L&R Farms Partnership et al v. Cargill, Incorporated

Filing 37

ORDER granting 15 Motion to Stay and Compel Arbitration. Signed by Judge Samuel H. Mays, Jr on 07/31/2013.

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

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L&R FARM PARTNERSHIP and JAMES
STEVEN LEWIS
Plaintiffs,
v.
CARGILL INCORPORATED, a
Minnesota Corporation

Defendant.

No. 11-2289

ORDER GRANTING MOTION TO STAY AND TO COMPEL ARBITRATION

Plaintiffs
(“Plaintiffs”)

L&R
bring

Farms

Partnership

this

action

and

against

James

Steven

Defendant

Lewis

Cargill

Incorporated (“Cargill”) for fraud, violation of the Tennessee
Consumer Protection Act, Tenn. Code Ann. § 47-18-104 (“TCPA”),
and

a

declaration

(Compl., ECF No. 1.)

that

the

contracts

are

void.

On May 23, 2011, Cargill filed a Motion to

Stay and Compel Arbitration.
No. 7.)

parties’

(Mot. to Stay and Compel Arb., ECF

Plaintiffs did not respond to the Motion, but filed an

Amended Complaint in which they contend that “the arbitration
clause located in the [contracts] is unenforceable and of no
effect.”

(Am. Compl., ECF No. 14.)

The Amended Complaint also

alleges violations of the Commodities Exchange Act (“CEA”), 7

U.S.C.

§

25,

Regulations.
filed

a

and

Commodities

Futures

(See Am. Compl.)

Renewed

Motion

to

Trading

Commission

On August 15, 2011, Cargill

Stay

and

Compel

1

Arbitration.

(Renewed Mot., ECF No. 15.)
On October 12, 2011, the Court entered an Order requiring
Plaintiffs to show cause why Cargill’s Renewed Motion should not
be granted.

(Order to Show Cause, ECF No. 18.)

On October 13,

2011, Plaintiffs filed a response stating that the Court had set
October 18, 2011 as the deadline for their response to Cargill’s
Renewed

Motion,

deadlines,
granted

and

that
that

without

they

not

therefore

Renewed

Cargill’s

consideration

still timely response.

had

Motion

of

their

violated
should

currently

not

unfiled

any
be
but

(Show Cause Resp., ECF No. 19.)

On November 16, 2011, Plaintiffs filed a Motion to Compel
Discovery Responses.
December 2, 2011.

(ECF No. 22.)

(ECF No. 24.)

Cargill filed a response on

The Court referred Plaintiffs’

Motion to Magistrate Diane K. Vescovo, who denied it.
Reference, ECF No. 23; Vescovo Order, ECF No. 25.)

(Order of
Plaintiffs

appealed Magistrate Judge Vescovo’s Order on January 13, 2012.
(ECF No. 27.)

Cargill filed a response on January 24, 2012.

(ECF No. 28.)

The Court affirmed Magistrate Judge Vescovo’s

1

Although Cargill maintains that Plaintiffs’ Amended Complaint is improper
and should be stricken, the Court relied on the Amended Complaint in its
March 5, 2012 Order and it has therefore been accepted within the meaning of
Federal Rule of Civil Procedure 15.

2

Order and denied Plaintiffs’ Motion to Compel on March 5, 2012.
(March 5 Order, ECF No. 29.)
In

a

telephone

conference

on

March

8,

2012,

the

Court

indicated that Cargill’s Renewed Motion to Stay and to Compel
Arbitration was still pending.

(ECF No. 32.)

Plaintiffs filed

a Response in opposition to Cargill’s Renewed Motion to Stay and
Compel Arbitration on March 20, 2012.
Cargill

filed

a

Reply

Memorandum

Renewed Motion on March 22, 2012.

in

(Resp., ECF No. 33.)
further

support

of

(Reply, ECF No. 34.)

its
Also

before the Court is Cargill’s March 19, 2013 Motion for Status
Conference, stating that there has been no further activity in
the case subsequent to the filing of its reply.

(ECF No. 36.)

