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Black Gold Potato Sales, Inc. v. Discovery Gardens

January 12, 2009

BLACK GOLD POTATO SALES, INC., PLAINTIFF,
v.
DISCOVERY GARDENS, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY; AND CALIFORNIA OREGON SEED, INC. AN OREGON CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Gary S. Austin United States Magistrate Judge

AND RELATED COUNTERCLAIM.

SCHEDULING ORDER (Fed. R. Civ. P. 16) Discovery Deadlines: Initial Disclosures: January 30, 2009 Non-Expert Discovery: May 31, 2009 Expert Disclosure: June 30, 2009 Supplemental Expert Disclosure: July 17, 2009 Expert Discovery: July 31, 2009 Motion Deadlines: Non-Dispositive: Filing: August 14, 2009 Dispositive: Filing: September 11, 2009 Settlement Conference: April 13, 2009 at 10:30 a.m. Courtroom 9 (DLB), 6th Floor Pre-Trial Conference:October 22, 2009 at 8:30 a.m. Courtroom 10, 6th Floor Trial: December 8, 2009 at 8:30 a.m. Courtroom 10, 6th Floor Jury Trial - 2-3 days

Date of Scheduling Conference January 8, 2009

Appearances of Counsel

Joseph Choate appeared on behalf of Plaintiff Black Gold Potato Sales, Inc.

Scott Belden appeared on behalf of Defendant California-Oregon Seed, Inc., and Oregon Corporation.

I. The Pleadings

In February of 2007, BLACK GOLD POTATO SALES, INC. ("Black Gold"), DISCOVERY GARDEN'S, LLC, and CALIFORNIA-OREGON SEED, INC., entered into a written agreement entitled Grower Services Agreement (the "Agreement"). California-Oregon Seed provided Sierra Gold potato seeds to Black Gold, Black Gold grew the potatoes, and Discovery Garden's was to handle the marketing of the potatoes. The Agreement provided that the potatoes could be used either for Tablestock (i.e., for baking, microwaving or boiling) or Chipstock (i.e., to make potato chips). Sierra Gold potatoes are a special hybrid variety of potatoes.

The planting and cultivation of the potatoes are the same irrespective of whether they are to be used for Tablestock or Chipstock. However, there is significant difference in the harvesting process. Potatoes to be used as Chipstock can be harvested, i.e., dug up, immediately. However, when they are to be used as Tablestock, the vines must first be killed with a particular chemical and the potatoes left in the ground to dry out for a period from anywhere between two and three weeks before they can be harvested. The purpose of this vine-killing and the subsequent waiting is to permit the skins of the potatoes to "set," something not required when they are going to be made into potato chips.

1. Black Gold's Contentions

It is Black Gold's position that, under the terms of the Agreement, Black Gold agreed to grow Sierra Gold potatoes for California-Oregon Seed and Discovery Garden's. It was up to Discovery Garden's to instruct Black Gold as to the purposes for which the potatoes were to be used. Black Gold asserts that, hoping to sell the potatoes for Chipstock, Discovery Garden's held off telling Black Gold to harvest the rapidly maturing potatoes until they were in fact already matured, at which point they told Black Gold the potatoes were to be used as Tablestock and to apply the necessary vine-killing chemicals. The lengthy vine-killing process resulted in the harvesting of over-mature potatoes, which Discovery Garden's claims did not meet the quality and condition requirements under the Agreement. It is Black Gold's position that there is no evidence to establish that the potatoes did not meet the requirements at least for Chipstock if not Tablestock, and that in any event, the condition of the potatoes at harvest, whatever they were, was the direct result of the failure of Discovery Garden's to give timely instructions as to harvesting.

Black Gold invoiced Discovery Garden's $56,580 for the potatoes and Discovery Gardens has refused to pay.

There are really no novel legal issues in this litigation as it appears to be a straight breach-of-contract action.

