Jackson v. Swift-Eckrich

Decision Date11 August 1993
Docket NumberCiv. No. 92-5133.
Citation830 F. Supp. 486
PartiesBill JACKSON and Juanita Jackson, Plaintiffs, v. SWIFT-ECKRICH, et al., Defendants.
CourtU.S. District Court — Western District of Arkansas

James G. Lingle, Lingle & Corley, Rogers, AR, Clay Fulcher, Strait Law Firm, Dardanelle, AR, for plaintiffs.

Charles Harwell, Cypert, Crouch, Clark & Harwell, Springdale, AR, for defendants.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

This case is presently before the court on defendants' second motion for summary judgment. The action was filed on August 20, 1992. The plaintiffs entered into a series of one year contracts with Swift during the years 1986 through 1991. Pursuant to the contracts plaintiffs agreed to grow either hen or tom turkeys and further agreed to purchase the turkey poults from Swift. Swift hired and controlled the catching and loading crew, the drivers, and the unloading crew.

As originally filed, the complaint asserted the following causes of action: breach of fiduciary duty; tort of outrage; breach of contract; misrepresentation and/or constructive fraud; breach of duty to deal fairly and in good faith; breach of implied warranty of merchantability and fitness for a particular purpose; and violation of the Packers and Stockyards Act, 7 U.S.C. § 192.

The defendants previously filed a motion to dismiss/motion for summary judgment. By letter opinion and order dated October 2, 1992, the court granted the first motion with respect to the breach of fiduciary duty claim and the claim for breach of the implied warranty of fitness for a particular purpose. The court also held the count alleging breach of duty of good faith and fair dealing was subsumed in the breach of contract claim. Subsequently, the plaintiffs dismissed their outrage claim.

The plaintiffs are currently alleging breach of contract, breach of the implied warranty of merchantability, fraud, negligence, and violations of the Packers and Stockyards Act. Defendants have moved for partial summary judgment on each claim with the exception of the negligence claim. After defendants filed the instant summary judgment motion, plaintiffs were given leave to file an amended complaint. The amended complaint was filed on August 2, 1993.

Misrepresentation/Constructive Fraud.

Defendants contend they are entitled to judgment as a matter of law on plaintiffs misrepresentation or constructive fraud claims for three separate reasons.1 First, defendants contend plaintiffs have failed to satisfy all the required elements to support a claim for fraud. Second, defendants argue that the alleged acts forming the basis of these claims occurred more than three years prior to the commencement of this action; therefore defendants argue these claims are barred by the statute of limitations. Third, defendants argue that the plaintiffs by continuing to enter into grower contracts after discovering the alleged misrepresentations, waived their right to assert a claim based on fraud.

In Arkansas, common law fraud has five elements: (1) a false representation, usually of a material fact; (2) knowledge or belief by the defendant that the representation is false or that he lacks a sufficient basis of information to make the statement, that is, the scienter requirement; (3) intent to induce the plaintiff to act or to refrain from acting in reliance upon the representation; (4) justifiable reliance by the plaintiff upon the representation; and (5) resulting damage to the plaintiff. Howard W. Brill, Arkansas Law of Damages § 35-7 at 489 (2d Ed.1990). Arkansas also recognizes a cause of action for legal or constructive fraud. Professor Brill summarizes this cause of action as follows:

This cause of action, which would be described as innocent misrepresentation or non-disclosure in other jurisdictions, exists even though any evil intention or moral wrong is absent. The action may be based on a mistake of fact. The essential element is that a legal or equitable duty has been breached in such a way that the law declares that breach to be fraudulent because of its tendency to deceive others, regardless of the moral guilt or intent of the fraud-feasor. Although liability may be based on a false statement honestly believed to be true, the mere expression of an opinion cannot be the basis for constructive fraud.

Id. at 492.

Under Arkansas law, a cause of action for fraud is governed by a three-year statute of limitations. Ark.Code Ann. § 16-56-105 (1987). See also Burton v. Tribble, 189 Ark. 58, 70 S.W.2d 503 (1934) (three year statute applies to all tort actions). In Dupree v. Twin City Bank, 300 Ark. 188, 777 S.W.2d 856 (1989) the court stated:

As to fraud or misrepresentation, mere ignorance of one's rights does not prevent the running of the statute of limitations or laches, unless such ignorance is due to fraudulent concealment or misrepresentation on the part of those invoking the benefit of the statute. While an action for fraud must be brought within three years from the date the cause of action accrues, the fraud does suspend the running of the statute of limitations and the suspension remains in effect until the party having the cause of action discovered the fraud or should have discovered it by the exercise of reasonable diligence.

