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East Lynn Fertilizers, Inc v. Chs

December 5, 2011

EAST LYNN FERTILIZERS, INC., PLAINTIFF/COUNTER-DEFENDANT,
v.
CHS, INC., DEFENDANT/COUNTER-PLAINTIFF, EAST LYNN FERTILIZERS, INC., THIRD-PARTY PLAINTIFF,
v.
LARRY HOSTETTER, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: David G. Bernthal U.S. Magistrate Judge

E-FILED Monday, 05 December, 2011 03:32:19 PM Clerk, U.S. District Court, ILCD

ORDER

In November 2009, Plaintiff East Lynn Fertilizers, Inc. filed a Second Amended Complaint (#30) against Defendant CHS, Inc., seeking return of a down payment made on an allegedly unenforceable contract. Defendant filed a cross-claim seeking damages for breach of contract and reimbursement for attorney's fees. Federal jurisdiction is based on diversity pursuant to 28 U.S.C. § 1332. The parties have consented to the exercise of jurisdiction by a United States Magistrate Judge. This Court previously granted CHS' Motion for Summary Judgment (#55) with respect to liability (#74).

In May 2011, Defendant filed CHS' Motion for Summary Judgment Regarding Damages (#81), and in June 2011 Plaintiff filed East Lynn Fertilizer, Inc.'s Response to CHS' Motion for Summary Judgment Regarding Damages and Motion to Strike Improper Statement of Facts (#84). Defendant filed CHS' Reply to East Lynn's Response to CHS' Motion for Summary Judgment Regarding Damages (#85). After reviewing the parties' pleadings, memoranda, and evidence, this Court GRANTS CHS' Motion for Summary Judgment Regarding Damages (#81) pursuant to FED. R. CIV. P. 56 and Local Rule 7.1.

I. Factual Background

Plaintiff East Lynn Fertilizer, Inc. (hereinafter "East Lynn") is an Illinois corporation that is engaged in the sale of fertilizer and other agricultural products to local commercial farmers. Mr. Keith Allen has owned and operated the business for the past 30 years. Defendant CHS, Inc. (hereinafter "CHS") is a Minnesota corporation engaged in the bulk sale of farm fertilizers to distributors such as East Lynn. Prior to the present controversy, the parties had an ongoing business relationship for a number of years.

In July 2008, the parties entered in to a contract (hereinafter the "Sale Agreement"), providing that East Lynn would purchase 360 tons of anhydrous ammonia for $1,180 per ton for delivery on April 1, 2009. (#26-1). Under the Sale Agreement, East Lynn had a right to pull the product from April 1, 2009, to May 30, 2009. (#26-1).

In November 2008, the market price for anhydrous ammonia had dropped significantly compared to the price established in the Sale Agreement. Mr. Allen e-mailed Mr. Hostetter, a CHS representative, seeking modification of the agreement. (#84-2). Mr. Hostetter did not agree to any modification of the contract, and he was instructed by his supervisors at CHS not to have any further communication with Mr. Allen on this matter. (#84-1). In December 2008, Mr. Allen indicated to CHS that he may not accept the ammonia, writing: "I am letting CHS know up front I will not need the ammonia . . . . Please let me know at your earliest convenience. If CHS will work with me. If not! I need to Know that too." (#84-3).

East Lynn owed CHS the full balance due under the contract on March 1, 2009. East Lynn did not make any payment. At that time, as of March 2, 2009, CHS considered East Lynn to be in default on the contract. (#82-2, p. 13). Nevertheless, despite East Lynn's default, CHS continued to perform their obligations under the contract. CHS delivered the ammonia on April 1, 2009, and left it available for East Lynn to pull until May 30, 2009, as contemplated in the parties' agreement. (#81-2, p. 7).

However, as early as March 2009, CHS began looking for other buyers. At this time, the market conditions for anhydrous ammonia were still challenging for sellers, due to the fact that demand had unexpectedly plunged. CHS's expert witness described the market conditions for anhydrous ammonia as follows:

Q: All right. So around the 2nd of March you tried to start looking for places to get rid of these tons [of anyhydrous ammonia that East Lynn had failed to collect].

A: Yes, that's correct.

Q: And I think you testified that there was just no market?

A: That's exactly right.

Q: What's your explanation for there not being a market?

A: Basically, it all goes back to the world economy tanking. As -- as the world economy tanked, so did the price of anhydrous ammonia. Prior to that the corn price was very strong; dealers and growers were contracting much earlier than usual to supply their needs for the next spring, for the next crop.

Then when things started to tank, all of a sudden the demand dried up from what they thought was going to be; and -- and as the market is falling, obviously, there's no buyer that's going to step up and buy anything. They're going to wait, hopefully find the bottom at some point. So the market just shut down for several months.

Q: Okay. So would it be fair to say that in March of '09 people had already purchased enough anhydrous for spring ...


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