John Morrell & Co., v. Halbur
| Decision Date | 05 March 2007 |
| Docket Number | No. C06-3023 MWB.,C06-3023 MWB. |
| Citation | 476 F.Supp.2d 1061 |
| Parties | JOHN MORRELL & CO., Plaintiff, v. Joseph HALBUR, Pete Simons, Mary Ann Borkowski, Vernon Brincks, Eric Brincks, Virginia Hagemann, Greg Halbur, Martin Halbur, Paul Halbur, Jeff Klocke, Howard Koster, Robert Overmohle, Frank Rosener, Harry Reiman, Sally Reiman, John Simons, Dale Thielen, Cyril Venner, Lavonne Wernimont, Leon Wernimont, Don Gerken and Doug Gerken, Individually and d/b/a D & D Gerken Inc., Hubert Hagemann, Dick Stark, and Diamond Enterprises, Inc., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Daniel L. Hartnett, Crary-Huff-Inkster-Hecht-Sheehan-Ringenberg-Hartnett-Storm, Sioux City, IA, Michael H. Wetmore, Sarah C. Hellmann, Urmila P. Paranjpe, Husch & Eppenberger, LLC, St. Louis, MO, for Plaintiff.
Jay Elliott Denne, Stanley E. Munger, Munger, Reinschmidt & Denne, Sioux City, IA, Jeffrey R. Minnich, Neu, Minnich, Comito & Neu, PC, Carroll, IA, for Defendants.
TABLE OF CONTENTS
I. INTRODUCTION AND BACKGROUND .....................................1062
A. Procedural Background .......................................1062
B. Factual Background ..........................................1063
II. LEGAL ANALYSIS ..................................................1073
A. Rule 12(b)(6) Standards .....................................1073
B. Choice Of Law ...............................................1074
C. Analysis Of Specific Claims .................................1075
1. Breach of contract claims ................................1075
2. Unjust enrichment claims .................................1077
3. Claim for an accounting ..................................1078
III. CONCLUSION ......................................................1079
On April 20, 2006, plaintiff John Morrell & Co. ("John Morrell") filed its complaint in this case against defendants Joseph Halbur, Pete Simons, Mary Ann Borkowski, Eric Brincks, Vernon Brincks, Virginia Hagemann, Greg Halbur, Martin Halbur, Paul Halbur Jeff Klocke, Howard Koster, Robert Overmohle, Frank Rosener, Harry Reiman, Sally Reiman, John Simons, Dale Thelen, Cyril Venner, Lavonne Wernimont Leon Wernimont, Doug Gerken and Doug Gerken, individually and d/b/a D & D Gerken, Inc., Hubert Hagemann, Dick Stark, and Diamond Enterprises, Inc. In its petition, plaintiff John Morrell sets out claims against the named defendants, all are hog producers, for breach of contract, unjust enrichment, and for an accounting to determine the amount of money owed John Morrell by each of the defendants.
Defendants Joseph Halbur, Pete Simons, Mary Ann Borkowski, Virginia Hagemann, Greg Halbur, Martin Halbur, Paul Halbur, Jeff Klocke, Howard Koster, Robert Overmohle, Frank Rosener, Harry Reiman, Sally Reiman, John Simons, Dale Thelen, Cyril Venner, Lavonne Wernimont, Leon Wernimont, Doug Gerken and Doug Gerken, individually and d/b/a D & D Gerken, Inc., Hubert Hagemann, Dick Stark, and Diamond Enterprises, Inc. filed a motion to dismiss all of the claims found in the Complaint (# 42). Defendants Eric Brincks and Vernon Brincks then filed their own motion to join in the other defendants motion to dismiss (# 44). The Brincks' motion to join is granted. Therefore, because all of the defendants are seeking dismissal of the claims found in the Complaint and the court will refer to the pending motion to dismiss generally as defendants' motion. Defendants' motion seeks dismissal of Count I and Count II, the breach of contract claims, on the ground that those counts fail to state a valid cause of action for breach of contract against defendants. Similarly, defendants' motion seeks dismissal of Count III and Count IV, the unjust enrichment claims, on the ground that those counts fail to state a valid cause of action for unjust enrichment against defendants. Defendants also seek the dismissal of Count V, the claim for an accounting, on the ground that this claim is derivative of the claims in Counts I through IV, and that upon the dismissal of those counts then the claim for an accounting must also fail as a matter of law. Plaintiff John Morrell has filed a timely response to defendants' motion.
On a motion to dismiss, the court must assume all facts alleged in plaintiff John Morrell's Complaint are true, and must liberally construe those allegations. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Therefore, the following factual background is drawn from plaintiff John Morrell's Complaint in such a manner.
Plaintiff John Morrell & Co. is a corporation organized under the laws of Delaware, with its principal place of business located in Cincinnati, Ohio. John Morrell is in the business of procuring hogs for slaughter, slaughtering hogs, and processing and selling the products of slaughtered hogs.
