Affiliated Foods Midwest Cooperative, Inc. v. SuperValu Inc.

Filing 76

MEMORANDUM AND ORDER - THEREFORE, IT IS ORDERED THAT: The objections to the findings of the magistrate judge in the Lead Case, Filing No. 54, are overruled. The objections to the findings of the magistrate judge in the Member Case, Filing No. 61, are overruled. The motion to strike the jury demand in the Lead Case, Filing No. 37, is granted. The order of the magistrate judge, Filing No. 48, is adopted in its entirety. Member Cases: 8:16-cv-00466-JFB-MDN, 8:16-cv-00465-JFB-MDN Ordered by Senior Judge Joseph F. Bataillon. (TCL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

AFFILIATED FOODS MIDWEST
COOPERATIVE, INC., a Nebraska
corporation, and ASSOCIATED
WHOLESALE GROCERS, INC.,
Plaintiffs,

8:16CV465
MEMBER CASE
MEMORANDUM AND ORDER

v.
SUPERVALU INC., a Delaware
corporation;
Defendant.
BOROWIAK IGA FOODLINER, INC.,
Plaintiff/Counter Defendant,

8:16CV466
LEAD CASE

v.
MEMORANDUM AND ORDER
AFFILIATED FOODS MIDWEST
COOPERATIVE, INC., and ASSOCIATED
WHOLESALE GROCERS, INC.,
Defendants/Third-Party
Plaintiffs/Counter Plaintiffs.
vs.
TREVOR BOROWIAK,
Third Party Defendant.

This matter is before the court on the parties’ (Counter Claimant Affiliated Foods
Midwest Cooperative, Inc., Defendants Affiliated Foods Midwest Cooperative, Inc.,
Associated Wholesale Grocers, Inc., Third Party Plaintiff Affiliated Foods Midwest
Cooperative, Inc.) motion to strike jury trial request, Filing No. 37, in 16-cv-00466.1
Borowiak objects, Filing No. 54 in the Lead case, and Filing No. 61 in the Member
Case, to the Order dated May 30, 2017, Filing No. 48, granting the Motion to Strike
Plaintiff’s Jury Demand in the Lead Case filed by Affiliated Foods Midwest Cooperative
(“AFM”) and Associated Wholesale Grocers (“AWG” and collectively with AFM,
“AFM/AWG”) (Filing No. 37). These objections are filed pursuant to Fed. R. Civ. P.
72(a) and NECivR 72.2(a). Defendant Supervalu filed a request for a jury trial in the
Member Case, 16cv465. Filing No. 1, ¶ 11 at 2, and in its answer, Filing No. 33 at 7
and its answer to amended complaint, Filing No. 58 at 10. In the Lead case, Borowiak
filed a request for a jury trial in its complaint, Filing No. 1.
The Supreme Court has construed the statutory grant of authority conferred on
magistrate judges under 28 U.S.C. § 636 to mean that nondispositive pretrial matters
are governed by § 636(b)(1)(A) and dispositive matters are covered by § 636(b)(1)(B).
Gomez v. United States, 490 U.S. 858, 873-74 (1989); see also Fed. R. Civ. P. 72(a).
On review of a decision of the magistrate judge on a nondispositive matter, the district
court may set aside any part of the magistrate judge's order that it finds is clearly
erroneous or contrary to law. 28 U.S.C. § 636 (b)(1)(A); Fed. R. Civ. P. 72(a). With

1

This memorandum and order will generally refer to filing numbers of the Lead Case only,
16cv466. The Magistrate Judge’s Order, Filing No. 55, in the Member Case is reported at Affiliated
Foods Midwest Coop., Inc. v. Supervalu Inc., No. 8:16-cv-465, 2017 WL 2345575 (D. Neb. May 30,
2017). This memorandum and order encompasses both the Lead Case and Member Case, as it relates
to the motion to strike.
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respect to dispositive motions, a magistrate judge lacks authority to do anything but
make recommendations, which are subject to de novo review. See e.g., United States
v. Lothridge, 324 F.3d 599, 600 (8th Cir. 2003); 28 U.S.C. § 636(b)(1).
BACKGROUND

Plaintiff AFM is in the business of selling grocery products and other items to
retail grocery stores. AFM regularly entered into long-term supply agreements with
many of its customers. As part of AFM’s agreement to loan money to its customers, the
parties agree that for a certain period of time AFM will supply all the groceries to the
customer. SuperValu Inc. is similarly in the business of selling grocery products to retail
grocery stores.

