Pitman Farms v. Kuehl Poultry LLC, File No. 19-cv-3040 (ECT/BRT)

• Decision Date: 18 December 2020
• Docket Number: File No. 19-cv-3040 (ECT/BRT)
• Citation: 508 F.Supp.3d 465
• Parties: PITMAN FARMS, Plaintiff/Counter Defendant, v. KUEHL POULTRY LLC, Rodney Boser, Dan Schlichting, John Tschida, Chris Uhlenkamp, and David Welle, Defendants/Counter Claimants.
• Court: U.S. District Court — District of Minnesota

508 F.Supp.3d 465

PITMAN FARMS, Plaintiff/Counter Defendant,

v.KUEHL POULTRY LLC, Rodney Boser, Dan Schlichting, John Tschida, Chris Uhlenkamp, and David Welle, Defendants/Counter Claimants.

File No. 19-cv-3040 (ECT/BRT)

United States District Court, D. Minnesota.

Signed December 18, 2020

Jeffrey J. Bouslog, Natalie I. Uhlemann, and Archana Nath, Fox Rothschild LLP, Minneapolis, MN; Asher Shepley Anderson, Baker, Manock & Jensen, PC, Fresno, CA, for Plaintiff/Counter Defendant Pitman Farms.

Jack Y. Perry and Maren M. Forde, Taft Stettinius & Hollister LLP, Minneapolis, MN, for Defendants/Counter Claimants Kuehl Poultry LLC, Rodney Boser, Dan Schlichting, John Tschida, Chris Uhlenkamp, and David Welle.

OPINION AND ORDER

Eric C. Tostrud, United States District Judge

Minnesota statutes and a rule promulgated by the Minnesota Department of Agriculture establish parent-company liability for a subsidiary's unmet obligations under specific kinds of agricultural contracts. Minn. Stat. § 17.93, subd. 2 ; Minn. Stat. § 27.133 ; Minn. R. 1572.0040. In other words, when they apply, these authorities override the general rule that a parent corporation is not liable merely by virtue of its status as a parent for the debts of its subsidiary.

The primary issue in this case is whether these authorities apply to chicken-production contracts between Defendants, who are Minnesota chicken growers (and who will be referred to collectively as "the Growers"), and Simply Essentials, LLC, a chicken processor. If these authorities govern the Growers’ contracts with Simply Essentials, then Plaintiff Pitman Farms, a California corporation that is Simply Essentials’ sole member, is liable to the Growers for Simply Essentials’ breaches of the contracts.

Pitman Farms brought this case under the federal Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaration that the Minnesota agricultural "parent-liability" statutes and rule do not govern the Growers’ contracts with Simply Essentials. Pitman Farms argues that the parent-liability authorities do not apply by their own terms, that Delaware law applies regardless, and that applying the Minnesota parent-liability authorities to trigger its liability to the Growers would violate the federal dormant Commerce Clause doctrine. In a counterclaim also brought under the Declaratory Judgment Act, the Growers seek essentially contrary declarations and damages.

The Parties have filed cross-motions seeking summary judgment on their respective declaratory-judgment claims. Pitman Farms also has filed a motion to exclude the Growers’ expert declaration of Daniel S. Kleinberger, Professor Emeritus at Mitchell Hamline School of Law. Pitman Farms’ motion to exclude Professor Kleinberger's declaration will be granted because the Growers’ reliance on the testimony is procedurally improper and because, as the Growers themselves describe it, the declaration offers only impermissible legal opinions. Pitman Farms’ summary-judgment motion will be granted, and the Growers’ cross-motion denied, because the Minnesota parent-liability authorities by their own terms do not apply to the Growers’ contracts with Simply Essentials.

I

The relevant facts are undisputed. The Growers grow chickens and provide them to processing plants. See Am. Compl. ¶ 15 [ECF No. 34]. In 2017, the Growers entered into "broiler production agreements" with Prairie's Best Farms, Inc., a Minnesota chicken processor. Nath Decl., Exs. A1–A7 [ECF No. 60-1]. Pitman Farms was not a party to the broiler production agreements. See id. On November 10, 2017, Simply Essentials purchased the assets of Prairie's Best and assumed the broiler production agreements. Id. , Ex. B [ECF No. 60-2]. Simply Essentials is a limited liability company organized under Delaware law and maintains its headquarters in California. Pitman Decl. in Opp'n ¶ 3 [ECF No. 67]. Pitman Farms was not a party to the asset purchase agreement between Simply Essentials and Prairie's Best. See Nath Decl., Ex. B.

Three days after the asset purchase agreement was executed, Pitman Farms became the sole member of Simply Essentials. Pitman Decl. in Supp. ¶ 2 [ECF No. 59]. "Pitman Farms’ purchase of Simply Essentials[’] membership interests occurred in Iowa," and "the agreement transferring Simply Essentials[’] membership interests to Pitman Farms ... is governed by Delaware law." Id. "Pitman Farms’ officers and directors direct, control, and coordinate the activities of Simply Essentials [ ] on behalf of Pitman Farms in its capacity as the sole member" from Pitman Farms’ California headquarters. Pitman Decl. in Opp'n ¶ 4. In January 2018, Pitman Farms registered to do business in Minnesota "to allow for the completion of payroll related to" an employee working remotely there. Pitman Decl. in Supp. ¶ 3, Ex. A [ECF No. 59-1].

