Justia Agriculture Law Opinion Summaries

Articles Posted in Commercial Law
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Phytelligence, an agricultural biotechnology company that used tissue culture to grow trees, and Washington State University (WSU) contracted for the propagation of WSU's patented “WA 38” apple trees. Section 4 of the agreement was entitled “option to participate as a provider and/or seller in [WSU] licensing programs.” The parties acknowledged that WSU would need to “grant a separate license for the purpose of selling.” Phytelligence expressed concern about the “wispy forward commitment.” WSU responded that “Phytelligence and others would have a shot at securing commercial licenses.”WSU later requested proposals for commercializing WA 38. Phytelligence did not submit a proposal. WSU accepted PVM’s proposal, granting PVM an exclusive license that required PVM to subcontract exclusively with NNII, a fruit tree nursery association, to propagate and sell WA 38 trees. Phytelligence later notified WSU that it wanted to exercise its option. WSU responded that PVM was WSU’s “agent.” Phytelligence rejected PVM’s requirement to become an NNII member and two non-membership proposals for obtaining commercial rights to WA 38. WSU terminated the Propagation Agreement, alleging that Phytelligence breached the Agreement when it sold WA 38 to a third-party without a license and that such actions infringed its plant patent and its COSMIC CRISP trademark.Phytelligence sued, alleging breach of the Agreement. The Federal Circuit affirmed summary judgment in favor of WSU. Section 4 is an unenforceable agreement to agree. WSU did not commit to any definite terms of a future license. View "Phytelligence Inc. v. Washington State University" on Justia Law

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Growers sold their perishable agricultural products on credit to a distributor, Tanimura, which made Tanimura trustee over a Perishable Agricultural Commodities Act (PACA), 7 U.S.C. 499a-499t, trust holding the perishable products and any resulting proceeds for the Growers as PACA-trust beneficiaries. Tanimura then sold the products on credit to third parties and transferred its own resulting accounts receivable to Agricap through a Factoring Agreement or sale of accounts. In this suit against Agricap, Growers alleged that the Factoring Agreement was merely a secured lending arrangement structured to look like a sale but transferring no substantial risk of nonpayment on the accounts; the accounts receivable and proceeds remained trust property under PACA; because the accounts receivable remained trust property, Tanimura breached the PACA trust and Agricap was complicit in the breach; and PACA-trust beneficiaries such as Growers held an interest superior to Agricap, and Agricap was liable to Growers. The court agreed with the district court's conclusion that Boulder Fruit Express & Heger Organic Farm Sales v. Transportation Factoring, Inc., controls the outcome of the case. The district court noted that the Ninth Circuit in Boulder Fruit expressly addressed the commercial reasonableness of a factoring agreement but implicitly rejected a separate, transfer-of-risk test. The district court further noted that the factoring agreement in Boulder Fruit transferred even less risk than the Factoring Agreement in the present case. Accordingly, the court affirmed the judgment. View "G.W. Palmer & Co. v. Agricap Financial" on Justia Law

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Between 2009 and 2012, Sunshine and Purdy, a Kentucky dairy farmer, entered into “Dairy Cow Leases.” Purdy received 435 cows to milk, and, in exchange, paid monthly rent to Sunshine. Purdy’s business faltered in 2012, and he sought bankruptcy protection. Sunshine moved to retake possession of the cattle. Citizens First Bank had a perfected purchase money security interest in Purdy’s equipment, farm products, and livestock, and claimed that its perfected security interest gave Citizens First priority over Sunshine with regard to the cattle. Citizens argued that the “leases” were disguised security agreements, that Purdy actually owned the cattle, and that the subsequently-acquired livestock were covered by the bank’s security interest. The bankruptcy court ruled in favor of Citizens, finding that the leases were per se security agreements. The Sixth Circuit reversed, noting that the terms of the agreements expressly preserve Sunshine’s ability to recover the cattle. Whether the parties strictly adhered to the terms of these leases is irrelevant to determining whether the agreements were true leases or disguised security agreements. Neither the bankruptcy court nor the parties sufficiently explained the legal import of Purdy’s culling practices or put forward any evidence that the parties altered the terms of the leases making them anything but leases. View "In re: Purdy" on Justia Law

