J. R. Simplot Company v. Washington Potato Company et al

MOTION for Temporary Restraining Order and Preliminary Injunction

W.D. Wash.March 20, 2017

MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 The Honorable Ricardo S. Martinez UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE J. R. SIMPLOT COMPANY, Plaintiff, vs. WASHINGTON POTATO COMPANY; OREGON POTATO COMPANY; FRANK TIEGS; and DOES 1 THROUGH 10, Defendants. No. 2:16-cv-01851-RSM MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION NOTE ON MOTION CALENDAR: March 20, 2017. I. INTRODUCTION & RELIEF REQUESTED On March 13, 2017, Defendant Washington Potato Company (“WPC”), the co-owner with Plaintiff of Pasco Processing, LLC (“Pasco”), unilaterally and without any legal authority whatsoever declared itself the sole owner of Pasco. WPC, the sole manager of Pasco, issued unilateral declarations about a fabricated “deadlock” and a fictional closing on the purchase of Plaintiff’s ownership in Pasco (“Simplot’s Equity”), ignoring specific warnings from Plaintiff (sometimes referred to herein as “Simplot”) that WPC’s attempts to deprive Simplot of its investment were illegal, null and void. WPC, however, persisted with its contrived and calculated scheme to misappropriate Simplot’s interest in Pasco and Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 1 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 the value associated with Simplot’s investment in, and crucial supply relationship with, Pasco. In furtherance of this scheme, WPC proceeded to unilaterally declare WPC the owner of Simplot’s Equity (the “Attempted Conversion”) and rushed to tell the world (including Pasco’s employees, lender, and other third parties) that Simplot was no longer an owner. WPC and its principal, Defendant Frank Tiegs (“Tiegs”), have also invoked the self-declared and spurious status of WPC as sole owner of Pasco to threaten severe disruptions to Simplot’s supply chain and to intimidate potential witnesses in this case. The Attempted Conversion is the culmination of a pattern of willful, reckless, and grossly negligent misconduct in connection with WPC’s management of Pasco that is the basis for Simplot’s pending petition to appoint a receiver for Pasco [Dkt. 21] (the “Receiver Petition”). WPC and Tiegs (“Defendants”) must be stopped from behaving as if their attempt to seize Simplot’s Equity at a manipulated depressed price is valid before this Court can rule on the Receiver Petition and Count VIII of Simplot’s First Amended Complaint [Dkt. 46] (“1AC”), which seeks a declaration that Simplot is not required to transfer Simplot’s Equity to WPC. Defendants’ Attempted Conversion is an effort to usurp the Court’s authority to decide a critical issue that is pending not only here, but in a collateral lawsuit involving the very same subject matter that Defendants filed on March 14, 2017 in another court. Simplot seeks a temporary restraining order (“TRO”) pursuant to Fed. R. Civ. P. 65(b) and LCR 65(b) to maintain the status quo and prevent Defendants from continuing to act on the Attempted Conversion before the Court can rule on the Receiver Petition and Count VIII of the 1AC. In addition to owning 50% of Pasco, Simplot is a customer of Pasco and of National Frozen Foods Corporation (“NFF”), a wholly-owned indirect subsidiary of Pasco. Defendants’ ongoing attempts to exploit their Attempted Conversion of Simplot’s Equity Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 2 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 will, in addition to preventing the Court from performing its dispute resolution role, jeopardize Simplot’s business and customer relationships in ways that cannot readily be redressed through money damages, necessitating immediate injunctive relief. Simplot filed this lawsuit on December 2, 2016 [Dkt. 1] alleging, among other things, that WPC and Tiegs breached their fiduciary duties by self-dealing, enriching themselves by tens of millions of dollars at Simplot’s expense, and concealing basic corporate records from Simplot.1 On December 8, 2016, Simplot filed its Receiver Petition detailing Defendants’ mismanagement of the Companies, including breaches of financial covenants that currently give the lender the right to foreclose, safety violations, and self- dealing that enriches Defendants (and has cost Simplot tens of millions of dollars in lost revenue and other harm). The Receiver Petition seeks Court appointment of a neutral, independent third party who can preserve Pasco and Gem State while this lawsuit is pending. The Receiver Petition currently has a May 5, 2017 noting date. On December 16, 2017, the Court ordered expedited discovery with respect to the Receiver Petition [Dkt. 32]. One of the most important functions of injunctive relief is to preserve the status quo ante, defined as “the last, uncontested status which preceded the pending controversy.” Regents of Univ. of California v. Am. Broad. Cos., 747 F.2d 511, 514 (9th Cir. 1984) (quotation omitted). Here, the “last uncontested status” was that Defendants acknowledged Simplot’s continuing 50% ownership of Pasco. Whether Defendants have the right to force a sale of Simplot’s Equity is a critical issue in this case and should be decided by the Court in due course, not unilaterally by Defendants. It is well settled that a TRO is a proper remedy to preserve the status quo pending resolution of rights with respect to a disputed 1 Simplot and another company controlled by Tiegs, Oregon Potato Company (“OPC”) are each 50% owners of another food processing and distribution business, Gem State Processing, LLC (“Gem State”). OPC is the manager of Gem State. Gem State and Pasco are collectively referred to herein as the “Companies.” Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 3 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 acquisition. E.g., Boardman v. Pac. Seafood Grp., 822 F.3d 1011, 1017 (9th Cir. 2016) (affirming grant of preliminary injunction entered after TRO). A TRO to restore the status quo pending judicial resolution of the Receiver Petition and Count VIII is necessary to prevent irreparable injury to Simplot, and will cause no injury to Defendants. In light of Defendants’ unilateral and wrongful tactics, Simplot respectfully requests that the Court enter a TRO enjoining Defendants from undertaking any acts based upon, or in furtherance of, the Attempted Conversion, enjoining Defendants from any further disruption of supply to Simplot, and enjoining Defendants from any further attempts to acquire Simplot’s Equity, until the Court can rule on the Receiver Petition and Count VIII. II. FACTUAL BASIS FOR INJUNCTIVE RELIEF The relevant factual background is set forth in Simplot’s 1AC, which is verified. The following summarizes the facts most pertinent to the TRO issues.2 A. Pasco’s Management Structure On March 19, 2008, Simplot formed Pasco, a processor and distributor of frozen vegetables, potatoes, fruit, and other food products. See 1AC ¶ 28.3 Simplot formed Pasco 2 Defendants have filed a Rule 12(b)(3) Motion to Dismiss for lack of subject matter jurisdiction [Dkt. 49] (the “MTD”). The MTD asserts that there is no diversity jurisdiction over Simplot’s derivative claims, which are alleged in the alternative and comprise six of the 15 counts in the 1AC. Defendants claim that the Companies’ citizenship must be considered and some members of the Companies are not diverse. Simplot’s Response to the MTD [Dkt. 52] cites contrary authority that the Companies are mere nominal parties whose citizenship is not separately considered for diversity purposes, especially where, as here, the dispute is between two members of the LLC rather than between a member and the LLC itself. Regardless, Defendants admit that this Court has subject matter jurisdiction over Simplot’s direct claims. [Dkt. 38, Ex. A.] Indeed, by (as discussed below) filing a claim that is the inverse of Count VIII in another federal court, Defendants admit to federal jurisdiction over the issues that are at the heart of this Motion. Count VIII of the 1AC seeks a declaration of rights with respect to the subject matter of this motion: Defendants’ attempt to unilaterally eliminate Simplot’s equity ownership in Pasco. That is a quintessential direct claim that impacts Simplot differently from Pasco, further exposing fundamental flaws in Defendants’ MTD. 3 Unless otherwise noted, “¶” references are to the numbered paragraphs of the 1AC. Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 4 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 to supply Simplot, and Pasco currently supplies approximately 42% of Simplot’s vegetable and specialty inventory (including substantially all of more than 50 Simplot branded roasted products and other specialty products). Ex. A, Declaration of Michael Johnston (“Johnston Decl.”) ¶¶ 4, 7. That business generates more than $54 million in revenue for Simplot. Id. ¶ 4. WPC became a fifty percent member of Pasco in April 2008. ¶ 28. In February of 2013, Pasco acquired NFF, which has operated a vegetable processing business since 1912. ¶ 29. WPC and Simplot are parties to Pasco’s Amended and Restated Limited Liability Company Operating Agreement dated February 15, 2013 (“Pasco OA”). ¶ 30, Dkt. No. 46- 1 [Ex. A to 1AC]. WPC is Pasco’s manager, with responsibility for Pasco’s day-to-day operations and management of Pasco’s assets. ¶ 31, Dkt. No. 46-1 [Ex. A to 1AC, Art. 5]. WPC is also required to maintain Pasco’s books and records and make information available to Simplot. ¶¶ 30-31, Dkt. No. 46-1 [Ex. A to 1AC, Art. 7.4, 8.2]. Similarly, WPC is designated as Pasco’s “sole and exclusive operator” pursuant to the February 15, 2013 Amended and Restated Management Services Agreement (“Pasco MSA”) between WPC and Pasco. ¶ 34, Dkt. No. 46-1 [Ex. B to 1AC].4 B. Pasco’s Failing Financial Performance Pasco’s financial health is deteriorating rapidly, 1AC ¶¶ 39-52, to the point that Pasco has incurred multiple financial covenant defaults, which are still continuing, under its $141,000,000 loan from Northwest Farm Credit Services, PCA (“Pasco’s Lender”). The consolidated net income of Pasco and its subsidiaries (including NFF) (the “Pasco Group”) has fallen more than 60% from FY 2014 through FY 2016, and Tiegs himself has predicted NFF’s imminent bankruptcy on several recent occasions. ¶¶ 40-43. 4 Gem State produces dehydrated potato products, and is managed by OPC. ¶¶ 35-36. Pursuant to the Gem State Operating Agreement dated April 4, 2011 (“Gem State OA”), OPC has duties similar to those imposed on WPC as Pasco’s manager. ¶ 36, Dkt. No. 46-1 [Ex. C to 1AC, Art. 5, §§ 7.3, 7.4, 8.2]. Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 5 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 C. Defendants’ Self-Dealing In addition to owning 50% of, and managing, the Companies, Defendants own or control affiliates (the “Tiegs Affiliates”) that are vendors and customers of the Companies. Defendants have fully exploited the self-dealing opportunities this scenario presents. Defendants’ self-dealing is detailed at 1AC ¶¶ 53-57 and is also described in the Johnston Declaration and the Declaration of Richard Grader, who was NFF’s President and CEO until he resigned on September 16, 2016 (Exhibit B hereto) (“Grader Decl.”). Tiegs has made numerous statements to NFF employees to the effect that Tiegs makes all decisions, that he did not want NFF to be operated in a way that would benefit Simplot, and that he did not care if NFF lost money. Grader Decl. ¶¶ 4-7. Mr. Grader states that “Later, the meaning of those statements became more clear to me; Tiegs used NFF as a way to make more money” for himself “outside of NFF and Pasco.” Id. ¶ 7. In many cases, Tiegs makes decisions regarding Pasco’s Simplot production and personally dictates the extent to which Pasco will fulfill specific production and packaging of Simplot branded products that Simplot requires to meet customer orders. Johnston Decl. ¶ 7. Tiegs has directed NFF to purchase crops from Tiegs Affiliates in quantities that far exceed what Pasco needs. This forces NFF to carry far more inventory than they actually require and unjustly enriches Tiegs to the detriment of Simplot, because NFF buys the inventory from the Tiegs Affiliates and must also pay third party storage fees to store the inventory because it is above and beyond Pasco’s in-house storage capacity. ¶ 55; Grader Decl. ¶ 14. Further, Tiegs has forced NFF to sell vegetable products to customers who buy those products from the Tiegs Affiliates as well as from NFF (“Shared Customers”) at or below cost. At the same time, the Tiegs Affiliates appear to be selling potato products for their own account to those same Shared Customers at a profit. ¶ 55(c); Grader Decl. ¶ 7. NFF’s former CEO Richard Grader estimates that NFF lost between $10 and $20 million Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 6 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 during FY 2015 and 2016 as a result of this scheme. Grader Decl. ¶ 13. A graphic illustration of Defendants’ “Shared Customer” misconduct is depicted in Exhibit G to the 1AC, also discussed in Grader Decl. ¶ 10, illustrating a $4.4 million loss to NFF with respect to sales of one product to one Shared Customer during 2012-15. Since December 2016, Defendants have accelerated their self-dealing and imposed additional losses on Simplot—and jeopardized Simplot’s customer relationships—by refusing to process product Simplot needs to meet customer demand, while shifting production capacity to fill orders for Simplot competitors who are Tiegs’ customers. Johnston Decl. ¶¶ 5, 8, 10-11. Pasco has also reversed its prior practice and now also refuses to allow any Simplot product to be moved out of the Pasco plant for final processing at another facility, even though the Pasco plant continuously fails to meet Simplot’s production requirements. Id. ¶ 9. These actions alone have caused Pasco to lose an additional $4.5 million or more in revenues, half of that loss is borne by Simplot. Id. ¶ 10. Simplot recently learned that Pasco is processing up to 600,000 pounds of specialty potato product for Lamb Weston, a Simplot competitor, while refusing to meet Simplot’s requirements for the same product. Id. ¶ 11. D. The Companies’ Safety and Other Investigatory Issues Simplot has learned of a number of worker safety violations, food contamination complaints and related recalls, administrative fines, and poor audit ratings at the Companies (and other facilities operated by Defendants) (as detailed in 1AC ¶¶ 58-85). The Companies and the Tiegs Affiliates have been investigated, cited, and/or otherwise punished by numerous state and federal agencies, including the USFDA, the USEPA, OSHA, and their state counterparts. Following these regulatory actions, Tiegs encouraged NFF staff to thwart inspections by directing a communication that they should “DISCREETLY shut down operations and begin sanitation” when the USFDA arrives to inspect facilities. ¶ 78, Dkt. No. 46-1 [Ex. W to 1AC]. Numerous other food and worker Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 7 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 safety issues are described in the 1AC. Additionally, Defendants’ alleged mistreatment of legal, non-citizen workers based on national origin is the subject of a pending federal administrative action against Pasco and WPC. ¶¶ 83-85. E. Defendants’ Lack of Transparency and Violation of Simplot’s Inspection Rights Simplot tried for months before filing this lawsuit to get to the bottom of the Companies’ finances and other problems. On September 30, 2016, Simplot served demands for Company corporate records on WPC and OPC pursuant to Simplot’s rights as a member of the Companies and the inspection provisions of the OAs. See ¶ 89, Dkt. No. 46-1 [Ex. Z to 1AC]. Tiegs and Defendants’ attorneys initially promised to provide the information that Simplot requested. ¶ 90, Dkt. No. 46-1 [Ex. AA to 1AC]. Defendants failed to comply with these promises and have made only cursory, evasive, and incomplete responses. ¶ 92, Dkt. No. 46-1 [Ex. AB to 1AC]. Since the filing of this lawsuit, Defendants have continued to obstruct Simplot’s efforts to uncover critical documents and information from NFF and the Companies. Simplot filed an expedited motion to compel on March 20, 2017, raising critical issues regarding Defendants’ refusal to produce Company documents and give Simplot access to the Company’s accounting databases and bank statements for accounts through which Defendants funnel Company funds. The Attempted Conversion has shed light on these tactics, and now appears to be the culmination of a scheme to attempt to deprive Simplot of its ownership interest in Pasco. F. The Attempted Conversion 1. Defendants Attempt to Manufacture a “Deadlock” By Breaching Their Fiduciary Duties On October 24, 2016, WPC and Tiegs advised Simplot that WPC and Simplot needed to make urgent capital contributions of $3,000,000 to $6,000,000 to Pasco because of an alleged financial crisis, which, if it existed at all, was caused by Defendants’ own breaches of fiduciary duties. ¶ 41, Dkt. No. 46-1 [Ex. D to 1AC]. Defendants never gave Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 8 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Simplot any warning of the impending financial crisis and continue to conceal information necessary for Simplot to thoroughly consider and respond to the request. 