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Aurora Coop. Elevator Co. v. Aventine Renewable Energy Holdings, Inc.

United States District Court, D. Nebraska

November 25, 2014

AURORA COOPERATIVE ELEVATOR COMPANY, Plaintiff,
v.
AVENTINE RENEWABLE ENERGY HOLDINGS, INC., AVENTINE RENEWABLE ENERGY, INC., and AVENTINE RENEWABLE ENERGY AURORA WEST, LLC, Defendants. AURORA COOPERATIVE ELEVATOR COMPANY, Plaintiff,
v.
AVENTINE RENEWABLE ENERGY HOLDINGS, INC., AVENTINE RENEWABLE ENERGY AURORA WEST, LLC, Defendants

For Aurora Cooperative Elevator Company, Plaintiff, (4:12-cv-03200-JMG-CRZ, 4:14-cv-03032-JMG-CRZ): Andre R. Barry, Kevin J. Schneider, Richard P. Garden, Jr., Terry R. Wittler, CLINE, WILLIAMS LAW FIRM - LINCOLN, Lincoln, NE; Jonathan J. Papik, CLINE, WILLIAMS LAW FIRM - OMAHA, Omaha, NE.

For Aventine Renewable Energy Holdings, Inc., Aventine Renewable Energy - Aurora West, LLC, Aventine Renewable Energy, Inc., Defendants (4:12-cv-03200-JMG-CRZ): Samantha M. Rollins, PRO HAC VICE, Jacob D. Bylund, Lance W. Lange, FAEGRE, BAKER LAW FIRM - IOWA, Des Moines, IA.

For Aventine Renewable Energy - Aurora West, LLC, Aventine Renewable Energy, Inc., Counter Claimants: Samantha M. Rollins, PRO HAC VICE, FAEGRE, BAKER LAW FIRM - IOWA, Des Moines, IA.

For Aurora Cooperative Elevator Company, Counter Defendant (4:12-cv-03200-JMG-CRZ): Kevin J. Schneider, Richard P. Garden, Jr., Terry R. Wittler, CLINE, WILLIAMS LAW FIRM - LINCOLN, Lincoln, NE.

For Aventine Renewable Energy Holdings, Inc., Aventine Renewable Energy - Aurora West, LLC, Defendants (4:14-cv-03032-JMG-CRZ): Jacob D. Bylund, Lance W. Lange, FAEGRE, BAKER LAW FIRM - IOWA, Des Moines, IA.

MEMORANDUM AND ORDER

John M. Gerrard, United States District Judge.

This matter is before the Court on two motions, in two separate cases, involving substantially the same parties and raising overlapping and related issues of law and fact. The plaintiff in both cases is Aurora Cooperative (Aurora), a Nebraska corporation located in Aurora, Nebraska. Case no. 4:12-cv-3200, filing 1 at ¶ 1.[1] Defendants Aventine Renewable Energy Holdings and Aventine Renewable Energy are corporations based in other states and registered to do business in Nebraska, and Aventine Renewable Energy -- Aurora West is a limited liability company whose sole member is Aventine Holdings (collectively, " Aventine"). Filing 1 at ¶ ¶ 2-4; filing 20 at ¶ ¶ 2-4, 60-62.

In case no. 4:12-cv-3200 (the " Grain Lawsuit"), Aventine has filed a motion for leave to amend its answer and counterclaims. Filing 49. And in case no. 4:14-cv-3032 (the " Easement Lawsuit"), Aventine has moved to dismiss Aurora's complaint, or in the alternative, consolidate that case with the Grain Lawsuit. Filing 20. For the reasons discussed below, both motions will be granted in part and denied in part.

I. FACTUAL BACKGROUND[2]

A. Development of the Aurora West Site

Around 2006, Aurora acquired an agri-business complex on an industrial site just west of the city of Aurora (the " Aurora West site"). Filing 39-21 at ¶ 4. The site is bounded to the north by U.S. Highway 34, and to the south by a Burlington Northern Santa Fe (BNSF) railroad line. Filing 39-21 at ¶ 4; filing 39-24 at 3. In June 2006, Aurora sold Aventine a large portion of the land within the site. Filing 20-1. And in August 2006, Aventine and Aurora entered into a series of agreements, including a " Master Development Agreement, " which related to the development of an ethanol plant on the land Aventine had purchased. Filing 1 at ¶ ¶ 8-9; filing 20-2; filing 39-21 at ¶ 6. The parties' agreements provided for the development of roads, rail tracks, and other infrastructure needed to operate the plant, and envisioned that Aventine would operate the plant using grain provided by Aurora. Filing 1 at ¶ 8; filing 20-2 at 1-12; filing 20-3; filing 39-21 at ¶ ¶ 5-8. Aventine constructed the plant, and Aurora built a grain elevator and grain storage facility. Filing 20-2 at 1-11; filing 39-21 at ¶ ¶ 5, 16.

B. The Double Track Loop

Much of the present disputes concern a pair of railway tracks that surround the Aurora West site and Aventine's ethanol plant--the " Double Track Loop." The Loop is shaped roughly like an athletic track and consists of two sets of railway tracks (the " Interior and Exterior Loops"). Filing 39-21 at ¶ 11; filing 39-5; filing 39-18; filing 39-22 at ¶ 6; filing 39-24 at 1-3. The Inner and Exterior Loops are (with exceptions not relevant here) situated on land owned by Aventine and Aurora, respectively. A service road runs between the two tracks, and the line dividing the parties' property runs down the middle of the road. Filing 39-21 at ¶ 11; filing 39-24 at ¶ ¶ 5-8 & p. 3.

