JOSEPH H. PAGE and FRANCES K. PAGE, Individuals, Plaintiffs,
FARM CREDIT SERVICES OF AMERICA, PCA, a federally chartered instrumentality of the United States, Defendant.
MEMORANDUM AND ORDER
RICHARD D. ROGERS, District Judge.
This matter is presently before the court upon defendant's motion to dismiss or, in the alternative, to transfer venue. Defendant seeks dismissal based upon res judicata. In the alternative, defendant seeks to transfer this case to the United States District Court for the District of Nebraska. Having carefully reviewed the arguments of the parties, the court is now prepared to rule.
The claims in plaintiffs' complaint arise from two loans that they had with the Farm Credit Services of America (FCSA). Plaintiffs had received the loans to purchase cattle and feed for a feedlot in Cedar Rapids, Nebraska that was operated by Big Drive Cattle, LLC, an entity in which plaintiffs had ownership interest. Plaintiffs claim that, during the course of the loans, the defendant failed to properly monitor and inventory the cattle pursuant to the security agreement entered into between the parties. Plaintiffs assert claims of negligent misrepresentation, negligence, fraudulent misrepresentation and breach of good faith and fair dealing.
The facts as set forth in the various pleadings filed by the parties are as follows. On or about March 10, 2010, Big Drive Cattle, LLC obtained a loan from FCSA and its related entity, Farm Credit Services of America, FLCA (FLCA) to finance Big Drive's purchase of a cattle feedlot in Cedar Rapids, Nebraska. Big Drive is an entity co-owned and operated by plaintiffs. Prior to the purchase, plaintiffs had co-leased the feedlot, sending and feeding cattle there and selling cattle from there. At the same time, Big Drive obtained a loan from FCSA and FLCA to operate the feedlot. The court shall collectively refer to these loans as the "Big Drive Loans." Big Drive provided collateral for the Big Drive Loans which included cattle at the feedlot. In addition, plaintiffs personally guaranteed payment of the Big Drive Loans.
On or about March 10, 2010, plaintiffs sought and obtained a $2, 500, 000 loan from FCSA to finance their purchase of cattle to be fed at the feedlot. Plaintiffs allege this loan functioned as an operating line of credit. In January of 2011, plaintiffs approached FCSA for an additional loan, the proceeds of which were to be used to purchase grain for storage at the feedlot. FCSA loaned plaintiffs $810, 000 on January 19, 2011. The court shall refer to these loans as the "Page Loans." Plaintiffs executed guarantees of the Page Loans on behalf of their revocable trust. Plaintiffs also granted FCSA security interests in cattle and corn as collateral for the Page Loans pursuant to the terms of a security agreement dated March 10, 2010. Plaintiffs authorized A. J. Ostrander, as manager of Big Drive, to initiate advances on their $2, 500, 000 loan. Plaintiffs allege that they learned in February of 2011 that many cattle at the feedlot, including plaintiffs' cattle, "were missing or had been sold, with no money being paid to the owner of the specific cattle missing or sold." According to plaintiffs, they were notified by FCSA on or about March 2, 2011 that their loan for their operating line of credit was being terminated for inadequate collateralization.
On September 9, 2011, the owners of Big Drive placed Big Drive into bankruptcy in the United States Bankruptcy Court for the District of Nebraska. Plaintiffs filed a proof of claim in the Big Drive Bankruptcy seeking to recover $2, 315, 000.00. The stated basis for their claim was: "Cattle on Debtor's premises that were lost, sold or moved off premises without owners consent and/or payment, and corn on Debtor's premises involved in fire loss, or utilized by Debtor without consent or payment." The Official Committee of Unsecured Creditors in the Big Drive Bankruptcy objected to the Pages' proof of claim claiming it lacked sufficient evidence of the cause, nature and extent of their alleged losses. Plaintiffs filed a response to the objection and provided further detail regarding their alleged loss of cattle and corn at the Feedlot. Plaintiffs later agreed to settle their claim.
