Idaho cattle company fights $1 million payment to Tyson
By Tom Johnston on 12/2/2013
An Idaho cattle company last week appealed a bankruptcy court’s ruling that it owes Tyson Fresh Meats nearly $1 million that Tyson overpaid during a cattle feeding contract between the two firms, according to court documents.
Hollyfield Ranches Inc. (HRI) disputes the court’s ruling that it owes Tyson $958,511 that Tyson overpaid in the agreement, which spanned about two years between 2010 and 2012, saying the packer violated the agreement by not using "reasonable and customary" risk management methods during the settlement of price that prompted more than $1.2 million in losses for HRI.
Idaho Bankruptcy Court Judge Jim D. Pappas had sided with Tyson’s argument that the contract provided that Tyson would have responsibility for risk management, that the company would use "reasonable and customary" risk management methods, and that its approach of using short hedges to adjust the settlement price constituted "reasonable and customary" methods.
Under the contract, Hansen, Idaho-based Double H Cattle Inc., a subsidiary of Hollyfield, purchased and fed cattle for Tyson, and Tyson would reimburse the ranch for those costs. Double H would deliver fed cattle to Tyson’s Pasco, Wash., slaughterhouse. In the settlement of price Tyson would apply hedging adjustments it developed using expense projections provided by HRI.
The relationship continued during and after Hollyfield’s filing in September 2010 for Chapter 11 bankruptcy. At that point, Tyson had fully reimbursed the rancher. But for most of the transactions afterward, Tyson said, the settlement price was lower than what Tyson already had paid to HRI through reimbursements, and HRI owed Tyson $958,511.
HRI grew and delivered more than 12,000 head of cattle for Tyson over the span of the contract, and initially was profitable until market prices moved, court documents state.
The contract terminated in March 2012 when Tyson filed a lawsuit to recoup the money from HRI. HRI countersued a month later.
A trial was held in August 2013, after which the two parties submitted final arguments to Pappas.