Philson v. Cold Creek Farms, Inc.

• Decision Date: 31 July 1996
• Docket Number: No. 4:95-CV-16-H1.,4:95-CV-16-H1.
• Citation: 947 F.Supp. 197
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: Clarence R. PHILSON, Jr. and Clarence R. Philson, Sr., d/b/a Philson's Farms, and Steve Grady, Plaintiffs, v. COLD CREEK FARMS, INC., Maxwell Foods, Inc., Maxwell Farms, Inc., and Carroll's Processing, Inc. d/b/a Carolina Turkeys in Duplin County, North Carolina<SMALL><SUP>1</SUP></SMALL>, Defendants.

947 F.Supp. 197

Clarence R. PHILSON, Jr. and Clarence R. Philson, Sr., d/b/a Philson's Farms, and Steve Grady, Plaintiffs, v. COLD CREEK FARMS, INC., Maxwell Foods, Inc., Maxwell Farms, Inc., and Carroll's Processing, Inc. d/b/a Carolina Turkeys in Duplin County, North Carolina¹, Defendants.

No. 4:95-CV-16-H1.

United States District Court, E.D. North Carolina, Eastern Division.

July 31, 1996.

Robert J. Willis, Raleigh, NC, for plaintiffs.

John A.J. Ward, Ward & Smith, New Bern, NC; Christina L. Adams, Ward & Smith, Wilmington, NC, for defendants.

ORDER

MALCOLM J. HOWARD, District Judge.

This matter is before the court on the motion of defendants Cold Creek Farms, Inc. and Maxwell Foods, Inc. for partial summary judgment. Plaintiffs have filed their response and this matter is now ripe for adjudication.

STATEMENT OF THE CASE²

Plaintiffs Clarence R. Philson, Jr., Clarence R. Philson, Sr. (the "Philsons"), and Steve Grady ("Grady") are turkey growers. Defendants are various entities involved in the turkey growing and processing business. In 1989, the Philsons and Grady entered into two separate agreements with defendant Cold Creek Farms, Inc. ("CCF")³. Under the terms of these agreements, the Philsons and Grady agreed to grow poults provided by CCF, with feed, medication, and services provided by CCF, and according to CCF standards. In return, CCF agreed to compensate the plaintiffs for all "marketable turkeys" grown. It was also agreed that compensation would be determined according to the weight of the turkeys on the purchaser's scale. Compl.Ex. 1 at 1. Defendant Carolina Turkeys was a purchaser at all times relevant to this lawsuit. Carolina Turkeys is a partnership between defendants Maxwell Farms, Inc. ("MFI") and Carroll's Processing, Inc. ("CPI").

While Grady still grows turkeys for CCF, CCF terminated its agreement with the Philsons in 1992. In 1994, the Philsons attempted to certify a class action lawsuit against CCF, Goldsboro Milling Company ("GMC"), MFI, and CPI in Lenoir County Superior Court. Plaintiffs commenced the above-captioned federal action on February 17, 1995, and voluntarily dismissed the state action five days thereafter.

In their complaint before this court, plaintiffs contend defendants unfairly and deceptively utilized a different method for calculating the number of turkeys sold when calculating the number for grower payment purposes than when calculating the number for USDA reports and load reports. Id. ¶ 47. In addition, plaintiffs contend defendants failed to weigh their birds in a timely manner and in accordance with applicable federal regulations thereby decreasing plaintiffs' compensation. Id. ¶¶ 20-21. The Philsons complained to GMC and CCF about both of these practices prior to the institution of this lawsuit. Id. ¶ 30. Plaintiffs allege GMC, CCF and/or Sleepy Creek Turkeys, Inc. ("SCT") knowingly furnished plaintiffs with low quality turkey poults and terminated the Philsons' turkey growing agreement in retaliation for the Philsons' vocalization of their grievances. Id. ¶¶ 10-12, 33.

Plaintiffs assert the above-stated acts of defendants constitute violations of both federal and state law, including the following claims for relief: (1) tortious termination and breach of contract; (2) unfair or deceptive trade practices; (3) violation of the Packers and Stockyards Act ("PSA"), 7 U.S.C. § 181, et seq.; (4) fraud; and (5) negligence. In an order filed July 26, 1996, this court dismissed all claims against defendants GMC and SCT and dismissed plaintiffs' breach of contract and fraud claims against defendants MFI and CPI. The court will now address the motion of defendants CCF and Maxwell Foods for partial summary judgment.

DISCUSSION

Summary judgment is appropriate when there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The party seeking summary judgment bears the burden of initially coming forward and demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Ross v. Communications Satellite Corp., 759 F.2d 355, 364 (4th Cir.1985). When making the summary judgment determination, the facts and all reasonable inferences must be viewed in the light most favorable to the non-movant. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513.

