San Miguel Produce, Inc. v. L.G. Herndon Jr. Farms, Inc.
Filing
102
ORDER granting in part and denying in part 61 Herndon Farms' Motion for Summary Judgment; granting 66 San Miguel Produce, Inc.'s Motion for Partial Summary Judgment. The Court ORDERS Herndon Farms' to file its written submissions, as set forth in footnote 2, within fourteen (14) days of the date of this Order. Signed by District Judge R. Stan Baker on December 10, 2020. (jrb)
Case 6:16-cv-00035-RSB-CLR Document 102 Filed 12/10/20 Page 1 of 44
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF GEORGIA
STATESBORO DIVISION
SAN MIGUEL PRODUCE, INC.,
Plaintiff,
CIVIL ACTION NO.: 6:16-cv-35
v.
L.G. HERNDON JR. FARMS, INC.,
Defendant.1
ORDER
This case concerns a contract dispute between Plaintiff San Miguel Produce, Inc., a shipper
of produce, and Defendant L.G. Herndon Jr. Farms, Inc., a grower of produce. (Docs. 1, 30.)
These parties entered into a grower-shipper agreement, under which L.G. Herndon Jr. Farms, Inc.
(“Herndon Farms”) was responsible for growing, harvesting, and delivering produce ordered by
San Miguel Produce, Inc. (“San Miguel”), to a packing facility in Toombs County, Georgia, which
was owned by an entity the parties had jointly formed. (Doc. 1, p. 5.) Their business relationship,
however, eventually took a turn for the worse, and the present litigation ensued. (See id. at pp.
11–15.) At bottom, San Miguel alleges that Herndon Farms breached the terms of their growershipper agreement by not supplying the produce required thereunder, (doc. 1), while Herndon
Farms alleges that San Miguel failed to remit payment for some of the produce it delivered, (doc.
30). After each party initially filed suit separately against the other, the Court, with the parties’
consent, consolidated their actions into this single case. (Doc. 29.)
1
Also present in this action are Consolidated Defendants Roy L. Nishimori and Janis Berk, officers of San
Miguel Produce, Inc., who are being sued pursuant to Defendant L.G. Herndon Jr. Farms, Inc.’s
counterclaims against Plaintiff San Miguel Produce, Inc. (See doc. 30.)
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The matter is now before the Court on each party’s respective Motion for Partial Summary
Judgment. 2 (Docs. 61, 66.) Herndon Farms moves for summary judgment as to all claims raised
by San Miguel and as to its own first and third counterclaims. (Docs. 61; see also doc. 62.) San
Miguel, meanwhile, moves for partial summary judgment on all but two of Herndon Farms’
counterclaims. (Doc. 66.) These issues have been fully briefed, (docs. 62, 66, 76, 79, 83, 85), and
are ripe for review. For the reasons set forth below, the Court GRANTS IN PART and DENIES
IN PART Herndon Farms’ Motion for Partial Summary Judgment, (doc. 61), and GRANTS San
Miguel’s Motion for Partial Summary Judgment, (doc. 66).
BACKGROUND
I.
Factual Background
San Miguel, a California corporation, grows, processes, and distributes produce. (Doc. 22,
p. 2.) Herndon Farms, a Georgia corporation, grows, distributes, and brokers produce. (Id.) In
September 2014, San Miguel and Herndon Farms executed a grower-shipper agreement (“GSA”),
Also, before the Court is Herndon Farms’ Limited Objections, (doc. 92), to the Magistrate Judge’s Order
on both parties’ Motions in Limine, (doc. 89). In its Objection, Herndon Farms argues that the Magistrate
Judge incorrectly excluded Michael Hively’s testimony that San Miguel did not make a reasonable business
decision concerning shipping produce across the United States. (Doc. 92, pp. 4–11.) Michael Hively’s
testimony about shipping is only relevant as to San Miguel’s first breach of contract claim, which asserts
in part that San Miguel “incurr[ed] additional and unnecessary freight charges” to ship produce from
California to Georgia. (Doc. 1, p. 16.) As the Court will explain below, San Miguel cannot bring this
claim. See Discussion Section II.A.2, infra. Thus, Hively’s testimony is no longer relevant, and Herndon
Farms’ challenge to the Magistrate Judge’s Order to exclude it is DENIED AS MOOT. Herndon Farms
also argues that the Magistrate Judge erred in excluding the testimony of Richard Deal. (Doc. 92, pp. 13–
16.) Richard Deal is a certified public accountant who has reviewed several documents in this case. (Doc.
89, pp. 13–14.) A review of Deal’s report indicates that his testimony is also related to San Miguel’s first
breach of contract claim. (See doc. 67-1, p. 3 (“Computing the difference between the quantities as
specified in the production schedules and the amounts shipped by [Herndon Farms] is not alone a sufficient
measure of [Herndon Farms’] compliance with the Grower-Shipper Agreement.”).) However, Deal’s report
also includes conclusions about the “total pounds” that Herndon Farms delivered to San Miguel, which may
be relevant to San Miguel’s claims involving “misweighing produce” (Counts V and VI). (See id.)
Accordingly, the Court ORDERS Herndon Farms to file a statement within fourteen (14) days of this
Order explaining whether it still seeks to challenge the Magistrate Judge’s Order excluding Deal, and, if it
does challenge the order, explaining why it contends Deal’s testimony is still relevant. San Miguel will
then have fourteen (14) days from the date of Herndon Farms’ filing to file a response.
2
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under which Herndon Farms agreed to grow, harvest, and deliver produce—ordered by San
Miguel—to a packing facility in Toombs County, Georgia. (Doc. 66-2.) This facility was owned
by ROBO Produce, LLC (“ROBO”), an entity the parties formed together. (Doc. 63, p. 4; doc.
66-3, p. 2.) San Miguel and Herndon Farms were equal members of ROBO, but San Miguel and
ROBO had a separate Co-Packing Agreement whereby ROBO was compensated by San Miguel
for processing the produce delivered by Herndon Farms.3 (Doc. 66-3, p. 2; doc. 64-14, p. 2.) At
the time the parties made these agreements and throughout their business relationship, San Miguel
did not have an agricultural dealer’s license for the State of Georgia. (Doc. 63, pp. 2–3.)
A.
Relevant Terms of the GSA
San Miguel and Herndon Farms entered into the GSA “to create a mutually beneficial
business relationship with respect to the production and distribution of [San Miguel’s] ‘Cut ‘N
Clean Greens’ brand.” (Doc. 66-2, p. 2.) To that end, they executed a “contractual growing
arrangement,” but they explicitly disavowed any intention to create “a joint venture or a
partnership.” (Id.) Nonetheless, Herndon Farms agreed to sell produce “at cost” to San Miguel,
and the parties agreed to “divide equally the profits from the sale of all products processed, packed
and shipped through” ROBO. (Id. at p. 4.) This profit-sharing included proceeds from additional
crops that Herndon Farms did not itself grow but “actively participated in securing and delivering”
to ROBO from third parties. (Id.) The GSA was slated to last for five years beginning on
November 1, 2014. (Id. at p. 2.) Any changes to the GSA had to “be in writing and signed by
both parties.” (Id. at p. 10.)
3
In total, San Miguel, Herndon Farms, and ROBO entered into five agreements: (1) the GSA between San
Miguel and Herndon Farms; (2) the Operating Agreement between San Miguel and Herndon Farms
establishing ROBO; (3) the Co-Packing Agreement between San Miguel and ROBO; (4) an equipmentlease agreement between San Miguel and ROBO for the facility’s processing equipment; and (5) a buildinglease agreement between Herndon Farms and ROBO to house the facility. (Doc. 63, pp. 3–4.)
3
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Herndon Farms was responsible for “[g]rowing, harvesting, and delivering” to ROBO
“fresh produce, crops and varieties of raw vegetables . . . in such quantities and prices as described
in Addendum A, attached, and as may be modified in writing by the Parties from time to time
during the term of [the GSA].” (Id. at p. 2.) The GSA required Herndon Farms to “make a good
faith effort to grow Crops in sufficient quantity to meet the anticipated volume of orders set forth
in Addendum A.” (Id. at p. 3.) The attached Addendum A, however, does not specify any
quantities, only prices. (Id. at p. 13.) Specifically, Addendum A provides that “Fresh Cut GreensConventional” were to be sold at $0.30 per field pound, and “Fresh Cut Greens-Organic” were to
be sold at $0.40 per field pound. (Id.)
As for San Miguel, the GSA obligated it to purchase from Herndon Farms “the [c]rops set
forth in Addendum A, attached, as the same are harvested during the calendar year, including such
Crops as may be provided pursuant to Section 2.f.” (Id. at p. 3.) In addition to agreeing to buy
crops from Herndon Farms, San Miguel agreed to “[m]anage all sales and marketing of packaged
fresh-cut products,” including “sell[ing] and market[ing] all products to regional and national
accounts.” (Id. at p. 4.) Further, San Miguel would “[p]rovide sales and marketing opportunities
for [Herndon Farms’] bunch/bulk product sales.” (Id.)
Under the terms of the GSA, neither party had the right to terminate the agreement within
its five-year term “except for cause.” (Id. at p. 5.) Both parties also agreed “to mediate any dispute
or claim arising out of [the GSA] before resorting to any legal action,” and they agreed that if
either party “commence[d] legal action without first attempting to resolve the matter through
meditation . . . then that party shall not be entitled to recover attorney’s fees, even if attorney’s
fees would otherwise be available to that party . . . .” (Id. at p. 6.)
B.
The Business Relationship
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Roy Nishimori and Jan Berk own San Miguel, and L.G. “Bo” Herndon, Jr. is the principal
of Herndon Farms. (Doc. 63, p. 2.) Mr. Herndon and Mr. Nishimori first met in the 1990s when
San Miguel opened a fresh cut greens processing plant in Atlanta, Georgia. (Id. at p. 3.) In 2013,
San Miguel began efforts to open a new east-coast processing facility, and Mr. Nishimori contacted
Mr. Herndon in this regard. (Id.) Their discussions culminated in 2014, when the parties entered
into a series of agreements, including the GSA and the Operating Agreement that created the
jointly-owned ROBO.4 (Id.)
Herndon Farms planted produce according to 2014–2015 sales projections that San Miguel
had provided approximately two months before they finalized and executed the GSA. (Doc. 6611, p. 24; see doc. 64-8, pp. 41–45.) In addition, throughout their business relationship, San Miguel
would send Herndon Farms “numerous projections of what product [it] thought [it] needed.”5
(Doc. 66-11, p. 10.) Herndon Farms in turn “would figure out what acreage [it needed] . . . to
produce that volume to suffice [San Miguel’s] needs.” (Id.) San Miguel normally bought greens
from Herndon Farms on credit and then later remitted payment per Herndon Farms’ invoices.
(Doc. 63, pp. 7–8.) San Miguel made payments to Herndon Farms, without objection, for produce
that was delivered and invoiced until December 2015, when it stopped making payments due to
purported weight issues with Herndon Farms’ delivered product. ((Doc. 66-1, p. 3; doc. 66-15, p.
23.) Specifically, San Miguel concluded that Herndon Farms was overbilling it for greens based
on inaccurate weights. (Doc. 66-15, p. 23.) It contends that Herndon Farms’ billing and weighing
practices resulted in more than $250,000 in overcharges. (Doc. 79, p. 17.) As a result, in San
4
The ROBO moniker is derived from the names of Roy Nishimori and Bo Herndon. (Doc. 66, p. 3.)
Over the course of 2015, however, problems arose with Herndon Farms’ fulfillment of San Miguel’s
orders. (See doc. 63, p. 7.) During the summer, beginning in May, San Miguel decided to ship organics
from California to the ROBO facility. (Id.)
