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San Miguel Produce, Inc. v. L.G. Herndon Jr. Farms, Inc.

United States District Court, S.D. Georgia, Statesboro Division

September 11, 2019

SAN MIGUEL PRODUCE, INC., Plaintiff,
v.
L.G. HERNDON JR. FARMS, INC., Defendant.

          ORDER

          R. STAN BAKER UNITED STATES DISTRICT JUDGE

         CERTIFICATION OF QUESTIONS FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF GEORGIA TO THE SUPREME COURT OF GEORGIA PURSUANT TO O.C.G.A. § 15-2-9.

         TO THE SUPREME COURT OF GEORGIA AND ITS HONORABLE JUSTICES:

         The above-captioned matter comes before this Court on Plaintiff and Defendants' respective Motions for Partial Summary Judgment. (Docs. 61, 66.) After a thorough review of the record, it appears to this Court that resolution of these motions and adjudication of this case involve questions of Georgia law-regarding contract enforceability, licensing requirements, and public policy-that are determinative but unanswered by controlling precedent of the Supreme Court of Georgia or the Georgia Court of Appeals. The Court therefore respectfully CERTIFIES the questions below for resolution by the Supreme Court of Georgia. See O.C.G.A. § 15-2-9; Ga. Sup. Ct. R. 46.

         For this reason, the Court ADMINISTRATIVELY CLOSES and STAYS this case until such time as the Supreme Court of Georgia renders its answers to the certified questions herein. The Court DIRECTS the Clerk of Court to transmit each party's Motion for Partial Summary Judgment and all related filings-including briefs, attachments, fact statements, declarations, etc.-to the Supreme Court of Georgia to assist its consideration of the certified questions presented. Ga. Sup. Ct. R. 47.

         BACKGROUND

         This case concerns a contract dispute between Plaintiff San Miguel Produce, Inc. (“San Miguel”), a California corporation that grows, processes, and ships produce, and Defendant L.G. Herndon Jr. Farms, Inc. (“Herndon Farms”), a Georgia corporation that grows and ships produce. (Docs. 1, 30, 31.) In September 2014, these parties entered into a “Grower-Shipper Agreement” (“the GSA”), under which Herndon Farms, “the Grower, ” was responsible for growing and delivering produce ordered by San Miguel, “the Shipper, ” to ROBO Produce LLC (“ROBO”), the jointly-owned operator of a packing and processing facility in Toombs County, Georgia. (Doc. 66-2, pp. 2-4.) Herndon Farms also agreed to source crops from other growers in the event it could not meet San Miguel's anticipated volume of orders. (Id.) In turn, San Miguel was obligated to purchase the produce delivered by Herndon Farms, to sell and market all products to regional and national accounts, and to provide sales and marking opportunities for Herndon Farms' bulk product sales. (Id.) The produce delivered by Herndon Farms was to be sold at cost to San Miguel, and the parties agreed to equally divide the profits from the sale of products processed and shipped through ROBO. (Id.) Georgia law governs this agreement. (Id. at p. 11.)

         Concurrent with the GSA, San Miguel and Herndon Farms entered into an Operating Agreement creating ROBO, and San Miguel executed a Co-Packing Agreement with ROBO.[1](Doc. 63, pp. 3-4.) Under the ROBO Operating Agreement, San Miguel and Herndon Farms were co-managers of ROBO and equal members, with each holding a fifty percent interest. (Doc. 66- 3, pp. 2, 5.) Herndon Farms was “the on-site managing member of the operation, ” while San Miguel retained the right to make “[a]ll decisions regarding food safety regulations, procedures and product quality.” (Id. at p. 5.) Under the Co-Packing Agreement between ROBO and San Miguel, ROBO was to process and package quantities of produce that San Miguel would direct its grower to deliver at the Toombs County facility. (Doc. 64-14, p. 1.) San Miguel promised to, inter alia, procure and provide a sufficient supply of produce to meet San Miguel's own requirements, give oversight and direction on facility operations, and supply all necessary packaging materials. (Id. at p. 2.) The Co-Packing Agreement and the GSA were both to last for a term of five years commencing on November 1, 2014. (Id. at p. 1; doc. 66-3, p. 2.)

