MAXWELL FOODS, LLC v. SMITHFIELD FOODS, INC., 2024 NCBC 89

STATE OF NORTH CAROLINA
WAYNE COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
20 CVS 1430
MAXWELL FOODS, LLC,
Plaintiff,
v.
SMITHFIELD FOODS, INC.,
Defendant.
ORDER AND OPINION
ON MOTIONS FOR
SUMMARY JUDGMENT
[Filed Under Seal –
Public Version to Follow]1
1. 	For over 25 years, Maxwell Foods, LLC sold hogs to Smithfield Foods, Inc.
under an output contract. In this lawsuit, each accuses the other of having breached
that contract. 	Discovery is closed, and the parties’ motions for summary judgment
are pending. 	For the following reasons, the Court GRANTS Maxwell’s motion for
summary judgment and GRANTS in part and DENIES in part Smithfield’s
motion.
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Reid L.
Phillips, Charles E. Coble, Eric M. David, Amanda S. Hawkins, and
Shana L. Fulton, for Plaintiff Maxwell Foods, LLC.
Robinson, Bradshaw, & Hinson, P.A., by Robert E. Harrington, Ethan
R. White, Mark A. Hiller, and Emma W. Perry, and McGuireWoods LLP,
by Jonathan Harmon, for Defendant Smithfield Foods, Inc.
Conrad, Judge.
1 The record related to the pending motions is voluminous and includes over 100 exhibits that
the parties filed provisionally under seal. 	In another order entered today, the Court has
unsealed many but not all of these documents. As a result, the Court does not believe that
any part of this opinion ought to be sealed. 	Out of an abundance of caution, however, the
Court is filing this opinion under seal temporarily to give the parties a chance to review it
and raise any concerns. A public version will follow in thirty days.
Maxwell Foods, LLC v. Smithfield Foods, Inc., 2024 NCBC 89.

I.
BACKGROUND
2. 	The Court does not make findings of fact when ruling on motions for
summary judgment. The following background, drawn from the evidence submitted
by the parties, provides context for the Court’s analysis and ruling only.
3. 	Smithfield is the world’s largest pork processor. It obtains hogs from many
suppliers—including 	both 	internal 	subsidiaries 	and 	external 	producers—and
processes the hogs for sale to consumers as pork products. Maxwell used to be one of
Smithfield’s suppliers but has not produced hogs since 2021.
4. 	The parties’ supply contract—the Production Sales Agreement, or PSA for
short—dates to December 1994. In that contract, Smithfield promised “to purchase,”
and Maxwell promised “to sell and deliver,” all hogs “actually produced by Maxwell”
each month “up to a maximum of” 155,000. The purchase price is stated as a formula,
using a mix of market factors and performance metrics. 	The formula starts with a
base price equal to the average daily price quoted for hogs sold on the Iowa-Southern
Minnesota spot market, which Maxwell and Smithfield deemed to be “a relatively
stable national market price.” 	To the base price, the formula adds an overage of a
few cents per pound. 	Then, in its last step, the formula adds or subtracts various
premiums, 	discounts, 	and 	credits: 	Smithfield 	might 	pay 	less, 	for 	example, 	if
Maxwell’s hogs weighed too much or too little, and it might pay more if the hogs had
desirable traits as set out in something called a Grade and Yield Matrix. (Production
Sales Agreement [“PSA”] §§ 1(b), 3(a), 3(b), 3(f), 5(a)–(c), ECF No. 154.12.)

5. 	Premiums and discounts were not set in stone. 	Smithfield could propose
changes to the Grade and Yield Matrix from time to time, and Maxwell could accept
or decline them. 	If Maxwell declined, then it would receive a flat “premium paid of
$0.45 per one hundredweight” rather than a variable, delivery-by-delivery premium.
As for the other components of the formula, Maxwell and Smithfield agreed to
“designate a substitute” base price “[i]f the Iowa-Southern Minnesota market ceases
to be a viable market” and to arbitrate the matter absent agreement. 	(PSA §§ 1(b),
5(c).)
6. 	Either party could terminate the PSA for any reason by giving written notice
six years in advance. 	Otherwise, the PSA specifies no fixed term or end date. 	In
addition, the PSA includes a force majeure clause, stating that “[n]either party shall
be liable for failure to perform or for delay in performing any act under this
Agreement if prevented by any cause beyond the reasonable control of such party,
including, but not limited to, acts of God, wars, epidemics, storms, tornadoes, or
explosions.” (PSA §§ 3(a), 4, 12.)
7. 	Negotiations over the PSA appear to have been cordial. To seal the deal, a
team of Maxwell’s senior officials traveled to the home of Smithfield’s CEO, where a
typewritten copy of the contract awaited their signatures. 	The only sticking point
was Maxwell’s fear that Smithfield might not treat it as well as other major hog
suppliers. 	So, before signing, Maxwell’s officials sought written assurance that its
deal was as good as the deals Smithfield had given to others. Smithfield agreed, but
rather than modify the prewritten PSA to reflect this assurance, the parties signed it

and supplemented it with a letter agreement the next day. 	(See Dep. S. Horsley,
53:11–23, ECF Nos. 154.3, 159.3, 188.7, 193.3, 222.2; Dep. R. Ivey 131:7–140:4, ECF
Nos. 154.5, 188.8, 194.1, 230.1, 231.)
8. 	To assuage Maxwell, the letter agreement contains a most-favored-nation
clause. 	Smithfield “represent[ed] that the [PSA] gives Maxwell Foods the same
economic incentives (including any Grade and Yield Matrix) as given all of Smithfield
Foods’ other major swine suppliers” and promised to offer Maxwell “the benefit of
future 	changes 	in 	economic 	benefits 	given 	said 	major 	swine 	suppliers.” 	A
handwritten addition states that “[m]ajor swine suppliers include Carroll’s Foods,
Inc., Murphy Family Farms, Inc., and Prestage Farms, Inc.” 	Among the letter
agreement’s other miscellaneous terms is Maxwell’s acceptance of the Grade and
Yield Matrix attached to the PSA. 	(Letter Agrmt. ¶¶ 1, 6, ECF No. 162.3; see also
Aff. R. Sharpe ¶¶ 7, 8, ECF No. 161.23.)
9. 	For the better part of the next three decades, Maxwell delivered hogs to
Smithfield under the PSA. Much changed during that time.
10. 	To start, Smithfield went from being a large pork producer to being the
world’s largest. 	In 1994, Smithfield obtained most of its hogs from its three largest
external suppliers, Carroll’s Foods, Murphy Family Farms, and Prestage Farms. 	A
smaller share came from affiliated companies, including Brown’s of North Carolina.
Toward the end of the decade, Smithfield acquired Carroll’s Foods and Murphy
Family Farms, increasing not only its size but also the proportion of hogs supplied by
internal as opposed to external suppliers. Today, Smithfield’s largest supplier by far

is Murphy-Brown, its subsidiary born from those acquisitions. 	(See Aff. S. Horsley
¶¶ 3–5, ECF No. 52.3; Smithfield 1994 10-K, ECF No. 162.1; Def.’s 2d Am. Resp. to
Pl.’s 2d Interrogs. Ex. 1, ECF No. 161.17.)
11. 	Smithfield also tweaked the way it computed payments for Maxwell’s hog
deliveries. In 2007, Smithfield jettisoned the Grade and Yield Matrix. Until then, it
had used a device called the Fat-O-Meater to measure backfat and loin depth, which
were key ingredients in determining the amount of a premium or discount under the
Grade and Yield Matrix. 	After retiring the Fat-O-Meater, Smithfield paid Maxwell
a flat amount of $0.63 per hundredweight (a higher premium than the PSA called for
when no Grade and Yield Matrix was in effect). There were other pricing adjustments
as well, including that Smithfield paid based on “carcass weight” for many deliveries
and based on “live weight” for others. Whether these practices line up with the strict
letter of the PSA is not always clear. 	(See PSA § 5(c); Oct. 2007 Letter from J.
Luckman, ECF No. 160.27; Dep. H. Suggs 42:3–47:23, ECF Nos. 159.17, 188.17,
230.2; Dep. J. Luckman 197:13–200:19, ECF Nos. 159.7, 188.12.)
12. 	In more recent years, the parties discussed dropping the PSA’s pricing
formula altogether. In February 2014, Smithfield’s head of hog procurement, Collette
Kaster, told Maxwell that many suppliers were shifting away from the Iowa-Southern
Minnesota market, which had become too “thinly traded,” in favor of “CME based
pricing” or “[c]utout” pricing.2 	Kaster asked Maxwell if it would consider “a CME
2 CME is short for Chicago Mercantile Exchange. The CME index “is a weighted average of
the national data for” both spot-market transactions, such as those on the Iowa-Southern
Minnesota market, and transactions involving supply contracts. Cutout pricing “recreate[s]

