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8/9/2019 Hearing Before The Honorable Rodney W. Sippel, United States District Judge - May 6, 2015
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8/9/2019 Hearing Before The Honorable Rodney W. Sippel, United States District Judge - May 6, 2015
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Appearances Cont'd:
For Defendant: David H. Luce, Esq.
CARMODY MACDONALD P.C.
120 South Central, Suite 1800
Clayton, MO 63105
Darren Johnson, Esq.
PAUL AND WEISS
1285 Avenue of the Americas
New York, NY 10019
For Counter Charles A. Weiss, Esq.
Defendant PRCG/ BRYAN CAVE LLP
Haggerty: One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, MO 63101
For Counter Michael A. Kahn, Esq.
Defendant Blue CAPES AND SOKOL
State Digital: 7701 Forsyth Boulevard, 12th Floor
Clayton, MO 63105
REPORTED BY: SHANNON L. WHITE, RMR, CRR, CSR, CCR
Official Court Reporter
United States District Court
111 South Tenth Street, Third Floor
St. Louis, MO 63102
(314) 244-7966
PRODUCED BY COURT REPORTER COMPUTER-AIDED TRANSCRIPTION
8/9/2019 Hearing Before The Honorable Rodney W. Sippel, United States District Judge - May 6, 2015
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Nestle Purina v Blue Buffalo Company -- 05-06-15
(PROCEEDINGS BEGAN AT 10:05 AM.)
THE COURT: Good morning. We're here today in the
case styled Nestle Purina against Blue Buffalo, 4:14-CV-859.
Would counsel make their appearances, please?
MR. ZARLENGA: Carmine Zarlenga, Mayer Brown, for
Purina.
MR. ASSMUS: Richard Assmus also for Mayer Brown for
the plaintiff, Nestle Purina.
MR. ROODMAN: David Roodman, Bryan Cave, on behalf of
Purina.
MR. WEISS: Charles Weiss on behalf of PRCG/Haggerty.
MR. KAHN: Michael Kahn, Your Honor, on behalf of
Blue State Digital.
MR. LUCE: Morning, Judge. Dave Luce with Carmody.
With me today is Steve Zalesin, Adeel Mangi, and Darren
Johnson on behalf of Defendant Blue Buffalo.
THE COURT: Very good. All right. Are there any
announcements before we begin to work our way through the
pending motions this morning?
MR. ZALESIN: There is one.
THE COURT: Good.
MR. ZALESIN: Good morning, Your Honor. Steve
Zalesin for Blue Buffalo. The parties worked out and
submitted to Your Honor a joint proposed scheduling order
which would extend all deadlines by roughly two months.
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THE COURT: The experts were, like, four months out,
weren't they? Or did I missing something?
MR. ZALESIN: There were some further extensions at
the back end.
THE COURT: Two months, four months.
MR. ZALESIN: I think that had a lot to do with
trying not to ruin anybody's Christmas or Thanksgiving.
THE COURT: Okay.
MR. ZALESIN: But recent developments suggest to Blue
Buffalo at least that that -- even that revised schedule is
going to need further revision. And the reason for that is
that Blue Buffalo has determined that it is going to bring
third-party claims in this proceeding against Wilbur-Ellis,
which is the supplier Your Honor has heard so much about,
which delivered product to Blue Buffalo's co-packers, which
was not what Blue Buffalo ordered and purchased and paid for,
not what it was labeled to be. We've previously told the
Court that we may at some point bring Wilbur-Ellis in as a
party to these proceedings if the facts warrant such a claim.
What has occurred in the very recent past is the week
before last, the end of the week of last week of April -- so I
think it was the 23rd -- we got a significant new production
of material and information from Wilbur-Ellis in response to
third-party subpoenas and discovery requests that both Blue
Buffalo and Nestle had served on Wilbur-Ellis.
