Summary of a Recent
Judicial Development in
Production Contracts

Plaintiffs Did Not Have Constructive Knowledge of Defects
to Swine Barn's Ventilation System or Slats

John Pesek
National AgLaw Center Research Associate

Summary of Decision

In Delashaw v. Tyson Foods, Inc., 100 Fed. App'x 762, 2004 U.S. App. LEXIS 11166 (10th Cir. 2004), the plaintiffs filed a cause of action against Tyson Foods, Inc. and Pork Group, Inc. for various contract and tort claims. The Tenth Circuit Court of Appeals reversed the district court's grant of summary judgment in favor of the defendants based on the statute of limitations because the plaintiffs did not know or have reason to know about the problems with the barn's slats and ventilation system and the defendants could not offer any proof of their knowledge. Id. at *17.

Background

In 1993, Tyson Foods (Tyson) and the plaintiffs discussed the possibility that the plaintiffs would produce swine for Tyson. Id. at *4. According to the contract, Tyson required the plaintiffs to build swine barns according to Tyson's plans and specifications. Id. In July 1993, the plaintiffs and Tyson entered into a written contract providing that Tyson would provide certain supplies and materials for the construction of the swine barns in return for the plaintiffs' promise to repay the cost of the supplies and materials. Id. In November 1993, plaintiffs entered into a contract with defendant contractor Daniel Yount to build the swine barns. Id. The plaintiffs started producing swine for Tyson in April 1994, and construction of the barns was completed in June 1994. Id.

The plaintiffs started experiencing problems with the barns immediately, and they discovered several problems with the barn in 1994 including improperly buried conduit lines, light switches that caused shocks, wiring deficiencies in the lactation area that caused short outs, and substandard construction of loading ramps and walkway rails. Id. at *5. The plaintiffs contacted the defendants in July and August 1994 to inform them of the problems with the barns. Id. On February 12, 2002, the plaintiffs filed a petition against the defendants seeking monetary damages for the repair and replacement of the swine barns, the loss of swine production, and other business losses. Id. at *5, *6. The defendants moved for summary judgment on all grounds, and the plaintiffs responded that the claims were related to two specific problems with a defective ventilation system and defective slats; furthermore, the plaintiffs argued that these defects were not discovered until after February 2000. Id. at *6.

The district court granted summary judgment in favor of the defendants, and held that the plaintiffs knew of the multitude of problems as early as 1994, and were thus barred under Oklahoma's two-year statute of limitations. Id. at *7-9. Plaintiffs then appealed the decision of the district court to the Tenth Circuit Court of Appeals. Id. at *9.

Arguments

The plaintiffs' sole argument was that the dismissal of their negligence claim was improper because they sought to impose liability against Tyson only for the defective ventilation system and slats. Id. at *10.

Analysis and Holdings

The defendants admitted that they owed a duty to the plaintiffs to ensure that the barns were properly designed and constructed, and that they breached that duty to the plaintiffs which caused the multitude of barn defects that the plaintiffs listed in their complaint. Id. The Tenth Circuit Court of Appeals stated that under Oklahoma law, a cause of action for an injury based on negligence has a two-year statute of limitations. Id. (citing Samuel Roberts Noble Found., Inc. v. Vick, 840 P.2d 619, 624 (Okla. 1992)). To trigger Oklahoma's statute of limitations, it is not necessary that the person harmed have actual knowledge of the negligence; he or she only needs knowledge that a problem existed. Id. at *11. The Oklahoma Supreme Court has also concluded that constructive knowledge will be found if there was sufficient evidence which, if pursued, would have led to knowledge of the true condition, and that knowledge would be sufficient to start running the statute of limitations. See id. (citing Daugherty v. Farmers Coop. Ass'n, 689 P.2d 947, 950-51 (Okla. 1984)). The party asserting the defense that the statute of limitations has run has the burden of proving the time period. See id. (citing MBA Commercial Constr. Inc. v. Roy J. Hannaford Co., 818 P.2d 469, 472 (Okla. 1991)). The Tenth Circuit applied a de novo standard to review the decision of the district court. Id. at *13.

The Tenth Circuit held that there was insufficient evidence to uphold the district court's finding of constructive knowledge on the part of the plaintiffs. Id. at *14-15. The court held that just because the plaintiffs knew about problems in 1994, such knowledge did not give them sufficient constructive knowledge of the defects in the ventilation system or the slats. Id. The evidence presented by the defendants did not show proof of actual or constructive knowledge on the part of the plaintiffs with respect to the ventilation system or the slats. Id. at *17. The court found that there were two genuine issues of material fact with regard to whether the problems with ventilation system or slats were related to the problems discovered in 1994 and 1998, as well as whether a reasonable investigation of the other known defects would have led to the discovery of the problems with the ventilation system and slats. Id. at *18. Therefore, the court reversed the district court's grant of summary judgment. Id.

The case was decided on June 7, 2004.