S & a Farms, Inc. v. Farms. Com, Inc.
2012 U.S. App. LEXIS 10836
8th Cir.2012Background
- S&A Farms, Inc. is an Iowa agricultural producer with Renaud as sole officer, director, and employee; Farms.com is a Canadian advisory firm.
- S&A entered a Price Risk Management Service with Farms.com in September 2007 for risk-management services on corn inputs and hog outputs, with S&A paying Farms.com for these services.
- Renaud opened an MF Global account and mostly executed trades based on Farms.com's advice from 2007 to 2009, resulting in a net loss of about $1,040,958.75.
- Farms.com’s risk management advice continued until Aideyan left in 2008; Agostino replaced him as Renaud’s advisor.
- On December 8, 2009, S&A sued Farms.com alleging CEA violations for unregistered status, along with breach of fiduciary duty, negligence, and misrepresentation; the district court granted summary judgment to Farms.com on all claims.
- On appeal, the Eighth Circuit reviews de novo the district court’s summary-judgment ruling; it affirms the grant of summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Causation pleading under CEA §25(a)(1) | S&A asserted damages flowed from Farms.com's unregistered status. | Farms.com argued S&A pleaded only a fraudulent scheme, not inducement, and failed causation. | S&A failed to plead fraudulent inducement; causation not shown; judgment affirmed. |
| Pleading fraudulent inducement vs. fraudulent scheme under §6o(1)(B) and §6 | S&A alleged a fraud through unregistered status. | Complaint tracks §6o(1)(B) and lacks explicit inducement claim. | Court held only a fraudulent-scheme claim pleaded; no inducement claim pleaded. |
| Breach-of-fiduciary-duty standard of care under Iowa law | Expert Zagotta set standards and alleged breach by Farms.com. | No competent evidence of standard of care or breach. | No expert-supported standard or breach; summary judgment affirmed. |
Key Cases Cited
- Hudson v. Wilhelm, 651 F. Supp. 1062 (D. Colo. 1987) (causation required between violation and damages under §25(a)(1))
- Ping He (Hai Nam) Co. Ltd. v. NonFerrous Metals (U.S.A.) Inc., 22 F. Supp. 2d 94 (S.D.N.Y. 1998) (damages must be caused by the violation; unregistered status alone unlikely to cause damages)
- Humiston Grain Co. v. Rowley Interstate Transp. Co., 512 N.W.2d 573 (Iowa 1994) (professional standard of care requires expert testimony unless obvious)