Top of Iowa Co-Op. v. Schewe
| Citation | 149 F.Supp.2d 709 |
| Decision Date | 19 June 2001 |
| Docket Number | No. C 96-3146-MWB.,C 96-3146-MWB. |
| Parties | TOP OF IOWA COOPERATIVE, an Iowa cooperative, Plaintiff, v. Virgil E. SCHEWE, Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Sean P. Moore, Brenton D. Soderstrum, Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C., Des Moines, IA, for plaintiff.
Matthew L. Benda, Peterson, Savelkoul, Schlichting & Davies, Ltd., Albert Lee, MN, Robert P. Malloy, Malloy Law Firm, Goldfield, IA, for defendant.
TABLE OF CONTENTS
I. BACKGROUND .............................................................. 713
II. LEGAL ANALYSIS .......................................................... 713
A. Top Of Iowa's Motion For Judgment As A Matter Of Law ................. 713
1. Arguments of the parties .......................................... 713
2. Applicable standards .............................................. 714
3. Sufficiency of the evidence ....................................... 717
a. Evidence of a fiduciary relationship ........................... 717
b. Evidence of breach of a fiduciary duty ......................... 719
4. Damages ........................................................... 719
B. Schewe's Post-Trial Motion ........................................... 720
1. The legal bar to Top of Iowa's recovery ........................... 721
a. Preservation of the issue for post-trial consideration ......... 721
b. Effect of the finding of breach of fiduciary duty .............. 722
2. Sufficiency of the evidence of Schewe's breach of contract ........ 725
a. "Meeting of the minds" ......................................... 726
b. Top of Iowa's adequate performance ............................. 727
c. Failure to provide Schewe with an opportunity to deliver
grain ......................................................... 727
3. Inconsistency of the verdicts ..................................... 727
a. Applicable standards ........................................... 728
b. Application of the standards ................................... 728
III. CONCLUSION .............................................................. 729
Following a trial in a case involving socalled "hedge-to-arrive" or HTA contracts for the sale and purchase of grain, a jury returned a verdict in favor of the plaintiff elevator on its claim that the defendant producer breached the contracts, but also entered a verdict in favor of the producer on his counterclaim that the elevator breached its fiduciary duty by failing to disclose material information concerning the "riskiness" of the HTAs. Both parties have filed post-trial motions, the producer for judgment as a matter of law, amendment of the judgment, or new trial on the elevator's breach-of-contract claim, and the elevator for judgment as a matter of law on the producer's breach-of-fiduciary-duty counterclaim. The thread running through the motions, in addition to the common assertion that the evidence is insufficient to sustain unfavorable portions of the verdict, is the question of the effect of the finding that the elevator breached its fiduciary duty upon the elevator's claim (and the jury's verdict) that the producer breached the contracts at issue.
This matter came to trial on April 2, 2001, on plaintiff Top of Iowa Cooperative's claim of breach of contract against defendant Virgil Schewe and Schewe's counterclaims of breach of contract and breach of fiduciary duty against Top of Iowa. On April 5, 2001, the jury returned a verdict (1) in favor of Top of Iowa on its breach-of-contract claim with an award of $60,900.00 in damages; (2) against Schewe on his counterclaim of breach of contract; and (3) in favor of Schewe on his counterclaim of breach of fiduciary duty with an award of $3,400.00 in damages.
On April 18, 2001, Schewe filed a motion for post-trial relief, seeking the following: (1) an order setting aside Top of Iowa's judgment for breach of contract owing to Top of Iowa's failure to disclose all material facts relating to the contracts; (2) an order amending the judgment pursuant to Rule 59(e) of the Federal Rules of Civil Procedure to eliminate Top of Iowa's judgment for $60,900; (3) an order pursuant to Rule 50 of the Federal Rules of Civil Procedure granting Schewe's renewed motion for judgment as a matter of law on Top of Iowa's breach-of-contract claim; or (4), in the alternative, an order for a new trial pursuant to Rule 59, because of an inconsistent and contradictory jury verdict. Top of Iowa resisted Schewe's post-trial motion on May 7, 2001. On April 19, 2001, Top of Iowa filed its own post-trial motion, consisting of a renewed motion for judgment as a matter of law on Schewe's breach-of-fiduciary-duty counterclaim pursuant to Rule 50 of the Federal Rules of Civil Procedure. By letter dated May 10, 2001, Schewe notified the court that he did not intend to file additional arguments in resistance to Top of Iowa's post-trial motion, because his resistance to Top of Iowa's arguments was adequately set forth in his memorandum in support of his own post-trial motion.
