Kottke Cattle, LLC v. Zia Agric. Consulting

CourtUnited States District Courts. 10th Circuit. District of New Mexico
PartiesKOTTKE CATTLE, LLC, an Illinois Limited Liability Company, Plaintiff, v. ZIA AGRICULTURAL CONSULTING, LLC, a New Mexico Limited Liability Company; NARCISO PEREZ and SEAN PEREZ, Defendants.
Docket NumberCIV 21-1004 JB
Decision Date20 October 2021

Alicia M. McConnell, Donald Kochersberger Business Law Southwest LLC Albuquerque, New Mexico, Attorneys for the Plaintiff.


THIS MATTER comes before the Court on the Plaintiff's Emergency Motion for Temporary Restraining Order and Preliminary Injunction, filed October 15, 2021 (Doc 2 (Ex Parte))(TRO Motion). The primary issue is whether, pursuant to rule 65(b)(1) of the Federal Rules of Civil Procedure, the Court should grant Plaintiff Kottke Cattle, LLC's, request for an ex parte temporary restraining order (“TRO”) enjoining Defendants Zia Agricultural Consulting, LLC (Zia Agricultural), Narciso Perez, and Sean Perez, from interfering with Kottke Cattle's recovery of its cattle or selling Kottke Cattle's livestock at auction on October 28, 2021, until the Court holds a hearing and rules on Kottke Cattle's application for a preliminary injunction (“PI”). Because Kottke Cattle does not show that damages would be an inadequate remedy or that it will suffer irreparable harm if the Court does not issue a TRO, and because Kottke Cattle has not shown a substantial likelihood that it will succeed on the merits of its claims the Court will deny Kottke Cattle's request for a TRO.


The Court takes its facts from the Plaintiff's Verified Complaint for Breach of Contract Breach of the Duty of Good Faith and Fair Dealing, Breach of Fiduciary Duty, Fraudulent Misrepresentation, Conversion Embezzlement, Unjust Enrichment, Accounting, Declaratory Judgement, and Injunction, filed October 15, 2021 (Doc. 1)(“Complaint”). Because there has been no hearing on the TRO, the Court can take its facts only from the Complaint. “A temporary restraining order requires the Court to make predictions about the plaintiff's likelihood of success.” Herrera v. Santa Fe Pub. Sch., 792 F.Supp.2d 1174, 1179 (D.N.M. 2011)(Browning, J.). Rule 52 of the Federal Rules of Civil Procedure states: “In granting or refusing an interlocutory injunction, the court must . . . state the findings and conclusions that support its action.” Fed.R.Civ.P. 52(a)(2). [T]he findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits.' Herrera v. Santa Fe Pub. Sch., 792 F.Supp.2d at 1179 (quoting Attorney Gen. of Okla. v. Tyson Foods, Inc., 565 F.3d 769, 776 (10th Cir. 2009))(alteration in Herrera v. Santa Fe Public Schools only). See Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981)([A] preliminary injunction is customarily granted on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits.”); Firebird Structures, LCC v. United Bhd. of Carpenters and Joiners of Am., Local Union No. 1505, 252 F.Supp.3d 1132, 1140 (D.N.M. 2017)(Browning, J.).

The United States Court of Appeals for the Tenth Circuit notes “that when a district court holds a hearing on a motion for preliminary injunction it is not conducting a trial on the merits.” Heideman v. S. Salt Lake City, 348 F.3d 1182, 1188 (10th Cir. 2003). Moreover, [t]he Federal Rules of Evidence do not apply to preliminary injunction hearings.” Heideman v. S. Salt Lake City, 348 F.3d at 1188. Thus, while the Court does the best it can to make accurate findings from the record that it has, and in the short time that it has to make findings, these findings of fact are relevant only for the purpose of determining whether to issue a TRO and do not bind the Court or the parties at trial. Accordingly, the Court finds as follows:

1. The Parties.

1. Kottke Cattle is an Illinois limited liability company. See Complaint ¶ 1, at 1.

2. Kottke Cattle's members are residents of Illinois and Oklahoma. See Complaint ¶ 2, at 1.

3. Glen Kottke is the manager of Kottke Cattle. See Plaintiff's Verification, filed October 18, 2021 (Doc. 5).

4. Zia Agricultural is a New Mexico limited liability company “registered in, authorized to, and doing business in, New Mexico, ” Complaint ¶ 3, at 1, which “markets and services various investments in livestock, ” Complaint ¶ 9, at 2.

5. N. Perez and his son, S. Perez, are New Mexico residents. See Complaint ¶ 4-5, 12, at 2.

6. Mike Rogers is an inventory manager for Zia Agricultural. See Complaint ¶ 16(a), at 3.

7. Kottke Cattle and Zia Agricultural “engaged in a series of transactions over time, all of which involved Kottke purchasing cattle and Zia caring for the cattle until the investment could be realized.” Complaint ¶ 13, at 2.

8. At first, “the investments returned expected values and Zia appeared to properly account to Kottke's inventory.” Complaint ¶ 14, at 2.