         Herndon Farms and San Miguel's business arrangement, however, proved unsuccessful, and the relationship terminated in February 2016, less than two years after it began. (Doc. 62, pp. 1-2; doc. 66, pp. 2-3.) Over that period, issues apparently arose with Herndon Farms' ability to deliver sufficient produce, or source enough from third-party growers, to meet San Miguel's requirements. (Doc. 1, p. 13; see doc. 62, pp. 11-13 & n.6.) While the parties were able to agree on some third-party sources, San Miguel eventually began shipping its own produce from California to the ROBO facility despite Herndon Farms' concerns over high transportation costs. (See Doc. 63, pp. 5-7.) Notably, at no point during the making of the parties' agreements or during their short-lived business arrangement did San Miguel obtain the Georgia state license required by O.C.G.A § 2-9-2 for dealers in agricultural products.[2] (Doc. 63, pp. 2-3; see doc. 79, pp. 6-8.)

         The instant litigation began on March 25, 2016, when San Miguel filed suit against Herndon Farms. (Doc. 1.) Herndon Farms then filed a separate action against San Miguel on April 5, 2016. See Notice, L.G. Herndon Jr., Farms, Inc. v. San Miguel Produce, Inc., No. 6:16- CV-043 (S.D. Ga. Apr. 12, 2016), ECF No. 1. The two actions were consolidated into this single case on December 6, 2016, (doc. 29), and the consolidated case was reassigned for plenary disposition to the undersigned on September 4, 2018, (doc. 87). Each party brings several causes of action against the other arising out of their failed grower-shipper arrangement. (Docs. 1, 30.) The matter is now at the summary judgment stage with San Miguel and Herndon Farms each filing a Motion for Partial Summary Judgment. (Docs. 61, 66.)

         DISCUSSION

         Though the legal and factual disputes in this case are many, (see docs. 62, 66, 76, 79, 83, 85), much of the case turns on the determinative question of whether the GSA is unenforceable and void under Georgia law. At its core, this case concerns San Miguel's allegation that Herndon Farms breached the GSA by failing to deliver produce as required under that agreement, (see doc. 1), [3] and Herndon Farms' counter-allegation that San Miguel breached the GSA by failing to remit payment on all produce delivered by Herndon Farms, (see doc. 30).[4]

         In fact, following discovery and summary judgment briefing, Herndon Farms' only remaining claims against San Miguel concern two alleged breaches of the GSA-one for failing to pay invoices on produce Herndon Farms delivered and the other for inducing Herndon Farms to grow produce before terminating the GSA. (See Doc. 76, pp. 1-2 & n.1; doc. 30, pp. 17, 20- 22.) Similarly, apart from San Miguel's federal-law claim for allegedly misweighed produce and its breach of the ROBO Operating Agreement claim, San Miguel's only remaining claims against Herndon Farms concern the GSA.[5] (See Doc. 79, p. 6 n.3; doc. 1, pp. 15-17, 20-22.) As such, the GSA is the locus of this case.

         In moving for summary judgment, however, Herndon Farms argues San Miguel's failure to comply with Georgia's Dealers in Agricultural Products Act, O.C.G.A. § 2-9-1 et seq. (“the Act”), renders the GSA void and unenforceable. (Doc. 62, pp. 3-8.) San Miguel's contention in response is twofold. San Miguel first argues it is exempt from the Act because it qualifies as a “farmer” pursuant to O.C.G.A. § 2-9-15(a)(1); San Miguel alternatively argues that, but even if it is not exempt, its failure to be licensed does not render the GSA void because, it contends, the Act was not intended to regulate business in the public interest. (Doc. 79, pp. 6-8.) Replying, Herndon Farms argues that San Miguel-a purchaser, marketer, and seller of Herndon Farms and others' produce under the GSA-does not qualify for the “farmer” exemption. (Doc. 83, pp. 9-10.) Herndon Farms also maintains that the Act is intended to protect the public and is not merely for revenue purposes, ...


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