § 766A in a footnote appended to the following passage about what the plaintiff did not allege: "And the only act Evers is alleged to have committed that affected Recio's employment relationship with Creighton was the sexual harassment complaint. To the extent that Recio's pleading can be read to allege that Evers made Recio's performance of her job obligations more difficult, such a claim fails because there is no evidence that Recio suffered a pecuniary loss from her alleged inability to perform any contractual duties." Recio, 771 N.W.2d at 134.
Thus, in both Pettit and Recio, the Nebraska Supreme Court found reason not to apply § 766A to the facts of the cases before it due to those particular facts and the way the plaintiffs had framed their claims. Both Plaintiffs and ADM are correct in their respective arguments. While the Nebraska Supreme Court has not explicitly adopted or recognized § 766A and applied it to the facts under consideration, it has also not rejected that section out of hand or refused to recognize it as a cause of action under Nebraska tort law. Thus, it is left to this court to attempt to determine whether Nebraska would recognize § 766A as a valid cause of action for intentional interference with contract.
Neither the Nebraska Supreme or Appellate Courts have explicitly addressed whether a defendant is subject to liability in a tortious interference of contract claim where the contract was actually performed, albeit at a loss, and no breach or termination occurred. "Absent such guidance, this court must predict how the Supreme Court of [Nebraska] would resolve the issue." Great Northern Insurance Co. v. Amazon.com, Inc., 524 F.Supp.3d 852, 856 (N.D. Ill. 2021), citing Community Bank of Trenton v. Schnuck Markets, 887 F.3d 803, 811 (7th Cir. 2018). "In so doing, this court must bear in mind the Seventh Circuit's admonition that, '[w]hen given a choice between an interpretation of [state] law which reasonably restricts liability, and one which greatly expands liability, [a federal court] should choose the narrower and more reasonable path (at least until the [state] Supreme Court [says] differently).' " Great Northern, 524 F.Supp.3d at 856, quoting Todd v. Societe Bic, S.A., 21 F.3d 1402, 1412 (7th Cir. 1994) (en banc); see also Pisciotta v. Old National Bancorp, 499 F.3d 629, 636 n.5 (7th Cir. 2007) (holding that this principle applies "even where the plaintiff had no choice but to litigate [its] claim in federal court").
The Seventh Circuit has cautioned district courts not to speculate on trends in state law or to extend state law into novel areas. Wauchop v. Domino's Pizza, Inc., 832 F.Supp. 1572, 1576 (N.D. Ind. 1993), citing Railway Express Agency, Inc. v. Super Scale Models, Ltd., 934 F.2d 135, 138 (7th Cir. 1991). Federal courts are loathe to fiddle around with state law, as innovative state law claims should be brought in state court. Insolia v. Phillip Morris Inc., 216 F.3d 596, 607 (7th Cir. 2000). "Though district courts may try to determine how the state courts would rule on an unclear area of state law, district courts are encouraged to dismiss actions based on novel state law claims." Insolia, 216 F.3d at 607, citing Railway Express, 934 F.2d at 138. When confronted with a state law question that could go either way, the federal courts usually choose the narrower interpretation that restricts liability. Insolia, 216 F.3d at 607.
Here, it is not entirely clear how the Nebraska Supreme Court would rule if the application of § 766A to a tortious interference with contract claim were directly challenged on legal, as opposed to factual, grounds. On the one hand, in both the Pettit and Recio cases the Nebraska Supreme Court discussed § 766A in a matter-of-fact manner, describing what kind of claims it would apply to, and holding that it did not directly apply in those case because of the factual allegations at issue and because of the way the plaintiffs had framed their arguments. Pettit, 583 N.W.2d at 610; Recio, 771 N.E.2d at 131-32, 134. In neither case did the court cast doubt on whether it would recognize § 766A as a valid formulation for a tortious interference with contract claim, should the facts at issue qualify. Indeed, based on the context of the Pettit and Recio courts' discussions of § 766A, and those courts' ready adoption and application of other sections of the Restatement (Second) of Torts (§§ 766, 767, 772, etc.), it could be inferred that, under the proper factual circumstances, the Nebraska Supreme Court would recognize § 766A-style claims as legitimate actions for tortious interference with contract.
And yet, on the other hand, the Nebraska court's adoption of § 766A is no certainty. The issue has never been squarely presented to the Nebraska Supreme Court. Because the proper factual circumstances have not presented themselves, the court has not had the opportunity to directly rule on an argument that the State of Nebraska should or should not recognize § 766A. While the court's discussion of the section in Pettit and Recio could lead to an inference that it would apply the section under the right factual circumstances, such an inference would seemingly be at odds with the Nebraska Supreme Court's repeated statements that "[o]ne of the basic elements of tortious interference with a business relationship requires an intentional act which induces or causes a breach or termination of the relationship." Recio, 771 N.W.2d at 131 (emphasis added); Pettit, 583 N.W.2d at 609; George Clift Enterprises, Inc. v. Oshkosh Feedyard Corp., 306 Neb. 775, 947 N.W.2d 510, 537 (2020) ("One of the basic elements of tortious interference with a business relationship requires an intentional act that induces or causes a breach or termination of the relationship or expectancy."); Denali Real Estate, LLC v. Denali Custom Builders, Inc., 302 Neb. 984, 926 N.W.2d 610, 627 (2019) (same).
