Summary of a Recent
Judicial
Development in
Commercial Transactions
Grain Elevator Held to Have a Fiduciary
Relationship with Farmers
Dawn M. StiddNational AgLaw Center Graduate Assistant
Summary of Decision
In Asa-Brandt, Inc. v. ADM Investors Services, Inc., 344 F.3d 738, (8th Cir. 2004), the United States Court of Appeals for the Eighth Circuit held that a grain elevator had a fiduciary relationship with the farmers it advised on using hedge-to-arrive contracts.
Background
This case involved a dispute between several farmers and a grain elevator over hedge-to-arrive contracts (HTAs) for the sale and purchase of grain between 1994 and 1995. See Asa-Brandt, 344 F.3d at 741. The defendant grain elevator encouraged the plaintiff farmers to enter into the HTA contracts and advised on them on different aspects of the contacts. See id. at 744. Reacting to market forces, the farmers rolled their contracts forward, forcing the elevators to buy back their positions on the Chicago Board of Trade (CBOT) and establish a new position consistent with the new HTA contracts. See id. The farmers brought suit against the defendant after the defendant informed them that they would no longer be allowed to roll the contracts forward and that they owed the elevator money on the existing HTA contracts. See id. at 742. The jury held, among other things, that the defendant owed the plaintiffs a fiduciary duty. See id. at 743. The defendant appealed that decision to the Eighth Circuit. See id.
Analysis and Holding
Analogizing this case to Top of Iowa Coop. v. Schewe, 324 F.3d 627 (8th Cir.2003), the court stated that the defendant was "more experienced, more sophisticated, and more privy to information than were the . . . [plaintiffs] about HTAs and the risks inherent in their use." Id. at 744. The also stated that there was evidence that the defendant encouraged the plaintiffs to enter into the contracts and that they depended on the defendant's advice in using the contracts. See id. The court concluded the following:
Obviously, this fiduciary relationship did not arise through a simple buyer/seller relationship. Rather, as the district court found, it arose through the . . . [plaintiffs'] reliance upon their cooperative, its manager, and his advice to them with respect to growing and marketing their grain, advice which included measures to improve their yield, when to sell their grain, and, most importantly, how to use HTAs to enhance the profitability of their operations. Given the evidence presented, we will not disturb the jury's finding that a fiduciary relationship existed between the. . . [plaintiffs and the defendant].
Id.
The case was decided on September 11, 2003; this summary was posted Mar. 21, 2005.