Intern. Casings Group v. Premium Standard Farms, No. 04-1081-CV-W-NKL.

• Decision Date: 09 February 2005
• Docket Number: No. 04-1081-CV-W-NKL.
• Citation: 358 F.Supp.2d 863
• Parties: INTERNATIONAL CASINGS GROUP, INC., Plaintiff, v. PREMIUM STANDARD FARMS, INC., Defendant.
• Court: U.S. District Court — Western District of Missouri

358 F.Supp.2d 863

INTERNATIONAL CASINGS GROUP, INC., Plaintiff, v. PREMIUM STANDARD FARMS, INC., Defendant.

No. 04-1081-CV-W-NKL.

United States District Court, W.D. Missouri, Western Division.

February 9, 2005.

Andrew J. Enschede, Howard K. Jeruchimowitz, Paul Del Aguila, Paul T. Fox, Greenberg, Traurig, LLP, Chicago, IL, Michael P. Joyce, Van Osdol, Magruder, Erickson & Redmond, Kansas City, MO, for Plaintiff.

Kevin D. Mason, Todd W. Ruskamp, Shook Hardy & Bacon LLP, Kansas City, MO, for Defendant.

ORDER

LAUGHREY, District Judge.

Pending before the Court is Plaintiff International Casing Group's ("ICG") Motion for Preliminary Injunction [Doc. # 8]. For the reasons set forth below, the Court grants ICG's Motion.

I. Background

Defendant Premium Standard Farms ("PSF") is a pork producer that has sold its hog casings to ICG for over six years. The two PSF facilities that supply their hog casings to ICG are located in Milan, Missouri ("Milan facility"), and Clinton, North Carolina ("Clinton facility"). ICG has its own equipment and employees on site at the Clinton and Milan facilities to harvest and process the casings.

Prior to May 2002, PSF and ICG had long term output contracts for both facilities. In May 2002, PSF and ICG terminated these contracts. However, the parties continued performing under the terms of their contracts, and in June 2002, they resumed negotiations regarding new terms for both facilities. The parties negotiated a myriad of issues, including, but not limited to, an electrical room that needed re-wiring at the Clinton facility, pricing adjustments related to quality control issues (frequently referred to as the bloody guts issue) and a blower pipe at the Clinton facility. Many of these negotiations occurred via e-mail between the parties and both entities consistently relayed negotiation terms and positions to one another via electronic correspondence. The negotiations were protracted.

In early 2004, Kent Pummill ("Pummill") represented PSF in its negotiations with ICG and Tom Sanecki ("Sanecki") represented ICG. In a series of e-mails from March and April 2004, Pummill and Sanecki discussed several open issues. Because of the importance of these e-mails, the Court includes them verbatim. All of the following e-mails were sent in 2004. The Court did not include the discussions about mucosa and these redactions are noted. Additionally, the Court did not include a series of three e-mails from May 19-21, 2004, regarding an unpaid invoice by ICG. See Pl.Ex. 32-33.

                ---------------------------------------------------------------------------------------------
                 Date Sender Recipient Text
                ---------------------------------------------------------------------------------------------
                 02/19   Kent Pummill   Tom         Here is where we are at. We agree that there is
                                        Sanecki     some blood in the casings as with all CO2 systems
                                                    We don't agree it is an 8 cent discount. We would
                                                    like to offer the following: 2 cent discount on the
                                                    Clinton contract; we [PSF] will pay 100% of the
                                                    electrical that was completed last year; you pay for
                                                    putting in the stainless steel pipe going to your
                                                    building; Heparin — to make sure your doing your
                                                    best in your building on mucosa. When we average
                                                    more than 41,000 units of heparin in a month, we will
                                                    give you 30% of that dollar amount, for anything
                                                    over and above 41,000 units. Where are your sticking
                                                    points, so we can get both plants under contract
                                                    and behind us
                                                    Thanks, Kent
                ---------------------------------------------------------------------------------------------
                 02/26   Kent Pummill   Tom         Did you get my e-mail. What is your counter-offer
                                        Sanecki     I agree, we have gone too long. Lets get this
                                                    cleaned up
                                                    Thanks, Kent
                ---------------------------------------------------------------------------------------------
                 02/26   Tom Sanecki    Kent        I am in LA this week, I will call you next week to
                                        Pummill     discuss, or would you prefer Eric and I come to KC
                                                    for a quick meeting next week. We would be available
                                                    Tuesday-Thursday
                ---------------------------------------------------------------------------------------------
                 02/26   Kent Pummill   Tom         Bo is traveling. Shoot me your counter offer next
                                        Sanecki     week, and lets get this moving
                ---------------------------------------------------------------------------------------------
                

