GNP Commodities, Inc. v. Walsh Heffernan Co.

GNP Commodities Inc. (GNP) (plaintiff) was a commodities trader and speculator in frozen pork bellies. Walsh Heffernan Co. (Walsh) (defendant) was a public meat broker and agent acting on behalf of the Florence Beef Company (Florence) (defendant). In March 1974, GNP’s president, Myron Rosenthal, spoke with Walsh’s agent, Eugene Figurelli, about purchasing frozen pork bellies. Figurelli represented that the pork bellies had been frozen within the last 15 days. This was important because GNP was a member of the Chicago Mercantile Exchange (the exchange) and could only offer delivery of the pork bellies as protection against a futures contract if the pork bellies were frozen no earlier than the preceding November 1. Pork bellies that had been frozen longer were at greater risk of deterioration. Thus, pork bellies frozen before November 1 had no value to hedgers such as GNP. GNP paid $164,368.39 for the pork bellies. Walsh’s written confirmation of the purchase included the storage locations and weight but made no mention of the freeze dates. Subsequently, Figurelli repeatedly assured Rosenthal that the freeze dates were February 1, 1974, or later. According to Rosenthal, he trusted these assurances because of prior dealings with Figurelli. In June, at Rosenthal’s request, the pork bellies were inspected by the exchange. The inspection failed because it was discovered that the bellies were frozen prior to November 1, 1973. Thus, GNP could not deliver them, if necessary, against a futures contract. Walsh refused to accept the pork bellies back or cancel the transaction. It was eventually determined that nine of the 10 loads that GNP purchased were frozen before November 1. GNP filed suit against Walsh and Florence. A jury returned a verdict against both defendants, finding that both defendants either singly or together knowingly misrepresented the age of the pork bellies. Florence and Walsh appealed, arguing that GNP did not reject or revoke acceptance within a reasonable time.