967 F.2d 233 (6th Cir. 1992), 90-2377, Agristor Financial Corp. v. Van Sickle

Docket Nº:90-2377, 90-2386.
Citation:967 F.2d 233
Party Name:RICO Bus.Disp.Guide 8133 AGRISTOR FINANCIAL CORPORATION, et al., Plaintiffs, v. Merle E. VAN SICKLE, et al., Defendants, A.O. Smith Corporation; A.O. Smith Harvestore Products, Inc., Defendants-Appellees, Cross-Appellants, West Marion Dairy Farm, Intervenor-Appellant, Cross-Appellee.
Case Date:July 20, 1992
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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967 F.2d 233 (6th Cir. 1992)

RICO Bus.Disp.Guide 8133

AGRISTOR FINANCIAL CORPORATION, et al., Plaintiffs,

v.

Merle E. VAN SICKLE, et al., Defendants,

A.O. Smith Corporation; A.O. Smith Harvestore Products,

Inc., Defendants-Appellees, Cross-Appellants,

West Marion Dairy Farm, Intervenor-Appellant, Cross-Appellee.

Nos. 90-2377, 90-2386.

United States Court of Appeals, Sixth Circuit

July 20, 1992

Argued Feb. 19, 1992.

Rehearing Denied Aug. 21, 1992.

Page 234

Christopher G. Hastings, Drew, Cooper & Anding, Grand Rapids, Mich., for defendant.

Jack J. Mazzara, Bruce L. Sendek (argued and briefed), Butzel, Long, Gust, Klein & Van Zile, Detroit, Mich., Donald E. Egan (briefed), Lee Ann Watson (argued), Lynn Thorpe, Lynn Urkov Thorpe, Katten, Muchin & Zavis, Chicago, Ill., for defendants-appellees, cross-appellants.

John E. Anding, Drew, Cooper & Anding, Grand Rapids, Mich. (argued), for intervenor-appellant cross-appellee.

Before: KEITH and SILER, Circuit Judges; and WELLFORD, Senior Circuit Judge.

WELLFORD, Senior Circuit Judge.

I. FACTS

The Van Sickle family, consisting of two generations of dairy farm owners and operators, appeal from the district court's grant

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of summary judgment in favor of A.O. Smith Corporation ("Smith") and A.O. Smith Harvestore Products, Inc. ("Harvestore") in this complex controversy. West Marion is the Van Sickle family partnership which owns the dairy farm in question. Smith and its wholly owned subsidiary, Harvestore, manufacture, market and lease grain storage units ("silos") which purportedly have characteristics that make them "oxygen-free." Agristor Financing Corporation ("Agristor") is the financial arm of Smith and Harvestore, and was the original plaintiff in this suit.

The Van Sickles acquired two silos from Harvestore, the first, obtained in 1973, was used for storage of corn, and the other, leased in 1980, was used for storage of hay. West Marion alleges that Smith, Harvestore and their agents represented that the silos were "oxygen-free" or "oxygen-limiting," a quality that purported to maintain high protein levels and to increase the nutritional value of the grain stored in the silos. According to Harvestore's alleged representations, dairy cattle raised on the stored grain are more productive and healthier than animals fed from other food sources. Harvestore and Smith allegedly stated that feed from the silos would increase production of milk and butterfat, leading to higher profits.

West Marion alleges that it relied on these representations in acquiring both silos. West Marion asserts that the silos were not oxygen-limiting; the stored grain did not have enhanced nutritional value; and its cattle suffered serious health consequences as a result of spoilage of the stored grain, which was moldy and unsatisfactory. West Marion attributes the deaths of many calves to the stored grain, a situation which allegedly led to expensive veterinary care and protein supplements for its dairy herd. Eventually, West Marion filed for bankruptcy protection allegedly due to the failure of its dairy herd to produce as anticipated. West Marion places the blame for its economic difficulties on the malfunctioning silos.

