UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION
NESTLE PURINA PETCARE COMPANY,
Plaintiff/Counterclaim Defendant,
v.
THE BLUE BUFFALO COMPANY, LTD.,
Defendant/Counterclaim Plaintiff,
v.
BLUE STATE DIGITAL INC.,
PRCG/HAGGERTY LLC, and JOHN DOES
1-8.
Counterclaim Defendants.

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) No. 4:14-CV-859 RWS
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STATUS AND MOTION HEARING

BEFORE THE HONORABLE RODNEY W. SIPPEL
UNITED STATES DISTRICT JUDGE
MAY 6, 2015
APPEARANCES:
For Plaintiff:

Carmine R. Zarlenga, III, Esq.

MAYER BROWN LLP
1999 K Street, N.W.
Washington, DC 20006
Richard M. Assmus, Esq.
MAYER BROWN LLP
71 S. Wacker Drive
Chicago, IL 60606
David A. Roodman, Esq.
BRYAN CAVE LLP
211 North Broadway, Suite 3600
St. Louis, MO 63102

For Defendant:

Steven A. Zalesin, Esq.

Adeel A. Mangi, Esq.
PATTERSON AND BELKNAP
1133 Avenue of the Americas
New York, NY 10036

Appearances Cont'd:

For Defendant:

David H. Luce, Esq.

CARMODY MACDONALD P.C.
120 South Central, Suite 1800
Clayton, MO 63105
Darren Johnson, Esq.
PAUL AND WEISS
1285 Avenue of the Americas
New York, NY 10019

For Counter
Defendant PRCG/
Haggerty:

Charles A. Weiss, Esq.

BRYAN CAVE LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, MO 63101

For Counter
Defendant Blue
State Digital:

Michael A. Kahn, Esq.

CAPES AND SOKOL
7701 Forsyth Boulevard, 12th Floor
Clayton, MO 63105

REPORTED BY:

SHANNON L. WHITE, RMR, CRR, CSR, CCR

Official Court Reporter
United States District Court
111 South Tenth Street, Third Floor
St. Louis, MO 63102
(314) 244-7966

PRODUCED BY COURT REPORTER COMPUTER-AIDED TRANSCRIPTION

Nestle Purina v Blue Buffalo Company -- 05-06-15

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(PROCEEDINGS BEGAN AT 10:05 AM.)

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THE COURT:

Good morning.

We're here today in the

case styled Nestle Purina against Blue Buffalo, 4:14-CV-859.

Would counsel make their appearances, please?

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6

MR. ZARLENGA:

Carmine Zarlenga, Mayer Brown, for

Purina.

MR. ASSMUS:

the plaintiff, Nestle Purina.

MR. ROODMAN:

10

MR. WEISS:

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MR. KAHN:

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David Roodman, Bryan Cave, on behalf of

Purina.

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Richard Assmus also for Mayer Brown for

Charles Weiss on behalf of PRCG/Haggerty.

Michael Kahn, Your Honor, on behalf of

Blue State Digital.

MR. LUCE:

Morning, Judge.

Dave Luce with Carmody.

15

With me today is Steve Zalesin, Adeel Mangi, and Darren

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Johnson on behalf of Defendant Blue Buffalo.

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THE COURT:

Very good.

All right.

Are there any

18

announcements before we begin to work our way through the

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pending motions this morning?

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MR. ZALESIN:

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THE COURT:

22

MR. ZALESIN:

There is one.

Good.
Good morning, Your Honor.

Steve

23

Zalesin for Blue Buffalo.

The parties worked out and

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submitted to Your Honor a joint proposed scheduling order

25

which would extend all deadlines by roughly two months.

Nestle Purina v Blue Buffalo Company -- 05-06-15

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THE COURT:
weren't they?

The experts were, like, four months out,

Or did I missing something?

MR. ZALESIN:
the back end.

THE COURT:

MR. ZALESIN:

There were some further extensions at

Two months, four months.

I think that had a lot to do with

trying not to ruin anybody's Christmas or Thanksgiving.

