Racicky v. Farmland Industries, Inc.

• Decision Date: 01 May 2003
• Docket Number: No. 02-1049.,02-1049.
• Citation: 328 F.3d 389
• Parties: Robert RACICKY and Debra Racicky, Husband and Wife; Greg Racicky and Joyce Racicky, Husband and Wife, d/b/a Elk Creek Dairy, Appellees, v. FARMLAND INDUSTRIES, INC., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

328 F.3d 389

Robert RACICKY and Debra Racicky, Husband and Wife; Greg Racicky and Joyce Racicky, Husband and Wife, d/b/a Elk Creek Dairy, Appellees, v. FARMLAND INDUSTRIES, INC., Appellant.

No. 02-1049.

United States Court of Appeals, Eighth Circuit.

Submitted: October 7, 2002.

Filed: May 1, 2003.

COPYRIGHT MATERIAL OMITTED

John E. Jackson, III, argued, Kansas City, MO (Kirk J. Goza, Kansas City, on the brief), for appellant.

David A. Domina, argued, Omaha, NE, for appellee.

Before McMILLIAN, LAY, and RILEY, Circuit Judges.

RILEY, Circuit Judge.

Robert Racicky, Debra Racicky, Greg Racicky and Joyce Racicky (Racickys) operate a commercial dairy farm in Nebraska and brought a negligence action against Farmland Industries, Inc. (Farmland), a Kansas corporation with its principal place of business in Missouri. The Racickys alleged Farmland's negligent feed ration advice injured their dairy cows. A jury found for the Racickys and calculated their damages in the amount of $778,496, but also found the Racickys to be 10% at fault. Denying Farmland's motion for judgment as a matter of law or, in the alternative, a new trial, the district court entered judgment for the Racickys in the amount of $700,646.40, plus costs and interest. On appeal, Farmland contends the Racickys failed to produce sufficient evidence on the issues of agency, standard of care, proximate cause and lost profits. We conclude the evidence supports the jury's findings on liability and on lost market value damages, but does not support a jury award for lost profits.

I. BACKGROUND

The Racickys operate Elk Creek Dairy, an award-winning commercial Holstein dairy farm in central Nebraska. Greg Sherwood (Sherwood), a sales and marketing manager and a dairy specialist with the Aurora, Nebraska, Cooperative Elevator Company (Co-op), approached the Racickys in April 1996 about providing them feed rations and ration advice to increase milk production for their herd.¹ Thereafter, the Racickys used Sherwood for ration advice. The Racickys claim they hired Sherwood for his access to Farmland technical support. During the relationship, Sherwood used Farmland employees, information, advice, and computer software to prepare rations for the Racickys. Sherwood also provided the Racickys with Farmland brochures, literature and joint Co-op/Farmland advertising. In 1997, after Sherwood nominated the Racickys for a Farmland dairy award, Farmland flew Robert and Debra Racicky to Kansas City to receive the Farmland award.

The Racickys had never purchased Farmland or Co-op corn for their rations until August 1998, at which time they bought corn from Sherwood. The record reveals this new corn was finely ground. After eating the rations with the new corn, the Racickys' cows experienced rumenal acidosis.² The Racickys claim this condition was caused by the new rations, specifically, the fine ground corn which was "too hot" and fermented too fast in the cow's rumen.³ Out of a herd of 219 cows, fifteen of the Racickys' cows died and 151 became very ill after eating the new rations. Some of the 151 sick cows were kept as cull cows (to produce offspring) and others were sold. After August 1998, the Racickys suffered a decrease in milk production, from approximately 23,666 pounds of milk per cow per year to approximately 17,100 pounds of milk per cow per year. Because all four issues in this case are fact-intensive, we will discuss additional facts as necessary to resolve each issue.

II. DISCUSSION

A. Standard of Review

We review de novo the district court's denial of Farmland's post-verdict motion for judgment as a matter of law. Bass v. GMC, 150 F.3d 842, 845 (8th Cir. 1998). We must decide "whether the record contains sufficient evidence to support the jury's verdict." Id. In doing so, "we must examine the sufficiency of the evidence in the light most favorable to the [Racickys] and view all inferences in [their] favor." Id. We must remain mindful that "[j]udgment as a matter of law is appropriate only when all of the evidence points one way and is susceptible of no reasonable inference sustaining the [Racickys'] position." Id. (citations and quotations omitted). As this is a diversity action, we must apply Nebraska negligence law. Jordan v. NUCOR Corp., 295 F.3d 828, 834 (8th Cir.2002).