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VLM, a Canadian agricultural supplier, sold frozen potatoes to Illinois Trading, a reseller. VLM sued Illinois Trading for $184,000 owed on the contract, with counts based on the Perishable Agricultural Commodities Act, which creates a trust in favor of the seller when a buyer purchases agricultural goods on short-term credit, 7 U.S.C. 499e(c)(2). To protect the trust assets, VLM sought a preliminary injunction. Illinois Trading had obtained loans from TAB Bank, giving a security interest in its assets. By the time VLM filed suit, TAB had seized Illinois Trading’s assets. The PACA-created trust made VLM’s claim superior to TAB’s security interest. VLM added a claim against TAB for seizing PACA trust assets. Before the amendment, VLM had successfully moved for consolidation of the preliminary-injunction hearing with trial on the merits. The consolidated hearing pertained only to counts against Illinois Trading, not Count V, pertaining to TAB. The court, however, issued an opinion resolving Counts I through IV and also entered judgment for TAB on Count V, because VLM had not presented evidence on that claim. The district court awarded VLM attorney’s fees and interest on the unpaid balance based on provisions in VLM’s invoices. The Seventh Circuit reversed with respect to Count V; held that the United Nations Convention on Contracts for the International Sale of Goods, was controlling not the Illinois Uniform Commercial Code; and reversed and remanded with respect to attorney’s fees and interest View "VLM Food Trading Int'l, Inc. v. Transp. Alliance Bank,Inc." on Justia Law

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Beginning in 2007, Mississippi Valley agreed to sell cattle to Swift, planning to fulfill that agreement in part with cattle it had received from J&R. Mississippi Valley was merely the holder of J&R’s cattle, not the purchaser or owner. Because the relationship between Swift and J&R had soured, Mississippi Valley did not inform Swift that some of the cattle were actually J&R’s. Swift paid for the purchases with checks made out to Mississippi Valley, which deposited the checks in its general operating account and periodically sent J&R checks for sales of J&R cattle. Mississippi Valley stopped making timely payments. As the debt mounted, J&R sent increasingly frantic demands for payment. Mississippi Valley sent seven checks to J&R totaling $862,747.31. Less than 90 days later, creditors filed an involuntary Chapter 7 bankruptcy petition against Mississippi Valley. The bankruptcy trustee sought to avoid the seven payments as preferential transfers, 11 U.S.C. 547(b), but J&R argued that Mississippi Valley never had a property interest in the funds but only held the sale proceeds for J&R’s benefit. The bankruptcy court granted J&R summary judgment. The district court affirmed. The Seventh Circuit remanded, stating that it is unclear how much money could properly be traced to a constructive trust in favor of J&R.View "In re: MS Livestock, Inc." on Justia Law

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Consolidated Grain maintains a grain elevator in La Salle County, sold Rogowski’s crops, and gave him the proceeds by checks paid directly to him. The bank had lent money to Rogowski for which he signed a note and granted the bank a security interest in his crops and any proceeds of their sale. The bank notified Consolidated of its lien by two written notices, one covering crop years 2004 and 2005 and the other covering years 2005 and 2006. The notices listed as covered agricultural commodities “all grain on hand, all growing crops,” without listing their amount or location. The bank obtained a deficiency judgment against Rogowski in 2008, which remains unsatisfied, then sought payment from Consolidated. The trial court ruled in favor of the bank. The appellate court reversed and the supreme court affirmed. The Federal Food Security Act of 1985 provides how notices of security interests are to be worded and provides that there must be a statement of “each county or parish in which the farm products are produced or located,” The court rejected a “substantial compliance” argument and held that the notices were insufficient for failing to strictly comply with the Act. View "State Bank of Cherry v. CGB Enters., Inc." on Justia Law