They are direct competitors of AFM.

Borowiak owns seven retail

grocery stores. At all material times herein, Borowiak entered in to a Supply Agreement
with AFM, which made AFM the primary grocery supplier to Borowiak. The Agreement
was to last for 5 years. Borowiak agreed to buy at least $85,000,000 in goods from
AFM. AFM decided to sell its business in late 2016. Once the announcement of a
possible sale occurred, SuperValu began working with Borowiak to become its
supplier.2
On October 12, 2016, a complaint filed by AFM filed against SuperValu in the
District Court of Madison County, Nebraska (Member Case) was removed to federal
court. The complaint alleged SuperValu, by supplying fresh meat and other groceries,
tortiously interfered with certain agreements between AFM and Borowiak. See Filing
No. 1 at 1. Borowiak alleged that there had been a “failure or refusal” by AFM “to
provide fresh meat and timely deliver produce” and AFM has been “unable or failed to
2

Prior to the contract with AFM, SuperValu serviced Borowiak.

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consistently serve Borowiak’s needs for other foodstuffs and items sold by retail grocers
such as the $1.00 product offering and cross-dock products.” See Filing No. 11, at 3.
As a result Borowiak purchased all fresh meat for its seven stores from SuperValu. Id.
In addition, Borowiak also learned AFM was selling substantially all of its assets to
Associated Wholesale Grocers, Inc. (“AWG”) and Borowiak would, thereafter, be
required to become an AWG member to receive the grocery items previously provided
by AFM. Id. at 2. Borowiak would be “required to accept terms and conditions different
than those in the Agreement relating to the valuable patronage rebate Borowiak was
then receiving from AFM”. See Filing No. 12-2 at 4-5.
On October 12, 2016, Borowiak filed suit (Lead Case) against AFM for breach of
contract, breach of the covenant of good faith and fair dealing, and for violations of the
Nebraska Consumer Protection Act (“NCPA”), and Borowiak requested a jury trial.
Filing No. 1. AFM filed a Counterclaim against Borowiak, alleging Borowiak defaulted
under the Supply Agreement and Promissory Note, and filed a Third Party Complaint
against Trevor Borowiak for breach of the guaranties, among other causes of action.
Filing No. 44. AFM/AWG filed the instant motion to strike Borowiak’s demand for jury
trial, arguing that Borowiak waived its right to a jury trial in each of the above
agreements executed between the parties. Borowiak filed a complaint and demand for
jury trial. Filing No. 1. AFM/AWG moved to strike the demand for jury trial. Filing No.
37.

Thereafter, in their amended answer, AFM/AWG requested a jury trial on all

matters that are triable to a jury. Filing No. 44, at 28. The Amended Answer with
AFM/AWG’s jury demand asserts claims for breach of contract relating to the three (3)
agreements relied upon in AFM/AWG’s motion to strike, as well as claims for violation of

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the Nebraska Consumer Protection Act, unjust enrichment and related business torts.
Filing No. 44.

The magistrate judge granted the motion to strike.

Filing No. 48.

SuperValu, a defendant in the Member case, demanded a jury trial, Filing No. 33, and
no motion to strike was ever filed.
DISCUSSION
Borowiak objects to the findings of the magistrate judge, in particular, the
magistrate judge’s determinations that:
a. “[T]he Eighth Circuit Court of Appeals has repeatedly stated that ‘the
right to a jury trial in the federal courts is to be determined as a matter of
federal law in diversity as well as other actions’” (Filing No. 48 at 4).
b. “Courts in the Eighth Circuit apply the federal ‘knowing and voluntary’ test to
determine whether a jury trial has been waived” (Filing No. 48 at 5).
c. “Borowiak argues enforcement of the clauses are procedurally
unenforceable” (Filing No. 45 at 5).
d. “Borowiak knowingly and voluntarily executed waivers of a jury trial on
its claims in this case” (Filing No. 48 at 5).
e. “[AFM/AWG] did not clearly, unequivocally, and decisively waive its
right to enforce the valid contractual waivers of a jury trial in this matter. It
is clear that [AFM/AWG] intended at the outset of this litigation to enforce
the jury waiver clauses. . . . The Court finds [AFM/AWG’s] conduct does
not amount to a clear, unequivocal, decisive waiver of the valid contractual
jury waivers” (Filing No. 48 at 6).
f. “The Motion to Strike the Plaintiff’s Jury Demand in the Lead Case
(Filing No. 37) is granted” (Filing No. 48 at 7).
Filing No. 54, at 2-3.
Borowiak contends he is entitled to a jury trial under the Seventh Amendment to
the United States Constitution.