Cargill’s Renewed Motion to Stay and to Compel Arbitration
is

ripe.

For

the

following

reasons,

Cargill’s

Motion

is

GRANTED.
I.

Background

The factual background of this case is recited in the Court’s
March 5 Order.
II.

Jurisdiction

The Court has subject matter jurisdiction under 28 U.S.C. §
1331 because Plaintiffs allege violations of the CEA.

To the

extent that any state law claims are at issue, the Court has
supplemental

jurisdiction

over

Plaintiffs’

3

related

state

law

claims. United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 727
(1966).
III. Standard of Review
Under the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq.
(“FAA”),

“a

district

court

must

make

a

number

determinations before compelling arbitration.”
Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003).

of

threshold

Fazio v. Lehman
The court has

four tasks:
[F]irst, it must determine whether the parties agreed to
arbitrate; second, it must determine the scope of that
agreement; third, if federal statutory claims are asserted, it
must consider whether Congress intended those claims to be
nonarbitrable; and fourth, if the court concludes that some,
but not all, of the claims in the action are subject to
arbitration, it must determine whether to stay the remainder
of the proceedings pending arbitration.
Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000).
Generally, proceedings are stayed after a proper motion to
compel arbitration is filed. 9 U.S.C. § 3; see also Simula, Inc.
v. Autliv, Inc., 175 F.3d 716, 726 (9th Cir. 1999); Merrill
Lynch, Pierce, Fenner & Smith, Inc. v. Coors, 357 F.Supp.2d
1277, 1281 (D. Colo. 2004).

Courts may consider the limited

issue of arbitrability. Prima Paint Corp. v. Flood & Conklin
Mfg.

Co.,

388

U.S.

395,

404

(1967).

A

dispute

about

the

validity of an arbitration provision, and not a contract as a
whole, is a matter for the court, not an arbitrator. Fazio, 340
F.3d at 393; Express Scripts, Inc. v. Aegon Direct Mtkg. Servs,

4

Inc., 516 F.3d 695, 699-701 (8th Cir. 2008); accord Nagrampa v.
Mailcoups, 469 F.3d 1257, 1271 (9th Cir. 2006).

When parties

challenge the validity of an arbitration provision, the Court’s
role

is

limited

to

“determin[ing]

only

whether

a

written

arbitration agreement exists, and if it does, enforce it in
accordance with its terms.” Simula, 175 F.3d at 720.
Under the FAA, “a written agreement to arbitrate disputes
arising out of a contract involving interstate commerce ‘shall
be valid, irrevocable, and enforceable save upon such grounds as
exist at law or in equity for the revocation of any contract.’”
Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002)
(quoting 9 U.S.C. § 2).

“‘[C]ourts are to examine the language

of the contract in light of the strong federal policy in favor
of arbitration.

Likewise, any ambiguities in the contract or

doubts as to the parties’ intentions should be resolved in favor
of arbitration.’”

Id. (quoting Stout, 228 F.3d at 714).

An

arbitration agreement can be invalidated for the same reasons
for which any contract can be invalidated.
939.

Fazio, 340 F.3d at

The FAA preempts state law specific to arbitration but not

general state contract law.

Id.

State law “governs ‘generally

applicable contract defenses [to an arbitration clause], such as
fraud, duress, or unconscionability.’”

Id.

Assoc. v. Casarotto, 517 U.S. 681, 687 (1996)).

5

(quoting Doctor’s

When a written agreement to arbitrate exists and one party
refuses to arbitrate, the other party may petition the district
court to order the refusing party to comply with the terms of
the

agreement.

9

U.S.C.

§

4.

“If

the

district

court

is

satisfied that the agreement to arbitrate is not ‘in issue,’ it
must compel arbitration.

If the validity of the agreement to

arbitrate is ‘in issue,’ the court must proceed to a trial to
resolve the question.”
4.

Great Earth, 288 F.3d at 889; 9 U.S.C. §

To show that the validity of an agreement is “in issue” and

therefore

that

a

trial

is

required,

“the

party

opposing

arbitration must show a genuine issue of material fact as to the
validity of the agreement to arbitrate.”

