Citations
- 360 F. Supp. 3d 817
Full opinion text
Hon. Jane Magnus-Stinson, Chief Judge
In 2016, Rembrandt Enterprises, Inc. ("Rembrandt") entered into an agreement to sell cage-free eggs to Rexing Quality Eggs ("Rexing"), the doing-business-as designation for Leo and Joseph Rexing's egg selling partnership. The contract required Rembrandt to provide Rexing with approximately 3,240,000 eggs per week for one year, subject to possible extensions. But cracks quickly formed in parties' relationship, which ultimately spoiled, leaving 16 weeks-worth of ordered eggs (over 50 million eggs) on Rembrandt's kitchen table. This lawsuit followed. Rexing alleges that its continued performance was excused and that Rembrandt sold deficient eggs. Rembrandt counterclaims, alleging that Rexing breached the contract by refusing egg shipments and repudiating the purchase agreement.
Rembrandt's partial Motion for Summary Judgment, [Filing No. 71], currently pends before the Court. After unscrambling the hundreds of pages of briefing and exhibits filed by the parties, what remains is a relatively straightforward matter of contract interpretation. 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. However, Rembrandt's claim for summary judgment on damages does not even begin to penetrate the eggshell.
The Court therefore GRANTS IN PART and DENIES IN PART Rembrandt's Motion.
I.
LEGAL STANDARD
A motion for summary judgment asks the Court to find that a trial is unnecessary because there is no genuine dispute as to any material fact and, instead, that the movant is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). As the current version of Rule 56 makes clear, whether a party asserts that a fact is undisputed or genuinely disputed, the party must support the asserted fact by citing to particular parts of the record, including depositions, documents, or affidavits. Fed. R. Civ. P. 56(c)(1)(A). A party can also support a fact by showing that the materials cited do not establish the absence or presence of a genuine dispute or that the adverse party cannot produce admissible evidence to support the fact. Fed. R. Civ. P. 56(c)(1)(B). Affidavits or declarations must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant is competent to testify on matters stated. Fed. R. Civ. P. 56(c)(4). Failure to properly support a fact in opposition to a movant's factual assertion can result in the movant's fact being considered undisputed, and potentially in the grant of summary judgment. Fed. R. Civ. P. 56(e).
In deciding a motion for summary judgment, the Court need only consider disputed facts that are material to the decision. A disputed fact is material if it might affect the outcome of the suit under the governing law. Hampton v. Ford Motor Co. , 561 F.3d 709, 713 (7th Cir. 2009). In other words, while there may be facts that are in dispute, summary judgment is appropriate if those facts are not outcome determinative. Harper v. Vigilant Ins. Co. , 433 F.3d 521, 525 (7th Cir. 2005). Fact disputes that are irrelevant to the legal question will not suffice to defeat summary judgment. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
On summary judgment, a party must show the Court what evidence it has that would convince a trier of fact to accept its version of the events. Johnson v. Cambridge Indus. , 325 F.3d 892, 901 (7th Cir. 2003). The moving party is entitled to summary judgment if no reasonable factfinder could return a verdict for the non-moving party. Nelson v. Miller , 570 F.3d 868, 875 (7th Cir. 2009). The Court views the record in the light most favorable to the non-moving party and draws all reasonable inferences in that party's favor. Darst v. Interstate Brands Corp. , 512 F.3d 903, 907 (7th Cir. 2008). It cannot weigh evidence or make credibility determinations on summary judgment because those tasks are left to the fact-finder. O'Leary v. Accretive Health, Inc. , 657 F.3d 625, 630 (7th Cir. 2011). The Court need only consider the cited materials, Fed. R. Civ. P. 56(c)(3), and the Seventh Circuit Court of Appeals has "repeatedly assured the district courts that they are not required to scour every inch of the record for evidence that is potentially relevant to the summary judgment motion before them," Johnson , 325 F.3d at 898. Any doubt as to the existence of a genuine issue for trial is resolved against the moving party. Ponsetti v. GE Pension Plan , 614 F.3d 684, 691 (7th Cir. 2010).
II.
PROCEDURAL HISTORY
This matter was first filed by Rexing on August 16, 2017 in state court. [Filing No. 1-1.] Rexing seeks a declaration that its continued acceptance of eggs was excused by the "significant and unexpected reduced consumer demand" for cage-free eggs and seeks damages for Rembrandt's alleged breach of express warranties as to the quality of the eggs. [Filing No. 1-1 at 3-4.] On September 9, 2017, Rembrandt removed the lawsuit to this Court. [Filing No. 1.]
Rembrandt counterclaimed against Rexing on October 6, 2017, [Filing No. 9], and, with leave of court, [see Filing No. 18], amended its counterclaim to join Dylan, Joe, and Leo as Counterclaim Defendants, [Filing No. 15]. Rembrandt's operative pleading alleges that the Rexings breached the purchase agreement and a separate credit agreement, and seeks damages, attorney's fees, and interest as provided by the contracts. [Filing No. 15.]
On August 7, 2018, Rembrandt filed its Partial Motion for Summary Judgment. [Filing No. 71.] Rembrandt seeks judgment in its favor as to Rexing's claims, which it argues fail as a matter of law. [Filing No. 71.] In addition, Rembrandt seeks affirmative judgment on its own claim for breach of the purchase agreement, arguing that the undisputed evidence demonstrates that it must prevail as a matter of law. [Filing No. 71.] Finally, Rembrandt argues that it has proven the amount of its damages as a matter of law. [Filing No. 71.] Rexing, on the other hand, did not cross-move for summary judgment, leaving Rembrandt's Motion as the only dispositive motion for the Court's consideration.
III.
BACKGROUND
The following factual background is set forth pursuant to the standards detailed above. The facts stated are not necessarily objectively true, but as the summary judgment standard requires, the undisputed facts and the disputed evidence are presented in the light most favorable to "the party against whom the motion under consideration is made." Premcor USA, Inc. v. American Home Assurance Co. , 400 F.3d 523, 526-27 (7th Cir. 2005). This recitation, moreover, is limited to the facts relevant to, and helpful for understanding, the Court's ultimate decision on the instant motion. Additional facts, particularly those argued by the parties to be relevant, are referenced as appropriate in the discussion of the parties' arguments.
A. The Parties
Rembrandt's chickens produce a lot of eggs, most of which Rembrandt dehydrates or liquifies before selling to other food product manufacturers. [Filing No. 89-3 at 2-7; Filing No. 89-3 at 18.] In 2016, Rembrandt began expanding into the cage-free egg market due to rising demand for cage-free eggs. [Filing No. 89-3 at 15.]