On the southern border of the Aurora West site, the Double Track Loop runs parallel to the BNSF line. A set of crossover tracks and switches connects the Exterior Loop to the BNSF line, and another set of tracks and switches connects the Exterior and Interior Loops. Filing 39-21 at ¶ ¶ 11, 13; filings 39-5, 39-6, and 39-7; filing 39-18; filing 39-24 at 3. In order to move from the BNSF line to the Interior Loop (or vice versa), a railcar must pass over one set of crossover tracks, then travel along the Exterior Loop for a short distance, then pass over another set of crossover tracks. The Court will refer to the small portion of the Exterior Loop that lies between the crossover tracks as the " Switching Portion."

C. The Parties' Agreements

Among the agreements signed by Aventine and Aurora in August 2006, three are particularly important to the present dispute. The first is the Double Track Loop Easement and Use Agreement (the " Double Loop Agreement"). Filing 39-3. Under this agreement, Aventine and Aurora granted each other easements over certain parcels of real estate owned by the other party and over the portion of the Double Track Loop located on that real estate. Filing 39-3 at 2, 6-7.

The second contract is the Grain Supply Agreement. Filing 20-3. It is essentially a requirements contract, whereby Aventine agreed to purchase from Aurora, on an exclusive basis, " all of the [g]rain which Aventine requires to operate the Aventine Ethanol Plant." Filing 20-3 at 3. The agreement allows Aurora to furnish the grain from its own farmer members or to procure it from third parties. Filing 20-3 at 5-8. Each grain purchase was to give rise to and be governed by a separate " Grain Contract." Any dispute arising under a Grain Contract is subject to arbitration through the National Grain and Feed Association (NGFA). Filing 20-3 at 2.

The third contract is the Aventine Marketing Agreement. The Marketing Agreement gave Aurora the exclusive right to market byproducts of the ethanol production process produced by the Aurora West plant. Filing 20 at ¶ 67; filing 20-4.

D. Construction of the Plant

The Master Development Agreement originally provided that Aventine's ethanol plant would be completed and fully operational on or before July 11, 2009. Filing 1 at ¶ 12; filing 20-2 at 5, 15. However, construction of the new plant did not proceed as the parties had envisioned. See filing 1 at ¶ ¶ 20-23. In March 2010, Aventine and Aurora entered into a new agreement (the " 2010 Agreement") which amended various aspects of the parties' existing agreements, and moved the completion deadline for the plant to July 1, 2012. Filing 1 at ¶ ¶ 25-27.

Once more, things did not proceed as the parties had intended. By July 2012, the plant was complete and operational, in that it was capable of producing ethanol.[3] See filing 20 at ¶ 75. But by then Aventine had determined that it was not profitable to produce ethanol using corn. Filing 34-10 at ¶ 11. So, on July 3, 2012, Aventine informed Aurora that it would not be operating the plant, at least for the time being. Filing 1 at ¶ 34.

E. Disputes Arising in the Summer of 2012

According to Aurora, in May and June 2012, the parties were in frequent contact concerning the procurement of grain for Aventine's anticipated start-up in July 2012. Filing 1 at ¶ 29. Throughout this period, the parties engaged in several grain transactions. See, e.g., filing 1 at ¶ ¶ 29-41; filing 20 at ¶ ¶ 29-41, 70-76; filing 49-1 at pp. 10-13.

On June 14, 2012, Aventine agreed to price 300, 000 bushels of corn from Aurora. Aurora sent a pricing confirmation (filing 20-7), identified as contract No. 015499-02, with delivery to occur on or before July 30. Filing 1 at ¶ 30; filing 20 at ¶ 30. Thus, the parties had formed a " Grain Contract" under the Grain Supply Agreement. Aventine paid Aurora in advance for 70, 000 bushels, [4] and accepted delivery of those bushels in June. Filing 1 at ¶ 31; filing 20 at ¶ 31. That same month, Aventine ran the Aurora West plant using these bushels. A byproduct of this operation was wet distiller's grain, one of the byproducts covered by the Marketing Agreement. Aurora accepted this byproduct and later sold it for approximately $130, 000 in July. Aventine claims that, under the Marketing Agreement, Aurora owes Aventine this money. Filing 20 at ¶ ¶ 75-76. Aurora has yet to pay, for reasons that will be explained below.

Around the same time, from May to July 2012, Aurora alleges that it acquired approximately 1.7 million bushels of corn " on behalf of Aventine pursuant to Aventine's specific instructions to do so and upon the representation that Aventine intended to start up and operate the Plant." Filing 1 at ¶ 32. Aventine disputes that it directed Aurora to purchase this grain. Filing 20 at ¶ 32. Instead, Aventine contends that this accumulation of grain was part of an effort by Aurora to use " the parties' contractual relationships as leverage to coerce Aventine . . . into operating its ethanol plant at a loss, " which was, in turn, an effort to force Aventine into financial ruin so that it would agree to Aurora's purchase of the ethanol plant at an extremely discounted price. Filing 50 at 5.

Either way, on July 3, 2012, Aventine informed Aurora that it would not be operating the Aurora West plant for the foreseeable future. So, Aventine instructed Aurora that it would not be taking delivery of the 230, 000 bushels of corn that were remaining under contract no. 015499-02. Aventine also declined to take delivery of the " disputed corn, " that is, the 1.7 million bushels that Aurora claims it had ...


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