5
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Miguel’s estimation, Herndon Farms had an overall negative account balance, making further
payment unwarranted. (Doc. 66-15, p. 23.) Although San Miguel disputes the accuracy of
Herndon Farms’ invoices, it is undisputed that the unpaid invoices—ranging from December 18,
2015 to February 1, 2016—total $486,095.83. (Doc. 63, p. 8.)
Though neither party clearly explains the invoice and weighing process, it appears that
Herndon Farms would weigh between three and five totes of product from a pallet before delivery;
the shipment’s full weight would then be calculated from these sample weights. (Doc. 79-6, p. 8.)
Herndon Farms would invoice San Miguel based on this weight calculation. (Id.) When that
shipment arrived at ROBO, however, employees there would weigh and record the weight of each
individual pallet. (Doc. 79-7, pp. 6–7.) The scales utilized at the ROBO facility—initially a table
scale and later a pallet scale—were not certified by the State of Georgia. (Doc. 63, pp. 8–9.) Using
these ROBO weights, Mr. Nishimori conducted a comparative analysis with the invoiced weights
and concluded that Herndon Farms had billed for approximately 740,000 pounds of produce not
reflected in the ROBO weight reports. (Doc. 79-4, p. 14.) Notably, however, at no time did San
Miguel obtain an inspection certificate from the United States Department of Agriculture
(“USDA”) regarding the weight of any of the produce that was delivered. (Doc. 63, p. 9.)
It became apparent in the fall of 2015 that the existing business format was not functioning
well. (Id.) The parties attempted to rectify the situation by negotiating a modified agreement, but
they were unable to reach agreeable terms. (Docs. 76-2, 76-3, 76-4, 76-5.) In one email, Mr.
Nishimori proposed “developing new subsequent agreements for 2016” and offered to pay $0.36
per pound for “Conventional” product and $0.58 per pound for “Organic” product. (Doc. 76-4,
pp. 2–3.) In subsequent emails, Mr. Herndon disagreed with the organic produce price, (doc 76-
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4, p. 2), and offered to grow the “greens” for $0.40 per pound, (doc. 76-5, p. 2).6 The parties did
not reach a modified agreement. (Doc. 63, pp. 9–10.) The ROBO facility closed in February 2016.
(Id. at p. 10.) Around this same time—February 2016—San Miguel formally notified Herndon
Farms of its alleged breach of the GSA. (Doc. 64-8, p. 38.)
C.
ROBO and the Operating Agreement
The parties intended the ROBO facility to be operated at cost in order “to facilitate the
other business interests and operations of the members in connection with the growing, processing,
and sale of fresh cut produce products as set forth in the [GSA] and Co-Packing Agreement.”
(Doc. 66-3, p. 7.) During the course of San Miguel and Herndon Farms’ business relationship,
San Miguel “advanced money” to ROBO for operating expenses. (Doc. 66-14, p. 91.) These
funds, which San Miguel provided in 2014 and 2015, were entered into ROBO’s balance sheet as
“accounts payable.” (Id. at p. 92.) Following the end of ROBO’s operations, the funding advanced
by San Miguel remained as an outstanding account payable on ROBO’s balance sheet. (Id. at pp.
91–92.) According to Mr. Nishimori, ROBO owes San Miguel $296,000, half of which Herndon
Farms is responsible for given its joint ownership of ROBO. (See id.)
As is pertinent here, the ROBO Operating Agreement sets forth the following terms
regarding profits and losses with respect to members’ capital accounts:
The net profits or net losses of [ROBO], after providing for the expenses of
[ROBO], shall be distributable or chargeable, as the case may be, to each of the
members according to their pro rata interest in [ROBO] as determined with
reference to their respective capital accounts. Profits and losses shall be credited
or debited to the individual income accounts as soon as practicable after the close
of each fiscal year or otherwise as may be agreed to by the members. If there is no
balance in a member’s income account, net losses shall be debited to the member’s
capital accounts. If the capital account of a member shall have been depleted by
6
According to his deposition testimony, in November or December 2015, Mr. Herndon informed San
Miguel that Herndon Farms intended to increase prices in January and San Miguel in fact “agreed to [a
price increase, but] none of that was in writing.” (Doc. 66-12, p. 30.) According to his testimony, Herndon
Farms subsequently increased prices from $0.30 per pound to $0.40 per pound. (Id.)
7
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the debiting of losses, future profits allocable to that member shall not be credited
to his or her income account until the depletion in his or her capital account shall
have been made up, but shall be credited to his or her capital account. After the
depletion in the member’s capital account shall have been made up, the member’s
subsequent share of the profits of the Company shall be credited to his or her
income account.
(Doc. 66-3, p. 7.) Further, under the Operating Agreement, ROBO members were permitted, but
not required, to make loans to the company “in an amount, at a time and on terms as may be
approved by resolution of the members. No loan in this manner shall be considered a contribution
to capital.” (Id. at p. 8.)
Upon dissolution, pursuant to the Operating Agreement, ROBO was to first pay or
adequately provide payment for “all known debts” except “debts owing to members.” (Id. at
p. 12.) ROBO’s remaining assets were to be distributed in the following order of priority:
(a) To pay the expenses of liquidation.
(b) To repay outstanding loans to members. If there are insufficient funds to pay
those loans in full, each member shall be repaid in the ratio that the member’s
respective loan, together with accrued and unpaid interest, bears to the total of
all those loans from members, including all interest accrued and unpaid on those
loans. . . .
(c) Among the members in accordance with their pro rata interests provisions.
(Id.) Under the agreed upon terms, San Miguel and Herndon Farms, as members, shall “look
solely to the assets of [ROBO] for the return of [their] investment.” (Id.) Furthermore, “if the
[ROBO] property remaining after the payment or discharge of the debts and liabilities of [ROBO]
is insufficient to return the investment of any member, the member shall have no recourse against
any other members for indemnification, contribution, or reimbursement.” (Id.)
Attempting to reach an agreeable end, Herndon Farms and San Miguel executed an
agreement in the spring of 2016 whereby San Miguel took responsibility for all of ROBO’s
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outstanding bills owed to third parties, while San Miguel took possession of the remaining
inventory and stock. (Doc. 79-4, pp. 9–10.)
II.
Procedural History
San Miguel commenced this action on March 25, 2016, alleging, inter alia, that Herndon
Farms breached the GSA, misrepresented the nature of the produce it supplied, and violated the
Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. § 499(a) et seq. (Doc. 1.) On April
5, 2016, Herndon Farms filed suit against San Miguel in the Superior Court of Toombs County,
Georgia, which San Miguel promptly removed to this Court. See Notice of Removal, L.G.
Herndon Farms Jr., Inc. v. San Miguel Produce, Inc., 6:16-cv-43 (S.D. Ga. Apr. 12, 2016), ECF
No. 1. Thereafter, Herndon Farms moved to dismiss San Miguel’s Complaint in the present action,
(docs. 5, 20), and to remand its separate action back to state court, see Motion to Remand, id. at
ECF No. 4.
Herndon Farms argued that, pursuant to the forum selection clause contained in the GSA,
its action should be remanded, id., and San Miguel’s Complaint dismissed, (doc. 5). The Court,
however, denied these Motions. (Doc. 22.) In so doing, the Court found that Herndon Farms
waived the forum selection clause when, on February 1, 2016, it elected to begin informal
proceedings before the USDA regarding San Miguel’s failure to pay. (Id. at pp. 5–9.) The Court
rejected Herndon Farms’ contention that the proceeding it instituted before the USDA was merely
a request for mediation consistent with the parties’ agreement to mediate prior to commencing
legal action. (Id. at pp. 2, 7 n.5.) Additionally, the Court denied Herndon Farms’ requests for
attorney’s fees in both actions. (Id. at pp. 9–12.)
The parties then filed a Consent Motion to Consolidate Cases pursuant to Federal Rule of
Civil Procedure 42(a), which the Court granted. (Docs. 27, 29.) Upon consolidation of the two
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cases, Herndon Farms filed a Second Amended Answer, Defenses and Counterclaims, and First
Amendment to Complaint, (doc. 30), and San Miguel filed its Answer to Herndon’s Second
Amended Counterclaims and First Amended Complaint, (doc. 31). Following discovery, San
Miguel and Herndon Farms each filed a Motion in Limine seeking to exclude the testimony of the
opposing party’s expert(s) pursuant to Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S.
579 (1993). (Docs. 65, 67.) The Magistrate Judge granted in part and denied in part both parties’
Motions. (Doc. 89.) As is relevant here, the Magistrate Judge excluded expert testimony proffered
by two of Herndon Farms’ expert witnesses, Mr. Richard Deal and Mr. Michael Hively. (Id. at
pp. 13–21.)
Pursuant to Federal Rule of Civil Procedure 72(a), Herndon Farms filed Limited Objections
to the Magistrate Judge’s Order, appealing the Order’s exclusion of testimony from Mr. Deal and
Mr. Hively. (Doc. 92.) Prior to Herndon Farms’ appeal of the Magistrate Judge’s decision, both
San Miguel and Herndon Farms had already filed their present Motions for Partial Summary
Judgment. (Docs. 61, 66.)
On September 11, 2019, the Court certified three questions to the Supreme Court of
Georgia. (Doc. 99, p. 11.) The Court ordered that this case be administratively closed and stayed
until the Georgia Supreme Court answered the certified questions. (Id. at pp. 11–12.) On May 18,
2020, the Georgia Supreme Court issued an opinion answering the three certified questions. San
Miguel Produce, Inc. v. L. G. Herndon Jr. Farms, Inc., 843 S.E.2d 403 (Ga. 2020).
III.
The Parties’ Claims and Counterclaims
A.
Plaintiff San Miguel’s Claims
San Miguel brings seven causes of action against Herndon Farms. (Doc. 1.) In Count I,
San Miguel alleges that Herndon Farms breached the GSA by failing to supply the amount of
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produce required by San Miguel and by failing to meet industry standards in its farming and
harvesting practices. (Id. at pp. 15–17.) As a result of Herndon Farms’ alleged breach, San Miguel
was forced to deliver product from California and incur unnecessary freight charges of
$492,607.00. (Id. at 16.) In Count II, San Miguel alleges that Herndon Farms breached the ROBO
Operating Agreement by making improper distributions to itself and by failing to make
contributions to its ROBO account to satisfy obligations to creditors. (Id. at pp. 17–18.)
In Counts Three and Four, San Miguel alleges that Herndon Farms violated PACA and
engaged in negligent misrepresentation by “passing off” others’ produce as its own, thereby
allegedly causing economic harm. (Id. at pp. 18–20.) In Counts Five, Six, and Seven, San Miguel
alleges that Herndon Farms violated PACA, engaged in negligent misrepresentation, and unjustly
enriched itself by misweighing, and overcharging for, the produce it delivered. (Id. at pp. 20–22.)
Lastly, San Miguel claims it is entitled to attorney’s fees under O.C.G.A. § 13-6-11. (Id. at p. 22.)
B.
Defendant Herndon Farms’ Counterclaims
Herndon Farms brings nine causes of action as counterclaims in this case. (Doc. 30.) As
to the GSA related claims, Herndon Farms brings the following counterclaims. In Count I,7
Herndon Farms alleges that San Miguel breached the contract by failing to remit payment for
produce delivered and invoiced, such produce being valued at $486,095.83. (Id. at pp. 17–18.) In
Count V, Herndon Farms alleges that San Miguel breached the GSA by directing Herndon Farms
to grow produce for the 2016 crop year and then terminating the agreement, causing Herndon
Farms to incur unnecessary expenses. (Id. at p. 22.) In Count VI, Herndon Farms alleges that it
is entitled to an accounting and lost profits under the GSA for San Miguel’s sale of its produce.
