Posted on September 12, 2019 by Sustainable Food News

North American organic grain, oilseed cos. settle contract lawsuit

Lawsuit over 1.5 mil' lbs. of transitional beans had accused Vollmar Organic of contract breach

A federal court judge has stayed proceedings pending binding arbitration in a breach of contract lawsuit filed by BroadGrain Commodities, Inc., a Canadian-based global marketer and handler of organic and non-organic grains and oilseeds for feed and food markets, against Vollmar Organic Farm, Inc., formerly Organic Bean & Grain, Inc. (OBGI), and Cooperative Elevator Co. (CEC).

The lawsuit had been filed in May in U.S. District Court for the Eastern District of Michigan (Case #: 1:19-cv-11382) by Toronto-based BroadGrain, saying it was owed at least more than a half million dollars.

On Monday, U.S. District Judge Thomas Ludington ordered the stay to allow the completion of binding arbitration, after OBGI had been dismissed from the case and not party to the stipulated order for arbitration.

The judge ordered the parties to file a joint status report in about six months and no later than 30 days after all claims are resolved either through settlement or the issuance of an arbitration award. Ludington also ordered that the court may modify or appeal any arbitration award; and to hear any motions filed to enforce the terms of the arbitration agreement entered into by the parties.

Case background

BroadGrain, which was certified organic in 2011 by Pro-Cert Organic Systems Ltd., alleged it entered into a contract in April 2016 to sell 681.8 metric tons (mt), about 1.5 million pounds, of transitional black beans to [OBGI].

The lawsuit stated that the transitional black beans, which refers to black beans that are grown on farms in transition to organic production, were already being stored at OBGI’s facility in Caro, Mich.

OBGI had changed its name to Vollmar Organic Farm, Inc. in August 2016, according to the state of Michigan’s Department of Licensing and Regulatory Affairs. Mark Vollmar, president of Vollmar Organic Farm, was also a defendant in the case.

A related entity, Vollmar Family Farms Inc., run by Mark Vollmar’s brother Steve, was certified organic in 2008 by Global Organic Alliance, Inc. Read more about the history of the Vollmar brothers’ history in the organic grain and oilseed business here.

BroadGrain had said in the lawsuit that it believed CEC, a major processor and global marketer of organic and non-organic grains and oilseeds, acquired certain assets of OBGI, including all its inventory, in July 2016. CEC maintains five facilities that are certified organic by Global Organic Alliance, Inc., including its headquarters in Pigeon, Mich., which was certified in 2016.

“At the time of the acquisition of [OBGI] by CEC, [OBGI] did not have title over all the transitional black beans to sell them free and clear of BroadGrain’s title,” the lawsuit stated. “At this point, BroadGrain had title to over 600.113 mt of the transitional black beans.”

“By August 2016, at the latest, CEC was aware of the contract between [BroadGrain] and [OBGI],” the lawsuit stated. in November 2016, BroadGrain said it wrote to CEC informing the company that it was owed $841,901 for the transitional black beans.

The lawsuit stated that CEC “did not object to the amount claimed within a reasonable time and made partial payments on the account,” but then CEC allegedly stopped making payments leaving a balance of $502,804.

BroadGrain alleged that CEC “intentionally interfered with the contract after being made aware of it by various means including, but not limited to, preventing, diverting, stopping and/or not processing payment from or on behalf of [OBGI] to Plaintiff and/or by retaining those payments for its own benefit.”

Meanwhile, BroadGrain said that in December 2018 it paid CEC money owned from a separate transaction but kept, or “set off,” the $502,804 it felt it was owed by CEC in relation to the transitional black beans.

“CEC did not agree to the $502,804 set off and the parties have not been able to reach a resolution concerning the amounts in dispute. Recently, CEC has threatened litigation concerning the amounts in dispute,” the lawsuit stated.

BroadGrain, which said its lawsuit seeks to avoid a “multiplicity of litigation” by having the court decide all the issues at one time, had requested judgment against CEC, Vollmar Organic, Mark Vollmar and Organic Bean, in an amount not less than three times the market value of the beans in question plus costs and reasonable attorney fees and any other relief permitted by law.

As an alternative, BroadGrain had proposed a judgment that CEC is liable for the $502,804 and that the set off amount of $502,804 withheld by BroadGrain in December shall be retained by BroadGrain.

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