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First Dakota National Bank v. Eco Energy, LLC

United States Court of Appeals, Eighth Circuit

February 1, 2018

First Dakota National Bank Plaintiff- Appellant
v.
Eco Energy, LLC, a Tennessee limited liability company formerly known as Eco Energy, Inc. Defendant-Appellee

          Submitted: November 16, 2017

         Appeal from United States District Court for the District of Nebraska - Omaha

          Before BENTON, SHEPHERD, and KELLY, Circuit Judges.

          BENTON, Circuit Judge.

         First Dakota National Bank sued Eco-Energy, LLC, for breach of contract. The district court[1] ruled for Eco-Energy. First Dakota appeals. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

         I.

         Eco-Energy contracted with Nedak Ethanol, LLC. Under a Marketing Contract, Eco-Energy promised to buy all Nedak's ethanol and to transport it by railcar. Eco-Energy leased the railcars from a railcar company under a Car Service Agreement. Nedak promised to sublease the railcars from Eco-Energy if the Marketing Contract were terminated for any reason.

         The next year, Nedak assigned its rights under the Marketing Contract and the Sublease to its lead lender, AgCountry Farm Credit Services, FLCA. Eco-Energy consented to the Assignment, agreeing "to give [AgCountry] prompt written notice of any default under the Assigned Documents and to allow [AgCountry] a reasonable period of time to cure any such defaults . . . ."

         About three years later, the parties terminated the Marketing Contract. As promised, Nedak subleased the railcars from Eco-Energy. Nedak eventually defaulted. Eco-Energy notified Nedak-but not AgCountry-of the default. Eco-Energy terminated the Sublease, ended Nedak's use of the railcars, and denied Nedak's attempt to cure.

         First Dakota National Bank owned an interest in the loan from AgCountry to Nedak. First Dakota later acquired the contractual rights of AgCountry and Nedak against Eco-Energy. First Dakota sued, claiming Eco-Energy terminated the Sublease without giving (1) Nedak notice and a sufficient opportunity to cure, and (2) AgCountry notice and an opportunity to cure Nedak's default.

         First Dakota and Eco-Energy both moved for summary judgment. The district court granted Eco-Energy's motion in part, ruling that Eco-Energy did not breach the Sublease. The court ruled that the Sublease did not require Eco-Energy to give Nedak notice and opportunity to cure. The court also ruled that Eco-Energy did breach the Assignment. It reasoned that the Assignment required Eco-Energy to give AgCountry notice and opportunity before terminating the Sublease, because it was an "Assigned Document." But, according to the district court, "issues of fact remain regarding causation which preclude summary judgment for either party" on the Assignment claim.

         The bench trial focused on whether Eco-Energy's breach caused damages. The key dispute: Would AgCountry have cured if Eco-Energy had given it notice and opportunity? According to First Dakota, curing would have been "the only reasonable choice." Eco-Energy countered that AgCountry would not have cured because, for example, AgCountry had frozen Nedak's accounts and kept them frozen "even after discovering that Nedak had defaulted on its sublease and was in jeopardy of losing its railcars." The district court found that First Dakota had not "proven that AgCountry would have exercised its right to cure Nedak's default had it received proper notice and opportunity."

         II.

         First Dakota argues the district court erred in granting partial summary judgment for Eco-Energy. According to First Dakota, although the Sublease by itself does not require notice and opportunity, it incorporates this requirement from the Car Service Agreement. This court reviews de novo the district court's interpretation of a contract ...


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