Joseph and Leo Rexing are brothers who own and have owned various agribusinesses. [Filing No. 74 at 4.] Among their enterprises is Rexing Quality Eggs, which is the unincorporated trade name under which Joseph and Leo Rexing have bought and sold eggs for over 20 years. [Filing No. 74 at 7; Filing No. 89-15 at 2.] Joseph's son, Dylan Rexing, was Vice President of Operations for Rexing Quality Eggs, though he neither received any of the partnership's profits nor shared in its losses. [Filing No. 73 at 4; Filing No. 89-13.] Dylan, then aged 25, conducted all negotiations with Rembrandt on behalf of Rexing, which were his first major negotiations for the sale of eggs. [Filing No. 73 at 12-13; Filing No. 74 at 8.] Before their contract with Rembrandt, the Rexings bought and resold eggs on the spot market, mostly to institutional and warehouse purchasers. [Filing No. 74 at 4-5.] They had never before engaged in a fixed-term commitment to buy eggs. [Filing No. 74 at 4.]
B. Rembrandt and Rexing Discuss Potential Deals
Rembrandt first came across Rexing in spring 2015 when it was searching for egg producers to fill its needs after it had lost most of its birds to the avian influenza epidemic. [Filing No. 89-5 at 3-4; Filing No. 89-5 at 44.] Initially, Rembrandt discussed with Dylan the possibility of hiring Rexing as a "contract manufacturer" (essentially a packaging middleman, never producing or owning the eggs) to grade and package cage-free eggs which would in turn be sold to Walmart. [Filing No. 73 at 13-14; Filing No. 89-5 at 46-47.] The Walmart deal never came to fruition. [Filing No. 73 at 14.]
Talks between Rembrandt and Dylan then turned to two farms in Tipton, Missouri, where Rembrandt had entered into supply contracts for the production of eggs. [See Filing No. 89-2; Filing No. 73 at 14.] Under this proposal, Rexing would not act as a contract manufacturer, but would instead purchase the eggs from Rembrandt. [See, e.g. , Filing No. 73 at 14; Filing No. 89-17.]
C. The Contract
Dylan and Rembrandt reached an agreement for Rexing to purchase at least one-year's worth of eggs, as memorialized in a contract dated September 2, 2016:
Parties: Rembrandt Enterprises, Inc. Rexing Quality Eggs 1521 18th Street 4501 Hitch Peters Road Spirit Lake, Iowa 51360 Evansville, IN 47711 ("Rembrandt") ("Purchaser") Date: September 2, 2016
A. Product: White Nest Run Shell Eggs (the "Shell Eggs") meeting the requirements contained on Exhibit A, attached hereto.
B. Volume: Purchaser shall purchase, and Rembrandt will supply, twelve (12) loads of Shell Eggs per week during the Term, as hereinafter defined, commencing the week of October 3, 2016. For purposes of this Agreement, a "load" is comprised of no less than 25 pallets (or such lesser number of pallets as are may be required to avoid violating applicable gross weight transportation requirements,) with approximately 900 dozen Shell Eggs per pallet. The Parties have agreed to permit Rembrandt a period of time to meet this schedule. Without limitation, the schedule below is a tentative ramp up schedule expected to be in place for deliveries through the week of December 25 (the "Ramp Up Period,") whereby Rembrandt has the right to source certain loads from other locations, and to supply less than twelve loads per week, until all loads can be supplied from Tipton, Missouri location:
Loads Tipton, MO Other Total Start Date Loads Locations Loads 10/3/2016 6 6 10/10/2016 7 1 8 10/17/2016 9 3 12 10/24/2016 10 2 12 10/31/2016 10 2 12 11/7/2016 10 2 12 11/14/2016 10 2 12 12/25/2016 11 1 12 2/12/2017 12 12
C. Price: The price ("Price") for Shell Eggs purchased by Purchaser hereunder for the Initial Term, as hereinafter defined, shall be $0.85 per dozen, FOB, Tipton, Missouri, or, during the Ramp Up Period, from other locations designated by Rembrandt. In the event that Rembrandt designates an alternative location for pick up of the Shell Eggs by Purchaser, the Price for the Shell Eggs shall be $0.80 per dozen, FOB such alternative location. The Price for Shell Eggs for each Continuation Term thereafter shall be mutually agreed upon between the parties, as specified in Section F.
D. Freight/Transportation/Loading: Purchaser is responsible for arranging and paying for any necessary transportation from the origination point. Rembrandt shall, however, be responsible for completing all loading of eggs onto trucks. Purchaser may, from time to time, provide recommendations and guidance upon desired loading procedures; provided, that any changes from Rembrandt loading practice will be mutually agreed upon. Loading shall take place at mutually agreed upon dates and times; provided, that all loading shall be required to occur between 7:00 a.m. and 4:00 p.m. during any loading day. Purchaser shall supply all required materials (i.e., without limitation, all pallets, flats, boards) necessary to packing and shipping the Shell Eggs for Purchaser hereunder, All such materials are to be properly washed clean, sanitized and dried by Purchaser at Purchaser's facility (and at Purchaser's expense) prior to providing materials to Rembrandt's facility for use in egg packing.
[Paragraph E., "Payment," is omitted.]
F.Term of Agreement: This Agreement will be for an initial term commencing as of October 3, 2016 ("Commencement Date") and terminating October 3, 2017 (the "Initial Term"). Thereafter, this Agreement shall continue for three (3) year one year periods thereafter (each, a "Continuation Term," and together with the Initial Term, the "Term,") unless terminated by either party upon written notice to the other party at least three (3) months notice prior to the expiration of the Initial Term or any Continuation Term thereafter. If Rembrandt's decision to terminate is based upon an offer with improved pricing or other terms and conditions from a third party, Rembrandt will, accompanying such notice, provide to Purchaser a summary of the material terms of such third party offer. If Purchaser, does not, within fifteen (15) days of receipt of such third party offer, agree (in a form satisfactory to Rembrandt) to match the terms of such third party offer, Rembrandt will be entitled to pursue such third party offer, and this Agreement shall terminate as provided in this Section. Notwithstanding the foregoing, if the
Price for Shell Eggs is not mutually agreed upon at least two (2) months prior to the commencement of any Continuation Term, either party shall be entitled to terminate this Agreement upon written notice the other party.
G.Specifications: Rembrandt will produce and supply Shell Eggs according to the specifications set forth in Exhibit A, attached hereto and part hereof,
H.Title and Risk of Loss: Title and Risk of loss to Shell Eggs shall pass to Purchaser upon loading at in Tipton, Missouri, or such other location designated by Rembrandt for loading hereunder.