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The Scotts Company, an Ohio LLC, brought a diversity action against Seeds, Inc., a Washington corporation, in federal district court. Thereafter, Millhorn Farmers, Maple Leaf Farms, Mica Creek, and Tim Freeburg (Growers) sued Seeds and Scotts in Washington state court. Maple Leaf Farms and Mica Creek were Washington corporations, Millhorn Farms was an Idaho corporation, and Tim Freeburg was a citizen of Idaho. Scotts subsequently filed an amended complaint in federal court adding the Growers as defendants and seeking declaratory relief. The district court subsequently realigned the Growers and plaintiffs and Seeds and Scotts as defendants and held, alternatively, that it would stay the federal proceedings in favor of the related state court proceedings under either the Brillhart doctrine or the Colorado River doctrine. Because the parties' realignment resulted in the absence of complete diversity of citizenship between defendant Seeds and newly-aligned plaintiffs-Growers, the district court dismissed the action for lack of subject matter jurisdiction. The Ninth Circuit Court of Appeals reversed, holding that the district court should not have declined to entertain the claim for declaratory relief under the Brillhart doctrine, and instead, the claims should have been evaluated under the Colorado River doctrine. Remanded. View "Scotts Co., LLC v. Seeds, Inc." on Justia Law

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Rabo Agrifinance and Rabo AgServices (collectively, Rabo) commenced a foreclosure action in 2009 on a mortgage granted by Connie and David Finneman (Finnemans) on 17,000 acres of farmland. Rabo commenced its action against Finnemans, Rock Creek Farms (RCF), and all parties who may have had an ownership or leashold interest in the land. Approximately forty-four defendants were listed in the complaint, including Ann and Michael Arnoldy (Arnoldys) and the U.S. as lienholders. The trial court eventually entered a decree of foreclosure in which it recognized RCF's owner's right of redemption. After a sheriff's sale, Ann Arnoldy redeemed from an assignee of the purchaser of the sheriff's certificate. The Arnoldys filed a motion to partially vacate the decree of foreclosure. The trial court granted the motion and vacated the decree of foreclosure recognizing RCF's redemption rights on the basis that RCF and its predecessors, Finnemans, waived those rights. RCF and Finnemans appealed. Arnoldys and the U.S. filed motions to dismiss the appeals for failure to serve the notice of appeal on the U.S. and a number of named parties. The Supreme Corurt dismissed Finnemans' and RCF's appeals for failure to serve their notices of appeal on each party to the action. View "Rabo Agrifinance, Inc. v. Rock Creek Farms" on Justia Law

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The Lesiaks were farmers who suffered a reduced corn yield, allegedly due to the overapplication of herbicide to their crops by Central Valley Ag Cooperative, Inc. (CVA). The Lesiaks filed this action against CVA, asserting multiple theories of recovery, including negligence, breach of implied warranty of merchantability, and breach of implied warranty of services. The district court granted summary judgment in favor of CVA on the implied warranty of services and negligence claims. Following the Lesiaks' presentation of their case, the district court granted CVA's motion for a directed verdict on the Lesiaks' remaining claim for breach of implied warranty of merchantability. The Supreme Court affirmed in part and reversed and remanded in part, holding (1) the district court erred in granting a directed verdict in favor of CVA as there was evidence in the record which would allow a jury to find the overapplication of the herbicide damaged the Lesiaks' fields and also to reasonably estimate the extent of the damage; and (2) the district court erred in granting summary judgment on the Lesiaks' negligence claim, as it was not barred by the economic loss doctrine. View "Lesiak v. Central Valley Ag Coop., Inc." on Justia Law

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A hog producer with outstanding loans to Primebank went deeper into debt by purchasing feed on credit from Oyens Feed & Supply to fatten the hogs to market weight. The hog producer subsequently filed for bankruptcy. Primebank had a perfected security interest in the hogs to secure two promissory notes predating Oyen Feed's perfected agricultural supply dealer lien on the hogs. The hog producer filed an adversary proceeding to determine the priority of the liens. The bankruptcy court granted Primebank partial summary judgment on grounds that Oyens Feed failed to provide Primebank a certified request under Iowa Code 570A.2. Oyens Feed appealed the bankruptcy court's ruling to the U.S. district court, which then certified a question of law to the Supreme Court. The Court answered by holding that Primebank's prior perfected security interest in the hogs is trumped by Oyen Feed's agricultural supply dealer lien under Iowa Code 570A.5(3) to the extent of the enhanced value of the livestock presumptively attributable to the feed, even though the bank received no certified request before the feed was sold on credit. View "Oyens Feed & Supply, Inc. v. Primebank" on Justia Law