2. California-Oregon Seed and Discovery Garden's Contentions

California-Oregon Seed fully performed its obligation to provide Sierra Gold seed to Black Gold under the Agreement. California-Oregon Seed and Discovery Garden's had no obligation with regard to the land, water, irrigation, chemicals, labor, equipment, materials, and facilities used in growing the Variety, or the harvesting, packing, and shipping (other than marketing materials) of the Sierra Golds. Black Gold, and no one else, was obligated to harvest, pack, and ship the Sierra Golds, and Black Gold, and no one else, was obligated to harvest the Sierra Golds within a specific time frame: between May 15, 2007, and June 20, 2007.

The Sierra Golds grown by Black Gold did not meet the standards required by the Agreement. Black Gold failed to harvest the Sierra Golds within the specified harvest time in the Agreement. As a result, upon inspection at their destinations, the Sierra Golds grown by Black Gold suffered from 29% soft rot, with total defects of 44% and all loads shipped by Black Gold failed to satisfy 85% US #1 grade on account of their condition. Similar to the potatoes rejected by customers, the remaining Sierra Golds were not suitable for shipment to buyers located by Discovery Garden's due to the same quantity and quality of defects.

Given the uncontroverted facts indicating that California-Oregon Seed fully performed under the Agreement by providing the Sierra Gold seeds to Black Gold on time for planting by Black Gold in the appropriate time frame, California-Oregon Seed urges its dismissal from this action. Any dispute regarding the securing of customers for the Sierra Golds grown by Black Gold is only between Discovery Garden's and Black Gold.

As a result of Black Gold's failure to deliver Sierra Golds that met the standards required by the Agreement, California-Oregon Seed and Discovery Garden's suffered damages in the approximate amount of $31,980 in lost revenue. California-Oregon Seed and Discovery Garden's also suffered a loss in the amount of $2,940 in freight costs for the rejected shipments of Sierra Golds to Sterman Masser, Inc., and Mrs. Dennis's Potato Farm. California-Oregon Seed and Discovery Garden's total damages, therefore, total $34,920, plus pre-judgment interest at the legal rate.

Paragraph 15 of the Agreement provides that "[i]n any action or proceeding arising under this Agreement, the prevailing party shall be entitled to reasonable attorney's fees and costs." Accordingly, California-Oregon Seed and Discovery Garden's request an award of attorney's fees and costs under the Agreement according to proof.

a. Proposed Amendments

No amendments are contemplated at this time, however, pursuant to an agreement by the parties in the joint statement, any amendments shall be filed no later than March 15, 2009.

II. Summary of Uncontested and Contested Facts

1. Uncontested Facts

While this litigation is in the early stages of discovery, the parties currently feel that the following facts are uncontested:

a. California-Oregon Seed has been granted an exclusive license that allows it to sell, distribute, market, or otherwise exploit a potato seed variety developed by the Texas A&M University System as experimental clone TX1523-1 Ru/Y ("Variety"), which Variety results in the production of "Sierra Gold(r)" brand potatoes ("Sierra Golds").

b. On February 5, 2007, Black Gold, Discovery Garden's, and California-Oregon Seed entered into a written agreement entitled Grower Services Agreement (the "Agreement").

c. The Agreement is valid. d. Under the Agreement, California-Oregon Seed was obligated to provide Counterdefendant with 440 hundred weight ("cwt") of the Variety for planting on 17 acres of Counterdefendant's land. California-Oregon Seed delivered the potato seeds to Black Gold no later than February 10, 2007.

e. Under the Agreement, Black Gold, at its own expense, was responsible for providing the land, water, irrigation, chemicals, labor, equipment, materials, and facilities necessary to plant and grow the Variety on the approximately 17 acres of land.

f. Each delivery of Sierra Golds intended for "Tablestock" had to be: (1) comprised of 85% of Sierra Golds in conformity with the US #1 standard; (2) a minimum of two inches; (3) comprised of 95% of Sierra Golds that did not exceed 14 ounces; and (4) comprised of 99.5% of Sierra Golds with no soft rot.

g. If the Sierra Golds grown by Black Gold under the Agreement were to be used as "Chipstock," then they had to conform with US #1 Process Grade.

h. Under the Agreement, locating and/or securing purchasers or prospective purchasers of the Sierra Golds grown by Black Gold was the responsibility of Discovery Garden's.

i. Discovery Garden's informed Black Gold of its failure to deliver Sierra Golds that met the standard required by the Agreement and that ...


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