B. Agency

Farmland argues the Racickys failed to prove Sherwood was Farmland's apparent agent. According to the Nebraska Supreme Court, apparent authority to act as another's agent may only be conferred "if the alleged principal affirmatively, intentionally, or by lack of ordinary care causes third persons to act upon the apparent authority." Franksen v. Crossroads Joint Venture, 245 Neb. 863, 515 N.W.2d 794, 801 (1994). The "apparent authority or agency for which a principal may be liable must be traceable to the principal and cannot be established by the acts, declaration, or conduct of the agent." Id. Furthermore, "[o]ne who is placed on inquiry as to an agent's or employee's authority, and who has reasonable means of making inquiry, occupies the same position in law as if he had actual knowledge of the employee's lack of authority, because he is charged with knowledge of the facts which the inquiry would have developed." Id.

Acknowledging the closeness of the apparent agency issue, we find the record contains sufficient evidence to support the district court's decision to submit the agency question to the jury. Although Farmland makes a compelling argument that the record does not support a finding of apparent agency, this argument was for the jury, who rejected it.

Sherwood first visited the Racickys' farm in April 1996, and gave them his Co-op business card. At times two others, Jeff Wheeler (Wheeler) and Vaughn Studer (Studer), visited Racickys' farm with Sherwood, their business cards showed they were Farmland employees. After the Racickys hired Sherwood, they only paid the Co-op for materials and services, and did not establish a financial relationship with Farmland. This evidence tends to negate an inference of apparent agency.

The record also contains evidence supporting the Racickys' claim that Sherwood was Farmland's agent. Sherwood, Studer, and Wheeler each gave Farmland brochures to the Racickys. Sherwood nominated the Racickys for a Farmland dairy award, which Farmland presented to the Racickys in 1997. Farmland provided Robert and Debra Racicky an all-expenses paid trip to Kansas City to receive their award at a Farmland banquet. At this event, Farmland gave the Racickys information and gifts. The Racickys could have reasonably inferred Farmland was bestowing gifts and awards to them based on Sherwood's recommendation.

The Co-op was a Farmland associated co-op, authorized to use Farmland's logos, brand name, advertisements and literature. Farmland also developed joint advertisements for the Co-op to use. A Farmland advertisement included the following words: "Technical Services — People are our most valuable resource." Under this heading, Farmland listed a number of positions, including: "Local Retail Sales Specialists (Contact the Nearest VIP Account)." The Aurora Coop was considered a Farmland VIP account.

Sherwood used Farmland on a regular basis to create, modify and build rations. Sherwood sometimes submitted his rations directly to Farmland for advice and other times he would just talk to Farmland on the telephone. In building the Racickys' rations, Sherwood used the Brill computer program acquired from Farmland, and he had unlimited access to Farmland's technical support regarding the computer program. When Sherwood designed a ration using the computer program, the printouts he gave to the Racickys were entitled "Farmland Industries Suggested Batch Sheet" and "Farmland's Summary of Suggested Rations."

Farmland assisted Sherwood by giving him direct access to its veterinarians and its research and feed consultants, which Robert Racicky testified was important and induced him to hire Sherwood. Sherwood consistently availed himself of Farmland's services, which cemented the Racickys' belief that Sherwood was Farmland's agent.⁴ Sherwood also visited the Racickys' farm with Farmland employees, whom Sherwood consulted before giving his ration advice to the Racickys.

When asked whether his decision to use Sherwood was based on anything Farmland did, Robert Racicky said, "I went with Sherwood because, you know, I wanted all this experience that was behind Aurora's Co-op with Farmland." When asked whether Sherwood was from the Coop, Robert said, "Not necessarily from — I mean, how do you look at Aurora Co-op and Farmland? They are both the same thing."

Viewing the evidence in the Racickys' favor and giving them the benefit of all reasonable inferences, a jury could reasonably infer the Racickys used Sherwood because they believed he was Farmland's agent. Whether Farmland led the Racickys to believe Sherwood was Farmland's agent was properly submitted to the jury.

C. Negligence

1. Standard of Care

In a negligence case involving an "alleged tort-feasor [who] possesses special knowledge, skill, training, or experience," the standard of care is not that "of a reasonably prudent person," but that of a person with "specialized knowledge, skill, and other qualities." Cerny v. Cedar Bluffs Junior/Senior Pub. Sch., 262 Neb. 66, 628 N.W.2d 697, 704 (2001). Farmland argues Sherwood's ration advice in August 1998 regarding fine ground corn did not breach the applicable standard of care. The Racickys counter that Sherwood controlled the rations, which rations were "too hot" because of a high concentrate level based on the fine ground grain. Under Nebraska law, the applicable standard of care for Sherwood's ration advice was whether a reasonable dairy feed specialist, with specialized knowledge, skill, training and experience, would have recommended using rations with the size of grain particles actually fed to the Racickys' dairy herd in August 1998.

Negligence...