1AC ¶¶ 91-95. On December 23, 2016, WPC unilaterally declared a “Deadlock” (the “December Deadlock Notice”) because Simplot would not commit to the capital contributions while being denied information about Defendants’ asserted reasons for the request. ¶ 100, Dkt. No. 46-1 [Ex. AC to 1AC]. 2. Relevant Provisions Of The Pasco OA Section 12.13 of the Pasco OA [Dkt. No. 46-1, Ex. A to 1AC] defines “Deadlock” as follows: “Deadlock” shall occur with respect to any matter for which a majority of the votes of the Board of Members is required for approval, and such matter is not approved as a result of a vote in which three (3) members of the Board of Members have voted against the matter and three (3) members of the Board of Members have voted in favor of the matter (a “Tie Vote”) on a matter submitted to it at a meeting or in the form of a proposed written consent. Defendants incorrectly claimed in the December Deadlock Notice that Simplot’s alleged refusal to agree to the October 2016 request for additional capital creates a Deadlock. ¶ 100, Dkt. No. 46-1 [Ex. AC to 1AC]. To the contrary, there is not, nor has there been, a Deadlock for that or any other reason. Simplot did not refuse to make a capital contribution to Pasco. ¶ 107. Simplot clearly stated that it would consider a contribution after Defendants complied with Simplot’s Records Demands so that Simplot could knowledgeably and adequately make a decision. Id. Defendants, however, reneged on their prior statements that they would produce records. ¶ 92, Dkt. No. 46-1 [Ex. AB to 1AC] Even if a “Deadlock” did exist, Section 9.5 of the Pasco OA (the “Forced Sale Term”) applies and states as follows (emphasis added): 9.5 Members Option to Purchase on Deadlock. In the event the Members cannot resolve a Deadlock in accordance with Section 12.13 below, Washington Potato shall have the option to purchase Simplot's Member Percentage Interest for the Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 9 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Agreement Price on the Agreement Terms. Washington Potato's option to purchase Simplot's Member Percentage Interest under this Section 9.5 shall be conditioned upon the Company, Washington Potato and Simplot entering into a supply agreement for a period of five (5) years for the supply of vegetable products to Simplot with terms and conditions mutually acceptable to Simplot and Washington Potato. In the event that Washington Potato does not exercise its option to purchase Simplot's Member Percentage Interest within seventy-five (75) days after a party provides a written request for mediation under Section 12.13 below, then Simplot shall have the option to purchase Washington Potato's Member Percentage Interest for the Agreement Price on the Agreement Terms. ¶ 30, Dkt. No. 46-1 [Ex. A to 1AC]. Defendants never complied with the supply agreement condition set forth in the italicized language above from Section 9.5 (“Supply Agreement Condition”) even assuming that provision were enforceable.5 As discussed in more detail below, Simplot has proposed drafts of supply agreements in the past and Defendants have refused to negotiate such supply agreements. Defendants now argue, without any legal basis, that WPC can “waive” Simplot’s contractual right under the Supply Agreement Condition. Assuming solely for the sake of argument that the Forced Sale Term could become operative, Tiegs and WPC, through their manufactured “Deadlock,” manipulation of Pasco’s operations and financial condition, and multiple and significant breaches of fiduciary duties, have devalued Pasco to the point where, based on a formula which assumed Pasco would be run by a manager that would not be motivated to impair the company’s value, Simplot would be forced to sell its interest for virtually nothing. Simplot’s Pasco capital account balance in September 2016 was $43.8 million. ¶ 13. This reflects the scale of the investment that 5 The Supply Agreement condition is an unenforceable “agreement to agree” because, among other reasons, the Pasco OA did not include any supply agreement as an exhibit and both parties must agree to the terms of the supply agreement. “Even where definite terms are present, if stipulations and conditions are placed on these terms, the court will not find an enforceable contract.” Cats v. NextAlarm.com, Inc., No. C08-1096 RSM, 2009 WL 577590, at *4 (W.D. Wash. Mar. 5, 2009). Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 10 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Simplot stands to lose if Defendants can act on their scheme. Johnston Decl. ¶ 14. It would be the perfect crime for Defendants to profit from their own misconduct in this manner. 3. Events Leading to the Attempted Conversion In a further effort to manufacture a Deadlock, Defendants called meetings for the Companies’ Boards of Members for January 11, 2017 (“January Board Meetings”).6 Defendants attempted at those Meetings to manufacture more spurious “Deadlocks” as to several items, including a significant NFF issue, imposing a monetary penalty on Simplot for its alleged refusal to make a capital contribution, and (once again) to dismiss Simplot’s derivative claims in this lawsuit. ¶ 111. Defendants refused to provide any background information for their own agenda items and refused to answer Simplot’s reasonable questions regarding the agenda items, thereby creating the spurious “Deadlocks” entirely through their own misconduct. ¶ 112. Tiegs also threatened at that meeting to make unilateral reductions in Pasco’s workforce. Exhibit C at p. 195. Simplot repeatedly objected to Defendants’ attempts to manufacture “Deadlocks” and otherwise pointed out that Defendants had no right to purchase Simplot’s Equity because, among other reasons, Defendants had refused to negotiate a supply agreement and otherwise did not comply with requirements of the OA. Exhibit D. Simplot further noted its objections in a March 10, 2017 letter (Exhibit E) which reiterated that Simplot had not waived the Supply Agreement Condition and reminded Defendants that WPC had ignored Simplot’s most recent proposal for a supply agreement, which proposal under the current circumstances would no longer be sufficient given the deterioration of product fulfillment and WPC’s refusal to cooperate in proper supply planning and inspection rights. 6 As discussed in more detail in 1AC ¶¶ 109-113, Simplot attended the January Board Meetings while expressly noting its objection to the validity of those meetings pursuant to the Companies’ OAs. Tiegs objected to Simplot’s request to have a court reporter present. Simplot (and ultimately Tiegs) recorded audio of the January Board Meetings and Simplot had a court reporter transcribe the audio. Exhibit C hereto is a true and copy of relevant portions of that transcript. Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 11 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Defendants’ tactics in this regard are part of the pattern of creating a pretext for the Attempted Conversion that followed thereafter. 4. Defendants’ March 13, 2017 Declaration if the Attempted Conversion and Ongoing Actions to Alter the Status Quo Defendants ignored Simplot’s warnings. Attached as Ex. A to the Johnston Decl. is a true and correct copy of a March 13, 2017 letter from Defendants’ counsel to Simplot’s counsel (the “Attempted Conversion Declaration”). In the Attempted Conversion Declaration, Defendants announced that: (a) “[t]he closing of Washington Potato Company’s purchase of [Simplot’s Equity] occurred on March 10, 2017” (emphasis added); (b) WPC “waived the requirement that Simplot enter into a Supply Agreement as part of the Closing;” (c) WPC was unilaterally withdrawing the previously agreed upon pricing structure for Simplot’s critical West Memphis, Arkansas plant that was based on Simplot’s status as a Pasco member; (d) Simplot is required to execute an “Assignment Agreement” memorializing the Attempted Conversion (the “Assignment Agreement”); (e) the Attempted Conversion has triggered certain real estate excise taxes that WPC will advance for Simplot, and then seek reimbursement from Simplot; and (f) Simplot must dismiss its derivative claims in this lawsuit by March 17, 2017. Later in the day on March 13, Simplot’s counsel responded to the Attempted Conversion Declaration, stating that WPC had no right to force the buyout and demanding that Defendants retract the Attempted Conversion (Ex. F hereto). On March 14, 2017, Defendants’ counsel replied, stating that Defendants would not retract the Attempted Conversion. (Ex. G hereto). By submitting the Assignment Agreement to Simplot for execution, Defendants admit that the Attempted Conversion requires Simplot’s agreement pursuant to Section 9.7 of the OA. Defendants also conceded that they cannot close on WPC’s purported acquisition of Simplot’s Equity without Simplot’s consent or a court order when on March 14, 2017, WPC filed a Complaint against Simplot in the Eastern District of Washington Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 12 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 (Washington Potato Co. v. J. R. Simplot Co., No. 4:17-cv-05032 (E.D. Wash.), copy of Complaint attached hereto as Exhibit H) (“Eastern District Lawsuit”). In that Lawsuit, WPC seeks a declaratory judgment or an order of specific performance requiring Simplot to transfer the Simplot Equity to WPC. Id. Those claims are tacit admissions that Defendants cannot act unilaterally.7 Defendants’ assertion in the Attempted Conversion Declaration that WPC could “waive” the Supply Agreement Condition because that Condition was for WPC’s benefit is absurd. The Supply Agreement Condition was clearly inserted for Simplot’s benefit, and therefore WPC cannot waive this condition on behalf of Simplot. E.g., Alkan v. Wheeler, 142 Wn. App. 1013, at *3-4 (2007) (holding that party cannot waive contractual condition that benefits the other party, even if the provision also benefits the party seeking the waiver). Simplot’s hesitancy to agree to a supply agreement while WPC is Pasco’s manager and (allegedly) its sole owner without appropriate protections is well-grounded given WPC’s recent record of poor product fulfillment and improper management of Pasco and its facilities in addition to WPC’s significant tortious misconduct and breaches of the Pasco OA that Defendants committed even when they acknowledged that Simplot was an owner of Pasco. Johnston Decl. ¶ 15. 7 On March 3, 2017, one of the Tiegs Affiliates, Dickinson Frozen Foods, Inc. (“DFF”), filed a lawsuit in Ada County (Idaho) District Court against Simplot, Simplot’s President- North American Food Group Mark McKellar, and the two law firms representing Simplot in this lawsuit (“Idaho Lawsuit”). In the Idaho Lawsuit (copy of Complaint attached hereto as Exhibit J), DFF alleges that Simplot’s allegations in this lawsuit were defamatory and in breach of a non-disclosure agreement. These allegations are utterly without merit and the Idaho Lawsuit defendants will respond in due course, but the filing of the Idaho Lawsuit exemplifies Defendants’ scorched earth tactics and desperation to change the status quo before this Court can rule on the Receivership Petition. Simplot strongly believes that Defendants and their counsel will be vulnerable to a variety of sanctions pursuant to 28 U.S.C. § 1927, Fed. R. Civ. P. 11, and their state counterparts. Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 13 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Defendants have also invoked the Attempted Conversion to change the status quo regarding Simplot’s communications with Pasco’s Lender. Previously, Defendants accused Simplot of providing too much information to Pasco’s Lender, for example with respect to the parties’ unsuccessful February 2017 mediation. Since it was Pasco’s Lender that required the mediation as a condition to any forebearance, Simplot believed that Pasco’s Lender (which expressly indicated it reserved the right to approve any ownership change) should have been kept informed, Simplot honored Defendants’ request to keep that information from Pasco’s Lender for the time being, while reserving the right to later insist on transparency. On March 13, 2017, Defendants invoked the Attempted Conversion by demanding that Pasco’s Lender not communicate with Simplot about Pasco, which Pasco’s Lender refused. Ex. I, K hereto. Defendants are also using the Attempted Conversion to attempt to intimidate NFF witnesses who are scheduled to be deposed later this week. Defendants’ counsel sent a letter to NFF’s counsel claiming that “WPC closed on the buyout of Simplot’s interest in Pasco Processing and is now the 100% owner of the company, and indirectly, NFF.” Dkt. No. 71-1 [Ex. 1 to Dkt. No. 71]. The letter went on to accuse NFF employees of “colluding with Simplot” and stated it would be “inappropriate for NFF to assert itself” into the dispute between WPC and Simplot.” Id. This letter (sent at a time when NFF depositions were scheduled for the week of March 20 [Dkt. 59-1]) was a less than subtle threat. Making matters worse, Defendants are represented in this case by the same law firm that represented NFF for decades, Davis Wright Tremaine LLP (“DWT”), which is the subject of NFF’s Motion to Disqualify counsel filed on March 16, 2017. [Dkt. 57]. Simplot recently learned that soon after Pasco acquired NFF in 2013, Tiegs told NFF management that he did not care if NFF, a then highly profitable 100-year old company, did not make money for seven to eight years—statements that began to make sense to Richard Grader when he realized that Tiegs was running NFF to benefit the Tiegs Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 14 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Affiliates benefitted from Pasco’s operations. Grader Decl., ¶¶ 4-7. Simplot is also now learning that Tiegs made other statements to NFF management over the years that shed light on Defendants’ recent actions that “Simplot doesn’t say no to me [Tiegs],” that Simplot should be “kept out” of NFF’s business, that NFF “was our [Defendants’] toy” and “we [Defendants] own you.” Id. at ¶¶ 5-7. The Attempted Conversion makes these prior statements appear to be precursors to a plan to drive down the value of Pasco so that Defendants could essentially steal Simplot’s Equity. 