Farmers claim cooperative not paid $2.4 million for hogs

By Kelly Holleran | Nov 24, 2009

Three pork farms say a financial services company refused to release $2.4 million to a farm cooperative after it purchased hogs from the farms.

Great Lakes Pork, Johnson-Pate Pork and Lehmann Brothers Farms filed a lawsuit Nov. 19 in St. Clair County Circuit Court against The CIT Group/Business Credit and Richard T. Klene.

Great Lakes Pork, Johnson-Pate Pork and Lehmann Brothers Farms all were members of Meadowbrook Farms Cooperative, which was having problems procuring commitment from its members to deliver and sell enough hogs to the cooperative in early 2008. Meadowbrook required more hogs from its members in order to keep its packing plant running at a capacity required to meet its cash flow needs, according to the complaint.

To entice members to sell additional hogs to it, Meadowbrook promised to sell additional common stock in the cooperative to the members who agreed to sell hogs to it, the suit states.

In response, the plaintiffs agreed to deliver additional hogs to Meadowbrook as long as proceeds from the sale of the meat were given to the plaintiffs, the complaints say.

"MFC made Defendant CIT aware of these terms and Defendant CIT assented to and/or acquiesced in MFC's purchase of additional hogs from Plaintiffs GLP, JPP and LBF on such terms," the suit states.

In late 2008 and early 2009, Great Lakes Pork says it delivered $1.6 million worth of hogs to Meadowbrook, while Johnson-Pate Pork delivered $547,356.30 and Lehmann Brothers Farms delivered $332,376.32 worth of additional hogs.

However, none of the plaintiffs were paid for the hogs they delivered, according to the complaint.

"A portion of the proceeds derived from the sales of meat processed from the additional hogs delivered and sold to MFC by Plaintiffs GLP, JPP and LBF, on the terms agreed, were paid over to Defendant CIT by MFC notwithstanding Defendant CIT's knowledge that such proceeds were to be applied to pay Plaintiffs for their hogs, and Defendant CIT has received and retained the benefit of such proceeds," the suit states.

Klene, who was a principal executive officer of MFC, owed the plaintiffs a duty to communicate accurate information, the complaint says.

"Plaintiffs GLP, JPP and LBF have alleged and continue to allege that Defendant CIT was aware of and assented to and acquiesced in the terms offered by MFC to those producers in respect of their deliveries and sales of additional hogs commencing on October 1, 2008," the suit states. "If, however, Defendant CIT avers and proves that it did not know of and/or assent to and/or acquiesce to such terms, Defendant Klene was negligent in that he (a) failed to confirm Defendant CIT's agreement before communicating to Plaintiffs that Defendant CIT was aware of and did assent and/or acquiesce to such terms; and/or (b) failed to communicate the actual agreement."

In addition to the money they say they are due, the plaintiffs seek punitive damages, interest, attorneys' fees, costs and other relief the court deems just.

John W. Rourke of Niemann Rourke in St. Louis will be representing them.

St. Clair County Circuit Court case number: 09-L-625.

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