Justia U.S. 7th Circuit Court of Appeals Opinion SummariesArticles Posted in Agriculture Law
Estate of Stuller v. United States
Wilma Stuller and her late husband bred Tennessee Walking Horses. They incorporated the operation and claimed its substantial losses as deductions on their tax returns. The IRS determined that the horse-breeding was not an activity engaged in for profit, assessed taxes and penalties, and penalized them for failing to timely file their 2003 return. After paying, the Stullers and LSA, sued the government for a refund. The district court excluded the Stullers’ proposed expert. It determined that his expertise did not extend to the financial or business aspects of horse-breeding and he lacked a reliable methodology to opine on the Stullers’ intent. The court found that the corporation was not run as a for-profit business under 26 U.S.C. 183, and determined that the Stullers lacked reasonable cause for failing to timely file their 2003 tax return. The court also denied a request to amend the judgment and effectively refund taxes paid by the Stullers on rental income received from the corporation. The Seventh Circuit affirmed. The district court followed Daubert in excluding the expert and applied each factor of the regulations to the facts. Only the expectation of asset appreciation weighed in the Stullers’ favor; almost every other consideration pointed to horse-breeding as a hobby or personal pleasure. View "Estate of Stuller v. United States" on Justia Law
Jentz v. Conagra Foods, Inc.
A Chester, Illinois grain bin exploded, injuring three workers. A jury awarded almost $180 million in compensatory and punitive damages against ConAgra, which owned the facility, part of a flour mill, and West Side, which ConAgra had hired about a month before the explosion to address problems in the bin. The injured workers were working on the bin’s problems. On appeal, West Side did not contest liability to the workers but claimed that it did not have to reimburse ConAgra for the cost of repairing the facility. Both maintained that damages were excessive. The Seventh Circuit reversed the judgment against ConAgra and the award of punitive damages against West Side, but affirmed awards of compensatory damages against West Side and remanded for consideration of indemnification and contribution. West Side was an independent contractor in a commercial relation with ConAgra and normal rules of contract and tort law apply. Having hired an expert in hot bins, ConAgra was entitled to assume that West Side would ask for whatever information it needed. Admission of evidence that referred to insurance was harmless; the verdicts so far exceeded $3 million that the jury’s belief that West Side carried that much insurance cannot have played a material role.View "Jentz v. Conagra Foods, Inc." on Justia Law
Knight v. Enbridge Pipelines, L.L.C.
In 1952 an Illinois owner granted a pipeline operator an easement for two pipelines across the parcel. The first was built immediately; the second, if built, had to be within 10 feet of the first. The contract says that any pipeline must be “buried to such depth as will not interfere with such cultivation.” In 2012 the operator notified the owner that it planned to build a second pipeline. The owner filed a quiet-title suit, alleging that either the right to build a second line had expired or that another line would violate the farmability condition. The operator replied that 49 U.S.C. 60104(c), preempts enforcement of the farmability condition. The district court dismissed. A second pipeline has been built 50 feet from the first, using eminent domain to obtain the necessary rights, but the owner anticipates construction of a third pipeline. Vacating the judgment, the Seventh Circuit held that no construction is currently planned and the district court acted prematurely. Until details of a third pipeline’ are known, it is not possible to determine what effect it would have on agricultural use. Only if a third pipeline prevents using the land for agriculture would it be necessary (or prudent) to determine whether section 60104(c) establishes a federal right to destroy more of the land’s value than paid for in 1952. The court stated that it had no reason to think that Illinois would call the 1952 contract an option or apply the Rule Against Perpetuities. View "Knight v. Enbridge Pipelines, L.L.C." on Justia Law
VLM Food Trading Int’l, Inc. v. Transp. Alliance Bank,Inc.