AFM/AWG contends there is a waiver clause that

prohibits a jury trial as to the claims of Borowiak. The relevant language in the contract
states:
“Governing Law: Venue; Waiver of Jury Trial.” EACH OF THE
PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A
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TRIAL BY JURY WITH RESPECT TO ANY ACTIONS OR LIABILITIES
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT.
Filing No. 38-A, § 7(j), Supply Agreement.
It further states:
WAIVER OF JURY TRIAL. DEBTOR AND SECURED PARTY HEREBY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, SUIT,
COUNTERCLAIM, CROSSCLAIM OR OTHERWISE, WHETHER IN
CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT OR ANY ACTS OR OMISSIONS
OF SECURED PARTY AND ITS OFFICERS, DIRECTORS, EMPLOYEES
OR AGENTS IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT
TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
DEBTOR AND SECURED PARTY AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH
THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
DEBTOR AND SECURED PARTY ARE EACH HEREBY AUTHORIZED
TO FILE A COPY OF THIS SECTION 7(K) IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER.
Id., Ex. B, § 7(k), Security Agreement.
And finally, the Promissory Note states:
TRIAL BY JURY. BORROWER AND LENDER HEREBY WAIVE, TO
THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING, SUIT, COUNTERCLAIM,
CROSSCLAIM OR OTHERWISE, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THIS
PROMISSORY NOTE OR ANY ACTS OR OMISSIONS OF LENDER
AND ITS OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER
AND LENDER AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. BORROWER AND
LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS
SECTION 10 IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER.
Filing No. 38, Ex. C, Promissory Note, § 10.
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a. Contractual Waiver

AFM/AWG argues that the findings of the magistrate judge should be affirmed.
They contend that the cases cited herein, support the magistrate judge’s application of
the “knowing and voluntary” standard in contractual waiver cases. The magistrate judge
applied the “knowing and voluntary” test to determine if waiver applies to a jury trial
request. Id. at 5. See DAB, Inc. v. Sunbelt Rentals, Inc., 2017 WL 280692, at *4 (D.
Neb. Jan. 20, 2017). The magistrate employed the DAB factors and determined that
Borowiak waived its right to a jury trial.
The magistrate judge relied, as does AFM/AWG, on the following cases for
determining whether federal or state law applies to the validity of the contractual waiver.
See Simler v. Connor, 372 U.S. 221, 222 (1963) (“[T]he characterization of [a] statecreated claim as legal or equitable for purposes of whether a right to jury trial is
indicated must be made by recourse to federal law”; “In diversity cases, of course, the
substantive dimension of the claim asserted finds its source in state law…”) (emphasis
added); InCompass IT, Inc. v. XO Communications Services, Inc., 719 F.3d 891, 896
(8th Cir. 2013), and Kampa v. White Consolidated Industries, Inc., 115 F.3d 585, 587
(8th Cir. 1997) (same).

AFM/AWG argue that federal law applies, relying on ERA

Franchise Systems, LLC v. Realty Linc, Inc., 2009 WL 464942 (D. Neb. Feb. 23, 2009)
(knowing waiver of jury trial is upheld).
However, none of the three cases, argues Borowiak, cited by the magistrate
judge, discussed the issue of jury waiver. In fact, Borowiak contends that recent federal
courts of appeals have concluded otherwise. IFC Credit Corp. v. United Bus. & Indus.
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Fed. Credit Union, 512 F.3d 989, 991-92 (7th Cir. 2008)3; In re Cty. of Orange, 784 F.3d
520, 525 (9th Cir. 2015) (the Ninth Circuit issued a writ of mandamus directing the
district court to deny a motion to strike a jury demand where “[i]t relied on Simler . . . ,
and Byrd . . . , to conclude that the right to a jury trial— including waiver of that right—is
a federal procedural issue controlled in federal court by federal law.” Cty. of Orange,
784 F.3d at 525. However, that Court also determined that “we are faced with a void in
federal law. Rather than expand the constitutional “knowing and voluntary” standard to
fill that void, we adopt state law as the federal rule. This means that federal courts
sitting in diversity must apply the relevant state law to evaluate the validity of a predispute jury trial waiver when that law is more protective than federal law.” Id. at 53132.
The court agrees with the magistrate judge that state law determines the validity
of the jury waiver in the contract, where the contract selects state substantive law.” IFC
Credit Corp., 512 F.3d at 991. “State law governs the validity of a jury waiver clause in
a diversity action where the contract contains a choice of law provision.” FPC Financial
F.S.B. v. Doniphan Energy, LLC, No. 10–03242–CV–S–DGK, 2011 WL 5402046, at *1
(W.D. Mo. Nov. 7, 2011); Norhurst, Inc. v. Acclaim Sys., Inc., No. 11 C 7222, 2012 WL
473135, at *2 (N.D. Ill. Feb. 9, 2012) (“[W]hen a contract is governed by state law, the
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Simler holds that the classification of a dispute as ‘legal’ or ‘equitable’ must be made
under federal norms: after all, the phrase ‘at common law,’ which guarantees a right to
trial by jury, is in the Seventh Amendment, and meaning of this phrase therefore must be
a matter of federal law. It does not follow that national law also controls the validity of a
contractual agreement to a bench trial. There is no general federal law of contracts after
Erie R.R. v. Tompkins, 304 U.S. 64 (1938); if ‘federal law’ did control, the best it could do
would be to use state law as the rule of decision. See United States v. Kimbell Foods,
Inc., 440 U.S. 715 (1979). . . . We therefore ask whether the agreement [to a bench trial]
is valid under the law of Illinois.
IFC Credit Corp. v. United Bus. & Indus. Fed. Credit Union, 512 F.3d 989, 991-92 (7th Cir. 2008).

