United States District Court, D. Nebraska
MEMORANDUM AND ORDER: FINDINGS OF FACT AND
CONCLUSIONS OF LAW
M. GERRARD UNITED STATES DISTRICT JUDGE
matter is before the Court after a bench trial on the
plaintiff's breach of contract claim. For the reasons
explained below, the Court finds that the plaintiff has
failed to establish the required elements of its claim.
Accordingly the Court will enter judgment in favor of the
defendant and dismiss the plaintiff's complaint.
case involves an ethanol plant formerly owned and operated by
Nedak Ethanol, LLC. Prior to shutting its doors, Nedak
defaulted on a contract with the defendant, Eco Energy, for
the sublease of railcars. As a result of the default, Eco
pulled its railcars from Nedak and diverted them to other
diverting the railcars from Nedak, Eco breached its
obligation under a separate 2007 agreement between Nedak,
Eco, and Nedak's lead lender, Farm Credit Services of
Grand Forks (which later became AgCountry Farm Credit
Services). Pursuant to that agreement, and as explained in
more detail below, Eco was obligated to provide Nedak's
lender notice of Nedak's default and a reasonable
opportunity to cure. Because Eco failed to do so, the
plaintiff contends that the defendant breached the 2007
contract, resulting in damages of $6, 224, 959.
North Dakota law, this Court, in its January 12, 2015
Memorandum and Order, determined that the plaintiff had
satisfied the first two elements of its breach of contract
claim: the existence of a contract (the 2007 agreement), and
a breach of that contract. But the Court left the remaining
element-causation-for trial, holding that genuine issues of
fact remained as to whether AgCountry would have exercised
its right to cure had it received appropriate notice of
trial, the plaintiff presented evidence suggesting that
Nedak's lenders would have been ready, willing, and able
to pay the default had AgCountry been presented with the
appropriate notice and opportunity. Specifically, the
testimony and evidence focused on three primary factors that,
the plaintiff contends, "objectively confirm that making
the cure was the only reasonable choice." Filing
60 at 3. These factors include (1) the financial
incentive to the lender, (2) the importance of preserving
Nedak's railcars, and (3) the ready availability of funds
from several participating lenders.
defendant contended, however, that AgCountry was unwilling to
pour additional money into Nedak. To support this argument,
the defendant presented evidence that Nedak, at the time of
the default, was experiencing serious financial difficulties,
causing concern amongst its lenders. These concerns prompted
AgCountry to freeze Nedak's accounts, and maintain that
freeze even after discovering that Nedak had defaulted on its
sublease and was in jeopardy of losing its railcars.
full consideration, and weighing the evidence, the Court
finds that the plaintiff has failed to satisfy its burden on
causation-that is, the Court finds that the plaintiff has not
proven that AgCountry would have exercised its right to cure
Nedak's default had it received proper notice and
opportunity. Accordingly, the Court will dismiss the
plaintiff's breach of contract claim.
The Marketing Contract (2006)
2006, Nedak and Eco entered into an ethanol marketing
agreement (the "Marketing Contract"), under which
Eco agreed to transport and sell all of the ethanol produced
by Nedak. Filing 69 at 9; ex. 2 at 1. To transport
Nedak's ethanol, Eco used railcars which it had
previously leased from a third party, Union Tank Car Company.
That lease covered approximately 133 railcars, with monthly
lease rates ranging from $400 to $735 per railcar. The lease
terms on the railcars varied, with some expiring as early as
2012, and others as late as 2020. Ex. 5 at 8.
of the Marketing Contract, Nedak agreed to assume Eco's
financial obligation to Union Tank Car in the event that the
Marketing Contract was terminated. Specifically, the
Marketing Contract provided: "If this Agreement is
cancelled for may [sic] reason, NEDAK will be responsible to
take over all rail contracts." Ex. 2 at 9.
The Collateral Assignment (2007)
2007, Nedak assigned all rights and remedies under the
Marketing Contract, and all documents related
thereto (collectively, the "Assigned
Documents"), to its lead lender, Farm Credit Services of
Grand Forks. Ex. 1 at 1 (emphasis added). This contract (the
"Collateral Assignment") also included a provision,
executed by Eco, which provided the lender a right to notice
and cure in the event of Nedak's default on the Assigned
Documents. The provision provides in relevant part:
[Eco] agrees to give Lender prompt written notice of any
default under the Assigned Documents and to allow Lender a
reasonable period of time to cure any such defaults should
Lender elect to effect such cure. . . . Consent to the
foregoing assignment is hereby granted in all respects.
Ex. 1 at 5. Farm Credit, as lead lender, held this right
until it merged with AgCountry in 2008. The right was
subsequently assigned to a company called Choice Ethanol
Holdings LLC, and, ultimately, to First Dakota National Bank.
See, filing 68 at 52- 54; ex. 10 at 1; ex.
11 at 1; ex. 13 at 1-2.
The Sublease (2010)
2010, Nedak and Eco agreed to terminate the Marketing
Contract. To do so, the parties entered into a termination
agreement, which reflected a mutual desire for "a fair
and equitable settlement with regard to the cancellation of
the rights and obligations granted under the Marketing
[Contract.]" Ex. 3 at 1. But the termination agreement
was not absolute- indeed, it reaffirmed Nedak's
responsibility "to reimburse Eco the cost associated
with the ...