8 F. Irreparable Harm Caused by Defendants’ Misconduct 1. Irreparable Harm To Simplot’s Supply Relationships If Defendants can continue to act on the Attempted Conversion, Simplot will sustain ongoing and immediate harm to its supply relationships that money damages will not fully be able to undo. As set forth in the Johnston Declaration (Ex. A), the major reason that Simplot went into business with WPC was to develop Pasco as a strong supplier for Simplot. Johnston Decl. (Ex. A) ¶ 4. By the end of the most recent fiscal year, Pasco supplied 42% of Simplot’s vegetable and specialty product inventory and supplied substantially all product in more than 50 Simplot branded roasted and other specialty products, and these lines of business collectively represent more than $54 million in annual gross revenues. Id. 8 In addition to its efforts, discussed above, to warn Defendants against taking further improper actions with respect to Pasco, Simplot has other contractual rights that it is exercising to redress Defendants’ misconduct. Section 5.6 of the Pasco OA gives Simplot the right to remove WPC as Manager in the event of WPC’s “gross negligence, reckless conduct or willful misconduct in connection with the [Pasco’s] business.” Dkt. No. 46-1 [Ex. A to 1AC, § 5.6]. Simplot has served a notice on WPC removing WPC as Manager of Pasco in accordance with this provision. No one disputes that Simplot has the unilateral contractual right to remove WPC as Manager, so that action is not at issue in this litigation. But Simplot’s serving of notice under Section 5.6 illustrates that Simplot has made every effort to use its contractual rights to prevent Defendants from engaging in further misconduct—another reason why a TRO is warranted. Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 15 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Pasco’s performance in supplying Simplot—measured objectively in quantitative terms—has deteriorated as Defendants’ misconduct has escalated. Id. at ¶¶ 8-10. The Attempted Conversion Declaration further threatens to cutoff Simplot’s supply as of September 2, 2017, less than six months from now and well before Simplot can possibly find an alternative supplier. Id. at ¶ 13. Because of the nature of the vegetable industry, where packing plans must be made well in advance of crop planting and harvesting, it therefore will be very difficult for Simplot to find another supplier that is not already committed to process products in 2017. Id. ¶ 4. Defendants are using the Attempted Conversion Declaration to escalate their ongoing efforts to disrupt Simplot’s supply. For example, on or about February 2, 2017, Tiegs told Simplot supply chain management that Pasco was going to “stop running Simplot product, and only run OPC products.” Id. at ¶ 5. Also, Simplot learned that Pasco has begun processing hundreds of thousands of pounds of baby baker potatoes for a major Simplot competitor, a product upon which Simplot exclusively relies on Pasco for supply. Id. at ¶ 11. This diminishes Pasco’s capacity to process supply to Simplot. Further, Defendants have very recently indicated that they are not going to act to correct supply issues that Simplot has in obtaining product from Pasco to supply one of Simplot’s major customers. Id. at ¶ 9. The Attempted Conversion Declaration also explicitly threatens tote product supply to Simplot’s critical West Memphis, Arkansas plant, by unilaterally increasing the agreed pricing charged by Pasco to Simplot to undefined “market” prices. Id. at ¶ 14. This forced increase will have a significant impact because Simplot relies on Pasco for approximately 75% of Simplot’s toted product at that plant. Id. The threat of imposing undefined “market” prices is typical of Defendants: creating extreme uncertainty so that Simplot cannot plan its all-important procurement process, which obviously relies heavily on forecasting. Id. Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 16 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 2. Irreparable Harm to Simplot’s Investment Without immediate injunctive relief, Simplot will suffer irreparable harm caused by the irreversible alteration of the status quo and the ongoing damage to Simplot’s critical supply relationships. The Companies are continuing to lose millions of dollars. ¶ 120. Pasco remains in default of its financial covenants under its loan agreements, and Pasco’s Lender has the right to demand immediate payment in full, cancel Pasco’s credit facility, and liquidate the Pasco Group assets. Pasco is also experiencing acute food and worker safety issues. Id. NFF has experienced management turnover and significantly more is threatened. Approximately 2,150 employees who perform services for Pasco, NFF, and Gem States face an uncertain employment future. Id. Additionally, Simplot has suffered direct losses that Simplot currently estimates are in the millions of dollars and continuing to accrue. ¶ 115. Further, Defendants have concealed their misconduct from Simplot and gone so far as instructing Pasco and NFF personnel to keep material information from Simplot. ¶ 116. Accordingly, the full extent of Defendants’ misconduct and the resulting harm remains unknown and will be even more severe if Defendants can operate Pasco without any scrutiny from Simplot (or this Court)— which is precisely what Defendants desire and what they hope the Attempted Conversion would accomplish. III. ARGUMENT AND AUTHORITY A. A TRO is Necessary to Preserve the Status Quo. Pursuant to Fed. R. Civ. P. 65, to establish the right to a TRO, the moving party must show (1) a likelihood of success on the merits of the underlying case; (2) a likelihood of irreparable harm in the absence of the TRO; (3) “that a balance of equities tips in the favor of the moving party”; and (4) that a TRO is in the public interest. Blueshield v. Totten, No. C15-1851RSM, 2015 WL 12572543, at *1 (W.D. Wash. Nov. 24, 2015) (citation omitted); Panyanouvong v. Aphay, No. 2:14-CV-00275 RSM, 2014 WL 2986507, at *5, 8 (W.D. Wash. July 1, 2014) (granting motion for TRO construed as a motion for Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 17 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 preliminary injunction in part). Courts in the Ninth Circuit apply a “sliding scale” to these elements, “‘so that a stronger showing of one element may offset a weaker showing of another.’” Id. at *5 (quotation omitted); Earthbound Corp. v. MiTek USA, Inc., No. C16- 1150 RSM, 2016 WL 4418013, at *7 (W.D. Wash. 2016) (granting TRO and citing Big Country Foods, Inc. v. Bd. of Educ. of Anchorage Sch. Dist., 868 F.2d 1085, 1088 (9th Cir. 1989)): To obtain a preliminary injunction, the moving party must show either (1) a combination of probable success on the merits and the possibility of irreparable injury, or (2) that serious questions are raised and the balance of hardships tips sharply in its favor. These formulations are not different tests but represent two points on a sliding scale in which the degree of irreparable harm increases as the probability of success on the merits decreases. Under either formulation, the moving party must demonstrate a significant threat of irreparable injury, irrespective of the magnitude of the injury. When considering these factors, “[t]he urgency of obtaining [relief] necessitates a prompt determination[.]” Flynt Distrib. Co. v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984). Accordingly, the Court may consider what at trial would be “inadmissible evidence,” including hearsay. Id. To that end, Rule 65(b)(1) and LCR 65(b)(3) expressly authorize the Court to act based on the motion without a hearing, even if the opposing party is served notice. The well-known purpose of TROs and preliminary injunctions is to preserve the status quo as it existed prior to the controversy. “The status quo ante litem refers not simply to any situation before the filing of a lawsuit, but instead to the last uncontested status which preceded the pending controversy.” GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1210 (9th Cir. 2000) (quotation omitted; reinstating preliminary injunction).9 9 Simplot seeks a restoration of the status quo ante litem and therefore a prohibitory, and not mandatory, injunction. Regardless, Simplot would be entitled to a mandatory injunction through a TRO or preliminary injunction. The same standards apply to a mandatory injunction as apply to a prohibitory injunction. Hamby v. Hammond, No. C14- 5065 RBL-KLS, 2014 WL 4162542, at *6 (W.D. Wash. Aug. 21, 2014) (granting Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 18 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Here, the last “uncontested status” was Simplot’s 50% ownership of Pasco, and a TRO is required to preserve that status quo. Here, the status quo ante litem comprises: (a) Defendants not acting upon their claim that Simplot is no longer an owner of Pasco; (b) Simplot’s enjoyment of an uninterrupted supply chain, with the pricing and terms that it has had for years; and, (c) Defendants otherwise being obligated to heed their fiduciary and other duties to Simplot as a member of the Companies. B. Simplot is Likely to Succeed on the Merits. Simplot seeks a TRO to maintain the status quo by enjoining Defendants from acting as if their fictitious “closing” of the acquisition of Simplot’s Equity occurred. To the extent that it is relevant to analyze Simplot’s likelihood of success on its claim in Count VIII that WPC does not have the legal right to acquire Simplot’s Equity, Simplot has shown a likelihood of success on that claim. In the alternative, under the Ninth Circuit’s sliding scale test, Simplot raises “serious questions going to the merits” of the claim. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011). As a result, this factor weighs heavily in favor of a TRO. The plaintiffs in Boardman v. Pac. Seafood Grp. asserted antitrust claims and requested a declaratory judgment that defendant’s proposed acquisition of another company violated a previous settlement agreement. Boardman, 822 F.3d at 1017. Plaintiffs applied for a TRO to halt the proposed acquisition, which the District Court granted, followed later by a preliminary injunction prohibiting defendants “‘from undertaking any further act to acquire or control any interest in’ Ocean Gold’s stock or assets.” Id. The Ninth Circuit affirmed the district court’s order granting the preliminary injunction. Id. at 1025. mandatory TRO under the same test as a prohibitory TRO); see also Stanley v. Univ. of S. Cal., 13 F.3d 1313, 1320 (9th Cir 1994). Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 19 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Here, an actual and justiciable controversy exists between the parties with respect to their rights and legal relations under the Pasco OA. WPC, on the one hand, asserts that there is a Deadlock under Section 12.13 of the Pasco OA. ¶¶ 100-01, 142. Simplot, on the other hand, asserts that there is no Deadlock because Simplot and WPC have not yet voted on a purported resolution, as required by Section 12.13 and because the Supply Agreement Condition and Defendants’ litany of breaches of fiduciary, contractual, and statutory duties prevent Defendants from enforcing the Forced Sale Term. ¶¶ 100-01, 142. Thus, Simplot is likely to succeed on the merits of the declaratory judgment claim, or, in the alternative, has raised serious questions on the merits. C. Irreparable Harm Will Occur Absent the TRO. Defendants’ Attempted Conversion Declaration would require Simplot to make a vital decision based on incomplete information that Defendants have actively concealed from Simplot. Courts recognize that requiring a decision in these circumstances would cause irreparable injury. E.g., Woodward & Lothrop, Inc. v. Schnabel, 593 F. Supp. 1385, 1394 (D.D.C. 1984) (finding that a vote based on incomplete information would cause irreparable harm sufficient to justify a TRO). More importantly, the requested TRO will preserve the status quo until the Deadlock dispute can be resolved in a more orderly fashion in Court, and not through unilateral action, and allow a receiver to manage the Companies if the Court grants Simplot’s Receiver Petition.10 Absent such intervention, Pasco may very well collapse, leaving thousands of employees without jobs. The Ninth Circuit noted that where monetary damages would be inadequate due to impending insolvency, or the defendant engaged in a 10 Simplot does not specifically request that the Court immediately rule on the Receiver Petition at this time. However, in light of Defendants’ Attempted Conversion and subsequent actions that are causing ongoing harm to Simplot and the Companies, it would be well within the Court’s discretion to appoint a receiver now. Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 20 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 pattern of misconduct to avoid judgment, a TRO is appropriate. See In re Estate of Ferdinand Marcos, 25 F.3d 1467, 1480 (9th Cir. 1994). That is exactly the case here. Defendants have mismanaged Pasco to the point that Simplot’s interest is substantially diminished and Simplot’s reputation for quality and reliability is being tarnished beyond what damages could compensate. Thus, this factor weighs heavily in favor of a TRO. Moreover, as discussed above and per the Supply Agreement Condition, before a buyout of Simplot’s Equity can take place, the parties must enter a mutually acceptable supply agreement. ¶ 103, Dkt. No. 46-1 [Ex. A to 1AC, § 9.5]. Defendants control a substantial portion of Simplot’s supply of products, as Simplot is a customer of Pasco. To date, Defendants have caused significant supply chain disruptions as set forth above, and more disruptions are imminent. This Court has previously found that irreparable harm is likely where a food vendor is “suffering financial difficulty” and improperly managing its funds. Oregon Potato Co. v. Seven Stars Fruit Co., LLC, No. C12-0931JLR, 2012 WL 2277943, at *3 (W.D. Wash. June 18, 2012) (granting TRO for plaintiff). This is the case with the Companies. In addition to the impact on Simplot, the continued food and worker safety issues arising under Defendants’ control will cause irreparable harm to Pasco. Simplot’s involvement with the Companies has prevented further harm by providing oversight to the operations of the Companies. If Defendants are permitted to act on the Deadlock and force Simplot out, the Defendants’ breaches of fiduciary duties and demise of the Companies will continue without anybody watching. This factor also weighs heavily in favor of a TRO. D. The Balance of Equities Favors Simplot. Without a TRO, the status quo will be altered and Simplot will face rapidly accruing and irreparable harm caused by Defendants’ continuing to act on the Attempted Conversion. With a TRO, Defendants will merely be forced to resolve the Deadlock issue through an orderly court process, as they were prior to their Attempted Conversion Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 21 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 Declaration. Also, Defendants’ misconduct has occurred under a veil of concealment, another factor favoring a TRO. See In re Estate of Ferdinand Marcos, 25 F.3d at 1480 (TRO is appropriate where defendant engages in misconduct and secrecy). E. A TRO is in the Public Interest. The Ninth Circuit noted that impact “on the health of the local economy is a proper consideration in the public interest analysis.” Alliance for the Wild Rockies, 632 F.3d at 1138. Here, the collapse of the Companies threatens such local economic wellbeing. The entities involved have experienced substantial management turnover already, and significantly more is threatened. ¶ 120. Additionally, in the face of dire financial and safety situations at Pasco or Gem State, approximately 2,150 employees of the entities face uncertain futures in their jobs, which should be at a safe workplace. Id. A TRO is in the public interest to protect these jobs and the economies in these communities. F. Bond Should be Waived. The Court has “wide discretion in setting the amount of the bond, and the bond amount may be zero if there is no evidence the party will suffer damages from the injunction.” Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 321 F.3d 878, 882 (9th Cir. 2003) (internal citation omitted). Defendants bear the burden of establishing the bond amount. Kelly v. Public Utility Dist. No. 2, No. CV-11-023-JLQ, 2012 WL 1068079, at *4-6 (E.D. Wash. Mar. 29, 2012). Where, as here, the injunction will preserve the status quo among the parties and Defendants will not suffer any monetary harm from preservation of the status quo, it is appropriate not to require a bond. E.g., ST Ventures, LLC v. KBA Assets and Acquisitions LLC, No. 1:12-cv-01058 LJO SMS, 2012 WL 3647656, at *2, 4 (E.D. Cal. Aug. 23, 2012). Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 22 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 IV. CONCLUSION For the reasons set forth above, Simplot respectfully requests that the Court enter the proposed order filed contemporaneously with this Motion and award all other relief that is necessary and just. DATED: March 20, 2017 YARMUTH WILSDON PLLC By: /s/ Jeremy E. Roller Jeremy E. Roller, WSBA No. 32021 1420 Fifth Avenue, Suite 1400 Seattle, WA 98101 Phone: 206.516.3800 Fax: 206.516.3888 Email: jroller@yarmuth.com THOMPSON COBURN LLP By: Robert H. Lang Lawrence C. Friedman Kimberly M. Bousquet Renato Mariotti Patrick Morales-Doyle Ryan Gehbauer (pro hac vice applications to be filed) 55 East Monroe Street, 37th Floor Chicago, Illinois 60603 Phone: 312.580.2242 Fax: 312.580.2201 Email: rhlang@thompsoncoburn.com kbousquet@thompsoncoburn.com rmariotti@thompsoncoburn.com pmoralesdoyle@thompsoncoburn.com rgehbauer@thompsoncoburn.com Attorneys for Plaintiff J. R. Simplot Company Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 23 of 24 MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 CERTIFICATE OF SERVICE I hereby certify that this date I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to the following counsel of record: Brad Fisher Jaime Drozd Allen Davis Wright Tremaine LLP 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 Telephone: (206) 622-3150 Fax: (206) 757-7700 E-mail: bradfisher@dwt.com jaimeallen@dwt.com Attorneys for Defendants Washington Potato Company; Oregon Potato Company; and Frank Tiegs Dated: March 20, 2017, at Seattle, Washington. s/Kelly Kennedy Kelly Kennedy 972.01 rc201505 Case 2:16-cv-01851-RSM Document 75 Filed 03/20/17 Page 24 of 24 EXHIBIT A Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 1 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 2 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 3 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 4 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 5 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 6 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 7 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 8 of 77 Exhibit A to M. Johnston Declaration Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 9 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 10 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 11 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 12 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 13 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 14 of 77 EXHIBIT B Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 15 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 16 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 17 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 18 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 19 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 20 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 21 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 22 of 77 EXHIBIT C Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 23 of 77 DECLARATION OF RYAN J. GEHBAUER NO. 2:16-cv-01851-RSM – Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 The Honorable Ricardo S. Martinez UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE J. R. SIMPLOT COMPANY, Plaintiff, v. WASHINGTON POTATO COMPANY; OREGON POTATO COMPANY; FRANK TIEGS; and DOES 1 THROUGH 10, Defendants. No. 2:16-cv-01851-RSM DECLARATION OF RYAN J. GEHBAUER The undersigned, Ryan J. Gehbauer, under penalties as provided under the laws of the state of Washington, certifies that the statements set forth in this instrument are true and correct. 1. I am an attorney with the law firm of Thompson Coburn LLP (“Thompson Coburn”). 2. I am providing this Declaration in support of J. R. Simplot Company’s (“Simplot”) Motion for Temporary Restraining Order and Preliminary Injunction in this lawsuit. Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 24 of 77 DECLARATION OF RYAN J. GEHBAUER NO. 2:16-cv-01851-RSM – Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 3. I am over the age of twenty-one and have personal knowledge of the facts set forth herein. If called upon as a witness, I could and would testify competently thereto under oath. 4. I am familiar with the facts alleged in Simplot’s Motion for Temporary Restraining Order and Preliminary Injunction and the exhibit attached hereto. 5. On January 11, 2017, the board members of Pasco Processing, LLC and Gem State Processing, LLC purportedly held a Board of Members Meeting. Simplot requested that this meeting be transcribed by a court reporter, but Defendants refused. However, the meeting was audio recorded, and Simplot engaged M&M Court Reporting Service to transcribe the audio recording. Jeff LaMar of M&M Court Reporting transcribed this audio recording, and provided the transcript to Simplot. Attached as Exhibit 1 is a true and correct copy of excerpts of the transcript prepared by Jeff LaMar of M&M Court Reporting Services, and received by Thompson Coburn. I, Ryan J. Gehbauer, declare and certify that I have read the foregoing Declaration and know its contents. Pursuant to 28 U.S.C. § 1746, I declare and certify under penalty of perjury that the foregoing is true and correct. Executed this 20th day of March, 2017. /s/ Ryan J. Gehbauer Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 25 of 77 Exhibit 1 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 26 of 77 1 TRANSCRIPT OF BOARD OF MEMBERS MEETINGS PASCO PROCESSING, LLC AND GEM STATE PROCESSING, LLC LOCATION: Pasco Processing Plant 5815 Industrial Way Pasco, Washington DATE: January 11, 2017 TIME: 10:00 a.m. and 1:45 p.m. respectively TRANSCRIBED BY: JEFF LaMAR, C.S.R. No. 640 Notary Public Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 27 of 77 Transcript of Board of Members Meeting Audio Transcription January 11, 2017 Page 174 1 one day I got really embarrassed because, you know, 2 like literally I went downstairs and we got in the car. 3 And my wife, you know, was driving along. And we come 4 to a red light, she looks over at me and she goes, 5 "What do all these people there do at National?" 6 And I was thinking, Oh, shit. I said, 7 "Why? Why, Honey?" 8 "Well, I don't see anybody working. You 9 know, when the weather is bad, I walk through the whole 10 place, and everybody just -- two people in there just 11 BSing or doing that or, you know, they're not doing 12 anything." She goes, "I can hear it clear through the 13 whole dang -- clear through all the offices. You 14 sitting there talking on the phone, you're the only guy 15 on the phone doing anything. You're always busy. And 16 these people are, you know, in their -- in the break 17 room doing that." 18 And I said, "Really?" I said, "Yeah, 19 that's not good to hear." I -- I -- I don't know what 20 they do. 21 I was embarrassed by that because, you 22 know, I mean -- and then I -- she goes in, "Boy, I'll 23 tell you what. You better not be standing in the way 24 of the elevator at four o'clock because you get ran 25 over, you know, from that time." And I'm -- literally Page 175 1 it's "You're the only person left in the building at 2 four o'clock, period." 3 And she was just not used to that, you 4 know, the way we work, I mean five o'clock comes and 5 goes. And but she was really -- she was there with me 6 lots of times. And when she asked me that question, 7 that was to me an embarrassing question. 8 Do you guys understand that? 9 So anyway, getting to Bob, Bob's trained 10 with this whole thought process that National's a -- 11 you know, on a level of itself and that, you know, that 12 nobody is supposed to interfere. And, you know, they 13 don't mind selling some stuff if they can get, you 14 know, nice markup on it and do their thing. 15 And I mean even stuff that Oregon Potato 16 tries to help him sell, they even try to charge us an 17 SG&A on top of it, and -- which is ridiculous. And I 18 don't know, Dick, you know, they've kind of got in 19 line. But, you know, Dick's dad, you know, owned 20 Albany, and Bob's grandfather, you know, was with 21 McCaffery [phonetic]. And, you know, I think the 22 terminology for the people that are, you know, in the 23 ranks are their silver spoons. And they really -- 24 they're just -- you know, they're just spoiled kids is 25 what they are. That's what I've been -- I've heard. Page 176 1 That's, you know, just hearsay only. And, you know, 2 but my opinion -- my opinion is is that Bob can't -- 3 Bob -- you know, I mean Bob can do some, but he -- I 4 mean to run it, to run it, I mean I don't think so. 5 MR. PATTERSON: So, Frank, given all that, does 6 it make sense to assign a CRO possibly? 7 MR. TIEGS: Yes. Well, I need to back up on 8 that. I think for right now -- I'm going to restate 9 what I said until everything's resolved, then -- you 10 know, at the end, then -- then I think whoever ends up 11 with it or however it ends up at the end of the day, 12 then I think they can decide what they want to do. 13 Because you know what? Bob Ashmun might be 14 plenty fine for Simplot. But for me, no. No. In 15 fact, as a sales manager, no. And I'd like to -- I'd 16 like to vote to remove him as sales manager and move 17 Patrick up as sales manager. 18 MR. JOHNSTON: Patrick? 19 MR. TIEGS: D'Ambrosio? 20 MR. JOHNSTON: Does anybody know him? 21 MR. MOYLAN: I've met Patrick a couple of times. 22 MR. TIEGS: A good, young man. 23 MR. MOYLAN: I don't know him. Met him a couple 24 times. 25 MR. TIEGS: Yeah, I've spent some time with him. Page 177 1 And, you know, not about talking about that, but 2 actually they moved him up to sales manager. And Bob, 3 they moved him into, you know -- I'm not sure. 4 What did they say that Bob was moving up 5 to? He didn't really say. It wasn't Dick's position. 6 It was somewhere in between. 7 MS. McCLORY: It was like vice -- 8 MR. TIEGS: Vice -- 9 MR. TIPPETT: Yeah, vice president, wasn't it? 10 MR. TIEGS: No. Yeah, he already was. 11 MS. McCLORY: Operations, VP of operations. 12 MR. TIPPETT: Could have been. 13 MR. TIEGS: It was like he was taking Dick's 14 job, and then he also gave himself a raise to get to 15 Dick's pay. And then he moved up -- Patrick up 16 66 percent pay to his pay. And yes, and I squelched 17 it. The only person that deserves more money was B 18 McDowell because she had moved into the -- more of the 19 COO-type role. And so I said, "Well, I'm okay with 20 that." 21 Was this all of it or half of it? 22 MS. McCLORY: Half. 23 MR. TIEGS: Half of it. Yeah, that's right. 24 And the other two, absolutely no. But I already knew 25 by September -- let's back up a little bit here so that Min-U-Script® M & M Court Reporting Service (208)345-9611(ph) (800)234-9611 (208)-345-8800(fax) (44) Pages 174 - 177 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 28 of 77 Transcript of Board of Members Meeting Audio Transcription January 11, 2017 Page 178 1 you guys are clearer of timelines. And we got into -- 2 clear until within two weeks of August, we were told 3 that the COGS adjustment was going to -- actually, give 4 us about a $2 million more increase on our net earnings 5 clear until the middle of August. 6 Then the first few days of September, Marty 7 sent Janelle the financial for -- you know, to assist 8 any -- you know, the September 1 of August 31st. 9 MR. JOHNSTON: Year end? 10 MR. TIEGS: Year end. And all of a sudden it 11 was like a change that was supposed to be originally 12 like two-and-a-half million sold by the numbers he had, 13 he had it pumped up to about 5 million net. Well, it 14 ended up going 2 million down, which was a $7 million 15 swing from what he said it was going to be on the -- 16 about two weeks before that he published. 17 MS. McCLORY: Right. So the e-mail -- 18 MR. TIEGS: And we went back even into June 19 believing that he was -- that there was going to be 20 several million dollars on the COGS. And in fact, that 21 ended up being $7 million different than what he said 22 two weeks before. 23 So we don't know if they screwed up or, you 24 know, if you guys came in and -- and told him to make 25 that $7 million adjustment worse. I mean you guys were Page 179 1 involved in it potentially, because it's hard for us to 2 believe that there was a $7 million COGS adjustment 3 from where he thought he was the middle of August. 4 Is that -- am I speaking it correctly, 5 Janelle? 6 MS. McCLORY: Yeah. Everything leading up -- up 7 until the middle of August was they were going to be 8 positive, a couple million dollars positive, compared 9 to what their -- 10 MR. TIEGS: Basically, e-mailed it over at 11 quitting time. And by the time Janelle got a chance to 12 call him, he had already left and he was gone for a 13 week vacation. So we weren't even able to talk to him 14 until the following week about it. 15 Well, one thing that came out when we -- 16 that I understood, and we went there on like the 17th 17 or -- you know, of September, is is that -- because Tom 18 went with us, and they were estimating their COGS at -- 19 you know, they weren't closing out their COGS each 20 month. They were just taking an estimate. And so at 21 the end of the year they did their final adjustment. 