LDT KELLER FARMS LLC. v. BRIGITTE HOLMES LIVESTOCK CO. INC.
| Decision Date | 30 March 2011 |
| Docket Number | CAUSE NO. 1:08-CV-243 |
| Parties | LDT KELLER FARMS, LLC, and KELLER FARMS PARTNERSHIP, Plaintiffs / Counterclaim Defendants, v. BRIGITTE HOLMES LIVESTOCK CO., INC., BRIGITTE HOLMES, and MERVIN MISHLER Defendants / Counterclaim Plaintiffs. |
| Court | U.S. District Court — Northern District of Indiana |
OPINION TEXT STARTS HERE
LDT Keller Farms, LLC and the Keller Farms Partnership (collectively, "Keller Farms) operate a dairy farm near Fort Recovery, Ohio. Luke Keller ("Luke"), Daniel Keller ("Dan"), and Timothy Keller ("Tim") are the sole members of LDT Keller Farms, LLC and each have an equal share in the Keller Farms Partnership.2
The Brigitte Holmes Livestock Company ("BHLC") is an Indiana corporation and registered commercial dealer of livestock. Brigitte Holmes ("Brigitte") is the sole shareholder, director, and President of BHLC. Samuel Steven Holmes ("Steve"), Brigitte's then, but now former, husband, and Mervin Mishler ("Merv") were employed by BHLC as sales agents.3
On October 17, 2008, Keller Farms filed suit against BHLC, Steve, Merv, and Brigitte, alleging a breach of contract (Count II), breach of the implied warranty of fitness for a particular purpose (Count IV), violation of the Packers and Stockyards Act ("PSA"), 7 U.S.C. § 213 (Count VI), actual fraud and fraudulent concealment (Count VIII), and constructive fraud (Count X). Their claims arose out of ten separate purchases of "Holstein heifer" calves by Keller Farms from BHLC from October 26, 2006, to January 31, 2007, totaling 204 head. Keller Farms alleges that the calves were represented to be "replacement Holstein heifers," and therefore likely to eventually give milk, but that 197 of them were actually sterile and therefore useless to a dairy. When Keller Farms placed newspaper ads in a regional trade publication seeking other farmers who also bought sterile calves from BHLC, the Defendants and Steve counterclaimed for defamation. (See Docket # 44.)
After ruling on various summary judgment motions, the following claims of Keller Farms remained for a bench trial: Count II (breach of contract) against BHLC; Count IV (breach of warranty) against BHLC, but only with respect to 7 calves sold on January 31, 2007; Count VI (alleging violations of the PSA) against BHLC, Steve, and Merv; Count VIII (actual fraud) against BHLC, Steve, and Merv; and Count X (constructive fraud) against BHLC, Steve, and Merv. Brigitte was granted summary judgment on all counts, but as the sole shareholder of BHLC, she remained potentially liable for its actions under a "piercing the corporate veil" theory. Part of the defamation counterclaims also remained for trial. (See Docket ## 69, 70.)
Just prior to the bench trial, however, Keller Farms settled with Steve, concerning their claims and his counterclaims, with no exchange of money, and those claims and counterclaims were dismissed with prejudice on February 22, 2011. (Docket # 107.)
The balance of the case then proceeded to a three-day bench trial on March 1, 2011. The remaining Defendants, however, moved to dismiss their defamation counterclaims during the trial, and there being no objection, they were dismissed with prejudice under Federal Rules of Civil Procedure 41(a)(2) and (c).
At the close of Keller Farm's case in chief and again at the close of all of the evidence, the Defendants orally moved in accordance with Federal Rule of Civil Procedure 52(c) for a judgment on partial findings concerning all claims (except for the breach of warranty claim concerning 7 calves sold on January 31, 2007). The Court granted the motion with respect to the PSA claim, holding that Keller Farms failed to present any evidence that the Defendants' actions had an adverse effect on competition, as is almost universally required for such claims. See Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355, 362 (5th Cir. 2009) (); Farrow v. U.S. Dept. of Agr, 760 F.2d 211, 214 (8th Cir. 1985) (); Pac. Trading Co. v. Wilson & Co., 547 F.2d 367 (7th Cir. 1976); cf. Spencer Livestock Com'n Co. v. Department of Agriculture, 841 F.2d 1451, 1455 (9th Cir. 1988).
Any claim for attorney fees was also removed from the case as a matter of law. See In re Busick, 264 B.R. 518, 524 (Bankr. S.D. Ind. 2001) (); Ind. Glass Co. v. Ind. Mich. Power Co., 692 N.E.2d 886, 889 (Ind. Ct. App. 1998) ().4 The Court then took the remainder of the motions under advisement.