Index pricing alternative.” 	Maxwell’s president, Bob Ivey, responded that the
company was “open as long as it is not a step backward on pricing” but opted to “stay
with the present market pricing for now until we could model” the change. (Feb. 2014
Kaster/R. Ivey E-mails, ECF No. 160.5.)
13. 	Sporadic communications about pricing continued from that point forward.
The parties view those communications very differently. Smithfield contends that it
made several formal contract offers containing index pricing, cutout pricing, and
other alternatives to the Iowa-Southern Minnesota market. 	Maxwell denies that
these were genuine offers. 	Either way, no agreement was ever reached. 	(See, e.g.,
May 2014 Allison/T. Ivey E-mail, ECF No. 160.9; Jan. 2018 Allison/Smith E-mails,
ECF No. 160.18; Apr. 2016 Allison/R. Ivey E-mail, ECF No. 160.19; Dec. 2017
Allison/R. Ivey E-mail, ECF No. 160.21; Aff. C. Allison ¶¶ 3–12, ECF No. 161.20; Aff.
R. Ivey ¶¶ 26–35, ECF No. 189.8.)
14. 	Throughout the period in which these discussions took place, Maxwell was
losing money. It considered a variety of options to shore up or scale down its business.
In 2016, it approached Prestage Farms about a merger, and in 2017 and 2018, it
gauged whether Smithfield had interest in acquiring it. Neither idea gained traction.
Then, in 2019, Maxwell terminated its contracts with certain hog growers and sold
some of its own hog farms. Even so, the losses mounted, adding up to more than $100
what [a] hog was worth” by using the prices of finished “cuts,” such as the ham or loins. (Dep.
R. Plain 157:8–24, 162:18–163:5, ECF No. 159.12; see also Dep. J. Pike 100:13–18, ECF Nos.
154.9, 159.11, 188.14, 193.7.)

million from 2015 to 2020. 	(See, e.g., Dep. J. Pike 183:11–185:22, 218:5–219:24,
238:15–240:25; Aff. R. Jennings ¶ 4, ECF No. 154.36.)
15. 	In February 2020, Maxwell returned to Smithfield and asked for better
pricing, telling it that “[t]o continue producing hogs . . . we would need an agreement
to sell hogs based on a cutout calculation.” Smithfield promised an answer in thirty
days. A month later, Smithfield’s CEO, Ken Sullivan, told Maxwell that the answer
was no. 	Maxwell’s CEO, John Pike, responded that “we’re going to make our plans
to exit the business” in 2021. (Feb. 2020 Pike/Pike E-mail, ECF No. 193.18; Dep. J.
Pike 284:9–17, 286:6–17, 287:25–289:20; Dep. K. Sullivan 184:1–13, 197:9–198:20,
ECF Nos. 154.11, 159.18, 193.9, 222.4.)
16. 	This was about the same time that the Covid-19 pandemic began spreading
across the country. 	The pandemic led to labor shortages at Smithfield’s plants.
Absenteeism reduced its processing capacity, sometimes by half. 	To manage its
diminished capacity, Smithfield began accepting fewer hogs from its suppliers,
including Maxwell. From April 2020 until early 2021, Smithfield bought only part of
Maxwell’s output. 	To avoid euthanizing hogs, Maxwell sold as much of the surplus
as it could to other buyers. 	(See Dep. S. Horsley 222:14–224:4; 30(b)(6) Dep. S.
Horsley 85:13–18, 144:18–147:25, ECF Nos. 154.4, 159.4, 188.6, 193.4, 222.1; 30(b)(6)
Dep. Maxwell Foods 238:2–239:17, ECF Nos. 154.7, 159.8, 194.2; 2d Aff. R. Jennings
¶¶ 3–7, ECF No. 222.6.)
17. 	All the while, the rift between Maxwell and Smithfield kept widening. 	In
June 2020, Smithfield’s vice president, Shane Horsley, sought confirmation of his

understanding that Maxwell “would be terminating” the PSA in 2021 but that it
would supply hogs “at the historical rate through March 2021” before “ramp[ing]
down” production. 	Maxwell responded that it had not “given notice of termination”
of the PSA. 	Rather, Maxwell said, it was “developing a plan to potentially exit the
hog business” because Smithfield had “refused to offer . . . a more equitable deal that
would allow Maxwell to at least cover their costs and make enough margin to
survive.” 	On the heels of that exchange, Maxwell accused Smithfield of breaching
the most-favored-nation clause, stating that “there are other major producers within
Smithfield’s system that have agreements with you that are substantially better than
what Maxwell has.” 	Smithfield denied the accusation and countered that Maxwell
had repudiated the PSA when it stated that it planned to exit the hog business. (June
2020 Letter from S. Horsley, ECF No. 154.26; June 2020 Letter from J. Pike, ECF
No. 154.24; July 2020 Letter from J. Pike, ECF No. 154.25; July 2020 Letter from M.
Flemming, ECF No. 154.27.)
18. 	In August 2020, Maxwell informed its employees and the public that it
would stop producing hogs and shut down operations. Maxwell made its last sale to
Smithfield in June 2021. (See 30(b)(6) Dep. Maxwell Foods 188:21–25; Maxwell Foods
Communcs. Plan, ECF No. 154.29; Dep. R. Jennings, 294:4–25, ECF Nos. 154.6,
188.9, 193.6.)
19. 	In this lawsuit, Maxwell alleges that Smithfield shirked its contractual
obligations. Maxwell claims that Smithfield breached the most-favored-nation clause
by giving other suppliers better pricing without offering that pricing to Maxwell; that

Smithfield breached the PSA’s output provision by buying less than Maxwell’s entire
output in and after April 2020; and that Smithfield breached the PSA’s pricing terms
by underpaying for deliveries when using a live-weight formula. (See 2d Am. Compl.,
ECF No. 97.)3
20. 	Smithfield denies any breach and has raised affirmative defenses based on
the PSA’s force majeure clause and allegations that Maxwell anticipatorily breached
the PSA. In its counterclaims, Smithfield alleges that Maxwell breached the PSA by
repudiation and by terminating it without sufficient notice. 	(See Countercls., ECF
No. 68; Ans. to 2d Am. Compl. & Aff. Defs., ECF No. 134.)
21. 	Both sides have moved for summary judgment. 	(See ECF Nos. 152, 157.)
Their motions have been fully briefed, and the Court held a hearing on 22 January
2024. The motions are ripe for decision.
II.
LEGAL STANDARD
22. 	Summary 	judgment 	is 	appropriate 	when 	“the 	pleadings, 	depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that any party is
entitled to a judgment as a matter of law.” N.C. R. Civ. P. 56(c). In ruling on a motion
for summary judgment, the Court must consider the evidence in the light most
3 In earlier orders, the Court dismissed Maxwell’s claims for fraudulent concealment, breach
of an alleged duty to negotiate, and unfair or deceptive trade practices under N.C.G.S.
§ 75-1.1. See Maxwell Foods, LLC v. Smithfield Foods, Inc., 2021 NCBC LEXIS 71, at *15–
28 (N.C. Super. Ct. Aug. 26, 2021); Maxwell Foods, LLC v. Smithfield Foods, Inc., 2023 NCBC
LEXIS 20, at *5–12 (N.C. Super. Ct. Feb. 3, 2023) [“Maxwell II”].

