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S Farms v. United Grain Corp. of Oregon

United States District Court, D. Montana, Billings Division

December 18, 2018

S FARMS and SINGLETON FARMS, Plaintiffs,
v.
UNITED GRAIN CORPORATION OF OREGON, an Oregon Domestic Business Corporation, Defendant.

          ORDER

          TIMOTHY J. CAVAN UNITED STATES MAGISTRATE JUDGE

         Plaintiffs S Farms and Singleton Farms (“Singleton”) bring this action against Defendant United Grain Corporation of Oregon (“United”). In their complaint, Singleton sets forth nine counts against United relating to the parties' agreements for the delivery and sale of wheat. (Doc. 1-2.)

         Presently before the Court is United's Motion to Stay and Compel Arbitration. (Doc. 2.) The motion is fully briefed and ripe for the Court's review. (Docs. 3, 5, 6.) The Court held a hearing on the motion on November 14, 2018. Having considered the parties' submissions, and the parties' oral arguments, the Court ORDERS that United's Motion to Stay and Compel Arbitration is DENIED.

         I. BACKGROUND

         This dispute arises from multiple transactions between the parties involving the delivery and sale of grain. (Doc. 3 at 2; Doc. 5-1 at 3.) Singleton is a spring and winter wheat producer in Custer County, Montana. Between 2007 and 2017 Singleton delivered over one million bushels of wheat to United at one of its grain elevators in Pompeys Pillar, Montana. (Doc. 5-1 at 3.) The grain was delivered under delayed pricing agreements, whereby title to the grain would pass to United upon delivery, but the purchase price would be determined according to future market rates. (Doc. 6-3 at 2-3.) The present dispute involves grain deliveries between 2007 and December 13, 2015. (Doc. 1-2 at 7.)

         The parties disagree as to how the terms of their transactions were established. According to United, it has a regular procedure for the development of delayed pricing agreements. After a producer delivers grain to one of its facilities, the elevator generates a contract that records the terms of the pricing agreement for that transaction. (Doc. 6-1 at 2.) United's policy is to then send two copies of the agreement to the producer, one for the producer's records and a second to be signed and returned to United. (Doc. 6-1 at 2-3.)

         Prior to 2015, United's written pricing agreements were created by hand on preprinted, fill-in-the-blank forms. (Doc. 6-1 at 3.) The pre-2015 agreements made no mention of arbitration, or the application of National Grain and Feed Association (“N.G.F.A.”) rules. In 2015, United began using a new computer-generated contract. (Doc. 6-1 at 3.) The new contracts contained a notation on the front of the agreement which stated: “RULES TO GOVERN: N.G.F.A. Trade & Arbitration.” (See e.g., Doc. 3-3 at 1.) United filed several post-2015 agreements with Singleton as an exhibit to its opening brief. (Doc. 3-3.) Four of the contracts are dated prior to December 13, 2015; two appear to be signed by a representative of Singleton (doc. 3-3 at 2, 3), and two are unsigned (doc. 3-3 at 1, 10).

         Singleton disputes that United's written contracts control the parties' agreements. According to Singleton, the terms of the transactions were set according to oral agreements entered into by the parties at the time Singleton delivered its grain to the Pompeys Pillar facility. (Doc. 1-2 at 3.) Singleton acknowledges that United sent written documents to Singleton after the delivery of grain. (Doc. 1-2 at 5; 5-1 at 4.) But Singleton contends United represented that the documents were solely for auditing purposes with the state, and United assured Singleton that their oral agreements would control their course of dealing. (Doc. 1-2 at 5; 5-1 at 4.)

         It appears a dispute arose between the parties regarding the pricing agreements in 2017. In August 2017 and February 2018, United “priced” all the bushels of grain delivered by Singleton on or before December 13, 2015, and sent Singleton proceeds from the transactions. (Doc. 1-2 at 7; Doc. 3 at 3.) Singleton contends United priced the grain contrary to its instructions, and improperly calculated the sales price and fees under the parties' agreements. Id.

         Singleton initiated this action in Montana state court on December 28, 2017. (Doc. 1-2.) Singleton asserts nine causes of action: (1) reformation of contract; (2) declaratory judgment; (3) breach of contract; (4) fraud; (5) constructive fraud; (6) negligent misrepresentation; (7) breach of covenant of good faith and fair dealing; (8) unjust enrichment; and (9) violation of the Commodity Dealer Act. Id. On March 12, 2018, United timely removed, alleging this Court has diversity jurisdiction under 28 U.S.C. §1332(a). (Doc. 1.) United now moves the Court to stay the pending action and compel arbitration of the parties' dispute. (Docs. 2, 3.)

         II. DISCUSSION

         A. Legal Standard

         a. Federal Arbitration Act

          The Federal Arbitration Act (“FAA”) governs the enforceability of arbitration agreements in contracts involving interstate commerce. The FAA provides that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. ...


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