Jury awards million-dollar verdict in egg dispute

An Evansville-based egg buyer suffered a $1.46 million jury verdict in late November over a broken agreement to buy more than 100 million eggs, but a piece of the fight involving egg packing materials will continue Tuesday before the 7th Circuit Court of Appeals.

Rexing Quality Eggs in Evansville had entered into a contract with Rembrandt Enterprises, an egg supplier based in Iowa, in 2016 to purchase 12 loads of cage-free eggs, the equivalent of 3.24 million eggs, per week for one year. The parties agreed to a price of $0.85 per dozen with a discount that kicked in if 91.5% of the eggs did not meet Grade A standard.

Problems developed soon after the shipments started. Dylan Rexing, who had negotiated the contract, had concerns about the quality of the eggs with shipments underperforming by more than 20% in late May and early June of 2017, according to court documents.

Also, Rexing’s primary customer for the eggs, Hickman’s Family Farms in Arizona, ultimately stopped buying. Hickman’s believed it could resell the eggs to Costco and other retailers, but when demand dropped, Rexing could not prevent the customer from walking away because the pair had never reached a binding, long-term agreement.

With about 16 weeks left on the contract, Rexing quit buying eggs from Rembrandt.

Initially, Rembrandt sued Rexing in Iowa state court, and Rexing responded by filing a complaint in Indiana state court. Rembrandt’s attorney Alain Baudry, partner at Saul Ewing Arnstein & Lehr LLP in Minneapolis, said rather than engage in a forum fight, his client opted to move the matter to the U.S. District Court for the Southern District of Indiana.

In December 2018, the Southern Indiana District Court granted summary judgment to Rembrandt on all claims except for the egg-supplier request for damages, which included $1.67 million for the eggs Rexing refused to purchase.

“After unscrambling the hundreds of pages of briefing and exhibits filed by the parties, what remains is a relatively straightforward matter of contract interpretation,” Chief Judge Jane Magnus-Stinson wrote in Rexing Quality Eggs v. Rembrandt Enterprises, Inc. and Rembrandt Enterprises, Inc. v. Rexing Quality Eggs, Leo R. Rexing, Dylan Rexing, Joseph L. Rexing, 3:17-cv-00141. “The contract and undisputed evidence demonstrate that Rexing’s nonperformance was not excused by the change in economic demand, and that Rembrandt did not breach any express warranty. Rather, Rexing unilaterally terminated the contract after determining that the deal was not all that it was cracked up to be.”

The district court found Rembrandt fell short in establishing the amount of its damages. Since summary judgment was inappropriate because questions of fact remained, the court reserved the issue for a jury to decide.

Settlement negotiations faltered and the dispute ended in a two-day trial at the Winfield K. Denton Federal Building and U.S. Courthouse in Evansville. The jury awarded Rembrandt $1.46 million. In addition to the $60,059.91 the district court found Rexing had underpaid by miscalculating its discount, the award reached over $1.52 million.

Baudry said he was pleased with the work the jury did. “I think they did their job very well,” he said.

Rexing’s trial counsel, James Johnson, partner at Jackson Kelly PLLC in Evansville, declined to comment on the verdict. He said his client is still evaluating whether to appeal.

However, Rexing has appealed the district court’s dismissal of its separate lawsuit alleging Rembrandt failed to return certain egg packing materials, called the EggsCargoSystem. Oral arguments are schedule for 9:30 a.m. Tuesday in the 7th Circuit’s Chicago courtroom.

Rexing filed a separate complaint in January 2019, after the Southern Indiana District Court had entered the summary judgment order and days before the parties were to meet for a settlement conference. The Evansville company maintained it purchased the EggsCargoSystem expressly for Rembrandt to use, but the supplier kept “thousands of” the egg shipment materials after the relationship ended.

In its federal court filings in Rexing Quality Eggs v. Rembrandt Enterprises, Inc., 3:19-cv-00031, Rexing demanded $725,425 from Rembrandt. The district court agreed with Rembrandt that Rexing was violating Indiana’s prohibition on claim splitting.

“Rexing’s legal theories may differ, but because Rexing had the same claims available to it at the time it filed Rexing I — and certainly well before the pleading amendment deadline — it was obligated to raise all claims it had to the packing materials in that case,” Magnus-Stinson wrote in the court order, referring to Rexing v. Rembrandt, 3:17-cv-00141 as Rexing I. “Rexing did not do so, and it cannot split its claims to raise them in a new case. Rembrandt is therefore entitled to judgment in its favor.

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