(Id. at p. 23.) In Count IX, Herndon Farms alleges that San Miguel breached the GSA and caused
For matters of ease of reference and consistency, the Court terms Herndon Farms’ nine separate causes
of action “Counts.” (See doc. 30.)
7
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lost profits by submitting a plant production schedule for the 2015–2016 crop year that
underestimated the amount of kale San Miguel eventually required. (Id. at p. 25.)
Herndon Farms also brings the following other counterclaims. In Count II, Herndon Farms
seeks the enforcement of a statutory trust under PACA regarding the unpaid invoices. (Id. at
pp. 18–20.) In Count III, Herndon Farms alleges San Miguel failed to account and pay promptly
by not paying the unpaid invoices. (Id. at pp. 20–21.) In Count IV, Herndon Farms seeks a
declaration that, in the event a PACA trust is enforced, its claims against such trust take first
priority. (Id. at pp. 21–22.) In Count VII, Herndon Farms alleges San Miguel breached the ROBO
Operating Agreement by interfering with its contractual right to run the facility. (Id. at pp. 23–
24.) In Count VIII, Herndon Farms alleges that San Miguel breached their agreement that
obligated San Miguel to assume the third-party debts of ROBO. (Id. at p. 24.) Lastly, Herndon
Farms claims it is entitled to statutory attorney’s fees under O.C.G.A. §§ 13-1-1 and 13-6-11. (Id.
at pp. 18, 25.)
STANDARD OF REVIEW
Summary judgment “shall” be granted if “the movant shows that there is no genuine
dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). A fact is “material” if it “might affect the outcome of the suit under the governing
law.” FindWhat Inv’r Grp. v. FindWhat.com, 658 F.3d 1282, 1307 (11th Cir. 2011) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute is “genuine” if the
“evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.
The moving party bears the burden of establishing that there is no genuine dispute as to
any material fact and that it is entitled to judgment as a matter of law. See Williamson Oil Co. v.
Philip Morris USA, 346 F.3d 1287, 1298 (11th Cir. 2003). Specifically, the moving party must
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identify the portions of the record which establish that there are no “genuine dispute[s] as to any
material fact and the movant is entitled to judgment as a matter of law.” Moton v. Cowart, 631
F.3d 1337, 1341 (11th Cir. 2011). When the nonmoving party would have the burden of proof at
trial, the moving party may discharge his burden by showing that the record lacks evidence to
support the nonmoving party’s case or that the nonmoving party would be unable to prove his case
at trial. See id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986)). If the moving party
discharges this burden, the burden shifts to the nonmovant to go beyond the pleadings and present
affirmative evidence to show that a genuine issue of fact does exist. Anderson, 477 U.S. at 257.
In determining whether a summary judgment motion should be granted, a court must view
the record and all reasonable inferences that can be drawn from the record in a light most favorable
to the nonmoving party. Peek-A-Boo Lounge of Bradenton, Inc. v. Manatee County, 630 F.3d
1346, 1353 (11th Cir. 2011) (citing Rodriguez v. Sec’y for Dep’t of Corr., 508 F.3d 611, 616
(11th Cir. 2007)). However, “facts must be viewed in the light most favorable to the non-moving
party only if there is a ‘genuine’ dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380
(2007). “[T]he mere existence of some alleged factual dispute between the parties will not defeat
an otherwise properly supported motion for summary judgment; the requirement is that there be
no genuine issue of material fact.” Id. (emphasis and citation omitted).
DISCUSSION
Though they deal with the same nucleus of facts, San Miguel and Herndon Farms’
respective Motions for Partial Summary Judgment concern unique claims and issues. As such, the
Court addresses each party’s Motion in turn.8
In Count III of its Complaint, San Miguel alleges that Herndon Farms violated PACA by “pass[ing]off
[p]roduce to [San Miguel] as its own, knowing that the [p]roduce was purchased from an unapproved
grower.” (Doc. 1, p. 18.) San Miguel also asserts a state law claim, in Count IV, for negligent
misrepresentation under the same set of facts. (Doc. 1, pp. 19–20.) In its Response brief, San Miguel states
8
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I.
Choice of Law
In this diversity action, the Court must apply the choice-of-law rules of its forum state of
Georgia to determine which state’s substantive laws apply. Boardman Petroleum, Inc. v. Federated
Mut. Ins. Co., 135 F.3d 750, 752 (11th Cir. 1998). San Miguel and Herndon Farms’ claims
resound in contract and tort. “[I]n contract cases, [Georgia] follows the traditional doctrine of lex
loci contractus: contracts are ‘governed as to their nature, validity and interpretation by the law of
the place where they were made’ unless the contract is to be performed in a state other than that in
which it was made.” Id. (quoting Gen. Tel. Co. of Se. v. Trimm, 311 S.E.2d 460, 461 (Ga. 1984)).
In addition, “the law of the jurisdiction chosen by parties to a contract to govern their contractual
rights will be enforced unless application of the chosen law would be contrary to the public policy
or prejudicial to the interests of this state.” CS-Lakeview at Gwinnett, Inc. v. Simon Prop. Grp.,
Inc., 659 S.E.2d 359, 361 (Ga. 2008) (citation omitted). Here, the GSA states that it “shall be
that it “has decided not to pursue its claims in Counts 3 or 4.” (Doc. 79, p. 6 n.3.) In addition, in its
counterclaim, Herndon Farms brings a cause of action to enforce a statutory trust under PACA (Count II)
and seeks a declaratory judgment under PACA (Count IV). (Doc. 30, pp. 18–22.) It also brings two breach
of contract counterclaims for lost profits under the GSA (Counts VI and Count IX) and a breach of
agreement to satisfy third-party creditors (Count VIII). (Id. at pp. 23–25.) San Miguel argues that it is
entitled to summary judgment on these counterclaims. (Doc. 66.) It argues that summary judgment is
warranted because the undisputed evidence shows that the business arrangement was unprofitable, so
Herndon Farms is not entitled to lost profits. (Id. at pp. 8–9.) It also argues that the undisputed evidence
shows that it satisfied all debts to third party creditors. (Id. at pp. 12–13.) Finally, it argues that Herndon
Farms did not comply with requirements imposed by PACA in order to enforce a statutory trust under that
statutory scheme. (Id. at pp. 6–8.) A review of the record reveals that San Miguel is correct that no dispute
of fact exists on these issues. (Doc. 66-6, p. 9; doc. 66-14, p. 14.) In its Response Brief, Herndon Farms
“concedes” that summary judgment is appropriate as to these counterclaims. (Doc. 76, p. 1). “[T]he onus
is upon the parties to formulate arguments; grounds alleged in the complaint but not relied upon in summary
judgment are deemed abandoned.” Resolution Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir.
1995); see also Jones v. Bank of America, N.A., 564 F. App’x 432, 434 (11th Cir. 2014) (per curiam)
(“[W]hen a party fails to respond to an argument or otherwise address a claim, the Court deems such
argument or claim abandoned.”) (citation and quotation omitted); State Farm Mut. Auto. Ins. Co. v.
Marshall, 175 F. Supp. 3d 1377, 1385 (S.D. Ga. 2016) (same). Thus, the Court GRANTS Herndon Farms’
Motion for Summary Judgment as to Counts III and IV in San Miguel’s Complaint. (Doc. 61). The Court
also GRANTS San Miguel’s Motion for Summary Judgment as to Counts II, IV, VI, VIII, and IX as to
Herndon Farms’ counterclaim. (Doc. 66.)
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governed by, construed and determined in accordance with the [l]aws of the [s]tate of Georgia . .
. .” (Doc. 66-2, p. 11.) Neither party argues that this provision should not be enforced, and the
Court also finds no reason to disregard it. Accordingly, Georgia law will apply to both parties’
contract claims.9
Apart from the contract claims, San Miguel also asserts a tort claim for negligent
misrepresentation. In tort actions, “Georgia continues to apply the traditional choice of law
principles of lex loci delicti.” Willingham v. Glob. Payments, Inc., No. 1:12-CV-01157-RWS,
2013 WL 440702, at *14 (N.D. Ga. Feb. 5, 2013) (citation omitted). Under the rule of lex loci
delicti “a tort action is governed by the substantive law of the state where the tort was committed.”
Dowis v. Mud Slingers, Inc., 621 S.E.2d 413, 414 (Ga. 2005). The parties do not dispute that the
events giving rise to this action took place in the state of Georgia. Thus, the tort claim is governed
by Georgia law.
II.
Defendant Herndon Farms’ Motion for Partial Summary Judgment (Doc. 61)
Herndon Farms moves for summary judgment as to all Counts alleged in San Miguel’s
Complaint, including its claim for attorney’s fees. (See docs. 61, 62.) Additionally, Herndon
Farms moves for summary judgment in its favor as to its first and third counterclaims regarding
San Miguel’s failure to pay invoices. (See id.) For the reasons explained below, the Court
GRANTS IN PART and DENIES IN PART Herndon Farms’ Motion. (Doc. 61.) Specifically,
the Court GRANTS Herndon Farms summary judgment on Counts I, II, and VII of San Miguel’s
9
The ROBO Operating Agreement does not include a choice of law provision. However, the ROBO
Operating Agreement did create a “Georgia Limited Liability Company” which would “operate a
processing facility in Toombs County, Georgia . . . .” (Doc. 66-3, pp. 2, 7.) In addition, neither party argues
that any law other than Georgia law should apply. See Int’l Ins. Co. v. Johns, 874 F.2d 1447, 1458 n.19
(11th Cir. 1989) (“[B]ecause the parties failed to consider the choice of law in this diversity case, we must
presume that the substantive law of the forum . . . controls.”) (citation omitted). Thus, Georgia law also
applies to the parties’ breach of contract claims based on the ROBO Operating Agreement.
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Complaint, but DENIES Herndon Farms summary judgment on Counts V and VI of San Miguel’s
Complaint as well as San Miguel’s claim for attorney’s fees. (Id.) The Court also DENIES
Herndon Farms’ Motion for Summary Judgment on Counts I and III of its own counterclaim. (Id.)
A.
Herndon Farms Is Entitled to Summary Judgment on San Miguel’s Claims
for Breach of the GSA.
Herndon Farms moves for summary judgment on San Miguel’s claims for breach of the
GSA because, it contends, the GSA is both void and unenforceable. (Doc. 62, p. 3.) Specifically,
Herndon Farms argues, among other things, that San Miguel cannot enforce the GSA because it
does not have an agricultural dealer license in Georgia. (Id. at pp. 4–8.) Herndon Farms also
argues the GSA is void due to a lack of mutuality and indefiniteness caused by the GSA’s silence
on the quantity of produce required by San Miguel as well as the absence of an exclusivity
obligation for sourcing produce. (Id. at pp. 9–15.) In other words, Herndon Farms contends that,
even if San Miguel had the proper license, the GSA is merely an “agreement to agree,” rather than
a valid requirements contract.10 (Id. at p. 15.)
In its Response, San Miguel argues that Herndon Farms waived the issue of the GSA’s
enforceability through factual admissions in its Answer, by not including an affirmative defense
of illegality in its Answer, by seeking to enforce the GSA in its remand motion, and by bringing
claims for breach of the GSA. (Doc. 79, pp. 2–3.) Additionally, San Miguel argues Herndon
Farms should be estopped from contesting the GSA’s enforceability because it did not raise this
issue until late in the case, after seeking to enforce the GSA’s forum selection clause. (Id. at pp.
3–6.) Taking the enforceability issue on its merits, San Miguel contends it can bring GSA claims,
Because the Court can resolve these claims without resolving the GSA’s potential lack of mutuality and
indefiniteness, the Court will address this issue later this Order. See Discussion Section II.F, infra.
10
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despite not having an agricultural dealer license, because it is either exempt from that requirement
or because being unlicensed does not render the GSA illegal or unenforceable. (Id. at pp. 6–8.)