Once the moving party has met its burden, the non-moving party must then affirmatively demonstrate that there is a genuine issue of material fact which requires trial. Matsushita Electric Industrial Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. Anderson, 477 U.S. at 250, 106 S.Ct. at 2511. The moving party can bear his burden either by presenting affirmative evidence, or by demonstrating that the non-movant's evidence is insufficient to establish his claim. Celotex Corp., 477 U.S. at 331, 106 S.Ct. at 2557 (Brennan, J., dissenting). If the moving party makes a sufficient showing that there is an absence of evidence to support the non-moving party's case, the non-moving party may not rest upon mere allegations or denials in his pleadings, but must set forth specific facts showing there is a genuine issue for trial. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514.

In their complaint, plaintiffs contend CCF⁴ is liable for violating § 192(a) of the PSA, § 75-1.1 of the North Carolina General Statutes, for breach of contract, tortious termination of the Philsons' contract, fraud, and negligence. These claims are premised upon five alleged acts: (1) failure to weigh turkeys grown by plaintiffs immediately upon arrival; (2) failure to properly load, transport, and otherwise handle turkeys grown by plaintiffs; (3) providing plaintiffs with low quality poults; (4) using an unfair and inaccurate method of computing the number of "head sold"; and, (5) wrongful termination of the Philsons' contract. CCF seeks summary judgment on all claims except plaintiffs' second assertion regarding the handling of turkeys grown by plaintiffs.

I. Plaintiffs' Claims Under the PSA

Section 192(a) of the PSA provides, "[i]t shall be unlawful with respect to ... poultry products for any packer or any live poultry dealer or handler to ... [e]ngage in or use any unfair, unjustly discriminatory, or deceptive practice or device." 7 U.S.C. § 192(a) (1980). A "live poultry dealer" is defined by the PSA as "any person engaged in the business of obtaining live poultry by purchase or under a poultry growing arrangement for the purpose of either slaughtering it or selling it for slaughter by another...." 7 U.S.C. § 182(10) (Supp.1996). As both CCF and Carolina Turkeys fall within the parameters of the PSA's live poultry dealer definition, both are subject to the prohibitions of § 192(a).

The PSA was enacted in 1921 to regulate the business of packers by forbidding them from engaging in "unfair, discriminatory, or deceptive practices in [interstate] commerce, or to subject any person to unreasonable prejudice therein, or to do any of a number of acts to control prices or establish a monopoly in the business." Stafford v. Wallace, 258 U.S. 495, 513, 42 S.Ct. 397, 401, 66 L.Ed. 735 (1922). "The chief evil feared [in 1921 was] the monopoly of the packers, enabling them unduly and arbitrarily to lower prices to the shipper, who sells, and unduly and arbitrarily to increase the price to the consumer, who buys." Id., 258 U.S. at 514-15, 42 S.Ct. at 401. Section 192(a)'s broad mandate against unfair, unjustly discriminatory or deceptive practices in the poultry business, which was added to the PSA in 1935, must therefore be construed against the backdrop of the corruption the Act was intended to prevent. Consequently, only those unfair, discriminatory or deceptive practices adversely affecting competition are prohibited by the Act. Pacific Trading Company v. Wilson and Company, Inc., 547 F.2d 367, 369 (7th Cir.1976); De Jong Packing Co. v. U.S. Department of Agriculture, 618 F.2d 1329, 1336-37 (9th Cir.1980); Farrow v. U.S. Department of Agriculture, 760 F.2d 211, 214 (8th Cir.1985); Jackson v. Swift Eckrich, Inc., 53 F.3d 1452, 1458 (8th Cir.1995) (quoting Jackson v. Swift-Eckrich, Inc., 836 F.Supp. 1447, 1456 (W.D.Ark.1993)).

Plaintiffs contend CCF has violated the PSA by: (1) failing to weigh the turkeys grown by plaintiffs immediately upon their arrival at the slaughterhouse; (2) failing to properly load, transport, and otherwise handle the turkeys grown by plaintiffs; (3) providing the plaintiffs with low quality poults; (4) using an unfair and inaccurate method of computing the number of "head sold"; and, (5) wrongfully terminating the Philsons' contract. CCF asserts all of plaintiffs' claims, except the allegation regarding the loading and transporting of the turkeys, are either "factually or legally unsupported or are not, as a matter of law, violations of the Act and, thus, may be adjudicated summarily." Defs.' Mem.Supp.Mot.Partial Summ.J. at 12.

In a general sense, CCF appears to contend that the only activities for which it may be held liable under the PSA are those activities explicitly addressed by 9 C.F.R. § 201.82. Section 201.82, which is entitled "[c]are and promptness in weighing and handling livestock and live poultry," provides,

(a) Each stockyard owner, market agency, dealer, packer and live poultry dealer shall exercise reasonable care and promptness with respect to loading, transporting, holding, yarding, feeding, watering, weighing or otherwise handling livestock or live poultry to prevent waste of feed, shrinkage, injury, death or other avoidable loss. (b) Whenever live poultry is obtained under a poultry growing...