Gunderson v. ADM Investor Services, Inc., No. C96-3148-MWB (N.D. Iowa 2/13/2001)
| Decision Date | 13 February 2001 |
| Docket Number | No. C96-3148-MWB.,No. C96-3151-MWB.,C96-3148-MWB.,C96-3151-MWB. |
| Parties | JAY GUNDERSON, ROSLYN GUNDERSON, et al., Plaintiffs, v. ADM INVESTOR SERVICES, INC., et al., Defendants. GARY HOOVER, MARILYN HOOVER, et al., Plaintiffs, v. ADM INVESTOR SERVICES, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
This case arises from hedge-to-arrive contracts ("HTAs"), contracts for the sale and purchase of grain, that were entered into by grain producers and grain elevators. On June 14, 1996, case No. C96-3148-MWB (Gunderson), was filed in the United States District Court for the Northern District of Illinois. Plaintiffs in Gunderson are a group of grain producers seeking declaratory judgment and other relief as described in greater detail below.1 Plaintiffs alleged, inter alia, that defendants engaged in the promotion and marketing of HTAs in violation of the Commodity Exchange Act, 7 U.S.C. § 1 et seq.2 Also on June 14, 1996, case No. C96-3151-MWB (Hoover), which likewise seeks declaratory judgment and other relief, was filed in the United States District Court for the Northern District of Illinois by a second group of grain producers.3 Both the original complaints in Gunderson and Hoover asserted the same thirteen claims for relief.4 All of the grain producers will be referred to herein collectively as the Producers. The defendants will be referred to collectively as the defendants, unless otherwise indicated. Defendants Farmers Co-op, Titonka, Buffalo Center, FCS, West Bend, FCE, Bode Co-op, and Cylinder Co-op will be referred to collectively as the Grain Elevators. On September 25, 1996, the Honorable Suzanne B. Conlon, United States District Court Judge for the Northern District of Illinois transferred Gunderson to the Northern District of Iowa. On October 3, 1996, the Honorable James H. Alesia, United States District Court Judge for the Northern District of Illinois, transferred Hoover to the Northern District of Iowa.
Defendants ADM and the Grain Elevators subsequently moved for dismissal of the Producers' claims on a number of grounds. On April 17, 1997, the court entered its ruling on defendants' motions to dismiss and found, inter alia, that the Producers' CEA fraud claims had not been pleaded with sufficient particularity. The court also concluded that it did not need to consider at that time defendants' various challenges, pursuant to Federal Rule of Civil Procedure 12(b)(6), to the adequacy of other claims asserted by the Producers, because repleading of the fraud claims, either by amendment or by refiling, was necessary in both cases. The court therefore granted defendants' motions to dismiss in each case to the extent that it found the claims of fraud inadequately pleaded under Federal Rules of Civil Procedure 9(b) and 12(b)(6). The Producers were directed to file an amended complaint adequately pleading fraud pursuant to Federal Rule of Civil Procedure 9(b). The court further held that such an amended complaint might also rectify any inadequacies perceived in the pleading of other claims, and therefore the Producers would be permitted to replead each count.
On May 20, 1997, the court consolidated Gunderson and Hoover. On June 10, 1997, the Producers filed their First Amended Complaint in the consolidated case.5 The First Amended Complaint contained fifteen claims.6 Defendant ADM and the Grain Elevators again sought the dismissal of all claims asserted against them in the First Amended Complaint. Among the grounds for dismissal asserted by defendants was the argument that the Producers had again failed to plead fraud with the particularity required by Federal Rule of Civil Procedure 9(b). On March 31, 1998, the court entered its ruling on defendants' motions to dismiss and again found, inter alia, that the Producers' CEA fraud claims had not been pleaded with sufficient particularity. The court further concluded that it did not need to consider at that time defendants' remaining challenges, pursuant to Federal Rule of Civil Procedure 12(b)(6), to the adequacy of other claims asserted by the Producers, because repleading of the fraud claims, either by amendment or by refiling, was necessary in both cases. The court therefore again granted defendants' motions to dismiss in each case to the extent that it found the claims of fraud inadequately pleaded under Federal Rules of Civil Procedure 9(b) and 12(b)(6). The Producers were directed to file a second amended complaint adequately pleading fraud pursuant to Federal Rule of Civil Procedure 9(b).