VLM, a Canadian agricultural supplier, sold frozen potatoes to Illinois Trading, a reseller. VLM sued Illinois Trading for $184,000 owed on the contract, with counts based on the Perishable Agricultural Commodities Act, which creates a trust in favor of the seller when a buyer purchases agricultural goods on short-term credit, 7 U.S.C. 499e(c)(2). To protect the trust assets, VLM sought a preliminary injunction. Illinois Trading had obtained loans from TAB Bank, giving a security interest in its assets. By the time VLM filed suit, TAB had seized Illinois Trading’s assets. The PACA-created trust made VLM’s claim superior to TAB’s security interest. VLM added a claim against TAB for seizing PACA trust assets. Before the amendment, VLM had successfully moved for consolidation of the preliminary-injunction hearing with trial on the merits. The consolidated hearing pertained only to counts against Illinois Trading, not Count V, pertaining to TAB. The court, however, issued an opinion resolving Counts I through IV and also entered judgment for TAB on Count V, because VLM had not presented evidence on that claim. The district court awarded VLM attorney’s fees and interest on the unpaid balance based on provisions in VLM’s invoices. The Seventh Circuit reversed with respect to Count V; held that the United Nations Convention on Contracts for the International Sale of Goods, was controlling not the Illinois Uniform Commercial Code; and reversed and remanded with respect to attorney’s fees and interest View "VLM Food Trading Int'l, Inc. v. Transp. Alliance Bank,Inc." on Justia Law
In re: MS Livestock, Inc.
Beginning in 2007, Mississippi Valley agreed to sell cattle to Swift, planning to fulfill that agreement in part with cattle it had received from J&R. Mississippi Valley was merely the holder of J&R’s cattle, not the purchaser or owner. Because the relationship between Swift and J&R had soured, Mississippi Valley did not inform Swift that some of the cattle were actually J&R’s. Swift paid for the purchases with checks made out to Mississippi Valley, which deposited the checks in its general operating account and periodically sent J&R checks for sales of J&R cattle. Mississippi Valley stopped making timely payments. As the debt mounted, J&R sent increasingly frantic demands for payment. Mississippi Valley sent seven checks to J&R totaling $862,747.31. Less than 90 days later, creditors filed an involuntary Chapter 7 bankruptcy petition against Mississippi Valley. The bankruptcy trustee sought to avoid the seven payments as preferential transfers, 11 U.S.C. 547(b), but J&R argued that Mississippi Valley never had a property interest in the funds but only held the sale proceeds for J&R’s benefit. The bankruptcy court granted J&R summary judgment. The district court affirmed. The Seventh Circuit remanded, stating that it is unclear how much money could properly be traced to a constructive trust in favor of J&R.View "In re: MS Livestock, Inc." on Justia Law
N. Grain Mktg., LLC v. Greving
Greving has lived and farmed in southeastern Wisconsin since 1971. In 2003 he began contracting to sell his grain to Northern Grain, an Illinois-based grain buyer. Northern Grain claimed that Greving repudiated several contracts formed years after the parties first began contracting and sought almost $1 million in damages. When Greving refused to arbitrate, Northern Grain sought an order compelling arbitration. The Illinois district court dismissed for lack of personal jurisdiction. The Seventh Circuit affirmed. Greving lacks minimum contacts with Illinois that would permit the district court, consistent with the due process clause, to exercise specific personal jurisdiction over him. Greving only set foot in Illinois once, to attend a seed-corn meeting in 2003, months before the parties entered into the first of their contracts, where he met Wilson, who became his contact with Northern Grain. Even assuming that his attendance at the meeting would enter the “personal-jurisdiction calculus for the later-formed contracts at issue,” there is no indication that Greving attended the meeting in an effort to find grain buyers. Virtually everything else about Greving’s contractual relationship with Northern Grain was based in Wisconsin. View "N. Grain Mktg., LLC v. Greving" on Justia Law
Acute Care Specialists II v. United States
During the 1970s and 1980s, American Agri‐Corp organized several limited partnerships, for which the company served as general partner. American solicited high‐income individuals to serve as limited partners, investing in supposed agricultural ventures. According to the IRS, the actual purpose was to shelter the income of limited partners from taxation. Plaintiffs were each limited partners (or spouses) in at least one partnership that was audited by the IRS during the mid‐1980s. Several years later, the IRS concluded that the partnerships were, essentially, tax‐avoidance schemes .In 1990 and 1991, the IRS issued Final Partnership Administrative Adjusts for the partnerships and disallowed several listed farming expenses and other deductions for the 1984 or 1985 tax years. The Tax Court consolidated cases, held that the IRS action was not time‐barred, and determined that the partnerships had engaged in “transactions which lacked economic substance” that resulted in a substantial distortion of income and expense. The district court held that it lacked subject‐matter jurisdiction over the taxpayers’ claims that the assessments were untimely and improperly included penalty interest. The Seventh Circuit affirmed. The determinations at issue are attributable to partnership items over which courts lack subject‐matter jurisdiction. View "Acute Care Specialists II v. United States" on Justia Law
Muscarello v. Winnebago Cnty. Bd.