THE COURT:

MR. ZALESIN:

Okay.
But recent developments suggest to Blue

10

Buffalo at least that that -- even that revised schedule is

11

going to need further revision.

12

that Blue Buffalo has determined that it is going to bring

13

third-party claims in this proceeding against Wilbur-Ellis,

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which is the supplier Your Honor has heard so much about,

15

which delivered product to Blue Buffalo's co-packers, which

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was not what Blue Buffalo ordered and purchased and paid for,

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not what it was labeled to be.

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Court that we may at some point bring Wilbur-Ellis in as a

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party to these proceedings if the facts warrant such a claim.

And the reason for that is

We've previously told the

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What has occurred in the very recent past is the week

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before last, the end of the week of last week of April -- so I

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think it was the 23rd -- we got a significant new production

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of material and information from Wilbur-Ellis in response to

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third-party subpoenas and discovery requests that both Blue

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Buffalo and Nestle had served on Wilbur-Ellis.

Nestle Purina v Blue Buffalo Company -- 05-06-15

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And we then analyzed that information carefully over

the weekend and last week and were able to determine for the

first time that the Wilbur-Ellis mislabeling scheme did, in

fact, impact a significant proportion of Blue Buffalo's dry

pet food products that were manufactured from material that

was shipped to our co-packers prior to May of 2014.

result of that determination, we've decided to assert

third-party claims against Wilbur-Ellis and possibly others

involved in that mislabeling scheme.

10

And as a

Now, we did not come to this decision lightly, Your

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Honor.

12

been pushing for tighter discovery, tighter deadlines in this

13

case.

14

it resolved in no small part because we have counterclaims in

15

the case in which we seek, among other things, a permanent

16

injunction against the ongoing attack or advertising campaign

17

that Purina is still running to this day, calling Blue Buffalo

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liars and dishonest and what have you.

19

As you know, Blue Buffalo has been the party that has

We wanted to try this case this year, in 2015, and get

But this latest production from Wilbur-Ellis provides

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an important puzzle piece that had been missing until now,

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which is:

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in fact, were impacted by the mislabeling?

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from their most recent spreadsheets and documents that the

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answer appears to be a very -- a substantial proportion.

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we intend now to take prompt action against Wilbur-Ellis.

What proportion of the shipments to our co-packers,

And we now know

So

Nestle Purina v Blue Buffalo Company -- 05-06-15

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As I mentioned, we are also looking at the

possibility of additional third-party defendants who were

complicit in that mislabeling conduct.

decision on that in the next couple of days, but we thought we

should make the Court aware of our intentions.

We'll come to a

Now, let me be clear about what this means for Blue

Buffalo and its position in this case.

this case alleging that Blue Buffalo had intentionally lied

about the ingredients in its pet foods, said we were using

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high-quality, expensive ingredients when, in fact, we were

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knowingly substituting cheaper, lower-quality ingredients.

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That claim is completely false.

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that it was being defrauded by its supplier, as were

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apparently many other pet food manufacturers who were sourcing

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from Wilbur-Ellis, which is one of the biggest names in the

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business.

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Nestle Purina brought

Blue Buffalo had no knowledge

We ordered high-priced, high-quality chicken meal.

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We paid for high-priced, high-quality chicken meal, but that's

19

not what we got in many instances.

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trying to capitalize on this.

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And Nestle Purina is

We believe that this, in fact, had no impact on

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Nestle Purina or its business.

This is really a matter

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between Blue Buffalo and its suppliers and Blue Buffalo and

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its customers, but if Blue Buffalo is found to have any

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liability in this case -- because we did put in our ads and on

Nestle Purina v Blue Buffalo Company -- 05-06-15

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our bags "no chicken by-product meal," and that turns out not

to be true in many cases -- then if we have liability to

Nestle Purina, then those responsible should have to answer

for it.

So we would expect, Your Honor, with your permission,

to be in a position to file an amended answer, counterclaims,

and third-party claims within two weeks.

until -- today's the 6th; so that would be May 20.

acceptable to the Court.