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validity of a jury-trial waiver similarly is governed by state law.”). “The rule of decision
concerning the validity of a [jury] waiver clause is drawn from the state whose rules will
govern the rest of the dispute.” FPC Financial F.S.B., 2011 WL 5402046, at *1.
b. Nebraska law
Federal courts sitting in diversity must apply the relevant state law to evaluate the
validity of a pre-dispute jury trial waiver when that law is more protective than federal
law. Cty. of Orange, 784 F.3d at 531–32. All the agreements in question designate
Nebraska as the governing law. Filing No. 38-1, ¶ 7(j); Filing No. 38-2, ¶ 7(a), Filing No.
38-3, ¶ 9). Nebraska law states:
The trial by jury may be waived by the parties in actions arising on
contract, and with assent of the court in other actions (1) by the consent of
the party appearing, when the other party fails to appear at the trial by
himself or attorney; (2) by written consent, in person or by attorney, filed
with the clerk; and (3) by oral consent in open court entered on the journal.

Neb. Rev. Stat. § 25-1126.
Borowiak relies heavily on a Nebraska case that states:

“Under a rule of

exclusivity, unless a party’s conduct falls into one of § 25-1126’s three categories, we
will not find a waiver of a constitutional right.” Jacobson v. Shresta, 288 Neb. 615, 623,
849 N.W.2d 515, 521 (2014) (emphasis added). However, the case is not similar to the
one at hand. Jacobson does not involve a waiver but instead involves a lack of timely
request for a jury trial. The second case relied on by AFM/AWG states: “In sum, in
district court, a party’s waiver of a jury trial occurs only if a court determines that one of
three circumstances under § 25-1126 applies.” Id.; accord McKinney v. Cass Cty., 180
Neb. 685, 691, 144 N.W.2d 416, 421 (1966) (“Agreements of parties [in the course of
litigation] in regard to the trial of a suit [without a jury] are not absolute, even though in
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writing, and they are not to be treated as contracts to be enforced in all circumstances.
They may be set aside by the court in the exercise of a sound discretion in the
promotion of justice.”). Again, this case does not address a contractual clause in a
contract, but instead concerns a waiver stipulation by the parties, followed by the death
of the trial judge, and then followed by a request to withdraw the waiver. The court finds
neither of these cases deal with the issue at hand.
Borowiak contends that the magistrate judge struck the jury demand under
federal law without examining whether Nebraska law gives greater protections to a
party. While this might be true, it is not outcome determinative in this case. Section 251126 allows waivers in contract cases, and the protections argued by Borowiak are not
present. Numbers 1-3 in § 25-1126 apply and with the assent of the Court in “other
actions.” The “arising on contract” language is applicable only to contracts. Numbers 13 of the clause do not apply to contracts, but instead that clause relates to the “other
actions” under § 25-1126. Nebraska clearly allows waivers in contract actions. The
court finds the parties voluntarily and knowingly entered into these agreements. They
had equal bargaining power. The language is clear and in bold print in all three relevant
agreements.

More importantly, § 25-1126 permits such waivers of a jury trial.

