United States District Court, D. Idaho
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Lynn Winmill Chief Judge United States District Court
Court held a three-day bench trial in this case concluding on
November 9, 2016. Thereafter, the parties submitted proposed
Findings of Fact and Conclusions of Law that were received on
November 21, 2016. The case is now at issue. For the reasons
explained below, the Court finds that plaintiffs are entitled
to a judgment in the sum of $1, 327, 478.16 against Idaho
Potato Packers Corporation, Nonpareil Corporation, Nonpareil
Farms, Inc., Nonpareil Processing Corporation, and Nonpareil
Dehydrated Potatoes, Inc., jointly and severally
Jacobs shipped $1.5 million worth of potatoes to
Taylor Produce in 2013, but was paid only a fraction of that
sum. Jacobs brought this lawsuit to recover the unpaid
balance of over $1.3 million.
grows potatoes while Taylor Produce packages, sells and ships
potatoes to end-users. The relationship between Jacobs and
Taylor Produce began in 2013 when Jacobs consigned fresh
potatoes to Taylor Produce for sale. Their agreement was not
a pure consignment, however, because Alan Taylor, Manager of
Taylor Produce, promised Jacobs a price range that would vary
but was most often between $6.50 and $8.00 a hundredweight.
All of Taylor Produce's expenses - from marketing to
packaging - were factored into the price, except for taxes.
This meant that Taylor Produce would remit all the sales
proceeds to Jacobs except for the taxes.
those potatoes were sold, Taylor Produce sent accountings to
Jacobs verifying that they would receive payment for the sale
of their potatoes as follows:
a. Silver K Farms was owed $611, 408.44;
b. Kirk Jacobs Farms was owed $719, 640.20; and
c. Reynolds Bros. was owed $208, 028.71.
See, Defendants' Exhibit 5008. Those figures add
up to $1, 539, 077.35. Taylor Produce made some payments but
the amount still due and owing is $1, 327, 478.16.
Produce did not sell the potatoes itself but entered into a
Marketing Agreement with Idaho Potato Packers Corporation
(IPPC) whereby IPPC would market and sell the potatoes,
remitting the sales proceeds to Taylor Produce, who would
then package the potatoes and ship them to the customer. The
Marketing Agreement stated that IPPC could charge Taylor
Produce for marketing fees and for commissions for sales
under the Betty Crocker label, but the Agreement did not
specify whether IPPC could deduct those expenses before
remitting the proceeds to Taylor Produce or whether IPPC
should remit all the sales proceeds and bill Taylor Produce
for those expenses.
to entering into the Marketing Agreement, IPPC invested $5
million in Taylor Produce, taking a 49% interest in the
company. The point of the Marketing Agreement was to put in
writing Taylor Produce's promise to use IPPC as the
exclusive marketing agent for Taylor Produce's potatoes
and to specify the expenses IPPC could charge to Taylor
arrangement between Taylor Produce and IPPC was strictly
between those two parties, and Jacobs was not a party to
their Marketing Agreement. In like fashion, the arrangement
between Taylor Produce and Jacobs was strictly between those
two parties, and IPPC was not a party to their agreement.
the parties did know of the other's involvement. For
example, Jacobs knew that IPPC was marketing and selling
potatoes for Taylor Produce. However, no evidence was
presented that Jacobs had agreed with Taylor Produce to pay
IPPC's expenses such as those for marketing, freight,
packaging materials, or commissions. There was no evidence
that Jacobs or Taylor Produce contemplated that the sales
proceeds due to Jacobs would be reduced by anything other
January 1, 2012, and December 31, 2013, IPPC marketed and
sold Taylor Produce's fresh potatoes that were supplied
by multiple farmers. IPPC provided packaging materials to
Taylor Produce, but did not perform any packing services in
connection with its sales of the potatoes. All the potatoes
consigned by Jacobs were packed by Taylor Produce and shipped
directly to IPPC's customers.
the sales of Taylor Produce's potatoes, IPPC collected
the gross proceeds from its customers and deposited them into
its operating account, which included both PACA trust and
non-trust assets. Between January 1, 2012, and April 2013,
IPPC deducted, before remitting the sales proceeds to Taylor
Produce, the following expenses: (1) freight, (2) Outside
Brokerage Fees and (3) commissions for sales under the Betty
April, 2013, Alan Taylor complained to IPPC that he was
having cash flow problems, could not pay his growers, and
needed IPPC to remit the entire sum of sale proceeds without
taking out deductions. Christopher Abend of IPPC disputes a
portion of Alan Taylor's account. Abend testified that
Alan Taylor only expressed a concern over cash flow in
requesting that no deductions be taken, and never revealed
that he was unable to pay growers. Abend testified that he
did not learn that Taylor Produce was unable to pay growers
until November of 2013.
the conflict in the testimony between Alan Taylor and
Christopher Abend, the Court finds Alan Taylor most credible.
But even if Abend's version is accepted, Alan
Taylor's complaint put IPPC on inquiry notice in April of
2013 that ...