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And we then analyzed that information carefully over
the weekend and last week and were able to determine for the
first time that the Wilbur-Ellis mislabeling scheme did, in
fact, impact a significant proportion of Blue Buffalo's dry
pet food products that were manufactured from material that
was shipped to our co-packers prior to May of 2014. And as a
result of that determination, we've decided to assert
third-party claims against Wilbur-Ellis and possibly others
involved in that mislabeling scheme.
Now, we did not come to this decision lightly, Your
Honor. As you know, Blue Buffalo has been the party that has
been pushing for tighter discovery, tighter deadlines in this
case. We wanted to try this case this year, in 2015, and get
it resolved in no small part because we have counterclaims in
the case in which we seek, among other things, a permanent
injunction against the ongoing attack or advertising campaign
that Purina is still running to this day, calling Blue Buffalo
liars and dishonest and what have you.
But this latest production from Wilbur-Ellis provides
an important puzzle piece that had been missing until now,
which is: What proportion of the shipments to our co-packers,
in fact, were impacted by the mislabeling? And we now know
from their most recent spreadsheets and documents that the
answer appears to be a very -- a substantial proportion. So
we intend now to take prompt action against Wilbur-Ellis.
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8/9/2019 Hearing Before The Honorable Rodney W. Sippel, United States District Judge - May 6, 2015
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As I mentioned, we are also looking at the
possibility of additional third-party defendants who were
complicit in that mislabeling conduct. We'll come to a
decision on that in the next couple of days, but we thought we
should make the Court aware of our intentions.
Now, let me be clear about what this means for Blue
Buffalo and its position in this case. Nestle Purina brought
this case alleging that Blue Buffalo had intentionally lied
about the ingredients in its pet foods, said we were using
high-quality, expensive ingredients when, in fact, we were
knowingly substituting cheaper, lower-quality ingredients.
That claim is completely false. Blue Buffalo had no knowledge
that it was being defrauded by its supplier, as were
apparently many other pet food manufacturers who were sourcing
from Wilbur-Ellis, which is one of the biggest names in the
business.
We ordered high-priced, high-quality chicken meal.
We paid for high-priced, high-quality chicken meal, but that's
not what we got in many instances. And Nestle Purina is
trying to capitalize on this.
We believe that this, in fact, had no impact on
Nestle Purina or its business. This is really a matter
between Blue Buffalo and its suppliers and Blue Buffalo and
its customers, but if Blue Buffalo is found to have any
liability in this case -- because we did put in our ads and on
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our bags "no chicken by-product meal," and that turns out not
to be true in many cases -- then if we have liability to
Nestle Purina, then those responsible should have to answer
for it.
So we would expect, Your Honor, with your permission,
to be in a position to file an amended answer, counterclaims,
and third-party claims within two weeks. We would request
until -- today's the 6th; so that would be May 20. If that's
acceptable to the Court. And we would respectfully request
the Court's permission to do so.
We are willing, obviously, if Your Honor prefers, to
file a formal motion for leave to bring these additional
third-party claims. Your Honor's existing scheduling order
had a cutoff date. I'm not even sure when it was, but it was
some months ago for adding parties. But we just got this
information from Wilbur-Ellis.
And I should add, Your Honor, that Nestle Purina has
been in a rush to judgment saying, oh, it's obvious, it's been
obvious for six months or longer, that a significant
proportion of these products were impacted.
That is not true. We have been waiting on
Wilbur-Ellis. The information has been coming out very
slowly. They sent us information about turkey meal, which is
a relatively minor ingredient, in February. It wasn't until
the end of April they sent us the information we needed on
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chicken meal, and now that the facts have come to our
attention, we intend to act.
THE COURT: All right. Mr. Zarlenga.
MR. ZARLENGA: Well, Your Honor, it may be the first
time in this case that I actually agree with a lot of what Mr.
Zalesin said. Whoever put on their labels that the product
has no chicken by-product meal on product that has that in it
should be held responsible. We've been saying that from the
beginning.
