Asa-Brandt, Inc. v. Adm Investor Services, Inc.

• Decision Date: 11 September 2003
• Docket Number: No. 02-2373.,No. 02-2374.,02-2373.,02-2374.
• Citation: 344 F.3d 738
• Parties: Asa-Brandt, Inc., a/k/a Asa-Brandt Partnership; Philip Asa; Keith Brandt; Robert Becker; Dennis Cink; Duane DeWaard; Beverly Everett; Richard Gardner; Edward A. Otis; Ronald L. Schmidt; Debra Schmidt; Jim Otis; Plaintiffs-Appellants; v. Adm Investor Services, Inc.; Defendant-Appellee; Fac-Marc, Inc.; Agri-Plan, Inc.; Competitive Strategies for Agriculture, Ltd.; Farmers Cooperative Society; Gold Eagle Cooperative; Defendants. Asa-Brandt, Inc., a/k/a Asa-Brandt Partnership; Philip Asa; Keith Brandt; Robert Becker; Dennis Cink; Duane DeWaard; Beverly Everett; Richard Gardner; Edward A. Otis; Ronald L. Schmidt; Debra Schmidt; Jim Otis; Plaintiffs-Appellees; v. Adm Investor Services, Inc.; Defendant; Fac-Marc, Inc.; Agri-Plan, Inc.; Competitive Strategies for Agriculture, Ltd.; Defendants; Farmers Cooperative Society; Gold Eagle Cooperative; Defendants-Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 738

344 F.3d 738

Asa-Brandt, Inc., a/k/a Asa-Brandt Partnership; Philip Asa; Keith Brandt; Robert Becker; Dennis Cink; Duane DeWaard; Beverly Everett; Richard Gardner; Edward A. Otis; Ronald L. Schmidt; Debra Schmidt; Jim Otis; Plaintiffs-Appellants; v. Adm Investor Services, Inc.; Defendant-Appellee;

Fac-Marc, Inc.; Agri-Plan, Inc.; Competitive Strategies for Agriculture, Ltd.; Farmers Cooperative Society; Gold Eagle Cooperative; Defendants.

Asa-Brandt, Inc., a/k/a Asa-Brandt Partnership; Philip Asa; Keith Brandt; Robert Becker; Dennis Cink; Duane DeWaard; Beverly Everett; Richard Gardner; Edward A. Otis; Ronald L. Schmidt; Debra Schmidt; Jim Otis; Plaintiffs-Appellees; v. Adm Investor Services, Inc.; Defendant;

Fac-Marc, Inc.; Agri-Plan, Inc.; Competitive Strategies for Agriculture, Ltd.; Defendants;

Farmers Cooperative Society; Gold Eagle Cooperative; Defendants-Appellants.

No. 02-2373.

No. 02-2374.

United States Court of Appeals, Eighth Circuit.

Submitted: February 13, 2003.

Filed: September 11, 2003.

Stay Granted: October 3, 2003.

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Nicholas P. Iavarone, argued, Chicago, Illinois (Laurel G. Bellows and Christopher L. Gallinari, on the brief), for appellants in 02-2373.

Richard K. Updegraff, argued, Des Moines, Iowa (Sean P. Moore, on the brief), for appellants in 02-2374.

Richard J. Rappaport, argued, Chicago, Illinois (Timothy C. Clenk, Amy B. Manning, and Joshua B. Silverman, on the brief), for appellee in 02-2373.

Nicholas P. Iavarone, argued, Chicago, Illinois (Laurel G. Bellows and Christopher L. Gallinari, on the brief), for appellees in 02-2374.

Before WOLLMAN, HEANEY, and MELLOY, Circuit Judges.

HEANEY, Circuit Judge.

These are appeals¹ from separate orders by the district court granting summary judgment for ADM Investor Services, Inc. against Asa-Brandt, Inc., et al., and denying Farmers Cooperative Society its motions for judgment as a matter of law or a new trial. Our task in weighing these appeals has been made difficult because the record as designated by the parties often contains only abbreviated references to the testimony and documents relied upon by the parties, and both parties' briefs frequently fail to reference specific pages in the appendices or transcripts used to buttress their positions. We affirm the district court with respect to its denial of Farmers Cooperative Society's post-trial motions, its grant of summary judgment to ADM Investor Services, Inc. in whole on the plaintiffs' Racketeer Influenced and Corrupt Organizations Act claim and in part on the plaintiffs' Commodity Exchange Act claim, and its denial of the plaintiffs' cross-motion for partial summary judgment. We reverse the district court's order granting summary judgment to ADM Investor Services, Inc., on the plaintiffs' CEA claims as to Philip Asa, Robert Becker, Keith Brandt, and Dennis Cink, reverse the district court's order granting summary judgment to ADM Investor Services, Inc. on the plaintiffs' state law claims as to all the farmers, and remand.

I. Background

These cases primarily involve hedge-to-arrive contracts (HTAs) between grain producers and grain elevators for the sale and purchase of grain entered into in 1994 and 1995.² In an HTA, a grain producer agrees to deliver at an unspecified time a predetermined quantity and grade of grain. The price of the grain is determined by reference to a futures contract price established by the Chicago Board of Trade (CBOT), plus or minus a variable component referred to as the "basis." "Basis is the difference between the price of the designated futures contract and the cash price for that commodity." Grain Land Coop v. Kar Kim Farms, Inc., 199 F.3d 983, 987 (8th Cir.1999). The basis remains unfixed, or "floating," until the farmer elects to fix the basis, at which point the grain will be delivered. Under an HTA, a farmer has at least two sale options on his crop: he can deliver grain under the HTA, or he can defer delivery on (i.e., "roll") the contract if he thinks he can get a better price in the cash-grain market (the current market price for grain). The buyers of the grain, usually grain elevators, would enter into HTAs with farmers and then establish a position equal to the contract with the farmers on the CBOT. In other words, the elevator would agree to sell on the CBOT the grain it agreed to purchase from the farmer. If the farmer elected to roll his HTA, the grain elevator would buy back its position on the CBOT (as it now had no grain to sell on that date) and would establish a new position on the CBOT consistent with the rolled HTA.

