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Chisholm v. American Cold Storage, Inc.

United States District Court, Sixth Circuit

May 21, 2013

RONALD A. CHISHOLM, LTD., Plaintiff,
v.
AMERICAN COLD STORAGE, INC. and AMERICAN COLD STORAGE NORTH AMERICA, LP, Defendants and Third Party Plaintiffs
v.
ABILENE TEXAS FOODS, INC., Third Party Defendant.

MEMORANDUM OPINION

CHARLES R. SIMPSON III, Senior District Judge.

This case is before the court on a motion for partial summary judgment by the Plaintiff, Ronald A. Chisholm, Ltd. ("Chisholm"), against the Third Party Defendant, Abilene Texas Foods, Inc. ("Abilene") (DN 64). The court will also address motions for summary judgment regarding Abilene's counterclaims against Chisholm (DNs 48 and 64), and Chisholm's cross claims against Abilene (DNs 45 and 71).

BACKGROUND

This case arose from a series of contractual relationships among three parties: the Plaintiff, Chisholm, an international meat seller; Abilene, a meat processor and reseller; and American Cold Storage ("ACS"), the owner of a cold storage facility that stored both Chisholm's and Abilene's meat products. Beginning in 2007, Abilene contracted to purchase meat products from Chisholm on credit. In early 2008, Abilene stopped making timely payments and reached its credit limit with Chisholm. Chisholm then stopped shipping meat to Abilene. Thereafter the parties negotiated to resolve Abilene's arrearage.

The Master Product Supply Agreement

The following facts are undisputed: on August 15, 2008, Abilene and Chisholm entered into the Master Product Supply Agreement ("MPSA"), the contract which is at issue here. In the MPSA, the parties agreed that Chisholm would supply meat products to Abilene. Abilene would process and sell the meat to Abilene's customers, and Abilene would remit the sales proceeds to Chisholm (DN 64-1). The purpose of the MPSA was to allow Chisholm to recoup Abilene's debt. Pursuant to the MPSA, after Abilene repaid its debt to Chisholm, then Chisholm and Abilene would split the profits on all of Abilene's subsequent sales to its customers.

ACS stored both Abilene's and Chisholm's products in its cold storage facility. Chisholm retained ownership of its meat at ACS at all times until Abilene's customers were invoiced for it. To facilitate Abilene's sales under the MPSA, Chisholm authorized ACS to give Abilene access to Chisholm's inventory and to release Chisholm's meat products to Abilene upon Abilene's request. However, Abilene was required to have its requests approved by Chisholm before ACS released any of Chisholm's meat.

On November 11, 2008, the parties amended the MPSA and agreed, among other things, that although the MPSA expired on March 31, 2009, Abilene could not terminate the MPSA until it paid its debt to Chisholm in full. However, later that month, Chisholm notified Abilene that it would not extend the MPSA beyond the expiration date and told Abilene to find another source of financing.

In April and May 2009, after operating under the MPSA until its expiration, Chisholm audited its meat inventory and found that meat was missing from its account at ACS's facility.[1] Based on Abilene's invoices, inventory records, and bills of lading, Chisholm determined that 0Abilene removed meat from Chisholm's account at ACS without paying Chisholm for it. The records that Chisholm acquired from Abilene show that the loss began in December 2008- immediately after Chisholm advised Abilene that it would not extend the MPSA-and the losses continued until May 2009 when Chisholm audited its account at ACS.

The September 2009 Purchase Order

Thereafter, the parties negotiated a purchase order to reduce the balance that Abilene owed Chisholm. Abilene contends that there was an arrearage due to both parties when Chisholm discovered that Abilene improperly removed meat products-specifically, Abilene claims that Chisholm owed Abilene processing fees. However, Abilene also admits that it owed Chisholm more money than Chisholm allegedly owed in processing fees (DN 64-1).

