S & A Farms, Inc. v. Farms.com, Inc.

• Decision Date: 17 June 2011
• Docket Number: No. 4:09–cv–497.,4:09–cv–497.
• Citation: 862 F.Supp.2d 898
• Court: U.S. District Court — Southern District of Iowa
• Parties: S & A FARMS, INC., Plaintiff, v. FARMS.COM, INC., a North Carolina Corporation and Farms.Com Risk Management, Ltd., a Canadian Federal Corporation, Defendants.

862 F.Supp.2d 898

S & A FARMS, INC., Plaintiff,

v.FARMS.COM, INC., a North Carolina Corporation and Farms.Com Risk Management, Ltd., a Canadian Federal Corporation, Defendants.

No. 4:09–cv–497.

United States District Court,

S.D. Iowa,

Central Division.

June 17, 2011.

Gail E. Boliver, Boliver & Bidwell Law Firm, Marshalltown, IA, William J. Bolotin, Doyle & Bolotin Ltd., Chicago, IL, Brian P. Rickert, Brown Winick Graves Gross Baskerville & Schoenebaum PLC, Bridget R. Penick, Richard A. Malm, Dickinson Mackaman Tyler & Hagen PC, Des Moines, IA, for Defendants.

Brant D. Kahler, Brian P. Rickert, Brown Winick Graves Gross Baskerville & Schoenebaum PLC, Des Moines, IA, for Defendants.

ORDER

ROBERT W. PRATT, Chief Judge.

Before the Court is a Motion for Summary Judgment, filed on March 11, 2011 by Farms.com Risk Management, Ltd. (“Defendant”).¹ Clerk's No. 39. S & A Farms, Inc. (“Plaintiff”) filed a resistance to the Motion on April 1, 2011. Clerk's No. 42. Defendant filed a Reply on April 8, 2011. Clerk's No. 43. The matter is fully submitted.

I. FACTUAL BACKGROUND

Plaintiff is an Iowa corporation that is in the business of producing corn and both producing and selling soybeans and hogs. Def.'s Statement of Material Facts in Support of Mot. for Summ. J. (hereinafter “Def.'s Facts”) ¶¶ 1, 4; Pl.'s Resp. to Def.'s Facts ¶ 4. It was formed in 1992 by Scott Renaud (“Renaud”) and Abbie Renaud (collectively “the Renauds”), who are its sole officers, directors, and shareholders. Def.'s Facts ¶ 2. Renaud is the Plaintiff's sole employee. Id. ¶ 3. Renaud did not attend college, other than two eight-week programs for farmers. Pl.'s Statement of Material Facts in Resp. to Def.'s Mot. for Summ. J. (hereinafter “Pl.'s Facts”) ¶ 33. He did not have any formal training in hedging or risk management techniques, but had been involved in—and had prior experience with—commodities trading with three different brokers in years prior to 2007. Id.; Def.'s Resp. to Pl.'s Facts ¶ 33.

At some point in time, Howard Vroom (“Vroom”), a local feed salesman, introduced Renaud to Victor Aideyan (“Aideyan”),² the Senior Consultant/Manager for Defendant. Def.'s Facts ¶ 5. In a brochure, Defendant stated that it was “an agricultural commodity marketing and price risk management service provider for farmers, producers and agribusiness across North America.” Pl.'s Facts ¶ 1. In marketing materials, Aideyan was listed as a “Senior Risk Management Consultant” on Defendant's “Risk Management Team,” with “over 14 years experience in commodity trading and marketing.” Id. ¶ 4.

In September 2007, Vroom arranged a meeting at Defendant's Ames, Iowa office between Renaud, Aideyan, and Jack Ticky (“Ticky”), another employee of Defendant. Def.'s Facts ¶ 6. In attending this meeting, Renaud advised Aideyan that Plaintiff was increasing the size of its hog production and needed risk management advice. Pl.'s Facts ¶ 8. Renaud wanted Aideyan and Ticky to explain how Defendant could help provide risk management services in relation to the corn he purchased to feed Plaintiff's hogs.³ Def.'s Facts ¶ 7. On September 17, 2007, Aideyan and Renaud executed a Price Risk Management Service Letter (hereinafter the “Contract”), wherein Defendant agreed to provide, and Plaintiff agreed to purchase, consulting services related to the corn inputs and hog outputs involved in Plaintiff's operation.⁴Id. ¶ 11. On September 19, 2007, Defendant sent an invoice to the Renauds requesting payment in the amount of $2,000.00, in relation to “Risk Management Services and Consulting for Hogs and Inputs” for the period September 17, 2007 to March 17, 2008. Id. ¶ 13; Pl.'s Facts ¶ 10. Plaintiff paid the invoice, via a check made out to “Farms.com Risk Management,” on September 20, 2007. Def.'s Facts ¶ 14. Also on September 20, 2007, Aideyan sent an External Memorandum to the Renauds, outlining in more detail the services that Defendant would be providing. Id. ¶ 12. On March 27, 2008, Aideyan sent another invoice to the Renauds, requesting payment in the amount of $4,000.00, for Defendant's “Elite Service Hog Program,” for the period of March 17, 2008 to March 17, 2009. Id. ¶ 15; Pl.'s Facts ¶ 11. Plaintiff paid the invoice, via a check made out to “Farms.com Risk Management,” on April 10, 2008. Def.'s Facts ¶ 16.