favorable to the nonmoving party, drawing all inferences in the nonmoving party’s
favor. See, e.g., Morrell v. Hardin Creek, Inc., 371 N.C. 672, 680 (2018).
23. 	The moving party “bears the initial burden of demonstrating the absence of
a genuine issue of material fact.” Liberty Mut. Ins. Co. v. Pennington, 356 N.C. 571,
579 (2002). If the moving party carries this burden, the opposing party “may not rest
upon the mere allegations or denials of his pleading,” N.C. R. Civ. P. 56(e), but must
instead “come forward with specific facts establishing the presence of a genuine
factual dispute for trial,” Liberty Mut. Ins., 356 N.C. at 579. “An issue is ‘genuine’ if
it can be proven by substantial evidence and a fact is ‘material’ if it would constitute
or irrevocably establish any material element of a claim or a defense.” 	Lowe v.
Bradford, 305 N.C. 366, 369 (1982) (quoting Bone Int’l, Inc. v. Brooks, 304 N.C. 371,
374–75 (1981)).
24. 	“When the party with the burden of proof moves for summary judgment, a
greater burden must be met.” Almond Grading Co. v. Shaver, 74 N.C. App. 576, 578
(1985). The moving party “must show that there are no genuine issues of fact, that
there are no gaps in his proof, that no inferences inconsistent with his recovery arise
from the evidence, and that there is no standard that must be applied to the facts by
the jury.” 	Parks Chevrolet, Inc. v. Watkins, 74 N.C. App. 719, 721 (1985); see also
Kidd v. Early, 289 N.C. 343, 370 (1976). 	For that reason, it is “rarely . . . proper to
enter summary judgment in favor of the party having the burden of proof.” Blackwell
v. Massey, 69 N.C. App. 240, 243 (1984).

III.
ANALYSIS
25. 	The parties’ motions present three sets of issues. 	One set concerns the
most-favored-nation clause. 	A second set concerns the PSA’s output requirement.
And a third set concerns whether Smithfield underpaid Maxwell for certain hog
deliveries.
26. 	Both sides agree that Article 2 of the Uniform Commercial Code (“UCC”)
governs these contractual disputes because the UCC applies to all “transactions in
goods,” including livestock. 	N.C.G.S. § 25-2-102; see also id. § 25-2-105(1) (defining
“goods” as “all things . . . movable at the time of identification to the contract for
sale”). 	North Carolina’s appellate courts have not yet addressed in depth many
aspects of the UCC that are debated in the briefs. Thus, when appropriate, the Court
looks to persuasive authority from other jurisdictions for guidance. See, e.g., Neugent
v. Beroth Oil Co., 149 N.C. App. 38, 44 (2002) (consulting UCC case law from other
jurisdictions); United Carolina Bank v. First Union Nat’l Bank, 109 N.C. App. 201,
208 (1993) (same); see also N.C.G.S. § 25-1-103(a)(3) (stating that a purpose of the
UCC is “[t]o make uniform the law among the various jurisdictions”).
A. Most-Favored-Nation Clause
27. 	In the most-favored-nation clause, Smithfield represented that the PSA gave
Maxwell “the same economic incentives . . . as given all of Smithfield[’s] other major
swine suppliers.” 	Smithfield then promised to offer Maxwell “the benefit of future
changes in economic benefits given said major swine suppliers . . . .” (Letter Agrmt.
¶ 1.) 	Maxwell claims that Smithfield breached that promise by giving six suppliers

more beneficial pricing terms—index or cutout pricing, primarily—without offering
it the same terms.
28. 	Smithfield 	seeks 	summary 	judgment 	on 	several 	grounds. 	Its 	chief
contention is that it was not required to offer these terms to Maxwell. 	This is so,
according to Smithfield, because five of the six suppliers are not “major swine
suppliers” 	and 	because 	pricing 	formulas 	based 	on 	anything 	other 	than 	the
Iowa-Southern Minnesota market are not “economic benefits.” 	Smithfield also
presses sundry evidentiary arguments, including an argument that it offered the
terms at issue to Maxwell, though not required to do so, only for Maxwell to reject
them.
29. 	Some of these arguments are about the meaning of the most-favored-nation
clause. To resolve them, the Court follows traditional rules of contract interpretation,
aiming to ascertain the parties’ intent at the time the contract was made. 	See, e.g.,
Morrell, 371 N.C. at 681. 	Contracting parties are free to define the words used to
express their agreement. 	When they have defined a word, their chosen definition
controls; when they haven’t, the word takes its ordinary meaning unless another
meaning is clear from the surrounding context. See, e.g., Singleton v. Haywood Elec.
Membership Corp., 357 N.C. 623, 629 (2003). 	Under the UCC, contract terms “may
not be contradicted by evidence of any prior agreement or of a contemporaneous oral
agreement but may be explained or supplemented by course of performance, course
of dealing, or usage of trade.” N.C.G.S. § 25-2-202(a).

30. 	“Major Swine Suppliers.” 	Smithfield argues that the phrase “major
swine suppliers” means a fixed group of its existing suppliers as of 1994 when the
parties signed the PSA. 	According to Smithfield, the group includes only Carroll’s
Foods, Murphy Family Farms, and Prestage Farms—the three suppliers named at
the end of the most-favored-nation clause. 	If the phrase “major swine suppliers”
includes others, however, then Smithfield’s position is that the other suppliers must
be similar to the named suppliers. That is, the suppliers must be large, based on the
East Coast, and not an affiliate or subsidiary of Smithfield.
31. 	Maxwell reads “major swine suppliers” more expansively. 	In its view, the
number and identity of “major swine suppliers” could change over time, sweeping in
new suppliers that Smithfield added after 1994. 	The three suppliers named in the
clause are, according to Maxwell, merely illustrative. Maxwell also contends that the
clause’s text and context do not support the geographical and other limitations
advocated by Smithfield.
32. 	The Court concludes that the parties intended “major swine suppliers” to
refer to a group of Smithfield’s existing suppliers at the time of the PSA.4 The phrase
does not include suppliers that began doing business with Smithfield later.
33. 	The structure of the clause leaves no doubt about this. 	When Smithfield
represented that it was giving “Maxwell . . . the same economic incentives . . . as given
all of [its] other major swine suppliers,” it was plainly referring to a group of existing
4 The “major swine suppliers” in 1994 included at least Carroll’s Foods, Murphy Family
Farms, and Prestage Farms. 	There may have been others not expressly named in the
most-favored-nation clause, but Maxwell has not identified any as the subject of its claim.

suppliers. Likewise, when Smithfield promised to offer Maxwell any “future changes
in economic benefits given said major swine suppliers,” it was just as plainly referring
to the same suppliers mentioned earlier in the clause. (Letter Agrmt. ¶ 1 (emphasis
added).) 	To construe this language to require Smithfield to offer terms given to
later-added suppliers would excise the word “said” from the clause, contrary to the
canon that “no word in a contract is to be treated as surplusage.” 	Williams v.
Nationwide Mut. Ins. Co., 269 N.C. 235, 239 (1967) (citation and quotation marks
omitted); see also WakeMed v. Surgical Care Affiliates, LLC, 243 N.C. App. 820, 824
(2015) (“[I]f possible, every word and every provision is to be given effect.” (citation
and quotation marks omitted)).
34. 	This interpretation does not rob Maxwell of its bargain, as it contends. Had
Maxwell wanted the right to be offered the pricing that Smithfield gave to new
suppliers during the PSA’s term, it could have negotiated for a more comprehensive
most-favored-nation clause. 	But it didn’t. 	In simple terms, Maxwell bargained for
an assurance that Smithfield was treating it as well as existing major suppliers and
a promise that Smithfield would continue to treat it as well as those suppliers, and
only those suppliers, in the future.
35. 	Smithfield is therefore entitled to partial summary judgment. 	Recall that
Maxwell bases its claim on the pricing that Smithfield gave to six suppliers. Of those
six suppliers, four began doing business with Smithfield long after the PSA. 	Thus,
they are not “major swine suppliers.” 	Even if it is true that Smithfield gave them
better terms without offering the same terms to Maxwell, that was not a breach of