Neither party expressly requested oral arguments on the post-trial motions and the court concludes that no further arguments are required. Therefore, these matters are now fully submitted.
The court will begin its legal analysis with consideration of Top of Iowa's motion for judgment as a matter of law on Schewe's counterclaim of breach of fiduciary duty. If the court grants Top of Iowa's motion, Schewe's premise for post-trial relief on all of the issues he raises—that the jury's finding that Top of Iowa breached its fiduciary duty bars or is inconsistent with the jury's verdict in favor of Top of Iowa on its breach-of-contract claim—will be eliminated, thus necessarily defeating Schewe's post-trial motion. However, if the court denies relief on Top of Iowa's post-trial motion, and allows the jury's verdict to stand on Schewe's counterclaim of breach of fiduciary duty, the court must necessarily also consider Schewe's post-trial motion concerning the effect of that verdict upon Top of Iowa's breach-of-contract claim.
In support of its renewed motion for judgment as a matter of law pursuant to Rule 50 of the Federal Rules of Civil Procedure, Top of Iowa argues that Schewe failed to produce any evidence that a fiduciary relationship existed between Schewe and Top of Iowa and that, if there is sufficient evidence that such a relationship existed, Schewe failed to produce any evidence that Top of Iowa breached its fiduciary duty. More specifically, Top of Iowa argues that Schewe failed to present any evidence that Top of Iowa or Paul Nesler, Top of Iowa's grain merchandiser, exercised "dominant influence" over Schewe. Instead, Top of Iowa argues that the evidence, including Schewe's testimony, shows that Schewe was an experienced farmer who made his own marketing decisions, and that, although he occasionally discussed with Nesler his opinions about grain marketing, Schewe recognized that Nesler's opinions were speculative, not guarantees about what the market would do. In short, Top of Iowa argues that the relationship between the parties here was an arm's-length commercial relationship. Moreover, Top of Iowa argues that, if a fiduciary relationship somehow existed, there is no evidence that Top of Iowa breached its fiduciary duty to inform Schewe about the "riskiness" of HTAs. Top of Iowa argues that the record is full of evidence that Top of Iowa informed Schewe about the effect of market moves, positive and negative, on Schewe's HTAs, informed him promptly of the price "spread" on "rolls" of his HTAs, that Schewe signed a risk disclosure statement informing Schewe that margins and penalty fees would ultimately be assessed to the producer, and that Schewe attended two seminars for grain producers concerning HTAs, but chose to ignore whatever information he was given about the potential negative side of entering into HTAs. Top of Iowa also points out that Schewe could have avoided any "risk" inherent in his HTAs by delivering grain in the fall of 1995, instead of "rolling" the contracts, but he made the choice not to incur the costs of waiting in line to unload his corn at the elevator that fall.
Schewe, however, contends that there is evidence in the record of the long relationship between Schewe and Top of Iowa and his reliance on and trust in Paul Nessler, just as there is copious evidence that Top of Iowa had superior knowledge about and experience in the grain industry. Schewe contends further that, in response to Nessler's invitation to do so, Schewe placed his trust and confidence in Top of Iowa's advice by entering into the HTAs in the spring of 1995 and by delivering some of his corn for cash in the fall of 1995, and storing the rest, instead of delivering all of his corn at that time pursuant to his HTAs. Schewe contends that Top of Iowa's board of directors and managers were aware of rallying corn prices as early as January 2, 1996, and that Schewe's expert testified that Top of Iowa's representatives should have known as early as June of 1995 that the price of corn could be the highest in history based on the USDA's stocks-to-use ratio. Schewe also contends that Top of Iowa had day-to-day information about moves in the corn market and margin calls, which should have warned Top of Iowa of the increasing "riskiness" of carrying HTAs on the Chicago Board of Trade (CBOT). Schewe contends that the jury properly found that Top of Iowa never disclosed to him the risk inherent in the...
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