I.Warranties: Rembrandt represents and warrants to Purchaser that all Shell Eggs sold to Purchaser pursuant to this Agreement will not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, as amended, and not be an article which may not be introduced into interstate commerce under the provisions of Section 404 or 405 of such act. NO OTHER REPRESENTATION OR WARRANTIES OF ANY KIND OR NATURE, WHETHER EXPRESS OR IMPLIED, OR OTHERWISE ARE MADE OR INTENDED BY REMBRANDT WITH RESPECT TO THE SHELL EGGS, AND REMBRANDT SPECIFICALLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
J.Attorneys' Fees: The prevailing party shall be entitled to attorneys' fees and costs of collection in any dispute arising under this Agreement.
K.Assignment: This Agreement shall not be assigned by either party without the other party's prior written consent. Notwithstanding the foregoing, the parties agree that Rembrandt shall be entitled to assign its right to payment under this Agreement as partial security for financing, to the financial institution(s) which have provided financing to Rembrandt.
L.Governing Law: This Agreement shall be governed by and construed under the laws of the State of Iowa.
M.Other Terms: In no event shall Rembrandt be responsible for any lost profits, or any special, indirect, incidental, consequential, or punitive damages, even if advised in advance of the possibility of such damages.
N.Waiver: The failure of either party to insist in any one or more Instances upon performance of any terms or conditions of this Agreement shall not be construed as a waiver of future performance of any such terms and conditions, but the obligations of each party shall continue in full force and effect.
O.Force Majeure: Any delay or failure of either party to perform its obligations under this Agreement shall be excused if, and to the extent that the delay or failure is caused or materially contributed to by force majeure or other acts or events beyond the reasonable control of a party hereto. During the period of the delay or failure to perform by Rembrandt, the Purchaser may, at its option, purchase Shell Eggs from other sources.
P.Entire Agreement: This writing constitutes the entire understanding of Rembrandt and Purchaser and supersedes all previous agreements, proposals or negotiations, between the parties with respect to the subject matter hereof. No modification, alteration or change in the terms hereof shall be effective unless made in writing and signed by both Purchaser and Rembrandt.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date written below.
REMBRANDT ENTERPRISES, INC. REXING QUALITY EGGS Title: Title: Date: 9-4-16 Date: 9-2-16
[Filing No. 72-1 at 1-5.] As referenced in paragraph A of the contract, attached Exhibit A provided the following "Specifications":
EXHIBIT A
SPECIFICATIONS
Each load with be Inspected at loading, and all Shell Eggs will be supplied in compliance with the following specifications:
Egg Specifications - All Shell Eggs shall be white eggs. Average case weights for each load of Shell Eggs shall be between 47 lbs. and 52 lbs. Shell Eggs loaded into Purchaser pick up vehicles shall be no older than 7 days from the date of lay.
Certified Humane - All facilities producing Shell Eggs under this Agreement shall be certified by Humane Farm Animal Care, or an appropriate successor organization, as "Certified Humane" or its equivalent, based upon the standards in effect as of the date of this Agreement. In the event of a change in the requirements to obtain certification after the date of this Agreement, the parties shall adjust the Price of the Shell Eggs hereunder to reflect the cost associated with Rembrandt implementing necessary changes. If Purchaser does not request Rembrandt to implement any necessary changes to maintain "Certified Humane" certification, the Purchaser may choose to go with an equivalent or successor organization; provided, that any changes required by Rembrandt to comply with the requirements of such equivalent or successor organization shall require an adjustment to the Price of the Shell Eggs hereunder to reflect the cost associated with Rembrandt implementing any necessary changes.
Inspection and Grading - All Shell Eggs hereunder shall be inspected within ten (10) business days of receipt by Purchaser at the Purchaser's __________ facility, and Purchaser shall be obligated to notify Rembrandt, in writing, within such ten (10) business day period of any failure to conform with the specifications and requirements herein. With respect to each load of Shell Eggs, ninety-one and a half percent (91.5%) of such Shell Eggs shall grade out as Grade A, and specifically, no more than eight and a half percent (8.5%) of any load of Shell Eggs shall grade out as restricts or losses. With regard to any load in which in excess of eight and a half percent (8.5%) of Shell Eggs grade as restricts or losses (such excess restricts and losses in a load hereinafter the "Excess Losses") as reported, in writing, to Rembrandt (with grading documentation attached) no later than ten (10) business days following receipt by Purchaser of such load, Rembrandt shall issue a credit for such Excess Losses, so that the payment by Purchaser for such Shell Eggs comprising the Excess Losses will be equal to five cents back of the High Side Breaker Market quoted on the Thursday prior to the date of shipment, in lieu of the payment specified in this Agreement. Notwithstanding the foregoing, in no event shall a deduction on any load of Shell Eggs exceed a deduction on ten percent (10%) of the Shell Eggs in such load.
In the event of any material breach of any of the specifications noted above, Purchaser shall provide immediate notice to Rembrandt and an opportunity to review and confirm the failure. As Purchaser's sole remedy for such non-compliance, Purchaser shall have the right to reject any load in which the parties agree upon such non-compliance, and Rembrandt shall be responsible in the case of a rejected load, for reimbursing Purchaser its cost incurred for freight to deliver such load to Purchaser's grader, and Rembrandt shall be responsible for the freight to return the shipment to Rembrandt's designated location.
The parties may from time to time agree upon changes in production by Rembrandt in order to achieve certain agreed upon specialty egg characteristics. Prior to implementing any such change, the parties shall agree to an adjustment in the Price under this Agreement to compensate Rembrandt for implementing any such change.
Rembrandt shall be entitled to observe the grading process to validate the calculations of Shell Eggs qualifying as restricts and losses. In the event of disagreement with the number of Shell Eggs grading out as restricts and losses Rembrandt shall be entitled to require an independent evaluation or review of the Shell Eggs, to validate the determination of restricts and losses.
[Filing No. 72-1 at 5-6.]
In reaching these terms, the parties engaged in negotiations via telephone and email. Rexing sought, among other things, "a clause for use [sic] to get out of this contract based on poor performance." [Filing No. 72-10 at 1 (email from Dylan dated August 23, 2016); Filing No. 72-11 at 1 (email from Dylan dated August 31, 2016, seeking a "[c]lause in the contract for immediate cancelation based on poor egg performance").] The final contract contained no provision allowing for "immediate cancelation," but did contain the rejection provision of Exhibit A, excerpted above (in the paragraph beginning "In the event of any material breach...."). A previous draft had omitted the language providing that "Rembrandt shall be responsible in the case of a rejected load, for reimbursing Purchaser for its cost...." [Filing No. 72-12 at 7.]
