American Wagyu Breeders, LLC. v. Sarah Bailey and Estate of Eric C. Bailey

Court of Appeals of Iowa·Decided January 9, 2025·No. 23-1237·Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 23-1237

Filed January 9, 2025

AMERICAN WAGYU BREEDERS, LLC, Plaintiff-Appellee,

vs.

SARAH BAILEY and ESTATE OF ERIC C. BAILEY, Defendants-Appellants.

Appeal from the Iowa District Court for Johnson County, Paul D. Miller, Judge.

The defendants appeal the district court’s entry of judgment following a jury trial in which the defendants were found liable for breach of contract and fraudulent misrepresentation and assessed damages. AFFIRMED.

Siobhan Briley of Pugh Hagan Prahm PLC, Coralville, for appellants.

Jason J. O’Rourke and Jenny L. Juehring of Lane & Waterman LLP, Davenport, for appellee.

Heard by Tabor, C.J., and Ahlers and Sandy, JJ.

SANDY, Judge.

Where’s the beef? That is the pivotal question brought before us in this case. Despite days of trial and years of litigation, we are left just as confused now as the day the original petition was filed. We only know that a full-blood black Wagyu bull named Michiyoshi disappeared into thin air. Sarah Bailey and the estate of Eric Bailey (together, the “Baileys”) appeal the district court’s entry of judgment following a jury trial in which they were found liable for breach of contract and fraudulent misrepresentation and assessed damages. The jury found the Baileys breached a livestock agreement with American Wagyu Breeders, LLC (AWB) under which they were to care for Michiyoshi. The jury also found the Baileys made fraudulent misrepresentations to AWB concerning Michiyoshi, and it awarded AWB damages of $460,000.

The Baileys argue the district court (1) abused its discretion in excluding the proposed Exhibit L, (2) abused its discretion in excluding testimony relating to Sarah’s character for truthfulness, (3) abused its discretion in accepting the jury’s award of speculative and excessive damages, and (4) committed a combination of errors that cumulatively denied the Baileys a fair trial. AWB requests appellate attorney fees pursuant to its livestock agreement with the Baileys. Finding no abuses of discretion, we affirm the district court. We also award AWB its appellate attorneys’ fees.

I. Background Facts and Proceedings In November 2012, AWB and the Baileys entered an agreement under which the Baileys would board and be allowed to use Michiyoshi. This dispute arose following a breeder’s discovery in 2016 that a bull the Baileys provided for

collection was not Michiyoshi as claimed by the Baileys but, in fact, a different black Wagyu bull they owned named Hirashige. To this date, Michiyoshi’s fate is unknown. The Baileys claimed they had only one other bull at their West Branch farm around the time they boarded Michiyoshi. That animal was Hirashige, also known as Romeo, but the Baileys claimed to have sold him to a friend shortly before or shortly after Michiyoshi arrived at their farm. According to that timeline, Michiyoshi would have been the only bull on the Baileys’ farm by December 2012.

In April or May 2014, the Baileys sent a bull that was meant to be Michiyoshi to Hawkeye Breeders Service, Inc. (Hawkeye Breeders) in Adel to have semen collected. The bull the Baileys sent to Hawkeye Breeders was returned to the Bailey farm in September 2014. In 2015, the Baileys sent the same bull to a farm in Oklahoma for boarding. In 2016, the same bull was again sent to Hawkeye Breeders to have semen collected. While the bull was there, DNA testing was conducted and it was determined that the bull the Baileys sent to Hawkeye Breeders in 2014 and to Oklahoma in 2015 was actually Hirashige, who the Baileys claimed had died long before. At the time of trial it remained unclear what happened to Michiyoshi.

Michiyoshi had been developed and owned by AWB, whose sole member was Nick Bell. Bell had worked with a well-known Wagyu breeder to develop the embryo that eventually became Michiyoshi. He claimed that Michiyoshi’s rare genetics produced offspring with high-quality meat. Michiyoshi was registered with the American Wagyu Association as a 100% full blood Wagyu bull. When a full- blood Wagyu bull is registered with the AWA, the owner is required to submit a blood or hair sample so that the AWA can confirm the DNA and keep the DNA on

file, which Nick did when he registered Michiyoshi. In 2012, Bell sought to have Michiyoshi boarded and cared for, which led to his relationship with the Baileys.

The Baileys lived on a farm near West Branch and had farmed and raised cattle for many years. They raised Wagyu cattle and owned the business Bailey American Wagyu. Sarah testified that they began purchasing Michiyoshi’s semen in 2011 because it would produce good meat for the Baileys to sell. The Baileys also used semen from Hirashige, whom they bought from another bull owner, Mike Goodell, in January 2012. Before being sold, Goodell registered Hirashige with AWA. The AWA kept Hirashige’s DNA on file and tattooed his AWA registration number in his ear. The Baileys began boarding Hirashige in fall 2011—shortly before purchasing him. Eric regularly worked with Hirashige, knew what he looked like, and trained him for livestock shows. The Baileys claimed that Hirashige was the only bull kept on their farm in 2011.

In July 2012, Sarah visited Bell’s farm in Michigan with her son to see Michiyoshi because the Baileys were interested in boarding the bull in exchange for rights to use his semen on their herd. Michiyoshi was the only animal on Bell’s farm. Following that visit, the Baileys continued to reach out to Bell about boarding Michiyoshi. In November they exchanged a draft livestock agreement over email.

Later that month the Baileys agreed to board Michiyoshi and drove to Bell’s farm to pick him up on November 25. They signed the livestock agreement upon arriving and transported Michiyoshi back to their farm the following morning. Bell provided the Baileys with a certificate of veterinary inspection for Michiyoshi, which is required when a bull is transported between states. Two days after Michiyoshi arrived at the Bailey farm, Sarah emailed Bell photos of Michiyoshi at the farm

which showed him with two ear tags that Bell testified had been in Michiyoshi’s ears at the time of the Bailey pickup. The Baileys testified they left the tags in until Hawkeye Breeders removed them in May 2014.

Conflicting evidence was presented as to what animals were present on the Bailey farm when Michiyoshi arrived. Eric testified that Hirashige had been sold to cattle farmer Molly Erenberger and left before Michiyoshi arrived on November 26. Yet Sarah testified that Hirashige was on their farm when they first brought Michiyoshi and that the bulls were kept in different pens. At trial, she claimed that she sold Hirashige to Erenberger and hauled the bull to Erenberger’s farm shortly after Michiyoshi arrived on November 26. She could not recall the specific date of Hirashige’s sale to Erenberger.

When the dispute over the bull’s identity first arose, Sarah told Bell’s wife that Hirashige left the Bailey farm within a week of Michiyoshi’s arrival. But in interrogatories she claimed to have sold Hirashige in “2013 or 2014.” Sarah and Eric both claimed Hirashige was no longer in their possession after being sold. Ronald Woosley, who ran the Oklahoma cattle boarding facility, testified that in 2013 he saw “three or four” bulls on the Bailey farm and in the same pen. Erenberger testified that the bull the Baileys sold her got sick, died, and was buried on her property about a month after arriving at her property. This bull’s remains were later exhumed for DNA testing, but the remains were too decomposed to provide useful material.

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