Terry Lusk v. C.H. Robinson Worldwide, Inc.

Background

Plaintiffs are produce farmers (collectively 'Growers') who contracted with C.H. Robinson Worldwide, Inc., C.H. Robinson Company, Inc., and C.H. Robinson Company (collectively 'CHR') to market and sell their produce to grocery stores, restaurants, and wholesalers. Within CHR, the Robinson Fresh ('RF') division handled produce sales, quoting daily market prices (FOB prices — meaning the price for goods at the point of origin, before freight) to buyers. CHR earned a commission of roughly 10% of the FOB price and remitted the remainder to the Growers.

In 'delivered-sale' transactions, CHR also arranged transportation. The freight quote came from a separate CHR division called North American Surface Transportation ('NAST'), which built a profit markup into its freight estimates. The Growers alleged that CHR engaged in 'freight topping' — inflating freight costs — and then allocated proceeds between FOB price and freight in a way that reduced the amount the Growers received, without disclosing the freight markup to the Growers.

CHR maintained that the FOB price and freight costs were set independently by separate divisions, and that freight costs were ultimately the buyer's and CHR's concern, not the Growers'.

This litigation has a long procedural history, including prior partial summary judgment rulings and two denied class certification motions. The Court had previously held that Growers must show they bore the 'economic impact' of the freight markups to prevail on either claim.

Summary Judgment Standard

Summary judgment is appropriate when there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. (Federal Rule of Civil Procedure 56(a).) The nonmoving party must present specific evidence showing a genuine issue for trial.

PACA Claim — Granted

PACA (7 U.S.C. § 499b(4)) requires a produce sales agent to truthfully and accurately account to the producer for all charges against a shipment. The Court had previously held that, to recover, the Growers must prove they bore the economic impact of the freight markups for each individual transaction — because only then would the markups qualify as charges against the shipment that should have been disclosed.

The Growers' only evidence of economic impact was an expert report prepared for class certification purposes, which analyzed aggregated data from 212 putative class members and found a statistically negative relationship between CHR's freight profits and Growers' overall revenue. However, the expert did not analyze economic impact on any particular transaction. The Court found this insufficient to establish transaction-by-transaction impact, as its prior orders required. Because the Growers had no other evidence meeting this standard, the PACA claims were dismissed with prejudice.

Breach of Fiduciary Duty — Denied

Existence of a Fiduciary Relationship

CHR argued that no fiduciary relationship existed between the parties. The Court disagreed. Applying the seven-factor test from the Minnesota Supreme Court's decision in Jurek v. Thompson, 241 N.W.2d 788 (Minn. 1976) — which distinguishes buyer-seller relationships (not fiduciary) from agent-principal relationships (fiduciary) in consignment sales — the Court found the factors overwhelmingly supported a fiduciary relationship:

- CHR never held legal title or physical possession of the produce; Growers retained title until buyers accepted delivery. - CHR was not responsible for paying a fixed price; it was obligated to seek the best possible price on the Growers' behalf. - CHR was required to account to Growers for the FOB price and could only retain a percentage commission; it could not pocket price differences like a reseller. - The produce was delivered without alteration or addition by CHR. - Growers, not CHR, bore the risk of loss and spoilage until buyer acceptance.

Two factors (CHR dealing with multiple growers, and CHR selling under its own 'Robinson Fresh' brand without disclosing that the produce was Growers') pointed toward a buyer-seller relationship, but the Court found those factors unpersuasive and not strongly indicative.

CHR argued it could not be an agent because Growers did not control it — pointing to contract language giving CHR 'full control' over sale timing, price, and buyer selection. The Court rejected this argument, citing the Restatement (Second) of Agency § 14: a principal can exercise control by setting preconditions on an agent's authority, and the right to control may exist even if the principal agreed not to exercise it directly. The Growers could have revoked CHR's authority (even if doing so would have breached the contract), and CHR was bound to seek the best possible price. Those constraints constituted sufficient control to establish an agency relationship.

The Court concluded CHR was Growers' agent in delivered-sale transactions and therefore owed them fiduciary duties, including the duty to disclose any material matter bearing on CHR's duty to represent Growers with undivided loyalty.

Breach of Fiduciary Duty

Under Minnesota law (the Perl line of cases), a fiduciary that fails to disclose a material conflict of interest breaches its duty even without proof of actual harm. The principal need only show that the fiduciary had an opportunity to self-deal and failed to disclose that risk.

The Court found that CHR's own account of the transaction structure demonstrated a clear risk of self-dealing: CHR was simultaneously negotiating FOB prices (on which it earned only a percentage commission) and freight markups (the entire profit of which went to CHR). This created an incentive to accept lower FOB prices in exchange for higher freight profits. The Growers' expert report further supported that there was a negative correlation between CHR freight profits and Growers' revenue. Because CHR never disclosed the freight markups to Growers, CHR breached its fiduciary duty regardless of which party's factual narrative was more accurate.

Damages — Forfeiture of Commissions

The Court reconsidered its prior holdings that required proof of economic impact for damages on the fiduciary-duty claim. Under the Perl cases, a fiduciary that breaches its duty forfeits the right to compensation — period — without proof of actual economic harm to the principal. The 'injury' is the degradation of the fiduciary relationship itself.

However, the recoverable amount is limited: forfeiture cannot exceed compensation paid by the principal to the fiduciary (not commissions paid by third parties). The Court held:

- Freight markups: Not recoverable, because the Growers have no evidence that they (rather than buyers or CHR) bore the cost of those markups. The freight markups were not compensation paid by the Growers. - Sales commissions: Subject to forfeiture. It is undisputed that CHR's commissions were deducted directly from the FOB price remitted to the Growers, making them compensation paid by the Growers. The commissions may therefore be forfeited.

Because there is no evidence of actual fraud, bad faith, or demonstrable harm — and because there are multiple potential plaintiffs — the Court held under Perl III (Gilchrist v. Perl, 387 N.W.2d 412 (Minn. 1986)) that the forfeiture need not be total. The amount must be determined by reference to the statutory factors for measuring punitive damages under Minnesota law.

Class Certification Invitation

Because economic impact no longer needs to be proven transaction-by-transaction for the commissions claim, the Court noted that class treatment may now be appropriate and invited the Growers to move for limited reconsideration of the September 2024 order denying class certification.

Disposition

CHR's motion for summary judgment was granted in part and denied in part: 1. Plaintiffs' PACA, contract, and implied-covenant claims are dismissed with prejudice and on the merits. 2. The motion is denied in all other respects (the breach-of-fiduciary-duty claim proceeds).

The Court also ordered that Central Florida Fruit Sales, LLC be dismissed from the lawsuit and replaced with Sandway Farms, Inc., per agreement of the parties.