Court Opinion

ID: 2707892
Source: CourtListenerOpinion
Date Created: 2014-08-05 13:43:05.184436+00
Date Added: 2024-06-11T13:04:17.203531
License: Public Domain

[Cite as Paramount Farms Intl., L.L.C. v. Ventilex B.V., 2014-Ohio-986.]

                                     IN THE COURT OF APPEALS

                           TWELFTH APPELLATE DISTRICT OF OHIO

                                            BUTLER COUNTY

PARAMOUNT FARMS INTERNATIONAL,                          :
LLC,
                                                        :           CASE NO. CA2013-04-060
        Plaintiff-Appellant,
                                                        :                  OPINION
                                                                            3/17/2014
   - vs -                                               :

                                                        :
VENTILEX B.V., et al.,
                                                        :
        Defendants-Appellees.
                                                        :

            CIVIL APPEAL FROM BUTLER COUNTY COURT OF COMMON PLEAS
                               Case No. CV12-02-0854

Millikin & Fitton Law Firm, Steven A. Tooman, Thomas A. Dierling, 9032 Union Centre Blvd.,
Suite 200, West Chester, Ohio 45069 and Klapach & Klapach, P.C., Joseph S. Klapach,
8200 Wilshire Blvd., Suite 300, Beverly Hills, CA 90211, for plaintiff-appellant

Frost Brown Todd LLC, Scott D. Phillips, Thomas B. Allen, 9277 Centre Pointe Drive, Suite
300, West Chester, Ohio 45069 and Morrison Cohen LLP, Donald H. Chase, Edward P.
Gilbert, 909 Third Avenue, 27th Floor, New York, New York 10022, for defendants-appellees,
Ventilex B.V. and Thomas J. Schroeder

        RINGLAND, P.J.

        {¶ 1} Plaintiff-appellant, Paramount Farms International LLC ("Paramount Farms"),

appeals from the Butler County Court of Common Pleas decision granting summary

judgment in favor of defendants-appellees, Ventilex, B.V. and Thomas Schroeder.
                                                                        Butler CA2013-04-060

       {¶ 2} Paramount Farms is a Delaware corporation that grows and processes almonds

in California. Ventilex, B.V. is a Dutch company that manufactures nut pasteurization

systems and is the sole shareholder of Ventilex USA. Thomas Schroeder is the former

President and Chief Executive Officer of Ventilex USA.

       {¶ 3} In response to concerns regarding a salmonella outbreak in 2004, the USDA

notified the almond industry that it was planning to issue a rule requiring the pasteurization of

all almonds sold within the United States. In order to comply with the impending regulations,

Paramount Farms entered into a contract with Ventilex USA to purchase a pasteurization

system. However, the pasteurization system subsequently failed to obtain government

approval. As a result, Paramount Farms was forced to ship its almonds to processors with

approved pasteurizers until such time as the Ventilex system could be replaced.

       {¶ 4} In June 2008, Paramount Farms filed a notice of demand for arbitration against

Ventilex USA and Ventilex B.V., pursuant to the terms of the contract. Paramount Farms

alleged breach of contract, breach of warranty and rescission. Ventilex B.V. claimed it was

not a party to the contract and therefore could not be forced into arbitration. Paramount

Farms subsequently commenced an action against Ventilex B.V. in the Eastern District of

California and withdrew its arbitration demand against that company.            The arbitration

proceeded against Ventilex USA alone. Prior to the arbitration hearing, Paramount Farms

amended its arbitration demand to include claims for fraud, negligent misrepresentation and

violation of California's Business & Professions Code.

       {¶ 5} In February of 2010, a panel of three arbitrators ruled that Ventilex USA

"breached its warranty to provide a pasteurization system that would obtain the necessary

approvals and that it would work with Paramount [Farms] at its expense to correct the

machine so it could obtain approval." However, the panel rejected Paramount Farms' claims

for fraud, negligent misrepresentation and violations of California's Business & Professions
                                               -2-
                                                                      Butler CA2013-04-060

Code. Including interest and costs, total judgment amounted to over $5 million. As a result

of the judgment, Ventilex USA filed for bankruptcy.

