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Kraft Foods Group, Inc. v. Sunopta Ingredients, Inc.

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

September 23, 2016

KRAFT FOODS GROUP, INC., Plaintiff,
v.
SUNOPTA INGREDIENTS, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          HON. JORGE L. ALONSO United States District Judge.

         Plaintiff Kraft Foods Group, Inc. (“Kraft”) purchased a dried buttermilk product from defendant SunOpta Ingredients, Inc. (“SunOpta”) or SunOpta's predecessor for over two decades. Kraft learned in 2013 that the dried buttermilk product it was purchasing was not pure buttermilk powder but a blend of buttermilk powder and other ingredients including whey powder, whey protein concentrate, and dried milk. Kraft subsequently brought this action against SunOpta for breach of contract, common-law fraud, and violation of the Illinois Consumer Fraud Act (“ICFA”), 815 ILCS 505/2. SunOpta moves to dismiss Counts II and III of Kraft's amended complaint for failure to state a claim. For the following reasons, the motion is granted.

         I. BACKGROUND

         For over twenty years, Kraft purchased from SunOpta or a SunOpta predecessor a high-heat spray-dried buttermilk product, which it used as an ingredient in Kraft products such as cheese powder. (Am. Compl. ¶ 6, ECF No. 34.) Kraft alleges that, throughout this twenty-year period, Kraft understood the buttermilk product to be composed of pure, unadulterated buttermilk. (Id., ¶¶ 1, 14-15.)

         Kraft periodically requires ingredient suppliers to verify that the ingredients supplied are in compliance with Kraft's specifications. (Id. ¶ 19.) In 1996, Kraft sent a Raw Material Information Sheet form to Northern Food and Dairy, Inc. (“Northern Food”), a Kraft supplier that was subsequently acquired by SunOpta. (Id. ¶¶ 20-21.) In the 1996 Raw Material Information Sheet, which Northern Food filled out in handwriting and returned to Kraft, Northern Food stated that the buttermilk product's only ingredient was “Buttermilk - 100%.” (Id. ¶ 22; id., Ex. 4, at 3.) Where the form asked for a “physical description” of the product, Northern Food offered the following: “Buttermilk product in liquid form is brought into the plant to be spray dried.” (Id., Ex. 4, at 4.) The form is not signed, but it lists a “contact name” of “Mary, ” without giving a last name, and a phone number. (Id., Ex. 4, at 7.)

         In June 2012, Kraft notified SunOpta that it wished to change the specifications for the buttermilk product, increasing the protein level from the current 20-28% to a minimum of 28%. (Id. ¶ 26.) SunOpta acknowledged that the change in protein level would “affect the cost of the product.” (Id. ¶ 27.)

         In March 2013, Kraft “learned from SunOpta” (Kraft does not elaborate on how) that the buttermilk product it was buying from SunOpta was not 100% buttermilk, but a blend of buttermilk powder, whey powder, whey protein concentrate and nonfat dried milk. (Id. ¶¶ 14-15.)

         Kraft subsequently brought this action. On August 10, 2015, this Court dismissed Kraft's fraud claims without prejudice for failure to state a claim. (Memo. Op. & Order, ECF No. 27.) Kraft filed an amended complaint on September 29, 2015, again alleging breach of contract as well as common-law fraud (Count II) and violation of the ICFA, 815 ILCS 505/2 (Count III). SunOpta has moved to dismiss Counts II and III.

         II. LEGAL STANDARDS

         “A motion under Rule 12(b)(6) tests whether the complaint states a claim on which relief may be granted.” Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). Under Rule 8(a)(2), a complaint must include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must “give the defendant fair notice of what the claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (ellipsis omitted).

         Under federal notice-pleading standards, a plaintiff's “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Stated differently, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “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.” Id. (citing Twombly, 550 U.S. at 556). “In reviewing the sufficiency of a complaint under the plausibility standard, [courts must] accept the well-pleaded facts in the complaint as true, but [they] ‘need[ ] not accept as true legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.'” Alam v. Miller Brewing Co., 709 F.3d 662, 665-66 (7th Cir. 2013) (quoting Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009)).

         Additionally, a plaintiff alleging fraud must “state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). Although fraudulent or deceptive intent “may be alleged generally, ” Rule 9(b) requires Kraft to describe the “circumstances” of the alleged fraud with “particularity” by including such information as the “the identity of the person who made the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff, ” Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., Inc., 536 F.3d 663, 668 (7th Cir. 2008), or, to put it differently, by providing the “who, what, where, when and how” of the alleged misrepresentations. See Bank of Am., Nat. Ass'n, v. Knight, 725 F.3d 815, 818 (7th Cir. 2013).

         SunOpta moves to dismiss Kraft's claims of common-law fraud (Count II) and violation of the ICFA by engaging in “deceptive acts and practices” (Count III). The elements of these claims are as follows:

To state a claim under the ICFA, a plaintiff must allege “(1) a deceptive or unfair act or practice by the defendant; (2) the defendant's intent that the plaintiff rely on the deceptive or unfair practice; and (3) the unfair or deceptive practice occurred during a course of conduct involving trade or commerce.” Siegel v. Shell Oil Co.,612 F.3d 932, 934 (7th Cir. 2010) (citing Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951, 960 (Ill. 2002)). To state a claim of common law fraud, a plaintiff must allege “(1) a false statement or omission of material fact; (2) knowledge or belief of the falsity by the party making it; (3) intention to induce the other party to act; (4) action by the other ...

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