Contract analysis

I. INTRODUCTION Plaintiff Greenfield Agricultural Partners LLC ("GAP") respectfully submits this Memorandum of Law in Support of its Motion to Strike the First, Second, and Third Affirmative Defenses asserted by Defendants Prairie Basin Grain Co. ("PBGC") and Darren K. Musgrave ("Musgrave") (collectively, "Defendants") in their joint Answer and Affirmative Defenses filed on June 27, 2022 (the "Answer"). This Memorand

II. FACTUAL BACKGROUND A. The Off-Take Agreement On March 15, 2019, GAP, acting as Seller, and PBGC, acting as Buyer, entered into the Off-Take Agreement, a comprehensive five-year master agreement governing the purchase and sale of grain commodities, specifically #2 Yellow Corn and #1 Yellow Soybeans. The Off-Take Agreement has a term running from March 15, 2019, through March 14, 2024, and establishes the commercia

Section 5.2 of the Off-Take Agreement governs payment terms. Payment for each delivery is due net thirty (30) days from the date of delivery and acceptance at the elevator facility. The term "acceptance" is defined in Section 2.1(b) to mean the physical receipt of grain at the elevator weigh station, confirmation of quality specifications by PBGC's on-site quality assurance personnel, and issuance of a scale ticket o

Section 7.3 of the Off-Take Agreement provides that all amounts not paid when due shall bear interest at a rate of 1.5% per month (equivalent to 18% per annum), calculated on the outstanding balance from the date payment was due until the date of actual payment in full. This contractual interest rate was negotiated at arm's length between the parties and represents a commercially reasonable rate given the credit risk

Section 12.4 of the Off-Take Agreement contains a prevailing-party fee-shifting provision, which states: "In any action, suit, or proceeding arising out of or in connection with this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees, costs, and expenses from the non-prevailing party." This provision is relevant to GAP's entitlement to fees and costs in this enforcement action

Section 13.1 of the Off-Take Agreement provides that the agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to its conflict-of-laws provisions. Section 13.2 provides for exclusive jurisdiction in the courts of Cook County, Illinois, or the United States District Court for the Northern District of Illinois. As part of the overall transaction, and contempor

1. Invoice GAP-2021-3187, dated September 28, 2021, for 150,000 bushels of #2 Yellow Corn delivered to PBGC's Champaign County elevator facility, in the amount of $892,500.00, with payment due on or before October 28, 2021.

2. Invoice GAP-2021-3244, dated October 15, 2021, for 75,000 bushels of #1 Yellow Soybeans delivered to PBGC's Piatt County elevator facility, in the amount of $936,750.00, with payment due on or before November 14, 2021.

3. Invoice GAP-2021-3301, dated November 12, 2021, for 200,000 bushels of #2 Yellow Corn delivered to PBGC's Champaign County and Piatt County elevator facilities, in the amount of $1,224,000.00, with payment due on or before December 12, 2021.

4. Invoice GAP-2021-3358, dated December 8, 2021, for 120,000 bushels of #2 Yellow Corn delivered to PBGC's Champaign County elevator facility, in the amount of $741,600.00, with payment due on or before January 7, 2022.

5. Invoice GAP-2022-0042, dated January 19, 2022, for 80,000 bushels of #1 Yellow Soybeans delivered to PBGC's Piatt County elevator facility, in the amount of $1,075,200.00, with payment due on or before February 18, 2022. The total unpaid principal balance across these five invoices is $4,870,050.00. As of the date of this filing, no portion of this amount has been paid. Interest continues to accrue on each invoice

III. LEGAL STANDARD FOR MOTION TO STRIKE AFFIRMATIVE DEFENSES Under Section 2-615 of the Illinois Code of Civil Procedure, 735 ILCS 5/2-615, any party may move to strike a pleading or any part thereof on the ground that it is substantially insufficient in law. This standard applies with equal force to affirmative defenses asserted in an answer. See Dratewska-Zator v. Rutherford, 2013 IL App (1st) 122699, ¶ 12 ("A Sec

IV. ARGUMENT A. The First Affirmative Defense (Force Majeure) Should Be Stricken PBGC's First Affirmative Defense, which invokes force majeure based on the October 17, 2021 fire at its Macon County elevator facility, is legally insufficient as a matter of law and should be stricken in its entirety. The defense fails for three independent reasons: (1) the force majeure clause in the Off-Take Agreement, by its express

1. Force Majeure Clauses Are Strictly Construed Under Illinois Law It is well established under Illinois law that force majeure clauses are creatures of contract, not of common law, and must be strictly construed. See Thackeray Enterprises v. Allied-General Nuclear Services, 731 F. Supp. 850, 855 (N.D. Ill. 1990); Northern Illinois Gas Co. v. Energy Cooperative, Inc., 122 Ill. App. 3d 940, 949 (3d Dist. 1984). A forc

