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Glacial Plains Cooperative v. Chippewa Valley Ethanol Co., LLLP

Court of Appeals of Minnesota

June 12, 2017

Glacial Plains Cooperative, formerly known as United Farmers Elevator, Respondent,
v.
Chippewa Valley Ethanol Company, LLLP, successor to Chippewa Valley Ethanol Company, LLC, Appellant.

         Swift County District Court File No. 76-CV-14-332

          Jason G. Lina, Fluegel, Anderson, McLaughlin & Brutlag, Chartered, Morris, Minnesota (for respondent)

          Ian A. J. Pitz, Michael Best & Friedrich LLP, Madison, Wisconsin (for appellant)

          Considered and decided by Worke, Presiding Judge; Johnson, Judge; and Kirk, Judge.

         SYLLABUS

         1. When the language of a contract reflects the parties' intent to create a contract of perpetual duration, the contract is not subject to the general rule that contracts of indefinite duration are terminable at will.

         2. A district court does not abuse its discretion by granting specific performance of a services contract when the district court finds that the value of the nonbreaching party's expectancy under the contract cannot be correctly estimated and that specific performance is the only fair remedy.

          OPINION

          KIRK, Judge.

         We affirm the district court's entry of judgment against appellant following a court trial of respondent's breach-of-contract claim because the district court did not err by (1)rejecting appellant's argument that the parties' contract was terminable at will or (2)ordering appellant to specifically perform the contract.

         FACTS

         This appeal arises out of a contractual dispute between appellant Chippewa Valley Ethanol Company LLLP (CVEC) and respondent Glacial Plains Cooperative (GPC). The parties' relationship stems from a grain-handling contract (the contract) executed on November 8, 1994.[1] At that time, CVEC anticipated opening an ethanol plant and was seeking additional equity to support the operation. The parties came to an arrangement, memorialized in the contract, whereby GPC would invest in CVEC in exchange for property next to the plant on which to build a grain-processing facility and the exclusive rights to handle grain for the plant.

         The terms of the contract created an ongoing relationship between the parties after the ethanol plant and grain-processing facility were built. Paragraph 1 of the contract expressly provides: "It is the intent of the parties that this agreement shall continue indefinitely until either terminated by the terms of this agreement, or by the mutual agreement of both parties." Consistent with that expressed intent, numerous provisions of the contract provide for continuous performance by both parties. Paragraph 1 provides an initial per-bushel grain-handling fee of 3.2 cents, effective for the first three years of operations, with future fees to be negotiated for successive three-year periods. Paragraph 2 provides for GPC to purchase 200, 000 shares of CVEC for $400, 000, resulting in its part ownership of CVEC. Paragraph 3 provides for CVEC to transfer to GPC an eight-acre parcel for construction of the grain-handling facility and for the parties to share road-construction costs. Under paragraph 4(H) of the contract, GPC agreed "to keep the facility operational, always maintaining the ability to provide enough grain to keep the ethanol plant at full capacity, in a timely manner." And under paragraph 6(B), CVEC agreed that GPC "shall be the exclusive grain handler to the . . . plant, as long as it is complying with all warranties and agreements" and "continue[s] to be able to handle the full capacity of corn required to run the . . . plant."

         The contract does not include an express termination clause. However, paragraph 5 of the contract provides that, if GPC fails to perform its obligations under the contract, "[CVEC] shall have the right to declare that this contract has been breached." In the event of a declared breach, GPC has 30 days to cure. If the breach is unresolved, GPC must deed the real estate and grain-processing plant to CVEC in exchange for compensation determined by formula under the contract. Disputes over breaches by GPC under paragraph 5 are subject to arbitration.

         The parties commenced operations in 1996 and proceeded under the contract for more than a decade before their relationship began to sour, resulting in litigation. In 2011, CVEC sued GPC, alleging breaches of the contract and seeking its termination. The 2011 action was submitted to arbitration, and a panel of arbitrators awarded damages to CVEC for one material breach but found that GPC did not otherwise materially breach the contract and did not order termination of the contract. In February 2015, the district court issued an order confirming the arbitrators' determinations in relation to ...


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