Judicial proceedings in this case began in November 1986, when Agristor filed a claim against the Van Sickles for replevin of the 1980 silo. In October 1987, the Van Sickles filed a counterclaim against Agristor for fraud, conspiracy to commit fraud, innocent misrepresentation, bad faith, breach of warranty and two RICO violations. Later, the Van Sickles filed a similar complaint against Smith and Harvestore, and the district court consolidated these two actions. The Van Sickles alleged jurisdiction based on diversity of citizenship and the existence of a federal question with regard to their RICO claim.

Agristor moved to dismiss the Van Sickles' claims, and the district court granted the motion on the basis of judicial estoppel. West Marion then successfully filed a motion for permissive intervention as a counter-plaintiff. After District Judge Harvey recused himself before trial, successor Judge Hackett granted the motion for summary judgment filed by Smith and Harvestore, finding that West Marion's claims were barred by the relevant statutes of limitations. Judge Hackett denied West Marion's motion to amend the judgment.

West Marion appeals from this grant of summary judgment and the magistrate judge's limitation of discovery prior to trial. The Van Sickles, as individuals, also appeal from the district court's dismissal of their claims. Smith and Harvestore appeal from the district court's decision to allow West Marion to intervene. This case follows a factual pattern similar to other cases involving Smith and Harvestore, and we first examine the statute of limitations questions.

II. GRANT OF SUMMARY JUDGMENT

  1. SUMMARY JUDGMENT STANDARDS

    The standard of review for a district court's grant of summary judgment is de novo. Massey v. Exxon Corp., 942 F.2d 340, 342 (6th Cir.1991).

    The district court held:

    Plaintiff's argument fails to provide a credible explanation as to why these experienced farmers did not learn or determine that the Harvestore system was the

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    source of years of declining dairy production and health problems for their herd of cows.

    Since plaintiff failed to file this action (1) within six years of its lease of the second silo; (2) within four years of when it knew or should have known of defendant's allegedly fraudulent scheme; or, (3) within two years of when it knew or should have known of its injuries from the alleged misrepresentation, the court finds plaintiff's fraud and RICO claims barred by their respective statutes of limitation.

    Judge Hackett granted Harvestore's and Smith's motion for summary judgment solely on the basis of the various statutes of limitations, though other arguments, such as Smith's non-liability for its subsidiary's actions, were presented.

    Summary judgment is appropriate when "there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of proving that no material facts exist, and the court must draw all inferences in a light most favorable to the non-moving party. Watkins v. Northwestern Ohio Tractor Pullers Ass'n, Inc., 630 F.2d 1155, 1158 (6th Cir.1980). A court may grant summary judgment when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). Once the moving party has proved that no material facts exist, the non-moving party must do more than raise a metaphysical or conjectural doubt about issues requiring resolution at trial. Id. at 586, 106 S.Ct. at 1355-56.

  2. ACCRUAL OF FRAUD STATUTE OF LIMITATIONS

    Michigan employs a six-year statute of limitations for fraud actions. See Mich.Comp.Laws § 600.5813. The issue in this appeal deals first with the proper accrual method for measuring when West Marion's 1 claim began to run. The district court held that fraud claims accrue "at the time the wrong (misrepresentation) upon which the claim is based was done regardless of the time when damage results." (citing Mich.Comp.Laws § 600.5827 and Mercer v. Jaffe, Snider, Raitt and Heuer, P.C., 713 F.Supp. 1019 (W.D.Mich.1989), aff'd, 933 F.2d 1008 (1990)). Based upon a literal reading of this statute, the court held that the lease date of the 1980 silo, when the misrepresentation occurred, initiated the running of the statute of limitations. In other words, the district court rejected the discovery accrual standard proposed by West Marion. The court noted, however, that if "a defendant fraudulently conceals the existence of a claim, an action may be commenced 'at any time within 2 years after the person...

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