9. “During the course of later transactions, however, Zia has repeatedly and consistently failed to account for the production of the investments, allowed/caused unnecessary losses, overcharged Kottke for Zia's services and pass-through expenses, and refused/failed to pay Kottke for investment income realized.” Complaint ¶ 15, at 2-3.

2. The “Mexford” Program.

10. In 2019, Kottke Cattle “paid Zia approximately $1.5M for an investment in 2, 004 head of cattle (‘HD').” Complaint ¶ 16(a), at 3.

11. Kottke Cattle paid Zia Agricultural “more than $400k in various charges for services related to the 2, 004 HD. Complaint ¶ 16(a), at 3.

12. Under the parties' agreement, Zia Agricultural was to receive twenty percent of the profits from the sale of the Mexford cattle, and Kottke Cattle would receive the remainder. See Complaint ¶ 16(a), at 3.

13. Zia Agricultural agreed to purchase cattle from Kottke Cattle “according to an agreed pricing scheme” once the livestock were “ready to go to a feed yard.” Complaint ¶ 16(a), at 3.

14. So far, “Zia has only accounted for the sale of 420 HD, ” leaving 1, 584 HD for which there is no accounting. Complaint ¶ 16(a), at 3.

15. In early 2021, Glen Kottke contacted Mike Rogers “to ask about the whereabouts of the Mexford cattle, which he expected to still be on pasture, ” but learned that the cattle had been sold approximately a year earlier. Complaint ¶ 16(a), at 4.

3. The “GY1” Program.

16. In 2019, Kottke Cattle paid Zia Agricultural “approximately $1.2M for an investment in 1, 541 HD. Complaint ¶ 16(b), at 4.

17. Kotte Cattle paid Zia Agricultural $1.2 million “under the condition that Zia would pay Kottke its proceeds from the Mexford Program by year's end.” Complaint ¶ 16(b), at 4.

18. Zia Agricultural did not pay Kottke Cattle proceeds from the Mexford Program before the end of that year. See Complaint ¶ 16(b), at 4.

19. The GY1 Agreement was “otherwise structured substantially similar” to the Mexford Agreement. See Complaint ¶ 16(b), at 4.

20. Zia Agricultural has not accounted for the cattle that Kottke Cattle purchased under the GY1 Agreement. See Complaint ¶ 16(b), at 4.

4. The “Source 2” Program.

21. In 2020, Kottle Cattle paid Zia Agricultural “more than $1.8M for an investment in more than 2, 000 HD for Source 2.” Complaint ¶ 16(c), at 4-5.

22. Kottke Cattle entered into the agreement believing that Zia Agricultural would purchase cattle for the Source 2 program “exclusively from the Milk Source Dairy, which were supposed to be of a specific breed and quality, ” then feed them at “a feed lot called Heifer Source located in Liberal, Kansas . . . for an agreed price to feed the cattle to sale weight.” See Complaint ¶ 16(c), at 4.

23. Kottke Cattle believed that it was “investing entirely in NHTC certified . . . Holstein/Angus calves from the Milk Source Dairy in Wisconsin.”[1] See Complaint ¶ 16(c), at 5.

24. Under the Source 2 program, [a]ll of the animals were to be created by artificial insemination using semen paid for by Kottke and shipped to Milk Source Dairy.” Complaint ¶ 16(c), at 5.

25. While, “initially, Zia purchased some Source 2 cattle from Milk Source Dairy and sent them to Heifer Source, as planned, ” Zia Agricultural “eventually ceased purchasing the cattle from Milk Source and instead started purchasing inferior cattle from other locations, and sending them to a different feed lot, Beef City, while nonetheless attributing them to Kottke's Source 2 inventory.” Complaint ¶ 16(c), at 5.

26. 247 HD came from Milk Source Dairy. See Complaint ¶ 16(c), at 5.

27. Zia Agricultural purchased 1, 853 HD from Mellencamp Dairy, in Idaho, and those cattle were “inferior Jersey/Angus calves.” Complaint ¶ 16(c), at 5.

28. 216 HD were from Ponderosa Dairy in Idaho. See Complaint ¶ 16(c), at 5.

29. “None of the Idaho animals appear to have resulted from the semen shipped to Milk Source.” Complaint ¶ 16(c), at 5.

30. Zia Agricultural borrowed against the value of the cattle to finance their feed, so that, “when the cattle were sold, the proceeds first went to repaying the amount financed, which was nearly the entirety of the cattle's value, with any remaining profit also going to Zia.” Complaint ¶ 16(c), at 6.

31. Other than “one credit of $98k during the course of the investment, ” Zia Agricultural has not paid Kottke Cattle anything for the sale of these cattle. Complaint ¶ 16(c), at 6.

5.The “Clovis 1” Program.

32. Under the parties' “Clovis 1” agreement, Zia Agricultural “was to send semen to the Clovis Dairy in New Mexico, ” where the cows were to be artificially inseminated, and “their offspring would then belong to Kottke and raised as beef animals.” Complaint ¶ 16(d), at 6.

33. In February, 2019, Kottke Cattle paid Zia Agricultural $109 375.00 for “semen costs and freight for 6...

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