Fritz v. Banghart Props. LLC (In re Claims Against Banghart Props.)

32 Neb.App. 168

995 N.W.2d 212

IN RE CLAIMS AGAINST BANGHART PROPERTIES.

Terri Fritz, grain program manager, Grain Warehouse Department, Nebraska Public Service Commission, appellee, v. Banghart Properties LLC, also known as Fearless Grain Marketing Storage and Arbitrage, also known as Fearless Grain Marketing, also known as Fearless Grain, Gettysburg, South Dakota, appellant.

No. A-22-427.

Court of Appeals of Nebraska.

Filed August 15, 2023.

Loel P. Brooks, of Brooks, Pansing Brooks, P.C., L.L.O., Lincoln, and Robert Konrad, of Konrad Law, P.L.L.C., for appellant.

Douglas J. Peterson, Attorney General, and L. Jay Bartel, Lincoln, for appellee.

Pirtle, Chief Judge, and Riedmann and Welch, Judges.

Welch, Judge.

INTRODUCTION

Banghart Properties LLC appeals from the imposition of a $290,000 civil penalty by the Nebraska Public Service Commission (PSC)for numerous violations of Nebraska's Grain Dealer Act (the Act) under Neb. Rev. Stat. §§ 75-901 to 75-910 (Reissue 2018) and related PSC regulations. For the reasons stated herein, we affirm.

STATEMENT OF FACTS

Banghart Properties is a limited liability company operating primarily in South Dakota and is engaged in the business of grain merchandising, brokering, and purchasing. Banghart Properties was also licensed as a grain buyer and dealer in Colorado and North Dakota and ultimately sought licensing in Nebraska to conduct business in this state.

In July 2021, Jan Banghart (Jan), the managing member and sole owner of Banghart Properties, contacted Terri Fritz, the grain program manager with the PSC's grain warehouse department, to inquire into whether Banghart Properties needed a grain dealer license to operate in Nebraska. Fritz informed Jan that a grain dealer license was required to conduct business in Nebraska and provided information on obtaining a Nebraska license. During the conversation, after Jan informed Fritz that Banghart Properties had previously conducted business in Nebraska acting as a broker, Fritz indicated that Banghart Properties needed to obtain a grain dealer license prior to conducting further business in the state. Jan assured Fritz that Banghart Properties would not conduct further business in Nebraska until it obtained a grain dealer license.

On September 15, 2021, Fritz received an application for a grain dealer license from Banghart Properties that did not include any other business names. On October 4, after receipt of Banghart Properties’ application, but prior to its approval, Fritz became aware of an advertisement that had been published in a Nebraska newspaper that indicated "Banghart Properties, d/b/a Fearless Grain Marketing" was buying commodities from Nebraska producers at set price ranges. Fritz subsequently contacted Jan, and during the conversation, Jan informed Fritz that the advertisement was published in error and reassured Fritz that Banghart Properties would not be purchasing grain until after the company was approved to conduct business in Nebraska.

Shortly thereafter, during another telephone conversation, Fritz asked Jan for copies of contracts that Banghart Properties had executed with Nebraska producers. Jan once again reassured Fritz that Banghart Properties was not conducting business in Nebraska. Fritz subsequently received a phone call from Banghart Properties’ attorney who, after reassuring Fritz that the company was not doing business in Nebraska, stated that any contract that the company had with Nebraska producers would be provided to Fritz. Around the same time, Fritz received another phone call from Jan, who disclosed that Banghart Properties had been doing business in Nebraska and inquired whether Banghart Properties could pay money owed to Nebraska producers.

On October 12, 2021, as a followup from the phone conversations, Fritz sent a letter ordering Banghart Properties to cease any grain dealer operations until completion of the application for licensing and the grant of a grain dealer license. In the letter, Fritz requested copies of all contracts between Banghart Properties and Nebraska producers. In response, Banghart Properties’ attorney provided copies of the contracts and supporting documentation related to its Nebraska business operations.