(1)
Herndon Farms Can Challenge the Enforceability of the GSA.
The Court has carefully considered San Miguel’s position that Herndon Farms cannot
challenge the GSA and finds none of its arguments availing. First, as to Herndon Farms’ admission
regarding the GSA in its Answer, “[t]he existence and validity of a contract are legal conclusions
not facts.” MAO-MSO Recovery II, LLC v. Boehringer Ingelheim Pharm., Inc., 281 F. Supp. 3d
1278, 1283 (S.D. Fla. 2017) (citations omitted).
“The issues of contract construction and
enforceability are generally questions of law for a court to resolve . . . .” SunTrust Bank v.
Bickerstaff, 824 S.E.2d 717, 722 (Ga. Ct. App. 2019) (quoting Precision Planning, Inc. v.
Richmark Cmties., Inc., 679 S.E.2d 43, 45 (Ga. Ct. App. 2009)). Herndon Farms’ admission, in
its Answer, that the parties “entered into a valid contract and expressly agreed therein that the
contract shall be governed by . . . Georgia law,” (doc. 1, p. 15; doc. 30, p. 11), is—to the extent it
concerns validity rather than execution and choice of law—a “legal conclusion, and, therefore,
does not qualify as a judicial admission.” Matter of Hoffman, No. 18-10556-WHD, 2019 WL
3403883, at *4 (Bankr. N.D. Ga. July 26, 2019); see also Cameron v. Moore, 406 S.E.2d 133, 135
(Ga. Ct. App. 1991) (“In order for a judicial admission to be binding it must be one of fact and not
a conclusion of law or an expression of opinion.”). Consequently, San Miguel’s argument that
Herndon Farms judicially admitted the GSA’s validity is without merit.
Second, as to Herndon Farms bringing counterclaims on the GSA while also challenging
the contract’s validity, “[a] party may state as many separate claims or defenses as it has, regardless
of consistency.” Fed. R. Civ. P. 8(d)(3). Third, contrary to San Miguel’s interpretation of Herndon
Farms’ Answer, a fair reading of that pleading shows that Herndon Farms raised the issue of
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illegality it now presses at summary judgment. In its “Second Defense,” Herndon Farms asserted
that San Miguel cannot pursue this action because it “failed to procure a license from the Georgia
Department of Agriculture.” (Doc. 30, p. 2.) In its “Sixth Defense,” Herndon Farms asserted that
San Miguel’s claims “are barred under the doctrine of consideration.” (Id.) Although Herndon
Farms did not invoke the word “illegal” in these defenses, the substance of its facial challenge to
the GSA regarding illegality and unenforceability was made readily apparent. These averments,
while not models of clarity, provided sufficient notice of Herndon Farms’ illegality defense. Thus,
because “[p]leadings must be construed so as to do justice,” Fed. R. Civ. P. 8(e), the Court finds
that Herndon Farms did not waive this defense.
Finally, San Miguel’s argument that Herndon Farms should be judicially estopped from
challenging the GSA’s validity and enforceability—because it sought remand pursuant to the
forum selection clause contained therein—is similarly deficient. Judicial estoppel “generally
prevents a party from prevailing in one phase of a case on an argument and then relying on a
contradictory argument to prevail in another phase.” New Hampshire v. Maine, 532 U.S. 742, 749
(2001) (citation omitted). Here, however, there has been no determination in Herndon Farms’
favor—whether as to remand or otherwise. If a party’s position fails to prove successful, that party
is not precluded from taking a contrary position later in the case. Jaffe v. Bank of Am., N.A., 395
F. App’x 583, 587 (11th Cir. 2010) (per curiam) (affirming court’s decision to not apply judicial
estoppel where the earlier, arguably inconsistent motion was denied). Furthermore, judicial
estoppel is only appropriately applied in situations where the party advancing the “inconsistent
position would derive an unfair advantage,” New Hampshire, 532 U.S. at 751, and it is undisputed
that San Miguel has been aware of Herndon Farms’ position in this regard since April 2016 when
Herndon Farms filed suit in Toombs County. In that proceeding, which San Miguel removed and
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which was eventually consolidated with the present case, Herndon Farms asserted that San
Miguel’s ability to recover on the GSA was limited by its failure to obtain the proper license. See
Complaint at p. 9, L.G. Herndon Farms Jr., Inc. v. San Miguel Produce, Inc., 6:16-cv-43 (S.D. Ga.
Apr. 14, 2016), ECF No. 1-1.
Because Herndon Farms has not yet received a favorable
determination regarding the GSA and because San Miguel has long been aware of the licensure
issue, estoppel should not be applied to prevent Herndon Farms from challenging the GSA. For
all of these reasons, the Court finds that Herndon Farms may challenge the enforceability and
validity of the GSA.
(2)
San Miguel Cannot Enforce the GSA Without an Agricultural Dealer
License.
It is undisputed that San Miguel does not currently hold, and has not at any time held, a
Georgia Dealer in Agricultural Products license. (See doc. 63, p. 2.) Herndon Farms asserts this
failure renders the parties’ GSA illegal and unenforceable by San Miguel. (Doc. 62, pp. 4–8.) San
Miguel, however, contends it is exempt from this requirement as a “farmer” and that, in any event,
this licensure requirement was not for the public interest and thus does not affect the validity of
the GSA. (Doc. 79, pp. 6–8.) After reviewing Georgia case law, the Court determined that no
Georgia appellate court had dealt with these issues. (Doc. 99, p. 8.) The Court certified the
following three questions to the Georgia Supreme Court:
(1) Does an entity that purchases produce from other growers, has it processed, and
then markets, sells, and ships that produce qualify as a “[d]ealer in agricultural
products” as defined in O.C.G.A. § 2-9-1(2), or does that entity meet the
“farmers in the sale of agricultural products grown by themselves” exemption
in O.C.G.A. § 2-9-15(a)(1) because at times it also processes, markets, sells,
and ships produce that it grew itself as part of the same business operation?
(2) Under the contract rule restated in Paulsen St. Investors v. EBCO General
Agencies, 514 S.E.2d [904], 906 [(Ga. Ct. App. 1999)] . . . are the licensing
requirements set forth by the Dealers in Agricultural Products Act, O.C.G.A. §
2-9-1 et seq., regulatory in the public interest or merely for revenue purposes?
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(3) If a “[d]ealer in agricultural products,” as defined by O.C.G.A. § 2-9-1(2), fails
to obtain a license, as required by O.C.G.A. § 2-9-2, prior to engaging in a
business that comes within the terms of the Act, is it precluded from recovering
on a contract made to carry out that business?
(Id. at p. 11.) The Georgia Supreme Court has now entered judgment in response to the certified
questions. See San Miguel Produce, Inc., 843 S.E.2d at 405.
The Georgia Supreme Court held “that an entity as described by the district court does
qualify as a dealer in agricultural products under the Act” and “if a dealer has failed to obtain a
license as required by OCGA § 2-9-2, it may not recover under a contract to the extent that the
contract relates to business coming within the terms of the Act.” Id. Business coming within the
terms of the Georgia Dealers in Agricultural Products Act includes “buying, receiving, selling,
exchanging, negotiating, or soliciting the sale, resale, exchange, or transfer of any agricultural
products. . . .” O.C.G.A. § 2-9-1(2). San Miguel’s activities easily fall within this expansive
definition. First, San Miguel negotiated the terms of the GSA in Georgia. (Doc. 25, p. 2.) In
addition, under the GSA, San Miguel agreed to purchase produce from Herndon Farms which was
delivered in Toombs County, Georgia. (Doc. 66-2, p. 3.) San Miguel also shipped produce from
California to Toombs County. (Doc. 63, p. 7.)
In light of the Georgia Supreme Court’s holding, the Court finds that San Miguel cannot
recover against Herndon Farms under the GSA because San Miguel did not have a Georgia Dealer
in Agricultural Products license during any time relevant to this action. Accordingly, the Court
GRANTS Herndon Farms’ Summary Judgment Motion as to San Miguel’s Breach of GSA claim
(Count I).11 (Doc. 61.)
11
San Miguel also brings an unjust enrichment claim based on Herndon Farms allegedly providing
“incorrect amounts of [p]roduce” on their invoices to San Miguel. (Doc. 1, p. 22.) However, Georgia
Courts have made clear that a party “cannot recover the value of goods and services provided under a theory
of unjust enrichment . . . [i]f . . . an express agreement is unenforceable because it violates public policy . .
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B.
Herndon Farms is Entitled to Summary Judgment on San Miguel’s Claim for
Breach of the ROBO Operating Agreement.
In Count II of its Complaint, San Miguel brings a breach of contract claim under the ROBO
Operating Agreement. (Doc. 1, pp. 17–18.) Specifically, San Miguel explains that this claim is for
funds San Miguel “advanced” to ROBO in 2014 and 2015 for operating expenses. (Doc. 79, p. 15.)
Herndon Farms argues that this agreement does not require it to cover San Miguel’s loss for the
funds San Miguel advanced to ROBO. (Doc. 62, p. 16.) In response, San Miguel argues that
Herndon Farms has an “obligation to settle its negative capital account balance” under the ROBO
Operating Agreement. (Doc. 79, p. 15.) Thus, this issue turns on determining the specific
requirements imposed on Herndon Farms by the Operating Agreement.
Under Georgia law, “[t]he construction of a contract is a question of law for the court, and
it is the cardinal rule of contract construction that the court should ascertain the intent of the parties.”
Davis v. VCP S., LLC, 740 S.E.2d 410, 411 (Ga. Ct. App. 2013) (citing O.C.G.A. §§ 13-2-1, 132-3). However, “no construction is required or even permissible when the language employed by
the parties in the contract is plain, unambiguous, and capable of only one reasonable interpretation.”
Walker v. Virtual Packaging, LLC, 493 S.E.2d 551, 554 (Ga. Ct. App. 1997) (quoting Bradley v.
British Fitting Grp., PLC, 472 S.E.2d 146, 150 (Ga. Ct. App. 1996)).
Here, article seven of the Operating Agreement—titled “Dissolution and Winding Up”—
states in part that “if the Company property remaining after the payment or discharge of the debts
and liabilities of the Company is insufficient to return the investment of any member, the member
shall have no recourse against any other members for indemnification, contribution, or
. .” JR Constr./Elec., LLC v. Ordner Constr. Co., 669 S.E.2d 224, 226 (Ga. Ct. App. 2008). Accordingly,
as San Miguel cannot enforce the GSA for its breach of contract claim, it likewise cannot bring a claim for
unjust enrichment. Thus, the Court GRANTS Herndon Farms’ Motion for Summary Judgment as to San
Miguel’s unjust enrichment claim (Count VII). (Doc. 61.)
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reimbursement.” (Doc. 66-3, pp. 11–12.) An investment is “[a]n expenditure to acquire property
or assets to produce revenue [or] a capital outlay.” Black’s Law Dictionary (11th ed. 2019); cf.
Golden Atlanta Site Dev., Inc. v. Nahai, 683 S.E.2d 166, 169–170 (Ga. Ct. App. 2009) (an
agreement where a party pays in order to take part “in the financial return generated from” a
common enterprise is “an investment” not a loan).
In his deposition, Nishimori, the principle owner of San Miguel, characterized the
advancement to ROBO as an investment. (Doc. 66-14, p. 91.) Specifically, he stated that “San
Miguel advanced money, [and] made payments for materials for ROBO Produce during 2015
expecting that the partnership in time or will, through profits, . . . be able to repay.” (Id.) Thus, the
undisputed evidence shows that San Miguel provided this money to ROBO with the expectation
that it would be paid back through ROBO’s profits. Clearly, this falls within the ordinary meaning
of the term “investment” as described in article seven of the Operating Agreement. See, e.g.,
Milliken & Co. v. Ga. Power Co., 839 S.E.2d 306, 309 (Ga. Ct. App. 2020) (“In construing a
contract so as [to] implement the intentions of the parties, a court is first required ‘to look to the
plain meaning of the words of the contract.’”) (quoting Argo v. G–Tec Servs., LLC, 791 S.E.2d
193, 195 (Ga. Ct. App. 2016)).
