Dettenhaim Farms, Inc. v. Greenpoint Ag, LLC

This decision of the appeal court of Louisiana took up the alleged damages of the soybean crop and the trial court’s findings on the matter. The appeal court found that the trial court abused its discretion when it chose an expert’s methodology for determining damages, “as another methodology was supported by the record and was not overly speculative.” As a result, a reduced damage award was appropriate.

The appeal court affirmed two other trial court decisions: that the damage to the soybean crop was caused “by an LLC” and that a son and a corporation lacked a real and actual interest in the unharvested soybeans. While these two decisions are rationale, found in the opinion, are of interest, and can be found in the case, we digest here the issue of the number of damages.

Background.

Bobby and his son, Jason, farmed 800 acres in East and West Carroll parishes. Jason’s parents owned the land. Dettenhaim Farms Inc. (DFI) never farmed crops before 2018 and owned no cropland. Wesley Sanchez, a friend of the Dettehaims, worked as an outside salesman for farm chemicals. Greenpoint Ag LLC (LLC) became Sanchez’s employer around 2011. Sanchez would check the fields before and after the annual burndown to see what weeds needed to be destroyed. The Dettenhaims “completely relied on Sanchez to check their crops and make recommendations about what and when to spray.”

The 2016 growing season.

Going into the 2016 season, the Dettenhaims had a carryover balance with LLC of around $45,000. On March 14, they paid an outstanding balance of $134,000 to John Deere Financial (JDF). Bobby and Jason applied for credit from JDF. The Dettenhaims ran into cash and credit problems with LLC soon after that regarding purchases of chemicals. On April 7, Jason told LLC’s credit manager that he planned to sell several houses and some of his cattle. Jason was told the account would go to collection if not paid by June 15.

Between May 8 and May 12, Bobby and Jason planted their soybean crops. LLC’s location manager claimed that, during a June 9 call with Bobby, their past due account had caused a lot of anxiety, and he thought it best they find a new supplier. Later that month, the manager told Sanchez he might not need to return to the Dettenhaims’ fields and could spend his time more wisely. He did not let the Dettenhaims know of this. Noone from LLC passed this along to Dettenhaims.“ Sanchez knew that the Dettenhaimsdid did not have a crop consultant. However, he thought what Benny had told them was sufficient.”

On June 29, Jason said he could pay only $5,000 at that time, to which the credit manager told him that was “perfect.” A cash account was opened for Bobby and Jason at Greenpoint in June. This allowed them to buy products from Greenpoint by either producing a check or paying when the product was picked up or delivered.” The crops, generally remaining unchecked, had infestations of stinkbugs. Ultimately, the Dettenhaims were able to harvest some of their produce and sell the beans.“ On March 1, 2017, Bobby, in his capacity, and Jason, individually and as president of DFI, executed a promissory note for over $57,000 in favor of Greenpoint. No payments were ever made on this note.”

Lawsuit.

On Dec.14, 2016, DFI filed suit against LLC, its insurer, and Sanchez. DFIasserted that, for 20 years, it had relied on Sanchez to check for insects and weeds and recommend treatment. DFI also asserted that, due to this reliance, significant damage was incurred to its 2016 crop, thus reducing the yield. DFI could have hired a new consultant had it been notified that Sanchez was stopping consulting. In August 2017, DFI amended its petition to add Bobby and Jason as individuals and as owners and managers of DFI. DFI alleged it suffered crop yield damages and had to sell its cattle prematurely to compensate for the crop loss. DFI also alleged it suffered mental anguish due to the defendant’s actions.

In April 2018, LLC filed a reconventional demand that DFI, Jason, and Bobby owed payment in full on the $57,000 note that was due and payable in full. The plaintiffs answered that any amount owed to LLC resulted from its negligence, and they should be stopped from seeking payment.

Trial.