On September 22, 2011, FCSA and FLCA filed an action in the United States District Court for the District of Nebraska against the plaintiffs and the owners of Big Drive seeking to recover under their personal guarantees of the Big Drive Loans. At the Pages' request, the case was referred to the United States Bankruptcy Court for the District of Nebraska. While the action was pending before the Nebraska Bankruptcy Court, the Pages filed a counterclaim against FCSA and FLCA alleging, inter alia, that FCSA and FLCA had breached their alleged duty to properly count the cattle at the feedlot and to accurately report that count to the Pages. FCSA and FLCA moved to dismiss the Pages' counterclaim on the grounds that the Nebraska Bankruptcy Court lacked jurisdiction over the state law counterclaims or, alternatively, for a more definite statement. The Bankruptcy Court agreed with FCSA and FLCA's jurisdictional argument and recommended that the Nebraska District Court withdraw the reference. The Nebraska District Court agreed and the case was transferred back to the Nebraska District Court.
After the action had been returned to the Nebraska District Court, the Pages again filed a counterclaim based on the allegations that FCSA undertook a duty to accurately keep count of cattle and inventory at the feedlot, that the duty was breached, that FCSA misrepresented the cattle and inventory at the feedlot and that the Pages were damaged as a result. FCSA and FLCA again filed a motion to dismiss the counterclaim or, alternatively, for a more definite statement. The District of Nebraska granted this motion to dismiss without prejudice.
The Pages then filed an amended counterclaim. In their amended counterclaim, the Pages alleged: "Farm Credit, by and through its employee and/or agent, made representations to the Pages regarding the state of the collateral, specifically monthly statements detailing the cattle and inventory represented on the feed lot." The Pages also alleged that "[t]he Pages relied in good faith upon [Farm Credit] to accurately report its collateral" and that "[Farm Credit's] failure to properly and accurately report the cattle inventory after representing it to the Pages it was doing so directly harmed the Pages." The Pages further alleged that FCSA undertook a duty to accurately keep count of cattle and inventory at Big Drive and communicated that information to the Pages and that the Pages were damaged as a result.
On August 3, 2012, the Pages' amended counterclaim was dismissed with prejudice. The Nebraska Federal Court's Memorandum and Order dismissing the amended counterclaim stated, in part:
Defendants attempted to plead their counterclaims twice, without success. Even after receiving direction from the Court in its previous Memorandum and Order, deficiencies similar to those in the original counterclaims remain. Nothing in the Defendants' briefs in response to the Plaintiffs' motions to dismiss suggests that further amendment of the counterclaims would be likely to cure the deficiencies. This case was filed on September 22, 2011, and the matter of the Defendants' counterclaims has been before this Court since the filing of the Plaintiffs' original motions to dismiss on February 20, 2012. Any delays in the progress of the case have been due to the Defendants' requests for extensions of time to answer and file briefs. Any further delay to allow the Defendants a third attempt to plead their counterclaims would result in unfair prejudice to the Plaintiffs. Therefore, the amended counterclaims will be dismissed with prejudice.
The Pages appealed the dismissal of their amended counterclaim to the United States Court of Appeals for the Eighth Circuit. Oral argument in that appeal was scheduled for May 15, 2013 in Omaha, Nebraska.
The defendants contend that res judicata bars the instant claims made by the plaintiffs. The defendants, relying on Nebraska law, argue that the claims asserted here were considered or should have been considered by the Nebraska District Court. They point to the claims where the Pages allege that FCSA had an obligation to them to accurately count the cattle at the feedlot and report that count to them.
Plaintiff contends that res judicata does not apply here because the claims here are different than those raised in the Nebraska District Court concerning the Big Drive Loans. Plaintiffs point out that the claims in this case arise from the personal loans they entered into with the FCSA, not the business loans that Big Drive entered into with the FCSA. Although the nature of the claims has some similarities, plaintiffs argue that the ...