I do disagree that Blue Buffalo needed a year to
figure this out. It was obvious a year ago. And you will see
today, later in this hearing, that it should have been
determined three years ago, and we'll go through the documents
on that because they relate to the declassification motion.
So we think this is a very late development that Blue
Buffalo is only doing because they are completely backed into
a corner. The first day this case was filed, within five
hours, with not one single shred of due diligence, they
categorically denied -- those are not my words; those are the
chairman of the company's words -- every single allegation in
the case.
The other thing that I will just say that needs to be
corrected is that every time -- it happens in every hearing.
Blue Buffalo gets up here and tries to tell you what my case
is about. Every time they get it wrong. And we are not
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alleging intentional knowledge or dishonesty or falsehoods on
their part that they knew about things. I don't need to prove
that. I think that that evidence is -- there will be plenty
of evidence indicating that's what happened, but I don't need
to prove that. That's not an element of my claim. And the
Court just issued a ruling keeping in two codefendants that
we'd like out of the case, saying you don't need to have
intent. Blue Buffalo exploited that, and my claims exploit
that too. I don't want to take on that burden, but I do think
it may come out in this trial. And clearly, to me, it
indicates that they knew or certainly should have known this
was a problem, a widespread, long-term problem for many years.
So I don't have much more to say. I don't object to
bringing in a third party.
THE COURT: That's my question. I mean, whatever
happens, I don't want there to be any confusion about how we
got there. You know, the rule says "leave shall be freely
granted," and I always set the marker as before that date, you
know, there's not much of a conversation. After that date we
need to have a conversation or motion practice to determine
whether it's appropriate in this case to amend or add.
So are you consenting to giving them two weeks to
file their amended pleadings, or do you want them to file a
motion with your opportunity to respond?
MR. ZARLENGA: I will gladly give them two weeks, but
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I may want to amend our pleadings because a lot -- this is
new. The admission part is new. This has been -- we have
spent a year fighting tooth and nail over this question which
really wasn't necessary, from our standpoint.
THE COURT: Right.
MR. ZARLENGA: It was a monumental waste of our time.
So, therefore, we may seek relief on that, and we may seek
some other relief. There's been new things that have come out
that I would like to add to the complaints. So if we're going
it rephrase things, reframe things, then I want that
opportunity too. And provided I get it, I have no objection
to adding Wilbur-Ellis or whoever else is going to be added.
THE COURT: So by May 20 Blue Buffalo's to file its
proposed amended pleadings, which you suggest were amended
answer, amended counterclaim, and new third-party practice.
Is that --
MR. ZALESIN: That's correct, Your Honor. And just
to be clear, we currently are facing a deadline of this Friday
pursuant to your most recent order on the granting in part the
ad agency's motions to dismiss our counterclaims with leave to
amend to file amended counterclaims against the ad agencies.
I would request --
THE COURT: I'm going to roll that all together.
MR. ZALESIN: Yes, if that's permissible. Now, if
Mr. Zarlenga is going to file another pleading, then we're
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8/9/2019 Hearing Before The Honorable Rodney W. Sippel, United States District Judge - May 6, 2015
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additional time this is going to add to the overall life of a
case.
THE COURT: Mr. Zarlenga, you might as well attack
the CMO issue now, or the alternative is just to vacate it and
wait until everybody gets back together again, but I don't
think that's a good idea.
MR. ZARLENGA: You do not think that's a good idea?
THE COURT: Do you?
MR. ZARLENGA: I don't know.
THE COURT: I can be persuaded it is, but I hate
having no deadlines. That makes me really nervous.
MR. ZARLENGA: So I defer to the Court. That's fine.
Your Honor knows more about this than I do. Just that, okay,
I'm facing an unknown. This is brand new. I had no notice of
this this morning.
THE COURT: Okay.
MR. ZARLENGA: Right? So, you know, you've been
flexible. If flexibility is needed, then maybe we'll, you
know, extend it further. I don't know.
