Opinion
No. C 97-3094-MWB
August 21, 2000.
MEMORANDUM OPINION AND ORDER REGARDING THE PARTIES' REASSERTED MOTIONS FOR PARTIAL SUMMARY JUDGMENT
This matter comes before the court pursuant to the July 21, 2000, reassertion by plaintiff Farmers Cooperative Company of Farnhamville (FC) of its August 25, 1998, motion for partial summary judgment and pursuant to defendant Dale Youngstrom's August 14, 2000, reassertion of his September 29, 1998, resistance to FC's motion for summary judgment and his own cross-motion for summary judgment. This matter has been re-scheduled for trial on September 18, 2000, following the lifting of a stay on all proceedings.
In its motion, FC seeks summary judgment on Counts I and II of Youngstrom's Counterclaim, both of which assert that the HTAs between FC and Youngstrom violate the Commodities Exchange Act (CEA), 7 U.S.C. § 1-25, but which seek damages and declaratory relief, respectively. FC argues that the HTA contracts at issue are not in violation of the CEA, but are instead valid, "cash forward" contracts that fall within an exception to the CEA's regulatory regime. Additionally, FC seeks summary judgment on Counts III (breach of fiduciary duty) and IV (fraud) of Youngstrom's Counterclaim, to the extent those claims seek compensatory damages, and on Counts V (breach of contract) and VI (negligence) of Youngstrom's Counterclaim, in their entirety, on the ground that Youngstrom has testified in deposition that he suffered no damages as the result of the misconduct of FC alleged in those counts.
In his resistance to FC's motion for partial summary judgment, Youngstrom asserts that the HTA contracts do not fall within the "cash forward" contracts exception to the CEA. However, he also acknowledges that he does not seek compensatory damages in this action, but instead seeks cancellation of the HTAs at issue as relief on Count V. Youngstrom does not offer any resistance to FC's motion for partial summary judgment as it relates to Counts III, IV, or VI of his Counterclaim. In its reply, FC states that it does not resist Youngstrom's contention that he can proceed on his breach-of-contract claim in Count V of the Counterclaim, if the only relief he seeks is cancellation of the contracts. However, FC contends that Counts III, IV, and VI should be dismissed for lack of resistance to FC's motion for partial summary judgment on those claims.
For his part, Youngstrom seeks partial summary judgment on his breach-of-contract counterclaim and FC's breach of contract claims on the ground that FC repudiated the contracts at issue as a matter of law by demanding assurances when not reasonably insecure, by demanding unreasonable assurances, and by announcing an intention not to perform except on terms and conditions different from those set forth in the contracts. FC contends that genuine issues of material fact concerning the reasonableness of its actions in the circumstances require denial of Youngstrom's cross-motion for partial summary judgment.
This court has considered in some detail the standards applicable to motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure in a number of prior decisions. See, e.g., Swanson v. Van Otterloo, 993 F. Supp. 1224, 1230-31 (N.D.Iowa 1998); Dirks v. J.C. Robinson Seed Co., 980 F. Supp. 1303, 1305-07 (N.D.Iowa 1997); Laird v. Stilwill, 969 F. Supp. 1167, 1172-74 (N.D.Iowa 1997); Rural Water Sys. #1 v. City of Sioux Ctr., 967 F. Supp. 1483, 1499-1501 (N.D.Iowa 1997), aff'd in pertinent part, 202 F.3d 1035 (8th Cir. 2000); Tralon Corp. v. Cedarapids, Inc., 966 F. Supp. 812, 817-18 (N.D.Iowa 1997), aff'd, 205 F.3d 1347 (8th Cir. 2000) (Table op.); Security State Bank v. Firstar Bank Milwaukee, N.A., 965 F. Supp. 1237, 1239-40 (N.D.Iowa 1997); Lockhart v. Cedar Rapids Community Sch. Dist., 963 F. Supp. 805 (N.D.Iowa 1997). Thus, the court will not consider those standards in detail here. Suffice it to say that Rule 56 itself provides, in pertinent part, as follows:
Rule 56. Summary Judgment
(a) For Claimant. A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory judgment may, at any time after the expiration of 20 days from the commencement of the action or after service of a motion for summary judgment by the adverse party, move with or without supporting affidavits for a summary judgment in the party's favor upon all or any part thereof.
(b) For Defending Party. A party against whom a claim . . . is asserted . . . may, at any time, move for summary judgment in the party's favor as to all or any part thereof.
(c) Motions and Proceedings Thereon. . . . The judgment sought shall be rendered forthwith 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(a)-(c) (emphasis added).
