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Corn-ethanol dispute settled before jury deliberatesTell North Platte what you think
 
Photo by Joe Chitwood
Boxes of evidence

The biggest civil lawsuit ever to go to trial in Lincoln County was quietly settled late Wednesday, after attorneys for both sides negotiated long into the night.

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Both parties agreed on a settlement on the eve of the final day that evidence would have been presented. The jury was expected to begin deliberating on Thursday afternoon or Friday morning.

The $20 million lawsuit began more than four years ago. Mountains of written and oral evidence were gathered. Court deliberations began March 18 and continued seven days.

But in the end, the jury did not have to settle the dispute. They were sent home.

The terms of the settlement of were not revealed.

“I think both sides were satisfied,” attorney George Clough of North Platte said. “I won’t say happy, but I don’t think they were unhappy either. I don’t think either side left with a bad taste in their mouths about the settlement.”


Dispute 

The Lansing Trade Group of Kansas City sought approximately $20 million from two ethanol plants located near the small Nebraska towns of Madrid and Cambridge.

Lansing claimed that the ethanol companies -- Mid-America Bio Energy Commodities of Nebraska -- failed to reimburse them for contracts to buy corn after the market crashed.

The contracts were cancelled by Lansing.

The ethanol plants buy 16 million bushels of corn each annually, producing around 40 million gallons of ethanol a year.

 
Wild times

In 2008, prices fluctuated wildly. The corn price skyrocketed to nearly $8 a bushel that summer, but the economy entered the great recession that fall and the corn price dropped below $4 a bushel in December.

Mid-America not only denied they owed the Lansing Trade Group money, they filed a counter-claim for $5.5 million in damages from Lansing.

Mid-America signed 14 contracts with Lansing in June 2008, followed by 66 more contracts from July 11 through Oct. 17. The latter contracts were for corn to be delivered in 2009, according to court statements. 

There was little dispute about the first 14 contracts, but there was a basic dispute about the final 66 contracts, all of which were cancelled before the corn was delivered.

In the first 14 contracts, the contracts included what is known as a “physical swap transfer,” meaning that Lansing agreed to sell corn to Mid-America at a set price and in turn purchase ethanol from Mid-America at a set price. 

In the following 66 deals -- all made in the summer of 2008 for delivery in 2009 -- Lansing claimed the contract allowed them to sell the corn on “margin” – in effect allowing Lansing to charge $8 for the corn even when the price went down to $4 before the corn was delivered.

But the ethanol companies claimed an underlying agreement did not allow “margin sales” and the subsequent 66 contracts were governed by the same master agreement.

Lansing differed. The way the contracts were written left the interpretation subject to dispute.

Trial

During the trial, witnesses testified for hours at a time. Video testimony was also shown, depicting long interviews with top company officials as evidence was gathered.

Both sides claimed the other side became manipulative, deviated from accepted practices and tried to back out of the basic agreement to avoid financial failure. Both sides brought a team of attorneys to the courtroom. Cartons of contracts, letters and emails lined the room.

An extensive audio-video system was set in the courtroom so attorneys, jurors, witnesses, the court reporter and judge could all read documents – down to the same line -- when they were discussed by witnesses on the stand.   

Top officials of each company were present, including Mid-America President and registered agent Bob Lundeen of North Platte, Lundeen’s son-in-law and chief financial officer of Mid-America, Preston Read, as well as Mid-America board members Andy Olson of Hershey and Ralph Holzfaster of Paxton.

Lansing Trade Group Chief Executive Officer Bill Kruger attended the trial.

Clough, who was affiliated with the ethanol company’s legal team, said the process worked, despite the imposition on the jurors, because it prompted an agreement.

Clough said both sides tried to reach a settlement a couple years ago, but could not settle their differences.

Attorney’s fees and related costs for this case were proportional to the amount of the $20 million claim, Clough said without specifying further.

He said the courts and legal profession are doing what they can to promote settlement of civil disputes through alternatives such as arbitration, to avoid the costs of a jury trial.

 

 


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The North Platte Bulletin - Published 3/28/2014
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