the most-favored-nation clause as a matter of law. 	Having so concluded, the Court
need not address Smithfield’s alternative arguments that these four suppliers are not
“major swine suppliers” due to their geographic location and volume of sales.
36. 	The 	fifth 	and 	sixth 	suppliers 	are 	Prestage 	Farms 	and 	Smithfield’s
subsidiary, 	Murphy-Brown. 	The 	most-favored-nation 	clause 	expressly 	names
Prestage Farms as a major supplier, and Smithfield concedes that it is one. 	The
clause also names Murphy Family Farms, from which Murphy-Brown is descended.
Although Smithfield contends that Murphy Family Farms ceased to be a major
supplier when it became a Smithfield subsidiary, the text of the most-favored-nation
clause does not distinguish between internal and external suppliers. Smithfield has
not established that the term “major swine suppliers” unambiguously excludes
Murphy-Brown.5
37. 	“Economic 	Benefits.” 	Next, 	Smithfield 	contends 	that 	the 	phrase
“economic benefits” excludes pricing formulas using a base price, or benchmark, other
than 	the 	Iowa-Southern 	Minnesota 	market. 	According 	to 	Smithfield, 	the
most-favored-nation clause does not require it to offer Maxwell all changes in pricing
given to another major supplier, only those changes that result in higher prices. But
it is impossible, Smithfield says, to know in advance whether any given benchmark—
5 Smithfield contends that it conducts business with external suppliers in a way that is
fundamentally different from the way it conducts business with Murphy-Brown. 	External
suppliers 	receive 	money 	for 	their 	hogs; 	Murphy-Brown 	receives 	an 	“accounting
determination” denoted as a “transfer price.” 	(Dep. K. Sullivan 65:3–17.) 	This evidence,
which is outside the four corners of the contract, has more to do with the type of “economic
benefits” that Murphy-Brown receives and less to do with Murphy-Brown’s status as a “major
swine supplier.”

say, index or cutout pricing—is better or worse than the PSA’s. 	On that basis,
Smithfield insists that it had no duty to offer Maxwell index or cutout pricing given
to other suppliers.
38. 	Maxwell responds that “economic benefits,” as used in everyday speech,
include benchmark price mechanisms. It also points to evidence that those in the hog
industry, 	including 	Smithfield, 	regularly 	compared 	pricing 	benchmarks 	and
concluded 	that 	index 	and 	cutout 	pricing 	were 	superior 	to 	the 	Iowa-Southern
Minnesota market. 	In any event, Maxwell contends, Smithfield had to offer it any
change in pricing, not just better pricing, given to another major supplier.
39. 	As Maxwell correctly observes, the phrase “economic benefits” is broad. 	In
ordinary usage, “economic” means “capable of or liable to profitable exploitation,” and
“benefit” means “something that guards, aids, or promotes well-being.” 	(Pl.’s Opp’n
Def.’s Mot. Summ. J. 14, ECF No. 187 (quoting Webster’s 3d New Int’l Dictionary
(Jan. 1993).) Using those definitions, the PSA’s price term is certainly an economic
benefit. It follows that the components that make up the pricing formula—the base
price, the overage, and any premiums or discounts—are also economic benefits. 	All
work together to aid or promote the profitable exploitation of the contractual
relationship.
40. 	The 	contrary 	interpretation 	urged 	by 	Smithfield 	is 	not 	reasonable.
Smithfield does not discuss, much less dispute, the ordinary meaning of the phrase,
arguing instead that pricing benchmarks are not economic benefits because it is

impossible to know in advance whether one will generate higher prices than another.
This is unpersuasive for at least three reasons.
41. 	First, whether one supplier’s deal is better than another’s is not strictly a
matter of dollars and cents. 	Price stability matters, too. 	The PSA bears this out,
stating that the parties chose the Iowa-Southern Minnesota market “to establish a
relatively stable national market price” as the foundation for their pricing formula.
(PSA ¶ 1(b).) 	Quite a bit of evidence suggests that industry observers, including
Smithfield, knew as early as 2014 that the Iowa-Southern Minnesota market was
“thinly traded” and believed it to be inferior to index and cutout pricing for that
reason. 	(E.g., Feb. 2014 Kaster/R. Ivey E-mails.) 	The most natural reading of the
most-favored-nation clause gives Maxwell the right to receive pricing based on a more
stable benchmark if Smithfield gave that pricing to another major supplier. 	That
holds true even if it is not possible to say on the front end that the switch would result
in higher prices on any given day and even if the goal of switching benchmarks is to
hold prices paid to suppliers steady rather than to increase them.
42. 	Second, even if dollars and cents are all that matter, it is far from clear that
Smithfield and its suppliers had no way to predict or estimate to a reasonable degree
the effect of moving from the Iowa-Southern Minnesota market to index or cutout
pricing. The likelihood that either Smithfield or its suppliers would make a change
on that scale without studying the potential effect is nil. 	And although Smithfield
objects that modeling the future impact involves too many subjective judgments and
too much uncertainty, that suggests only that making comparisons is hard, not

impossible. 	If Smithfield gave a major supplier a formula based on index or cutout
pricing with the intent to pay higher prices to that supplier, it stands to reason that
Maxwell had the right to receive the same offer.
43. 	Third, Smithfield and Maxwell negotiated the most-favored-nation clause
knowing that pricing benchmarks sometimes change. 	Take Smithfield’s 1992
contract with Prestage Farms as an example. It named the “Peoria, Illinois and East
St. Louis, Illinois” markets as the initial benchmark but anticipated choosing a new
benchmark “from time to time” out of “any number of the national livestock markets.”
(Prestage Farms’ 1992 Contract at 2, ECF No. 160.1; see also Aff. R. Sharpe ¶ 7.)
And, 	in 	fact, 	Smithfield 	and 	Prestage 	Farms 	did 	choose 	to 	switch 	to 	the
Iowa-Southern Minnesota market at some point before the formation of the PSA. The
most-favored-nation clause’s promise of equal treatment for the PSA’s duration
wouldn’t have meant much at all if Smithfield could have avoided it at any time just
by shifting the major suppliers’ pricing to another national livestock market.
44. 	Smithfield also points to section 1(b) of the PSA, which states that the
parties “shall designate a substitute” if “the Iowa-Southern Minnesota Market ceases
to be a viable market” and that “either party hereto shall have the right to submit
the matter to arbitration.” 	(PSA § 1(b).) 	This section, Smithfield contends, is the
exclusive avenue for changing the base price. That isn’t true. The arbitration clause
is a failsafe that allows both Maxwell and Smithfield to designate a new benchmark
in the worst-case scenario when the Iowa-Southern Minnesota market loses viability.
The most-favored-nation clause, by contrast, grants Maxwell the right to receive the

same pricing as Smithfield’s other major suppliers whether the Iowa-Southern
Minnesota market is viable or not. They are complementary rights.
45. 	The Court concludes that the phrase “economic benefits” includes the base
price or benchmark for a pricing formula. 	Smithfield is not entitled to summary
judgment on this ground.
46. 	Statute 	of 	Limitations. 	Having 	addressed 	the 	parties’ 	interpretive
disputes, the Court now turns to their evidentiary disputes, starting with the statute
of limitations.6 Smithfield contends that Maxwell waited too long to bring a claim for
breach of the most-favored-nation clause based on the pricing terms given to
Murphy-Brown. 	Smithfield points to evidence to show that Maxwell was aware of
Murphy-Brown’s pricing as early as July 2015 but waited more than four years to file
suit, rendering the claim untimely.
47. 	Maxwell does not dispute that one of its employees, Harvey Suggs, received
and analyzed documents that revealed Murphy-Brown’s pricing. It contends instead
that Suggs’s duties did not include price negotiations and that there is conflicting
evidence about whether he shared what he learned with more senior decisionmakers,
suggesting that the company may not have been truly aware of the alleged breach.
In addition, Maxwell contends that Smithfield should be equitably estopped from
6 Earlier in the lawsuit, Smithfield moved to dismiss portions of the claim for breach of the
most-favored-nation clause as untimely. Noting that Maxwell had alleged at least one breach
within the limitations period, the Court declined to employ “an allegation-by-allegation
application of the statute of limitations” to any other claimed breach and concluded that
disputes about timeliness were better suited to summary judgment. Maxwell II, 2023 NCBC
LEXIS 20, at *12–13.