In the mid to late 1990's several meat packers, including John Morrell, offered hog producers contracts with a pricing formula that, during the term of the contract, provided hog producers with a minimum or "floor price" for their hogs. These contracts were typically for a period of three to five years. These types of contracts were often referred to as "ledger contracts." During the term of these ledger contracts, the meat packer agreed to pay a minimum price for the hog producers' hogs, even when the market price for hogs was less than the floor price in the ledger contract. When the minimum floor price was higher than the market price, the difference paid to the hog producer was reflected as a negative balance on the particular hog producer's ledger account. At the conclusion of the ledger contract, the hog producer was required to pay to the meat packer the amount of the negative ledger balance.
On February 16, 1998, John Morrell entered into three Ledger Contract Program contracts (collectively "Ledger Contracts"). The Ledger Contracts were signed by defendant Pete Simons as "Pete Simons (power of attorney)." Each ledger contract has a space for identifying the hog producer's "trade name" or "doing business as" identifier. On one of the contracts, the "trade name" or "doing business as" is stated to be Diamond Enterprises/Mack Walnut ("the Black Walnut Ledger Contract"), on the second it is Diamond Enterprises/Cornerstone ("the Cornerstone Ledger Contract"), and on the third it is Diamond Enterprises/Stone Path ("the Stone Path Ledger Contract"). In the Ledger Contracts, the hog producers to those contracts agreed to deliver 47,000 hogs annually to John Morrell.
The Ledger Contracts were executed on behalf of the defendant hog producers by Pete Simons. While there exist corporate entities in Iowa called Diamond Enterprises, Inc., Black Walnut, Inc., Cornerstone, Inc. and five corporations bearing some form of the name "Stone Path," there are no corporate entities bearing the names "Diamond Enterprises/Black Walnut," "Diamond Enterprises/Cornerstone," or "Diamond Enterprises/Stone Path."
During the term of the Ledger Contracts, the market price for hogs was usually less than the contract floor price. This resulted in a growing ledger deficit to the hog producers. Due to the low market price for hogs, John Morrell recognized the possibility of increasing negative ledger balances for hog producers who had entered into ledger contracts with it. To alleviate concerns of such hog producers, John Morrell sent a letter in August, 1998 to "All Long-Term Ledger Contract Producers" which provided, in part, as follows:
AS WE ENTER THE 1998 FALL MARKETING PERIOD WITH LARGER VOLUMES OF SLAUGHTER HOGS EXPECTED AND A DECLINING PRICE CYCLE ANTICIPATED, JOHN MORRELL HAS BEEN APPROACHED BY SOME OF OUR LEDGER CONTRACT PRODUCERS WITH QUESTIONS CONCERNING THEIR CONTRACTS, THE PURPOSE OF THIS FORM LETTER IS TO INFORM ALL CURRENT CONTRACT PRODUCERS OF JOHN MORRELL'S ANSWERS TO COMMONLY ASKED QUESTIONS.
Q.) I'M CONCERNED ABOUT MY ACCOUNT BALANCE GROWING THIS FALL TO A POINT I COULD BE PUTTING MYSELF IN A UNSTABLE FINANCIAL POSITION, IS THERE ANY WAY I CAN LIMIT, DECREASE OR TERMINATE MY NEGATIVE LEDGER BALANCE?
A.) JOHN MORRELL DID NOT DEVELOP THIS CONTRACT WITH THE PURPOSE BEING TO PUT A PRODUCER IN AN UNSTABLE POSITION. JOHN MORRELL WILL ALLOW PRODUCERS TO BRING THEIR ACCOUNT BALANCE TO A NEUTRAL POSITION AT ANY TIME DURING THE CONTRACT PERIOD.
JOHN MORRELL WILL ALSO ALLOW LEDGER PRODUCERS THE OPPORTUNITY TO MARKET THEIR HOGS WHEN PRICES ARE BELOW THE GUARANTEED FLOOR WITHOUT INCREASING THEIR LEDGER BALANCE.
IF ANY PRODUCER HAS THE DESIRE TO TERMINATE HIS CONTRACT, THEY MAY DO SO; SIMPLY BY CONTACTING THE JOHN MORRELL PROCUREMENT OFFICE, STATING YOUR REQUEST AND BRINGING THEIR CURRENT LEDGER BALANCE TO NEUTRAL.
Complaint, Ex. 5, John Morrell letter at 1 (emphasis original).
The hog producers in the Ledger Contracts made limited use of this offer and continued to make ledger sales to John Morrell when the market price was below the contract floor price, thereby increasing the size of their ledger deficits.
Magnolia, Inc. is an Iowa family farm corporation with its principal place of business in Carroll, Iowa. Magnolia, Inc. is a partner of the Mahogany Partnership, which was formed to farm and own agricultural land and to own and operate a pork nursery operation in Carroll County, Iowa. Defendants John Simmons and Pete Simmons collectively own a majority stake in Magnolia, Inc.
Mahogany, Inc. is an Iowa family farm corporation with its principal place of business in Carroll, Iowa. Mahogany, Inc. is a partner in the Mahogany Partnership, which was formed to farm and own agricultural land and to own and operate a pork nursery operation in Carroll County, Iowa. Defendants Greg Halbur, Joseph Halbur, Martin Halbur, and Paul Halbur collectively own a majority...
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