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Soybean council wins royalties lawsuit

Soybean council wins royalties lawsuit

June 17th, 2016 by Bob Watson in Missouri News

Missouri Soybeans logo by the Missouri Soybean Merchandising Council

It took a jury less than 30 minutes Wednesday, at the end of a three-day trial, to award almost $603,000 in damages to the Jefferson City-based Missouri Soybean Merchandising Council (MSMC) and the Mid-America Research and Development Foundation (MRDF).

A Thursday news release from the Missouri Soybean Association said the jury's unanimous verdict against AgBorn Genetics LLC "affirms protection for farmers' checkoff investments."

The news release said the Kansas City-area jury determined AgBorn Genetics owed a total of $602,945 "based on royalties owed for undisclosed and unreported sales of MSMC's soybean seed technologies, and for unpaid and bounced royalty checks issued by AgBorn Genetics."

Those checks were signed by AgBorn's general manager, Alex Stemme, who formed AgBorn Genetics in 2006, with William J. Cook of Garden City — who also was an official for the Soybean Association and the MSMC.

Todd A. Rowden, a Chicago-based attorney, told the News Tribune the Jackson County case was the first of two filed over actions by former Soybean Association Director Dale Ludwig and Stemme, who was the association's director of Identity-Preserved Products and of Research.

"Unbeknownst to the council, (Stemme) was the general manager and later the CFO of this AgBorn Genetics," Rowden explained. "In 2008, AgBorn Genetics — through Dale Ludwig, Alex Stemme and Bill Cook — entered into this Master Commercialization Agreement and, later a Sublicense Agreement for MSMC's soybean technology.

The two agreements essentially gave AgBorn the national and worldwide exclusive rights to sell virtually all of MSMC's seed technolog, Rowden said,

But the lawsuit alleged AgBorn Genetics didn't fulfill key provisions of those agreements.

The commercialization agreement, or MCA, required AgBorn to pay royalties to the MSMC. The lawsuit contended no royalties were paid in 2008, 2009, 2010 or 2014.

Royalties in 2011, 2012 and 2013 were sent to the MRDF, in violation of the agreement.

The agreement also allowed the merchandising council to audit AgBorn's records each year, but "MSMC has made multiple requests to (AgBorn) to audit its records and provide information concerning its activities, and Defendant has failed to provide such access or allow MSMC to conduct an audit," the lawsuit said.

Thursday's news release noted MSMC is a "farmer-run organization dedicated to improving the profitability of the Missouri soybean farmer through a combination of marketing, research and commercialization programs, supported by the soybean checkoff paid by Missouri soybean farmers."

The lawsuit said MRDF "is affiliated with MSMC and supports research related to soybean production and use."

Rowden explained the elected farmer leadership of MSMC, during 2013, investigated the activities of the senior staff, including these contracts with AgBorn. "These documents were not enforceable agreements — so, we attempted to negotiate with AgBorn and Stemme, to no avail," he said.

Ultimately,when AgBorn refused to cooperate, Rowden and other attorneys issued numerous subpoenas for bank, tax and other records, and "lo and behold, we find hundreds of thousands of seed sales that were never reported and royalties never paid."

Even before the case went to the jury, Rowden said, the judge voided the contracts and issued sanctions against AgBorn for refusing to produce documents or answer interrogatories.

The jury trial involved arguments over the amounts AgBorn did not report to MSMC and royalties it did not pay. "The jury verdict Wednesday was for the full amount that we sought," Rowden said.

The Jackson County jury's decision could have an impact on the second unscheduled trial, which will be in Cole County. That lawsuit accuses Ludwig and Stemme of violating their responsibilities to the Soybean Association, Merchandising Council and Research and Development Foundation, and for violating conflicts of interest rules.