Rolling Meadow Ranch, Inc. v. Pro AG Mgmt.
| Decision Date | 23 March 2020 |
| Docket Number | 8:19CV39 |
| Parties | ROLLING MEADOW RANCH, INC., Plaintiff, v. PRO AG MANAGEMENT, Defendant. |
| Court | U.S. District Court — District of Nebraska |
This matter is before the Court on defendant Pro Ag Management's ("Pro Ag") Motion for Partial Summary Judgment (Filing No. 43). Pro Ag seeks summary judgment on claims raised in plaintiff Rolling Meadow Ranch, Inc.'s ("Rolling Meadow") Complaint (Filing No. 1-A) and on its own counterclaims (Filing No. 6) against Rolling Meadow. Rolling Meadow has requested a hearing (Filing No. 52). For the reasons stated below, Pro Ag's motion is denied without a hearing.
Rolling Meadow, a Florida corporation, owns approximately 2,500 acres of "agricultural real estate" in Lincoln County, Nebraska (the "farm"). Rolling Meadow leased the farm to Pro Ag from 2016 to 2018 under various written leases. In its brief, Rolling Meadow expends great energy discussing the nature of Pro Ag's business structure when it leased the farm.
In early 2016, Rolling Meadow sent Pro Ag's Chief Financial Officer Ben Hendrix ("Hendrix") a lease agreement ("2016 lease") which identified Hendrix's company as "Pro Ag Management, a Colorado partnership." Pro Ag maintains no such partnership exists. According to Pro Ag, Hendrix emailed Rolling Meadow proposed amendments for that lease (Filing No. 45-2), including one to amend the name of the tenant to what Pro Ag contends is the company's proper name—"Progressive Agricultural Management, a Colorado corporation."1 (Emphasis added).
Rolling Meadow denies it ever received Hendrix's proposed changes. On February 2, 2016, Hendrix signed the 2016 lease as is. The parties entered into two subsequent written leases in 2017 and 2018 ("2018 lease"),2 both which listed the tenant as Pro Ag Management, a Colorado partnership.
Rolling Meadow now contends Pro Ag failed to notify Rolling Meadow "that the name of the tenant was ever incorrect or mistaken." Rolling Meadow asserts "for liability purposes it executes lease agreements with partnerships." In short, Rolling Meadow alleges Pro Ag fraudulently represented its business structure. The argument is irrelevant to the Court's resolution of the present motion and the Court will not consider it further here.
The 2018 lease is at issue in this case. Rolling Meadow leased the farm to Pro Ag to grow crops such as popcorn. The 2018 lease required Pro Ag to operate "in accordance with the principles of good farming" and "best husbandry practices." Pro Ag agreed to "prevent noxious weeds from going to seed" and to destroy them.
Two provisions of the 2018 lease granted Rolling Meadow a right to a lien on Pro Ag's crops. Paragraph seven of the 2018 lease granted Rolling Meadow "a lien on all crops produced by [Pro Ag] for the value of any annual rent and any other obligations of Pro Aghereunder." Paragraph fifteen3 of the 2018 lease provided Rolling Meadow "shall have a lien upon all crops, goods, chattels, or personal property of any description belonging to [Pro Ag] . . . as a security for rent due" if Pro Ag failed to make "any rental payments."
The 2018 lease also required Rolling Meadow to "cooperate and execute Popcorn contracts on three varieties with Con Agra"4 and Pro Ag to grow popcorn as directed by Conagra "so, as not to jeopardize [Rolling Meadow's] good standing with Con Agra." Rolling Meadow further agreed to "forward all proceeds and bonuses from the contracts" to Pro Ag. Thus, under the lease, Pro Ag would grow the popcorn for Conagra, Conagra would pay the proceeds to Rolling Meadow, and Rolling Meadow would forward those proceeds to Pro Ag.
Rolling Meadow alleges over the course of the time Pro Ag leased the farm, Pro Ag "failed to maintain and grow crops on the farm in accordance with the industry standards of good farming and the principles of good husbandry" and did not prevent "noxious weeds from going to seed and destroy" them. Rolling Meadow asserts that as a result, Palmer Amaranth, a noxious weed, infested the farm at a level "so severe that [Rolling Meadow] lost its good standing with Conagra due to the necessary remediation actions that needed to occur."
In August 2018, Rolling Meadow filed a Uniform Commercial Code Financing Statement ("financing statement") with the Nebraska Secretary of State against Pro Ag as the debtor and listing as collateral "all crops, . . . goods, chattels, or personal property" on the farm. Rolling Meadow asserts it filed the financing statement "as security against [ProAg]'s failure to maintain the [farm] in accordance with the industry standard" resulting in the Palmer Amaranth outbreak.