                 03/18   Tom Sanecki    Kent        I will be out of the office thru 03/29/04
                                        Pummill
                                                    I have the following questions and I think we should
                                                    schedule a meeting in KC to get this resolved.
                                                    [Deleted discussion regarding mucosa]
                                                    Electrical room and blow pipe — not to beat a dead
                                                    horse but, I think getting the guts, undamaged, to
                                                    the casing department should be PSF's responsibility.
                                                    ICG paid for the blow system and it has worked
                                                    for years. It has only been since it has been
                                                    disassembled by your maintenance department for
                                                    cleaning that we have been having problems with
                                                    damaged guts.
                                                    The quote we have is for $25,000, I expect this to go
                                                    up due to the increases in the cost of steel, my guess
                                                    is an additional $8,000-$10,000. We also need to
                                                    make sure that the finish is not going to cause
                                                    damage. My suggestion is that ICG will pay for the
                                                    pipe and turn the blower system over to PSF, if PSF
                                                    will extend both contracts an additional two years.
                                                    The remaining issue is the compensation for the
                                                    bloody guts. $0.02 is not enough to compensate for
                                                    the additional processing required. I suggest that
                                                    we schedule a meeting for either 04/06/04 or 04/07/04
                                                    in KC. Please let me know your thoughts.
                ---------------------------------------------------------------------------------------------
                 03/23   Kent Pummill   Tom         We might as well schedule a meeting then, because
                                        Sanecki     if you want more than 2 cents, then our plan is to
                                                    put it back out to bid.
                                                    [Deleted discussion regarding mucosa]
                                                    We have paid for the electrical room. You pay for
                                                    the pipe. Sounds like it just comes down to the
                                                    discount # . We will do a 2 cent discount at Clinton
                                                    and will go 5 years on a new contract for both plants.
                                                    Your choice, this or us putting both plants back out
                                                    to bid. Let me know, we would be glad to meet.
                                                    Thanks, Kent
                ---------------------------------------------------------------------------------------------
                 04/19   Tom Sanecki    Kent        I am not happy about the $0.02. The mucosa is fine,
                                        Pummill     it would be helpful if yield numbers we provided to
                                                    us so we can continue to work on optimizing the
                                                    collection and the feedback is very important.
                                                    The pipe vs. the electrical room is ok, and the sooner
                                                    we get this contract signed the better, we need to
                                                    get this pipe replaced. It is effecting our yields. Do
                                                    we agree that when ICG pays for the pipe replacement
                                                    and we have the 5 year contract that PSF will
                                                    take responsibility and ownership of the pipe?
                                                    Can we do something about the costs we have
                                                    incurred with the bloody guts we have already processed?
                                                    This started in January 15, 2003, so for
                

                                                    16+ months. Can we get an additional $0.02 for the
                                                    next 16 months or an additional $0.005 off for the 5
                                                    year contract?
                                                    Please call me when you get a chance [phone
                                                    number deleted].
                ---------------------------------------------------------------------------------------------
                 04/20   Kent Pummill   Tom         Send the new contracts with a decrease of $0.025 for
                                        Sanecki     the next 5 years at Clinton. We will take ownership
                                                    of the new

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