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We would request
If that's

And we would respectfully request

the Court's permission to do so.

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We are willing, obviously, if Your Honor prefers, to

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file a formal motion for leave to bring these additional

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third-party claims.

Your Honor's existing scheduling order

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had a cutoff date.

I'm not even sure when it was, but it was

15

some months ago for adding parties.

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information from Wilbur-Ellis.

17

But we just got this

And I should add, Your Honor, that Nestle Purina has

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been in a rush to judgment saying, oh, it's obvious, it's been

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obvious for six months or longer, that a significant

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proportion of these products were impacted.

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That is not true.

We have been waiting on

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Wilbur-Ellis.

The information has been coming out very

23

slowly.

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a relatively minor ingredient, in February.

25

the end of April they sent us the information we needed on

They sent us information about turkey meal, which is

It wasn't until

Nestle Purina v Blue Buffalo Company -- 05-06-15

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chicken meal, and now that the facts have come to our

attention, we intend to act.

THE COURT:

MR. ZARLENGA:

All right.

Mr. Zarlenga.

Well, Your Honor, it may be the first

time in this case that I actually agree with a lot of what Mr.

Zalesin said.

has no chicken by-product meal on product that has that in it

should be held responsible.

beginning.

10

Whoever put on their labels that the product

We've been saying that from the

I do disagree that Blue Buffalo needed a year to

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figure this out.

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today, later in this hearing, that it should have been

13

determined three years ago, and we'll go through the documents

14

on that because they relate to the declassification motion.

15

It was obvious a year ago.

And you will see

So we think this is a very late development that Blue

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Buffalo is only doing because they are completely backed into

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a corner.

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hours, with not one single shred of due diligence, they

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categorically denied -- those are not my words; those are the

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chairman of the company's words -- every single allegation in

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the case.

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The first day this case was filed, within five

The other thing that I will just say that needs to be

23

corrected is that every time -- it happens in every hearing.

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Blue Buffalo gets up here and tries to tell you what my case

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is about.

Every time they get it wrong.

And we are not

Nestle Purina v Blue Buffalo Company -- 05-06-15

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alleging intentional knowledge or dishonesty or falsehoods on

their part that they knew about things.

that.

of evidence indicating that's what happened, but I don't need

to prove that.

Court just issued a ruling keeping in two codefendants that

we'd like out of the case, saying you don't need to have

intent.

that too.

I don't need to prove

I think that that evidence is -- there will be plenty

That's not an element of my claim.

And the

Blue Buffalo exploited that, and my claims exploit

I don't want to take on that burden, but I do think

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it may come out in this trial.

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indicates that they knew or certainly should have known this

12

was a problem, a widespread, long-term problem for many years.

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14
15

And clearly, to me, it

So I don't have much more to say.

I don't object to

bringing in a third party.

THE COURT:

That's my question.

I mean, whatever

16

happens, I don't want there to be any confusion about how we

17

got there.

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granted," and I always set the marker as before that date, you

19

know, there's not much of a conversation.

20

need to have a conversation or motion practice to determine

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whether it's appropriate in this case to amend or add.

22

You know, the rule says "leave shall be freely

After that date we

So are you consenting to giving them two weeks to

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file their amended pleadings, or do you want them to file a

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motion with your opportunity to respond?

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MR. ZARLENGA:

I will gladly give them two weeks, but

Nestle Purina v Blue Buffalo Company -- 05-06-15

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I may want to amend our pleadings because a lot -- this is

new.

spent a year fighting tooth and nail over this question which

really wasn't necessary, from our standpoint.

The admission part is new.

THE COURT:

MR. ZARLENGA:

This has been -- we have

Right.
It was a monumental waste of our time.

So, therefore, we may seek relief on that, and we may seek

some other relief.

that I would like to add to the complaints.

There's been new things that have come out

So if we're going

10

it rephrase things, reframe things, then I want that

11

opportunity too.

12

to adding Wilbur-Ellis or whoever else is going to be added.

