Summary of a Recent
Judicial
Development in
Production Contracts
Processor's Cancellation of Poultry
Growing Contract Affirmed
Eric PendergrassNational AgLaw Center Graduate Assistant
In Gatlin v. Sanderson Farms, Inc., No. 2005-CA-01056-SCT, 953 So.2d 220 (Miss. Feb. 8, 2007), the Supreme Court of Mississippi held that Sanderson Farms, Inc. (hereinafter Sanderson), a poultry processor, did not breach its contract with Roy R. Gatlin, a poultry producer, because Gatlin failed to perform under the terms of the contract which required compliance with the laws and regulations governing disposal of dead birds, even though no state official cited Gatlin for a violation.
The parties' poultry production contract provided that the processor would have the right to withdraw from the agreement if the producer disposed of birds that died during the course of production in a manner inconsistent with local, state, and federal laws and regulations. Id. at 222. The governing law was Regulation 13 of the Mississippi Board of Animal Health, which prohibits the disposal of dead birds in fields or woods and requires that they be incinerated, composted, or placed in an approved pit. Id. at 224. Contrary to Regulation 13, Gatlin disposed of the carcasses in some brush not far from his poultry houses. Id. at 222. The processor sent an agent to investigate following some complaints and found the skeletons of dead birds deposited by Gatlin. Id. Consequently, the processor immediately terminated its relationship with the producer. Id.
Gatlin filed suit claiming that the processor breached the contract by terminating the agreement before a determination was made by any state agency that an actual violation of the law governing the disposal of dead chickens occurred. Id. at 222. The producer argued that without such a citation, no violation of state law occurred and the processor should not be allowed to halt its performance. Id.
The court disagreed with the producer's arguments and cited the contract itself, which specifically allowed the processor to withdraw if the producer failed to "comply with" local, state, and federal laws and regulations. Id. at 223. The court concluded that since the producer admittedly failed to "comply with" Regulation 13, the processor was within its rights to terminate the contract. Id.
The case was decided on February 8, 2007; this summary was posted July 20, 2007.