relying on the statute of limitations on the ground that it deceived Maxwell about its
compliance with the most-favored-nation clause.
48. 	A plaintiff must bring an action for breach of a contract for sale of goods
“within four years after the cause of action has accrued.” N.C.G.S. § 25-2-725(1). For
many types of claims, “accrual of the limitations period does not begin when the
defendant’s conduct occurred, but when the plaintiff discovered it.” 	Inhold, LLC v.
PureShield, Inc., 2020 NCBC LEXIS 107, at *13 (N.C. Super. Ct. Sept. 22, 2020)
(citation and quotation marks omitted). Under the UCC, though, “[a] cause of action
accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge
of the breach.” N.C.G.S. § 25-2-725(2).
49. 	Smithfield must have given Murphy-Brown the disputed pricing terms
sometime before July 2015, for that is when Suggs learned about them. Any breach,
if there was one, had occurred by that point, and as a result, the four-year limitations
period expired in July 2019 at the latest. 	Because Maxwell began this lawsuit in
August 2020, its claim is untimely under section 25-2-725.
50. 	Maxwell’s assertion that it was unaware of Murphy-Brown’s pricing is
irrelevant. The cause of action accrued whether Maxwell was aware or not. In any
event, Suggs’s awareness is imputed to Maxwell because his duties included keeping
tabs on the purchase price that Smithfield paid under the PSA and because he shared
his Murphy-Brown “[p]rice comparison” with Maxwell’s president, Bob Ivey. 	(Dep.
H. Suggs 42:3–46:22, 69:21–25, 70:7–18.) Ivey could not recall that conversation but
stopped short of denying that it took place. 	(See Aff. R. Ivey ¶ 36.) 	Thus, Suggs’s

testimony stands unrebutted, and Ivey’s knowledge of the price comparison “is
imputed to” Maxwell. Jay Grp., Ltd. v. Glasgow, 139 N.C. App. 595, 601 (2000). And
even if Suggs had kept the information to himself, Maxwell “is chargeable with” his
knowledge because he received it while acting “within the scope of his authority and
in reference to a matter over which his authority extends.” 	Norburn v. Mackie, 262
N.C. 16, 24 (1964).
51. 	Likewise, Maxwell’s estoppel argument is unpersuasive. “Equity will deny
the right to assert the defense of the statute of limitations when delay has been
induced by acts, representations, or conduct, the repudiation of which would amount
to a breach of good faith.” 	Duke Univ. v. Stainback, 320 N.C. 337, 341 (1987).
Maxwell had Murphy-Brown’s pricing in hand in 2015. 	(See Dep. H. Suggs 68:24–
69:25; July 2015 Taylor/Suggs E-mail, ECF No. 160.16; Murphy-Brown Kill-Cut
Sheets, ECF No. 160.17.) 	It does not point to any evidence to show that Smithfield
induced it to delay a lawsuit related to that alleged breach.
52. 	Because Maxwell’s claim for breach of the most-favored-nation clause is
untimely as to Murphy-Brown, Smithfield is entitled to partial summary judgment.
53. 	Smithfield’s Compliance. 	Next, Smithfield argues that it complied with
the most-favored-nation clause. According to Smithfield, its head of hog procurement
on the East Coast, Charles Allison, repeatedly offered Maxwell index and cutout
pricing formulas comparable to those given to other suppliers. Each time, Smithfield
contends, Maxwell rejected the proposed terms. Maxwell denies having received any

genuine offers and asserts that it would have accepted one or more of the pricing
proposals had they been genuinely offered.
54. 	The evidence is neither undisputed nor subject to only one reasonable
interpretation, as Smithfield contends. 	Smithfield’s best written evidence is a May
2014 e-mail from Allison to Ted Ivey (notably, not Maxwell’s president, Bob Ivey).
The message attached “a draft of [a] proposed contract” with index pricing. Although
Smithfield insists that this was a formal contract offer, that is debatable. 	Allison
asked Ted Ivey—who could not accept a contract offer in his position at Maxwell—to
“review and provide your thoughts” and stated that “[w]e are also pulling together a
cost of production pricing mechanism based off the Iowa State model that we can
discuss.” 	(May 2014 Allison/T. Ivey E-mail.) 	A jury could reasonably infer that
Allison was negotiating, not making an offer. 	See Yeager v. Dobbins, 252 N.C. 824,
828 (1960) (“Care should be taken not to construe as offers letters which are intended
merely as preliminary negotiations.” (citation and quotation marks omitted)).
55. 	Later communications were even more equivocal. 	In April 2016, Allison
asked Bob Ivey to “run a comparison” of index and cutout pricing options against the
PSA’s pricing. 	(Apr. 2016 Allison/R. Ivey E-mail.) 	In December 2017, Allison sent
Bob Ivey a cost-of-production pricing formula and stated “[l]et me know if you have
questions.” 	(Dec. 2017 Allison/R. Ivey E-mail.) 	And in January 2018, Allison and
Maxwell’s Chad Smith discussed “try[ing] to model” a pricing formula partly based
on cutout pricing and partly based on index pricing. 	(Jan. 2018 Allison/Smith
E-mails.) None of these communications indisputably conveyed a contract offer.

56. 	Allison’s deposition testimony is just as equivocal at times. Asked whether
he ever formalized the April 2016 e-mail as a contract offer, Allison testified that he
“talked about it with” Bob Ivey. 	(Dep. C. Allison 182:9–19, ECF Nos. 159.1, 188.2,
193.1, 229.1.) 	Discussing the December 2017 e-mail, Allison stated that “the intent
was Bob was going to review this and get back to me if he wanted to move forward
with this type of model.” 	(Dep. C. Allison 204:24–205:14.) 	As to the January 2018
exchange, when asked whether he had made an offer, Allison testified that “[w]e had
discussed a proposal.” (Dep. C. Allison 217:3–22.)
57. 	Allison followed up this testimony with an affidavit, representing that a
genuine 	oral 	or 	hand-delivered 	offer 	of 	index, 	cutout, 	or 	alternative 	pricing
accompanied each e-mail. (See Aff. C. Allison ¶¶ 3–12.) Arguably, his affidavit and
deposition testimony are inconsistent.7 Regardless, Maxwell offered an affidavit from
Bob Ivey in rebuttal, stating that “Allison’s testimony on this and other points is not
true.” 	(Aff. R. Ivey ¶¶ 26–35.) 	In deciding summary judgment, the Court cannot
credit Allison’s account over Ivey’s; weighing credibility is a task for the jury. 	See
Marcus Bros. Textiles, Inc. v. Price Waterhouse, LLP, 350 N.C. 214, 226 (1999)
(holding that a conflict between two witnesses’ testimony “cannot be appropriately
reconciled on a motion for summary judgment”).
7 Maxwell has moved to strike Allison’s affidavit for this reason. (See Mot. Strike, ECF No.
184.) Having concluded that a genuine issue of material fact exists even when the affidavit
is considered, the Court denies the motion to strike as moot.

58. 	Because there are genuine issues of material fact about whether Smithfield
offered pricing terms comparable to those given to other major suppliers, Smithfield
is not entitled to summary judgment on this basis.
59. 	Hindsight 	& 	Leanness. 	Smithfield’s 	remaining 	arguments 	are 	not
compelling.8
60. 	Smithfield argues that Maxwell relies on impermissible hindsight, largely
repeating its earlier stance that it is impossible to know in advance whether a formula
based on index or cutout pricing will be better or worse than a formula based on the
Iowa-Southern Minnesota market. 	For reasons akin to those discussed above, the
Court disagrees.
61. 	As early as 2014 and 2015, Smithfield’s own employees had concluded that
the Iowa-Southern Minnesota market was “no longer a relevant market,” (Feb. 2014
Pope/Manly E-mails, ECF No. 188.20), and was “nonliquid, not representing the true
supply and demand equilibrium of price,” (Dep. J. Weber 105:11–20, ECF Nos.
159.19, 188.18, 193.10). 	Allison believed “the spread between the [Iowa-Southern
Minnesota market] and the CME [index] was continuing to grow” and likely “to
escalate.” 	(Dep. C. Allison 112:17–113:15 (“the ISM you can see from the data was
suppressed to the CME”).) 	He went on to testify that he “was trying to get better
8 Unlike Maxwell, Smithfield’s other suppliers had volume commitments, requiring them to
supply a certain number of hogs in a defined period. Smithfield suggests that the lack of a
volume commitment was an economic benefit that Maxwell would have had to relinquish as
a condition of receiving index or cutout pricing. Even if true, that is not a basis for summary
judgment, given the factual disputes about what Smithfield did or didn’t offer and whether
Maxwell would or wouldn’t have traded a volume commitment for a new base price
mechanism.