Id.

“The required

showing mirrors that required to withstand summary judgment in a
civil suit.”

Id.

The court “shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Civ. P. 56(a).

Fed. R.

The moving party can meet this burden by

pointing out to the court that the non-moving party, having had
sufficient opportunity for discovery, has no evidence to support
an essential element of his case.

See Fed. R. Civ. P. 56(c)(1);

Asbury v. Teodosio, 412 F. Appx. 786, 791 (6th Cir. 2011)
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)).

6

When confronted with a properly supported motion for summary
judgment, the non-moving party must set forth specific facts
showing that there is a genuine dispute for trial.
Civ.

P.

56(c).

A

genuine

dispute

for

trial

See Fed. R.

exists

if

the

evidence is such that a reasonable jury could return a verdict
for the non-moving party.

See Wasek v. Arrow Energy Servs., 682

F.3d

2012)

463,

467

(6th

Cir.

(quoting

Lobby, Inc., 477 U.S. 242, 248 (1986)).

Anderson

v.

Liberty

The non-moving party

must “‘do more than simply show that there is some metaphysical
doubt as to the material facts.’”
Auto.

Ins.

Co.,

680

F.3d

725,

Phelps v. State Farm Mut.

735

(6th

Cir.

2012)

(quoting

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
586

(1986)).

A

party

may

not

oppose

a

properly

supported

summary judgment motion by mere reliance on the pleadings.

See

Beckett v. Ford, 384 Fed. Appx. 435, 443 (6th Cir. 2010) (citing
Celotex Corp., 477 U.S. at 324).

Instead, the non-moving party

“must adduce concrete evidence on which a reasonable juror could
return a verdict in his favor.”

Stalbosky v. Belew, 205 F.3d

890, 895 (6th Cir. 2000) (citations omitted); see Fed. R. Civ.
P. 56(c)(1).
record

for

The court does not have the duty to search the
such

evidence.

See

Fed.

R.

Civ.

P.

56(c)(3);

InterRoyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir.
1989).

The non-moving party has the duty to point out specific

evidence in the record that would be sufficient to justify a
7

jury decision in his favor.

See Fed. R. Civ. P. 56(c)(1);

InterRoyal Corp., 889 F.2d at 111.
IV.

Analysis

In its March 5 Order, the Court decided that the parties had
entered into a written agreement to arbitrate and that the broad
scope of the agreement required an arbitrator to decide both
disputes about the performance of the contracts and disputes
about the formation of the contracts.
Stout, 228 F.3d at 714.

(March 5 Order 14); see

The Plaintiffs’ Amended Complaint

raises a federal statutory challenge to the arbitration
agreements under the CEA.

The Court decided that the

Plaintiffs’ CEA challenge was a “separate and valid challenge to
arbitration, which the Court must address” and not a challenge
to the contract as a whole.

(March 5 Order 14.)

Specifically, the Plaintiffs allege that “the arbitration
clause located in the No Basis Contracts is unenforceable and of
no effect” because “Cargill was required to provide the required
pre-dispute arbitration disclosures pursuant to 17 C.F.R. §
166.5.”

(Am. Compl. ¶¶ 27, 25.)

If a contract is subject to

the requirements of the CEA, compliance with 17 C.F.R. § 166.5
is a question to be decided by the court and not an arbitrator
because it concerns the validity of the arbitration agreement
itself.

(See March 5 Order 14); Fazio, 340 F.3d at 393.

The

Court concluded that, to determine whether Cargill was required
8

to make pre-dispute arbitration disclosures, the Plaintiffs
would need to show that the Grain Contracts were options or
futures contracts subject to the requirements of 17 C.F.R. §
166.5.

(March 5 Order 15.)

The only question before the Court is whether the arbitration
clauses in the contracts between the Plaintiffs and Cargill are
enforceable.

(See March 5 Order, ECF No. 29.)

