The 7th Circuit Court of Appeals has upheld the dismissal of a Mexican company’s fraud claims against an Indiana-based Fortune 500 company, finding the Mexican entity failed to allege the company, rather than its Mexican subsidiary, committed any wrongs.
In 2009, Berry Plastics Corporation executed a series of purchase orders in 2009 through its subsidiary, Pliant de Mexico, S.A. de C.V., with Mexican plastic and shrink wrap supplier Vexol, S.A. de C.V. the agreement called for Pliant to manufacture and distribute shrink wrap to Vexol, but a dispute arose when Vexol’s customers began complaining about the quality of shrink wrap they were purchasing.
When Vexol attempted to return the allegedly subpar products, Pliant claimed Vexol owed it money pursuant to a fabricated “pagare,” the Mexican equivalent of a promissory note. When that allegation produced no results for Pliant, the company filed a fraud claim against Vexol, beginning a process of repeatedly threatening to have Sergio Torreblanca Lopez — a Vexol officer — arrested if his company did not pay what was allegedly owed.
In response, Vexol and Torreblanca filed two complaints in the U.S. District Court for the Southern District of Indiana, the second of which alleged Berry committed fraud — or “dolus” — and “illicit acts” by aiding and abetting Pliant in misleading Vexol into entering into the purchase agreements with the intent of stealing Vexol’s customers. But the district court dismissed Vexol’s complaint with prejudice, finding it failed to allege any misconduct by Berry.
The 7th Circuit Court of Appeals agreed, with Judge Elaine E. Bucklo — sitting by designation from the Illinois Northern District Court — writing that though Vexol claimed its complaint rises from Berry’s conduct in Mexico, it fails to describe any actions that Berry — as opposed to Pliant — took in Mexico.
“Perhaps Vexol thinks its sufficient to describe Berry’s illicit conduct generally as ‘aiding and abetting Pliant’ in committing specific bad acts in Mexico,” Bucklo wrote. “…However expansive Mexico’s law of ‘wrongs’ in terms of the degree of culpability required for liability and the breadth of conduct proscribed … Vexol cites no authority to suggest that corporate ownership, without more, is sufficient to prove aiding-and-abetting liability under Article 1910 (of Mexico’s Federal Civil Code).”
The appellate court then found the district court did not err by denying Vexol’s motion to file a third amended complaint, noting the lower court had warned the company that if its second complaint did not cure defects identified in the first, it would be dismissed with prejudice.
“It appears to use that another bite at the apple is unlikely to engender anything other than additional expense for all involved,” Bucklo wrote.
Finally, the 7th Circuit denied Berry’s motions for sanctions against Vexol for filing a frivolous appeal. Berry failed to file a separate motion for damages, as is required under Federal Rule of Appellate Procedure 38, Bucklo said.
The case is Vexol, S.A. de C.V. and Sergio Torreblanca Lopez v. Berry Plastics Corporation, 17-2164.