Egg dispute back in court over allegations of cracked contract

A dispute between farming companies over egg production and chickens snatched from their coops will return to court to address two breach claims after the Indiana Court of Appeals partially reversed a dismissal.

CW Farms LLC began working for Egg Innovations LLC in 2010, when it was hired by E.I. to raise chickens for egg production. The parties executed agreements for two barns managed by CW, with the agreements expiring after eight “flocks.”

By June 2018, CW had raised five and six flocks in each barn, respectively, but the parties amended the agreement so that CW would only raise one more flock in each barn. Those final flocks were delivered to CW in September 2018, but 48 weeks later, E.I. removed the chickens from the barn before the end of the production cycle, which lasts 95-100 weeks.

Thus, CW in August 2019 sued E.I. for breach of contract; promissory estoppel; breach of good faith and fair dealing; and negligence. In addition to removing the final flocks, CW alleged E.I. had not provided suitable feed and necessary supplies.

E.I. moved to dismiss under Indiana Trial Rule 12(B)(6), and the Kosciusko Superior Court agreed. But the Indiana Court of Appeals partially reversed in a Friday opinion.

Specifically, the appellate panel ruled that the trial court erred by dismissing the two breach claims. E.I. had argued that paragraph 4 of the agreement — which allowed it to “sell the birds prior to the end of the normal production cycle” — gave it authority to remove the birds, but the panel disagreed.

“Had CW alleged in its complaint that E.I. had sold the chickens prior to the end of a normal production cycle, that allegation would not survive a Rule 12(B)(6) motion,” Judge Edward Najam wrote for a unanimous appellate panel. “But CW’s complaint alleged that E.I. removed the chickens without explanation, which could include removal for a reason other than to sell them, a plausible fact which we must accept as true for purposes of Rule 12(B)(6) analysis.”

In a footnote, Najam added that C.W. alleged E.I. had “‘gassed [the chickens] and removed them.’”

The panel also found that “CW’s allegation that E.I. did not provide suitable feed to sustain adequate egg-laying is not inconsistent with the plain language of the agreement. We hold that the trial court erred when it dismissed CW’s breach of contract claims.”

As to the breach of good-faith claim, CW argued the chickens were removed as “retaliation” for the company’s role in modifying the parties’ original agreement. CW pointed to paragraph 6, which held that “[t]his agreement will be interpreted assuming all parties conduct themselves in a professional and honest manner and uphold their respective obligations.”

“The terms ‘this Agreement’ and ‘all parties’ are unambiguous. Thus, again, we agree with CW that the contract expressly includes a duty of good faith and fair dealing in paragraph 6. Accordingly, we hold that the trial court erred when it dismissed CW’s claim that E.I. breached this duty under Trial Rule 12(B)(6),” Najam wrote.

However, the panel affirmed the dismissal of CW’s negligence claim, finding that CW alleged a “purely economic loss as a result of E.I.’s negligence ‘under the contract,’” and none of the exceptions to the economic loss rule applied.

The case of CW Farms, LLC v. Egg Innovations, LLC, 20A-PL-2051,  was remanded for further proceedings.

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