Pro Ag sold its 2018 popcorn crop to Conagra, and Conagra paid Rolling Meadow the proceeds. Specifically, Conagra paid Rolling Meadow $278,432.42 on December 6, 2018, and $221,952.27 on May 6, 2019.5 Conagra also paid Rolling Meadow $2,606.04 for Pro Ag's unused popcorn seed (collectively, "Conagra proceeds").
After Conagra paid Rolling Meadow, Rolling Meadow did not forward Pro Ag any of the Conagra proceeds because, according to Rolling Meadow, they are "subject to the UCC lien against Pro Ag." In Rolling Meadow's view, Pro Ag is obligated to pay Rolling Meadow's damages from eradicating the Palmer Amaranth. Rolling Meadow says it spent approximately $180,000 in 2018 and $255,000 in 2019 remediating the Palmer Amaranth and estimates it will take at least another $1,000,000 and an additional four years to complete remediation. Pro Ag denies it is responsible for the noxious-weed outbreak or owes Rolling Meadow any money for it.
On December 28, 2018, Rolling Meadow sued Pro Ag in the District Court of Lincoln County, Nebraska. On January 25, 2019, Pro Ag removed (Filing No. 1) the case to this Court alleging diversity jurisdiction. See 28 U.S.C. §§ 1332(a) and 1446.6
In its complaint, Rolling Meadow asserts claims for breach of contract, negligence, and setoff. Relevant here, Rolling Meadow alleges Pro Ag breached and negligentlyperformed under the leases in numerous ways, such as those relating to the Palmer Amaranth, causing both past and future damages. Rolling Meadow also asserts it is entitled to "a setoff" under the 2018 lease "against any damages suffered by [it] due to the default and breach of contract and/or negligence of [Pro Ag]." Specifically, Rolling Meadow seeks to use the Conagra proceeds subject to its financing statement to setoff its damages in this case.7
On February 1, 2019, Pro Ag filed an answer and counterclaim against Rolling Meadow asserting claims for (1) breach of contract, (2) restitution and unjust enrichment, and (3) conversion. Pertinent to the present motion, Pro Ag alleges Rolling Meadow breached the 2018 lease and has exercised "an unauthorized and wrongful act of dominion" over Pro Ag's property by failing to forward the Conagra proceeds.
Pro Ag now seeks partial summary judgment on Rolling Meadow's setoff claim and its own counterclaims for breach of contract and conversion. Pro Ag contends it must prevail on these claims as a matter of law because Rolling Meadow has inappropriately attempted to setoff its unliquidated claims for damages (from the Palmer Amaranth) with a liquidated amount (the Conagra proceeds).
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute of material fact exists "if there is enough evidence 'that a reasonable jury could return a verdict for the nonmoving party.'" Farverv. McCarthy, 931 F.3d 808, 811 (8th Cir. 2019) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
The movant bears the burden of showing the absence of a genuine dispute of material fact. See id. If the movant satisfies that burden, the nonmoving party must "set forth affirmative evidence, specific facts, showing that there is a genuine dispute on that issue." Moore v. Martin, 854 F.3d 1021, 1025 (8th Cir. 2017) (quoting Counts v. MK-Ferguson Co., 862 F.2d 1338, 1339 (8th Cir. 1988)). The Court views the facts and "makes all reasonable inferences 'in the light most favorable to the nonmoving party.'" Hustvet v. Allina Health Sys., 910 F.3d 399, 406 (8th Cir. 2018) (quoting Bunch v. Univ. of Ark. Bd. of Trs., 863 F.3d 1062, 1066 (8th Cir. 2017)).
The parties agree Nebraska law governs this diversity action. See Perry v. Johnston, 641 F.3d 953, 955 (8th Cir. 2011) (). Pro Ag's motion stands on its proposition that, under Nebraska law, a party cannot setoff an unliquidated claim with a liquidated claim without some independent legal authority. As framed by the parties, the success of Pro Ag's motion depends on whether (1) Nebraska law does generally bar the setoff in this case and (2) the 2018 lease nonetheless authorizes Rolling Meadow's attempted setoff. As explained below, the Court finds a genuine dispute of material fact regarding the latter.
The Court will first consider Pro Ag's contention that Nebraska law generally bars Rolling Meadow's attempted setoff because a party cannot setoff an unliquidated claim with a liquidated claim as a matter of law. Pro Ag draws that principle from a garnishment case, Davis Erection Co. v. Jorgensen, 534 N.W.2d 746, 751 (Neb. 1995). In Davis, the Nebraska Supreme Court recognized the common-law principle that, as a general matter, an "unliquidated claim cannot be set off against a liquidated claim." Id.
Rolling Meadow does not challenge whether the principle from Davis applies in this case, so the Court will assume it does. Rolling Meadow instead argues its setoff survives because its claims are...
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