Each Grain

Contract includes an arbitration provision that states:
The parties agree that the sole forum for the resolution of
all disagreements or disputes between the parties arising
under any grain contract between Buyer and Seller or relating
to the formation of any grain contract between Buyer and
Seller shall be arbitration proceedings before [the National
Grain and Feed Association (“NFGA”)] pursuant to NFGA
Arbitration Rules. The decision and award determined by such
arbitration shall be final and binding upon both parties and
judgment upon the award may be entered in any court having
jurisdiction thereof.
(Grain Contracts, ECF Nos. 14-1, 14-2, and 14-3.)
arbitration

agreements

are

so

broadly

stated,

Because the
if

they

are

enforceable, any remaining conflicts between the parties must be
resolved by the NFGA arbitration panel.
The Plaintiffs contend that the arbitration clauses in the
Grain
provide

Contracts
the

are

unenforceable

Plaintiffs

with

the

because

pre-dispute

disclosures required by 17 C.F.R. § 166.5.
Cargill

contends

that

its

contracts

Cargill

are

did

not

arbitration

(Am. Compl. ¶ 25.)
not

subject

to

the

requirements of § 166.5 because that section implements the CEA

9

and the contracts are exempt from coverage by the CEA.
Mot.

9.)

forward

Cargill

argues

contracts,

that

which

requirements of the CEA.

the

are

Grain

Contracts

are

cash

exempt

from

the

explicitly

(Id.)

(Renewed

The Plaintiffs argue that the

contracts are in substance futures contracts because of their
Focal

Point

Addenda,

or

option

contracts

Minimum Price Addenda.

(Resp. 6-8.)

and

for

futures

contracts

grain

because

of

their

They contend that options
are

not

exempt

from

requirements of the CEA and must comply with § 166.5.

the

(Id. 4-

6.)
The Court need not decide whether the Grain Contracts are
in

fact

options

or

futures

contracts.

The

nature

of

the

contracts as a whole is a question that is outside the purview
of the Court if the agreement to arbitrate is valid.

The Court

will

submitted

decide

only

whether

the

Plaintiffs

have

sufficient evidence to the Court to require the Court to hold a
trial about the validity of the arbitration agreements.

Whether

the Plaintiffs have satisfied the standard of review on the
Motion to Compel Arbitration has no bearing on what an NFGA
panel

may

decide

applying

its

substantive rules.
A. Cargill’s Burden
1. Option Contracts

10

different

procedural

and

The CEA defines an option as “an agreement, contract, or
transaction that is of the character of, or is commonly known to
the trade as, an ‘option,’ ‘privilege,’ ‘indemnity,’ [etc.].”
U.S.C. §1a(26).

7

“[A]n option means the contract whereby the

creator (or writer) of the option grants the purchaser ‘the
right, for a specified period of time, to either buy or sell the
subject of the option at a predetermined price.’”

CFTC v. White

Pine Trust Corp., 574 F.3d 1219, 1226 (9th Cir. 2009) (quoting 1
Derivatives Regulation § 1.02[10]).
Unlike futures and cash forwards which create mutually
binding obligations, the option holder incurs no
obligation,
but
rather
pays
a
fee
or
other
consideration for obtaining the enforceable obligation
of the option giver to sell or buy upon demand. Thus,
the total risk assumed in purchasing an option is the
loss of fee. A commodity option confers on its holder
the right, but not the obligation, to buy (a “call
option”) or to sell (a “put option”) a specific amount
of a commodity at a fixed price by a date certain.
Salomon Forex, Inc. v. Tauber, 8 F.3d 966, 971 (9th Cir.
1993).
Cargill asserts that the Plaintiffs cannot prove that
the Minimum Price Addenda convert the Grain Contracts into
option

contracts

reject

the

because

offer,”

and

“Plaintiffs
“[u]nlike...an

cannot
option

accept

or

contract,

failure to deliver under the Grain Contracts would result
in a breach of contract.”

(Reply 8) (internal quotations

11

omitted.)