       {¶ 6} In November 2010, Paramount Farms' federal action against Ventilex B.V.

proceeded to trial in the Eastern District of California. Paramount Farms claimed that

Ventilex B.V. had provided an express warranty regarding the Ventilex system and breached

that warranty. Paramount Farms presented evidence alleging that the guarantee occurred at

a meeting in the spring of 2005, wherein the Managing Director of Ventilex B.V., Henk

Dijkman, promised that Ventilex B.V. would "stand behind" the system. The court found

there to be an issue of "credibility as to whether or not the express warranty was given, and,

if given, relied upon to - - to any extent, in that there was no memorializing the ever so

important guarantee." Having found that the evidence indicated "that either the express

warranty wasn't made or it was not relied upon," the court entered judgment in favor of

Ventilex B.V. The Ninth Circuit Court of Appeals affirmed the district court's decision.

       {¶ 7} The present action was filed on February 29, 2012, alleging intentional

interference with contractual relations against Ventilex B.V. and fraudulent inducement

against Ventilex B.V. and Schroeder. On March 12, 2013, the trial court granted Ventilex

B.V. and Schroeder's motions for summary judgment based on the application of California's

doctrine of res judicata. Specifically, the court held that Paramount Farms' claims against

Ventilex B.V. should have been raised in the federal action, and that the claims against

Schroeder should have been raised in the federal action or arbitration.

       {¶ 8} Paramount Farms appeals from that decision, raising three assignments of

error for our review.

                                  Statute of Limitations

       {¶ 9} Before addressing Paramount Farms' assignments of error, we begin by

addressing appellees' contention that the underlying causes of action are barred by
                                             -3-
                                                                          Butler CA2013-04-060

California's statute of limitations. Appellees do not contest that Paramount Farms' complaint

was not barred by Ohio's four-year statutes of limitations for interference with contractual

relations and fraudulent inducement.        R.C. 2305.09.      However, appellees argue that

California law should apply, thus barring those causes of action pursuant to California's two

and three-year statutes of limitations, respectively.

       {¶ 10} In Ohio:

              The Ohio Supreme Court has adopted the Restatement
              (Second) of Conflict of Laws to govern conflict of law issues.
              Cole v. Mileti, 133 F.3d 433, 437 (6th Cir.1998). When there is a
              conflict between two states' statutes of limitations, the
              Restatement provides that "[a]n action will be maintained if it is
              not barred by the statute of limitations of the forum, even though
              it would be barred by the statute of limitations of another state."
              Id. (citing Restatement (Second) of Conflict of Laws § 142(2)
              (1971)). [Footnote omitted.] Therefore, Ohio courts are required
              to apply Ohio's statute of limitations to an action filed in Ohio
              even if that action would be time-barred in another state. Id.

Dudek v. Thomas & Thomas Attorneys & Counselors at Law, LLC, 702 F.Supp.2d 826, 834

(N.D.Ohio 2010).

       {¶ 11} On the other hand, Ohio's borrowing statutes provides that:

              No civil action that is based upon a cause of action that accrued
              in any other state, territory, district, or foreign jurisdiction may be
              commenced and maintained in this state if the period of limitation
              that applies to that action under the laws of that other state,
              territory, district, or foreign jurisdiction has expired or the period
              of limitation that applies to that action under the laws of this state
              has expired.

R.C. 2305.03(B). Unfortunately, Ohio's borrowing statute does not clarify how to determine

where a cause of action accrues, and case law has not offered a definitive answer. Jarvis v.

First Resolution Investment Corp., et al., 9th Dist. Summit No. 26042, 2012-Ohio-5653, ¶ 18.

       {¶ 12} In resolving that issue, other Ohio courts have looked to the time of accrual to

help determine where the cause of action accrued. Id. In the case of fraud, a cause of

action accrues either when the fraud is discovered, or when in the exercise of reasonable
                                               -4-
                                                                       Butler CA2013-04-060

diligence, the fraud should have been discovered. E.g., Cundall v. U.S. Bank, 122, Ohio

St.3d 188, 2009-Ohio-2523, ¶ 29. In the present case, the alleged fraud was or should have

been discovered once the Ventilex system failed to obtain government approval and

Paramount Farms was forced to ship their almonds to another producer in the spring of 2008.

