168 F. Supp. 3d 1334
D. Kan.2016Background
- Cargill and Premium Beef Feeders, LLC and Power Plus Beef Feeders, LLC entered a Cattle Procurement and Feeding Arrangement (CPFA) where title to cattle, profits/losses, and operations were shared.
- CPFA included a risk-management clause: "Cargill will be solely responsible for determining and implementing any risk management (i.e. hedging) strategies for the Cattle... and the grain." Cargill hedged cattle early but delayed corn hedges.
- Defendants suffered significant losses, failed to pay debts, and counterclaimed after Cargill sued for breach: Count I (breach of contract and implied duty of good faith) and Count II (breach of fiduciary duty based on alleged joint venture).
- Cargill moved to dismiss the fiduciary-duty counterclaim, for partial summary judgment on contract and good-faith claims limited to risk-management conduct, and to exclude the defendants’ expert.
- The court denied dismissal and partial summary judgment, finding disputed factual issues (including contract ambiguity over the scope of risk-management duties) and allowed limited expert testimony while excluding legal-conclusion opinions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CPFA created a joint venture (fiduciary duty) | CPFA’s "Independent Parties" clause disclaims agency and precludes joint venture | CPFA’s terms (joint title, shared profits/losses, mutual decision-making) plausibly show joint venture | Denied dismissal — facts plausibly allege joint venture; issue is factual |
| Whether Cargill breached the contract by its risk-management practices | "Sole responsibility" grants Cargill broad authority to decide whether and what to hedge; conduct complied with CPFA | "Sole responsibility" requires Cargill to perform hedging; failure to hedge and speculative trades breached the CPFA | Denied partial summary judgment — risk-management clause is ambiguous; factual dispute precludes summary disposition |
| Whether Cargill breached implied duty of good faith by its risk-management conduct | No breach because Cargill complied with its contractual authority and terms | Conduct was arbitrary/unreasonable and violated the good-faith spirit of the risk-management term | Denied — resolution depends on contract meaning; ambiguity prevents summary judgment |
| Admissibility of defendants’ expert (Leffler) | Expert may opine on customary risk-management practices and parties’ intent | Cargill contends many opinions are improper legal conclusions usurping jury/bench functions | Granted in part/Denied in part — exclude opinions that state legal conclusions (e.g., that a contract was violated); allow expert testimony on industry practices and evidence of parties’ intent (redacted report required) |
Key Cases Cited
- Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174 (10th Cir. 2007) (pleading plausibility standard applying Twombly/Iqbal)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must be plausible)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (legal conclusions not assumed true on Rule 12(b)(6))
- In re Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528 (Kan. 1996) (agency can exist despite contractual denial)
- Modern Air Conditioning, Inc. v. Cinderella Homes, Inc., 226 Kan. 70 (Kan. 1979) (factors for finding joint venture)
- Investcorp, L.P. v. Simpson Inv. Co., L.C., 267 Kan. 840 (Kan. 1999) (contract interpretation principles — ascertain parties’ intent)