In addition, under the section pertaining to profits and losses, the Operating Agreement
states in part that “[t]he net profits or net losses of [ROBO], after providing for the expenses of
[ROBO], shall be distributable or chargeable, as the case may be, to each of the members according
to their pro rata interest in [ROBO] as determined with reference to their respective capital
accounts.” (Doc. 66-3, p. 7.) This section then provides a detailed process for how to handle
ROBO’s potential losses and notes that losses could be applied to a member’s capital account if
the member’s income account was empty. (Id.) It further specifically notes that if a member’s
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capital account becomes “depleted by the debiting of losses, future profits allocable to that member
shall not be credited to his or her income account until the depletion in his or her capital account
shall have been made up, but shall be credited to his or her capital account.” (Id.) Nowhere in this
section does the Operating Agreement state that members must cover any losses themselves, even
if their capital account is depleted. As Georgia law makes clear, “a contract should be construed
by examining the agreement in its entirety, and not merely by examining isolated clauses and
provisions thereof.” Duffett v. E & W Props., Inc., 430 S.E.2d 858, 859 (Ga. Ct. App. 1993).
Thus, this section, read in combination with the “Profits and Losses” section, further supports the
conclusion that the Operating Agreement does not require Herndon Farms to pay San Miguel for
the advancements San Miguel made to ROBO. San Miguel does not point to any specific language
in the Operating Agreement to show that Herndon Farms had a definitive obligation to cover the
advances San Miguel made to ROBO. Accordingly, the Court GRANTS Herndon Farms’
Summary Judgment Motion as to San Miguel’s claim that Herndon Farms Breached the ROBO
Operating Agreement (Count II).12 (Doc. 61.)
C.
Herndon Farms is Not Entitled to Summary Judgment on San Miguel’s PACA
Misweighing Claim.
In Count V of its Complaint, San Miguel asserts that Herndon Farms violated PACA by
incorrectly weighing the produce it sent to ROBO, which resulted in San Miguel “overpa[ying]
[Herndon Farms] . . . for goods actually delivered.” (Doc. 1, p. 20.) In its Motion for Summary
Judgment, Herndon Farms first argues that this claim fails because it is based on dealings that were
In Count VII of its counterclaim, Herndon Farms brings an action for its “Lost Investment in [ROBO].”
(Doc. 30, pp. 23–24.) San Miguel moved for summary judgment on this counterclaim arguing that that the
ROBO did not require it to reimburse Herndon Farms for its lost investment. (Doc. 66, pp. 13–14.) As this
Court has explained, the Operating Agreement places no obligation on either member of the ROBO to pay
for the other member’s lost investments in the ROBO. Accordingly, the Court GRANTS San Miguel’s
Motion for Summary as to Count VII of Herndon Farms’ counterclaim. (Id.)
12
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part of the GSA, which San Miguel cannot enforce. (Doc. 62, pp. 5–8.) It also argues this Count
should be dismissed because San Miguel has not presented as evidence a USDA inspection
certificate to prove any produce was underweight. (Id. at pp. 16–20.) In response, San Miguel
asserts that it does not need a USDA inspection certificate in order to prevail on its PACA claim.
(Doc. 79, pp. 18–21.) The Court will address each of Herndon Farms’ arguments in turn.
“PACA regulates the sale of perishable agricultural commodities to protect produce sellers
from unscrupulous or insolvent dealers, brokers, and commission merchants.” Country Best v.
Christopher Ranch, LLC, 361 F.3d 629, 631 (11th Cir. 2004) (per curiam). Under PACA, it is
unlawful for “any commission merchant, dealer, or broker to engage in or use any unfair,
unreasonable, discriminatory, or deceptive practice in connection with the weighing . . . of any
perishable agricultural commodity received, bought, sold, shipped, or handled in interstate or
foreign commerce.”13 7 U.S.C. § 499b(1). “If any commission merchant, dealer, or broker violates
any provision of section 499b of this title he shall be liable to the person or persons injured thereby
for the full amount of damages . . . sustained in consequence of such violation.” Id. § 499e(a).
Herndon Farms first argues that San Miguel’s PACA claim is derivative of its claim for
breach of the GSA. (Doc. 62, pp. 3, 5–8.) It asserts then that because San Miguel cannot bring its
GSA-based breach of contract claim (because San Miguel did not have a Georgia Dealer in
Agricultural Products license, see Discussion Section II.A(2), supra), it likewise cannot bring a
PACA claim based on the same transactions. (Id.) However, this argument ignores the plain
language of PACA. PACA provides a remedy to “person or persons injured” and does not limit
13
Neither party disputes that PACA is applicable to Herndon Farms. In addition, the statute provides that
“[a]ny person not considered as a ‘dealer’ under [previous clauses] may elect to secure a license under the
provisions of section 499c of this title, and in such case and while the license is in effect such person shall
be considered as a ‘dealer’.” 7 U.S.C. § 499a(b)(6). Here, the evidence shows that Herndon Farms had a
PACA license, (doc. 66-4, p. 6), and as such would qualify as a dealer under the statute.
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recovery to only other merchants, dealers, and brokers, or those in a valid contractual relationship.
7 U.S.C. § 499e(a). Moreover, PACA explicitly states that it does “not in any way abridge or alter
the remedies now existing at common law or by statute, and the provisions of this chapter are in
addition to such remedies.” 7 U.S.C. § 499e(b). The Eleventh Circuit has interpreted this language
to mean that PACA remedies are “separate” from any state law remedies that a plaintiff might also
assert. Paris Foods Corp. v. Foresite Foods, Inc., 278 F. App’x 873, 875 (11th Cir. 2008) (per
curiam). Thus, San Miguel can bring its separate and distinct PACA claim even though its breach
of contract claim fails.
San Miguel claims that Herndon Farms charged it for nearly 740,000 pounds of produce
that Herndon Farms did not supply. In support, it points to discrepancies between the weights
listed on Herndon Farms’ invoices and the measurements taken at the ROBO facility. (Doc. 794, p. 14.) According to the record, workers at the ROBO facility measured the weight of delivered
produce first using a table scale and, later, using a pallet scale. (Doc. 63, pp. 8–9; doc. 79-7, p. 6.)
Herndon Farms argues that this evidence is insufficient for the PACA claim to survive summary
judgment because San Miguel did not obtain a USDA inspection certificate to support the
measurements taken by the ROBO employees. (Doc. 62, pp. 18–20.) In support of this argument,
Herndon Farm first cites 7 U.S.C. § 499n. (Id.) Under that statute, “official inspection certificates
for fresh fruits and vegetables issued by the Secretary of Agriculture pursuant to any law shall be
received by all officers and all courts of the United States . . . as prima-facie evidence of the truth
of the statements therein contained.” 7 U.S.C. § 499n(a). While this statute makes clear that
evidence bearing a USDA inspection certification should be considered prima facie evidence, it
does not state that is the exclusive or necessary evidence of such facts or otherwise prohibit parties
from relying upon and submitting other evidence. Herndon Farms cites no case law interpreting
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the statute in a way that forecloses the Court from considering other evidence that it deems reliable
and admissible, and this Court is not aware of any such authority. For these reasons, this statute
does not prevent the admission of San Miguel’s evidence regarding weight of delivered produce.
Next, Herndon Farms points to a federal regulation issued by the USDA, which states in
part:
When produce is being handled for or on behalf of another person, proof as to the
quantities of produce destroyed or dumped in excess of five percent of the shipment
shall be provided by procuring an official certificate showing that the produce has
no commercial value from any person authorized by the Department to inspect
fruits and vegetables.
7 C.F.R. § 46.23. As an initial matter, this regulation pertains specifically to produce that has been
“destroyed or dumped,” and nothing in the record indicates that San Miguel did this with any of
the produce it received. Moreover, the Court is aware of no authority that this regulation somehow
creates an exclusive method of proof on a claim such as that brought by San Miguel. Herndon
Farms cites several USDA decisions in further support of its contention that this regulation
prevents the consideration of San Miguel’s evidence. (Doc. 62, p. 19.) However, in none of these
cases does the USDA exclude or even discount evidence about the weight of produce just because
the party did not have an inspection certificate. The closest case Herndon Farms cites is Conner
v. McBryde Produce, 69 Agric. Dec. 798 (Jan. 13, 2010). In that case, Conner agreed to ship more
than 40,000 pounds of watermelons to McBryde Produce. Id. at 802. McBryde Produce in turn
sold all of the watermelons to a third party. Id. at 803. Conner sent the watermelons in a truck
with one license plate number, and the third party eventually received watermelons from a truck
with a different license plate number. Id. at 802–03. The third party claimed that it received 4,000
pounds fewer watermelons than what Conner agreed to sell to McBryde. Id. at 803. McBryde
refused to pay Conner for the difference, and the case came before the USDA. Id. In examining
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the evidence, the agency noted that there had been no USDA inspection but also stated there was
“no other evidence in the case file to account for the 4,000 pound discrepancy in the weight of the
watermelons.” Id. at 803 n.1. Ultimately, the USDA found that McBryde failed to show that
Conner had shipped too few watermelons. Id. at 819. However, it did not base its decision on the
lack of an inspection certificate, but instead relied on the fact that the different license plates made
it impossible “to conclude with reasonable certainty that the identity of the bins of watermelons
[McBryde’s] customer had weighed matche[d] the identity of the bins of watermelons [Conner]
shipped on a different truck.” Id. Thus, this case does not support Herndon Farms’ assertion that
San Miguel’s evidence cannot be considered at all because of the lack of USDA certification.14
Here, San Miguel has provided evidence showing it paid for more produce than it received.
(Doc. 79-4, p. 14.) This evidence creates a question of fact concerning how much produce San
Miguel actually received, and it is for a jury to determine the credibility of this evidence. See Mize
v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) (“It is not the court’s role to
weigh conflicting evidence or to make credibility determinations; the non-movant’s evidence is to
be accepted for purposes of summary judgment.”). For these reasons, the Court DENIES Herndon
Farms’ Motion for Summary Judgment as to San Miguel’s PACA Misweighing claim (Count V).
(Doc. 61.)
14
Even if one of the cited USDA decisions did interpret 7 C.F.R. § 46.23 to require a party to obtain
certification in situations outside of dumping, the Court would not have to defer to it. The Supreme Court
has articulated a standard for when a court should defer to an agency’s interpretation of its own regulation,
which is typically called “Auer deference.” See Auer v. Robbins, 519 U.S. 452, 461–63 (1997). “Auer
deference provides that when a regulation is ambiguous, [the court] defer[s] to the promulgating agency’s
interpretation of that regulation, unless its construction is plainly erroneous or inconsistent with the
regulation[,] [a]s long as the agency’s interpretation . . . reflect[s] [its] fair and considered judgment on the
matter in question.” United States v. Phifer, 909 F.3d 372, 382–83 (11th Cir. 2018) (sixth alteration in
original) (internal quotation and citation omitted). Here, the at-issue regulation is not ambiguous. The text
of the language refers only to “destroyed or dumped” produce, and the regulation itself is titled “Evidence
of dumping.” 7 C.F.R. § 46.23. Thus, the language is clear that the regulation only applies to dumping,
and any interpretation expanding its scope to the evidence this Court may receive on a claim such as that
brought here would clearly be inconsistent with the text and, as such, not entitled to deference.
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D.
