Tyson Foods, Inc. v. Keystone Foods Holdings Limited
- Andrew Carter
- 1:19-cv-10125
- U.S. District Court · Southern District of New York
- 4
In Tyson Foods v. Keystone Foods, Judge Carter denied Tyson’s motion to strike a defense concerning alleged material breach of the purchase agreement.
Tyson Foods, Inc., Keystone Foods Holdings Limited (n/k/a Beef Holdings Limited), and Marfrig Global Foods S.A.; the defense that Tyson materially breached the share purchase agreement remains in the case.
What happened
Tyson Foods, Inc. sued Keystone Foods Holdings Limited and Marfrig Global Foods S.A. over a share purchase agreement for a poultry and fish business. Tyson asked the court to remove the defendants’ defense that Tyson had materially breached provisions concerning purchase-price adjustments.
Tyson argued that the defense should be removed because a related case had been sent to arbitration. The court explained that the arbitration was limited to disputed items or amounts used to calculate the purchase price. Whether Tyson materially breached the agreement involved a fact-intensive inquiry that the court, rather than the arbitrator, would decide.
The court also noted that Tyson filed its motion nearly a year after the defense was served, beyond the usual 21-day deadline for such a motion. Judge Andrew L. Carter, Jr. denied the motion to strike and directed the clerk to terminate it.
The detailed version
- Tyson Foods, Inc. v. Keystone Foods Holdings Limited · No. 1:19-cv-10125
- Andrew Carter
- Mar. 31, 2022
Background
Tyson Foods, Inc. brought this action against Keystone Foods Holdings Limited, now known as Beef Holdings Limited, and Marfrig Global Foods S.A. The dispute arises from a share purchase agreement under which Tyson acquired the defendants’ poultry and fish business. The agreement allowed Tyson to seek reimbursement after closing based on certain purchase-price adjustments.
The defendants’ answer included an affirmative defense alleging that Tyson materially breached provisions of the agreement concerning those purchase-price adjustments. After Tyson filed an amended complaint, the defendants’ amended answer included the same defense as the Fifth Affirmative Defense, although it had originally been labeled the Seventh Affirmative Defense.
In a related first-filed action, the court had ordered arbitration of claims concerning the purchase-price adjustments and dismissed the remaining claims in that action. Tyson then moved under Federal Rule of Civil Procedure 12(f) to strike the material-breach defense, arguing that the arbitration ruling required the defense to be removed.
Court’s analysis
Rule 12(f) permits a court to strike an insufficient, redundant, immaterial, impertinent, or scandalous matter from a pleading. The court stated that motions to strike are generally disfavored. To strike an affirmative defense, there must be no factual or substantial legal question that could allow the defense to succeed, and the defense’s inclusion must prejudice the moving party.
The court held that it retained jurisdiction over the material-breach defense despite the arbitration concerning purchase-price calculations. The arbitration provision was narrow: the arbitrator’s authority covered only disputed items or amounts for calculating the purchase price. It did not cover disputes of every kind under the agreement.
The court further explained that material breach depends on a fact-intensive balancing test, including the size of the alleged default, its effect on the agreement’s purpose, whether it was willful, and the extent to which the injured party benefited from the agreement. The court stated that it would decide whether Tyson materially breached the agreement.
The court also relied on the timing of Tyson’s motion. Rule 12(f) generally requires a motion to strike to be filed within 21 days after service of the pleading. The defendants served the answer containing the defense on December 12, 2019, while Tyson filed its motion nearly a year later. The court declined to exercise its discretion to strike the defense after that deadline.
Disposition
The court denied Tyson’s motion to strike. It directed the clerk to terminate the motion at ECF No. 107.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.