The Growers allege that Simply Essentials "began materially breaching its obligations" under the broiler production agreements "nearly as soon as it assumed" them. Mem. Supp. Mot. to Dismiss at 5 [ECF No. 17]. In 2019, Simply Essentials ceased operating due to financial difficulties.¹ See Nath Decl., Ex. C [ECF No. 60-3]. On June 7, 2019, Simply Essentials notified the Growers in writing that it would terminate the broiler production agreements effective September 5, 2019. See, e.g. , id. , Ex. D [ECF No. 60-4]. Following termination, the Growers sent notices of default to Simply Essentials, addressed to David Pitman, the Secretary of Pitman Farms. Id. , Ex. E [ECF No. 60-5]; Pitman Decl. in Supp. ¶ 1. The Growers estimate that they are collectively owed more than $6 million as a result of Simply Essentials’ alleged breaches of its obligations under the broiler production agreements. Mem. Supp. Mot. to Dismiss at 6.

On December 5, 2019, Pitman Farms commenced this action. Compl. [ECF No. 1]. That same day—after Pitman Farms filed this case—the Growers filed a complaint in Minnesota state district court, Morrison County, asserting breach-of-contract claims against Pitman Farms, Prairie's Best, and Simply Essentials. Tschida Decl., Ex. A [ECF No. 52-1 at 2–59]. Pitman Farms and Simply Essentials filed motions in the state-court action to stay that case pending resolution of this case. ECF Nos. 18-9, 18-11, 29-1 at 1–21. The Growers then filed a motion in the state-court action for partial summary judgment against Simply Essentials and Pitman Farms, including on the issue of whether Pitman Farms is liable under Minnesota law for Simply Essentials’ alleged breaches. ECF No. 29-1 at 110–130. On March 19, 2020, the Morrison County District Court ordered that case stayed "until the related federal court declaratory judgment action is resolved, or until further Order of this Court." Order Granting Motion to Stay Pending Resolution of Federal Court Action ¶ 2, Boser v. Prairie's Best Farms, Inc. , No. 49-cv-19-1751 (Morrison Cnty., Minn.). The Growers then moved to dismiss this action for lack of subject-matter jurisdiction and for failure to join a required party under Federal Rule of Civil Procedure 19. ECF Nos. 15, 35. Alternatively, they argued that the case should not move forward in deference to their state-court suit. Id. The Growers’ motions were denied. ECF No. 37. The Growers subsequently filed their answer and counterclaim. ECF No. 40.

II

It makes sense to start with Pitman Farms’ motion to exclude Professor Kleinberger's declaration because a decision on the motion will determine the record on which the summary-judgment motions will be adjudicated. Pitman Farms advances two arguments in support of its motion: first, that the Growers failed to disclose Professor Kleinberger in compliance with Fed. R. Civ. P. 26(a)(2), and that exclusion is the appropriate remedy under Fed. R. Civ. P. 37(c) ; and second, that the testimony should be excluded under the general rule that expert witnesses are forbidden from offering opinions that are legal arguments and conclusions. See generally Pl.’s Mem. Supp. Mot. to Exclude [ECF No. 76].

A

The Growers’ reliance on Professor Kleinberger violates Rule 26(a)(2) because it contradicts the pretrial scheduling order. ECF No. 47. Under Rule 26(a)(2)(D), expert disclosures must be made "at the times and in the sequence that the court orders." Here, that did not happen. The pretrial scheduling order "incorporates a schedule for early cross-motions for summary judgment ... because the parties represent[ed] that they do not require any fact discovery to support their [motions.] " Pretrial Sched. Order at 4 (emphasis added); see also id. at 1 ("Counsel also explained why they jointly believed that the early cross-motions contemplated would likely resolve the case."). Consistent with the Parties’ representations, the pretrial scheduling order repeatedly makes plain that discovery would occur only if—and then only after—a decision on the summary-judgment motions left the case or some part of it unresolved. Id. at 2 ("The Court engaged counsel in a discussion about the need to include a pretrial schedule that addressed all Rule 16 scheduling requirements in the event the early cross-motions for summary judgment did not resolve the case in its entirety."); 3 ("The parties agreed to immediately discuss the scope of discovery to ensure that relevant information is preserved if any fact discovery is sought following the court's decision on the early cross-motions for summary judgment."); 5–7 (establishing disclosure and discovery deadlines based on the date of a decision on the summary-judgment motions). Even then, Pitman Farms and the Growers made clear that they "d[id] not anticipate calling any expert witnesses" at all, but that if something changed, then each would notify the other of the need for expert discovery after the summary-judgment decision. Id. at 6. In other words, based on the Parties’ representations, the pretrial scheduling order permits discovery only after a decision on the summary-judgment motions. The Growers’ filing of an expert declaration...