Bader Farms, Inc. et al v. Monsanto Company

Filing 453

MEMORANDUM AND ORDER re: 322 MOTION for Reconsideration re 288 Memorandum & Order filed by Defendant BASF Corporation. IT IS HEREBY ORDERED that BASF's motion to reconsider (#322) is DENIED. Signed by District Judge Stephen N. Limbaugh, Jr on 2/3/20. (CSG)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
SOUTHEASTERN DIVISION
BADER FARMS, INC. and
BILL BADER
Plaintiffs,
v.
MONSANTO CO. and
BASF CORP.,
Defendants.

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MDL No. 1:18md2820-SNLJ
Case No. 1:16cv299-SNLJ

MEMORANDUM and ORDER
On December 31, 2019, this Court denied defendant BASF Corporation’s motion
for summary judgment (#288). This Court held, inter alia, that a question of fact existed
regarding whether BASF and co-defendant Monsanto were joint-venturers. BASF has
moved for reconsideration under Federal Rule of Civil Procedure 54(b) (#322).1
First, BASF argues that this Court applied the preponderance of the evidence
standard rather than the clear and convincing evidence standard. In support of the clear
and convincing standard, BASF relies on Cutcliff v. Reuter, 889 F.3d 491, 495 (8th Cir.
2018), in which the Eighth Circuit stated that a partnership can be established “by
implication…only …where there is clear, cogent and convincing evidence that the
purported partners have made a definite and specific agreement.” Id. (quoting Morrison
v. Labor & Indus. Rel. Comm’n, 23 S.W.3d 902, 909 (Mo. App. 2000)). This Court,

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This Memorandum and Order assumes familiarity with the Court’s summary judgment
Memorandum and Order (#288).

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however, is bound to follow the law of the Supreme Court of Missouri in this case. See
Williamson v. Hartford Life and Acc. Ins. Co., 716 F.3d 1151, 1154 (8th Cir. 2013) (“A
federal court must follow the announced state law … unless there are very persuasive
grounds for believing the state’s highest court would no longer adhere to it.”). BASF
states in its reply that Grissum v. Reesman, 505 S.W.2d 81, 86 (Mo. 1974), “applied the
clear and convincing evidence standard to determine whether the plaintiff and her
brother formed a partnership by implication.” (#323 at 3 (citing Grissum, 505 S.W.2d at
86.) But as this Court painstakingly set out in Morley v. Square, Inc., 4:10CV2243
SNLJ 2016 WL 1615676 (E.D. Mo. Apr. 22, 2016), although Grissum is the most recent
Missouri Supreme Court pronouncement, the rule has been frequently misstated. Per
Grissum, 505 S.W.2d at 86, the rule in Missouri is that
[a] preponderance of the evidence is necessary and sufficient to prove a
joint adventure. The clear and convincing standard, then, is simply the
exception to the general rule for [cases involving an oral contract to convey
real estate or a resulting trust in real property].
Morley, 2016 WL 1615676, at *7 (internal citation omitted). Grissum relied on Brooks
v. Brooks, 208 S.W.3d 279 (Mo. 1948), which in turn relied on 48 C.J.S. Joint
Adventures, § 12 (1965), for the general rule that a “preponderance of the evidence is
necessary and sufficient to prove a joint adventure.” Id. at 284. Not long after Grissum,
an appellate court stated (relying on Grissum) that the agreement must be “proved by
cogent, clear and convincing evidence, or at least by a preponderance of the credible
evidence.” Brotherton v. Kissinger, 550 S.W.2d 904, 907 (Mo. App. S.D. 1977). This
confusion continued as other cases relied on Brotherton, such as Morrison, 23 S.W.3d at
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909.2 Cutcliff, relied upon by BASF, cites Morrison and notes that a partnership must be
proved by “clear, cogent, and convincing evidence,” but omits a later passage in
Morrison that includes the phrase “…or at least by a preponderance of the evidence.”
Compare Cutcliff, 889 F.3d at 495, with Morrison, 23 S.W.3d at 909. In any event, as
BASF appears to acknowledge, the Missouri Supreme Court has not reversed Grissum.
And this Court is bound to follow Grissum as the most recent Missouri Supreme Court
pronouncement. Williamson, 716 F.3d at 1154.
Second, BASF contends that this Court applied the wrong state’s law. This Court
applied Missouri law to the plaintiffs’ joint venture claim. BASF argues that New York
law applies because the defendants’ written agreements invoke New York law. BASF
stated in its summary judgment briefing that New York and Missouri law are the same
with respect to the issues here. However, BASF now states that the two states diverge
regarding whether “shared losses” are required to support a finding that a joint venture
exists. BASF argues it is entitled to judgment under New York law.
If this case presented an issue between BASF and Monsanto regarding one of the
pertinent contracts, then it is clear that New York law applies to govern the contract. See
Inacom Corp. v. Sears, Roebuck & Co., 254 F.3d 683, 688 (8th Cir. 2001). However, the
question here is whether the defendants were engaged in an implied joint venture, based