13

And provided I get it, I have no objection

THE COURT:

So by May 20 Blue Buffalo's to file its

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proposed amended pleadings, which you suggest were amended

15

answer, amended counterclaim, and new third-party practice.

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Is that --

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MR. ZALESIN:

That's correct, Your Honor.

And just

18

to be clear, we currently are facing a deadline of this Friday

19

pursuant to your most recent order on the granting in part the

20

ad agency's motions to dismiss our counterclaims with leave to

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amend to file amended counterclaims against the ad agencies.

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I would request --

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THE COURT:

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MR. ZALESIN:

25

I'm going to roll that all together.

Yes, if that's permissible.

Now, if

Mr. Zarlenga is going to file another pleading, then we're

Nestle Purina v Blue Buffalo Company -- 05-06-15

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going to have to answer that, but I think what -- it makes

sense because we want to get the case started against

Wilbur-Ellis, and if we have to amend in response to Mr.

Zarlenga's amended pleading, we can do that.

We've also, Your Honor, given some thought to what

the amended schedule might look like and recognizing that

Wilbur-Ellis and any other parties we might bring in will

obviously have a say or may want to have a say on that

subject.

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11

THE COURT:

Well, we're certainly not going to tell

them they don't get to participate.

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MR. ZALESIN:

Obviously.

But we think that extending

13

the proposed extended schedule by an extra three months should

14

allow ample time.

15

issues relating to their shipments since the fall of 2014.

16

They've been engaged in third-party discovery with both Blue

17

Buffalo and Nestle Purina all this time; so this is hardly

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going to come out of right field for them.

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Wilbur-Ellis has been well aware of the

So that would take us -- right now we are proposing

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the end of July.

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would take us to the end of October, and it would give

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Wilbur-Ellis roughly six months of fact discovery to get its

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defenses ready for trial and its expert and then on to expert

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reports.

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If we added August, September, October, that

So that's a preliminary set of thoughts on how much

Nestle Purina v Blue Buffalo Company -- 05-06-15

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additional time this is going to add to the overall life of a

case.

THE COURT:

Mr. Zarlenga, you might as well attack

the CMO issue now, or the alternative is just to vacate it and

wait until everybody gets back together again, but I don't

think that's a good idea.

MR. ZARLENGA:

THE COURT:

MR. ZARLENGA:

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THE COURT:
having no deadlines.

You do not think that's a good idea?

Do you?
I don't know.

I can be persuaded it is, but I hate

That makes me really nervous.

MR. ZARLENGA:

So I defer to the Court.

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Your Honor knows more about this than I do.

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I'm facing an unknown.

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this this morning.

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THE COURT:

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MR. ZARLENGA:

This is brand new.

Just that, okay,

I had no notice of

Okay.
Right?

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flexible.

19

know, extend it further.

20

That's fine.

So, you know, you've been

If flexibility is needed, then maybe we'll, you

THE COURT:

I don't know.

I've talked about this before.

The Rule

21

No. 1 that no lawyer reads, which is that every decision in

22

the conduct of a case should be done as inexpensively as

23

possible, if this is new information to you but we're prepared

24

to move on and bring Wilbur-Ellis in -- I'm trying to get my

25

brain around "it's new information to me" -- how we manage

Nestle Purina v Blue Buffalo Company -- 05-06-15

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this so we don't, in the interim, end up -- I'll tell you.

mean, when I do a Rule 16 order, a case management order, the

reason I have that marker out there about when you amend is

that, after that date, we need to talk about what can we do to

minimize the cost of changing course.

Obviously, bringing in a new party, especially in

this case, we're going to change course here.

about maybe some different theories.

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10

MR. ZARLENGA:

You're talking

I don't know.

Well, so if I can answer that

directly.

11

THE COURT:

How do we manage this so we're not doing

12

things we're going to have to repeat again?

13

isn't going to just take your word for it, right?

14

there.

15

They may have another version of events.

Wilbur-Ellis
They're out

I mean, everybody is kind of looking at them for now.

16

MR. ZARLENGA:

Yeah.

And I will go through that.