A bench trial was held in July 2019, with numerous documents and witnesses. Reynold Minsky testified as an Ag expert. He estimated that the first field had a 10%-to-20% stinkbug and worm infestation, but the other two areas had severe damage. He determined his damages by counting the good pods and bad pods on a plant and then looking at the bad pods. The third field had the worst damage, but he did not provide an estimate because he did not take counts in that field. Minsky did not perform a commercial count or net sweep but stood by his calculations. He also asked about soybean yields from a couple of surrounding farms. “Based upon that information and his observations and 66 years of experience, he estimated that Bobby’s and Jason’s yield would have been 65-70 bushels per acre in one field and 75-80 bushels per acre in the second field.” He did not go out into the fields to make a count, but he thought he provided an educated guess of what he saw.

Dave Elliott, a neighbor, drew a map of where his fields lie adjacent to or across the road from Dettenhaims’ fields. Carlton Clark, CPA, specializes in economic damages, lost profits, and business valuation. He offered three alternative methods to determine the damage:(1) average yields from 2011 to 2015 to determine the yield percentages ($91,795); (2) highest yielding year (2014) to determine the outcome ($148,946), and (3) 2016 yield of the Elliott farm ($246,334).

“Edward Peters is an independent crop consultant who testified on behalf of defendants as an expert in crop consulting, entomology, weed science, and plant pathology.” Peters was retained by the defendants in 2018 and never visited the Dettenhaim fields. He felt it essential to visit each area since they can vary materially. Peters agreed the stink bugs were nasty in 2016. He thought the range of damages Minsky determined was extensive. He thought Minsky did not conduct a lot of sample collecting, analysis, and counts. He opined one could not look at a few stalks in one or two fields and apply that to 800 acres.

Reasons for judgment.

The trial court concluded that the plaintiffs relied on LLC and Sanchez to advise them, and this reliance led to a change in their position to their detriment. “The trial court did not agree with Greenpoint’s argument that detrimental reliance was not applicable because the Dettenhaims were in debt for more than $50,000 to Greenpoint going into the 2016 crop year.” Among other things, the TC noted that, during the alleged June 9 phone call, LLC never said that Sanchez would no longer be allowed to scout their properties or sell products. Further, LLC sold products to them at later dates. The trial court found that the defendants were obliged to inspect and spray. Thus, the preponderance of the evidence proved causation.

The trial court accepted Clark’s third method of damages, noting that their yields would be comparable to the Elliott yields. The trial court also favored LLC on the reconventional demand of the promissory note. The trial court rejected the argument that the plaintiffs had to sell cattle to pay down debt due to the crop damage. The trial court also denied any damages for mental anguish.

Damages.

LLC argued that the method of damages the trial court chose, relying on yields from the Elliott farms, was not the proper legal standard for calculating damages. Per the Aultman case (citation omitted), “Generally, the amount of damages which should be awarded for the loss of a growing crop is the average yield and market value of crops of the same kind, planted and cared for in the same manner and in the same area, less the cost of cultivating, harvesting, and marketing the crop.”

The plaintiffs countered that Clark was the only accounting expert to testify at trial. They noted that Minsky testified that expected yields could be scheduled for other fields in the area. The appeal court pointed out that ” there were similarities in the plaintiffs’ fields and those of Elliott. There were also significant differences.“ Clark relied on the methodology presented in a publication by Robert L. Dunn titled Recovery of Damages for Lost Profits. He testified that he used Elliott’s yields because he thought it was a relevant comparison. However, that comparison is not consistent with the standard used in Aultman.”The appeal court concluded that the trial court abused its discretion when it chose Clark’s third alternative. The appeal court further noted that the use of the alternative two was supported by the record and was not overly speculative. The appeal court reduced the damages to $148,946.

Mitigation.

The appeal court noted that an injured party must reasonably mitigate its damages. LLC maintained the trial court committed manifest error in not finding that the plaintiffs failed to mitigate their damages. LLC stated several reasons to support this contention.

The plaintiffs countered that they did contact multiple crop consultants as to what to do, made a pesticide application when told to do so, and harvested the crop. The plaintiffs also explained the timing and issues they incurred to mitigate the damages.

Reviewing the record, the appeal court concluded that Bobby and Jason failed to mitigate the damages and reduced the damages by 10% to $134,051.