However, under the facts of the case at bar, the timing of the accrual does not aid in

determining where the cause of action accrued.          Regardless of when the fraud was

discovered, the question remains of whether the cause of action accrued in the place where

the allegedly fraudulent representation was made, or the place where representation was

relied upon.

       {¶ 13} While acknowledging that the issues relating to conflicts of law and place of

accrual are not identical, their similarities are sufficient for us to find guidance in the Ohio

Supreme Court's adoption of the Second Restatement of Conflict of Laws in determining

where the causes of action in the present case accrued. In relation to the claims of

fraudulent inducement, under Restatement 2nd, Conflict of Laws, Section 148(2), courts are

directed to consider the place where plaintiff acted in reliance on defendant's

representations, where plaintiff received the representations, where defendant made the

representations, the domiciles or place of incorporation of the parties, and the place of

performance or any tangible thing at issue. The key issues are where plaintiff acted in

reliance, where the plaintiff received the representations, and where the defendant made the

representations. Section 148(2) Comments (f), (g) and (h).

       {¶ 14} Looking first to Paramount Farms' claim of fraudulent inducement against

Ventilex B.V., we find that (1) Paramount Farms acted in reliance on the alleged

representations in Ohio as the contract was entered into in Ohio, (2) Paramount Farms

received the alleged representations in California, and (3) Ventilex B.V. made the alleged

                                              -5-
                                                                                  Butler CA2013-04-060

representations in California.1 The place of incorporation for the businesses provides no

further insight as Paramount Farms and Ventilex B.V. are incorporated in Delaware and the

Netherlands, respectively. Weighing all of those factors, we find that the cause of action for

fraudulent inducement accrued in California rather than Ohio.                      California's statute of

limitations for fraudulent inducement is three years. Paramount Farms was or should have

been aware of the allegedly fraudulent representations in the spring of 2008, and the present

cause of action was not filed until approximately four years later on February 29, 2012.

Accordingly, Paramount Farms' claim for fraudulent inducement against Ventilex B.V. is

barred by California's statute of limitations.

        {¶ 15} Conversely, Paramount Farms' claim for fraudulent inducement against

Schroeder is not subject to California's statute of limitations. Applying the same factors as

above, (1) Paramount Farms acted in reliance on the alleged representations in Ohio as the

contract was entered into in Ohio, (2) Paramount Farms received the alleged representations

in California, (3) Schroeder made the alleged representations in Ohio, and (4) Schroeder's

alleged fraudulent representations in this case were made as an agent of an Ohio

corporation. Given the totality of the circumstances, we find that the cause of action for the

alleged fraudulent inducement made by Schroeder accrued in Ohio and is subject to Ohio's

four-year statute of limitations for fraudulent inducement.

        {¶ 16} Finally, we also find that Paramount Farms' claim of intentional interference with

contractual relations is not subject to California's statute of limitations. The contract allegedly

interfered with is one that was entered into in Ohio, was executed by an Ohio corporation and

allegedly interfered with in Ohio. Therefore, we find there to be little question that Ohio's

1. The alleged misrepresentations were said to have been made at a meeting in April 2005 at the site of another
processor, Cal-Nut, in Madera, California.

                                                     -6-
                                                                         Butler CA2013-04-060

four-year statute of limitations for intentional interference with contractual relations applies to

that cause of action.

       {¶ 17} Assignment of Error No. 1:

       {¶ 18} THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN

FAVOR OF VENTILEX B.V. UNDER CALIFORNIA'S RES JUDICATA LAW BECAUSE THE

INTENTIONAL INTERFERENCE AND FRAUDULENT INDUCEMENT CLAIMS ASSERTED

BY PARAMOUNT FARMS IN THIS ACTION AROSE OUT OF A DIFFERENT PRIMARY

RIGHT THAN THE CONTRACT CLAIMS LITIGATED IN THE FEDERAL ACTION.