Accordingly, the court finds the contractual waiver in this case and under these
circumstances is valid.
c. Waiver by AFM/AWG
The court now looks at the argument regarding the jury request by AFM/AWG
and Supervalu to determine if they have waived this contractual right by their actions.
With regard to whether AFM waived its right to argue the jury waiver by requesting a

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jury trial in its amended answer, the magistrate judge concluded that AFM did not
clearly waive its right to enforce the contractual jury trial waiver.

As stated by the

magistrate judge:
The Court finds that AFM did not clearly, unequivocally, and decisively
waive its right to enforce the valid contractual waivers of a jury trial in this
matter. It is clear that AFM intended at the outset of this litigation to
enforce the jury waiver clauses. The parties’ Rule 26(f) Report filed in
February 2017 noted the parties’ disagreement as to whether a trial by
jury was available in this case, and agreed to a deadline for a party to file
a motion to strike the demand for jury trial. (Filing No. 29 at pp. 38-39).
AFM filed its motion to strike by the agreed-upon deadline. Although
AFM’s Amended Answer added a demand for jury trial, this Amended
Answer was filed after it filed the instant motion to strike, which AFM
asserts was a contingency plan in case its motion to strike is not granted.
[f.n. 2]. AFM agrees to proceed without a jury if its motion to strike is
granted. (Filing No. 47 at p. 7). The Court finds AFM’s conduct does not
amount to a clear, unequivocal, and decisive waiver of the valid
contractual jury waivers. Cf. Sprint Nextel Corp, 2017 WL 119583, at *2
(denying plaintiff’s request to withdraw its proper jury demand after
litigating for five years); Sapp v. Propeller Co. LLC, 784 N.Y.S.2d 532
(App. Div. 2004) (finding defendants waived contractual jury waiver clause
by affirmatively demanding a jury trial and then failing to seek to withdraw
the demand until nine months later).
Filing No. 48, Magistrate Judge’s Order, at 6.
Borowiak contends that AFM/AWG cannot enforce the contractual waiver since
they have made their own jury demand.

“Under Rule 39(a), the parties or their

attorneys may stipulate that trial will be without a jury, even though a jury trial has been
previously properly demanded. All parties must consent to the stipulation, which must
either be made in a writing filed with the court or, as in the present case, by oral
stipulation made in open court and somehow reflected in the record.” Fields Eng’g &

11

Equip., Inc. v. Cargill, Inc., 651 F.2d 589, 592 (8th Cir. 1981)4; see also Concordia Co.
v. Panek, 115 F.3d 67, 69 (1st Cir. 1997) (“Any party can preserve its right to a jury by
making a timely demand for a jury trial, and once the demand is made, both parties
must consent before it can be withdrawn.”). “When a jury trial has been demanded
under Rule 38, the action must be designated on the docket as a jury action. The trial
on all issues so demanded must be by jury unless (1) the parties or their attorneys file a
stipulation to a nonjury trial or so stipulate on the record.” Fed. R. Civ. P. 39(a)(1).
The court has carefully reviewed the arguments of counsel and the relevant law.
The court agrees with the findings and analysis of the magistrate judge. The contracts
clearly waived the right to a jury trial in the Lead Case. AFM/AGW clearly did not want
to waive these contractual provisions, as evidenced by their contracts, motion to strike,
and argument in support of not having their jury in their 26(f) disclosures. Accordingly,
the court will adopt the order of the magistrate judge.
d. Certification
Any request for certification of an appeal to the Eighth Circuit is denied, as there
is no support for such a request. Further, the court will not grant an interlocutory appeal
on this issue. See 28 U.S.C. § 1292(b). The court does not believe this is an issue of a
controlling question of law with substantial ground for a difference of opinion.

See

Henggeler v. Brumbaugh & Quandahl, P.C., LLO, 2012 WL 3030110, at *1 (D. Neb.
July 25, 2012).

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Cargill, however, dealt with a case wherein the parties stipulated at the pretrial conference to a
nonjury trial.
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THEREFORE, IT IS ORDERED THAT:
1. The objections to the findings of the magistrate judge in the Lead Case, Filing
No. 54, are overruled;
2. The objections to the findings of the magistrate judge in the Member Case,
Filing No. 61, are overruled;
3. The motion to strike the jury demand in the Lead Case, Filing No. 37, is
granted.
4. The order of the magistrate judge, Filing No. 48, is adopted in its entirety.

Dated this 3rd day of August, 2017.

BY THE COURT:
s/ Joseph F. Bataillon
Senior United States District Judge

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