17

I'm pretty sure I know what that is.

18

later today.

19

following up on the Rule 1 -- and I do, I read the rules cover

20

to cover every year.

It's germane to one of the motions, but -- so

Once a year.

21

THE COURT:

22

MR. ZARLENGA:

23

because that way --

24

THE COURT:

25

to them.

I'll go through that

Oh.
And sometimes I read them backwards

You don't get bored by the time you get

Nestle Purina v Blue Buffalo Company -- 05-06-15

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MR. ZARLENGA:

-- you focus on the ones at the end

first, which everybody ignores --

MR. ZALESIN:

THE COURT:

He really is a fun guy.

I hope it's not on vacation.

I'm going to say.

reading the Rules of Civil Procedure.

7
8

Sitting by the pool at the Breakers,

MR. ZARLENGA:
something new.

Every time I read them, I see

Every single time, I see something new.

THE COURT:

Well, the Chief Justice just sent over a

10

bunch of new rules to Congress.

11

MR. ZARLENGA:

12

No.

I mean, I see something that

maybe has been in there a long time.

13
14

That's all

THE COURT:

There will be new ones this year, you

know, and it's about -- the new focus is on proportionality.

15

MR. ZARLENGA:

16

your Rule 1 point, which I like.

17

is great if Blue Buffalo comes clean, so to speak, on how much

18

of this is in their product, which is now, you know, the issue

19

du jour, not whether, how much, how long.

20

It would save us a lot of money, you know.

21

spent, we've already spent, maybe we'll get that back, but

22

I --

23
24
25

THE COURT:

Right.

Right.

So let's go back to

So, for example, that timing

It would be nice.
The money we

I don't want to keep down that path if

we're redefining.
MR. ZARLENGA:

Right.

I'd like to get some answers

Nestle Purina v Blue Buffalo Company -- 05-06-15

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on that that make it easy.

have to go, you know, hammer and tong, tooth and nail, you

know, document by document, which we've done over the last

year, I don't think that's enough time.

saying.

THE COURT:

That would be great.

But if we

That's all I'm

Well, you know, we need to take a release

valve off of it today.

Wilbur-Ellis gets here and we get back together, what's the

new world version going to be after that happens?

10

MR. ZARLENGA:

11

THE COURT:

12

The real question is:

Right.

Once

I agree.

And we know the current schedule is not

going to occur.

13

MR. ZARLENGA:

14

THE COURT:

I don't see any way that can happen.

So I will extend everything in the

15

interim for three months, understanding I still think it's

16

always good to have deadlines, but when we bring a new

17

substantial party in like this and -- I take it this is a

18

little bit of a sea change in how we're approaching the case.

19

It's not "no."

20
21
22

It's "We got duped."

MR. ZALESIN:

That's right, Your Honor.

We have been

saying -THE COURT:

Is that the CliffsNotes version?

You've

23

been saying, "It ain't so," but if it is so, and it looks like

24

it might be so, we got somebody else who's got to hold the bag

25

for this is what you're saying.

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MR. ZALESIN:

Yeah.

Look, we've been saying since

the fall of 2014 "We got duped."

was some material shipped to our co-packers by Wilbur-Ellis

that was mislabeled, and we admitted that not only in this

court but publicly to consumers in the fall of 2014.

What we didn't know is:

We certainly knew that there

Was it material?

Are we

talking about one percent of our bags or some larger

proportion?

the bottom-line answer yet, but we know it's --

And there's still work to be done.

10

THE COURT:

11

MR. ZALESIN:

We don't know

You've concluded it's material.

It's material, it's substantial, and

12

it's a serious, serious issue between Blue Buffalo and

13

Wilbur-Ellis for sure.

14

THE COURT:

So the one thing that's clear to me today

15

is we're not going to talk about Wilbur-Ellis depositions

16

today.

It's --

17

MR. ZALESIN:

18

THE COURT:

I have not --

I think it would be fundamentally unfair

19

to take a deposition and then show up with a complaint against

20

somebody.

21

MR. ZALESIN:

22

THE COURT:

23

Well, we will certainly --

The landscape is a little different for

them.

24

MR. ZALESIN:

25

THE COURT:

I agree, Your Honor.

Unless there's a different view of the

Nestle Purina v Blue Buffalo Company -- 05-06-15

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I wouldn't -- if I was in private practice and

universe here.

I knew there was a lawsuit coming against my client but I

haven't seen it yet, I wouldn't let them show up and sit for a

deposition --

MR. ZALESIN:

THE COURT:

MR. ZALESIN:

Yeah.

-- until I know what I'm dealing with.

Yeah.

Wilbur-Ellis' position.

Wilbur-Ellis.

10

THE COURT:

We anticipate that that will be

We have not discussed the issue with

It would certainly be a deposition you'd

11

end up taking twice if you redefine the case, and that's not

12

helpful.

13

MR. ZALESIN:

In all likelihood -- they are

14

represented by Covington & Burling, a big, very sophisticated

15

firm.

16

there until they see --

17
18

I don't think they're going to put their person out

THE COURT:

Paul Tagliabue gone back there yet so he

can --

19

MR. ZALESIN:

20

THE COURT:

21

MR. ZALESIN:

I don't know.

Okay.
In any event, that seems almost

22

inevitable that we're going to wind up with an adjournment of

23

the third-party depositions against Wilbur-Ellis until they're

24

properly joined.

25

THE COURT:

Till we define their participation.

Nestle Purina v Blue Buffalo Company -- 05-06-15

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just don't see, out of a fundamental sense of fairness, that

it makes any sense to go down that road.

MR. ZALESIN:

MR. ZARLENGA:

THE COURT:

MR. ZARLENGA:

my wife sometimes:

Okay.

You know, I'll use a line I use with

I only care about me.

THE COURT:

MR. ZARLENGA:
THE COURT:

Well --

Oh.

10

Do you disagree?

How does that work out for you?

It's a train wreck every time.

But I'm going to keep doing it and hope

11

one day I'll get a different result.

12

definition of.

13
14

MR. ZARLENGA:

THE COURT:

Apparently, you're going to get them big

time.

17
18

We've been waiting a really long time

to get to Wilbur-Ellis and for --

15
16

You know what that's the

MR. ZARLENGA:
with you, Your Honor.

19

THE COURT:

Yeah, well.

So, I mean, look, I agree

I mean, it is -- we have to take --

You wouldn't let your client show up for

20

a deposition knowing that they're going to get a lawsuit next

21

week.

22

MR. ZARLENGA:

23

THE COURT:

24

MR. ZARLENGA:

25

fine.

That's fine.

You know I wouldn't; so . . .

You wouldn't.
No, I would not.

I do want to --

So, yeah, that's

Nestle Purina v Blue Buffalo Company -- 05-06-15

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THE COURT:

MR. ZARLENGA:

Well, it doesn't work here either.

It

doesn't work here either.

4
5

But it's all about me.

I do want to correct something because this does

bother me.

It just bother me.

THE COURT:

MR. ZARLENGA:

Okay.

screen.

said on October 14.

10

THE COURT:

11

MR. ZARLENGA:

Let's get it out.

I will put this document on the

So this is what Blue Buffalo said what they actually

Can you see that?
I have it.
Okay.

Just want to make sure.

They

12

did not admit that there was by-product meal in their product.

13

They said in the first highlighted line in this letter from

14

the chairman of Blue Buffalo to so-called pet parents:

15

this Wilbur-Ellis plant was the source of some of our chicken

16

meal, we may have received some of these mislabeled

17

shipments."

18

Period.

"Since

"May have."

And they have said that consistently.

Even a week

19

ago their CEO said that under oath in a deposition.

So I

20

don't know how anybody could be up here saying, oh, we

21

admitted this a long time ago.

Not true.

22

So this was the first time anybody admitted it.

23

MR. ZALESIN:

Your Honor, I object.

I object to

24

putting what I believe is confidential designated material up

25

on the ELMO.

There's no reason for this right now.