THE COURT: I've talked about this before. The Rule
No. 1 that no lawyer reads, which is that every decision in
the conduct of a case should be done as inexpensively as
possible, if this is new information to you but we're prepared
to move on and bring Wilbur-Ellis in -- I'm trying to get my
brain around "it's new information to me" -- how we manage
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this so we don't, in the interim, end up -- I'll tell you. I
mean, when I do a Rule 16 order, a case management order, the
reason I have that marker out there about when you amend is
that, after that date, we need to talk about what can we do to
minimize the cost of changing course.
Obviously, bringing in a new party, especially in
this case, we're going to change course here. You're talking
about maybe some different theories. I don't know.
MR. ZARLENGA: Well, so if I can answer that
directly.
THE COURT: How do we manage this so we're not doing
things we're going to have to repeat again? Wilbur-Ellis
isn't going to just take your word for it, right? They're out
there. I mean, everybody is kind of looking at them for now.
They may have another version of events.
MR. ZARLENGA: Yeah. And I will go through that.
I'm pretty sure I know what that is. I'll go through that
later today. It's germane to one of the motions, but -- so
following up on the Rule 1 -- and I do, I read the rules cover
to cover every year. Once a year.
THE COURT: Oh.
MR. ZARLENGA: And sometimes I read them backwards
because that way --
THE COURT: You don't get bored by the time you get
to them.
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MR. ZARLENGA: -- you focus on the ones at the end
first, which everybody ignores --
MR. ZALESIN: He really is a fun guy.
THE COURT: I hope it's not on vacation. That's all
I'm going to say. Sitting by the pool at the Breakers,
reading the Rules of Civil Procedure.
MR. ZARLENGA: Every time I read them, I see
something new. Every single time, I see something new.
THE COURT: Well, the Chief Justice just sent over a
bunch of new rules to Congress.
MR. ZARLENGA: No. I mean, I see something that
maybe has been in there a long time.
THE COURT: There will be new ones this year, you
know, and it's about -- the new focus is on proportionality.
MR. ZARLENGA: Right. Right. So let's go back to
your Rule 1 point, which I like. So, for example, that timing
is great if Blue Buffalo comes clean, so to speak, on how much
of this is in their product, which is now, you know, the issue
du jour, not whether, how much, how long. It would be nice.
It would save us a lot of money, you know. The money we
spent, we've already spent, maybe we'll get that back, but
I --
THE COURT: I don't want to keep down that path if
we're redefining.
MR. ZARLENGA: Right. I'd like to get some answers
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on that that make it easy. That would be great. But if we
have to go, you know, hammer and tong, tooth and nail, you
know, document by document, which we've done over the last
year, I don't think that's enough time. That's all I'm
saying.
THE COURT: Well, you know, we need to take a release
valve off of it today. The real question is: Once
Wilbur-Ellis gets here and we get back together, what's the
new world version going to be after that happens?
MR. ZARLENGA: Right. I agree.
THE COURT: And we know the current schedule is not
going to occur.
MR. ZARLENGA: I don't see any way that can happen.
THE COURT: So I will extend everything in the
interim for three months, understanding I still think it's
always good to have deadlines, but when we bring a new
substantial party in like this and -- I take it this is a
little bit of a sea change in how we're approaching the case.
It's not "no." It's "We got duped."
MR. ZALESIN: That's right, Your Honor. We have been
saying --
THE COURT: Is that the CliffsNotes version? You've
been saying, "It ain't so," but if it is so, and it looks like
it might be so, we got somebody else who's got to hold the bag
for this is what you're saying.
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MR. ZALESIN: Yeah. Look, we've been saying since
the fall of 2014 "We got duped." We certainly knew that there
was some material shipped to our co-packers by Wilbur-Ellis
that was mislabeled, and we admitted that not only in this
court but publicly to consumers in the fall of 2014.
What we didn't know is: Was it material? Are we
talking about one percent of our bags or some larger
proportion? And there's still work to be done. We don't know
the bottom-line answer yet, but we know it's --
THE COURT: You've concluded it's material.