The negotiations culminated in Chisholm's agreement to sell Abilene the salvaged meat from the ACS facility at an "up charge"[2] to cover part of Abilene's arrears and losses. This agreement was memorialized in a purchase order on September 23, 2009. Chisholm asserts that it agreed to the purchase order with Abilene in an effort to mitigate Abilene's outstanding debt- the amount that Abilene owed Chisholm from its failure to pay for the meat purchased on credit, and to cover the amount it owed Chisholm from improperly selling Chisholm's meat.[3]

In the September 23, 2009 purchase order Abilene agreed to buy over $4 million worth of Chisholm's salvaged meat from ACS. The meat was priced at an up-charge-a price that was higher than what Chisholm paid for it-to cover part of Abilene's arrears and losses (DN 64-1). Chisholm alleges that it accepted the purchase order based on Abilene's promise to make up the difference in the parties' calculations of Chisholm's total loss "on the back end." (DN 64-1, Ex. 3 Hoey dep.). However, the parties had not-and subsequently have not-agreed about the exact amount that Abilene owed to Chisholm.[4]

We will first address Chisholm's contention that it is entitled to summary judgment against Abilene regarding Abilene's liability for breach of the MPSA (DN 64). For the reasons set forth herein, we see no genuine issue of material fact with regard to Abilene's liability for breaching the MPSA. Thus, we will grant Chisholm's motion for partial summary judgment as a matter of law. However, this ruling is limited to the issue of Abilene's breach and does not extend to the issue or amount of damages, if any, that Abilene owes Chisholm.[5]

Second, we will address Chisholm's motion for summary judgment regarding Abilene's counterclaims (DN 64-1). Abilene's counterclaims assert that Chisholm is liable for breach of contract, breach of a settlement agreement, and breach of fiduciary duty and the implied covenant of good faith and fair dealing (DN 48). Abilene also makes a demand for equitable accounting (DN 48). For the reasons set forth herein we will grant Chisholm's motion for summary judgment.

Third, we will address Abilene's motion for partial summary judgment regarding Counts II, IV, and V of Chisholm's cross claims (DN 71-1). Chisholm's cross claims assert that Abilene is liable for: Count I, breach of contract; Count II, breach of the covenant of good faith and fair dealing; Count III, unjust enrichment; Count IV, violation of the Packers and Stockyards Act ("PASA") and conversion; and Count V, fraud (DN 45). Chisholm also asserts that it is entitled to an award for punitive damages (DN 45). For the reasons set forth herein we will deny Abilene's motion for partial summary judgment.

STANDARD

Fed. R. Civ. P. 56(a) states that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A party moving for summary judgment bears the initial burden of specifying a basis for its motion by demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Not every factual dispute between the parties will prevent summary judgment-the disputed facts must be facts which, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). After the moving party meets this burden, the nonmoving party bears the burden of showing "specific facts showing that there is a genuine issue for trial." Id. at 248 ( quoting First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288 (1968)). Plaintiffs must offer evidence demonstrating a genuine issue of material fact. Celotex, 477 U.S. at 322. A "mere scintilla of evidence is insufficient" because there must be evidence on which a jury could find for the nonmoving party. McLean v. Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000) ( quoting Anderson, 477 U.S. at 252)).

However, the evidence must be construed in the light most favorable to the party opposing the motion. Matsushida Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) ( quoting United States v. Diebold Inc., 369 U.S. 654, 655 (1962)). The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor. Anderson, 477 U.S. at 255.

DISCUSSION

I. Breach of Contract

Chisholm's motion (DN 64) argues that partial summary judgment against Abilene is appropriate because Abilene breached the MPSA by selling Chisholm's meat without permission and failing to remit the sales proceeds to Chisholm (DN 64-1).

Abilene's response argues that we should deny summary judgment because Chisholm has no damages to recover-Abilene contends that it has already paid Chisholm more than it owed under the MPSA (DN 70). Abilene also argues that the September 2009 purchase order settled all the claims between the parties. In the alternative, Abilene contends that whether or not ...


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