Herndon Farms is Not Entitled to Summary Judgment on San Miguel’s
Negligent Misrepresentation Claim (Count VI).
San Miguel also brings a state law negligent misrepresentation claim based on the same
discrepancies between the produce weight listed on Herndon Farms’ invoices and the produce
weight recorded using the scales at the ROBO facility. (Doc. 1, p. 22; doc. 79-4, p. 14.) Herndon
Farms argues that San Miguel’s negligent misrepresentation claim should be dismissed because
the claim is based on the GSA, which San Miguel cannot enforce, and because San Miguel’s
evidence is derived from scales that were not state certified. (Doc. 62, pp. 3, 20–21.) As an initial
matter, Georgia case law is clear that a party can pursue a negligent misrepresentation claim even
if the party cannot enforce a breach of contract claim based on the same set of facts. See, e.g.,
Hendon Props., LLC v. Cinema Dev., LLC, 620 S.E.2d 644, 649–50 (Ga. Ct. App. 2005)
(“[N]egligent misrepresentation, being a tort, presupposes the absence of an enforceable
contractual relationship between the parties. Consequently, neither [plaintiff’s] promissory
estoppel claim nor its negligent misrepresentation claim is barred by the absence of a legally
enforceable agreement between the parties.”). Accordingly, San Miguel’s inability to assert a
breach of contract claim under the GSA against Herndon Farms does not in itself cause its
negligent misrepresentation claim to fail.
Herndon Farms next argues that San Miguel’s misrepresentation claim fails because it used
a pallet scale that was not approved by the Georgia Department of Agriculture to weigh the produce
it received. (Doc. 62, p. 21.) Under Georgia law, the Commissioner of the Georgia Department
of Agriculture shall “[i]nspect and test . . . weights and measures commercially used [i]n
determining the weight, measure, or count of commodities or things sold, or offered or exposed
for sale, on the basis of weight, measure, or count.” O.C.G.A. § 10-2-5(10)(A). The Georgia
Department of Agriculture can also promulgate regulations in order to enforce this law. O.C.G.A.
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§ 10-2-5(3). One of these regulations states that “[i]f the new or used scale is installed by the
buyer, or if the scale is relocated by the owner, the scale shall not be put into service prior to
inspection by an inspector of the Weights and Measures Division.” Ga. Comp. R. & Regs. 40-152-.03(c)(1).
According to the record, the Georgia Department of Agriculture never inspected or
approved any scale or weighing device for either ROBO or San Miguel between September 12,
2014 and December 7, 2016. (Doc. 67-5, p. 3.) Because of this, Herndon Farms argues that San
Miguel is barred from bringing a claim using the measurements obtained from the unapproved
scales. (Doc. 62, pp. 20–21.) In their response, San Miguel does not contest that the scales were
uncertified but asserts that no Georgia authority exists to support Herndon Farms’ contention that
this bars its claim. (Doc. 79, pp. 21–23.) A review of the Georgia statutory scheme clearly shows
that the penalty for failing to certify a scale is a “misdemeanor,” O.C.G.A. § 10-2-22, and no statute
indicates that weights obtained from the uncertified scale are prohibited from being used to support
a claim for civil liability. In addition, Herndon Farms cites no Georgia case law to support its
contention that San Miguel’s claim is barred because of the uncertified scales, and the Court has
also been unable to find such support.
Finally, the out-of-state cases cited by Herndon Farms are less than persuasive. First, in
Smith Fertilizer & Grain Co. v. Wales, the Iowa Supreme Court stated that a party’s failure to
comply with a state statute concerning weighing could bar its breach of contract action. Smith
Fertilizer & Grain Co. v. Wales, 450 N.W.2d 814, 816 (Iowa 1990). However, in that case, the
statute specifically stated that “[n]o action shall be maintained in any of the courts of the state upon
any contract or sale made in violation of or with the intent to violate” the weighing statute. Id. at
814. As the Court has already pointed out, no similar provision exists under Georgia law. Herndon
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Farms also cites Petty v. Lyons, 171 S.W. 112 (Ark. 1914), which is equally unpersuasive. (Doc.
62, p. 21.) In that more-than-a-century-old case, the plaintiff sought to collect a fee pursuant to a
statute that “provide[d] that the cotton weigher or any deputy appointed shall receive as
compensation for his services 10 cents for each bale of cotton weighed, to be paid by the
purchaser.” Petty, 171 S.W. at 112. However, because the plaintiff—a cotton weigher—had not
tested his scales as required by law, the Court said he could not collect the statutory fee, reasoning
that the law “certainly did not intend to permit him to weigh cotton and charge the fee provided
for upon scales that were not properly tested and known to be correct.” Id. at 113. The present
case does not deal with any sort of special statutory fee for weighing produce but instead the
common law tort of negligent misrepresentation. Herndon Farms is thus unable to cite a case from
any jurisdiction showing that a negligent misrepresentation claim should be barred for failure to
properly certify scales. As such, the Court DENIES Herndon Farms’ Motion for Summary
Judgment as to San Miguel’s negligent misrepresentation claim for the allegedly misweighed
produce (Count VI). (Doc. 61.)
E.
Herndon Farms is Not Entitled to Summary Judgment on San Miguel’s Claim
for Attorney’s Fees.
San Miguel requests attorney’s fees pursuant to O.C.G.A. § 13-6-11. (Doc. 1, p. 22.)
Under this code section, which authorizes plaintiffs to recover expenses of litigation where the
defendant has acted in bad faith or been stubbornly litigious, a plaintiff “must prevail on [its] basic
cause of action in order to obtain litigation expenses.” Ellis v. Gallof, 469 S.E.2d 288, 289 (Ga.
Ct. App. 1996) (quoting Barnett v. Morrow, 396 S.E.2d 11, 13 (Ga. Ct. App. 1990)). Herndon
Farms asserts San Miguel may not obtain attorney’s fees provided for in O.C.G.A. § 13-6-11
because San Miguel’s claims fail in whole. (Doc. 62, p. 22.) However, because the Court has
determined that Herndon Farms is not entitled to summary judgment on all of San Miguel’s claims,
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it is not entitled to summary judgment on the claim for attorney’s fees. See R.T. Patterson Funeral
Home v. Head, 451 S.E.2d 812, 819 (Ga. Ct. App. 1994) (plaintiff may recover attorney’s fees
attributable to claims on which it prevails).
Accordingly, the Court DENIES this portion of Herndon Farms’ Motion for Partial
Summary Judgment. (Doc. 61.) San Miguel may pursue attorney’s fees at trial on those claims
which remain before the Court.
F.
Herndon Farms is Not Entitled to Summary Judgment on Its Unpaid Invoice
Counterclaims.
Herndon Farms also seeks summary judgment on two of its counterclaims. (Doc. 62, pp.
22–24.) Herndon Farms asserts both a breach of contract counterclaim and a failure to account
and pay properly counterclaim against San Miguel (Counts I and III). (Doc. 30, pp. 17–18, 20–
21.) These counterclaims are based on Herndon Farms’ argument that it sent San Miguel invoices
totaling $486,095.83, and San Miguel did not timely object to them. (Doc. 62, pp. 22–23.) It
further argues that the GSA is completely unenforceable, so these invoices should act as the
operative contract between the two parties, and that San Miguel violated the invoices by not
paying. (Id. at pp. 23–24.) In response, San Miguel first argues that the GSA is still a valid
agreement which governs their transactions. (Doc. 79, p. 24.) It also asserts that Herndon Farms’
argument that the invoices can serve as an enforceable contract is based on an incorrect reading of
Georgia law. (Id. at pp. 24–25.) The Court agrees with San Miguel for the following reasons.
(1)
The GSA is still valid as to Herndon Farms’ Counterclaims.
First, the fact that San Miguel may not recover under the GSA (due to its own failure to
obtain a license as required by O.C.G.A. § 2-9-2) does not mean that the GSA is itself invalid.
Herndon Farms has not cited any authority to support this theory. Moreover, Georgia law is clear
that “[c]ontracts void as against public policy or merely legally unenforceable ‘may be severable
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so that the entire contract not be void but merely unenforceable as to that which is illegal.’”
Bowers v. Howell, 417 S.E.2d 392, 394 (Ga. Ct. App. 1992) (quoting Johnson v. Frazier, 173
S.E.2d 434, 436 (Ga. Ct. App. 1970)). The GSA itself states “[i]f any term of this Agreement is
held by a court of competent jurisdiction to be void or unenforceable, the remainder of the contract
terms shall remain in full force and effect and shall not be affected.” (Doc. 66-2, p. 12.) Thus,
despite San Miguel’s inability to recover for any breach of it, the GSA and its terms remain valid.
Herndon Farms next argues that the GSA is void because the contract lacks a mutuality of
consideration. (Doc. 62, pp. 12–14.) “To constitute consideration, a performance or a return
promise must be bargained for by the parties to a contract.” O.C.G.A § 13-3-42(a); see also
O.C.G.A § 13-3-42(b) (“A performance or return promise is bargained for if it is sought by the
promisor in exchange for his promise and is given by the promisee in exchange for that promise.”).
Herndon Farms argues that, because the GSA did not require San Miguel to purchase a minimum
amount of produce from it or to purchase exclusively from it, the contract fails. (Doc. 62, pp. 12–
14.) In support, Herndon Farms cites Billings Cottonseed, Inc. v. Albany Oil Mill, Inc., 328 S.E.2d
426 (Ga. Ct. App. 1985). In that case, the seller agreed to sell seeds in an amount “sufficient to
meet all reasonable requirements of” the buyer, but the buyer only had “to purchase from [the
seller], seed which, from time to time, it reasonably required.” Billings Cottonseed, 328 S.E.2d at
428. The Georgia Court of Appeals found no mutuality of consideration because “there [was] no
promise, express or implied, by [the buyer] to purchase its requirements exclusively from [the
seller].” Id. at 429.
San Miguel argues that the facts of this case differ from Billings Cottonseed because it had
additional obligations under the GSA, besides buying produce, which would create consideration.
(Doc. 79, pp. 11–13.) San Miguel points to a section of the GSA which required it to “[m]anage
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all sales and marketing of packaged fresh-cut products” and “[p]rovide sales and marketing
opportunities for Grower’s bunch/bulk product sales.”15 (Doc. 66-2, p. 4.) The Court finds that
these promises are adequate to establish consideration. See Franklin v. UAP/GA. AG. CHEM,
Inc., 514 S.E.2d 241, 243 (Ga. Ct. App. 1999) (“Slight consideration is sufficient to sustain a
contract.”) (citing Wolfe v. Breman, 26 S.E.2d 633, 635 (Ga. Ct. App. 1943)). Because San Miguel
had an obligation with regard to the produce that Herndon Farms delivered (and the delivered
produce is the subject of this breach of contract claim), the contract does not fail for lack of
mutuality of consideration. See Sealtest S. Dairies Div. v. Evans, 120 S.E.2d 887, 890 (Ga. Ct.
App. 1961) (“[A]s to the past performance, an action would lie, but not for a breach as to the future
performance . . . . While the contract was unilateral and, therefore, unenforceable as to future
performances, the plaintiff clearly is entitled to recover for deliveries made under the contract prior
to the plaintiff’s refusal to make future deliveries.”); Romala Stone, Inc. v. Home Depot U.S.A.,
Inc., No. 1:04–CV–02307–RWS, 2009 WL 900776, at *7 (N.D. Ga. Mar. 30, 2009) (contract was
unenforceable for unperformed portions but was enforceable to the extent that one party had
already delivered goods because the other party then had an obligation to “promote and market”
those goods).
