Summary of a Recent
Judicial Development in
Production Contracts

Grower's Breach of Contract Damages Limited
to Lost Net Income

Eric Pendergrass
National AgLaw Center Graduate Assistant

In Goolesby v. Koch Farms, LLC, 2006 WL 2925327 , the Alabama Supreme Court upheld an order of remittitur that reduced a poultry growers breach of contract damages to lost net income because the grower did not have a proper cause of action for conversion, interference with a business relationship, or conspiracy.

While the grower was operating under a broiler production contract with the company, he was in the process of renegotiating a contract for a second term. Id. The grower refused to sign the proposed contract without modification. Id. After receiving a court order, the poultry company went onto the grower's farm and repossessed the chickens two months before the expiration of the original broiler production contract and refused to enter into any further agreement with the grower. Id.

Initially, the grower asserted claims of conversion, fraud, breach of contract, intentional interference with a business relationship, economic duress, abuse of civil process and conspiracy. Id. At the trial, the court dismissed all of the grower's claims, except breach of contract, and the jury returned a verdict for $275,000. Id. However, on appeal the court held that the amount of damages in an action for breach of contract are measured by the expectation interest of the non-breaching party. Id. The supreme court stated the trial court was within its discretion to reduce the jury's award of $275,000 to $100,632.32 because the lower amount would give the grower the entire benefit of the bargain. Id. The growers were not entitled to additional monies for consequential damages related to loss of farm value or difficulty entering into a contract with another company because those damages were speculative and not sufficiently certain. Id.

Furthermore, the grower was not entitled to damages for conversion, interference with a business relationship, or conspiracy because the company had an ownership interest in the birds and the business relationship in question was its own. Id. As matters of law, the company, as the true owner of the birds, could not convert them against the grower who only had a possessory interest, nor could the company improperly interfere with a business relationship to which it was a party. Id. Without either of these underlying torts, the grower had no basis to make a claim of conspiracy and the reduction in the amount of damages stood as ordered. Id.

The case was decided on October 13, 2006; this summary was posted Feb. 21, 2006.