The parties also specifically negotiated the scope of the "Excess Loss" provision of Exhibit A, which as set forth above gives Rexing a certain credit (essentially a discount) for loads "in which excess of eight and a half percent (8.5%) of the Shell Eggs grade as restricts or losses." [Filing No. 72-1 at 5-6.] One proposed version of the contract limited Rexing to a credit "so that the payment" for the deficient eggs would be "equal to the High Side Breaker Market."
[Filing No. 72-9 at 6.] Dylan responded as follows:
6.) Inspection/Grading: Rembrandt is Guaranteeing a 91.5% grade out to be able to be merchantable basically. If we come to a part where it gets over that amount or excessive, we want to make sure we are not on the short side of the stick. By that I mean, we would like to have Rembrandt pick up that product and give credit (If that makes sense).
[Filing No. 72-10 at 1.] Several days later, Dylan again wrote Rembrandt about his concerns, stating:
3.) Im going to need to go over the portion about losses over 8.5% tomorrow. Dad wants me to push some on this subject to come to a more defined answer. Reason being, if we pay Caldwell to grade these eggs for instance .15 cents/DZ and I am paying .85 from you and your guaranteeing me at least the high side of the breaker marker we are going to be losing here. How can we fix?
[Filing No. 72-11 at 1.] In its final version, the contract provided that Rembrandt would credit Rexing for excess losses so that Rexing would pay "equal to five cents back of the High Side Breaker Market" for such eggs. [Filing No. 72-1 at 6.]
D. Contractual Performance
At the time Rembrandt and Rexing executed the contract, Rexing intended to resell the eggs to Hickman's Family Farms, which would in turn resell the eggs to a large retailer. [Filing No. 73 at 13-14.] Rexing and Hickman's, however, only reached a nonbinding "letter of intent," [Filing No. 72-13 at 2], which ultimately never progressed into a long-term contractual relationship, [see Filing No. 72-4 at 13]. Without a long-term contract with Hickman's, Rexing had no alternative customer in line to purchase the significant quantity of eggs bought from Rembrandt. [Filing No. 73 at 9; Filing No. 74 at 11-13.]
Rexing received its first shipment of eggs at the end of September 2016. [Filing No. 89-10 at 40.] After the "Ramp Up Period" agreed to by the parties, Rexing received 12 truckloads of eggs each week, as set forth in the purchase agreement. [Filing No. 78 at 3.] The quality of the initial loads was low. [Filing No. 89-8 at 15-28.] Dylan sent Rembrandt emails on October 6 and October 25, complaining about the poor egg quality. [Filing No. 89-10 at 5-6.] Dylan visited the Tipton farms in that first month and reported that Rembrandt had not done "quality checks" on the eggs. [Filing No. 73 at 41.] Rembrandt also sent an employee to the Tipton farms who believed that there were "two main issues ... [:] shell quality and equipment." [Filing No. 89-6 at 37.] In response, the Tipton farms made several changes to the equipment and bird nutrition. [Filing No. 89-6 at 23-24; Filing No. 89-7 at 18-20.] Rembrandt also notified one of the two Tipton farms that it would begin charging for the farm's underperformance. [Filing No. 89-44.] On November 25, Dylan emailed Rembrandt complaining of continuing quality concerns: "Our contract calls for 91.5 quality which are running 81.64-82.64. This is 8.86-9.86 off of our numbers." [Filing No. 89-10 at 6.]
In January 2017, a Mycoplasma gallisepticum ("MG") outbreak hit the Tipton, Missouri area. [See Filing No. 89-26.] Emails sent in March 2017 reflected Rembrandt's concern that there was "something going on with the birds" at the Tipton farms. [Filing No. 89-45 at 2.] In April 2017, Rembrandt began to euthanize its birds at one of the Tipton farms, [Filing No. 89-27], and birds at both Tipton farms tested positive for MG, [Filing No. 89-46]. Egg quality issues remained pervasive from April to June 2017, when Rexing repudiated the contract. [See Filing No. 89-10 at 39-47.] During this time, Rembrandt also began supplying eggs from farms outside of Tipton with greater frequency. [Filing No. 78-6.] On April 4, 2017, internal Rembrandt emails expressed concern about ongoing quality problems, explaining that it "ha[d] known about" the problems for "quite some time." [Filing No. 89-4 at 34.] As one email from the inventory control manager explained, "[Over a sample of] 163 loads, a deduction [for below-standard quality] has been given for 69 of them. When I average the chex/loss [below-grade eggs] for ALL loads, I get 8.55%." [Filing No. 89-4 at 34.]
On May 20, 2017, Dylan emailed Rembrandt expressing his continued concern regarding the egg quality: "Im not taking full volume because quality is lacking and eggs are small at the other farms. As we change flocks, I dont have enough material to spread across 6 sites its just impossible." [Filing No. 89-32 at 1 (misspellings in original).] In late May and early June, shipments were underperforming by over 20 percent, with several loads approaching and exceeding 30 percent under grade. [Filing No. 89-10 at 47.]
Throughout the life of the contract, Rexing received invoices including proper discounts for underperforming loads, as required under the Excess Loss provision of the purchase agreement. [Filing No. 72-16 at 3-4; Fling No. 72-15; Filing No. 78 at 2.] Rexing, however, underpaid the invoices by miscalculating its discount. Rexing subtracted 10 cents from the breaker market price instead of the 5 cents set forth in the purchase agreement. In total, Rexing underpaid $60,059.91. [Filing No. 72-27 at 2-4; Filing No. 73 at 30, 38; Filing No. 72-28 at 5.]
On June 2, 2017, Dylan spoke with Mike Gidley of Rembrandt, and discussed the possibility of rejecting loads. [Filing No. 89-10 at 7.] Mr. Gidley told Dylan that Rexing could not reject loads under the terms of the purchase agreement. [Filing No. 89-10 at 7; Filing No. 89-34 at 1 (internal Rembrandt chat explaining that "we took a much closer look at our supply agreement, as well as your suggestion that Rexing was able to reject loads," and concluding that "we believe our contract is solid" and "Rexing does not have the right to reject loads").]