Applying these standards, the trial judge's function at the summary judgment stage of the proceedings is not to weigh the evidence and determine the truth of the matter, but to determine whether there are genuine issues for trial. Quick v. Donaldson Co., 90 F.3d 1372, 1376-77 (8th Cir. 1996); Johnson v. Enron Corp., 906 F.2d 1234, 1237 (8th Cir. 1990). An issue of material fact is genuine if it has a real basis in the record. Hartnagel v. Norman, 953 F.2d 394 (8th Cir. 1992) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)). As to whether a factual dispute is "material," the Supreme Court has explained, "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Beyerbach v. Sears, 49 F.3d 1324, 1326 (8th Cir. 1995); Hartnagel, 953 F.2d at 394. If a party fails to make a sufficient showing of an essential element of a claim with respect to which that party has the burden of proof, then the opposing party is "entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) ; In re Temporomandibular Joint (TMJ) Implants Prod. Liab. Litig., 113 F.3d 1484, 1492 (8th Cir. 1997). In reviewing the record, the court must view all the facts in the light most favorable to the non moving party and give that party the benefit of all reasonable inferences that can be drawn from the facts. See Matsushita Elec. Indus. Co., 475 U.S. at 587; Quick, 90 F.3d at 1377 (same). With these standards in mind, the court turns to consideration of the parties' cross-motions for partial summary judgment on Youngstrom's counterclaims and FC's breach-of-contract claim.
As the parties recognize, this court has already discussed in some detail the development of the CEA and its different treatment of "futures" contracts and "cash forward" contracts in Oeltjenbrun v. CSA Investors, Inc., 3 F. Supp.2d 1024, 1033-37 (N.D.Iowa 1998). This court has also applied the standards for distinguishing between "futures" contracts and "cash forward" contracts in a number of published decisions, see Johnson v. Land O' Lakes, Inc., 18 F. Supp.2d 985, 994-1001 (N.D.Iowa 1998); Barz v. Geneva Elevator Co., 12 F. Supp.2d 943, 952-57 (N.D.Iowa 1998); Top of Iowa v. Schewe, 6 F. Supp.2d 843, 853-59 (N.D.Iowa 1998); Oeltjenbrun, 3 F. Supp.2d at 1037-48, and the Eighth Circuit Court of Appeals has now used a similar analysis to reach similar conclusions that various HTA contracts are valid, "cash forward" contracts not within the regulatory purview of the CEA. See Haren v. Conrad Coop., 198 F.3d 683, 684 (8th Cir. 1999); Grain Land Coop. v. Kar Kim Farms, Inc., 199 F.3d 983, 992-93 (8th Cir. 1999). Therefore, the court will not repeat a detailed discussion of the applicable standards here. Instead, the court will turn directly to the core question of whether, applying the standards articulated in Oeltjenbrun and the decisions upon which it relies, Youngstrom's HTAs do indeed fall within the "cash forward" exception as FC contends in its motion for partial summary judgment. Thus, the factors the court must consider are, first and foremost, whether the contracts contemplate actual physical delivery of grain, measured by an objective obligation to deliver grain and a subjective intent to deliver grain, and secondary considerations, including whether the contracts are between persons engaged in the business of buying and selling grain for actual physical delivery; whether the contracts are between parties capable of making or receiving actual physical delivery of the subject goods; whether the contracts have inherent value to the parties; and the "nature" of the contracts viewed as a whole. See, e.g., Oeltjenbrun, 3 F. Supp.2d at 1035-37 1045-47.
Having reviewed the contracts at issue here against the applicable standards, and having considered the arguments of the parties, the court concludes that the HTA contracts at issue here do not differ in any determinative way from other HTA contracts this court and the Eighth Circuit Court of Appeals have found fall within the "cash forward" contract exception to CEA regulation. The contracts explicitly require actual physical delivery of grain, and Youngstrom had a subjective intent to deliver grain at some time. Furthermore, the contracts are between persons engaged in the business of buying and selling grain for actual physical delivery, and the contracts are between parties capable of making or receiving actual physical delivery of the subject goods, as Youngstrom is a grain producer and FC is a grain buyer with elevator facilities. Finally, the contracts have inherent value to the parties, again as a grain producer and elevator, respectively, and viewed as a whole, the "nature" of the contracts is that they are for actual physical delivery of grain at a "forward" date. Therefore, the HTAs at issue here fall within the "cash forward" contract exception to CEA regulation and FC is entitled to summary judgment on Counts I and II of Youngstrom's Counterclaim, in their entirety.
The court turns next to the remainder of FC's motion for partial summary judgment on Youngstrom's Counterclaim, which addresses Youngstrom's prayer for compensatory damages on various Counts of his Counterclaim. With Youngstrom's acknowledgment that he is seeking cancellation of the contracts, not compensatory damages, on his breach-of-contract claim in Count V of the Counterclaim, and FC's agreement that the breach-of-contract claim can proceed on that basis, FC is entitled to summary judgment on that part of Count V of the Counterclaim seeking compensatory damages. FC also sought summary judgment on Count VI of the Counterclaim, Youngstrom's negligence claim, in its entirety, on the basis that compensatory damages were not available, and such damages are an element of a negligence claim. Youngstrom has not resisted this portion of FC's motion for partial summary judgment. Therefore, FC's motion for partial summary judgment will also be granted as to Count VI of Youngstrom's Counterclaim, in its entirety.