After examining the entire record, considering the arguments of counsel, and determining the credibility of the witnesses, the Court makes the following Findings of Fact and Conclusions of Law in accordance with Federal Rule of Civil Procedure 52(a) based upon a preponderance of the evidence.
For centuries, it has been known that a female calf born twin to a bull will be sterile and unable to breed. (Defs.' Ex. J.) Because such bovine animals—commonly known in the dairy industry as "freemartins"—do not have a complete reproductive tract, they cannot reproduce and give milk. (Id.) Thus, freemartin heifers are useless as dairy cows and are generally consigned to immediate slaughter. (Id.)6
This case concerns the sale of 197 freemartins to Keller Farms, between October 26, 2006, and January 31, 2007. In 2006, the Kellers decided to dramatically bolster the size of their dairy herd from 300 to 800 cows for increased milk production. Because it would take too long to increase the herd by simply breeding existing stock, the Kellers sought to purchase Holstein calves in the marketplace. Generally, the Kellers were interested in baby calves, sometimes called "bucket calves," of generally less than 110 pounds. After learning that BHLC might have suitable calves for sale, Luke called the company and spoke to Steve, its principal sales agent. Luke informed Steve that Keller Farms was looking to build up its dairy herd and inquired if BHLC had "replacement Holstein heifers" for sale. In the dairy industry, a "replacement heifer" is commonly understood to mean a calf that will likely be able to give milk. When Steve confirmed that BHLC had such calves, the Kellers arranged a visit.
BHLC was incorporated on March 14, 2005, and so by the time the Kellers called, BHLC had been in operation for about a year and a half. It was Steve's idea to sell cattle under the name Brigitte Holmes Livestock Company and the reason for such a trade name was simple: Steve has a checkered past in the livestock industry, including a large existing civil judgment stemming (or so he told Brigitte) from check-kiting.7 In any event, Steve was unable to secure any credit to finance the livestock transactions or to obtain the livestock dealer bond under 7 U.S.C. § 204. As a consequence, Steve convinced Brigitte, his wife, to form a corporation naming herself as the sole shareholder and director. Although Brigitte had no prior experience in buying or selling livestock, and little practical experience with dairy cattle, she hoped to eventually learn the business from Steve. In actual practice, however, Steve ran every phase of BHLC, with Brigitte largely relegated by Steve to a book-keeping role.8 Despite this limited role, Brigitte nevertheless kept accurate financial records for BHLC and observed corporate formalities. (Defs.' Ex. E.) BHLC was incorporated by an attorney as a Subchapter S corporation and was, at the time of the sales to the Kellers, in good standing with the Indiana Secretary of State. (Id.) BHLC held itself out as a corporation in its business dealings, was adequately capitalized, and had adequate cash-flow. BHLC was also properly registered with the United States Department of Agriculture, see 7 U.S.C § 203, and secured the statutorily-required bond. See 7 U.S.C § 204. (Pls.' Ex. 2.) Although Brigitte did pay some personal expenses from the BHLC corporate account, these were disclosed on BHLC's informational income tax returns, were primarily done for convenience, and not in disregard of the corporate form.
BHLC also employed Merv as a sales agent and paid him on a commission basis for any livestock sales. Merv, however, had virtually no authority in the operation of the business, would perform a mere clerical role in any sales, and took directions from Steve.
Steve was the one who regularly ordered BHLC's cattle, primarily from Glenview Livestock Company, and by 2006, he was frequently purchasing freemartins. The Glenview Bills of Lading show that Steve was usually the person who received the shipped cattle. (Pls.' Exs. 14, 15, 16.) Glenview would conspicuously designate the freemartins by applying pink livestock marker to the white areas of the calf, such that they appeared almost entirely black and pink. Accordingly, the calves were known to be, and were readily identifiable as, freemartins by both Glenview and Steve. Steve, however, told both Brigitte and Merv that the pink coloration meant that these calves should be separated from bulls and other livestock, and did not reveal to them that they were actually freemartins. The pink coloration would last, depending on the calves' exposure to the weather, for at least several days, and often for weeks. Because there is no market for freemartins, except for slaughter, Steve was able to purchase them for approximately $50 per head from Glenview.
Steve would not test the calves, or allow them to be tested, to verify if they were truly freemartins. Nevertheless, because he specifically ordered them from Glenview,...
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