pricing for Maxwell,” including that Maxwell “needed to be on a more stable market.”
(Dep. C. Allison 168:12–22.) By 2017, Smithfield’s employees had concluded that the
Iowa-Southern Minnesota market was “done.” 	(Apr. 2017 Weber/Schmidt E-mails,
ECF No. 188.34.)
62. 	This is not hindsight evidence. 	It tends to show that Smithfield gave
suppliers index and cutout pricing with advance knowledge that they were more
stable than, and thus superior to, the Iowa-Southern Minnesota market. It also tends
to show that Smithfield itself believed that index and cutout pricing were better than
the PSA’s pricing by 2014.
63. 	Smithfield also argues that it paid higher prices for leaner hogs and that
Maxwell produced fatter hogs than other suppliers. 	The disparity in leanness,
according to Smithfield, accounts for much or all of the disparity in pricing. 	Put
another way, Smithfield contends that the most-favored-nation clause does not
require it to pay Maxwell the same as other suppliers for lower-quality hogs.
64. 	The evidence on this point is conflicting and often hazy. 	Before 2007,
Smithfield used the Fat-O-Meater to measure backfat and calculate any premium
due. Afterward, Smithfield stopped paying a variable premium and instead added a
flat amount of “$0.63/cwt” to Maxwell’s “base price.” 	At the time, Jeff Luckman,
Smithfield’s Vice President of Livestock, told Maxwell to expect periodic reviews and
possible adjustments to this amount “to reflect the current quality of your hogs.” (Oct.
2007 Letter from J. Luckman.) 	But Luckman could not recall whether any periodic
reviews took place and testified that “there was no lean premiums” after 2007. (Dep.

J. Luckman 203:6–25.) 	And Bob Ivey, in his affidavit, represents that “Luckman
specifically told me that leanness was no longer a factor that Smithfield was
concerned about with respect to its hog supply.” (Aff. R. Ivey ¶ 11.) Even if Smithfield
did pay a so-called lean premium after 2007, the evidence does not definitively show
how it calculated the premium or how Maxwell’s hogs compared with other suppliers’
hogs.
65. 	From this conflicting evidence, a jury could reasonably conclude that
Maxwell has not relied on impermissible hindsight and that leanness does not
account for any disparity in pricing that it received. 	Smithfield is not entitled to
summary judgment on these grounds.
66. 	Conclusion. 	In 	sum, 	the 	Court 	grants 	in 	part 	and 	denies 	in 	part
Smithfield’s motion as to the claim for breach of the most-favored-nation clause. The
Court’s construction of the phrase “major swine suppliers” forecloses any alleged
breach relating to suppliers that began doing business with Smithfield after the
formation of the PSA. In addition, the statute of limitations bars Maxwell’s claim as
to Murphy-Brown. 	Smithfield is entitled to summary judgment as to these alleged
breaches.
67. 	But Smithfield is not entitled to summary judgment as to the claim that it
breached the clause by failing to offer Maxwell changes in pricing given to Prestage
Farms. The claim shall proceed to trial to that extent.

B. Output Provision
68. 	The PSA is an output contract. 	This means that the contract defines the
number of hogs that Maxwell was to sell and that Smithfield was to buy in terms of
Maxwell’s output, rather than by specifying an exact number. 	Apart from a few
exceptions that aren’t relevant here, the output provision requires Smithfield to buy
“all Market Swine actually produced by Maxwell . . . up to a maximum of” 155,000
per month. (PSA § 3(a).)
69. 	Maxwell claims that Smithfield breached this provision in April 2020 and
for several months afterward by buying less than its entire output. 	Smithfield
concedes that it did not buy all hogs produced by Maxwell during those months. But
Smithfield denies any liability, contending that the PSA’s force majeure clause and
Maxwell’s repudiation of the PSA excused its performance. 	In addition, in its
counterclaims, Smithfield asserts that Maxwell breached the PSA first by wrongfully
repudiating it and terminating it without notice.
70. 	Both sides have moved for summary judgment on Maxwell’s claim for breach
of the output provision. 	Maxwell has also moved for summary judgment on
Smithfield’s counterclaims and affirmative defenses of force majeure and anticipatory
breach.
71. 	Force Majeure. 	The PSA states that “[n]either party shall be liable for
failure to perform . . . any act under [the PSA] if prevented by any cause beyond the
reasonable control of such party . . . .” 	(PSA § 12.) 	This is known in contract-law
jargon as a force majeure clause. 	The phrase force majeure means a superior or

irresistible force, and the purpose of a force majeure clause is to limit a contracting
party’s liability when some event beyond its control makes performance impossible
or impracticable. 	See, e.g., Michel v. Yale Univ., 110 F.4th 551, 556 (2d Cir. 2024)
(quoting Black’s Law Dictionary (12th ed. 2024)).
72. 	Smithfield contends that the Covid-19 pandemic—an event indisputably
“beyond the reasonable control of” the parties—prevented it from buying Maxwell’s
entire output in and after April 2020. 	As the pandemic surged, Smithfield says, so
did employee absenteeism, which at times halved its capacity to process hogs at its
East Coast plants. According to Smithfield, it had to allocate its diminished capacity
among its many suppliers, including Maxwell, and the force majeure clause negates
any liability that might otherwise result from buying less than Maxwell’s entire
output. On that basis, Smithfield seeks summary judgment as to Maxwell’s claim for
breach of the output provision.
73. 	Maxwell argues that it, not Smithfield, is entitled to summary judgment. In
Maxwell’s view, the PSA requires Smithfield to purchase hogs, not to process them.
Maxwell offers evidence to show that Smithfield could have paid for its entire hog
output throughout the pandemic. Likewise, it offers evidence to show that Smithfield
could have processed the entire output had Smithfield taken fewer hogs from its
internal or other external suppliers, none of which had output contracts. 	Instead,
Maxwell 	says, 	Smithfield 	prioritized 	hog 	deliveries 	from 	its 	subsidiary,
Murphy-Brown. For these reasons, Maxwell contends that Smithfield’s force majeure
affirmative defense fails as a matter of law.

74. 	It wouldn’t be reasonable to read the PSA, as Maxwell does, to require
Smithfield to do nothing more than pay for Maxwell’s hogs. Smithfield’s promise “to
purchase” the hogs connotes more than payment. (PSA § 3(a).) In everyday speech,
to purchase a good means “to obtain” the good as well as to pay for it. 	Purchase,
Merriam-Webster Dictionary, http://www.merriam-webster.com/dictionary/purchase
(last visited Dec. 20, 2024). The letter agreement reinforces this: Smithfield agreed
to “have adequate facilities to unload market hogs in a timely manner” and to
“provide loading chutes, holding pens, necessary employees, water, etc. required to
receive, hold and move all hogs.” 	(Letter Agrmt. ¶ 4.) 	These terms also jibe with
UCC default rules, which state that the obligation “of the buyer is to accept and pay
in accordance with the contract,” N.C.G.S. § 25-2-301, and that “the buyer must
furnish facilities reasonably suited to the receipt of the goods,” id. § 25-2-503(1)(b).
75. 	Even so, the undisputed evidence favors Maxwell. 	Although the Covid-19
pandemic hampered Smithfield’s ability to process hogs, the effect was not so great
as to prevent it from accepting and processing all that Maxwell produced. 	The
numbers don’t lie: at its lowest level, Smithfield’s processing capacity exceeded
Maxwell’s output by about an order of magnitude. 	Smithfield could have processed
the entirety, and it could have done so comfortably. 	(See, e.g., May 2020 Kill/Cut
Summary, ECF No. 222.9; 2d Aff. R. Jennings ¶¶ 4–7; Dep. S. Horsley 230:7–12.)
76. 	Smithfield maintains that purchasing the entire output would have been
impracticable because it would have had to turn away other suppliers’ hogs to
accommodate Maxwell’s. The impracticability standard demands far more than that.