MR. ZALESIN: It's material, it's substantial, and
it's a serious, serious issue between Blue Buffalo and
Wilbur-Ellis for sure.
THE COURT: So the one thing that's clear to me today
is we're not going to talk about Wilbur-Ellis depositions
today. It's --
MR. ZALESIN: I have not --
THE COURT: I think it would be fundamentally unfair
to take a deposition and then show up with a complaint against
somebody.
MR. ZALESIN: Well, we will certainly --
THE COURT: The landscape is a little different for
them.
MR. ZALESIN: I agree, Your Honor.
THE COURT: Unless there's a different view of the
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universe here. I wouldn't -- if I was in private practice and
I knew there was a lawsuit coming against my client but I
haven't seen it yet, I wouldn't let them show up and sit for a
deposition --
MR. ZALESIN: Yeah.
THE COURT: -- until I know what I'm dealing with.
MR. ZALESIN: Yeah. We anticipate that that will be
Wilbur-Ellis' position. We have not discussed the issue with
Wilbur-Ellis.
THE COURT: It would certainly be a deposition you'd
end up taking twice if you redefine the case, and that's not
helpful.
MR. ZALESIN: In all likelihood -- they are
represented by Covington & Burling, a big, very sophisticated
firm. I don't think they're going to put their person out
there until they see --
THE COURT: Paul Tagliabue gone back there yet so he
can --
MR. ZALESIN: I don't know.
THE COURT: Okay.
MR. ZALESIN: In any event, that seems almost
inevitable that we're going to wind up with an adjournment of
the third-party depositions against Wilbur-Ellis until they're
properly joined.
THE COURT: Till we define their participation. I
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just don't see, out of a fundamental sense of fairness, that
it makes any sense to go down that road.
MR. ZALESIN: Do you disagree?
MR. ZARLENGA: Well --
THE COURT: Oh. Okay.
MR. ZARLENGA: You know, I'll use a line I use with
my wife sometimes: I only care about me.
THE COURT: How does that work out for you?
MR. ZARLENGA: It's a train wreck every time.
THE COURT: But I'm going to keep doing it and hope
one day I'll get a different result. You know what that's the
definition of.
MR. ZARLENGA: We've been waiting a really long time
to get to Wilbur-Ellis and for --
THE COURT: Apparently, you're going to get them big
time.
MR. ZARLENGA: Yeah, well. So, I mean, look, I agree
with you, Your Honor. I mean, it is -- we have to take --
THE COURT: You wouldn't let your client show up for
a deposition knowing that they're going to get a lawsuit next
week.
MR. ZARLENGA: You know I wouldn't; so . . .
THE COURT: You wouldn't.
MR. ZARLENGA: No, I would not. So, yeah, that's
fine. That's fine. I do want to --
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THE COURT: But it's all about me.
MR. ZARLENGA: Well, it doesn't work here either. It
doesn't work here either.
I do want to correct something because this does
bother me. It just bother me.
THE COURT: Okay. Let's get it out.
MR. ZARLENGA: I will put this document on the
screen. So this is what Blue Buffalo said what they actually
said on October 14. Can you see that?
THE COURT: I have it.
MR. ZARLENGA: Okay. Just want to make sure. They
did not admit that there was by-product meal in their product.
They said in the first highlighted line in this letter from
the chairman of Blue Buffalo to so-called pet parents: "Since
this Wilbur-Ellis plant was the source of some of our chicken
meal, we may have received some of these mislabeled
shipments." Period. "May have."
And they have said that consistently. Even a week
ago their CEO said that under oath in a deposition. So I
don't know how anybody could be up here saying, oh, we
admitted this a long time ago. Not true.
So this was the first time anybody admitted it.
MR. ZALESIN: Your Honor, I object. I object to
putting what I believe is confidential designated material up
on the ELMO. There's no reason for this right now.
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