22 And according to Janelle and Tom, in the 23 discussion with them, that they had been telling them 24 that that wasn't right and they needed to close every 25 month out. And they weren't. And to me, it was just Page 180 1 laziness. They just weren't taking the extra time to 2 close out their month. So what happened is they -- 3 they had 12 months of COGS they had to adjust, and all 4 of a sudden instead of being where he thought it was, 5 it was all of a sudden a $7 million difference from the 6 number he gave us that he told us it was going to be. 7 So we thought everything was in fine order, 8 everything was going along just fine until the -- until 9 the 5th or so of September. And all of a sudden it's 10 like -- and we couldn't even talk to him to find what 11 happened. Is there something wrong here? Because he 12 immediately, you know, got it, hit send, and out the 13 door he went. And oh, you know, you can't get ahold of 14 him for a week because he's gone on vacation. 15 So it's even more than that, you got the 16 two days, plus you got the week, plus you got, you 17 know, the next Monday. So it's really -- it's really 18 nine days. So kind of that's a problem that, you 19 know -- so, you know, I -- so when I went over there, 20 we went over there, it was to discuss that, you know, 21 the whys and also "Okay. Well, what happened now that 22 Dick's not here. Did you guys -- did anybody -- did 23 anything go on here?" 24 And then they said, "Yeah, that we moved -- 25 Bob, I moved myself up, and I moved Patrick up, and I Page 181 1 moved B up." 2 And I said, "Well, what did you do on pay?" 3 And then they showed me they gave each of them a 4 33 percent increase, and they gave Patrick -- or 5 Patrick a 66 percent increase in his pay. So it took 6 him from like 125,000, took him up to like 220,000 or 7 something like that. 8 So -- and I said, "No. You're -- Patrick, 9 you're going back to your position. Bob, you're going 10 back to your position. And, B, you know, you need -- 11 you know, we'll agree to half of this until we can get 12 this, you know, thing resolved." 13 MR. PATTERSON: Do you have an updated org chart 14 from them, Frank, that you could share with us? 15 MR. TIEGS: I haven't -- I haven't, Steve. 16 It's -- I know you're listening, but I want to come 17 back to you and let you know that it's been very 18 difficult. I brought that up in board meetings before. 19 I think Mike and Brent both agreed to that, or not? 20 MR. JOHNSTON: Yeah. No, we discussed -- yes, 21 we've discussed National. We've discussed individuals, 22 personnel. 23 MR. TIEGS: That they're very difficult? 24 MR. JOHNSTON: Yep. Yep. 25 MR. TIEGS: So that's what I've had to deal Min-U-Script® M & M Court Reporting Service (208)345-9611(ph) (800)234-9611 (208)-345-8800(fax) (45) Pages 178 - 181 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 29 of 77 Transcript of Board of Members Meeting Audio Transcription January 11, 2017 Page 194 1 pushing them, it's got to be done by the end of the 2 fiscal year. 3 And so that's what they were working on. 4 And we started seeing those changes. And we kept every 5 month making sure they were on track to have this done 6 by the end of the fiscal year, which they were. 7 So by the time they got all of it switched 8 over, do their inventory rebuild end of August. This 9 COGS adjustment was, you know, large and unexpected. 10 And even though they were -- we were talking to them 11 every month, it was, you know, through the middle of 12 August still going to be positive to where their latest 13 forecast was and what their projections were showing, 14 we still thought there was going to be a positive, 15 until I got an e-mail in that first week of September 16 that it wasn't. 17 MR. TIEGS: In fact, there wasn't even money 18 left over. It was actually the other way by, you 19 know -- it took the two-and-a-half million dollar 20 profit it should have been and took it into a 21 two-and-a-half million dollar loss is what it did. 22 MR. MOYLAN: Uh-huh. 23 MR. TIEGS: But it should have been instead of 24 being a two-and-a-half million dollar profit, according 25 to him it was going to be a $5 million profit or Page 195 1 four-and-a-half million dollar profit is the exact way 2 he was -- he thought it would be a minimum of 2 million 3 up. So that's where that's at. So anyway, that's kind 4 of where the -- if we get off of this, you know. 5 As a managing member, I'm going to make a 6 motion that Washington Potato, you know, being who we 7 are, Pasco Processing, that we look and make the 8 reduction in force. 9 So do I got a second on that, or not? 10 MR. TIPPETT: What do you mean, reduction in 11 force? 12 MR. TIEGS: The reduction in force means that 13 trim off some people -- 14 MR. TIPPETT: Okay. 15 MR. TIEGS: -- that we don't need. Look at the 16 list, and clearly with the pack size, and make that 17 adjustment, the appropriate adjustment to the -- 18 because every month we're just going to go further and 19 further in the shitter. 20 MR. TIPPETT: Without being specific, okay, 21 that's fine. I second the motion. 22 MR. TIEGS: Okay. 23 MR. MOYLAN: Would it be possible to -- to have 24 a schedule listing out the type of headcount and the 25 salary and benefits associated with it so we can see an Page 196 1 overall impact to the P&L? 2 MR. JOHNSTON: Number. 3 MR. TIEGS: You know, I've got to go through 4 there and work with through it. And if I don't have 5 the vote to do it, I'm not going to put the time and 6 the effort to go do it, Brent, because it's going to 7 take me some time. And if I'm going to get, you know, 8 stimied around on a vote, then that -- I mean there 9 needs to be some changes that are made not to disrupt 10 it. But I mean you get a few more months down the road 11 in this thing, and I mean it's going to be a financial 12 disaster for somebody. 13 MR. JOHNSTON: But I guess, Frank, I understand 14 what you're saying. But couldn't -- would it not be 15 prudent to get some detail around what the proposal -- 16 I mean you talked about seven I.T. people. Well, I 17 assume you're not going to get rid of all seven. How 18 many do you really need? What's the -- just what are 19 we really talking about, and then monetize that. I 20 mean how much are we really going to save? 21 Because you also talked about -- if I 22 understood correctly, you were talking about they need 23 to -- you're talking about the plants, too, because you 24 were talking about shops needing to be -- if you're 25 going to cut all those acres, you'd probably take out Page 197 1 some of that shop help. 2 Was that part of it? 3 MR. TIEGS: Yes. 4 MR. JOHNSTON: And some of -- I mean could we at 5 least get some -- I mean it's awfully broad. 6 MR. PATTERSON: Yeah, it's a matter of just 7 needing more detail. 8 MR. JOHNSTON: Yeah. 9 MR. PATTERSON: And to Mike's point, something 10 that's a financial number that we can look at and say, 11 yeah, that's the impact it's going to have on the 12 business, so we understand it. 13 MR. JOHNSTON: Because there's also -- I mean 14 there are some HR considerations here, too, that I 15 think have to be made. So if we could at least get 16 some kind of -- of proposal, list, names, whatever, I 17 mean something that details what this -- a little more 18 specific. 19 MR. PATTERSON: And functional area. 20 MR. JOHNSTON: Functional area, yeah, you know. 21 MR. TIEGS: Well, Mike, technically, you know 22 what, I'm the managing member, and I don't even have to 23 go to the board to do this. And all I'm doing is I've 24 made a motion to put it together and look at it and 25 start implementing it. And, you know, I can do it as a Min-U-Script® M & M Court Reporting Service (208)345-9611(ph) (800)234-9611 (208)-345-8800(fax) (49) Pages 194 - 197 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 30 of 77 EXHIBIT D Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 31 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 32 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 33 of 77 EXHIBIT E Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 34 of 77 Victoria A. Gilbert 310 282 9432 direct vgilbert@thompsoncoburn.com March 10, 2017 VIA EMAIL William Weigand Davis Wright Tremaine LLP 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 Dear Bill: I am responding to your letter to my partner, Rob Lang, dated March 7, 2017 captioned Re: Closing of Purchase of Member Percentage Interest. In response to all your points, we believe Mark McKellar’s February 28, 2017 letter to Washington Potato Company (“WPC”) makes the position of J. R. Simplot Company (“Simplot”) absolutely clear. Your letter ignores the allegations in Simplot’s First Amended Verified Complaint. With regard to the Supply Agreement, as a condition to any buy-out exercise it was primarily if not exclusively intended for Simplot’s benefit given Simplot’s purpose for establishing the Pasco processing plant. For the sake of argument, and without waiving any rights, I want to remind you that Simplot has proposed short term supply agreements in the past, based on the then known conditions and relevant supply/quality/fulfillment concerns applicable at the time of communication, which WPC refused to negotiate or sign. You do not even reference the most recent draft supply agreement sent to WPC in November of 2016, which also was ignored by WPC, and which is now out of date based on continuing deterioration of product fulfillment and refusal to cooperate in proper supply planning and full inspection access. Simplot is not prepared to waive the supply agreement condition in any event. Your client’s continued refusal to respond to three proposals for a supply agreement, and then unilateral claim that you can utilize a superseded, out of date proposal that does not address current concerns, appears to indicate that your client was and still is acting in bad faith. Lastly, your suggestion that Janelle McClory’s October 5, 2017 projections were acceptable for valuation purposes is curious since Simplot had no input before the numbers were submitted to Northwest Farm Credit Services (“NWFCS”). Also, very shortly after submitting those projections to NWFCS, Ms. McClory delivered revised projections to Simplot showing an approximate $9 million cash deficit by December 31, 2016. Simplot then, and has been continually, requesting financial and operating information from WPC to determine the reasons for Pasco’s sudden cash flow deficiency. Mark McKellar’s letter, dated February 28, 2017, as supplemented by the foregoing, is a non-exclusive list of the reasons why the purported closing is not authorized and a nullity. Very truly yours, Thompson Coburn LLP By Victoria A. Gilbert Partner Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 35 of 77 EXHIBIT F Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 36 of 77 Robert H. Lang 312 580 2242 direct rhlang@thompsoncoburn.com March 13, 2017 VIA E-MAIL William L. Weigand, Esq. DAVIS WRIGHT TREMAINE LLP 1201 Third Avenue, Ste. 2200 Seattle, WA 98101 Re: Pasco Processing, LLC (“Company”) Dear Bill: As you know, we represent J. R. Simplot Company (“Simplot”). We have received your March 13, 2017 letter, through which your client, Washington Potato Company (“WPC”), purports to unilaterally “close” on the transfer of Simplot’s interest (“Simplot Interest”) in the Company to WPC (“Illegal Transfer”). Simplot rejects and does not recognize the Illegal Transfer, which is a blatant and improper attempt to alter the status quo and to usurp the Court’s province to determine whether Simplot is obligated to transfer the Simplot Interest to WPC pursuant to the Company’s most recent operating agreement (“Operating Agreement”). This dispute has squarely been at issue in the pending litigation among Simplot, WPC, and others pending in the United States District Court for the Western District of Washington. Simplot incorporates the allegations of its First Amended Complaint, of which your clients and you are well aware. Simplot demands that WPC retracts the Illegal Transfer, in writing, prior to 5:00 p.m. Pacific Time on March 14, 2017. Otherwise, Simplot will seek immediate relief from the Court. Simplot will hold liable your clients and all those who have aided and abetted them in this blatant breach of fiduciary duty. Simplot will continue to communicate with Northwest Farm Credit Services (“FCS”) pursuant to the agreed-upon protocol and will not otherwise heed the Illegal Transfer. Very truly yours, Thompson Coburn LLP By Robert H. Lang Partner Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 37 of 77 William L. Weigand, Esq. November 21, 2016 Page 2 RHL/jkh Cc: Simplot counsel; Larry Friedman, Esq.; Victoria Gilbert, Esq.; John Rizzardi, Esq.; Jenny Faubion, Esq.; Diana Carey, Esq. Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 38 of 77 EXHIBIT G Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 39 of 77 Davis Wright Tremaine LLP Suite 2200 1201 Third Avenue Seattle, WA 98101-3045 William L. Weigand 206.757.8164 tel 206.757.7164 fax billweigand@dwt.com March 14, 2017 Via Email Robert H. Lang Thompson Coburn LLP 55 E Monroe Street, 37th Floor Chicago, IL 60603 Re: Pasco Processing, LLC Dear Rob: It is true Simplot included a claim for declaratory relief in its amended complaint filed on January 19, asserting feeble arguments that there was not a board of members deadlock. That does not make it so. The deadlock on the proposed capital contribution was clear and unambiguous, and Washington Potato Company ("WPC") carefully followed the requirements of the Operating Agreement to give Simplot every opportunity to resolve that deadlock. For reasons that remain unclear, Simplot chose not to participate in the parties' pre-agreed, multi- step resolution process, nor did Simplot seek any injunctive remedy in court. At a more fundamental level, Simplot's own derivative case seeking to replace WPC as Pasco Processing, LLC's manager established an "existential" deadlock. Simplot acknowledged this in its allegations regarding demand futility - that a board vote over whether Pasco Processing should bring such claims against WPC would have resulted in another board deadlock. A business divorce was the only thing that made practical sense in this situation. Your lawsuit, in addition to its lack of merit, failed to address the end game. Fortunately, the Operating Agreement provided a mechanism and formula for resolving deadlocks and effectuating the business divorce. WPC was exercising its bargained-for rights when it provided notice to Simplot on February 8 that WPC had exercised its option to purchase Simplot's LLC interest and closed the transaction on March 10. Your characterization of those acts as "illegal" is ludicrous. Your accusation that WPC's exercise of a bargained-for right was a breach of fiduciary duty is baffling. WPC acted as a party to a contract, and exercised its own contractual rights vis-a-vis Simplot. In our view, that cannot be a breach of fiduciary duty. If you have a reasoned argument to the contrary, please make it and we will consider it. Pounding the table is not helpful. As far as the pending litigation goes, you contend that WPC "usurped the court's province" to 4814-9203-0533v.2 0086504-000002 Anchorage Bellevue Los Angeles 100% ® New York Portland San Francisco Seattle Shanghai Washington. D.C. www.dwt.com "I Davis ri t I! ai LLp nroe Street, 37 , Paseo Proc s i , : i 951 - . i t l f lI eiganddwt.co t i t i its c l i r , ti l ts t at there as not a board of r ea lock. he deadlock t r i s, ' P ") careful y fol o ed t e re ir t f t r ti t l t t l c . l , i l t s t t t a r l t's o n derivative case seeking to replace P as ase r i , ' l Simplot ackno ledged this in e l i t l e r s lted in another board deadlock. i i t i sit ti . erit, faile t r ss t rt t l , t l s r . it i l t's i our characterizati f t t ill l i . ' a bargained-for ri t r f i i . t c tract al t i - - is i plot. t t e a reach of fiduciary duty. t t tr r , ill it. i is n t hel f l. s f r , t t at "usurped the c t' t v. 008 00 o e i I , . t. 