To support its contention, Cargill submits the

Grain Contracts and the Minimum Price Addenda.
Cargill has made the required showing to shift the
burden to the Plaintiffs to prove that there is a genuine
dispute of material fact about whether the Grain Contracts
are option contracts within the meaning of the CEA. The
Court has previously decided that:
The Minimum Price Addendum, on its face, does not give
L&R Farms the right to withhold sale if the price does
not rise. (Minimum Price and Combinations Grain
Contract Addendum 1, ECF No. 14-2.) The Addendum does
not give a party the right to buy or sell a commodity;
it uses the value of the option as part of a pricing
mechanism. (Id.)
(March 5 Order 18.)

The Court is obligated to begin its

analysis of the validity and enforceability of a contract
by considering the language of that contract.
228

F.3d

at

714.

In

the

context

of

an

See Stout,
arbitration

agreement, the Court must construe any ambiguities in the
contract or doubts as to the parties’ intentions in favor
of arbitration.

Id.

is unambiguous.

On its face, the Minimum Price Addendum

establishes
parties’

a

In this case, the contract language

minimum

obligation

to

price;
buy

it
and

(Minimum Price Addenda.)
2. Futures Contracts

12

does
sell

not
to

affect
one

the

another.

Futures contracts do not include “any sale of any cash
commodity for deferred shipment or delivery.”
7 U.S.C. § 1(a)(19).

17 C.F.R. 1.3(o);

The Sixth Circuit has adopted two tests to

determine whether a contract is a futures contract.
In Andersons, Inc. v. Horton Farms, Inc., 166 F.3d 308 (6th
Cir. 1998), the parties entered into nine contracts for the
delivery of corn.

A dispute arose over fees, and the defendants

refused to deliver, causing the plaintiffs to move the court to
compel arbitration.
that

the

Id. at 314.

arbitration

clauses

The Sixth Circuit determined
in

the

contracts

were

not

enforceable as written if the contracts were subject to the CEA.
Id. at 317.

The court concluded that under the CEA “‘any sale

of any cash commodity for deferred shipment or delivery’” is not
a futures contract.

Id. at 318 (quoting 7 U.S.C. § 1a(11)).

Contracts that “contemplate physical transfer of the commodity”
and “reduce the risk of price fluctuations . . . are not subject
to CFTC regulations because those regulations are intended to
govern only speculative markets; they are not meant to cover
transactions wherein the commodity in question has an ‘inherent
value’ to the transacting parties.”

Id.

When “determining

whether a particular commodities contract falls within the cash
forward exemption [to the CEA], courts must focus on whether
there is a legitimate expectation that physical delivery of the

13

actual community by the seller to the original contracting buyer
will occur in the future.”
More

recently,

the

Id.
Sixth

Circuit

futures contract test in CFTC v. Erskine.
324 (6th Cir. 2008).

adopted

a

different

512 F.3d 309, 322,

The Erskine court identified six elements

of a futures contract:
1) The ‘contract’ is standardized so that it can be traded
on an exchange, and is
2) a fungible agreement to buy or sell
3) a stated unit quantity of
4) a stated commodity
5) at a stated unit price
6) at or before a stated unit time.
Id. at 324.
1)
2)
3)
4)
5)
6)

A forward contract, by comparison, is:

neither standardized nor traded on an exchange, and is
an individual agreement to buy or sell
some agreed-upon quantity of
some commodity
at some agreed-upon price
at some agreed-upon time in the future.

Id.
The Sixth Circuit has not explicitly held that the test in
Andersons was overruled by Erskine.

Under the Rules of the

Sixth Circuit, both Andersons and Erskine are binding current
law and should be distinguished so that they do not conflict.
See 6 Cir. R. 32.1(b) (“Published panel opinions are binding on
later panels.
court

en

A published opinion is overruled only by the

banc.”)

The

court

in

Erskine

specifically

distinguished Andersons, and the analysis in Erskine provides
guidance in the present case.
14

In Erskine, the CFTC sued a company that traded in foreign
currency in violation of the CEA.

512 F.3d at 310.

The company

traded units of currency, and “the trading was in the actual
currency, not in any paper representing a fungible unit batch of
currency to be bought or sold at a later date.”