On May 28, 1998, the Producers filed their Second Amended Complaint in the consolidated case.7 The Second Amended Complaint asserts the following fifteen claims: Counts I and II allege violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), under 18 U.S.C. § 1962(c), by ADM, CSA, FAC-MARC, and Agri-Plan; Count III alleges a RICO violation, under 18 U.S.C. § 1962(c), by Titonka; Count IV alleges a RICO violation, under 18 U.S.C. § 1962(c), by ADM; Count V alleges fraud in violation of § 4b of the Commodity Exchange Act ("CEA"), 7 U.S.C. § 6b, against ADM and CSA; Count VI alleges that the HTAs are illegal because they violate §§ 4(a) and 4(d) of the CEA, 7 U.S.C. § 6(a) and 6(c); Count VII seeks declaratory judgment of the rights of the parties to the HTAs, a declaration that the HTAs are illegal, void, and unenforceable, because they violate §§ 4(a)-(c) of the CEA, 7 U.S.C. § 6(a)-(c), § 2(1) of the Securities Act of 1933, 15 U.S.C. § 77b(1), and § 3(a)(10) of the Securities Act of 1934, 15 U.S.C. § 78c (a)(10); Count VIII alleges a violation of the CEA, 7 U.S.C. § 6d, by the defendant grain elevators; Count IX alleges a violation of the CEA, 7 U.S.C. § 6o(1), by Titonka, FCE, Bode Co-op, Buffalo Center, West Bend, Cylinder Co-op, FCS and Farmer's Co-op; Count X alleges a state-law claim for recission of the HTA contracts against defendant Grain Elevators; Count XI alleges a state-law claim of breach of fiduciary duty against ADM, FAC-MARC, Agri-Plan, and CSA; Count XII alleges a state-law claim for breach of fiduciary duty against the defendant Grain Elevators; Count XIII alleges a state-law claim of fraudulent misrepresentation against ADM, FAC-MARC, Agri-Plan, CSA and Titonka; Count XIV alleges a state-law claim for breach of contract against the defendant Grain Elevators; Count XV alleges a state-law claim for negligence against the defendant Grain Elevators.
ADM filed a motion to dismiss the Second Amended Complaint. On March 22, 1999, the court granted ADM's motion. In granting ADM's motion to dismiss, the court concluded that the Producers failed to allege that ADM had granted any other defendant actual or implied authority to make representations about HTA agreements. The court ruled that under Federal Rule of Civil Procedure 9(b)'s heightened pleading standard for fraud, the Producers' allegations that other defendants promoted HTA agreements as agents of ADM were insufficient. On August 16, 2000, the Eighth Circuit Court of Appeals reversed and remanded finding that the Producers had made sufficient allegations that ADM was responsible as a principal for the fraudulent promotion of HTA agreements. Gunderson v. ADM Investor Services, Inc., 230 F.3d 1363, 2000 WL 1154423, at *2 (8th Cir. 2000) (table decision).
Defendant ADM has again moved to dismiss all claims asserted against it in the Second Amended Complaint. Defendant ADM reasserts as grounds all issues raised in its prior motion to dismiss that were not ruled on by the court. First, ADM asserts that the Producers' fraud claims fail to meet the requirements of Federal Rule of Civil Procedure 9(b) because the Producers have failed to allege any fraudulent acts or misrepresentations by ADM itself, have failed to plead scienter, and have failed to allege causation with respect to their fraud claims. Second, ADM contends that the Producers' RICO claims fail to meet the requirements of Federal Rules of Civil Procedure 9(b) and 12(b)(6) because the Producers have failed to plead any RICO predicate acts, failed to properly allege an enterprise and the conduct or participation in the conduct of the enterprise's affairs, failed to allege a "pattern" of racketeering activity, and failed to connect ADM to the alleged predicate acts. Third, ADM contends that the Producers' CEA claim, related to their own HTA contracts, fails to meet the requirements of Federal Rules of Civil Procedure 9(b) and 12(b)(6) because the Producers have failed to plead their CEA claims with particularity, that the Producers lack standing to bring any private cause of action under the CEA against ADM arising out of their HTA transactions with defendants; that some of the Producers' CEA claims are barred by the CEA's two-year statute of limitations; that the Producers have failed to adequately allege any violation of 7 U.S.C. § 6a, 6(a), 6b, 6c(b) or 6o; and that the Producers may not bring a private cause of action to enforce CFTC rules and regulations. Fourth, ADM asserts that the Producers' claims related to commodity trading accounts fail because the Producers have neglected to allege any basis for their claims and the Producers lack standing to bring a private cause of action under the CEA. Fifth, ADM argues that the Producers have failed to allege any facts which would entitle them to punitive damages in their CEA claims. Sixth, ADM contends that the Producers' breach of fiduciary duty claim fails because the Producers have failed to assert a duty owed to them by ADM. Seventh, ADM asserts that the Producers' fraudulent inducement claim fails because the Producers have not alleged any of the requisite elements of that claim. Eighth, ADM charges that the Producers negligence claim fails because the Producers cannot bring a negligence...
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