However, Youngstrom's concession that he is not seeking compensatory damages in this action does not entitle FC to summary judgment on Counts III (breach of fiduciary duty) and IV (fraud) of the Counterclaim in their entirety, as FC contends in its reply brief. Rather, as this court has explained, under Iowa law, fraudulent misrepresentation in the inducement to a contract gives rise to three distinct actions: (1) a cause of action at law for money damages, (2) a defense to a breach-of-contract claim; and (3) a ground for rescission of a contract in an action in equity. See Gunderson v. ADM Inv. Servs., Inc., 85 F. Supp.2d 892, 919-20 (N.D.Iowa 2000); Oeltjenbrun, 3 F. Supp.2d at 1050; Utica Mut. Ins. Co. v. Stockdale Agency, 892 F. Supp. 1179, 1191 (N.D.Iowa 1995). Count IV of Youngstrom's Counterclaim specifically pleads the elements of an equitable claim for rescission based on misrepresentation, and specifically prays for rescission as well as compensatory damages, see Amended Answer and Counterclaim, Count IV, and compare Gunderson, 85 F. Supp.2d at 920 (stating the elements of an equitable claim for rescission based on fraudulent misrepresentations), so that this claim survives as a defensive claim or a claim for equitable relief, even if FC is entitled to summary judgment on that part of the claim seeking compensatory damages. Similarly, in Count III, on the claim of breach of fiduciary duty, Youngstrom prays, in the alternative, for rescission of the HTA contracts and such other equitable relief as may be appropriate in light of FC's breach of fiduciary duty, and Iowa law suggests that such a remedy would be available upon a showing of breach of fiduciary duty. See, e.g., Kurth v. Van Horn, 380 N.W.2d 693, 698 (Iowa 1986) (the district court entered equitable relief of cancellation of a mortgage upon a finding that the defendant breached a fiduciary duty to the plaintiff, but the Iowa Supreme Court reversed cancellation of the mortgage on the ground that, "[b]ecause we have concluded there was no fiduciary duty established, the basis for cancellation of the mortgage no longer exists"). Thus, FC is not entitled to summary judgment on that part of Youngstrom's breach of fiduciary duty claim seeking equitable relief.
Finally, the court turns to Youngstrom's cross-motion for partial summary judgment on his breach-of-contract claim and defenses to FC's claims on the ground that FC has repudiated the HTAs at issue as a matter of law. This court also surveyed the Iowa law applicable to repudiation of contracts in another HTA case, albeit one in which "the shoe was on the other foot," because in that case, it was the elevator asserting that the grain producers had repudiated their HTAs. See Barz, 12 F. Supp.2d at 959-63. After reviewing the standards for repudiation articulated in Barz, the record and arguments of the parties in this case, the court concludes, although perhaps just barely, that there are genuine issues of material fact as to whether or not FC repudiated the HTAs at issue here on the basis of its letter of May 28, 1996. Although the court readily concludes that there are genuine issues of material fact as to whether the circumstances were such that FC reasonably concluded that it was insecure as to Youngstrom's HTAs, a much closer question is presented as to whether FC's demands for assurances were unreasonable, and in fact constituted a refusal to perform except on conditions beyond the terms of the HTAs. Id. at 960-62. The court would be inclined to find that the demand for assurances was unreasonable and exceeded the terms of the contracts, and substantially impaired the value of the contracts to Youngstrom, id. at 962, but the judge's role on a motion for summary judgment is not to weigh the evidence and determine the truth of the matter, but to determine whether there are genuine issues for trial. Quick, 90 F.3d at 1376-77; Johnson, 906 F.2d at 1237. FC's arguments that the types of assurances it requested were authorized by UCC § 2-609 in the circumstances of the case, and reasonable inferences that what was demanded would only have assured performance of the contracts according to their terms, rather than requiring performance in excess of the terms of the contracts, are sufficient to generate genuine issues of material fact precluding summary judgment. Consequently, Youngstrom's cross-motion for partial summary judgment will be denied.
THEREFORE,
1. FC's August 25, 1998, motion for partial summary judgment, as reasserted on July 21, 2000, is granted to the extent that
a. summary judgment is granted in favor of FC on Counts I, II, and VI of Youngstrom's Counterclaim, in their entirety; and
b. summary judgment is granted in favor of FC on those parts of Counts III, IV, and V of Youngstrom's Counterclaim seeking compensatory damages.
2. Youngstrom's September 29, 1998, cross-motion for partial summary judgment, as reasserted on August 14, 2000, is denied in its entirety.
IT IS SO ORDERED.