Fight for Control of Potato Processor Hits Ninth Circuit

SEATTLE (CN) – J.R. Simplot, the country’s largest supplier of fresh potatoes tried to convince the Ninth Circuit on Monday that a business partner improperly took over a vegetable processor without paying.

Washington Potato Company won a judgment in federal court in 2017 allowing it to purchase Pasco Processing for $0, after U.S. District Judge Rosanna Peterson ruled its contract with Simplot allowed the transfer because there was a deadlock over capital contributions to Pasco.

Simplot has a contentious history with both companies.

The agribusiness giant sought control over Washington Potato and Pasco, in addition to other smaller processing and distribution companies integral to its business, in 2016, claiming the companies were being mismanaged and in danger of going bankrupt.

That federal complaint was dismissed in 2017 due to lack of jurisdiction.

In the current dispute, Simplot claims there was not an official deadlock because the term only refers to matters that require board approval. Washington Potato asked Simplot to contribute $3 million for Pasco’s defaulted loan, but the contribution only required Simplot’s members to approve, attorney Eric Miller told a three-judge appellate panel Monday.

“There is a distinction between members and board members,” Miller said.

“Can members take any action apart from through the board?” U.S. Circuit Judge Morgan Christensen asked.

Miller said that a majority board vote was not required for capital contributions.

“Disagreements among the members are not subject to deadlock provisions,” he said.

Washington Potato Company’s attorney Stephen Rummage said Simplot was ignoring the structure of the joint operating agreement.

“Deadlock clearly rose under the operating agreement,” he said.

Once the parties became deadlocked, Washington Potato was allowed to take over Pasco, according to Rummage.

“If a conflict walks, talks and looks like a deadlock, it’s a deadlock,” he said.

Rummage asked the panel to affirm the lower court’s decision to allow a sale under the deadlock provision and find Washington Potato the sole owner of Pasco.

U.S. Circuit Judge Sandra Ikuta and U.S. Court of International Trade Judge Jennifer Choe-Groves, sitting by designation, rounded out the panel. The judges did not indicate when they would rule.

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