'M, r Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 40 of 77 William L. Weigand Robert H. Lang March 14, 2017 Page 2 decide Simplot's deadlock claims; does that mean Simplot is prepared to acknowledge WPC's ownership and dismiss its deadlock claims now as moot? Barring that, those claims remain pending, at least until the court dismisses the complaint, which we expect will happen any day now. Where does that leave us? Since Simplot did nothing to stop WPC's exercise of its purchase option, and nothing to stop the closing of WPC's purchase at the date set forth in the Notice of Exercise, the status quo is that WPC is Pasco Processing's 100% owner. Unless and until a Court decides otherwise, that is how things will remain. As previously noted,•should Simplot wish to continue to purchase product from Pasco Processing and National Frozen Foods Corporation ("National") it may do so based upon the pre-closing terms and conditions, except that Pasco Processing's sales of totes to Simplot's West Memphis facility will now be offered at market prices. In addition, WPC would be willing to discuss a longer-term Supply Agreement if Simplot wants one. For the time being, WPC will focus its efforts on attempting to mitigate the tremendous damage to Pasco Processing's and National's reputations and goodwill caused by Simplot's baseless complaint and motion for receiver. At the appropriate time, WPC will have much to say about Simplot's own conduct in filing this litigation in order to try to maneuver out of the deadlock provisions it had agreed to, or, failing that, to destroy the goodwill of the companies on the way out the door. Very truly yours, Davis Wright Tremaine LLP cc: Larry Friedman, Esq. Victoria Gilbert, Esq. John Rizzardi, Esq. Jenny Faubion, Esq. Diana Carey, Esq. 4814-9203-0533v.2 0086504-000002 eci i l t' l t ' o ers i t i t t l i t, ill t t i i l t i t its ti , f 's r i , t r i ' nless a ti rt i . cited, l i l t i t e i ti l i t r i ' totes t i plot's est i i l ff r at arket prices. I iti , longer-ter l t . r it t t tr s a ' ati l' r i t' c l i t ti f r receiver. a r ri t t t s t i l t' liti ti f l r i i t, t t . . . , . . 3- 3v. Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 41 of 77 EXHIBIT H Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 42 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 1 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax Brad Fisher Jaime Drozd Allen Davis Wright Tremaine LLP 1201 Third Avenue, Suite 2200 Seattle, Washington 98101-3045 Telephone: 206.622.3150 Facsimile: 206.757.7700 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WASHINGTON AT RICHLAND WASHINGTON POTATO COMPANY, Plaintiff, v. J. R. SIMPLOT COMPANY, Defendant. No. ___________________ COMPLAINT Plaintiff, Washington Potato Company (“WPC”) brings suit for a declaratory judgment, or in the alternative specific performance for breach of contract, against Defendant J.R. Simplot Company (“Simplot”) to enforce WPC’s buyout rights under the Amended and Restated Limited Liability Operating Agreement (“Operating Agreement”) of Pasco Processing LLC (“Pasco Processing”), a frozen vegetable supplier and processor in Pasco, Washington. In 2008, the parties entered into business as equal co-owners of Pasco Processing. In 2013, they agreed to restructure their original operating agreement, and after heavy negotiation, they added specific parameters and procedures that Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 43 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 2 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax would govern if WPC and Simplot reached a “deadlock” regarding a decision requiring a vote of the Pasco Processing Board of Members. The parties set forth a procedure that included notification to the other member of the deadlock; a good faith attempt at resolving the deadlock; mediation by the parties if the deadlock could not be resolved; and, if the mediation failed, the option of WPC to purchase Simplot’s interest in Pasco Processing for a price and on terms specified in the Operating Agreement. In the Fall of 2016, the members reached a deadlock regarding whether they should make a capital contribution to bring Pasco Processing into compliance with its loan covenants. In November 2016, WPC gave Simplot official notice of the deadlock per the Operating Agreement. Simplot ignored numerous opportunities to discuss the suggested capital contribution, refused to attend board meetings, delayed in discussing the loan covenants with the lender; and failed to otherwise meaningfully and in good faith address the need for additional capital. Given the unresolvable deadlock, WPC followed the process required by the parties’ agreement – it notified Simplot of the deadlock and offered to discuss resolution; when no agreement could be reached because Simplot would not participate in discussing the deadlock, WPC requested a mediation; Simplot refused to participate in the mediation; and, after waiting the required forty-five days under the parties’ agreement, on February 8, 2017, WPC exercised its buyout option setting a March 10, 2017 closing date for its purchase of Simplot’s interest in Pasco Processing. Simplot did not attend the closing. Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 44 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 3 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax WPC now brings suit to enforce the plain terms of the parties’ agreement and, solely for the avoidance of doubt, to obtain a judicial determination that WPC is the lawful sole, one-hundred percent owner of Pasco Processing. WPC therefore alleges the following: I. PARTIES 1. Plaintiff, Washington Potato Company (“WPC”), is a Washington corporation with its principal place of business in Pasco, Washington. 2. Defendant, J. R. Simplot Company, is a Nevada corporation with its principal place of business in Boise, Idaho. II. JURISDICTION AND VENUE 3. This Court has personal jurisdiction over Simplot because Simplot entered into the Operating Agreement with WPC, a Washington State company. Moreover, Simplot agreed to the Court’s jurisdiction and venue when it agreed that “any suit, action or Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with...[the]...Agreement shall be brought in a state or federal court located in Washington” and waived any objections to jurisdiction or venue in Washington. Operating Agreement ¶ 12.14 (attached hereto as Exhibit A). This Complaint seeks a declaratory judgment that Simplot has breached that Operating Agreement, and asserts claims for breach of contract requiring specific performance. The Complaint, therefore, arises out of and is related to the Operating Agreement. 4. This Court has diversity jurisdiction regarding the subject matter of this action pursuant to 28 U.S.C. § 1332. WPC is a Washington State corporation Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 45 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 4 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax with its principal place of business in Pasco, Washington. Simplot is a Nevada corporation with its principal place of business in Boise, Idaho. The amount in controversy exceeds $75,000. This Court additionally has jurisdiction under 28 U.S.C. § 2201 and Federal Rule of Civil Procedure 57 to issue a declaration of rights under a written contract. 5. Venue is proper in this court under 28 U.S.C. § 1391(b) because a substantial part of events occurred in Pasco, Washington, in this district. Furthermore, under § 12.14 of the Operating Agreement, the parties’ submitted to the venue of any state or federal court in Washington and waived all objections thereto. III. FACTS 6. In 2008, Simplot and WPC became co-owners of Pasco Processing. Each party owned an equal, 50% interest in Pasco Processing. (Ex. A § 6.1). Each member appointed 3 representatives to serve on Pasco Processing’s Board of Members. WPC served as Pasco Processing’s manager. (Ex. A §§ 5.1-5.6). Simplot and the Oregon Potato Company (“OPC”), which is wholly owned by Mr. Tiegs and his wife, are the only customers of Pasco Processing. 7. On or about February 15, 2013, the parties entered into their current Operating Agreement (attached hereto as Exhibit A). 8. The Operating Agreement has specific provisions giving WPC the option to purchase Simplot’s 50% membership interest in the event of a deadlock on a matter requiring board approval. This buyout provision arose out of the 2013 changes to the Operating Agreement. Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 46 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 5 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax 9. The original 2008 operating agreement did not contain an agreed upon solution if the parties reached a disagreement. The buyout provision in the Operating Agreement arose out of the parties’ other business interests. In 2010, OPC formed Gem State Processing LLC (“Gem State”). In 2011, Gem State sought to lease land previously donated to the city by Simplot with a covenant against using the land for a potato plant. Simplot agreed to waive the covenant and allow Gem State to construct its plant on that land if Mr. Tiegs gave Simplot an option to buy a 50% interest. Simplot’s then-president, Kevin Storm, assured Mr. Tiegs that Simplot would not exercise its option. When Mr. Storm was replaced with Simplot’s current president, Mark McKellar in 2011, Simplot exercised on the option and purchased 50% of Gem State. 10. Mr. Tiegs agreed not to contest Simplot’s to purchase of 50% of Gem State on the condition that OPC would have the right to buy out Simplot’s interest in the event of a management deadlock between the owners. Simplot and Gem State agreed to an “agreement price” that had recognized risks and was dictated by recent actual and projected operating results. 11. In December 2012, OPC and National Frozen Foods Corporation (“NFF”) entered into a term sheet for OPC’s acquisition of NFF. Simplot informed Mr. Tiegs that it would like to participate in the NFF acquisition. Mr. Tiegs agreed to structure the purchase where NFF became a wholly-owned subsidiary of Pasco Processing, rather than OPC, on the condition, among others, that Simplot agree to change Pasco Processing’s operating agreement to include a right for WPC to buy Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 47 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 6 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax out Simplot’s interest in Pasco Processing in the event of a deadlock, similar to the buyout right under the Gem State agreement. 12. During the course of their relationship as equal co-owners of Pasco Processing, Simplot regularly received business information and records as described in the Operating Agreement, including Pasco Processing’s monthly financial statements: which included, but were not limited to, an income statement, balance sheet, cash flow, and trial balance. Pasco Processing’s accountant routinely submitted Pasco Processing’s tax returns to Simplot’s tax manager. Pasco Processing and Simplot’s accountants provided tax related work papers and schedules as requested by the other. Additionally, Simplot had regular access to Pasco Processing reports which pulled data directly from its accounting software, Navision. As a co-owner at all times during their relationship, Simplot also had Pasco Processing’s organizational documents and amendments, and kept or could have kept minutes of the Pasco Processing board meetings. 13. Section 9.6 of the Operating Agreement provides a formula for calculating the “Agreement Price” for WPC’s option to purchase Simplot’s membership interest. At all material times, the Agreement Price has been a negative number, a fact of which Simplot is well-aware. Although Pasco Processing’s board of members has not in the past calculated the Agreement Price at regular annual meetings as contemplated by § 9.6, that section provides that the same formula shall apply whether or not calculated by the board. 14. As early as June 2016, Northwest Farm Credit Services (“NWFCS”) notified Simplot and WPC that Pasco Processing’s debt ratio was off and that it Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 48 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 7 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax would soon not be in compliance with the loan’s covenant. Simplot knew during the Summer of 2016 when it began having discussions with WPC regarding a buyout. Simplot advised WPC that it wished to cease their business relationship as co-owners of Pasco Processing. Simplot offered to buy or sell its interest in Pasco Processing for a stated price different than the Agreement Price (which did not then apply, since Simplot’s proposal was voluntary). The parties discussed the matter, but never reached agreement. 15. On September 29, 2016, Simplot first informed WPC that it intended to request business records from Pasco Processing. Simplot did not specify what information it wanted or why it wanted it other than “to help [Simplot] analyze [its] investments in Pasco Processing LLC.” 16. On September 30, 2016, Simplot made a request for documents it claimed was pursuant to §§ 7.3, 7.4, and 8.2 of the Operating Agreement and RCW 25.15.136 (“Records Demand”). Simplot’s Records Demand requested numerous documents that were irrelevant to its responsibilities as a co-owner of Pasco Processing, including countless documents regarding entities outside of Pasco Processing which Pasco Processing did not control and which were irrelevant to whether a capital contribution should be made to Pasco Processing. The Records Demand was also made during harvest season, when WPC’s staff was extremely busy. Nonetheless, WPC worked to collect and produce documents to Simplot. 17. Pasco Processing continued its normal business operations, although the need remained for its co-owners to supply additional capital to come into compliance with the loan covenant. Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 49 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 8 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax 18. In October 2016, Pasco Processing was notified by NWFCS, its lender, that it was out of compliance on the funded debt to EBITDA ration and debt coverage ratio for its loan. WPC informed Simplot of this notice and suggested that the parties each make a capital contribution to bring Pasco Processing back into compliance with the loan. 19. WPC requested and Simplot agreed to hold a meeting of the Board of Members of Pasco Processing at the Pasco Processing Plant on October 28, 2016 at 10:30 a.m. (“October Board Meeting”) to discuss the proposed capital contribution and other business matters. 