From 1995 to 1996, the grain market experienced unexpected price hikes. This market "inversion" created an environment where farmers consistently could make more money selling on the cash market, and consequently those farmers with HTA contracts continually rolled their HTAs, as their grain was more valuable now than in the future. Grain elevators across the country were forced to buy back expensive positions on the CBOT and purchase less valuable futures positions. The continual rolling added up to enormous margin costs on the HTAs. The question of whether farmers could continually roll their contracts, and who should pay for these large margin costs, sparked litigation throughout the Bread Belt.

Among the litigants were Asa-Brandt, Inc. and nine additional farmers, who, after being informed by their grain elevator that they owed the elevator money on the HTAs, and that they could no longer roll the contracts, brought an action in federal district court against, inter alia: ADM Investor Services, Inc. (ADM), a Futures Commission Merchant (FCM); Agri-Plan, Inc., a registered guaranteed Introducing Broker (IB); Competitive Strategies for Agriculture, Ltd.,³ also an IB; FAC-MARC, a Commodity Trading Advisor (CTA);⁴ and the Farmers Cooperative Society of Wesley, Iowa (Wesley), a grain elevator.⁵ They alleged claims under state law and violations of the Commodity Exchange Act (CEA) and the Racketeer Influenced and Corrupt Organizations (RICO) Act. Gunderson v. ADM Investor Servs., Inc., 43 F.Supp.2d 1058 (N.D.Iowa 1999).⁶ In Gunderson, the district court dismissed the claims against ADM, concluding that the farmers failed to sufficiently allege an agency relationship between ADM and any other defendant making fraudulent representations for the purposes of Fed.R.Civ.P. 9(b).⁷ Gunderson, 43 F.Supp.2d at 1065. The farmers appealed the district court's decision.

On appeal, we noted that in determining whether an agency relationship exists, the question hinged on the principal's right to exercise control over the activities of the agent. Gunderson v. ADM Investor Servs., Inc., No. 99-4032, 2000 WL 1154423, at *2 (8th Cir. Aug. 16, 2000). We concluded that the farmers pleadings were sufficient to meet even the heightened standard of Rule 9(b), reversed the district court and remanded the case. Id. at *3.

On remand, ADM again moved to dismiss the farmers' complaints. On February 13, 2001, the district court denied in part ADM's renewed motion to dismiss⁸ insofar as it related to the farmers' fraud claims, stating that this court's 2000 decision controlled the matter. Gunderson v. ADM Investor Servs., Inc., Nos. C96-3148-MWB, C96-3151-MWB, 2001 WL 624834, at *7 (N.D.Iowa Feb. 13, 2001). It then divided the numerous claims before it into four separate cases, with the farmers grouped against the specific grain elevators they were suing, and proceeded with, among others, the instant case. ADM was sued by all the farmers, and so remained a party in all the suits, including this one.⁹

ADM then moved for summary judgment on all the claims against it, and Asa-Brandt, Inc. and the nine additional farmers remaining in this suit (the Farmers) moved for partial summary judgment on the existence and scope of the agency relationship between Agri-Plan and ADM, and on ADM's failure to supervise Agri-Plan. On April 18, 2001, the district court granted ADM's motion for summary judgment, and denied the Farmers' cross-motion, determining that the Farmers had failed to present sufficient evidence to support their agency allegations against ADM. Asa-Brandt, Inc. v. ADM Investor Servs., Inc., 138 F.Supp.2d at 1165-69 (N.D.Iowa 2001). It partially granted Wesley's motions for summary judgment,¹⁰ but allowed the case against Wesley to continue. Id. at 1174. On July 13, 2001, a jury returned a verdict against Wesley and in favor of the Farmers on their breach-of-contract and breach-of-fiduciary duty claims, and awarded the Farmers damages of $744,000 for breach of contract and nominal damages for breach of fiduciary duty. The jury also awarded the Farmers punitive damages in the amount of $45,000 for the breach of contract and nearly $1.25 million for the breach of fiduciary duty.¹¹ On May 10, 2002, the district court denied Wesley's post-trial motions for judgment as a matter of law, or, alternatively, for a new trial. Asa-Brandt, Inc. v. Farmers Coop. Soc'y, No. C01-3021-MWB, 2002 WL 1714197 (N.D.Iowa May 10, 2002).

Wesley now appeals the district court's denial of its motions of judgment as a matter of law and for a new trial. The Farmers appeal the district court's grant of summary judgment to ADM and the court's concurrent denial of the Farmers' summary judgment motion.

II. Legal Analysis

We consider each appeal in turn, addressing the issues raised by the appealing parties.

A. Wesley

Wesley makes four challenges to the district court. First, it argues it was entitled to judgment as a matter of law because there was no fiduciary relationship between itself and the Farmers. Next, Wesley argues the district court erred in allowing damages awards on the Farmers' breach-of-contract claim. Third, it contends the punitive damages on the breach-of-contract and fiduciary duty claims should be set aside. Finally, Wesley requests a new trial because the district court allowed...