Shortly after the September 2007 meeting between Renaud, Aideyan, and Ticky, Renaud established and opened a commodities trading account with MF Global, Inc. (“MF Global”).⁵Id. ¶ 17. Only Renaud was authorized to make trades in the MF Global account. Id. ¶ 18. Thus, after discussing potential trades and positions with Aideyan, Renaud would call MF Global and execute trades. Id. ¶ 19. On occasion, Aideyan would either contact MF Global in advance, or participate in the calls to MF Global to ensure that Renaud accurately communicated Plaintiff's desired trade. Id.; Pl.'s Facts ¶¶ 23–24. In September 2008, Aideyan left his employment with Defendant. Def.'s Facts ¶ 20. Thereafter, Maurizo Agostino (“Agostino”) provided services to Plaintiff. ⁶Id. ¶ 21.

Renaud, at times, provided copies of Plaintiff's MF Global account statements so that Aideyan could monitor the trades made on the account. Pl.'s Facts ¶ 22; Def.'s Resp. to Pl.'s Facts ¶ 22. Aideyan acknowledged in his deposition that he regularly discussed trades with Renaud and that the trading strategy reflected in the MF Global account was the strategy developed by Defendant. ⁷ Pl.'s Facts ¶ 18. All of the trades reflected in Plaintiff's MF Global account, save for one cotton trade on October 21, 2008, were recommended to Renaud by either Aideyan or Agostino.⁸Id. ¶ 21; Def.'s Resp. to Pl.'s Facts ¶ 21.

On February 24, 2009, Plaintiff unilaterally liquidated its positions and stopped obtaining and relying on advice from Defendant. Id. ¶ 23. Between September 20, 2007 and February 24, 2009, Plaintiff's accountwith MF Global incurred a net loss of $1,040,958.75. Pl.'s Facts ¶ 28.

On December 8, 2009, Plaintiff filed a Complaint in this Court alleging that Defendant is liable to Plaintiff for violating the Commodity Exchange Act (“CEA”), 7 U.S.C. § 1 et seq.See Compl. ¶¶ 16–26. Specifically, Plaintiff claims that Defendant failed to disclose that it was required to register with the Commodity Futures Trading Commission (“CFTC”), but had not so registered, and additionally failed to disclose its trading experience and other material information required by the CFTC regulations.⁹Id. ¶¶ 23–24. According to Plaintiff, had it known that Defendant was operating in violation of the CEA, it never would have done business with Defendant. Id. ¶ 23. Plaintiff further asserts claims against Defendant under Iowa law for breach of fiduciary duty, negligence, and misrepresentation. Id. ¶¶ 27–51.

II. STANDARD FOR SUMMARY JUDGMENT

The term “summary judgment” is something of a misnomer. See D. Brock Hornby, Summary Judgment Without Illusions, 13 Green Bag 2d 273 (Spring 2010). It “suggests a judicial process that is simple, abbreviated, and inexpensive,” while in reality, the process is complicated, time-consuming, and expensive. ¹⁰Id. at 273, 281. The complexity of the process, however, reflects the “complexity of law and life.” Id. at 281. “Since the constitutional right to jury trial is at stake,” judges must engage in a “paper-intensive and often tedious” process to “assiduously avoid deciding disputed facts or inferences” in a quest to determine whether a record contains genuine factual disputes that necessitate a trial. Id. at 281–82. Despite the seeming inaptness of the name, and the desire for some in the plaintiffs' bar to be rid of it, the summary judgment process is well-accepted and appears “here to stay.” ¹¹Id. at 281. Indeed, “judges are duty-bound to resolve legal disputes, no matter how close the call.” Id. at 287.

Federal Rule of Civil Procedure 56(a) provides that “[a] party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought.” ¹² “[S]ummary judgment is an extreme remedy, and one which is not to be granted unless the movant has established his right to a judgment with such clarity as to leave no room for controversy and that the other party is not entitled to recover under any discernible circumstances.” Robert Johnson Grain Co. v. Chem. Interchange Co., 541 F.2d 207, 209 (8th Cir.1976) (citing Windsor v. Bethesda Gen. Hosp., 523 F.2d 891, 893 n. 5 (8th Cir.1975)). The purpose of summary judgment is not “to cut litigants off from their right of trial by jury if they really have issues to try.” Poller v. Columbia Broad. Sys., Inc., 368 U.S. 464, 467, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962) (quoting Sartor v. Ark. Natural Gas Corp., 321 U.S. 620, 627, 64 S.Ct. 724, 88 L.Ed. 967 (1944)). Rather, it is designed to avoid “useless, expensive and time-consuming trials where there is actually no genuine, factual issue remaining to be tried.” Anderson v. Viking Pump Div., Houdaille Indus., Inc., 545 F.2d 1127, 1129 (8th Cir.1976) (citing Lyons v. Bd. of Educ., 523 F.2d 340, 347 (8th Cir.1975)). Summary judgment can be entered against a party if that party fails to make a showing sufficient to establish the existence of an element essential to its case, and on which that party will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Federal Rule of Civil Procedure 56 mandates the entry of summary judgment upon motion after there has been adequate time for discovery. Summary judgment is appropriately granted when the record, viewed in the light most favorable to the nonmoving party and giving that party the benefit of all reasonable inferences, shows that there is no genuine issue of material fact, and that the moving party is therefore entitled to judgment as a matter of law. SeeFed.R.Civ.P. 56(a); Harlston v. McDonnell Douglas Corp., 37 F.3d 379, 382 (8th Cir.1994). The Court does...