20. On October 21, 2016, Simplot told WPC it would not attend the October Board Meeting, despite Simplot having previously agreed to the time and location of the meeting and WPC having scheduled the meeting to accommodate Simplot’s board representatives’ schedules. Simplot’s excuse was that it had not received all of the records it had demanded, despite the fact that it had received everything reasonably relevant to a decision on whether to invest the additional capital requested. 21. In compliance with § 6.8 of the Operating Agreement, on October 24, 2016, WPC sent formal notice to Simplot of the October Board Meeting. WPC attached an agenda for the meeting and told Simplot that the “primary purpose of the meeting will be to approve an additional Capital Contribution to be contributed proportionally by the Members of Pasco Processing on or before October 30, 2016.” (Board Meeting Agenda, Pasco Processing, LLC, October 28, 2016, attached hereto as Exhibit B). WPC also told Simplot that, as Simplot knew, Pasco Processing was Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 50 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 9 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax out of compliance on the funded debt to EBITDA ratio and debt coverage ratio, and that because of the necessity to come back into compliance with the loans and address other business matters, it would be irresponsible for Pasco Processing to postpone the October Board Meeting. 22. On October 26 and October 27, 2016, WPC notified Simplot that it still intended to hold the October Board Meeting. WPC also repeatedly asked Simplot to identify specific information it needed to evaluate whether it would make the Capital Contribution to Pasco Processing. 23. Simplot continued to refuse to attend the October Board Meeting until all of the documents it requested in its Records Demand were supplied, regardless of whether the documents were relevant to whether Simplot would contribute capital to Pasco Processing. 24. On October 28, 2016, the October Board Meeting was held. WPC’s representatives to the Pasco Processing board, Frank Tiegs, Janelle McClory, and Tim Tippett, attended. Simplot’s board representatives, Brent Moylan, Stephen Patterson, and Michael Johnston did not attend the October Board Meeting. 25. After the meeting, also on October 28, 2016, WPC wrote to Simplot providing it the minutes of the October Board Meeting. WPC also provided, pursuant to § 6.11 of the Operating Agreement, a signed a Joint Written Consent of the Members and the Board of Members of Pasco Processing, LLC (“Joint Consent”) authorizing Pasco Processing to accept a further Capital Contribution of $6,000,000 from its Members, with $3,000,000 being contributed by WPC and $3,000,000 contributed by Simplot. (Joint Consent of the Members and the Board Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 51 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 10 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax of Members of Pasco Processing LLC, attached hereto as Exhibit C). WPC requested Simplot’s signatures. WPC also informed Simplot that if it did not sign the Joint Consent by November 4, 2016, that a Deadlock would have occurred under the § 12.13 of the Operating Agreement. 26. Section 12.13 of the Operating Agreement defines the kind of management deadlock which triggers the “buyout” provisions of that agreement (a “Deadlock”) and sets forth a procedure for when the parties reach a Deadlock. A “‘Deadlock’ shall occur with respect to any matter for which a majority of the votes of the Board of Members is required for approval, and such matter is not approved as a result of a vote in which three (3) members of the Board of Members have voted against the matter and three (3) members of the Board of Members have voted in favor of the matter (a “Tie Vote”) on a matter submitted to it at a meeting or in the form of a proposed written consent.” 27. The proposed capital contribution required board approval. Simplot’s refusal to sign the Joint Consent gave rise to a Deadlock under § 12.13 of the Operating Agreement. 28. On November 3, 2016, WPC provided Simplot with access to Pasco Processing’s accounting data from Navision. WPC again asked Simplot to identify specific information it was lacking in order to evaluate whether it would make the proposed capital contribution. WPC also produced additional documents per the Records Demand on or about November 8, 2016. 29. From October through December 2016, Simplot refused to attend most of the telephone conferences with NWFCS, the lender on Pasco Processing’s loan, Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 52 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 11 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax to discuss Pasco Processing’s non-compliance with the loan covenant. Simplot attended a single conference call where NWFCS asked Simplot to confirm it would make a capital contribution, but Simplot never responded. 30. Between November 3, 2016 and November 28, 2016, Simplot did not contact WPC about the Document Request. On November 28, 2016, Simplot demanded that the Document Request be completed by November 30, 2016. 31. Section 12.13 of the Operating Agreement requires that “[i]f a Deadlock occurs, the Board of Members shall hold a meeting fifteen (15) days after such Deadlock to make a good faith effort to resolve the dispute and break the Deadlock.” 32. Between WPC’s November 4, 2016 notice of Deadlock and December 8, 2016, WPC tried on multiple attempts to resolve the Deadlock with Simplot, but Simplot refused to meaningfully engage, instead insisting on the production of documents that had nothing to do with Pasco Processing’s longstanding need for capital. 33. On December 2, 2016, in a calculated attempt to evade its obligations under the buyout provisions of the Operating Agreement, Simplot filed a purported derivative suit in the Western District of Washington against WPC and others (the “Derivative Case”) seeking to replace WPC as manager and appoint a receiver for Pasco Processing. 34. On December 8, 2016, WPC provided Simplot with notice of a Board Meeting of Pasco Processing for December 14, 2016 at 11:00 a.m. (“December Board Meeting”) for the parties to make a good faith effort to resolve the Deadlock. Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 53 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 12 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax 35. On December 13, 2016, Simplot advised WPC that it would not attend the December Board Meeting. 36. Pasco Processing held the December Board Meeting, as scheduled, on December 14, 2016. WPC’s board representative, Frank Tiegs, Janelle McClory, and Tim Tippett attended. Simplot’s board representatives, Brent Moylan, Stephen Patterson, and Michael Johnston did not attend. 37. Section 12.13 of the Operating Agreement requires that if after making a good faith effort to resolve the dispute and break the Deadlock, “the Deadlock is still not resolved, the Members agree to submit the matter to non-binding mediation by providing to Judicial Arbitration and Mediation Services (“JAMS”) a written request for mediation.” 38. On December 23, 2016, WPC provided Simplot with Notice of Deadlock and Request for Mediation (“Notice of Deadlock,” attached hereto as Exhibit D) pursuant to § 12.13 of the Operating Agreement. WPC notified Simplot that the nature of the Deadlock was the parties’ need to contribute additional capital as described in the Joint Consent. WPC filed its December 23, 2016 Notice of Deadlock concurrently with JAMS. 39. Section 12.13 of the Operating Agreement states that “[t]he Members will cooperate with JAMS, will participate in mediation in good faith and will share equally in its costs.” 40. On December 28, 2016, JAMS provided the parties with a selection of four mediators and numerous dates for a mediation to occur. Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 54 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 13 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax 41. On January 11, 2017, Simplot informed JAMS that it would not participate in the mediation. 42. The Operating Agreement provides if a Deadlock cannot be resolved, “within forty-five (45) days after a Party provides a written request for mediation, the Members may exercise the option to purchase in accordance with Section 9.5 above or any available remedy under applicable law.” (Ex. A. § 12.13). 43. Under § 9.5 of the Operating Agreement, in the event of a Deadlock, “Washington Potato shall have the option to purchase Simplot’s Member Percentage Interest for the Agreement Price on the Agreement Terms.” 44. On February 8, 2017, pursuant to § 9.5 of the Operating Agreement, WPC gave Simplot written notice of the exercise of WPC’s option to purchase all of Simplot’s Member Percentage Interest (“Simplot’s Interest”) for the Agreement Price on the Agreement Terms. (Attached hereto as Exhibit E). 45. Pursuant to § 9.7 of the Operating Agreement, the purchase shall occur “at a closing held on the thirtieth day after the date on which the option to purchase is exercised at [Pasco Processing’s] principal place of business.” (Ex. A § 9.7). In compliance with § 9.7 of the Operating Agreement, on February 8, 2017 when it exercised its option, WPC scheduled the closing of its purchase of Simplot’s Interest for March 10, 2017 at 12:00 p.m. at Pasco Processing. 46. WPC attended the March 10, 2017 closing of its purchase of Simplot’s Interest. Since the Agreement Price was a negative number, WPC was not required to tender cash or other available funds. (Ex. A § 9.7). WPC reserves its rights to Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 55 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 14 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax secure payment of Simplot for the negative Agreement Price, or some portion thereof, at a later date. 47. Under § 9.5 of the Operating Agreement, WPC’s option to purchase Simplot’s Interest is conditioned on Pasco Processing, WPC and Simplot entering into a 5-year agreement for the supply of vegetables to Simplot on terms and conditions mutually acceptable to Simplot and WPC (“Supply Agreement”). Simplot provided a form of Supply Agreement to WPC, which WPC advised was acceptable. At all material times herein up until the closing on the transfer of Simplot’s Interest, WPC has been ready, willing and able to itself enter and to cause Pasco Processing to enter into a Supply Agreement with Simplot pursuant to § 9.5 of the Operating Agreement in the form Simplot agreed to in 2016. (Form Assignment, attached hereto as Exhibit C). Simplot did not agree to enter into the Supply Agreement, thus because the Supply Agreement is for WPC’s benefit as the remaining member of Pasco Processing, as of the March 10, 2017 closing, WPC waived the condition of the Supply Agreement. 48. Under § 9.7 of the Operating Agreement the “Members agree to execute such documents that are necessary to effectuate the Transfer of the Percentage Interest free and clear of all liens and encumbrances or any portion thereof at the closing.” 49. Simplot did not to attend the closing on March 10, 2017 at 12:00 p.m. at Pasco Processing. Simplot did not execute the closing documents. 50. Per the terms of the Operating Agreement, WPC is the lawful one- hundred percent owner of Pasco Processing. Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 56 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 15 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax 51. As a result of WPC’s acquisition of Simplot’s Interest, real estate excise tax will be due on the assessed value of Pasco Processing and NFF’s real property (“Real Estate Excise Tax”). Pursuant to RCW 82.45.080(1), the Real Estate Excise Tax is Simplot’s obligation as the seller of Simplot’s Interest. WPC anticipates that Simplot will not pay Real Estate Excise Tax. Simplot will either need to pay the Real Estate Excise Tax or reimburse WPC, Pasco Processing, or NFF for making that payment for Simplot. IV. CLAIMS FOR RELIEF A. First Claim for Relief: Declaratory Judgment, 28 U.S.C. § 2201 52. WPC incorporates the allegations in paragraphs 1 through 51 by reference as if fully stated here. 53. By refusing to follow the terms of the Operating Agreement, Simplot, in breach of the Operating Agreement, has created a substantial controversy of sufficient immediacy and reality to justify issuing declaratory relief. 54. WPC is entitled to a declaration that (a) WPC and Simplot reached a Deadlock regarding the necessity to make a capital contribution to Pasco Processing; (b) Simplot breached § 12.13 of the Operating Agreement when under it did not (i) make a good faith effort to resolve the dispute and break the Deadlock; and (ii) refused to cooperate with JAMS and participate in mediation in good faith; (c) WPC lawfully exercised its option pursuant to § 9.5 of the Operating Agreement; (d) Simplot waived the condition that the parties enter a Supply Agreement as a condition to WPC exercising its option to purchase Simplot’s Interest; (e) Simplot breached § 9.7 of the Operating Agreement by (i) refusing to Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 57 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 16 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax attend the closing of the sale of Simplot’s Interest after being properly notified that WPC was exercising its option to purchase under § 9.5 of the Operating Agreement; and (ii) failing to execute documents at closing necessary and sufficient to effectuate the transfer of Simplot’s Interest to WPC free and clear of all liens and encumbrances; (f) that, as a result, WPC has purchased and now owns Simplot’s Interest free and clear of all liens and encumbrances and WPC is the sole, one- hundred percent owner of Pasco Processing; and (g) that Simplot is responsible for the payment of, or reimbursement to WPC for, the Real Estate Excise Tax. B. Second Claim for Relief – In the Alternative: Breach of Contract/Specific Performance 55. Plaintiff incorporates the allegations contained in paragraphs 1 through 51 as though fully set forth herein. 56. Simplot agreed to the terms of the Operating Agreement and conveyed its agreement to WPC. 57. At all material times herein, WPC has been ready, willing, and able to meet its obligations under the Agreement, and remains ready, willing and able to do so, including its willingness to enter into a Supply Agreement with Simplot pursuant to § 9.5 of the Operating Agreement. 58. Simplot breached § 12.13 of the Operating Agreement when under it did not (1) make a good faith effort to resolve the dispute and break the Deadlock; and (2) refused to cooperate with JAMS and participate in mediation in good faith. 59. Simplot breached § 9.7 of the Operating Agreement by (1) refusing to attend the closing of the sale of Simplot’s Interest after being properly notified that Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 58 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 17 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax WPC was exercising its option to purchase under § 9.5 of the Operating Agreement; and (2) failing to execute documents at closing that were necessary to effectuate the transfer of Simplot’s Interest to WPC free and clear of all liens and encumbrances. 