       {¶ 19} This court's review of a trial court's ruling on a summary judgment motion is de

novo. Lindsay P. v. Towne Properties Asset Mgt. Co., Ltd., 12th Dist. Butler No. CA2012-11-

215, 2013-Ohio-4124, ¶ 16. Civ.R. 56 sets forth the summary judgment standard and

requires that (1) there be no genuine issues of material fact to be litigated, (2) the moving

party is entitled to judgment as a matter of law, and (3) reasonable minds can come to only

one conclusion being adverse to the nonmoving party. Slowey v. Midland Acres, Inc., 12th

Dist. Fayette No. CA2007-08-030, 2008-Ohio-3077, ¶ 8.

       {¶ 20} An Ohio forum court applies the procedural law of the forum state, but must

give effect to the substantive law of the state with the most significant contacts to the case.

Lawson v. Valve-Trol Co., 81 Ohio App.3d 1, 3-4 (9th Dist.1991). The trial court found that

California was the state with the most significant contacts, and the parties do not dispute that

on appeal. Ohio courts have determined that res judicata is a substantive rule of law, and

therefore we will apply California's doctrine of res judicata.

       {¶ 21} California's doctrine of res judicata differs from Ohio's transactional theory.

Under Ohio's doctrine of res judicata, a second action is barred if it arises out of the same

transaction or occurrence that was the subject of the first action.           In contrast, under

California's doctrine of res judicata, a second action is not barred even if it arises out of the
                                                -7-
                                                                                       Butler CA2013-04-060

same transaction or occurrence so long as there is a separate "primary right" involved.2

        {¶ 22} The California Supreme Court explained how their courts determine whether

two proceedings involve identical causes of action for purposes of claim preclusion:

                 California courts have "consistently applied the 'primary rights'
                 theory." Under this theory, "[a] cause of action ... arises out of an
                 antecedent primary right and corresponding duty and the delict
                 or breach of such primary right and duty by the person on whom
                 the duty rests. 'Of these elements, the primary right and duty
                 and the delict or wrong combined constitute the cause of action
                 in the legal sense of the term....'"

                 "In California the phrase 'cause of action' is often used
                 indiscriminately ... to mean counts which state [according to
                 different legal theories] the same cause of action...." But for
                 purposes of applying the doctrine of res judicata, the phrase
                 "cause of action" has a more precise meaning: The cause of
                 action is the right to obtain redress for a harm suffered,
                 regardless of the specific remedy sought or the legal theory
                 (common law or statutory) advanced. As we explained in Slater
                 v. Blackwood, * * *: "[T]he 'cause of action' is based upon the
                 harm suffered, as opposed to the particular theory asserted by
                 the litigant. Even where there are multiple legal theories upon
                 which recovery might be predicated, one injury gives rise to only
                 one claim for relief. 'Hence a judgment for the defendant is a bar
                 to a subsequent action by the plaintiff based on the same injury
                 to the same right, even though he presents a different legal
                 ground for relief.'" Thus, under the primary rights theory, the
                 determinative factor is the harm suffered. When two actions
                 involving the same parties seek compensation for the same
                 harm, they generally involve the same primary right.

(Internal citations omitted.) Boeken v. Philip Morris USA, Inc., 48 Cal.4th 788, 797-98 (2010).

        {¶ 23} Put succinctly, California's "primary right" theory of res judicata states that two

proceedings are based on the same cause of action only if they are based on the same

primary right. The plaintiff's primary right is defined as "the right to be free from a particular

injury, regardless of the legal theory on which liability for the injury is based. * * * An injury is

2. Unlike most jurisdictions, including Ohio and the federal courts, that apply the Restatement's "transaction"
theory, California instead applies the "primary right" theory articulated by University of California Hastings College
of Law Professor John Norton Pomeroy in the late 19th century.

                                                         -8-
                                                                      Butler CA2013-04-060

defined in part by reference to the set of facts, or transaction, from which the injury arose."

(Internal citations omitted.)    Crosby v. HLC Properties, Ltd., 167 Cal.Rptr.3d 354

(Cal.App.2014), quoting Federation of Hillside & Canyon Assns. v. City of Los Angeles, 126

Cal.App.4th 1180, 1202 (2004).