E. Repudiation of the Purchase Agreement
In August 2016, when the Rexing-Rembrandt agreement was being finalized, Hickman's believed that it would be able and willing to purchase 11 loads from Rexing for one year, largely due to the demand from Costco, among other retail customers. [Filing No. 72-4 at 3-16.] However, as explained above, Rexing and Hickman's never reached a binding, long-term agreement. [Filing No. 73 at 13-14.] Thus, when Hickman's ramped up its own cage-free production, [Filing No. 72-4 at 12], and faced reduced demand for cage-free eggs, it ultimately stopped buying eggs from Rexing. [Filing No. 72-4 at 6-7; Filing No. 89-9 at 3.] Rexing unsuccessfully tried to find a replacement buyer. [Filing No. 89-14 at 2.]
On May 24, 2017, Dylan emailed Rembrandt, explaining that Rexing would need to cancel orders due to decreased demand. [Filing No. 72-18 at 3.] Rembrandt responded that Rexing would need to take the full loads per the parties' agreement unless Rembrandt could find an alternative buyer. [Filing No. 72-18 at 1.] Unhappy with the situation, Dylan by email dated June 1, 2017 explained that he was "going to try and tell Rembrandt to pound sand," [Filing No. 72-19 at 1], and on June 2, Dylan discussed the possibility of rejecting loads and was told that Rexing could not do so, [Filing No. 89-10 at 7].
After refusing several loads, on June 5, 2017 Dylan emailed Rembrandt, again stating that Rexing would not be able to take their full volume of eggs and writing: "Im sorry to have to put anyone through this, but the cage free business isnt what we were told it was going to be this time of year." [Filing No. 72-20 at 1 (misspellings in original).] Following a conference call later that day, Rembrandt's Egg Sales Desk Manager emailed Rexing:
Joe and Dylan
Thank You for taking the time today to discuss the current Rexing cage free egg supply. Since our discussion, I noted that you had sent a notice that would stop our supply agreement from renewing for an additional year after the completion of the initial one year term. As you're aware, the supply agreement is still in effect through October 3, 2017, with the existing weekly purchase requirements of 12 loads per week.
As we discussed, Rembrandt does expect that Rexing comply with its supply agreement purchase obligations. Last week Rexing only took 8 full truckloads of cage free shell eggs, and as a result, Rembrandt is holding the remaining 4 loads for Rexing's account, and we need direction from you by the end of the day today as to whether we should continue to hold them or attempt to resell them, with any loss by Rembrandt (the difference between the contract price and what we're able to sell these containers for) being reimbursed to Rembrandt by Rexing. We also need to know today what to do with the 8 loads that you've told us you will not be taking next week.
I indicated that Rembrandt is willing to try to assist by referring possible opportunities to Rexing for sale, or we are open to suggestions you may have to try to resolve this. Given that our cooler space is full, we really need to hear back from you today so that we can take necessary steps.
[Filing No. 72-2 at 1.] Dylan responded:
Thank you for your email. With the unexpected fall in demand for cage free eggs and the significant reduction in purchase orders provided to us we thought it would be appropriate to allow the expectations under the supply agreement to expire after its first year. Certainly we would plan to continue to work with Rembrandt as a supplier based upon the needs of our customers and Rembrandt's ability to deliver the specified products.
Rembrandt should not be holding any eggs from last week for the Rexing account at this time. As the market conditions evolve and we are able to adjust to these change in conditions we will plan to work with you toward an amicable resolution.
[Filing No. 72-2 at 1.]
On June 6, 2017, Dylan emailed Hickman's to explain that he had extra eggs "on hand that need to start going away before they go out of date. Im going to cancel all of my orders for this week and order 0 from Rembrandt." [Filing No. 72-7 at 1.] Rexing refused all future loads from that point. [Filing No. 72-7 at 1; Filing No. 72-22 at 1; Filing No. 72-23; Filing No. 72-24; Filing No. 72-25; Filing No. 72-29.] On June 7, 2017, counsel for Rembrandt sent a letter to Rexing, to the attention of Dylan and Joe, demanding assurances that Rexing would accept egg loads in compliance with the terms of the purchase agreement. [Filing No. 72-24.] The letter "advised that Rembrandt intends to resell the shell eggs in the best manner available" and, if it did not receive assurances, would "consider all options, including permanently removing the flock supplying the shell eggs." [Filing No. 72-24 at 2.]
On June 9, 2017, counsel for Rexing responded to the demand for assurances, expressing, among other things, Rexing's belief that the poor quality of the eggs violated an express warranty. [Filing No. 72-25 at 1-2.] As to Rexing's explanation for no longer accepting eggs, counsel wrote as follows:
Further, and most importantly, the Agreement contains an express provision excusing certain conditions and events from being construed as a default under the Agreement. The Agreement provides that "[a]ny delay or failure of either party to perform its obligations under this Agreement shall be excused if, and to the extent that the delay or failure is caused or materially contributed to by force majeure or other acts or events beyond the reasonable control of a party hereto."
The profoundly reduced market demand for the product provided by Rembrandt is beyond the reasonable control of Rexing, falling under the "other acts" provision of the Agreement. Further, the depressed market conditions for the specified product are a force majeure event under the terms of this Agreement. Both Rembrandt and Rexing contemplated that there would be certain acts outside of their control that would excuse performance by either party, as memorialized in the Agreement.
Rembrandt assumed the risk that Rexing may have to invoke such provisions to excuse its performance by including the provisions in the Agreement. Additionally, Rembrandt is the party who wrote the Agreement, which must therefore be construed against it. In Iowa, courts will look to the intent of the parties to the contract to determine its interpretation, and if there is no ambiguity in the contract, then intent is determined by what the contract says. The Agreement says that force majeure events and other acts beyond the reasonable control of the parties shall excuse the failure of either party to perform its obligations.
Accordingly, the failure of Rexing to accept the product as set forth in the Agreement is an excusable event under the terms in the Agreement, both under the force majeure clause and the following "other acts" clause. Rexing denies any breach of the Agreement based on market conditions that are beyond its reasonable control. Certainly, if demand increases for Rembrandt eggs, then Rexing would contemplate satisfaction of the purchase requirements in the Agreement.
[Filing No. 72-25 at 2.] Subsequent conversations between counsel for Rembrandt and Rexing confirmed that Rexing would no longer accept any further egg deliveries. [Filing No. 72-29.] 198 truckloads of eggs remained undelivered as of the time of Rexing's repudiation. [Filing No. 78 at 4.]
F. Post-Repudiation Conduct
In July, August, and September 2017, Rembrandt depopulated several of the Tipton barns due to MG. [Filing No. 89-47; Filing No. 89-48; Filing No. 89-49; Filing No. 89-35 at 2.]
