Grower-Distributor Lawsuit

Business Disputes

March 2015

A Grower-Distributor Lawsuit and the Importance of a Good Contract

A victory in Yuma County litigation illustrates that the best way to avoid a “swearing match” in court is to have all terms in writing.

A Yuma County produce grower entered into a marketing and sales agreement with a produce distributor. Under the contract, the distributor agreed to front some of the growing costs and then sell the produce, taking a commission on the sales. Under the terms of the contract, the distributor was also permitted to recover some of his costs for selling the produce.

When the distributor tried to retain from the gross sales proceeds over $200,000 in “quality control” costs, the grower sued the distributor. I represented the grower in that litigation. The contract between the grower and distributor put the burden of quality control on the grower and, at the same time, listed 21 specific costs that the distributor could recover out of the gross sales.

“Quality control” was not among the 21 costs listed, but “repacking costs” were. Interestingly, during the litigation, when the distributor turned over his accounting records, the repacking line-item showed nearly $230,000 – a total that provided a thinly veiled cover for the $200,000 in unauthorized “quality control” costs for which the distributor sought reimbursement.

At trial, the distributor’s quality control contractor testified that the produce coming to the distributor was of good quality. It is not clear why someone was paid so much money to inspect produce that was of good quality. In any event, our client was awarded over $200,000 for the “quality control” costs that were wrongfully included in the repacking costs.

"Swearing Match" Avoided

When a list of items is set forth in a contract, the law presumes that anything not specifically listed is excluded. In the absence of a well-written contract, the decision-maker would have been left to the two parties' competing testimonies as to whether “quality control” was properly withheld as a cost. Attorneys often refer to this as a “swearing match,” because both parties swear to tell the truth but testify in total opposition to one another.

The best way to avoid a swearing match is to put all material terms in writing. In this case, the contract proved to be crucial to our success in winning a recovery for our client.
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