                  Intentional Interference with Contractual Relations

       {¶ 24} Paramount Farms alleges that Ventilex B.V. tortiously interfered with Ventilex

USA's ability to perform on the contractual obligations it owed to Paramount Farms.

Specifically, Paramount Farms alleges that Ventilex B.V. pulled money out of Ventilex USA

while directing Schroeder to refuse to service Ventilex machines and instead focus on selling

new machines. In addition, Paramount Farms alleges that Ventilex B.V. stopped providing

sales leads, engineering, maintenance and other support to Ventilex USA. Their contention

is that Ventilex B.V. intentionally acted to deprive Ventilex USA of the ability to meet its

financial obligations with respect to the guarantees made in its contract with Paramount

Farms.

       {¶ 25} The trial court granted summary judgment in favor of Ventilex B.V., finding that

the present intentional interference with contractual relations claim and the breach of express

warranty claim made in the federal lawsuit involve the same injury to Paramount Farms and

the same wrong by Ventilex B.V.

       {¶ 26} We find Brenelli Amedeo, S.P.A. v. Bakara Furniture, Inc., 29 Cal.App.4th 1828

(1994), persuasive in resolving this issue. In that case, the plaintiff obtained a judgment

against the defendant-corporation for breach of contract. However, before they were able to

execute on the judgment, the corporation filed for bankruptcy. Upon discovering that the

corporation's shareholders had fraudulently conveyed away the corporation's assets, the

plaintiff sued the shareholders for various torts.       The appellate court rejected the

shareholders' argument that res judicata barred the plaintiffs' tort claims, holding that "the
                                              -9-
                                                                        Butler CA2013-04-060

right to have contractual obligations performed is distinct from the right to be free from

tortious behavior preventing collection of a judgment." Id. at 1837.

       {¶ 27} Similar to Brenelli, the present action for intentional interference with

contractual relations and the previously adjudicated federal claims involve separate sets of

facts and distinct harms. While the dissent correctly notes that a single injury gives rise to

only a single cause of action under California's doctrine of res judicata, we find that under the

present set of facts, the harm suffered by the tortious intentional interference with contractual

relations claim differs from the harm suffered as a result of the contractual breach of express

warranty claim. Where the underlying facts and transactions of two causes of action are

entirely distinct, yet the "monetary loss" in two claims is the same, a court may find that "the

plaintiffs have been 'harmed' differently by tortious conduct * * * than by the contractual

breach * * *." Sawyer v. First City Financial Corp., Ltd., 124 Cal.App.3d 390 (1981).

       {¶ 28} The federal suit alleged that Ventilex B.V. breached an express warranty to

"stand behind" the system. In contrast, the present intentional interference with contractual

relations claim alleges that Ventilex B.V. intentionally restricted another party, Ventilex USA,

from performing its contractual obligations with Paramount Farms.             There is a clear

distinction between whether Ventilex B.V. promised and failed to "stand behind" the system,

and whether it subsequently sought to actively thwart Ventilex USA's ability to satisfy its

obligations to Paramount Farms.

       {¶ 29} Accordingly, pursuant to California's primary right theory of the doctrine of res

judicata, Paramount Farms' present claim for intentional interference with contractual

relations is not barred by the previous lawsuit where the present claims are based on

separate facts, transactions and harm suffered. Therefore, we find that the trial court erred in

dismissing the intentional interference with contractual relations claim as barred by res

judicata.
                                              - 10 -
                                                                      Butler CA2013-04-060

                                  Fraudulent Inducement

       {¶ 30} Having already determined that Paramount Farms' claim for fraudulent

inducement against Ventilex B.V. was barred by California's statute of limitations, Paramount

Farms' argument that the trial court erred in holding that it was barred by res judicata is

rendered moot. However, even if we had found that Ohio's statute of limitations applied, we

would not have found error in the trial court's holding.