Rembrandt elected not to resell the undelivered eggs on the national egg exchange, called Egg Clearinghouse, Inc., out of concern that doing so would flood the market and cause prices to drop. [Filing No. 77 at 2.] Instead, Rembrandt contacted the exchange and informed them that Rembrandt had supply available for any interested buyers. [Filing No. 77 at 2.] Rembrandt resold 133 of the remaining 198 loads via private sales, attempting to minimize transportation costs by purchasing eggs from egg producers located near the buyers. [Filing No. 78 at 4-5.] For 82 of the 133 loads resold, Rembrandt sourced the eggs from the Tipton farms because the cost of freight was the lowest for the particular buyers. [Filing No. 78 at 4-5.]
For the remaining 65 loads, Rembrandt used the eggs to satisfy its existing commitments to its liquid and powdered egg customers. [Filing No. 78 at 5; Filing No. 72-5.] Rembrandt invoiced Rexing for the difference between the contract price and "the actual market prices at which Rembrandt was able to sell loads to third parties at the same time." [Filing No. 78 at 5.] Rexing has refused to pay the invoiced amounts, and this lawsuit followed.
IV.
DISCUSSION
The parties' claims and counterclaims substantially overlap with one another. The Court begins by briefly setting forth general provisions of Iowa law, which governs this case pursuant to the purchase agreement's choice of law provision. The Court then addresses Rembrandt's arguments for summary judgment on Rexing's claim for damages based upon Rembrandt's alleged breach of express warranties. Next, the Court addresses whether Rexing's performance was excused for any reason, analyzing together Rembrandt's argument for summary judgment on Rexing's claim for declaratory relief and on Rembrandt's own claim for summary judgment as to Rexing's liability for breach of contract. Finally, the Court discusses Rembrandt's arguments for summary judgment as to its alleged damages.
A. Applicable Law
As the parties both acknowledge, the purchase agreement provides that Iowa law applies. Iowa's version of the Uniform Commercial Code, as interpreted and applied by the Iowa courts, therefore provides the governing background principles for resolving this dispute over the sale of livestock. See Midwest Hatchery & Poultry Farms, Inc. v. Doorenbos Poultry, Inc. , 783 N.W.2d 56, 61 (Iowa Ct. App. 2010). The Iowa Supreme Court has emphasized that the role of the courts in contract interpretation is to enforce the bargain as intended by the parties at the time of contracting:
The cardinal rule of contract interpretation is the determination of the intent of the parties at the time they entered into the contract. We strive to give effect to all the language of a contract, which is the most important evidence of the contracting parties' intentions. Because an agreement is to be interpreted as a whole, it is assumed in the first instance that no part of it is superfluous; an interpretation which gives a reasonable, lawful, and effective meaning to all terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect. Contracting parties have wide latitude to fashion their own remedies for a breach of contract and to deny full effect to such express contractual provisions is ordinarily impermissible because it would effectively reconstruct the contract contrary to the intent of the parties. Thus, courts generally enforce contractual limitations upon remedies unless such limitations are unconscionable.
C & J Vantage Leasing Co. v. Wolfe , 795 N.W.2d 65, 77 (Iowa 2011) (internal citations and quotations omitted). The Iowa UCC, moreover, codifies the general obligations of sellers "to transfer and deliver" and of buyers "to accept and pay in accordance with the contract." Iowa Code § 554.2301. While the UCC contains default allocations for risks and burdens between the parties, contracting parties "may not only shift the allocation but may also divide the risk or burden." Iowa Code § 554.2303.
Iowa "long ago ... abandoned the rule that extrinsic evidence cannot change the plain meaning of a contract" and instead "recognize[s] the rule in the Restatement (Second) of Contracts that states the meaning of a contract 'can almost never be plain except in a context.' " Pillsbury Co. v. Wells Dairy, Inc. , 752 N.W.2d 430, 436 (Iowa 2008) (quoting Hamilton v. Wosepka , 261 Iowa 299, 154 N.W.2d 164, 171-72 (1967) ) (citing Restatement (Second) of Contracts § 212 cmt. b (1979) ). While all evidence must be considered to ascertain the meaning of a contract, "the words of an integrated agreement remain the most important evidence of intention." Id. (quoting Fausel v. JRJ Enters., Inc. , 603 N.W.2d 612, 618 (Iowa 1999) (quoting Restatement (Second) of Contracts § 212 cmt. e) ) (emphasis omitted). Thus, as the UCC provides, the parties' course of dealing "may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement." Iowa Code § 554.1303. "Wherever reasonable[,] express terms and the course of dealing are to be construed consistent with each other." Grace Label, Inc. v. Kliff , 355 F.Supp.2d 965, 972 (S.D. Iowa 2005) (internal quotation omitted).
B. Rexing's Claim for Damages
Rexing alleges that Rembrandt breached the terms of the purchase agreement by sourcing eggs from outside of Tipton and by breaching the express warranty as to the quality of the eggs by delivering eggs that did not meet the 91.5 percent Grade A standard. [Filing No. 68 at 3.] As a consequence of Rembrandt's alleged breach, Rexing seeks damages and, as addressed in the next Section, a declaration that it was entitled to repudiate the contract. [Filing No. 68 at 3.] The Court first addresses Rexing's claim that Rembrandt was required to source loads from Tipton after the "Ramp Up Period" ended. This requires addressing the scope of the warranty disclaimer clause of the purchase agreement. The Court next addresses the effectiveness of the limitation of remedies clause, particularly as it applies to Rexing's claims for damages based upon the quality of the eggs.
1. Location Term and The Purchase Agreement's Express Warranties
Rembrandt argues that it did not breach any express warranty because the purchase agreement "warranted only that the eggs would not be adulterated, and that either the eggs would be 91.5% Grade A or the Rexings would receive a discount that lowered the price of Excess Losses to an agreed upon reference price." [Filing No. 81 at 27-28.]
In response, Rexing argues that a genuine issue of fact exists as to whether Rembrandt breached warranties concerning the location at which the eggs would be prepared. [Filing No. 90 at 32-35.] Rexing argues that no warranty disclaimer could disclaim the location term of the contract. [Filing No. 90 at 34-35.]
In reply, Rembrandt argues that the purchase agreement did not specify Tipton eggs and that the parties' course of dealing demonstrates that Rembrandt could source eggs from any farm. [Filing No. 99 at 10-15.]
In surreply, Rexing disputes Rembrandt's interpretation of the location term of the purchase agreement. [See Filing No. 102 at 3-4.]
The first issue is the scope of the disclaimer of waivers provision of the purchase agreement. Iowa's UCC provides that a seller may create an express warranty through:
1. ...
a. Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
b. Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
...