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Other Missouri appellate courts appear to overlook the distinction Grissum set out altogether,
relying only on the clear and convincing standard. Clark v. Francis, 422 S.W.3d 369, 378 (Mo.
App. W.D. 2013); Winslow v. Nolan, 319 S.W.3d 497, 501 (Mo. App. E.D. 2010); Price v.
Vattes, 161 S.W.3d 397, 400 (Mo. App. S.D. 2005); H2O’C v. Brazos, 114 S.W3d 397, 402 (Mo.
App. W.D. 2003); Nesler v. Reed, 703 S.W.2d 520, 523 (Mo. App. E.D. 1985)

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on their actions and not necessarily on the written agreements alone. See Jeff-Cole
Quarries, Inc. v. Bell, 454 S.W.2d 5, 14-15 (Mo. 1970). The contracts’ choice of law
provision does not apply to third parties whose claims sound in tort. See Inacom Corp.,
254 F.3d at 688.
All that said, the Court has considered the substantive aspects of BASF’s motion
and reiterates its holding that the question of whether or not a joint venture existed must
go to the jury. This Court already explained the basics of a joint venture:
A joint venture is “an association of two or more persons to carry out a
single business enterprise for profit.” Ritter v. BJC Barnes Jewish Christian
Health Sys., 987 S.W.2d 377, 387 (Mo. App. 1999). The elements of a joint
venture are (1) “an express or implied agreement among members of the
association,” (2) “a common purpose to be carried out by the members,” (3)
“a community of pecuniary interest in that purpose,” and (4) an “equal
voice” among all members “in determining the direction of the enterprise.”
Id. In other words, a joint venture is a partnership that is limited to a single
business purpose. See Jeff-Cole Quarries, Inc. v. Bell, 454 S.W.2d 5, 14-15
(Mo. 1970). With respect to corporations, however, Missouri courts have
declined to imply a joint venture “where the evidence indicates that the
parties created a different business form.” Ritter, 987 S.W.2d at 387;
Rosenfeld v. Brooks, 895 S.W.2d 132, 135 (Mo. App. 1995). Regardless,
“[i]ndications of a joint venture include: actively participating and sharing
in the profits, all parties having joint and several control, and having a duty
to share the losses.” Ritter, 987 S.W.2d at 387 (citing Jeff-Cole Quarries,
454 S.W.2d at 16).
(#288 at 11.)
The Missouri Supreme Court has emphasized that the components of common
control and mutual profit are most demonstrative of a joint venture. Pigg v. Bridges, 352
S.W.2d 28, 33 (Mo. banc. 1961). Indeed, the term “profit” necessarily contemplates a
“benefit [or] advantage remaining after all costs, charges, and expenses have been
deducted from income.” Labor Discount Ctr., Inc. v. State Bank & Tr. Co. of Wellston,