       {¶ 31} Paramount Farms' fraudulent inducement claim against Ventilex B.V. stems

from Djikman's alleged promise that Ventilex B.V. would "stand behind" the pasteurization

system. Similarly, Paramount Farms' federal suit against Ventilex B.V. alleged that Ventilex

B.V. expressly warranted that it would "stand behind" the system. Rather than protecting a

distinct primary right, Paramount Farms is simply pursuing recourse for the same harm on a

separate legal theory. This is distinguishable from our holding above as to the intentional

interference with contractual relations claims because Paramount Farms' fraudulent

inducement claim against Ventilex B.V. is based upon the exact same set of facts,

transactions and harm suffered as the federal suit. Both claims center on the alleged

statement by Djikman that Ventilex B.V. would "stand behind" the system, and both claims

allege the same injury resulting from Ventilex B.V.'s failure to subsequently follow through on

that alleged representation. Pursuant to California's doctrine of res judicata, those claims

involve the same primary right and cause of action. Accordingly, even if we were to have

found that Ohio's statute of limitations applied, Paramount Farms' claim for fraudulent

inducement against Ventilex B.V. would be barred by res judicata.

       {¶ 32} In light of the foregoing, having found that (1) Paramount Farms' claim for

intentional interference with contractual relations against Ventilex B.V. involves a different

primary right than the cause of action in the federal lawsuit and thus is not barred by

California's doctrine of res judicata, and (2) Paramount Farms' claim for fraudulent
                                             - 11 -
                                                                         Butler CA2013-04-060

inducement is barred by California's statute of limitations, or in the alternative is barred by res

judicata as it is based on the same primary right as the federal lawsuit, Paramount Farms'

first assignment of error is sustained as it relates to the claim for intentional interference with

contractual relations and overruled as it relates to the claim for fraudulent inducement.

       {¶ 33} Assignment of Error No. 2:

       {¶ 34} THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN

FAVOR OF MR. SCHROEDER ON RES JUDICATA GROUNDS.

       {¶ 35} Within this assignment of error, Paramount Farms argues that its claim against

Schroeder was not barred by res judicata because (1) Paramount Farms could not compel

Schroeder to arbitrate in the Ventilex USA arbitration, (2) a private arbitration award has no

collateral estoppel effect in favor of third parties under California law, and (3) the fraudulent

inducement claim was not actually litigated and decided in the Ventilex USA arbitration.

       {¶ 36} The trial court granted summary judgment in favor of Schroeder on the basis

that (1) Paramount Farms could have compelled Schroeder, as an agent of Ventilex USA, to

arbitrate in the Ventilex USA arbitration, (2) the conduct alleged by Paramount Farms was

directly at issue in the Ventilex USA arbitration and the federal lawsuit against Ventilex B.V.,

and (3) Paramount Farms was aware of the alleged conduct of Schroeder prior to both the

arbitration and federal suit.

       {¶ 37} Under California law, a nonsignatory who is the agent of a signatory can be

compelled to arbitrate claims against his will. Smith v. Microskills San Diego L.P., 153

Cal.App.4th 892, 896-97 (2007). Here, the contract containing the arbitration clause was

executed by Paramount Farms and Ventilex USA.

       {¶ 38} Pursuant to California Civil Code section 2295: "An agent is one who

represents another, called the principal, in dealings with third persons." Schroeder was the

President of Ventilex USA. Paramount Farms' allegations against Schroeder are comprised
                                               - 12 -
                                                                      Butler CA2013-04-060

solely of statements he made in his capacity as President of Ventilex USA. Accordingly,

Paramount Farms could have compelled the nonsignatory Schroeder, as an agent of

signatory Ventilex USA, to arbitrate the claims against him. Paramount Farms' claims

against Schroeder are thus barred by California's doctrine of res judicata.

       {¶ 39} Paramount Farms next argues that the trial court's alternative holding that

Paramount Farms' claim for fraudulent inducement against Schroeder was barred by issue

preclusion is erroneous as a matter of law. Because we have found that Paramount Farms'

claims against Schroeder are barred by California's theory of claims preclusion, we need not

address the trial court's alternative holding with regard to issue preclusion, i.e., collateral

estoppel.

       {¶ 40} In light of the foregoing, having found that (1) a nonsignatory agent of a

signatory can be compelled to arbitrate, and (2) Schroeder's alleged fraudulent

representations were made in his capacity as an agent of Ventilex USA, we find that (1) the

trial court did not err in holding that Schroeder could have been compelled to arbitrate, and

(2) Paramount Farms' claims against Schroeder were barred by the doctrine of res judicata.