Id. at 311.

Unlike Andersons, there was no tangible good, such as soy, at
issue because the contract involved only a currency swap.

The

Erskine court held that “Andersons does not provide controlling
precedent,”

because

distinction

“Andersons

between

is

tangible

distinguishable

and

intangible

–

on

the

commodities,

inasmuch as there is never ‘delivery’ of intangible or financial
commodities.” Id. at 322.
is

intended

to

be

A test that considers whether a good

delivered

is

not

relevant

in

determining

whether there is a futures transaction in circumstances like
those in Erskine.
Under the facts presented in this case, Andersons is the
controlling

precedent.

The

Grain

Contracts

evidence

an

agreement for the sale and purchase of soybeans, a tangible
commodity.

(Grain Contracts.)

Cargill asserts that the Plaintiffs cannot prove that the
Focal

Point

Addenda

make

the

Grain

Contracts

into

futures

contracts because delivery of the soybeans was expected within
the meaning of Andersons.

(Renewed Mot. 9.)

15

It contends that:

the parties were in the business of providing and obtaining
the commodity, the parties had the ability to make and take
delivery of the physical commodity, Cargill relied on the
actual delivery of the commodity to carry out its business,
delivery routinely occurred between the parties in past
dealings, and Plaintiffs received a cash payment only upon
delivery of the actual commodity.
(Id.); see Andersons, 166 F.3d at 320.

Cargill contends that

“[i]t is undisputed that the parties expected an actual physical
delivery of soybeans.”

(Id.)

In support of this contention,

Cargill submits the Grain Contracts and the Focal Point Addenda.
Cargill has made the required showing to shift the burden
to the Plaintiffs to establish that there is a genuine dispute
of material fact about whether the Grain Contracts are futures
contracts within the meaning of the CEA.

The language of the

Grain Contracts is unambiguous, and the Court has an obligation
to interpret it as written.

See Stout, 228 F.3d at 714.

The

Grain Contracts state that the “Seller confirms its sale and
obligation to deliver the listed commodity to Buyer under the
[listed] terms and conditions.”

(Grain Contracts.)

The Focal

Point Addenda state that the contracts are “physical delivery
commodity contract[s].

All commodity sold hereunder by Seller

shall be delivered during the delivery period stated in the
Contract[s].”

(Focal Point Addenda.)

The Addenda also state

that “entering this transaction does not result in [Plaintiffs]
opening a futures/options account or having a futures/options
position.”

(Id.)

The burden is on the Plaintiffs to adduce
16

specific evidence that would allow the Court to conclude that,
contrary to the terms of the Grain Contracts, physical delivery
was not actually anticipated within the meaning of Andersons,
and that the contracts are therefore futures contracts subject
to the CEA.
B. Plaintiffs’ Burden
Plaintiffs are obligated to point to specific facts in the
record

that

demonstrate

a

genuine

dispute

about

whether

the

Grain Contracts are options or futures within the meaning of the
CEA.

The

Plaintiffs

may

not

rely

exclusively

on

their

pleadings, and the Court gives no deference to their conclusory
legal statements about the nature of the agreements.
The
Compel

Plaintiffs’

Arbitration

Response

makes

to

numerous

Cargill’s
conclusory

Motion

to

assertions

that the “contracts were treated as futures and options,
rather

than

involved.”
to

cash

(Resp. 6.)

supporting

themselves

forward

contracts

by

all

parties

Plaintiffs state, without reference

documentation,

were

traded,

Response

cites

not

that

the

“[t]he

underlying

contracts
commodity.”

(Id. 5.)
The

two

documents

in

the

record

to

support the claim that the Grain Contracts are futures and
options, the Declaration of Steve Lewis, (Lewis Decl., ECF
No.

33-2),

and

the

Declaration
17

of

Phillip

Lee

Hageman,

(Hageman

Decl.,

ECF

No.

33-1).

The

copy

of

Lewis’

Declaration submitted to the Court has not been sworn and
is not competent evidence on which the Court may rely to
decide Cargill’s Motion.