2. It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that the seller have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.
Iowa Code § 554.2313. "Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but ... negation or limitation is inoperative to the extent that such construction is unreasonable." Iowa Code § 554.2316.
Rembrandt briefly suggests that paragraph I of the purchase agreement, which disclaims all express warranties except that the eggs would not be adulterated or misbranded, could preclude Rexing from recovering based upon a breach of either the location or quality terms of the purchase agreement. [See Filing No. 81 at 27.] But in the same paragraph, Rembrandt's own statement demonstrates that paragraph I cannot be as broad as it facially purports to be, explaining that "Rembrandt warranted only that the eggs would not be adulterated, and that either the eggs would be 91.5% Grade A or the Rexings would receive a discount that lowered the price of Excess Losses to an agreed upon reference price." [Filing No. 81 at 27.] This second clause, explaining that Rembrandt warranted "that either the eggs would be 91.5% or the Rexings would receive a discount," does not appear in paragraph I addressed to "Warranties," but instead in the Inspection and Grading provision of Exhibit A: Specifications. While paragraph I would likely be effective to "disclaim implied warranties," Ltd. Flying Club., Inc. v. Wood , 632 F.2d 51, 56 (8th Cir. 1980), and perhaps could disclaim express oral warranties or warranties created by sample or model, see Cannon v. Bodensteiner Implement Co. , 903 N.W.2d 322, 328-31 (Iowa 2017), it cannot disclaim the terms of the contract itself, see Select Pork, Inc. v. Babcock Swine, Inc. , 640 F.2d 147, 149 (8th Cir. 1981) (collecting authorities). Iowa's UCC explains that words negating or limiting are generally effective, but "negation or limitation is inoperative to the extent that" it cannot be reasonably construed as consistent with other terms "relevant to the creation of an express warranty." Iowa Code § 554.2316(1). And Comment 4 to the provision on express warranties explains that disclaimers cannot result in a "material deletion of the seller's obligation" under the contract. Iowa Code § 554.2313 UCC cmt. 4.
As Rembrandt effectively concedes, the purchase agreement's warranty is not limited to the statement in paragraph I regarding unadulterated or misbranded eggs but includes the grading specification and credits for excess losses. Rembrandt's own arguments demonstrate that the generic disclaimer cannot simply erase Rembrandt's other obligations under the terms of the purchase agreement. This means that any location term could not effectively be "disclaimed" by the generic disclaimer of paragraph I.
But Rexing's claim runs into other insurmountable obstacles. First, even assuming it were a breach for Rembrandt to source eggs from outside of Tipton after the Ramp Up Period, Rexing would not have been excused from continued performance under the purchase agreement. Iowa's UCC permits a buyer to cancel a contract "[w]henever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract." Iowa Code § 554.2612(3). Rexing, however, makes no showing or argument that having to spend more on delivery or packaging from certain locations would impair in any way the value of the whole contract. At most, it may make performance more expensive for Rexing, but cancellation would not be permitted for this reason. Nor could Rexing have rescinded the contract based upon a breach of the location term. Rescission is appropriate only where "(1) the injured party [is not] in default, (2) the breach [is] substantial and go to the heart of the contract, and (3) remedies at law [are] inadequate." Clark v. McDaniel , 546 N.W.2d 590, 595 (Iowa 1996). Rexing fails to demonstrate a genuine issue as to any of these requirements, inasmuch as Rexing had underpaid for certain deliveries of eggs and was therefore in default (discussed further below); any alleged breach did not reach the heart of the contract, which was to produce merchantable cage-free white eggs; and any breach could, in the appropriate case, be remedied by damages for the increased expense. In sum, any breach of the location term would not have excused Rexing's continued performance under the purchase agreement.
Next, again assuming that Rembrandt was required to source eggs from only Tipton after the Ramp Up Period, Rexing could not overcome the limitation on incidental and consequential damages from paragraph M of the purchase agreement. [Filing No. 72-1 at 3.] As the UCC explains, "[i]ncidental damages ... include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods" and consequential damages include "any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know." Iowa Code § 554.2715. Rexing argues that sourcing eggs from outside Tipton implicated "shipping and packaging concerns," [Filing No. 90 at 32]-the exact types of incidental and consequential damages that would be precluded by paragraph M.
Finally, the purchase agreement itself contained a mechanism for compensating Rexing when eggs were sourced from outside of Tipton, providing a $0.05-per-dozen discount off the price for Tipton-sourced eggs. [Filing No. 72-1 at 2.] Nothing about that provision, which simply says that "[i]n the event that Rembrandt designates an alternative location for pick up of the Shell Eggs by Purchaser, the Price for the Shell Eggs shall be $0.80 per dozen," [Filing No. 72-1 at 2], suggests that the discount is limited only to loads provided during the Ramp Up Period. Rexing provides no evidence and raises no argument suggesting that it was not billed this discounted rate for loads sourced from outside Tipton. Rembrandt therefore fully complied with its obligations under the purchase agreement. For all of these reasons, Rexing's claim for breach of the location term fails as a matter of law.
2. Egg Quality Provision and Limitation of Remedies
Next, the Court must resolve whether Rexing's remedies as to the quality terms are effectively limited by the provisions of the purchase agreement. The parties' positions on this issue are diametrically opposite. Rembrandt maintains that the purchase agreement sets forth all available remedies for any breach and that Rexing waived any of its claims for deficient egg quality by accepting the excess load credits without notifying Rembrandt of any claims. [Filing No. 81 at 26-28.] Rexing argues that the limitations provisions would cause the agreement to fail of its essential purpose. [Filing No. 90 at 33-35.] For the same reasons, Rexing argues that it may recover damages beyond the credits enumerated in the purchase agreement, including expenses incurred in preparing to perform its duties under the purchase agreement. [Filing No. 90 at 34.]
Two provisions purport to limit Rexing's remedies for Rembrandt's alleged breaches of the purchase agreement. The first is paragraph M, Other Terms: "In no event shall Rembrandt be responsible for any lost profits, or any special, indirect, incidental, consequential, or punitive damages, even if advised in advance of the possibility of such damages." [Filing No. 72-1 at 2.] The second is Exhibit A, Specifications, "Inspection and Grading":
[Filing No. 72-1 at 5-6.]
