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Vigortone Ag Prods. v. AG Prods.

Vigortone Ag Prods. v. AG Prods.

United States Court of Appeals for the Seventh Circuit

June 7, 2002, Argued ; November 6, 2002, Decided

Nos. 01-4029, 01-4073, 02-1071, and 02-1171

Opinion

 [*642]  POSNER, Circuit Judge. This diversity suit charges fraud and breach of contract in the sale of a business called Vigortone, a manufacturer of "swine premix," which is a vitamin- and mineral-enriched food supplement for pigs. The fraud claim is governed by Illinois law; the contract claim is governed by Delaware law by virtue of a choice of law provision in the contract.

 [*643]  Vigortone was a subsidiary of an animal-nutrition business called PM AG Products, which sold Vigortone to Provimi, a large manufacturer of agricultural products, including animal food products, for $ 39.5 million. PM is the defendant. The plaintiff, Vigortone Ag Products, is a Provimi subsidiary that was created to purchase Vigortone. To avoid confusion, we'll call the plaintiff Provimi.

Pigs are raised in stages. Piglets are kept at the sow farm until they weigh 12 pounds, and then they are weaned and shipped to "nurseries." When, having graduated from "weaners" to "feeders," they reach 50 pounds,  [**2]  they are transferred from the nursery to a finishing barn and raised to market weight. Vigortone decided to buy weaners and feeders and resell them to nurseries and other pig growers in the hope that both the sellers of the pigs to Vigortone and the buyers of the pigs from Vigortone would buy their swine premix from Vigortone. This kind of promotion is apparently common in the animal-feed business. By the time Vigortone was sold to Provimi in April of 1998, it had signed seven contracts with pig farms to buy a total of 3 million pigs over a 10-year period at specified prices. But it had made no contracts to sell the pigs, and so it bore the risk of a change in the market price of the animals. That risk passed to Provimi with the seven contracts. The price of pigs fell and as a result Provimi, according to its expert witness, lost $ 16 or $ 17 million. Even the lower figure is questionable, because it is based on a price drop most of which occurred months after the closing and therefore after Provimi discovered the contracts and could have hedged against any further decline; for it acknowledges having discovered its exposure "shortly after the closing."

Provimi claims that PM fooled [**3]  it into thinking that Vigortone had offsetting sale contracts for all the pigs and so bore no risk of price changes in the pig market. The jury agreed and awarded Provimi $ 12 million in damages for fraud and another $ 3 million in damages for breach of contract. The district judge thought the awards duplicative and so cut out the $ 3 million. PM appeals from the judgment against it. Provimi cross-appeals, seeking restoration of the $ 3 million in breach of contract damages and also additional attorney's fees pursuant to a contract clause that entitles a party that proves a breach to his attorney's fees. The judge awarded Provimi $ 1 million in attorney's fees in the belief that that was the most that would be consistent with the jury's award of $ 3 million in contract damages. Provimi argues that the fee award should be more and PM that it should be zero because, PM argues, Provimi failed to prove a breach of contract.

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316 F.3d 641 *; 2002 U.S. App. LEXIS 23041 **; 59 Fed. R. Serv. 3d (Callaghan) 1205

VIGORTONE AG PRODUCTS, INC., formerly known as PROVIMI ACQUISITION CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. AG PRODUCTS, INC., Defendant-Appellant, Cross-Appellee.

Subsequent History:  [**1]  Petition Denied January 2, 2003, Reported at: 2003 U.S. App. LEXIS 70.

Rehearing denied by Vigortone AG Prods. v. PM AG Prods., 2003 U.S. App. LEXIS 70 (7th Cir. Ill., Jan. 2, 2003)

Motion granted by Vigortone Ag Prods. v. PM Ag Prods., 2004 U.S. Dist. LEXIS 456 (N.D. Ill., Jan. 14, 2004)

Prior History: Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 7049. Harry D. Leinenweber, Judge.

Vigortone Ag Prods. v. PM Ag Prods., 2001 U.S. Dist. LEXIS 21409 (N.D. Ill., Dec. 21, 2001)

Disposition: Judgment of the district court reversed and remanded.

CORE TERMS

pigs, contracts, warranty, hedged, arbitration, pig-purchase, damages, integration clause, breach of contract, adversely affect, general rule, negotiations, animal, argues, buy, attorney's fees, sales contract, pass-through, reckless, parties, prices

Evidence, Burdens of Proof, Clear & Convincing Proof, Torts, Business Torts, Fraud & Misrepresentation, General Overview, Business & Corporate Compliance, Contracts Law, Contract Conditions & Provisions, Integration Clauses, Contracts Law, Affirmative Defenses, Types of Evidence, Documentary Evidence, Parol Evidence, Commercial Law (UCC), Sales (Article 2), Form, Formation & Readjustment, Contract Interpretation, Parol Evidence, Civil Procedure, Preliminary Considerations, Federal & State Interrelationships, Erie Doctrine, Governments, Courts, Rule Application & Interpretation, Jury Trials, Jury Instructions, Appeals, Standards of Review, Business & Corporate Law, Duties & Liabilities, Knowledge & Notice, Agent Knowledge, Agency Relationships, Alternative Dispute Resolution, Arbitration, Relevance, Relevant Evidence, Types of Contracts, Express Warranties, Insurance Law, Policy Interpretation, Reasonable Expectations, Real Property Law, Common Interest Communities, Condominiums, Remedies, Damages, Avoidable Consequences, Antitrust & Trade Law, Consumer Protection, Vehicle Warranties, Sales of Goods