Plaintiff owns three tracts, zoned agricultural, and challenged a 2009 amendment to the Winnebago County zoning ordinance that makes it easier to obtain permission to build a wind farm. She claimed that a wind farm on adjacent land would deprive the property “of the full extent of the kinetic energy of the wind and air as it enters the property, subjecting it to shadow flicker and reduction of light, severe noise, possible ice throw and blade throws, interference with radar, cell phone, GPS, television, and other wireless communications, increased likelihood of lightening damage and stray voltage. increased electromagnetic radiation, prevention of crop dusting, drying out her land, and killing raptors. The district court dismissed. The Seventh Circuit affirmed, characterizing the claim as simply that a wind farm adjacent to plaintiff’s property would be a nuisance. There is no merit to the claim that the amendment violates plaintiff’s constitutional rights. It is a “modest legislative encouragement of wind farming,” within the constitutional authority, state as well as federal, of a local government.View "Muscarello v. Winnebago Cnty. Bd." on Justia Law
Guth v. Tazewell County
Plaintiff owns properties in a mixed rural/suburban area in central Illinois and lives in a house on one parcel. The other parcels, about 190 acres and near the house, were zoned agricultural and very close to a hog farm. The owners of two other properties in proximity to the hog farm obtained rezoning to the “rural residential” classification, but the county declined plaintiff’s applications for rezoning. Plaintiff sued in state court; the court entered an “Agreed Order” that stated that the parcels should be rezoned, but did not order that they be rezoned. One year later, the zoning board held the required hearing and recommended approval. The County Board voted 11 to 10 in favor of the applications, less than a three-fourths majority, which functioned as a denial. In 2008, the Board granted the applications, but the real estate market had collapsed, and the parcels were no longer worth more zoned residential than they had been when zoned agricultural. Plaintiff sought damages under 42 U.S.C. 1983. The district court entered summary judgment for the defendants. The Seventh Circuit affirmed, noting that protection of agriculture was a rational, nonretaliatory motive for voting against the applications. View "Guth v. Tazewell County" on Justia Law
Minn-Chem, Inc. v. Agrium, Inc.
Most of the world's reserves of potash, a mineral used primarily in fertilizer, are in Canada, Russia, and Belarus. Defendants are producers with mines in those countries. Plaintiffs are direct and indirect potash purchasers in the U.S. They allege that producers operated a cartel through which they fixed prices in Brazil, China, and India, and that inflated prices in those markets influenced the price of potash in the U.S. Defendants moved to dismiss, arguing that the district court lacked jurisdiction under the Foreign Trade Antitrust Improvements Act, 15 U.S.C. 6a. The district court denied the motion. The Seventh Circuit affirmed. The world market for potash is highly concentrated and U.S. customers account for a high percentage of sales. This is not a “House-that-Jack-Built situation in which action in a foreign country filters through many layers and finally causes a few ripples” in the U.S. Foreign sellers allegedly created a cartel, took steps outside the U.S. to drive the price up of a product that is wanted in the U.S., and, after succeeding, sold that product to U.S. customers. The payment of overcharges by those customers was objectively foreseeable, and the amount of commerce is substantial.