Remedy limitation clauses for breach of warranty claims are subject to the same principles applicable to limitations of contractual remedies. Iowa Code § 554.2316. Thus, contracts may provide for remedies that are different from or more restrictive than the default remedies provided in the UCC except "[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose." Iowa Code § 554.2719. The Iowa Court of Appeals has explained what it means for a remedy to "fail of its essential purpose": "A remedy's essential purpose is to give to a buyer what the seller promised him. The focus of analysis is not whether the remedy compensates for all damage that occurred, but that the buyer is provided with the product as seller promised." Midwest Hatchery , 783 N.W.2d at 62-63 (internal quotations and citations omitted).
Several cases decided by federal courts applying or relying upon Iowa law have held that contractual remedies failed of their essential purpose where a seller provided nonconforming goods with "readily apparent" defects and where the "contractual limitations of remedies did not contemplate long-term use." Brown v. Louisiana-Pac. Corp. , 820 F.3d 339, 351 (8th Cir. 2016) (internal quotations omitted) (collecting authorities). In Select Pork , for instance, the court held that a limitation on consequential damages failed of its essential purpose because the underlying goods-"highly-touted special pigs"-were never delivered and were instead substituted with common diseased pigs. 640 F.2d at 150. As the court observed, "Had [the seller] delivered the promised [special pigs], then the clause limiting damages to return of the purchase price would have been reasonable." Id. at 149. But the failure to deliver the very goods promised in the product meant that the limited warranty would still deprive the buyer of the benefit of the bargain.
Similarly, in Hartzell v. Justus Co., Inc. , the Eighth Circuit applied South Dakota's identical UCC provision and relied upon Select Pork in holding that a home builder's performance was so deficient as to deprive the buyer of a repairable home, such that the limited remedy-providing for repair or replacement of defective materials in the home-failed of its essential purpose. 693 F.2d 770, 772-73 (8th Cir. 1982). Again, the court set forth, for comparison purposes, what would have been required for the limited remedy to be effective:
The purpose of a remedy is to give to a buyer what the seller promised him-that is, a house that did not leak. If repairs alone do not achieve that end, then to limit the buyer's remedy to repair would cause that remedy to fail of its essential purpose....
... So here, where the house sold was found by the jury to fall short of the seller's promises, and where repairs could not make it right, defendant's liability cannot be limited to the cost of repairs. If the repairs had been adequate to restore the house to its promised condition, and if Dr. Hartzell had claimed additional consequential damages, for example, water damage to a rug from the leaky roof, the limitation-of-remedies clause would have been effective.
Select Pork and Hartzell stand in contrast to Brunsman v. DeKalb Swine Breeders, Inc. , where the seller delivered seven boars as required by the contract. 952 F.Supp. 628 (N.D. Iowa 1996). The boars, the buyers alleged, spread congenital tremor syndrome to the offspring they produced. The buyers alleged that the limited remedies available, replacement of the boars or refund, failed of their essential purpose because the remedies provided by the contract bore "no relation to the damage which might be sustained." Id. at 634. But the court rejected the buyers' argument, holding that "Defendant promised to provide boars that conformed to the contract description and that would settle Plaintiffs' gilts. Because Plaintiffs did receive the boars as promised in the contract, there was no failure of remedy in this case and the limitation of remedy should be enforced." Id. at 635.
These cases "generally instruct us on how § 559.2719 operates." Brown , 820 F.3d at 351. In each instance, the court determined what the buyer was promised, and then assessed, based upon the evidence before it, whether the limited remedy deprived the buyer of that promise. Again, to reiterate, "[t]he focus of analysis is not whether the remedy compensates for all damage that occurred," Midwest Hatchery , 783 N.W.2d at 62-63, because the very purpose of remedy limitations clauses is to allow the parties, ex ante, to allocate risk should things go awry, cf., e.g., SAMS Hotel Grp., LLC v. Environs, Inc. , 716 F.3d 432, 436 (7th Cir. 2013) ("Limitation of liability clauses serve to establish a contractual ceiling on the amount of damages to be awarded if a plaintiff prevails in later litigation between the contracting parties.").
Here, Rexing was promised cage-free eggs which it could in turn sell to buyers. The parties extensively negotiated over the terms of the quality provision, where Dylan originally sought "a clause for use [sic] to get out of this contract based on poor performance," [Filing No. 72-10 at 1 (email from Dylan dated August 23, 2016); Filing No. 72-11 at 1 (email from Dylan dated August 31, 2016, seeking a "[c]lause in the contract for immediate cancelation based on poor egg performance") ], then negotiated from an initial draft which would have discounted eggs from under-performing loads to the breaker market price, to a counteroffer which would have had Rembrandt take back all excess losses, to the final version which provided Rexing with a discounted price five cents under the breaker market price, [see Filing No. 72-9 at 6; Filing No. 72-10 at 1; Filing No. 72-11 at 1; Filing No. 72-1 at 6]. That Rexing now believes that deal to be unfair or undercompensating is of no moment. Rexing provides no evidence to suggest that it did not receive the promised cage-free white eggs, or that the eggs were so deficient that they could not in turn be sold to other buyers. As in Brunsman , Rexing received the benefit of the bargain and complains only that it has not been compensated for "all damage that occurred." Midwest Hatchery , 783 N.W.2d at 62-63. Accordingly, the discount scheme in the purchase agreement does not fail of its essential purpose. And because Rexing does not controvert Rembrandt's evidence that Rexing has received all the discount credits to which it is entitled, Rembrandt is entitled to summary judgment on Rexing's claims for damages stemming from underperforming loads.
3. Conclusion
In summary, Rexing's claim for eggs sourced outside of Tipton fails as a matter of law because Rexing received the agreed-upon discounts and any claim for incidental or consequential damages would be precluded by the damages limitation provision. Even if Rembrandt were required to source all post-Ramp Up Period eggs from Tipton, a breach of that requirement would not have excused Rexing's continued performance. The Court further finds that the damages limitation provisions in the Purchase Agreement do not fail of their essential purpose. Rembrandt is therefore entitled to judgment on Rexing's claim for damages stemming from any loads which failed to reach the 91.5 percent Grade A threshold because Rexing received all of the grade-out credits to which it was entitled. Consistent with the foregoing, the Court GRANTS Rembrandt's Motion for Summary Judgment as to Rexing's claim for damages.
C. Rexing's Repudiation and Claim for Excusal
The Court next addresses Rexing's claim for a declaration that its continued performance was excused by a drop in demand and Rembrandt's overlapping counterclaim for breach of contract due to Rexing's repudiation. Rembrandt argues that it is entitled to summary judgment as to breach because Rexing was required to accept and pay for 12 loads of eggs per week until October 3, 2017, and instead repudiated the agreement in June 2017, refusing to accept or pay for any more loads from that point. [Filing No. 81 at 21-22.] Rembrandt argues that Rexing's for