Legal Development Updates

Jorgenson v. Agway, Inc.

The plaintiffs in this case were ninety farmers who purchased seed from the defendant commercial seed company for use in the cultivation and subsequent sale of the resultant crop. Alleging that certain defects in the seed led to inferior crop yields, the plaintiffs brought suit against the defendant in federal district court under multiple theories, including claims that the defendant violated the North Dakota Consumer Fraud Act by making knowing and deceptive misrepresentations about the product. The defendant moved to dismiss the consumer fraud act claims, arguing that the Act is not intended to apply to transactions which are more "mercantile" in nature such as those in which seed is purchased for cultivation and subsequent sale. In contrast, the defendants argued that the Act is to apply only to consumer transactions in which goods are acquired for direct use or ownership.

The federal district court certified the state law question to the Supreme Court of North Dakota to determine whether the heretofore uninterpreted North Dakota statute may apply to transactions in which farmers purchase seed for use in the production and subsequent sale of the resultant crops. Broadly interpreting the language of the state consumer fraud act, the Supreme Court of North Dakota held that the Act "clearly and unambiguously" applies to such transactions.

Specifically, the Court noted that North Dakota's Consumer Fraud Act defines an unlawful practice as "the use of any deceptive act, fraud, false promise, or misrepresentation in connection with the sale or advertisement of any merchandise." Under the Act, merchandise is defined as "any objects, wares, goods, commodities, intangibles, real estate, or services." The Court found that this definition is broad enough to encompass the seeds bought by plaintiffs.

In addition, although the Act is entitled "Consumer Fraud and Unlawful Credit Practices," the Court noted that the term "consumer" is not used anywhere in the text of the statute. Rather, the Act provides that "any person" is not precluded from bringing an action against another person who has profited financially through any unlawful practice under the Act. Person is defined by the Act as, among other things, any natural person, business entity, or association. The Court found that this definition of person does not necessarily limit the Act's reach to "consumers" or "consumer transactions" as defined by the defendant.

The federal district court hearing to determine, among other things, whether the defendant violated the state consumer fraud act is scheduled for October 2002.