Herndon Farms also argues that the GSA fails because the quantity term in the contract is
indefinite. (Doc. 62, pp. 10–11.) Under the GSA, Herndon Farms had to “make a good faith effort
Somewhat confusingly, a different part of the GSA states that “[i]n no event is this Agreement to be
deemed or construed as a guarantee or warranty of any specific price, marketing, or distribution . . . .” (Doc.
66-2, p. 7.) This provision is within a section of the GSA titled “Marketing,” which also states that San
Miguel “shall have the exclusive right to . . . market, and sell the Crops under its own labels, or under such
other labels as it may choose.” (Id.) Reading these two provisions together, the GSA apparently required
San Miguel to manage marketing and provide marketing opportunities but did not require San Miguel to
market the Crops in a specific way or under specific labels. This interpretation of the GSA allows all the
discussed provisions of the GSA to stand, which is consistent with the rules of contract interpretation under
Georgia law. See Eckerd Corp. v. Alterman Props., Ltd., 589 S.E.2d 660, 665 (Ga. Ct. App. 2003) (“[A]
contract must be construed so as to reconcile its different provisions and to avoid an interpretation which
renders any portion meaningless.”).
15
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to grow [c]rops in sufficient quantity to meet the anticipated volume of orders set forth in
Addendum A, attached.” (Doc. 66-2, p. 3.) Likewise, San Miguel had to “[p]urchase from
[Herndon Farms] the Crops set forth in Addendum A.” (Id.) Addendum A then lists three types
of crops, but under “Quantity,” it simply states, “Schedule Attached.” (Id. at p. 13.) Apparently,
however, no schedule was attached. Herndon Farms argues that since no schedule setting forth
the quantities was attached, there is no contract. (Doc. 62, pp. 10–12.) In its Response, San Miguel
points to Jason Herndon’s deposition testimony where he describes receiving schedules and
projections of pounds needed from San Miguel.16 (Doc. 79, pp. 10–11.) According to that
testimony, Jason Herndon first received “schedules for field pounds needed” on July 2, 2014, and
Herndon Farms then started planting “[s]ome time in July.” (Doc. 66-11, p. 24.) Jason Herndon
further stated that, during their business relationship, San Miguel sent “projections, numerous
projections of what product they thought they needed,” and then he would “figure out . . . [how]
to produce that volume to suffice [San Miguel’s] needs.” (Id. at p. 10.) Finally, Jason Herndon
noted that the projections included “pounds needed.” (Id.) San Miguel argues that this testimony
is evidence of San Miguel and Herndon Farms’ course of dealing, which can be used to determine
the quantity term. (Doc. 79, pp. 9–11.) In response to this, Herndon Farms argues that, at best,
this is only evidence of an agreement to agree, which would still make the GSA unenforceable.
(Doc. 62, pp. 14–15.)
Under Georgia law, “[a] contract cannot be enforced if its terms are incomplete, vague,
indefinite, or uncertain.” Douglas Asphalt Co. v. Martin Marietta Aggregates, 793 S.E.2d 615,
617 (Ga. Ct. App. 2016) (quoting Burns v. Dees, 557 S.E.2d 32, 35 (Ga Ct. App. 2001)). “A
Jason Herndon is Bo Herndon’s nephew. (Doc. 66-11, p. 14.) He is the “farm manager” at Herndon
Farms and his duties include “mak[ing] sure production is done” on the farm and that the produced is
shipped off the farm. (Id. at p. 4.)
16
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promise must be sufficiently definite as to both time and subject matter to be enforceable.” Key
v. Naylor, Inc., 602 S.E.2d 192, 195 (Ga. Ct. App. 2004). “If a contract fails to establish an
essential term, and leaves the settling of that term to be agreed upon later by the parties to the
contract, the contract is deemed an unenforceable ‘agreement to agree.’” Kreimer v. Kreimer, 552
S.E.2d 826, 829 (Ga. 2001). However, “[t]he law does not favor destroying contracts on the basis
of uncertainty, and a contract that may originally have been indefinite may later acquire more
precision and become enforceable because of the subsequent words or actions of the parties.”
Sanders v. Commercial Cas. Ins. Co., 485 S.E.2d 264, 267 (Ga. Ct. App. 1997). “A course of
performance or course of dealing between the parties . . . may give particular meaning to specific
terms of the agreement, and may supplement or qualify the terms of the agreement.” O.C.G.A. §
11-1-303(d). The Court of Appeals of Georgia decision in Scovill Fasteners, Inc. v. Northern
Metals, Inc., 692 S.E.2d 840 (Ga. Ct. App. 2010), is particularly instructive on this issue.
In that case, “the evidence showed that to execute the contract, [the buyer] issued blanket
purchase orders containing specifications for material but no amounts or actual delivery dates.
Then, on an as-needed basis, [the buyer] would issue [the seller] ‘releases’ that specified how much
of what material was needed.” Scovill Fasteners, Inc, 692 S.E.2d at 842. The seller would rely
on these releases to make sure it would have enough material to supply to the buyer. Id. Both
parties eventually filed breach of contract claims against each other. Id. at 841. The trial court
ruled that “the parties’ actual agreement was not contained in any one document” and it instead
examined the “subsequent verbal negotiations between the parties, the initial purchase orders sent
by [the buyer] to [the seller], and the running annual usage document and the stock requirements
documents provided via email from [the buyer] to [the seller].” Id. at 843. The Georgia Court of
Appeals held that “the trial court correctly considered matters outside the [initial agreement] to
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determine the parties’ intended final obligations under the agreement” and further stated that, “[i]n
light of this lack of clarity [in the initial agreement], the trial court did not err in considering the
parties’ behavior and their courses of performance and dealing, including that [the seller] relied on
the promised three-month forecast to stock material sufficient to meet the delivery deadlines.” Id.
Like the buyer in Scovill Fasteners, San Miguel sent Jason Herndon projections of the
amount of crops it needed throughout the parties’ business relationship. (Doc. 66-11, pp. 10, 24.)
Herndon Farms then relied on these projections to prepare crops for San Miguel, just like the seller
in Scovill Fasteners. (Id.) Thus, San Miguel’s projections can be used—just as the releases in
Scovill Fasteners were used—to define the quantity term in the agreement between San Miguel
and Herndon Farms. Accordingly, the GSA does not fail for indefiniteness. Furthermore, the
Scovill Fasteners Court did not consider the contract to be an unenforceable “agreement to agree”
even though the buyer sent releases after the initial agreement that specified the amount of material
needed. Thus, guided by Scovill Fasteners and Georgia law’s policy against invalidating contracts,
the Court also finds that the GSA is not an unenforceable agreement to agree. See Miami Heights
LT, LLC v. Home Depot U.S.A., Inc., 643 S.E.2d 1, 4 (Ga. Ct. App. 2007) (“[T]he policy of the
law is against the destruction of contracts on the ground of uncertainty if it is possible in the light
of the circumstances under which the contract was made to determine the reasonable intention of
the parties.”) (citation omitted).
(2)
Herndon Farms’ invoices are not valid contracts.
Finally, even if the GSA was completely invalid, Herndon Farms would still not be entitled
to summary judgment because Georgia law does not consider invoices to be contracts in this
context. Herndon Farms argues that the invoices it sent San Miguel totaling $486,095.83 constitute
a valid contract because San Miguel did not reject the invoices within ten days. (Doc. 62, p. 23.)
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It cites Ready Trucking, Inc. v. BP Exploration & Oil Co., 548 S.E.2d 420 (Ga. Ct. App. 2001), to
support this contention.17 (Id.) In that case, Ready Trucking regularly purchased diesel fuel from
BP. Ready Trucking, Inc., 548 S.E.2d at 422. After each purchase, BP sent Ready Trucking an
invoice which listed the price but also stated that BP was not withholding both state and local sales
taxes. Id. After the Georgia Department of Revenue billed Ready Trucking for several thousand
dollars in back taxes, Ready Trucking sued BP for breach of contract, arguing that BP had agreed
to a purchase price that included all applicable taxes. Id. The Court found in favor of BP reasoning
that “[t]he invoices constitute[d] an enforceable writing confirming the terms of the agreement,
and they constitute[d] an agreement between the parties that the two missing taxes would not be
collected and remitted by BP.” Id. at 424.
While Ready Trucking has never been overturned, a more recent Georgia case indicates
that Ready Trucking should not be extended beyond its facts. In Wheeler v. IDN-Armstrong’s,
Inc., a supplier of goods brought a claim against a buyer alleging that the buyer had not paid it.
Wheeler v. IDN-Armstrong’s, Inc., 653 S.E.2d 835, 836 (Ga. Ct. App. 2007). The buyer provided
evidence that it had paid in the form of invoices marked as “paid.” Id. The trial court found this
evidence unpersuasive and entered judgment in favor of the supplier. Id. The Georgia Court of
Appeals upheld the decision, stating that “under Georgia law an invoice for goods delivered on
open account is not a contract or similar legal document that defines rights, duties, entitlements,
17
Herndon Farms also cites Imex International, Inc. v. Wires EL, 583 S.E.2d 117 (Ga. Ct. App. 2003), to
support its argument that the invoices serve as valid contracts. (Doc. 62, p. 23.) In that case, the plaintiff
brought an open account action against the defendant after the defendant did not fully pay the amount stated
in the invoice. Imex Int’l, Inc., 583 S.E.2d at 120. The Georgia Court of Appeals found for the plaintiff.
Id. at 119. In doing so, it stated that a plaintiff establishes a prima facie open account case when it tenders
into evidence an “authenticated invoice” that “is supported by testimony that the invoiced amount was
unpaid.” Id. at 121. However, the court also noted that granting summary judgment on such a claim is
inappropriate “when there exists a bona fide dispute as to the amount due or the receipt of goods . . . .” Id.
As this Court has already discussed, San Miguel disputes the amount of produce it received from Herndon
Farms. See Discussion Section II.C, supra. Accordingly, the Court finds that Imex Int’l, Inc. does not
support Herndon Farms’ contention that its invoices are valid contracts.
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or liabilities. An invoice is ‘a mere detailed statement of the nature, quantity, and cost or price of
the things invoiced.’” Id. at 837 (quoting H. E. Lupo & Co. v. Brown-Wright Hotel Supply Corp.,
108 S.E.2d 767, 769 (Ga. Ct. App. 1959)). While Wheeler dealt with the application of the parol
evidence rule, the Court finds that its reasoning casts considerable doubt upon the reach of Ready
Trucking.18 Accordingly, the Court finds that Georgia case law, on balance, does not support
Herndon Farms’ argument that the invoices it sent San Miguel are binding contracts.
For all the above reasons, the Court DENIES Herndon Farms’ Motion for Summary
Judgment as to its breach of contract and failure to account and pay counterclaims (Counts I and
III). (Doc. 61.)
III.
San Miguel’s Motion for Partial Summary Judgment (Doc. 66)
San Miguel also moves for summary judgment on several of Herndon Farms’
counterclaims. (See doc. 66.) First, San Miguel seeks summary judgment on Herndon Farms’
counterclaim for attorney’s fees, arguing that the GSA prevents Herndon Farms from recovering
such fees. (Id. at pp. 4–5.) San Miguel also seeks partial summary judgment on Herndon Farms’
breach of contract counterclaim (Count I). (Id. at pp. 14–15.) It argues that Herndon Farms
unilaterally increased the price of produce, and San Miguel is not obligated to pay that price. (Id.)
The Court will address each of these arguments in turn.
A.
San Miguel is Entitled to Summary Judgment on Herndon Farms’
Counterclaims for Attorney’s Fees.
Herndon Farms seeks attorney’s fees as part of Counts I and III of its counterclaim. (Doc.
30, pp. 18, 21.) San Miguel argues that Herndon Farms cannot receive attorney’s fees because it
18
The Court finds further cause for doubt in reading prior district court decisions that have critiqued Ready
Trucking. See ABV Elecs., Inc. v. Ceton Corp., No. 1:12-CV-2178-ODE, 2014 WL 12573015, at *5 (N.D.