It is not enough that performance may cause inconvenience. 	Performance must be
untenable due to “extreme and unreasonable difficulty, expense, injury, or loss to one
of the parties.” Raytheon Co. v. White, 305 F.3d 1354, 1367 (Fed. Cir. 2002) (quoting
Restatement (Second) of Contracts § 261 cmt. d); accord Int’l Minerals & Chem. Corp.
v. Llano, Inc., 770 F.2d 879, 886 (10th Cir. 1985); see also Golden Triangle #3, LLC v.
RMP-Mallard Pointe, LLC, 2022 NCBC LEXIS 88, at *50 (N.C. Super. Ct. Aug. 2,
2022) (citing Restatement (Second) of Contracts § 263).
77. 	The evidence does not suggest that Smithfield would have faced an extreme,
unreasonable difficulty had it performed its obligations under the PSA. Smithfield’s
subsidiary and largest supplier, Murphy-Brown, does not have an output contract.
The same is true for many, perhaps all, external suppliers other than Maxwell. (See
Dep. S. Horsley 224:16–225:3.) Purchasing all the hogs that Maxwell produced might
have forced Smithfield to make difficult business decisions about how to allocate the
rest of its purchasing capacity—for example, whether to take fewer hogs from
Murphy-Brown or from its myriad external suppliers. 	But it would not have put
Smithfield at risk of breaching a contract with any other supplier.
78. 	Nor would it have put Smithfield at risk of violating the law. Citing N.C.G.S.
§ 25-2-615, Smithfield contends that it had no choice other than to allocate its
diminished purchasing capacity among all suppliers, including Maxwell. The statute
doesn’t say anything like that, however. It deals with untimely delivery of goods “by
a seller” when performance “has been made impracticable by” unforeseen events.
N.C.G.S. § 25-2-615(a). 	In that circumstance, the seller “must allocate production

and deliveries among his customers” fairly and reasonably. 	Id. § 25-2-615(b).
Smithfield is a buyer, not a seller; section 25-2-615 does not apply.
79. 	To be clear, this does not mean that a buyer can never allocate scarce
capacity among suppliers when faced with events beyond its control. 	The official
comment to section 25-2-615 suggests that the statute’s “reason” (if not its text) might
shield a buyer whose “contract is . . . conditioned on a definite and specific venture or
assumption as, for instance, a war procurement sub-contract known to be based on a
prime contract which is subject to termination, or a supply contract for a particular
construction venture.” 	Id. § 25-2-615 cmt. 9. 	These circumstances are not present
here, and Smithfield does not contend otherwise.
80. 	The bottom line is that Smithfield had the ability to accept and process
Maxwell’s entire output throughout the pandemic. 	And no physical, contractual, or
legal 	limitation 	made 	it 	impracticable 	to 	process 	Maxwell’s 	output. 	Because
Smithfield has not marshalled evidence sufficient to permit a jury to conclude that
the Covid-19 pandemic prevented it from performing its duties under the PSA, the
Court grants summary judgment in favor of Maxwell as to the affirmative defense of
force majeure.
81. 	Repudiation & Early Termination. The PSA has no fixed end date. The
parties’ obligations were to continue until one or the other terminated the agreement
on six-years’ written notice. (See PSA § 4.)
82. 	Smithfield claims that Maxwell ended the PSA early. 	Rather than comply
with the required six-year notice period, Smithfield contends, Maxwell announced its

intent to close its business in February 2020 and delivered its last hog about a year
later. To Smithfield, Maxwell’s closure amounts to a wrongful repudiation of the PSA
and a termination without notice. 	That is the basis for Smithfield’s overlapping
counterclaims for breach of the PSA as well as its affirmative defense of anticipatory
breach.
83. 	Maxwell seeks summary judgment on both counterclaims and the related
affirmative defense. 	It maintains that it went out of business in good faith due to
massive financial losses and that nothing in the PSA or the law obligated it to stay
in business. The PSA has no minimum output requirement, Maxwell notes, meaning
that its decision not to produce any hogs is not a breach so long as it acted in good
faith. 	At no point, Maxwell contends, did it terminate the PSA or repudiate its
obligation to sell its output, assuming it had any output, to Smithfield.
84. 	Elasticity is the defining feature of an output contract. 	The seller’s output
may go up or down, sometimes dramatically. 	See N.C.G.S. § 25-2-306(1). 	No, the
seller does not have unbridled freedom to produce as much or as little as it likes. As
the party that determines the quantity of goods exchanging hands, it must act fairly
and deliver “such actual output . . . as may occur in good faith.” Id. Still, that leaves
a lot of room for business judgment, even to the point of going out of business. 	A
good-faith 	“discontinuance” 	of 	production 	is 	just 	as 	permissible 	as 	any 	other
good-faith variation in output. Id. § 25-2-306 cmt. 2.
85. 	This carries obvious risk for the buyer. As courts elsewhere have observed,
“the output contract allocates to the buyer the risk of a change in the seller’s business

that makes continuation costly,” Atl. Track & Turnout Co. v. Perini Corp., 989 F.2d
541, 545 (1st Cir. 1993), including “the risk that the seller may reduce its production
to zero,” Canusa Corp. v. A&R Lobosco, 986 F. Supp. 723, 730 (E.D.N.Y. 1997). The
buyer could mitigate this risk by negotiating to add an estimated output or a
guaranteed minimum. 	“Any minimum or maximum set by the agreement shows a
clear limit on the intended elasticity. In similar fashion, the agreed estimate is to be
regarded as a center around which the parties intend the variation to occur.”
N.C.G.S. § 25-2-306 cmt. 3.
86. 	But Smithfield did not negotiate for these safeguards. 	The PSA has an
upper limit that relieves Smithfield of any obligation to buy more than 155,000 hogs
per month. 	(See PSA § 3(a).) 	It has no corresponding lower limit that requires
Maxwell to produce and deliver a minimum or estimated number of hogs. This means
that Smithfield hedged against the possibility that Maxwell might produce too many
hogs, not that it might produce too few. Stated another way, Smithfield avoided the
risk of oversupply but accepted the risk of scarcity, including the risk that market
factors might prompt Maxwell to shutter its business in good faith.
87. 	Undisputed evidence shows that Maxwell did just that. Maxwell sustained
huge financial losses in the years leading up to its decision to stop producing hogs. It
had negative net income each year from 2015 through 2020—a total loss exceeding
$100 million. 	(See Aff. R. Jennings ¶ 4.) 	Over that period, its credit rating fell as
sharply as its debt rose. (See Dep. K. Bang 193:18–19, ECF Nos. 154.1, 193.2 (“[W]hat
got them there[ ] is a high level of debt relative to where they were at. Lots of debt.

Low earnings. 	And that got them to a [credit risk rating of] 10.”); see also Dep. K.
Bang 191:21–195:21.) 	Then, in 2020, its lender declared its loan to be “distressed.”
(June 2020 Letter from K. Bang, ECF No. 154.28.) At that point, Maxwell’s business
was reeling from five years of decline. 	Closing it was a “good-faith, market-based
decision.” 	In re Fieldwood Energy LLC, 636 B.R. 463, 473 (Bankr. S.D. Tex. 2021)
(granting summary judgment in favor of seller that made a “prudent economic
decision” to cease production).
88. 	Smithfield argues that Maxwell could have limped along and, thus, that its
decision to stave off further losses by closing its business is evidence of bad faith.
That argument runs against the weight of persuasive authority. Courts have made
clear that a seller does not act in good faith when it stops production because the
contract turns out to be less profitable than expected. 	See Feld v. Henry S. Levy &
Sons, Inc., 37 N.Y.2d 466, 472 (N.Y. Ct. App. 1975) (“[G]ood faith required continued
production until cancellation, even if there be no profit.”). 	But a seller “[o]bviously”
has 	a 	good-faith 	basis 	to 	stop 	producing 	when 	continuing 	would 	threaten 	“a
bankruptcy or genuine imperiling of the very existence of its entire business.” Id. at
471–72. 	“Absent contract language, appreciable party reliance, or evidence of
evasion,” a party to an output or requirements contract “does not give up its
fundamental managerial right of disengaging from an unprofitable business, and the
courts should avoid usurping that right through a restrictive interpretation of good
faith.” Schawk, Inc. v. Donruss Trading Cards, Inc., 746 N.E.2d 18, 27 (Ill. App. Ct.
2001).