Id. at 191-92, 777 S.W.2d 856 (citations omitted).

"The test for the statute of limitations for fraud is not a subjective one, i.e. when the fraud was discovered or should have been discovered...." Id. at 192 n. 2, 777 S.W.2d 856. The question that arises is whether the plaintiff used due diligence. Talbot v. Jansen, 294 Ark. 537, 744 S.W.2d 723 (1988). The burden is on the plaintiff to exercise due diligence to discover the fraud if apprised of facts which should place the plaintiff on notice. "Affirmative action on the part of the person charged with fraud to conceal a plaintiff's cause of action will toll the running of the statute of limitations." Hughes v. McCann, 13 Ark.App. 28, 31, 678 S.W.2d 784 (1984).

In count four of the complaint plaintiffs allege defendants made the following misrepresentations which were false: that the condemned parts for which the plaintiffs were charged were accurately weighed; that the birds which were dead on arrival were accurately weighed; that payments were figured according to the formula set in the contract when in fact payments were improperly figured because of improper weighing, misstatement of poult prices, improper charging of condemnation and downgrading to the growers; and that the condemned carcass deduction was accurately calculated. Plaintiffs allege that the statements constituted a continuing course of conduct throughout the contract period. In count five, misrepresentation or constructive fraud, plaintiffs allege that when they entered into their contract with Swift, Swift's agents promised plaintiffs that the contract terms would not change for a period of five years.

Defendants first argue that the statute of limitations bars the suit on the alleged guarantee to provide birds for five years under the terms of the original contract without modifications. It is the defendants' contention that the plaintiffs knew as early as September of 1986, the date the second contract was signed, that the alleged guarantee of Swift to supply contracts with unchanging terms was not being honored. Defendants point out that plaintiffs arguably had this knowledge even earlier; plaintiffs received a letter dated June 28, 1985, from defendant Wolf stating that plaintiffs would be offered the standard growing contract at the beginning of the 1986, 1987, and 1988, growing seasons. In opposition, plaintiffs admit that the initial representations were made by Swift more than three years before the action was filed. Plaintiffs, however, contend that continuing misrepresentations were made throughout the contract period as set forth in plaintiffs' August 2, 1993, amended complaint.

Defendants have submitted portions of the deposition of Bill Jackson as an exhibit to the motion. At his deposition Bill Jackson was asked about the June 28, 1985, letter and conceded that the letter was at variance with the verbal assurances given by Wolf because it set forth a three-year deal and not a "five-year deal that he assured me of." Deposition of Bill Jackson at p. 55.

Beginning at page 46, Bill Jackson states the contract changed after the first year:

Q: When did Swift first change their contract:
A: The first change was in the second year that I grew turkeys.
* * * * * *
Q: I'm just trying to get this straight in my mind. The first contract you signed was to take you from September of '85 to August of '86; right?
A: Uh-huh.
Q: So the next contract that you signed was the one that they changed and gave you less favorable terms?
A: Yes.
* * * * * * Q: All right. So a year after you signed the first contract, then you knew that whatever representation that was made by Mr. Wolf a year before turned out to be inaccurate or incorrect or maybe a plain lie; is that true?
A: Probably.

Deposition of Bill Jackson at pp. 46-47. Jackson testified that contract modifications continued to occur:

Q: Let me ask you generally, in this way. Is it your contention that after the September of 1987 contract, that each contract after that that you signed or your wife signed with Swift changed?
A: Yes.
Q: None of the subsequent contracts were the same?
A: No.
Q: They were all, in your opinion, to your detriment?
A: Yes.

Id. at pp. 62-63.

With respect to the alleged representation that the terms of the contract would not change for a period of five years, the court finds the plaintiffs' misrepresentation and/or constructive fraud claims are time barred. By their own admission, plaintiffs knew the contract terms were being changed more than three years prior to the filing of this suit. As this appears to be the only allegation of count five, the court grants defendants' motion for summary judgment on count...

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2 books & journal articles
  • Arkansas. Practice Text
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    • ABA Antitrust Library State Antitrust Practice and Statutes (FIFTH). Volume I
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    • ABA Archive Editions Library State Antitrust Practice and Statutes. Fourth Edition Volume I
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