Jurisdictions are split on adopting both § 766 and § 766A. By way of example, Oklahoma has recognized both § 766 and § 766A claims, noting that the policy reasons for recognizing a tortious interference claim under § 766 and § 766A are virtually the same, as the harm a § 766A plaintiff suffers is just as genuine and damaging as that to the plaintiff in a § 766 claim. Wilspec Technologies, Inc. v. DunAn Holding Group, Co., Ltd., 204 P.3d 69, 73 (Okla. 2009); see also Shafir v. Steele, 431 Mass. 365, 727 N.E.2d 1140 (2000) (Massachusetts).
By contrast, other jurisdictions, such as Pennsylvania and Wyoming, which have adopted § 766, have not adopted § 766A. Karpf v. Massachusetts Mutual Life Insurance Co., 2018 WL 1142189, at *13 (E.D. Pa. Mar. 1, 2018), citing Windsor Securities, Inc. v. Hartford Life Insurance Co., 986 F.2d 655, 660-61 (3d Cir. 1993) (discussing the Third Circuit's prediction in Windsor Securities that the Pennsylvania Supreme Court would decline to adopt § 766A). The Wyoming Supreme Court noted that § 766 required improper interference with a contract that induced or caused a third party not to perform, or a breach of the contract, whereas under § 766A "a plaintiff may recover by showing only that plaintiff's performance of the subject contract was made more expensive or burdensome by the interference[,]" and thus found that "[t]he difference between §§ 766 and 766A is substantial and significant." Price v. Sorrell, 784 P.2d 614, 616 (Wyo. 1989). The Wyoming court found that "[w]here § 766 requires non-performance which includes a breach of the contract for liability to attach, § 766A requires, not a breach or non-performance, but only that performance became more expensive and burdensome[,]" and therefore the court was "convinced that such an element of proof is too speculative and subject to abuse to provide a meaningful basis for a cause of action." Price, 784 P.2d at 616.
Although the discussion around § 766A in Pettit and Recio could be interpreted as an implicit recognition of the applicability of that section of the Restatement to tortious interference with contract claims in Nebraska, for the reasons discussed above, the application of § 766A is by no means a certainty.
Keeping in mind that district courts should not speculate on trends in state law or extend state law into novel areas, as well as the Seventh Circuit's admonition that, when confronted with a state law question that could go either way, the federal courts usually choose the narrower interpretation that restricts liability, this court declines to find that Nebraska common law recognizes tortious interference with contract claims as formulated under § 766A of the Restatement (Second) of Torts. Thus, because Plaintiffs have failed to plead that ADM's alleged interference induced a breach of the contract or termination of the contractual relationship, ADM's Motion is granted on that ground.
With or Without Prejudice
Because the court has granted ADM's Motion to Dismiss, it must now determine whether that dismissal should be with or without prejudice. The court agrees with Plaintiffs that, were the court to have granted this Motion on just the first and second grounds, whether Plaintiffs sufficiently pled the existence of a valid contract and ADM's knowledge of said contract, they should be given at least one more opportunity to amend their Complaint and replead. However, the court has found that Nebraska law does not recognize a tortious interference with contract claim premised on § 766A, and thus Plaintiffs must plead that ADM's alleged interference induced the breach of the contract or termination of the contractual relationship. Plaintiffs, however, have pled that the contracts were performed, albeit at a lower price, and therefore have essentially affirmatively pled that no breach or termination occurred.
In response to ADM's argument that the dismissal should be with prejudice due to Plaintiffs' admission that no breach or termination occurred, Plaintiffs argue that ADM's argument in this regard is defective, and that Pettit and Recio hold that Plaintiffs can sustain a tortious interference claim under Nebraska law based only on unlawfully induced impaired performance. The court has found otherwise.
Based on Plaintiffs' pleadings and arguments made in their Response to the Motion to Dismiss, the court believes that any amendment to the Complaint would be futile, and thus Plaintiffs' Complaint must be dismissed with prejudice. See Arlin-Golf, LLC v. Village of Arlington Heights, 631 F.3d 818, 823 (7th Cir. 2011).
IT IS THEREFORE ORDERED:
(1) ADM's Motion to Dismiss (#88) is GRANTED. Plaintiffs' Complaint (#1) is DISMISSED with prejudice.
(2) This case is terminated.