89. 	No evidence suggests evasion or reveals other indicia of bad faith. Maxwell
didn’t sign the PSA and then get cold feet (it supplied hogs to Smithfield for more
than two decades). 	Maxwell didn’t stop production following short-term or trivial
losses (it continued to produce hogs at a big deficit for years). Maxwell didn’t try to
swap its deal with Smithfield for a better deal with someone else (it closed its business
entirely). 	And Maxwell didn’t go out of business to evade a promise to supply a
minimum volume (the PSA has no minimum).
90. 	The losses that Maxwell sustained were severe, long-lasting, and likely to
continue. 	Neither 	the 	PSA 	nor 	governing 	law 	required 	Maxwell 	to 	continue
producing hogs at all costs, such as by diving deeply into debt or by raiding the
financial resources of Maxwell’s related companies, as Smithfield suggests. Rather,
Maxwell retained the right to stanch its steep losses by making the reasonable,
good-faith business judgment to stop production. 	See In re Fieldwood Energy, 636
B.R. at 473 (“Valero took the risk that QuarterNorth would lower its output to zero,
which it did in good faith.”); Am. Paper Recycling Corp. v. IHC Corp., 775 F. Supp. 2d
322, 329–30 (D. Mass. 2011) (“The decision of Ivy to cease doing business simply does
not support a viable claim for breach of contract.”); Schawk, 746 N.E.2d at 27
(concluding in the context of a requirements contract that the defendant “had a
legitimate 	business 	reason 	for 	discontinuing 	its 	requirements 	business” 	given
evidence that it had “suffered dramatic declines in its sales”).
91. 	By closing its business in good faith, Maxwell did not repudiate the PSA or
terminate it without notice. The PSA required Maxwell to sell and deliver the hogs

that it actually produced, nothing more. 	Maxwell has not produced any hogs since
June 2021 and has therefore had no hogs to sell to Smithfield. This is not a breach
of the PSA. It is compliance. And it reflects the allocation of risk to which the parties
agreed. 	See 1 White, Summers, & Hillman, Uniform Commercial Code § 4:21 (6th
ed.) (“If a requirements seller wants a guaranteed minimum or a fixed maximum, the
seller can and should bargain for it. The same is true for an output buyer.”); see also
Neofotistos v. Harvard Brewing Co., 171 N.E.2d 865, 868 (Mass. 1961) (concluding
that, absent an agreement “for the production of any specific volume . . . or indeed for
any production,” the parties had “necessarily contemplated . . . that, whatever the
production, it would be governed by business conditions”).
92. 	Accordingly, the Court grants Maxwell’s motion for summary judgment as
to Smithfield’s counterclaims and affirmative defense of anticipatory breach.
93. 	Maxwell’s Output Claim. It is undisputed that Smithfield did not buy all
hogs produced by Maxwell in and after April 2020. 	Maxwell argues that this is a
cut-and-dried breach of contract, leaving no issue for a jury to decide as to Smithfield’s
liability. In response, Smithfield has not attempted to show that it complied with the
PSA’s output provision, arguing only that the PSA’s force majeure clause and
Maxwell’s purported anticipatory breach excused its performance.
94. 	Having disposed of Smithfield’s affirmative defenses, and given Smithfield’s
undisputed noncompliance with its obligation to buy Maxwell’s entire output, the
Court concludes that this is the rare situation in which it is proper to enter summary
judgment in favor of the party having the burden of proof. 	There are no genuine

issues of fact, no gaps in Maxwell’s proof, and no standard that a jury must apply to
these facts. See Parks Chevrolet, 74 N.C. App. at 721; see also Kidd, 289 N.C. at 370.
95. 	Accordingly, the Court grants summary judgment in favor of Maxwell as to
Smithfield’s liability for breach of the output provision. 	The determination of
Maxwell’s damages shall proceed to trial.
96. 	Conclusion. To recap, the Court grants Maxwell’s motion as to Smithfield’s
counterclaims and affirmative defenses of force majeure and anticipatory breach.
The Court also enters summary judgment in Maxwell’s favor as to Smithfield’s
liability for breach of the output provision and denies Smithfield’s cross-motion as to
that claim.
C. Live-Weight Payments
97. 	The last dispute concerns Maxwell’s claim that Smithfield breached the PSA
by underpaying for certain hog deliveries. In its second amended complaint, Maxwell
alleges that Smithfield sometimes paid for hogs based on their “live weight,” not their
“carcass weight . . . as detailed in the PSA.” 	(2d Am. Compl. ¶ 173.) 	In addition,
when 	paying 	based 	on 	live 	weight, 	Smithfield 	allegedly 	did not 	pay 	the 	full
live-weight price for every delivery. (See 2d Am. Compl. ¶ 175.)
98. 	Smithfield contends that the PSA doesn’t say anything about whether to use
live weight or carcass weight, meaning that it was free to pay Maxwell using either
methodology. 	Maxwell concedes as much, thus abandoning its claim that every
payment based on live weight, as opposed to carcass weight, is a breach of the PSA.

99. 	But Smithfield offers no argument or evidence concerning the allegation
that it sometimes underpaid Maxwell when using the live-weight formula. 	The
failure to pay what is due, if true, is surely a breach of contract. 	Having made no
attempt to show that it paid the appropriate live-weight price for the deliveries at
issue, Smithfield has not carried its “initial burden of demonstrating the absence of
a genuine issue of material fact.” 	Liberty Mut. Ins., 356 N.C. at 579. 	And in any
event, Maxwell has presented evidence to back up its allegation that it received less
in live-weight payments than it should have received for certain loads delivered
between August 2016 and January 2021. 	(See Dep. N. Piggott 91:7–92:6, ECF No.
188.13.)
100. 	Accordingly, the Court grants Smithfield’s motion as to this claim to the
extent based on an allegation that all live-weight pricing is a breach of the PSA. The
Court denies Smithfield’s motion as to the allegation that it did not pay the full
live-weight price for certain deliveries.
IV.
CONCLUSION
101. 	For all these reasons, the Court GRANTS in part and DENIES in part
Smithfield’s motion for summary judgment as follows:
a. 	The Court GRANTS Smithfield’s motion for summary judgment as to
Maxwell’s claim for breach of the most-favored-nation clause to the
extent based on allegations that Smithfield failed to offer Maxwell
changes in pricing given to any supplier other than Prestage Farms and
DISMISSES these aspects of the claim with prejudice. 	The Court

DENIES Smithfield’s motion for summary judgment as to this claim to
the extent based on the allegation that Smithfield failed to offer Maxwell
changes in pricing given to Prestage Farms. The claim shall proceed to
trial subject to this limitation.
b. 	The Court DENIES Smithfield’s motion for summary judgment as to
Maxwell’s claim for breach of the PSA’s output provision.
c. 	The Court GRANTS Smithfield’s motion for summary judgment as to
Maxwell’s claim for breach of the PSA’s pricing term to the extent based
on an allegation that the use of live-weight pricing is itself a breach of
the PSA and DISMISSES this aspect of the claim with prejudice. The
Court DENIES Smithfield’s motion as to this claim to the extent it is
based 	on 	the 	allegation 	that 	Smithfield 	did 	not 	pay 	the 	correct
live-weight price for certain deliveries. The claim shall proceed to trial
subject to this limitation.
102. 	In addition, the Court GRANTS Maxwell’s motion for summary judgment
as follows:
a. 	The 	Court 	enters 	summary 	judgment 	in 	Maxwell’s 	favor 	as 	to
Smithfield’s counterclaims and affirmative defenses of force majeure
and anticipatory breach. 	The counterclaims and these affirmative
defenses are DISMISSED with prejudice.
b. 	The Court also enters summary judgment in Maxwell’s favor as to
Smithfield’s liability on the claim for breach of the PSA’s output

provision. 	This claim shall proceed to trial for a determination of
Maxwell’s damages.
103. 	Finally, the Court DENIES Maxwell’s motion to strike the affidavit of
Charles Allison as moot.
SO ORDERED, this the 30th day of December, 2024.
/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases