Opinion
CASE NOS. 8:98CV407, 8:99CV175
February 2000.
ORDER
I. Introduction
Before me are 1) the motion (Filing Nos. 188 and 105) by Consolidated Nutrition Marketing Corporation, Consolidated Nutrition, L.C., and AG Processing, Incorporated (collectively, "Consolidated") for partial summary judgment, and 2) the motion (Filing Nos. 189 and 108) by Seaboard Farms, Incorporated (Seaboard) for partial summary judgment. Each party filed an index of evidence (Filing Nos. 188 and 105 [Consolidated's Index]; Filing Nos. 111 and 190 [Seaboard's Index]) supporting its motion for summary judgment, parts of which are sealed pursuant to an earlier protective order (Filing Nos. 102 and 183). Each party also submitted a brief opposing the other party's motion for summary judgment; these briefs were also accompanied by indexes of evidence (Filing Nos. 244 and 158 [Consolidated's Index]; Filing Nos. 245 and 159 [Seaboard's Index]), parts of which are also sealed. I have reviewed the record, the parties' briefs and indexes of evidence, and the applicable law.
I find that Consolidated's motion for partial summary judgment should be denied in its entirety.
I also find that Seaboard's motion for partial summary judgment should be granted in part in denied in part. Seaboard's motion is granted as follows: 1) insofar as Seaboard seeks a ruling that Consolidated is not entitled to a declaration that it could terminate the Market Hog Purchase Agreement because Seaboard allegedly violated the warranty and representation contained in section 8.01(d); and 2) on the issue of whether Consolidated was entitled to terminate the contract because it was impossible to perform. Seaboard's motion is denied as follows: 1) on the issue of whether Consolidated breached the Market Hog Purchase Agreement by failing to give formal written notice and an opportunity to cure; 2) insofar as Seaboard's motion seeks dismissal of Count II of Consolidated's Amended Complaint; 3) on the issue of whether Count III of Consolidated's Amended Complaint for common law fraud should be dismissed; 4) on the issue of whether Consolidated breached the Market Hog Purchase Agreement by failing to deliver to Seaboard its entire production of hogs; 5) on the issue of the RICO claim in Count IV of Consolidated's Amended Complaint; and 6) on the issue of whether Consolidated breached the Market Hog Purchase Agreement by failing to register as a dealer under the Packer and Stockyards Act.
II. Background
As the intensely partisan fact sections of their briefs demonstrate, Consolidated and Seaboard agree on only the most basic facts of their four-year association.
Consolidated and Seaboard first entered into a Market Hog Purchase Agreement on September 1, 1994. Consolidated agreed that it would deliver its entire production of market hogs, up to 300,000 a year by 1998, to Seaboard's yet-to-be-built hog slaughtering and processing facility in Guyman, Oklahoma. Filing Nos. 181 and 100, Consolidated's Amended Complaint at 3, §§ 8, 14; Ex. A, Market Hog Purchase Agreement at 1 (hereafter, "Amended Complaint"). Seaboard agreed to pay Consolidated "the Market Price on the Purchase Date, as adjusted in accordance with the Carcass Merit Program." Id., Ex. A, § 5.01. By October 1997, the relationship between the parties had soured to the point that Seaboard filed a breach of contract action in the United States District Court for the District of Kansas alleging that Consolidated had failed to deliver market hogs as required by the contract. The parties settled before trial. Id. at 3, 9.
The settlement did not improve the parties' contractual relationship, however. Consolidated notified Seaboard on August 14, 1998, that it was terminating the Market Hog Purchase Agreement because Seaboard had breached the agreement and engaged in unlawful conduct. Id. at 3-4, 9. Consolidated filed this action the same day, seeking to recover damages for breach of contract, fraud, and for violation of federal and state law. The federal laws at issue in Consolidated's claim are the Racketeer Influenced Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq., and the Packers and Stockyards Act, 7 U.S.C. § 181-231. Consolidated also seeks a declaratory judgment that it was entitled to terminate the Market Hog Purchase Agreement. Seaboard answered the complaint and counterclaimed for breach of contract. 8:98CV407, Filing No. 8.
In December 1998, Seaboard filed its own breach of contract action against Consolidated in United States District Court for the Western District of Oklahoma. 8:99CV175, Filing No. 1, Complaint [hereafter, Complaint]. Seaboard seeks damages from Consolidated and its guarantors for breach of contract and a declaratory judgment that Seaboard is entitled to recover present and future damages from Consolidated's guarantors as a result of the breach by Consolidated and its guarantors. On Consolidated's motion, Seaboard's action was transferred to this court in May 1999 and consolidated with Consolidated's action, 8:98CV407.
Each party seeks partial summary judgment. Consolidated seeks summary judgment on three issues: 1) its prayer for declaratory relief with a finding that it was entitled to terminate the Market Hog Purchase Agreement; 2) Seaboard's counterclaim for breach of contract; and 3) Seaboard's breach of contract claim in the consolidated case, 8:99CV175. Filing Nos. 188 and 105, Consolidated's Motion for Summary Judgment at 2.
For its part, Seaboard also seeks summary judgment on three issues: 1) Counts I, II, IV, V, VI, and VII of Consolidated's Amended Complaint; 2) that part of Count III of Consolidated's Amended Complaint which seeks to set aside or avoid the settlement agreement between the parties referred to in paragraph 51 of the Amended Complaint; and 3) Consolidated's breach of the Market Hog Purchase Agreement by failing to deliver all its hogs to Seaboard and by failing to qualify as hog producer under state and federal law. Filing Nos. 189 and 108, Seaboard's Motion for Partial Summary Judgment at 1-2.
III. Summary Judgment Standard
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, the court grants summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). When viewing the evidence, all ambiguities and inferences to be drawn from the underlying facts should be resolved in favor of the party opposing the motion, and all doubts as to the existence of a genuine issue for trial should be resolved against the moving party. Adickes v. S.H. Kress Co., 398 U.S. 144, 158-59 (1970). Since this case is before me on dual motions for summary judgment, this rule has the end result that I take each side's facts in the light most favorable to that side. The trial court's "function at the summary judgment stage is not to weigh the evidence, but to determine whether there is a genuine issue for trial." Rayes v. Eggars, 838 F. Supp. 1372, 1377 (D.Neb. 1993) ( citing Anderson v. Liberty Lobby, Inc., 477 U.S. at 249). The Eighth Circuit has recognized that primarily legal issues and particularly questions of contract interpretation are issues amenable to summary disposition. See, e.g., Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir. 1995); Mumford v. Godfried, 52 F.3d 756, 759 (8th Cir. 1995); and Crain v. Board of Police Comm'r, 920 F.2d 1402, 1405-06 (8th Cir. 1990).
IV. Discussion A. Consolidated's Motion for Summary Judgment
Consolidated alleges that Seaboard breached the contract in numerous ways. First, Consolidated alleges that Seaboard failed to pay the proper carcass price under section 5.01 of the Market Hog Purchase Agreement because it 1) manipulated data to create false carcass summary reports; 2) removed the hanging tender before weighing carcasses; 3) improperly and excessively trimmed carcasses before weighing; and 4) misweighed and misgraded Consolidated's hogs. Amended Complaint at 10, 35A. Second, Consolidated alleges that Seaboard failed to obtain and maintain accurate data that would have produced true written accounts of sales transactions. Id., 35B. Third, Consolidated alleges that Seaboard failed to pay for hogs that died after weighing but before slaughter. Id., 35C. Finally, Consolidated alleges that Seaboard violated section 8.01(d) of the Market Hog Purchase Agreement in which Seaboard represented and warranted that it would operate its Guyman plant "in compliance with all local, state, and federal laws and regulations." Amended Complaint, Ex. A at 10, § 8.01(d). The laws and regulations which Consolidated accuses Seaboard of violating are provisions of the Packers and Stockyard Act (PSA) and the regulations promulgated under that act. Consolidated further claims that because Seaboard's representation and warranty that it would lawfully operate the plant were "materially false or misleading" under section 9.01(b) and thus grounds for default, Consolidated had the right to terminate the contract. Id. at 11, § 9.01(b).
Seaboard argues in response that its hog identification procedures, record keeping, and accounting mechanisms are all acceptable under the PSA.
The parties have offered voluminous evidence both from experts and from other persons involved in packing industry to substantiate their positions, but this evidence does little to resolve the parties' factual disputes. For example, Consolidated vehemently opposes Seaboard's method of "balancing the kill" and maintains that Seaboard, in violation of both the contract and the PSA, disclosed to Consolidated neither its "balancing the kill" policies nor its parameters for editing, deleting, or adjusting carcass data on Consolidated's hogs. Two experts, however — one of whom is Consolidated's expert — indicated that Seaboard's data manipulation in its "balancing the kill" procedure is similar to what happens in other hog plants in the United States. Filing Nos. 245 and 159 [sealed], Seaboard's Index of Evidence Opposing Consolidated's Motion for Summary Judgment, Dep. of D. Jones, 137:6-139:25; Aff. of B. McLeay, Ex. A, Rpt. of R. Ellis at 2. Similarly, Seaboard offers evidence from other experts who suggest that other Seaboard practices which Consolidated challenges in this action are standard for the industry. If such is the case, the practices may not violate the PSA.
I cannot resolve on a motion for summary judgment the factual disagreement over whether the challenged practices violate the contract. I find that genuine issues of material fact exist not only about whether the practices Consolidated challenges breached the contract, but also about whether those practices violated the PSA or the regulations promulgated under the PSA.
Consequently, I also find that Consolidated is not entitled to summary judgment on its claim that it was entitled to terminate the contract without notice or allowing an opportunity to cure because Seaboard defaulted by breaching its warranty and representation in section 8.01(d) of the contract that it would operate the hog plant in compliance with all local, state, and federal laws and regulations. If the evidence at trial leads the jury to find that the practices did not violate the PSA, then Consolidated's justification for terminating the contract disappears. Moreover, if the practices do not violate the PSA, then Consolidated cannot establish that Seaboard intended, at the time of contracting with Consolidated, to operate the Guyman facility in contravention of the PSA.
I conclude that genuine issues of material fact remain about whether Seaboard breached the contract or violated the PSA. Accordingly, Consolidated's motion for summary judgment is denied.
B. Seaboard's Motion for Summary Judgment 1. Lack of Notice
Seaboard contends that it is entitled to summary judgment because Consolidated failed to give Seaboard notice and an opportunity to cure the alleged defaults before it terminated the contract. Consolidated maintains, however, that it was not required to give Seaboard any notice because section 10.02(c) of the contract makes no mention of a notice requirement; Consolidated argues that the section allowed it to terminate "in writing" upon Seaboard's default. Complaint, Ex. A at 13, § 10.02(c).
The only notice requirement found in the contract comes from section 9.01(a), which defines a default as a failure to perform and a subsequent "failure to remedy such failure" within ten days of receiving written notice. Id. at 11, § 9.01(a). A conflict thus obviously exists between the two contract provisions. Yet Consolidated argues that it was not required to give Seaboard formal notice and an opportunity to cure because as early as April 1996, Seaboard already had actual knowledge through Consolidated's numerous written and oral complaints that Consolidated suspected Seaboard of wrongfully manipulating carcass data and hence breaching the contract, yet did nothing to remedy the problems of which Consolidated complained. See Consolidated's Brief Opposing Seaboard's Motion for Summary Judgment at 21-25. Consolidated further argues that because Seaboard's practices amounted to fraud, it was excused from performing in accordance with the notice and cure provisions of the contract.
While neither complaining through letters and phone calls nor sending investigators to the plant is a substitute for the formal notice and cure requirements of section 9.01(a) of the contract, a question remains about whether Consolidated's pre-termination conduct could have put Seaboard on notice that Consolidated considered Seaboard in breach of the contract. A question also remains about whether Seaboard's practices violated the PSA, much less constituted fraud. Seaboard's motion for summary judgment is thus denied insofar as it asks me to declare that Consolidated breached the contract by failing to give formal notice and an opportunity to cure.
2. Breach of Warranty and Representation
Consolidated's main argument that it was not required to give Seaboard notice or an opportunity to cure rests on its belief that Seaboard breached section 9.01(b) of the contract by making a representation and warranty that "prove[d] to have been materially false or misleading." Complaint at 11, § 9.01(b). Seaboard represented and warranted in Article Eight of the Market Hog Purchase Agreement that it would operate the hog plant in compliance with federal, state, and local laws and regulations. See id. at 10, § 8.01(d). But Consolidated argues that Seaboard's alleged violations of the PSA are a breach of this representation and warranty that allowed it to terminate the contract without notice or an opportunity to cure under section 10.02(c).
To justify its decision to terminate the contract, Consolidated distinguishes between a warranty and a representation, the former being a promise regarding future performance and the latter being a promise regarding some past or existing fact or circumstance pertinent to the contract. See Consolidated's Brief Opposing Seaboard's Motion for Summary Judgment at 12-19. Consolidated claims that Seaboard's warranty created a strict liability situation in which Seaboard promised that it would always and ever after have the plant in full compliance with all relevant law. Id. at 15. Consolidated further argues that because of the strict liability nature of Seaboard's warranty, the truth or falsity of Seaboard's representation and warranty at the time they were made is irrelevant, as is Seaboard's intent at the time the Market Hog Purchase Agreement was signed. Id. at 16. Seaboard responds that Consolidated cannot establish that at the time the parties entered into the Market Hog Purchase Agreement — a time before the plant was even built — Seaboard had already determined not to operate the plant lawfully.
Despite the multi-paged intricacy of its analysis, Consolidated's argument still rests on the assumption that the alleged breach of warranty existed because Seaboard's practices violated the PSA. As I have stated previously, a genuine issue of material fact remains about whether that assumption is true. Consequently, the issue of whether Seaboard breached its warranty and representation in section 8.01(d) is for the jury to decide. Thus Seaboard's motion for summary judgment is granted only insofar as it seeks a ruling that Consolidated is not entitled to a declaration that it could terminate the contract because Seaboard had violated the warranty and representation in section 8.01(d). Whether Seaboard violated the warranty and representation is for the jury to decide.
3. Damages under the PSA
Additionally, Seaboard suggests that questions remain about whether Consolidated has suffered a compensable injury under the PSA. The PSA gives a private cause of action to an individual "injured" by a violation of the act; the individual is entitled to "the full amount of damages sustained in consequence of the such violation." 7 U.S.C. § 209(a). One of Seaboard's experts, however, believes that Consolidated suffered no financial harm during the period of time relevant to this lawsuit, in part because the value of the hogs which Consolidated delivered to Seaboard was actually less than the amount which Seaboard paid Consolidated for those hogs. Id., Aff. of B. McLeay, Ex. B, Rpt. of D. Nettleton at 2. Seaboard also observes that Consolidated's Rule 26(a) disclosures do not show any damages claimed as a result of Seaboard's alleged PSA violations. Seaboard's Brief in Support of Motion for Partial Summary Judgment at 11; Filing Nos. 190 and 109, Seaboard's Index of Evidence in Support of Motion for Summary Judgment, Aff. of B. McLeay, Ex. A at 7-8.
Consolidated responds that its motion for summary judgment does not seek a determination of damages it suffered as a result of Seaboard's alleged violations of the PSA; instead, Consolidated merely seeks a determination that Seaboard breached its warranty and violated the PSA. Consolidated's Reply Brief in Support of Motion for Summary Judgment at 12-13. Taking Consolidated at its word that it does not seek a damages determination in its motion for summary judgment, I will leave Consolidated to prove up its damages at trial. Seaboard's motion for summary judgment is thus denied insofar as it seeks dismissal of Count II of Consolidated's Amended Complaint.
4. Fraud
Seaboard asks for partial summary judgment on Count III to the extent Consolidated seeks to set aside or avoid the settlement agreement between the parties referred to in paragraph 51 of the Amended Complaint. This settlement agreement ended the Kansas litigation between the parties. In it, Consolidated agreed to pay Seaboard over a million dollars "as a penalty for a shortfall of Market Hogs to be delivered" under the Market Hog Purchase Agreement. Seaboard now claims that since the representative who signed the settlement agreement for Consolidated testified that Consolidated signed the settlement agreement without conducting any financial analysis or review of data provided by Seaboard to determine if its terms were appropriate, Consolidated cannot prove the detrimental reliance necessary to establish a common law fraud claim. Seaboard's Brief in Support of Motion for Partial Summary Judgment at 12-14; Filing Nos. 190 and 109, Seaboard's Index of Evidence, Dep. of J. Burritt at 201:10-203:25.
Consolidated maintains that Seaboard's argument about Consolidated's lack of detrimental reliance misses the point of Consolidated's fraud claim in Count III. Consolidated states that had it known that Seaboard was fraudulently altering carcass data, not only would it have terminated the Market Hog Purchase Agreement much sooner, but it also would have not paid the million-dollar settlement to end the Kansas litigation. Consolidated is not claiming that the amount or terms of the settlement were fraudulent, but that the settlement itself was procured by Seaboard's fraud in concealing how it manipulated carcass data through the practices which Consolidated challenges in this suit as violative of the PSA. Consolidated's Brief in Opposition to Seaboard's Motion for Summary Judgment at 30-31.
I find that the questions of fraud and reliance should be submitted to the jury since — once again — resolution of the issues depends on whether the practices challenged by Consolidated in fact violate the PSA. Consequently, Seaboard's motion for partial summary judgment on Count III of Consolidated's Amended Complaint is denied.
5. RICO
Seaboard asks for summary judgment on Consolidated's claim brought under the Racketeer and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. Consolidated claims that Seaboard violated section 1962(c), which makes it unlawful for "any person employed by or associated with any enterprise engaged" in interstate or foreign commerce "to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). To recover civil damages for a RICO violation, a plaintiff must prove: "(1) that the defendant violated 18 U.S.C. § 1962; (2) that the plaintiff suffered injury to business or property; and (3) that the plaintiff's injury was proximately caused by the defendant's RICO violation." Fogie v. Thorn Americas, Inc., 190 F.3d 889, 894 (8th Cir. 1999).
An enterprise is "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4) (emphasis added). The United States Supreme Court has said, "There is no restriction upon the associations embraced by the definition. . . . The enterprise is an entity, . . . a group of persons associated together for a common purpose of engaging in a course of conduct." United States v. Turkette, 452 U.S. 576, 583 (1981). An association of business entities may also serve as an enterprise. Fogie, 190 F.3d at 897. Consolidated alleges that a RICO enterprise existed because Seaboard operated the hog facility "in association with third party hog producers such as Consolidated Nutrition and Consolidated Nutrition's growers," thus constituting an "association in fact." Amended Complaint at 17, 53. The only common purpose of the enterprise that Consolidated describes is defrauding hog producers such as itself. Id. at 20, 58.
Seaboard maintains, however, that Consolidated's "association in fact" would make Consolidated part of the RICO "enterprise" which Consolidated complains defrauded it. In effect, Seaboard claims, Consolidated is alleging that it is the victim of its own racketeering. "If a racketeer's association with his victim could be an "enterprise,' there would be no case in which an "enterprise' would not be present." Seaboard's Reply Brief in Support of Motion for Partial Summary Judgment at 7.
While it is true that "the "enterprise in subsection (c) [of 18 U.S.C. § 1962] connotes generally the vehicle through which the unlawful pattern of racketeering activity is committed, rather than the victim of that activity," National Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 259 (1993), a question of fact exists about whether the relationship between Seaboard and its third party producers constituted an association-in-fact. If one of the producers owned directly by Seaboard believed that it was being short-changed on the price it received for its hogs, that producer obviously would not be allowed to bring a RICO challenge because it would part of Seaboard's "enterprise" — its "farm to fork" hog business. The matter is less clear, however, when the party charging fraud is a third party producer like Consolidated. Third party producers should have recourse if they believe Seaboard is not meeting its contractual obligations, and one powerful tool at their disposal is a RICO claim.
Consequently, I find that a jury should decide whether Consolidated is part of the same enterprise that it claims defrauded it. Seaboard's motion for summary judgment on Consolidated's RICO claim (Count IV) is denied.
6. Impossibility
The Market Hog Purchase Agreement provided that Seaboard would pay Consolidated for its hogs according to a formula using the USDA Agricultural Marketing Service Reports. Amended Complaint at 21, 64. The contract had no alternate pricing arrangement. Id. at 22, 72. In Counts VI and VII, Consolidated seeks to have its performance of the contract declared impossible because on March 1, 1999, the USDA "revised its reporting system and rendered the pricing procedures under the Agreement impossible to determine." Id. at 21, 65.
Consolidated contends that because the contract is silent on what should occur if the pricing procedures failed, Consolidated had the right to cancel the contract when the USDA market standard ceased to exist. To demonstrate that Seaboard recognized that producers had the right to cancel agreements when the USDA changed its reporting service, Consolidated relies on a letter which a Seaboard representative sent to another producer on February 26, 1999, in which Seaboard asked the producer to let Seaboard know if the producer did "not believe a mutually acceptable price can be obtained and [it] wish[ed] to cancel the Agreement" in light of the USDA changes. Filing Nos. 158 and 244, Consolidated's Index of Evidence, Aff. of M. Degan, Ex. M at 2.
Seaboard argues that Consolidated is not entitled to relief for several reasons. First, it observes that "the USDA changed the reports almost eight months after Consolidated unilaterally terminated" the contract, Seaboard's Brief in Support of Motion for Partial Summary Judgment at 16, an argument that Consolidated does not refute in its brief. Second, Seaboard notes that the Oklahoma version of the Uniform Commercial Code directs the parties to a contract in which the price is not settled to use "a reasonable price at the time for delivery if . . . the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded." 12A Okla. Stat. Ann. § 2-305[ 12A-2-305](1)(c). Seaboard contends that under this provision, a contract does not become impossible to perform merely because a third-party pricing standard has ceased to exist.
I agree with Seaboard's position. The letter on which Consolidated relies apparently came from a producer who was still delivering hogs to Seaboard under contract as of February 26, 1999 — well after the August 1998 date on which Consolidated terminated the contract and only two days before the USDA revision went into effect. Consolidated cannot rely on events that occurred nearly eight months after it terminated the contract to justify its actions, especially since it has not shown that either it or Seaboard knew when Consolidated terminated the contract in August 1998 that the USDA planned to revise its reports. Moreover, assuming that the parties did know that the revision was in the offing, Consolidated has not provided any evidence that prior to terminating the contract, the parties communicated about what price standard to use after the USDA revisions took effect.
The parties used the USDA market service reports "as an external benchmark by which they could measure market prices." Northern Arizona Gas Serv., Inc. v. Petrolane Transport, Inc., 702 P.2d 696, 702 (Ariz.Ct.App. 1984). Similarly, the parties in North Central Airlines v. Continental Oil Co., 574 F.2d 582, 593 (D.D.C. 1978), used as their pricing standard the posted price for crude oil set by regulations that subsequently were revised by the Federal Cost of Living Council in the wake of the OPEC oil crisis in the 1970s. The court of appeals remanded the case to the district court for a determination of a reasonable price for the fuel that was the subject of the contract, citing U.C.C. § 2-305(1). Another court observed that the new "regulations [in North Central Airlines] did not alter the terms of the contract, they simply made it impossible to use the price-setting method specified in the agreement." Northern Arizona Gas Serv., Inc. v. Petrolane Transport, Inc., 702 P.2d at 702. Consequently, I find that Consolidated is not entitled to summary judgment on its claims in Counts VI and VIII of the Amended Complaint on the ground of impossibility since the parties could easily have arrived at another reasonable method of fixing the price for Consolidated's hogs, such as the "Western Cornbelt 49-50% Top of the Lean Value Price Range," a market quote also reported by the USDA Agricultural Marketing Service and described in the letter on which Consolidated relies. Seaboard's motion for summary judgment is thus granted, and Counts VI and VIII of Consolidated's Amended Complaint are dismissed.
7. Failure to Deliver Hogs
Seaboard maintains that Consolidated breached the Market Hog Purchase Agreement by failing to deliver to Seaboard its entire production of hogs as required by the contract. Consolidated admits that it sent several shipments of hogs to other producers, but justifies its actions by claiming that it needed to compare Seaboard's slaughtered hog prices with other packers' prices. It also claims that such "split load tests" are a commonly used industry practice. Consolidated's Brief Opposing Seaboard's Motion for Summary Judgment at 38; Filing Nos. 244 and 158, Consolidated's Index of Evidence, Ex. 1, Aff. of M. Degan, Ex. C, Dep. of J. McClelland, 29:20-25, and Ex. 3, Aff. of R. Block at 2-3, §§ 8-16. I cannot determine from the parties' evidence whether split load tests are in fact an accepted industry practice. Seaboard does not address this contention directly in its briefs or evidence. Consequently, the issue is a factual one which the jury must address. Seaboard's motion for partial summary judgment on this issue is therefore denied.
8. Registration as a Dealer under the PSA
Finally, Seaboard borrows a tack from Consolidated by arguing that it is entitled to partial summary judgment because Consolidated failed to observe its contractual warranty that it would adhere to the PSA and the regulations promulgated under the act. Specifically, Seaboard argues that Consolidated failed to register as a dealer under the PSA until after October 1, 1997 — three years after the parties first entered into the contract. A dealer is "any person, not a market agency, engaged in the business of buying or selling in commerce livestock, either on his account or as the employee or agent of the vendor or purchaser." 7 U.S.C. § 201(d). The term "livestock" includes "swine." 7 U.S.C. § 182(4). Because Consolidated's business is selling its own hogs or those raised by other third-party producers such as Consolidated, Seaboard maintains that PSA regulations required Consolidated to register as a dealer. See 9 C.F.R. § 201.10(a) ("dealers" must apply for registration).
Consolidated disputes that it ever represented that it would register as a dealer under the PSA or that the contract required it to do so. Further, Consolidated argues that a genuine issue of material fact exists about whether it is a dealer under the PSA and thus subject to the registration requirement. Consolidated cites a Tenth Circuit case which identified three types of entities which can be dealers — packer-buyers, commissioned traders, and speculators — all of whom speculatively buy or sell livestock incidental to their primary businesses. Solomon Valley Feedlot, Inc. v. Butz, 557 F.2d 717, 720 (10th Cir. 1977). The court distinguished cattle feedlots, where "the profit comes from efforts in altering the animals by improving their value through feeding," from the other three entities who "profit from the transaction itself either by speculating on the market or by getting a commission. These individuals are truly in the business of buying or selling on their own account or as the employer-agent of the buyer or seller." Id. at 719-20.
Consolidated contends that its primary business is producing hogs to sell to packers. It argues that it therefore would fall into the feedlot category in Solomon Valley Feedlot because it earned its profit from the value added to the hogs before they were ever delivered to Seaboard. Consolidated admits in its brief that it occasionally bought hogs from other third-party producers, but it alleges that it did so only to meet its production quotas under the contract — and that such transaction never resulted in a profit. Consolidated's Brief Opposing Seaboard's Motion for Summary Judgment at 41. Seaboard does not respond to these arguments in its reply brief.
I find that genuine issues of material fact remain as to 1) whether Consolidated qualifies as a dealer subject to the registration requirements of the PSA, 2) whether the contract required Consolidated to register as dealer, and 3) whether Seaboard suffered any injury because Consolidated failed to register. Seaboard's motion for partial summary judgment on this issue is therefore denied.
IT IS THEREFORE ORDERED:
1. Consolidated's motion (Filing Nos. 188 and 105) for partial summary judgment is denied in its entirety;
2. Seaboard's motion (Filing No. 189 and 108) for partial summary judgment is denied in part and granted in part as follows:
a) On the issue of whether Consolidated breached the Market Hog Purchase Agreement by failing to give formal written notice and an opportunity to cure, the motion is denied;
b) Insofar as Seaboard's motion seeks dismissal of Count II of Consolidated's Amended Complaint, the motion is denied;
c) On the issue of whether Count III of Consolidated's Amended Complaint for common law fraud should be dismissed, the motion is denied;
d) On the issue of whether Consolidated breached the Market Hog Purchase Agreement by failing to deliver to Seaboard its entire production of hogs, the motion is denied;
e) On the issue of whether Consolidated breached the Market Hog Purchase Agreement by failing to register as a dealer under the Packer and Stockyards Act, the motion is denied;
f) Insofar as Seaboard seeks a ruling that Consolidated is not entitled to a declaration that it could terminate the Market Hog Purchase Agreement because Seaboard allegedly violated the warranty and representation contained in section 8.01(d), the motion is granted;
g) On the issue of the RICO claim in Count IV of Consolidated's Amended Complaint, the motion is denied;
h) On the issue of whether Consolidated was entitled to terminate the contract because it was impossible to perform, the motion is granted and Counts VI and VII of Consolidated's Amended Complaint are dismissed.