360 F. Supp. 3d 817
S.D. Ind.2018Background
- Rembrandt Enterprises (seller) and Rexing Quality Eggs (buyer partnership) signed a 1‑year contract (Oct 3, 2016–Oct 3, 2017) for 12 loads/week of cage‑free white shell eggs with detailed specs (91.5% Grade A) and remedies for under‑grade loads (credit: price equal to 5 cents back of High Side Breaker Market for "Excess Losses").
- Contract included FOB Tipton, Missouri pickup, a ramp‑up allowing non‑Tipton sourcing early on, a force‑majeure/"other acts" clause, a broad warranty disclaimer, and a limitation of consequential/incidental damages clause.
- Early shipments showed quality problems; parties exchanged complaints and Rembrandt made adjustments and applied the contract's excess‑loss credits; Rexing underpaid some invoices by misapplying the contract discount, totaling ~$60k underpayment.
- Market demand for cage‑free eggs declined; Rexing lacked a committed off‑taker (Hickman's letter of intent never matured) and in June 2017 stopped accepting/paid for further loads, repudiating the contract.
- Rembrandt withheld eggs, resold 133 of 198 repudiated loads via private sales and used 65 loads for processed product, invoiced Rexing for the shortfall; this suit followed. Rembrandt moved for partial summary judgment.
Issues
| Issue | Plaintiff's Argument (Rexing) | Defendant's Argument (Rembrandt) | Held |
|---|---|---|---|
| Whether Rembrandt breached by sourcing eggs outside Tipton after ramp‑up | Contract required Tipton sourcing; non‑Tipton sourcing breached location term | Ramp‑up and contract pricing clause allow non‑Tipton sourcing; Rembrandt gave discounted price for non‑Tipton loads | Held for Rembrandt: no breach as matter of law; pricing clause and discounts complied with contract |
| Whether Rembrandt breached express warranties on egg quality / whether buyer can recover beyond the contract credits | Eggs often failed 91.5% Grade A; credits insufficient; Rexing seeks consequential/incidental damages (e.g., prep costs) | Contract provides exclusive grading remedy (credit) and disclaims consequential damages; buyer received agreed credits | Held for Rembrandt: limitation of remedies does not fail of essential purpose; Rexing's damages claims for quality are barred; summary judgment for Rembrandt on these claims |
| Whether Rexing was excused from performance by force majeure, commercial impracticability, or frustration (decline in market demand) | Severe unexpected drop in demand excused performance under force majeure or impracticability doctrines | Market demand shifts are foreseeable business risk and do not trigger force majeure or impracticability here | Held for Rembrandt: decline in demand is not force majeure or impracticability under the contract and Iowa law; Rexing's repudiation was breach |
| Whether Rembrandt is entitled to summary judgment on damages for breach (resale market, commercial reasonableness) | Rembrandt's resale and damage calculations are commercially unreasonable, used non‑contract goods, miscounted loads, and failed to mitigate or properly credit | Resale and market recovery are permitted under UCC; Rembrandt provided resale evidence and market prices | Held: denied as to most damages — commercial reasonableness and market‑price calculations present factual issues for jury; granted as to undisputed $60,069.61 underpayment for accepted loads |
Key Cases Cited
- C & J Vantage Leasing Co. v. Wolfe, 795 N.W.2d 65 (Iowa 2011) (cardinal rule: courts interpret contract to effect parties' intent and give meaning to all terms)
- American Soil Processing, Inc. v. Iowa Comprehensive Petroleum Underground Storage Tank Fund Board, 586 N.W.2d 325 (Iowa 1998) (change in regulation may constitute force majeure/impracticability)
- Select Pork, Inc. v. Babcock Swine, Inc., 640 F.2d 147 (8th Cir. 1981) (limitation of remedies fails essential purpose when seller does not deliver promised specialized goods)
- Hartzell v. Justus Co., Inc., 693 F.2d 770 (8th Cir. 1982) (limited remedy fails essential purpose where repairs cannot restore promised product)
- Brunsman v. DeKalb Swine Breeders, Inc., 952 F. Supp. 628 (N.D. Iowa 1996) (where goods conform to contract description, limitation of remedies enforced)