60. Simplot has breached the covenant of good faith and fair dealing to the extent it refuses to enter into the Supply Agreement it proposed. 61. WPC has no adequate remedy at law and the terms of the Operating Agreement specify the procedure that is to occur in the event of a Deadlock. 62. WPC is entitled to a decree of specific performance requiring Simplot to execute documents necessary and sufficient to convey Simplot’s Interest to WPC pursuant to § 9.7 of the Operating Agreement, to establish that WPC is the sole, one-hundred percent owner of Pasco Processing. WPC is also entitled to an order requiring Simplot to pay the Real Estate Excise Tax and/or reimburse WPC for payment of the Real Estate Excise Tax pursuant RCW 82.45.080(1). V. RELIEF REQUESTED WHEREFORE, WPC respectfully requests that this Court enter judgment in its favor against Simplot as follows: 1. For an award of damages, as appropriate; 2. For a declaration as set forth in the preceding paragraph. 3. In addition to the declaration in paragraph 2 above, or in the alternative, that Simplot be ordered to specifically perform and comply with § 9.7 of the Operating Agreement by executing such documents that are necessary to effectuate WPC’s purchase of Simplot’s Interest in Pasco Processing free and clear of all liens and encumbrances or any portion thereof. Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 59 of 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 COMPLAINT - 18 Case No. ___________ 4821-5714-4389v.5 0086504-000003 Davis Wright Tremaine LLP LAW OFFICES 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 206.622.3150 main · 206.757.7700 fax 4. For an Order requiring Simplot to pay the Real Estate Excise Tax and/or reimburse WPC for such payment pursuant to RCW 82.45.080(1). 5. For such other necessary or proper relief based upon a declaratory judgment as the Court may grant under 28 U.S.C. § 2202 or otherwise; 6. For an order awarding WPC its attorneys’ fees, costs and expenses, as allowed; 7. For an order awarding WPC any pre- and post-judgment interest to the fullest extent permitted by law; and 8. For such further relief as the Court may deem proper and just. DATED this 14th day of March, 2017. DAVIS WRIGHT TREMAINE LLP By s/ Jaime Drozd Allen Brad Fisher, WSBA # 19895 Jaime Drozd Allen, WSBA # 35742 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 Telephone: 206-757-8039 Fax: 206-757-7039 bradfisher@dwt.com jaimeallen@dwt.com Attorneys for Plaintiff Washington Potato Co. Case 4:17-cv-05032 Document 1 Filed 03/14/17Case 2:16-cv-01851-RSM Document 75-1 Filed 03/2 /17 Page 60 of 77 EXHIBIT I Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 61 of 77 1 From: John Rizzardi Sent: Tuesday, March 14, 2017 5:38 PM To: William Weigand; Lang, Robert H. Cc: Jennifer Faubion; John Rizzardi Subject: Communications Bill, Thanks for your voice mail message to call you. We have reviewed the letter that was sent a short time ago. Given your representations about the apparent sale of Simplot's membership interest in Pasco, and Simplot's objection and further representation that it will seek immediate relief from the court regarding the same, NW FCS will not adjust the communications protocol with the parties until either (a) agreed clarity is achieved regarding the ownership interests of the Borrower, (b) guidance from the Court or (c) the parties, reserving all other rights if they wish, agree to a written modification of the protocol. In the meantime, NW FCS does not feel comfortable departing from the current agreed communications protocol. John CH& | John Rizzardi Attorney Cairncross & Hempelmann 524 Second Avenue | Suite 500 | Seattle, WA 98104-2323 d: 206-254-4444 | f: 206-587-2308 Assistant: Rachel Wang | d: 206-254-4485 | rwang@cairncross.com JRizzardi@cairncross.com | www.cairncross.com | Bio A member of Mackrell International, a Global Network of Independent Law Firms. This email message may contain confidential and privileged information. If you are not the intended recipient, please contact the sender by reply email and delete the original message without reading, disclosing, or copying its contents. Redacted Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 62 of 77 EXHIBIT J Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 63 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 64 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 65 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 66 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 67 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 68 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 69 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 70 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 71 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 72 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 73 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 74 of 77 Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 75 of 77 EXHIBIT K Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 76 of 77 1 From: Weigand, William Sent: Monday, March 13, 2017 2:33 PM To: John Rizzardi (JRizzardi@Cairncross.com); Jennifer Faubion (JFaubion@Cairncross.com) Cc: Weigand, William; VanLeuven, Joe; Lang, Robert H. Subject: Pasco Processing, LLC John and Jenny – On March 10, 2017, Washington Potato Company became the 100% owner of Pasco Processing, LLC by closing on its option to purchase Simplot’s interest under the Deadlock provisions of the parties’ Operating Agreement. While I am copying Simplot’s counsel Rob Lang on this email, the past communication protocol that included Simplot’s lawyers should no longer be followed. Because Simplot no longer has an ownership interest in Pasco Processing, LLC it has no further right to obtain from or discuss with Farm Credit any information regarding the loans to Pasco Processing, LLC and its subsidiaries, except through the formal litigation discovery process. We have demanded that Simplot immediately dismiss its derivative claims and motion for appointment of a receiver for Pasco Processing, LLC, since it no longer has standing to pursue those claims or that motion. We look forward to meeting soon to discuss ways to restore these loans to fully-performing status. Bill Bill Weigand | Davis Wright Tremaine LLP Chair, Family Business Group 1201 Third Avenue, Suite 2200 | Seattle, WA 98101 Tel: (206) 757-8164 | Fax: (206) 757-7164 | Mobile: (206) 890-4149 Email: billweigand@dwt.com | Website: www.dwt.com Bio: www.dwt.com/people/WilliamLWeigand Anchorage | Bellevue | Los Angeles | New York | Portland | San Francisco | Seattle | Shanghai | Washington, D.C. Visit DWT’s Family Business Resource Center at http://www.familyownedbusinessadvisors.com/ Redacted Case 2:16-cv-01851-RSM Document 75-1 Filed 03/20/17 Page 77 of 77 [PROPOSED] ORDER GRANTING PLAINTIFF J. R. SIMPLOT COMPANY’S MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 The Honorable Ricardo S. Martinez UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE J. R. SIMPLOT COMPANY, Plaintiff, vs. WASHINGTON POTATO COMPANY; OREGON POTATO COMPANY; FRANK TIEGS; and DOES 1 THROUGH 10, Defendants. No. 2:16-cv-01851-RSM [PROPOSED] ORDER GRANTING PLAINTIFF J. R. SIMPLOT COMPANY’S MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION Plaintiff J. R. Simplot Company’s (“Plaintiff” or “Simplot”) Motion for Temporary Restraining Order and Preliminary Injunction came before this Court in the ordinary course. All appearances are noted in the record. Having considered the papers filed in support of and in opposition to said motion, and for good cause shown, IT IS HEREBY ORDERED that Plaintiff J. R. Simplot Company’s motion is GRANTED. It is well settled that a TRO is a proper remedy to preserve the status quo pending resolution of rights with respect to a disputed acquisition. E.g., Boardman v. Pac. Seafood Grp., 822 F.3d 1011, 1017 (9th Cir. 2016) (affirming grant of preliminary injunction Case 2:16-cv-01851-RSM Document 75-2 Filed 03/20/17 Page 1 of 6 [PROPOSED] ORDER GRANTING PLAINTIFF J. R. SIMPLOT COMPANY’S MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 prohibiting defendants “‘from undertaking any further act to acquire or control any interest in’ Ocean Gold’s stock or assets”). Plaintiff is entitled to a TRO [preliminary injunction] as Plaintiff has established (1) a likelihood of success on the merits of the underlying case; (2) a likelihood of irreparable harm in the absence of the TRO [preliminary injunction]; (3) that a balance of equities tips in Simplot’s favor; and (4) that a TRO [preliminary injunction] is in the public interest. Blueshield v. Totten, No. C15-1851RSM, 2015 WL 12572543, at *1 (W.D. Wash. Nov. 24, 2015) (citation omitted); Panyanouvong v. Aphay, No. 2:14-CV-00275 RSM, 2014 WL 2986507, at *5, 8 (W.D. Wash. July 1, 2014). Courts in the Ninth Circuit apply a “sliding scale” to these elements, “‘so that a stronger showing of one element may offset a weaker showing of another.’” Blueshield, No. C15-1851RSM, 2015 WL 12572543, at *5 (quotation omitted); Earthbound Corp. v. MiTek USA, Inc., No. C16-1150 RSM, 2016 WL 4418013, at *7 (W.D. Wash. 2016). Although it seems apparent from the exhibits to Plaintiff’s Motion that WPC does not have the legal right to close on the acquisition of Plaintiff’s ownership interest before the issue can be litigated, Plaintiff in any event has shown a likelihood of success on the merits of its claim in Count VIII of its First Amended Complaint that WPC does not have the legal right to acquire Plaintiff’s ownership in Pasco Processing, LLC (“Pasco”) (the “Attempted Conversion”). In the alternative, under the Ninth Circuit’s sliding scale test, Simplot raises “serious questions going to the merits” of the claim. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011). Plaintiff has shown irreparable harm will occur absent a TRO [preliminary injunction] given that: if Defendants are permitted to act on their Attempted Conversion Declaration, Plaintiff’s entire investment in Pasco Processing, LLC is at risk as is Plaintiff’s supply chain. See, e.g., Woodward & Lothrop, Inc. v. Schnabel, 593 F. Supp. 1385, 1394 Case 2:16-cv-01851-RSM Document 75-2 Filed 03/20/17 Page 2 of 6 [PROPOSED] ORDER GRANTING PLAINTIFF J. R. SIMPLOT COMPANY’S MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 (D.D.C. 1984)); see also Oregon Potato Co. v. Seven Stars Fruit Co., LLC, No. C12- 0931JLR, 2012 WL 2277943, at *3 (W.D. Wash. June 18, 2012). Plaintiff has shown that the balance of equities favors Plaintiff given that without a TRO [preliminary injunction], the status quo will be altered and Plaintiff will face rapidly accruing and irreparable harm caused by Defendants’ continuing to act on the Attempted Conversion. Plaintiff has shown that with a TRO [Preliminary Injunction], Defendants will merely be forced to resolve the Deadlock issue through an orderly court process. Further, Plaintiff has shown that Defendants’ misconduct has occurred under a veil of concealment, favoring the grant of a TRO [preliminary injunction]. See In re Estate of Ferdinand Marcos, 25 F.3d 1467, 1480 (9th Cir. 1994). Finally, Plaintiff has shown a TRO [preliminary injunction] is in the public interest to protect the jobs and the economies in Pasco and Gem State Processing, LLC’s (“Gem State”) communities. The impact “on the health of the local economy is a proper consideration in the public interest analysis.” Alliance for the Wild Rockies, 632 F.3d at 1138. Plaintiff has shown that the collapse of Pasco threatens local economic wellbeing, and that without a TRO [preliminary injunction], the dire financial and safety situations at Pasco will continue, causing numerous Pasco employees to face uncertain futures in their jobs, which should be at a safe workplace. Accordingly, Defendants Washington Potato Company (“WPC”), Oregon Potato Company (“OPC”), and Frank Tiegs (collectively “Defendants”), and anyone acting on their behalf or at their direction, are hereby enjoined from: 1. Undertaking any actions based upon, or in furtherance of, WPC’s attempt to unilaterally declare WPC the owner of Plaintiff’s ownership in Pasco Processing (the “Attempted Conversion”); 2. Otherwise undertaking any actions with respect to the management of Pasco Processing LLC (“Pasco”) that are inconsistent with Simplot owning a membership interest in Pasco, including making any statements to Pasco employees, vendors, customers, or lenders to the effect that Simplot does not own any interest in Pasco; Case 2:16-cv-01851-RSM Document 75-2 Filed 03/20/17 Page 3 of 6 [PROPOSED] ORDER GRANTING PLAINTIFF J. R. SIMPLOT COMPANY’S MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 3. Undertaking any acts to disrupt supply to Plaintiff from Pasco, Gem State Processing, LLC and/or any other source; 4. Undertaking any acts to acquire Plaintiff’s ownership in Pasco outside of resolution through litigation. This Order [Preliminary Injunction] shall remain in effect until this Court adjudicates Count VIII of Plaintiff’s First Amended Complaint or until further Order of the Court [or until this Court rules upon Simplot’s motion for a preliminary injunction]. Plaintiff is not required to post a bond as the injunction will preserve the status quo among the parties and Defendants will not suffer any monetary harm from preservation of the status quo. Dated: Hon. Ricardo S. Martinez United States District Judge Presented by: YARMUTH WILSDON PLLC By: /s/ Jeremy E. Roller Jeremy E. Roller, WSBA # 32021 Diana S. Breaux, WSBA # 46112 1420 Fifth Avenue, Suite 1400 Seattle, WA 98101 Phone: 206.516.3800 Fax: 206.516.3888 Email: jroller@yarmuth.com dbreaux@yarmuth.com THOMPSON COBURN LLP By: /s/ Robert H. Lang Robert H. Lang (admitted pro hac vice) Kimberly M. Bousquet (admitted pro hac vice) Renato Mariotti (admitted pro hac vice) Patrick Morales-Doyle (admitted pro hac vice) Ryan Gehbauer(admitted pro hac vice) Elise N. Puma (admitted pro hac vice) Case 2:16-cv-01851-RSM Document 75-2 Filed 03/20/17 Page 4 of 6 [PROPOSED] ORDER GRANTING PLAINTIFF J. R. SIMPLOT COMPANY’S MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 55 East Monroe Street, 37th Floor Chicago, Illinois 60603 Phone: 312.580.2242 Fax: 312.580.2201 Email:rhlang@thompsoncoburn.com kbousquet@thompsoncoburn.com rmariotti@thompsoncoburn.com pmoralesdoyle@thompsoncoburn.com rgehbauer@thompsoncoburn.com epuma@thompsoncoburn.com Attorneys for Plaintiff J. R. Simplot Company Case 2:16-cv-01851-RSM Document 75-2 Filed 03/20/17 Page 5 of 6 [PROPOSED] ORDER GRANTING PLAINTIFF J. R. SIMPLOT COMPANY’S MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION – Page 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1420 FIFTH AVENUE, SUITE 1400 SEATTLE WASHINGTON 98101 T 206.516.3800 F 206.516.3888 CERTIFICATE OF SERVICE I hereby certify that this date I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to the following counsel of record: Brad Fisher Jaime Drozd Allen Davis Wright Tremaine LLP 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 Telephone: (206) 622-3150 Fax: (206) 757-7700 E-mail: bradfisher@dwt.com jaimeallen@dwt.com Attorneys for Defendants Washington Potato Company; Oregon Potato Company; and Frank Tiegs Dated: March 20, 2017, at Seattle, Washington. s/Kelly Kennedy Kelly Kennedy 972.01 rc201506 Case 2:16-cv-01851-RSM Document 75-2 Filed 03/20/17 Page 6 of 6