(See Lewis Decl.)

associated

the

person

arbitrator.

with

(Hageman

CFTC

Decl.

¶¶

and

4-5.)

Hageman is an
a

former

His

NGFA

Declaration

states his opinions about the nature of the Grain Contracts
based

on

a

expertise.

review

of

the

documents

and

his

purported

(See generally Id.)

The Plaintiffs cite paragraphs 7 and 8 of Hageman’s
Declaration
Contracts.

to

support

(Resp. 7.)

their

claims

about

the

Grain

Relying on Paragraph 7, Plaintiffs

claim that, “regardless of what the contracts were titled,
[they] were not treated as cash forward contracts.”

(Id.)

In paragraph 7, Hageman states that the contracts “were not
handled

by

Cargill

as

(Hageman Decl. ¶ 7.)

typical

cash

forward

contracts.”

He asserts that Cargill “offered and

permitted [Plaintiffs] to enter into multiple option and
futures transactions that went far beyond the mere pricing
of grain.”

(Id.)

Hageman goes on to state that the Grain

Contracts “were in substance equivalent to exchange-traded
options or futures contracts and, as such, were in economic
reality

agricultural

trade

options

that are regulated by the [CFTC].”
18

or

futures

(Id.)

positions

Whether the

Grain Contracts were cash forward, options, or futures is a
question of law that is in the exclusive purview of the
Court

to

decide.

Hageman’s

statements

are

legal

conclusions, not factual support, and they are not useful
to the Court in determining whether the Plaintiffs have
demonstrated a genuine issue of material fact about the
nature of the Grain Contracts.
The

Plaintiffs

rely

on

paragraph

8

of

Hageman’s

Declaration to support their claim that the Grain Contracts
“are not typical of unregulated cash forward contracts,”
because “the settlement totals Cargill sets forth consist
primarily of ‘roll service charges, contract cancellation
charges,

options

price

charges,

deferred

future

differences and other contract service charges.’”
(quoting Hageman Decl. ¶ 8).)

price

(Resp. 7

Although this statement is

factual, it does not support the Plaintiffs’ argument that
there

is

a

genuine

dispute

of

nature of the Grain Contracts.

material

fact

about

the

The Court concluded in its

March 5 Order that a “service fee has no bearing on whether
a

party

has

signed

(March 5 Order 20.)
Andersons,

the

an

option

or

a

futures

contract.”

Indeed, the cash forward contracts in

controlling

precedent,

entailed

service

fees, notably “approximately $30,000 in fees incurred by

19

[the

defendant]

when

it

features of the contracts.”

utilized

the

flex/convertible

166 F.3d at 312 n.7.

In its March 5 Order, the Court concluded that, to
demonstrate

that

the

Grain

Contracts

were

options,

Plaintiffs would need to produce “evidence that there was a
right not to buy or to sell the grain.”
18.)

(March 5 Order

As discussed above, to demonstrate that the Grain

Contracts

were

futures

under

the

Andersons

test,

the

Plaintiffs would need to produce sufficient evidence that
physical delivery was not actually anticipated under the
contracts to show a genuine dispute of material fact.

The

Plaintiffs have failed to identify any facts in the record
that

would

allow

the

Court

to

conclude

that

a

genuine

dispute of material fact exists about whether the Grain
Contracts are either options or futures contracts within
the meaning of the CEA.
The Plaintiffs have failed to meet their burden.

Cargill

is entitled to the equivalent of summary judgment on Plaintiffs’
claim

that

Plaintiffs’

the

arbitration

contention

that

agreements
Cargill’s

are

invalid.

arbitration

Because
agreements

fail to comply with 17 C.F.R. § 166.5 is the only question
properly before the Court, arbitration of all remaining claims
is now warranted.
V.

Conclusion
20

For the foregoing reasons, Cargill’s Renewed Motion to Stay
and Compel Arbitration is GRANTED.

So ordered this 31st day of July, 2013.

s/ Samuel H. Mays, Jr.____
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE

21