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526 S.W.2d 407, 424 (Mo. App. E.D. 1975). Furthermore, it appears clear that the
“shared losses” factor is not a strict requirement in Missouri. Morley, 2016 WL 1615676,
at *8. To be sure, parties can, through their contractual relationship, allocate their loss
liabilities in unequal amounts and kind. See Allison v. Dilsaver, 387 S.W.2d 206, 213
(Mo. App. S.D. 1965). In fact, “[t]here need not necessarily be an agreement to share
losses” at all. Pigg, 352 S.W.2d at 33.
The import of these cases is summed up in 48A C.J.S. Joint Ventures § 14 (Dec.
2019), which explains in pertinent part:
although some authority requires an express loss-sharing provision, at least
where an agreement includes a provision for sharing profits, it is more
commonly held that there need be no specific agreement to share in the losses
since an agreement to share losses may be implied from an agreement to
share profits. Further, the term “losses” is not limited to monetary losses but
includes time expenditures and out-of-pocket expenses, especially where one
party to the venture furnishes property, and the other only services …
Moreover, if the nature of the undertaking is such that no losses other than
those of time and labor in carrying it out are likely to occur, an agreement to
share in the profits might stamp it as a joint venture although nothing is said
about the losses.
The fact that a contract provides for a sharing of the profits, while an
important factor in determining the character of the contract, does not of itself
make it one of joint venture. The profit accruing to a joint venture must be
joint and not several. Profits which are severally earned, the parties merely
having dealt with the same subject matter, but not for and on behalf of each
other, do not meet this requirement of the existence of a joint adventure. Still,
the mode of participation in the fruits of the undertaking may be left to
agreement of the parties, and the benefits need not be of equal value or kind.
Thus, the fact that there is to be unequal distribution of profits does not
contravene the idea of joint venture, and the parties to the joint venture may
limit by special contract their respective profits and agree which part of the
expense each should bear before participating in profits.
Whether an agreement to share profits is merely a measure of compensation
for services, or whether it extends beyond and bestows ownership and
interest in the profits themselves so as to constitute a joint venture is a
question of fact.
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(emphasis added); see also Restatement (Second) of Torts § 491 (1965); 48A C.J.S. Joint
Ventures § 11 (“[T]he term ‘community of interest’ as applied to the relation of joint
venture means an interest common to both parties, that is, a mixture of identity of interest
in a venture in which each and all are reciprocally concerned and from which each and all
derive a material benefit and sustain a mutual responsibility.”); 46 Am. Jur. 2d Joint
Ventures § 16 (“[W]here parties share in the same revenue stream, the shared-profits
element required to establish the existence of a joint venture may be established.”).
Defendants reiterate that Monsanto’s “value share payments” to BASF are
“royalties” that do not constitute “profit-sharing” and so do not support a “community of
pecuniary interest.” In support, defendants cite Dinaco, Inc. v. Time Warner, Inc., 346
F.3d 64 (2d Cir. 2003). In Dinaco the court held that a “royalty agreement” between
trademark licensor and licensee established “contractual obligations, not a business
enterprise.” 346 F.3d at 68. Dinaco is distinguishable. Unlike Dinaco, the parties here
collaborated on the development of the product itself—a dicamba-tolerant seed system—
exercising a significant measure of joint control over the process. Moreover, the parties
do not call the related payments “royalties,” but rather “value share payments.”
Monsanto agreed to pay BASF based on the number of acres planted with “traited” seeds.
Although no agreement stated that either company has profit-sharing rights as to sales of
the other’s dicamba herbicides, plaintiffs argue that the value share payments were
necessary to equitably distribute earnings from the Xtend seeds BASF helped create. It
was not enough, apparently, for BASF to enjoy the earnings from its Engenia sales,
which were undoubtedly related to the Xtend seeds. From this and other evidence, the
jury may find that BASF’s right to value share payments contributed to the kind of
“community of pecuniary interest” necessary to demonstrate a joint venture.
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As the Court understands it, plaintiff’s theory is that Monsanto and BASF entered
into and acted on multiple agreements evidencing their joint venture to develop and
commercialize their DT system, and their conduct pursuant to those agreements support
that a joint venture was in fact created. The question of whether defendants were
engaged in a joint venture must be left to the jury.
Accordingly,
IT IS HEREBY ORDERED that BASF’s motion to reconsider (#322) is DENIED.
So ordered this 3rd day of February, 2020.

STEPHEN N. LIMBAUGH, JR.
UNITED STATES DISTRICT JUDGE

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