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In re Honey Transshipping Litigation

United States District Court, N.D. Illinois, Eastern Division

March 31, 2015

IN RE HONEY TRANSSHIPPING LITIGATION

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For Chris Moore doing business as Moore's Honey Farm, Cox Honey of Utah, LLC, Brett Adee doing business as Adee Honey Farms, Kelvin Adee on behalf of themselves and all others similarly situated doing business as Adee Honey Farms, Plaintiffs: Ben Barnow, LEAD ATTORNEY, Erich Paul Schork, Sharon Harris, Barnow and Associates, P.C., Chicago, IL; Richard Lyle Coffman, PRO HAC VICE, The Coffman Law Firm, Beaumont, TX.

For Daniel C. Whitney administrator d/b/a Davis Honey Company, Bauer Honey, Inc., Bee Natural Honey, LLC, Bernard Casavan administrator Casavan Apiaries, Blake Shook administrator Desert Creek Honey, Ruby's Apiaries, Inc., Kallas Honey Farm, Inc., Wind River Honey Company, Heaven's Honey, Inc. administrator Chip's Bees and Bennett's Honey Farm, Brad Stromme administrator Stromme Honey, Dan's Honey Company administrator Perry Apiaries, McCoy's Sunny South Apiaries, Inc., Willow Bee, LLC, GloryBee Natural Sweeteners, Inc., Orange Apiary, Inc., William H Perry administrator Perry Apiaries, Plaintiffs: Ben Barnow, LEAD ATTORNEY, Barnow and Associates, P.C., Chicago, IL; Richard Lyle Coffman, PRO HAC VICE, The Coffman Law Firm, Beaumont, TX.

For Wee Bee Honey Inc., Adee Honey Farms, Bill Rhodes Honey Company, LLC, Hackenberg Apiaries, Doan's Honey Farms, Plaintiffs: Adam J. Levitt, LEAD ATTORNEY, Grant & Eisenhofer P.A., Chicago, IL.

For Ernest L. Groeb, Defendant: Abigail A Clapp, LEAD ATTORNEY, Greenberg Traurig, LLP., Chicago, IL; David N. Zacks, PRO HAC VICE, Ishbia & Gagleard, P.c., Birmingham, MI.

For Troy L. Groeb, Defendant: Joseph J. Duffy, LEAD ATTORNEY, Henry M. Baskerville, William Paul Ziegelmueller, Stetler, Duffy & Rotert, Ltd., Chicago, IL.

For Horizon Partners, Ltd., Inc., Defendant: James Peter Fieweger, Peter C. John, LEAD ATTORNEYS, Williams Montgomery & John, Ltd., Chicago, IL; Lisa Marie Noller, LEAD ATTORNEY, Jonathan William Garlough, Martin J. Bishop, Rebecca Sklar Bradley, Foley & Lardner, Chicago, IL.

For Groeb Farms, Inc., Defendant: Lisa Marie Noller, LEAD ATTORNEY, Jonathan William Garlough, Martin J. Bishop, Rebecca Sklar Bradley, Foley & Lardner, Chicago, IL.

For Robert Feerick, Defendant: James Peter Fieweger, Peter C. John, LEAD ATTORNEYS, Williams, John Francis O'Brien, III, Montgomery & John, Ltd., Chicago, IL.

For Marquette Capital Partners, Thomas Jenkins, Defendants: Allan T. Slagel, Jeffrey M. Schieber, Taft Stettinius & Hollister LLP, Chicago, IL; Christopher H. Montana, PRO HAC VICE, Todd Wind, PRO HAC VICE, Fredrikson & Byron, P.a., Minneapolis, MN.

For Honey Holdings 1, Ltd., doing business as Honey Solutions, Defendant: Darren Brett Watts, Jonathan Rowan Walton, Swanson, Martin & Bell, Chicago, IL.

For HHI Management, Douglas A Murphy, Defendants: Darren Brett Watts, Jonathan Rowan Walton, Jeffrey Scott Becker, Troy M Sphar, Swanson, Martin & Bell, Chicago, IL.

For Urbain Tran, Defendant: Bradley C. Graveline, LEAD ATTORNEY, David Mitchell Poell, Sheppard Mullin Richter & Hampton LLP, Chicago, IL.

For Sunland Trading, Defendant: Alan S. Madans, Daniel A. Cummings, LEAD ATTORNEYS, Kenneth P. Taube, Robin Korman Powers, Rothschild, Barry & Myers LLP, Chicago, IL.

For National Honey, Inc., Jun Yang, Defendant: M. H. Cersonsky, PRO HAC VICE, Ceronsky, Rosen & Garcia P.c., Houston, TX; Mark L. Rotert, Stetler, Duffy & Rotert, Ltd., Chicago, IL.

