Oeltjenbrun v. Csa Investors, Inc.

3 F.Supp.2d 1024

Bradley K. OELTJENBRUN, Plaintiff, v. CSA INVESTORS, INC., and Iowa corporation; Land O' Lakes, Inc., a Minnesota cooperative; Farmers Cooperative Company, an Iowa cooperative; and Farmers Cooperative Society, an Iowa cooperative, Defendants, and LAND O' LAKES, INC., a Minnesota cooperative, Counterclaim Plaintiff, v. Bradley K. OELTJENBRUN, Counterclaim Defendant, and FARMERS COOPERATIVE COMPANY, Counterclaim Plaintiff, v. Bradley K. OELTJENBRUN, Counterclaim Defendant, and FARMERS COOPERATIVE SOCIETY, Counterclaim Plaintiff, v. Bradley K. OELTJENBRUN, Counterclaim Defendant.

No. C 96-3136-MWB.

United States District Court, N.D. Iowa, Central Division.

April 19, 1998.

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Steven P. Wandro of Wandro & Gibson, P.C., Des Miones, IA, for Plaintiff.

Jonathan C. Miesen of Doherty, Rumble & Butler, St. Paul, MN, for Defendant Land O' Lakes.

Brenton D. Soderstrum of Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, PLC, Des Moines, IA for Defendant FSC.

Joel J. Yunek of Laird, Heiny, McManigal, Winga, Duffy & Stambaugh, PLC, mason City, IA, for Defendant FCC.

MEMORANDUM OPINION AND ORDER REGARDING MOTIONS FOR PARTIAL SUMMARY JUDGMENT

BENNETT, District Judge.

TABLE OF CONTENTS
I.  BACKGROUND ..................................................................................1028
    A. Factual Background .......................................................................1028
    B. Procedural Background ....................................................................1030
II. LEGAL ANALYSIS ..............................................................................1031
    A. Standards For Summary Judgment ...........................................................1031
    B. The Declaratory Judgment Claim ...........................................................1033
       1. The Declaratory Judgment Act ..........................................................1033
       2. "Futures" and "cash forward" contracts under the CEA ..................................1033
          a. "Futures" contracts ................................................................1033
          b. "Cash forward" contracts ...........................................................1035
       3. Which kind of contracts? ..............................................................1037
          a. The Land O'Lakes contract ..........................................................1038
          b. The FCS contracts ..................................................................1041
          c. The FCC contracts ..................................................................1045
    C. Remaining Claims Against Land O'Lakes ....................................................1048
       1. "Mere continuation" ...................................................................1048
       2. Defenses against a successor ..........................................................1050
       3. Breach of contract ....................................................................1050
    D. Remaining Claims Against FCC .............................................................1051
       1. Misrepresentations and apparent authority of the speaker ..............................1051
       2. Breach of contract ....................................................................1052
       3. Breach of fiduciary duty ..............................................................1052
III. CONCLUSION .................................................................................1053

Now before the court is one of the fundamental — and highly contentious — questions asked in a multiplicity of lawsuits between grain producers and grain elevators filed in the last two years: Are certain so-called "hedge-to-arrive" (HTA) contracts for the sale and purchase of grain illegal off-exchange "futures" contracts under the Commodities Exchange Act (CEA), 7 U.S.C. §§ 1-25, or valid "cash forward" contracts not within the regulatory purview of the CEA?¹ In separate motions for partial summary judgment, three grain elevators have put this question, and others, before the court, seeking to dispose of nearly all of one producer's claims against them. If the HTAs in question here are indeed illegal futures contracts, the plaintiff grain producer, and possibly hundreds or thousands of other grain producers with similar contracts, will be relieved of any obligation to deliver grain under the contracts. If, however, the HTAs are valid cash forward contracts, the ultimate question in this and many other lawsuits will continue to be whether the grain elevators or the grain producers have breached their obligations under the contracts.

I. BACKGROUND

A. Factual Background

The court will discuss here only the nucleus of pertinent facts for this litigation. In its legal analysis, the court will address where necessary the parties' assertions of genuine issues of material fact that may preclude summary judgment in favor of the defendant grain elevators.