Accordingly, Paramount Farms' second assignment of error is overruled.

       {¶ 41} Assignment of Error No.3:

       {¶ 42} THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON RES

JUDICATA GROUNDS BECAUSE PARAMOUNT FARMS' CLAIMS FOR FRAUDULENT

INDUCEMENT TO CONTRACT AND INTERFERENCE WITH CONTRACTUAL RELATIONS

WERE NOT DISCOVERED UNTIL AFTER PARAMOUNT FARMS HAD FILED THE

FEDERAL ACTION.

       {¶ 43} Paramount Farms argues that its claims are not barred by res judicata because

the claims were not discovered until after it was able to depose Djikman in July of 2010, well

after the federal lawsuit had been filed.
                                             - 13 -
                                                                        Butler CA2013-04-060

       {¶ 44} Res judicata serves as a bar to all causes of action that were litigated or that

could have been litigated in the first action. Allied Fire Protection v. Diede Const., Inc., 127

Cal.App.4th 150, 155, (2005). However, res judicata is not a bar to claims that arise after the

initial complaint is filed. Id. The dispositive question then is whether Djikman's deposition

gave rise to the present claims after the federal complaint was filed?

       {¶ 45} Paramount Farms cites to Djikman's deposition as having given rise to the

present cause of action because Djikman admitted that Ventilex B.V. created Ventilex USA to

shield it from liability. Paramount Farms essentially alleges that the creation of a wholly-

owned subsidiary to insulate a parent company from liability is evidence of fraud. We

disagree. The creation of subsidiaries to limit liability to a parent company is a common

business practice. If Paramount Farms, a sophisticated corporate entity, wished for Ventilex

B.V. to be liable in the event the contract was breached, it could have required Ventilex B.V.

be a party to the contract. It did not, and it now essentially asks the court to amend the

contract to include Ventilex B.V.

       {¶ 46} Regardless, the alleged fraud was or should have been discovered long before

Djikman's testimony. While Paramount Farms may argue that Djikman's testimony was

beneficial to a claim for fraudulent inducement or intentional interference with contractual

relations, it cannot successfully argue that those claims could not have been otherwise

discovered or asserted prior to his deposition. By the spring of 2008, Paramount Farms was

or should have been aware that the alleged representations by Schroeder and Ventilex B.V.

asserting that Ventilex would "stand behind" the system were untrue. By that point, the

system had failed to obtain approval and Ventilex had failed to "stand behind" it. While

Djikman's deposition potentially provides support for the fraudulent nature of those alleged

representations, it did not give rise to those causes of action for the first time.

       {¶ 47} The same is true of the claim for intentional interference with contractual
                                              - 14 -
                                                                       Butler CA2013-04-060

relations. The conduct that led to Paramount Farms' allegation that Ventilex B.V. halted

sales leads, engineering, maintenance and other support to Ventilex USA was known prior to

Djikman's deposition. Djikman's statements would merely support that claim, not give rise to

it. Accordingly, we cannot find that Djikman's deposition included newly discovered evidence

that first gave rise to the claims in the present case.

       {¶ 48} In light of the foregoing, having found that Djikman's deposition may have given

support to the claims in the present case but did not give rise to them, Paramount Farms'

third assignment of error is overruled.

       {¶ 49} Finally, we note that appellees argue in the alternative that Paramount Farms'

fraud claims are barred by California's "economic loss" rule. Having already determined that

(1) Paramount Farms' fraud claim against Ventilex B.V. was barred by California's statute of

limitations, and (2) Paramount Farms' fraud claim against Schroeder was barred by

California's doctrine of res judicata, we decline to address appellees' alternative argument.

       {¶ 50} Judgment reversed and remanded only insofar as it pertains to the claim of

intentional interference with contractual relations. In all other respects, the trial court's

judgment is affirmed.

       M. POWELL, J., concurs.

       PIPER, J., concurs in part and dissents in part.

       PIPER, J., concurring in part and dissenting in part.