2. The Force Majeure Clause in the Off-Take Agreement Does Not Excuse Payment Obligations The force majeure clause in the Off-Take Agreement is contained in Section 10.1, which provides in relevant part: "Neither party shall be liable for any delay in or failure of performance of its obligations hereunder with respect to the delivery or acceptance of grain to the extent such delay or failure results from any event or

3. The Macon County Elevator Fire Affected Only One of Six PBGC Facilities Even setting aside the textual limitation of the force majeure clause, PBGC's First Affirmative Defense is insufficient because the fire at the Macon County elevator facility cannot excuse PBGC's failure to pay invoices for grain delivered to and accepted at PBGC's other elevator facilities. PBGC operates a network of six grain elevator facili

4. PBGC's Financial Difficulties Do Not Constitute Force Majeure At bottom, PBGC's First Affirmative Defense is not truly a force majeure defense at all. It is, in substance, an assertion that PBGC lacked sufficient funds to pay its obligations. PBGC's Answer and Affirmative Defenses, taken as a whole, implicitly concede that the real basis for nonpayment is financial distress — a combination of cash-flow shortfalls

1. Illinois Law Standard for Commercial Impracticability Under Illinois law and Section 2-615 of the Uniform Commercial Code, as adopted in Illinois (810 ILCS 5/2-615), a party may be excused from its performance obligations where performance has been "made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made." 810 ILCS 5/2-615(a). The doct

2. Payment of Money Is Not Subject to the Defense of Commercial Impracticability It is a bedrock principle of both Illinois common law and the UCC that the obligation to pay money cannot be excused by the doctrine of commercial impracticability. See 407 East 61st Garage, Inc. v. Savoy Fifth Avenue Corp., 23 N.Y.2d 275, 281 (1968) (holding that financial inability to perform does not excuse a monetary obligation); Lan

3. PBGC's Financial Losses from Hedging and the Fire Do Not Establish Impracticability Even if the doctrine of commercial impracticability could theoretically apply to a payment obligation — which it cannot — PBGC's allegations fall far short of establishing the level of impracticability required under Illinois law. PBGC alleges that volatile corn and soybean basis levels during the fourth quarter of 2021, combined w

4. PBGC Assumed the Risk of These Contingencies The doctrine of commercial impracticability is further inapplicable because PBGC assumed the risk of the very contingencies it now cites as the basis for excusing its performance. The Off-Take Agreement is a sophisticated commercial agreement between two experienced and well-counseled participants in the grain trade. Both parties were represented by counsel during the n

1. The Failure to Mitigate Defense as Pled Is Insufficient in Factual Particularity PBGC's Third Affirmative Defense alleges, in its entirety, that GAP "failed to mitigate its damages by failing to resell the grain to alternative buyers or take other reasonable steps to minimize its loss after PBGC's nonpayment." This allegation is wholly conclusory and devoid of any factual content that would put GAP on notice of th

2. In the Alternative, the Defense May Be Cognizable Under Illinois Law GAP acknowledges that the duty to mitigate damages is a well-recognized principle under Illinois law, and that failure to mitigate is a cognizable affirmative defense in a breach-of-contract action. See Goldberg v. Davis, 65 Ill.2d 378, 383 (1976); Midland Hotel Corp. v. Reuben H. Donnelley Corp., 118 Ill.2d 306, 317 (1987); In re Estate of Halas

V. CONCLUSION For all of the foregoing reasons, Plaintiff Greenfield Agricultural Partners LLC respectfully requests that this Court enter an order granting the following relief:

1. Striking Defendants' First Affirmative Defense (Force Majeure) in its entirety, on the ground that the force majeure clause in the Off-Take Agreement does not, by its terms, excuse payment obligations for grain already delivered and accepted; that the fire at PBGC's Macon County elevator facility bears no causal relationship to PBGC's failure to pay invoices for grain delivered to other facilities; and that financ

2. Striking Defendants' Second Affirmative Defense (Commercial Impracticability) in its entirety, on the ground that the obligation to pay money is not subject to the defense of commercial impracticability; that PBGC's hedging losses, basis volatility, and the Macon County fire do not rise to the level of objective impossibility required under Illinois law; and that PBGC assumed the risk of the very contingencies it

3. Striking Defendants' Third Affirmative Defense (Failure to Mitigate) for failure to plead the defense with sufficient factual particularity, or, in the alternative, ordering Defendants to replead the Third Affirmative Defense with specific factual allegations supporting the defense, including identification of the steps GAP allegedly should have taken, the alternative buyers or markets allegedly available, the pri

4. Granting such other and further relief as this Court deems just and proper. Respectfully submitted, GREENFIELD AGRICULTURAL PARTNERS LLC, By its attorneys, CALDERWOOD & HARKNESS LLP By: ________ Hannah Brinkley (ARDC No. 6329148) Patrick Gallagher (ARDC No. 6331502) 225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606 Telephone: (312) 555-7800 Facsimile: (312) 555-7801 Email: hbrinkley@calderwoodharkness.com