Ga. Mar. 25, 2014) (“The holding of Ready Trucking has been criticized by commentators . . . .”); Ardus
Med., Inc. v. Emanuel Cty. Hosp. Auth., 558 F. Supp. 2d 1301, 1310 (S.D. Ga. 2008) (applying Ready
Trucking but noting that the “holding has been criticized”).
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has violated the terms of the GSA. (Doc. 66, pp. 4–5.) Specifically, it points to a provision of the
GSA which stated that San Miguel and Herndon Farms “agree to mediate any dispute or claim
arising out of this Agreement before resorting to any legal action.” (Doc. 66-2, p. 6.) The
provision further provided that if either party “commences legal action without first attempting to
resolve the matter through meditation . . . then that party shall not be entitled to recover attorney’s
fees, even if attorney’s fees would otherwise be available to that party . . . .” (Id.) San Miguel
asserts that Herndon Farms commenced a legal action before attempting mediation when it filed
an informal PACA claim with the USDA. (Doc. 66, p. 5; doc. 66-4, pp. 5–7.) Because of this,
San Miguel argues that Herndon Farms is not entitled to attorney’s fees. (Doc. 66, p. 5.) In
response, Herndon Farms argues that this provision of the GSA is unenforceable. (Doc. 76, pp.
2–3.) It also argues that it initiated a mediation process with the USDA and not a legal action, so
it did not violate the GSA even if the GSA is valid. (Id. at pp. 3–6.)
In Georgia, “[t]here is no general public policy against contracting for the recovery of
attorney’s fees.” Hope & Assocs., Inc. v. Marvin M. Black Co., 422 S.E.2d 918, 919 (Ga. Ct.
App. 1992). The Court has already determined that the GSA is itself enforceable, though San
Miguel is not permitted to recover on a breach of contract claim pursuant to it. See Discussion
Section II.F, supra. Thus, Herndon Farms’ ability to collect attorney’s fees turns on whether the
claim it filed with the USDA constituted a legal action or a mediation. Herndon Farms has already
argued that its informal PACA complaint only constituted a request for mediation earlier in this
action, when it asserted it had not waived its right to enforce the GSA forum-selection clause. (See
doc. 22, p. 7 n.5.) At that time, the Court found that “nothing in the record indicates that Herndon
ever intended to pursue mediation through the USDA.” (Id.) The Court finds nothing in Herndon
Farms’ more recent filings provides a basis for reconsidering this conclusion.
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Herndon Farms cites footnotes from two USDA decisions to support its argument that it
only sought mediation of its claims when it filed the informal PACA Complaint. (Doc. 76, p. 4
(citing Lake Erie Greenhouse Mgmt. & Leasing Corp. Operating as Clifton Produce v. Agristar
Produce LLC, 59 Agric. Dec. 878 (2000) and Trans-W. Fruit Co., Inc. v. Ameri-Cal Produce, Inc.,
42 Agric. Dec. 1955 (1983)).) In Trans-W. Fruit, the USDA addressed whether a party that had
filed a compulsory counterclaim in state court was prevented from instituting a PACA claim (based
on the same transactions involving the same parties) with the USDA. Trans-W. Fruit Co., Inc., 42
Agric. Dec. at 1955–58. The USDA, in its “Decision and Order,” concluded it was not so
precluded, and in a footnote it explained that instituting an informal PACA action with the USDA
does not count as an “action” for purposes of the federal statute prohibiting a party from
maintaining an action with both the USDA and a court of competent jurisdiction. Id. at 1957 n.2.
The USDA reiterated this position in a subsequent decision, stating that “[a] PACA reparation
action qualifies as ‘another pending action’. . . only if a formal complaint has been filed. A pending
informal complaint is not viewed as commencing an ‘action.’” Lake Erie Greenhouse Mgmt. &
Leasing Corp., 59 Agric. Dec. at 882 n.5 (citing Trans-W. Fruit, 42 Agric. Dec. at 1957 n.2). Both
of these cases dealt with an issue entirely unrelated to the present issue of whether informal PACA
complaints constitute requests for mediation, and thus provide no indication that the USDA would
view them as such.
The Court’s skepticism over the applicability of these two cases is further enhanced given
the fact that evidence shows that the USDA declined Herndon Farms’ informal PACA complaint
specifically because the GSA required the parties to mediate. See Exhibit A at 20, L.G. Herndon
Farms Jr., Inc. v. San Miguel Produce, Inc., 6:16-cv-43 (S.D. Ga. Apr. 12, 2016), ECF No. 15-1.
It is undisputed that the USDA sent Herndon Farms a letter stating that it could not “open [Herndon
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Farms’] complaint because [Herndon Farms] elected to go before mediation based on item 7 of
the [GSA] . . . .” (Id.) The USDA then concluded the letter by explaining that “it appears the
parties made an election outside of the PACA for resolution of disputes thereby prohibiting us
from entertaining this matter.” (Id.) It is clear from this letter that the USDA did not consider
Herndon Farms’ informal PACA complaint to be a request for mediation. Thus, for these reasons
and the reasons the Court gave in its previous order, (doc. 22, p. 7 n.5), the undisputed facts, even
when viewed in the light most favorable to Herndon Farms, establish that Herndon Farms did not
commence mediation when it filed an informal PACA complaint and that it thus violated the GSA
by initiating a legal action. Accordingly, the Court GRANTS San Miguel’s Motion for Summary
Judgment as to Herndon Farms’ requests for attorney’s fees in Counts I and III of its Counterclaim.
(Doc. 66.)
B.
San Miguel is Entitled to Partial Summary Judgment on Herndon Farms’
Breach of Contract Counterclaim (Count I) to the extent it is based on
Herndon Farms Increasing Prices.
San Miguel also seeks partial summary judgment on Herndon Farms’ breach of contract
counterclaim (Count I) to the extent that its counterclaim for $486,095.83 is based on Herndon
Farms raising the price of greens by $0.10 per pound in January 2016. (Doc. 66, pp. 14–15.) San
Miguel argues that the price increase violates the GSA and is unenforceable. (Id. at p. 15.) In
response, Herndon Farms argues that it notified San Miguel that it was increasing prices. (Doc.
76, pp. 9–10.) It also once again contends that the entire GSA is unenforceable and that the
invoices it sent to San Miguel now govern the transaction. (Id. at pp. 10–12.)
As an initial matter, the Court has already determined that the GSA is enforceable as to
Herndon Farms’ breach of contract counterclaim and thus is the document which governs this
dispute. See Discussion Section II.F, supra. According to the GSA, the parties intended for the
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contract to “be for five (5) years commencing on the 1st day of November, 2014.” (Doc. 66-2, p.
2.) In addition, Addendum A, titled “Production Requirements By Crop, Quantity, And Price Crop
Year 2014–2015,” set the price for “Fresh Cut Greens–Conventional” at “$[0].30 per Field Lb.”
and the price for “Fresh Cut Greens–Organic” at “$[0].40 per Field Lb.” (Id. at p. 13.)
Herndon Farms asserts that the Addendum concerned only the 2014–2015 crop year and
did not address prices for years after 2015. (Doc. 76, p. 9.) It also points to a chain of emails
exchanged between Bo Herndon and Roy Nishimori where Mr. Herndon discussed increasing
prices. (Docs. 76-2, 76-3, 76-4, 76-5.) In one of the emails, Mr. Nishimori offered to submit a
proposal for “developing new subsequent agreements for 2016” and offered to pay $0.36 per pound
for “Conventional” product and $0.58 per pound for “Organic” product. (Doc. 76-4, pp. 2–3.) In
subsequent emails, Mr. Herndon said he could not agree to the organic produce price, (doc 76-4,
p. 2), and offered to grow the “greens” for $0.40 per pound, (doc. 76-5, p. 2). In addition, Mr.
Herndon testified in his deposition that, in November or December 2015, he informed San Miguel
that Herndon Farms intended to increase prices in January. (Doc. 66-12, p. 30.) According to Mr.
Herndon, San Miguel “agreed” to a price increase but, he admitted, “none of that was in writing.”
(Id.) Thereafter, Herndon Farms increased prices from $0.30 per pound to $0.40 per pound. (Id.)
Based on this evidence, Herndon Farms argues that San Miguel had notice of the price increase.
(Doc. 76, p. 9.)
While Herndon Farms is correct that Addendum A only specifically mentions the 2014–
2015 crop year, it is also clear that the GSA was intended to govern Herndon Farms and San
Miguel’s transactions for five years starting in November 2014. (Doc. 66-2, pp. 2, 13.) The
Addendum must be read in the context of the rest of the contract. See Thornton v. Kumar, 525
S.E.2d 735, 736 (Ga. Ct. App. 1999) (“[T]he whole contract should be looked to in arriving at the
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construction of any part.”). Section 2 of the GSA, titled “Grower’s Responsibilities,” states in part
that “prices as described in Addendum A, attached, . . . may be modified in writing by the Parties
from time to time during the term of this Agreement.” (Doc. 66-2, p. 2.) Furthermore, the GSA
also explicitly provides that “[n]o change or modifications of this Agreement shall be valid unless
the same shall be in writing and signed by both parties hereto.” (Id. at p. 10.) Herndon Farms has
not shown (and, according to Mr. Herndon’s testimony, cannot show) that it and San Miguel signed
a written agreement increasing the price of greens from $0.30 to $0.40.19 Because there is no
evidence of a written agreement, the Court GRANTS San Miguel’s Motion for Partial Summary
Judgment as to Count I of Herndon Farms’ counterclaim to the extent that Herndon Farms seeks
payment based on its increased prices. (Doc. 66.)
CONCLUSION
Based on the foregoing, the Court GRANTS IN PART and DENIES IN PART L.G.
Herndon Jr. Farms, Inc.’s Motion for Partial Summary Judgment. (Doc. 61.) Accordingly, the
Court DISMISSES Counts I, II, III, IV, and VII of San Miguel’s Complaint. (Doc. 1, pp. 15–20,
22.) Counts V, VI, and VIII of San Miguel’s Complaint remain pending against Herndon Farms.
(Id. at pp. 20–22.) The Court also DENIES Herndon Farms’ Motion for Partial Summary
Judgment as to Counts I and III of its own Counterclaim. (Doc. 61.) In addition, the Court
GRANTS San Miguel Produce, Inc.’s Motion for Partial Summary Judgment. (Doc. 66.) The
Court DISMISSES Count I of Herndon Farms’ Counterclaim to the extent it is based on
Herndon Farms’ increase of its prices. (Doc. 30, p. 17–18.) The Court also DISMISSES Counts
II, IV, VI, VII, VIII, and IX of Herndon Farms’ Counterclaim as well as Herndon Farms’ claims
19
Herndon Farms once again argues that the invoices it sent San Miguel—not the GSA—should serve as
the contract between the two parties. (Doc. 76, pp. 10–12.) As previously explained, the Court does not
find this contention consistent with Georgia case law. See Discussion Section II.F, supra.
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for attorney’s fees. (Id. at pp. 18–20, 21, 23–25.) Herndon Farms’ remaining counterclaims
(Counts I, III, and V) remain pending against San Miguel. (Id. at pp. 17–18, 20–22.)
Accordingly, the Court DIRECTS the Clerk of Court to TERMINATE Roy Nishimori and
Janis Berk as parties to this action as no claims remain pending against these parties. Finally, the
Court ORDERS Herndon Farms’ to file its written submissions, as set forth in footnote 2, supra,
within fourteen (14) days of the date of this Order.
SO ORDERED, this 10th day of December, 2020.
R. STAN BAKER
UNITED STATES DISTRICT JUDGE
SOUTHERN DISTRICT OF GEORGIA
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