       {¶ 51} I concur with the majority's opinion as it relates to the fraudulent inducement

portion of appellant's first assignment of error, as well as appellant's second and third

assignments of error. However, I must dissent with the majority's resolution of the intentional

interference with contractual relations portion of appellant's first assignment of error. I find
                                             - 15 -
                                                                           Butler CA2013-04-060

that the trial did not err in holding that Paramount Farms' claim for intentional interference

with contractual relations was barred by California's doctrine of res judicata because that

claim involved the same primary right as the breach of express warranty claim previously

litigated in the federal action.

       {¶ 52} The majority quotes the California Supreme Court decision in Boeken for the

proposition that, "[e]ven where there are multiple legal theories upon which recovery might be

predicated, one injury gives rise to only one claim for relief." 48 Cal.4th 788 (2010). The

claim for breach of express warranty in the federal action and the claim for intentional

interference with contractual relations in the present case involve the same injury, and

therefore give rise to only one claim for relief. Paramount Farms' injury from the breach of

express warranty consisted of the cost to replace the Ventilex USA system with a system that

obtained government approval, and the cost of shipping its almonds to another processor in

the intermediate time. I find that to be the same injury that was suffered as a result of

Ventilex B.V.'s alleged intentional interference with Ventilex USA's ability to fulfill its

contractual obligations to Paramount Farms.

       {¶ 53} While I agree with the majority that the facts and transactions that gave rise to

the intentional interference with contractual relations claim are separate and distinct from the

facts and transactions that gave rise to the express warranty claim, I would find that the

present claim against Ventilex B.V. is barred by California's doctrine of res judicata because

the injury suffered is the same under both legal theories. As was recently stated in Crosby v.

HLC Properties, Ltd., a plaintiff's primary right is, "the right to be free from a particular injury,

regardless of the legal theory on which liability for the injury is based." 223 Cal.App.4th 597

(2014). Therefore, there are no separate and distinct primary rights under contract and tort

theories where the injury suffered is the same under both claims.

       {¶ 54} The majority cites to the Brenelli decision to support the argument that, "the
                                                - 16 -
                                                                                        Butler CA2013-04-060

right to have contractual obligations performed is distinct from the right to be free from

tortious behavior preventing collection of a judgment."                       29 Cal.App.4th 1837 (1994).

However, other California courts have found that the focus should not be on the "distinction

between the legal theories pled in the two actions," but rather on the "difference between the

alleged injuries and the distinction between the alleged wrongs." Hacienda Mgmt. v.

Starwood Capital Group Global I LLC, N.D. California No. 12-0395-SC, 2012 WL 2838708,

*12 (July 10, 2012). While the legal theories in the federal action and present action may

differ, I agree with the trial court's holding that "[t]hese claims and the federal action claims
                                                                                                                3
involve the same injury to [Paramount Farms] and the same wrong by Ventilex [B.V.]."

        {¶ 55} Accordingly, because I find that (1) Paramount Farms suffered the same injury

regardless of the theory upon which recovery is sought, and (2) California law is unsettled as

to what defines a distinct primary right, I would affirm the trial court with regard to the

intentional interference with contractual relations portion of appellant's first assignment of

error and find that California's doctrine of res judicata barred that claim. I therefore am

compelled to concur in part, and dissent in part.

3. I note that Paramount Farms has had multiple opportunities to litigate this matter, including the arbitration in
New York and subsequently through the federal action in California. To allow this matter to continue to be
relitigated is contrary to the spirit of the doctrine of res judicata that rests on the ground that, "'the party to be
affected, or some other with whom he is in privity, has litigated, or had an opportunity to litigate the same matter
in a former action in a court of competent jurisdiction, and should be permitted to litigate it again to the
harassment and vexation of his opponent.' Res judicata thus 'not only precludes the relitigation of issues that
were actually litigated, but also precludes the litigation of issues that could have been litigated in the prior
proceeding.'" (Internal citations omitted.) People v. World Wide Mediacom, Second Dist., Div. 3, Cal. No
B241365, 2014 WL 856365 (Mar. 5, 2013).

                                                        - 17 -