Plaintiff Bradley K. Oeltjenbrun is and has been for many years a grain farmer in Cerro Gordo County in central Iowa. His annual corn production in a typical year is about 100,000 bushels. Like hundreds, perhaps thousands, of other grain producers, Oeltjenbrun entered into several so-called HTA contracts with various grain elevators, including contracts with defendants Farmers Cooperative Society (FCS) and Farmers Cooperative Company (FCC). Oeltjenbrun also entered into one HTA with Burchinal Cooperative Society, a cooperative that has since sold the majority of its assets, including Oeltjebrun's HTA, to defendant Land O'Lakes. Land O' Lakes, FCS, and FCC will be referred to collectively herein, where appropriate, as the Elevators. The fourth defendant in the present lawsuit, CSA Investors, Inc., is alleged to be an Iowa corporation that is or was engaged in the business of marketing crops for farmers.² Oeltjenbrun alleges that he entered into the HTAs with the Elevators on the advice of CSA and based on CSA's representations about the benefits of such contracts and the way in which they would work. The parties agree that any representations made to Oeltjenbrun about the HTAs were made by a representative of CSA, but they disagree over whether CSA was acting as the Elevators' agent in making those representations.

More specifically, on February 22, 1995, Oeltjenbrun entered into grain contract no. 1246,³ now held by defendant Land O' Lakes, with Burchinal Cooperative Society, under which he agreed to deliver 60,000 bushels of corn, at a price of $2.70 per bushel, in July of 1996. LOL Ex. F. Oeltjenbrun also entered into three contracts denominated as "hedge-to-arrive" contracts and a fourth "grain contract" with Farmers Cooperative Society (FCS), as follows: (a) contract no. 453, FCS Ex. A, dated June 6, 1995, for delivery "at a later date" of 10,000 bushels of corn, with delivery date and price to be determined later, but pursuant to a schedule indicating an initial delivery date in December of 1995, and a Chicago Board of Trade (CBT) reference price of $2.82¼ per bushel; (b) contract no. 534, FCS Ex. B, dated October 26, 1995, for delivery "at a later date" of 10,000 bushels of corn, with delivery date and price to be determined later, but pursuant to a schedule indicating initial delivery in June of 1996, and a CBT reference price of $3.35 per bushel; (c) contract no. 537, FCS Ex. C, dated November 1, 1995, for delivery "at a later date" of 10,000 bushels of corn, with delivery date and price to be determined later, but pursuant to a schedule indicating an initial delivery date in May of 1996, and a CBT reference price of $3.40 per bushel; and (d) "grain contract" no. 698, FCS Ex. D, dated September 22, 1995, for delivery of 5,000 bushels of corn, at a price of $2.85 per bushel, in April of 1996. Finally, Oeltjenbrun entered into three contracts, each denominated as a "hedge to arrive contract," with defendant Farmers Cooperative Company (FCC) as follows: (a) contract no. 157, FCC Ex. A, dated June 26, 1995, for delivery of 20,000 bushels in June of 1996, with no "cash price" yet determined for "arrival," but with a "Futures Option Price" of $2.85½ per bushel; (b) contract no. 167, FCC Ex. B, dated July 6, 1995, for delivery of 10,000 bushels of corn in June of 1996, with no "cash price" yet determined for "arrival," but with a "Futures Option Price" of $2.97½ per bushel; and (c) contract no. 193, FCC Ex. C, dated September 7, 1995, for delivery of 5,000 bushels of corn in May of 1996, with no "cash price" yet determined for "arrival," but with a "Futures Option Price" of $3.01 per bushel.⁴

Oeltjenbrun "rolled" each of his HTAs to later delivery dates at least once, sometimes several times. Notations on his HTA with Burchinal indicate that on June 27, 1996, after Land O' Lakes had acquired Oeltjenbrun's HTA with Burchinal, Oeltjenbrun and Land O' Lakes agreed that Oeltjenbrun could "roll" the delivery date on the remaining 42,608.12 bushels outstanding on the contract from July of 1996, at $2.70 per bushel, to December of 1996, at $1.45 per bushel. LOL Ex. F. Land O' Lakes and Oeltjenbrun disagree over who requested or required the roll. On June 27, 1996, Land O' Lakes sent Oeltjenbrun a confirmation of the roll, LOL Ex. G, requesting that Oeltjenbrun notify Land O' Lakes within five days if the notation of the roll did not reflect the parties' arrangement. The record contains no indication that Oeltjenbrun ever contradicted the terms of the roll as stated in the confirmation. Land O' Lakes asserts that Oeltjenbrun provided assurances to Land O' Lakes that he intended to deliver grain pursuant to the contract, but Oeltjenbrun ultimately sold his grain to another elevator, because, Oeltjenbrun explains, he was then involved in litigation with Land O' Lakes.

Oeltjenbrun's HTAs with FCS indicate each...