For Honey Holding I, Ltd. d/b/a Honey Solutions, Respondent: Darren Brett Watts, Jonathan Rowan Walton, Jeffrey Scott Becker, Troy M Sphar, Swanson, Martin & Bell, Chicago, IL.

For HHI Management, LLC, Douglas A Murphy, Respondent: Darren Brett Watts, Swanson, Martin & Bell, Chicago, IL.

For Adee Honey Farms, Bill Rhodes Honey Company, LLC, Hackenberg Apiaries, Intervenor Plaintiffs: Adam J. Levitt, LEAD ATTORNEY, Edmund S Aronowitz, Grant & Eisenhofer P.A., Chicago, IL.

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MEMORANDUM ORDER & OPINION

JOAN B. GOTTSCHALL, United States District Judge.

This consolidated matter consists of a class action and a parallel individual action

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(filed by members of the class who intend to opt out) against certain importers and suppliers of commercial honey. The class plaintiffs bring suit for alleged violations of the Lanham Act, 15 U.S.C. § 1125, and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § § 1961, et seq., (" RICO" ) against several defendants. Only a few defendants, however, are relevant at this stage of the litigation: (1) Honey Holding I, Ltd. d/b/a Honey Solutions (" Honey Solutions" ), HHI Management (" HHI" ), and Douglas A. Murphy (collectively, the " Honey Solutions defendants" ); and (2) Sunland Trading, Inc. (" Sunland" ). The individual plaintiffs have sued many of the same defendants, including the Honey Solutions defendants, but not Sunland.[1] The individual plaintiffs' complaint also differs from the class complaint in the types of claims raised: the individual plaintiffs' complaint asserts claims arising under RICO and the Illinois common law, but not under the Lanham Act.

Now before the court are three motions to dismiss: (1) Sunland's motion to dismiss the class complaint; (2) the Honey Solutions defendants' motion to dismiss the class complaint; and (3) the Honey Solutions defendants' motion to dismiss the individual plaintiffs' complaint. For the reasons set forth herein, Sunland's motion to dismiss is granted, and the Honey Solutions defendants' motions to dismiss are granted in part and denied in part.

I. Background

Both the class complaint and the individual plaintiffs' complaint revolve around an alleged conspiracy to " transship" Chinese honey through intermediate countries into the United States. The Chinese-made honey arrived in the United States illicitly, under false labels identifying an intermediate country as the country of origin. The falsified labels enabled the importers to deceive U.S. Customs officials into believing that the honey did not originate from China. As a result, the importers were able to circumvent the anti-dumping duties that the United States government had imposed on Chinese-produced honey.

Once inside the United States, the Chinese honey--which allegedly contained prohibited antibiotics and other harmful contaminants--passed from importer to packer, packer to supplier, and supplier to commercial end user (which could be a retailer of honey or a producer of products that contain honey). The transshipping scheme, however, involved only importers and suppliers who knew the true origin of honey and participated in the transshipping process.

Why did the importers and suppliers go to great lengths to sneak Chinese-produced honey into the United States? Money. Chinese honey was inexpensive, especially compared to domestically-produced American honey. By obtaining Chinese honey in bulk and mislabeling it as originating from a country other than China, the participants in the scheme could sell honey in the United States at lower prices than their competitors could.

Both the class plaintiffs and the individual plaintiffs are domestic commercial beekeepers and packers of honey. They allege that the defendants' transshipping scheme suppressed the price of honey in the United States. The lower prices, in turn, undermined the plaintiffs' competitiveness in the marketplace and caused the plaintiffs to lose sales and market share.

For brevity's sake, the court will not delve further into the allegations in the

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two complaints, given that some defendants have settled, and only a few defendants have moved to dismiss. Instead, the court will summarize the pertinent allegations made against the defendants whose motions require ruling.

A. The Honey Solutions Defendants[2]

Honey Solutions is an industrial honey supplier structured as a Texas limited partnership with a principal place of business in Texas. HHI is the general partner of Honey Solutions. From 2003 to May 2008, Douglas A. Murphy (" Murphy" ) was the Director of Sales at Honey Solutions. In that role, Murphy was responsible for the wholesale purchase of honey, maintaining relationships with honey suppliers, and the sale of honey in the United States. Murphy was also a principal and the managing member of HHI. In these positions, he exercised control over Honey Solutions and served as management's primary point of contact with Honey Solutions's customers regarding the company's policies and practices on food safety and the importation of honey.

Urbain Tran (" Tran" ) is a citizen and resident of California. Beginning in at least 2006, Tran served as an agent for Honey Solutions. Tran's responsibilities including locating and sourcing honey for Honey Solutions. To carry out his responsibilities, Tran brokered transactions in which Honey Solutions purchased Chinese-origin honey from shell companies that were controlled by Chinese honey producers, including AHCOF USA, Inc., Bo Bay Corporation, Chengda Trading Inc., Glory Spring Enterprise Co., ...


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