After obtaining the contracts and accompanying documents from Banghart Properties, Fritz learned that Banghart Properties had entered into 12 contracts with Nebraska producers for the purchase and delivery of Nebraska grain despite not being licensed as a grain dealer in Nebraska. Additionally, Banghart Properties purchased grain from Nebraska producers on at least 50 occasions between September 16 and October 21, 2021, which was during the period of time that Jan continued to reassure Fritz that Banghart Properties was not conducting business in Nebraska. Upon her examination of the contracts, Fritz also learned that Banghart Properties failed to provide specific "Warning to Seller" language as required by the PSC and that the tickets, receipts, bills of lading, and other written communication from Banghart Properties’ purchases were not prenumbered and maintained in numeric order as required by regulation.

On October 21, 2021, Fritz filed a departmental complaint against Banghart Properties alleging numerous violations of the Act and related PSC regulations. Specifically, the complaint alleged Banghart Properties violated the Act by (1) performing actions as a grain dealer without a license; (2) taking possession of grain without issuing written documentation to the seller that included the required "Warning to Seller" language that informed Nebraska producers of the right to recourse against the required grain dealer's security; and (3) failing to issue prenumbered receipts, contracts, bills of lading, or other written communications. As a result of the violations, Fritz requested the assessment of civil penalties against Banghart Properties in the amount of $870,000 for 87 separate violations of the Act.

In the answer to the complaint, Banghart Properties admitted entering into the 12 grain purchase contracts as described in the complaint, took delivery of some of the contracted grain, and paid producers. However, Banghart Properties denied violating the Act or any PSC regulations.

An evidentiary hearing was held before the PSC in January 2022. Testimony was adduced from Fritz and Jan consistent with the facts as laid out above. The PSC entered its order on March 15, finding:

The record clearly shows that [Banghart Properties] acted as a Grain Dealer on numerous occasions by buying grain from Nebraska producers for purposes of selling such grain without first being licensed as a Nebraska Grain Dealer. Moreover, [Banghart Properties] was not an end user of the grain so purchased. [Banghart Properties] also did not attempt to make such grain purchases through any licensed Nebraska grain dealers, electing to purchase directly from Nebraska producers.

The Complaint identifies 29 separate grain purchases with respect to which [Banghart Properties] acted as an unlicensed grain dealer during the period of September 16, 2021, through October 7, 2021. [Banghart Properties] admitted to these purchases in its Answer. Documentation of these transactions is included in the hearing record. The existence of these transactions is not in dispute. Therefore, we find by clear and convincing evidence that [Banghart Properties] has committed 29 separate violations of the grain dealer licensure requirements of the ... Act as alleged in the Complaint.

Furthermore, we note that the record also includes documentation from [Banghart Properties’] own business records demonstrating that an additional 21 unlicensed grain purchases were made by [Banghart Properties] from four Nebraska producers between the dates of October 7, 2021, and October 21, 2021, that were not referenced in the Complaint. The existence of these transactions is also not in dispute. Therefore, we find by clear and convincing evidence that such purchases constitute an additional 21 violations of the grain dealer licensure requirements of the ... Act.

Moreover, the record clearly shows that with respect to each of the 29 transactions referenced in the Complaint, [Banghart Properties], upon taking possession of the grain, failed to issue a receipt, contract, bill of lading or other written communication to the seller which included the required warning to seller language to inform producers of their rights to recourse against the required grain dealer security. Therefore, we find by clear and convincing evidence that [Banghart Properties] has committed 29 violations of the transaction documentation requirements of the ... Act.

Furthermore, the record clearly shows that with respect to each of the 29 transactions referenced in the Complaint, [Banghart Properties] failed to issue a pre-numbered grain dealer receipt as required by [PSC] regulation. Therefore, we find by clear and convincing evidence that [Banghart Properties] has committed a further 29 violations of the transaction documentation requirements of the ... Act and [PSC] regulations.

After finding that Banghart Properties had committed violations of the Act and related PSC regulations, the PSC determined that "a substantial civil penalty" was warranted, but declined to award the grain department's requested penalty of $870,000, instead reducing the recommendation by two-thirds and imposing a civil penalty of $290,000. In its order, the PSC stated:

We agree with the grain department that the facts presented in this docket warrant a substantial civil penalty. However, we decline to fully adopt the department's recommendation that the [PSC] impose the maximum penalty for all violations of the Act identified in the Complaint. More specifically, although we agree that the documentation failures relating to the warning to seller language and pre-numbered documents are clear violations of the Act, we also note that these

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