Gen. Mills Operations Llc v. Foods

• Decision Date: 20 May 2011
• Docket Number: Civ. No. 10–15 (RHK/JJG).
• Parties: GENERAL MILLS OPERATIONS, LLC, Plaintiff,v.FIVE STAR CUSTOM FOODS, LTD., Defendant.
• Court: U.S. District Court — District of Minnesota

789 F.Supp.2d 1148

GENERAL MILLS OPERATIONS, LLC, Plaintiff,

v.FIVE STAR CUSTOM FOODS, LTD., Defendant.

Civ. No. 10–15 (RHK/JJG).

United States District Court, D. Minnesota.

May 20, 2011.

Rolf E. Gilbertson, Christopher R. Paar, Kaisa M. Adams, Zelle Hofmann Voelbel & Mason LLP, Minneapolis, MN, for Plaintiff.Michael D. Barrett, Meaghan C. Bryan, Cousineau McGuire Chartered, Minneapolis, MN, for Defendant.

MEMORANDUM OPINION AND ORDER

RICHARD H. KYLE, District Judge.

INTRODUCTION

Plaintiff General Mills Operations, LLC, f/k/a General Mills Operations, Inc. (“General Mills”) purchased meatballs from Defendant Five Star Custom Foods, Ltd. (“Five Star”) for use in its Progresso line of soups. Some of the meat used in these meatballs was later recalled, and General Mills had to recover and destroy soup containing the product. It now asserts that Five Star breached its contract, breached several express and implied warranties, and was negligent by supplying the recalled meatballs. Both General Mills and Five Star have moved for summary judgment.¹ For the reasons set forth below, the Court will grant each Motion in part and deny each in part.

BACKGROUND

Except where otherwise indicated, the material facts are undisputed. Both General Mills and Five Star are companies in the food-products industry. They have had a business relationship since 2001, and General Mills continues to be a customer of Five Star. (Paar Aff. Ex. 1 (Phillips Dep.) at 10.)

Five Star is a custom food products manufacturer. As such, it is subject to federal regulation—specifically, its meat-based products are regulated by the United States Department of Agriculture (“USDA”), while non-meat products are regulated by the Food and Drug Administration (“FDA”). ( Id. at 11–12.) Five Star supplies General Mills with various custom manufactured meat-based products, including the “Big Meatballs Cooked Italian” used in General Mills' Progresso Italian–Style Wedding Soup.

In the fall of 2007, General Mills ordered two shipments of meatballs from Five Star, to be delivered by September 28 and October 5. As was its usual practice, General Mills sent purchase orders to Five Star via an automated fax system. The face of its purchase order form states: “This purchase order contract, along with General Mills' standard Purchase Order Terms and Conditions dated [1/29/04] ² shall govern all terms and conditions of sale.... Shipment of the goods against this order constitutes acceptance of terms and conditions dated [1/29/04]—otherwise do not ship.” (Paar Aff. Ex. 6; Bryan Aff. Exs. C, D.) According to General Mills, the Purchase Order Terms and Conditions (“Terms and Conditions”) were set forth on the back of every purchase order, including the meatball orders faxed to Five Star. (Tran Aff. ¶¶ 4–5; Paar Aff. Ex. 7 (Tran Dep.) at 18–23.) General Mills also claims that it mailed a copy of the 2004 version of its Terms and Conditions to Five Star's Customer Service Manager on February 4, 2004. (Tran Aff. ¶ 10.) For its part, however, Five Star denies receiving the Terms and Conditions.

General Mills asserts that Five Star breached its contract and breached express warranties based on the following relevant provisions in the Terms and Conditions:

5. GOODS: The Goods shall conform in all respects to the description on the face of this Order, and/or [General Mills'] then current specifications furnished to [Five Star]. The Goods ... shall be new, of first class commercial type ... unless otherwise specified on the face of this Order. Workmanship and materials shall be of the best quality and free from defects that might render the Goods unsuitable or inefficient for the purpose for which it is to be used. [Five Star] warrants and guarantees its Goods for the period of time normally specified for the type of Goods involved.... This warranty is in addition to and not in lieu of, any other warranties or guarantees made by [Five Star] or created or implied as a matter of law. The above warranties, as well as all other warranties contained herein, including, without limitation, the warranties in paragraphs 6, 8, 9, 10, 12, 18, 20, 21, 25, and 26 shall collectively be defined herein as “Warranties.”

* * *

25. COMPLIANCE WITH LAW: [Five Star]'s performance under this Order shall be in compliance with all applicable federal, state, and local laws, ordinances, regulations, rules and statutes (“Laws”).

* * *

27. RECALL: [General Mills] shall have the sole right, exercisable in its discretion, to initiate and direct the content and scope of a recall, market withdrawal, stock recovery, product correction and/or advisory safety communication (any one or more referred to as “Recall Action”) regarding the Goods.... Any and all action to be taken in connection with a Recall Action shall be in accordance with FDA policies and other Laws. [Five Star] shall bear the costs associated with any Recall Action which results from [Five Star]'s negligence or willful misconduct or that the Goods do not comply with [Five Star]'s Warranties under this Order.

(Paar Aff. Ex. 8; Bryan Aff. Ex. E (emphases added).)

Additionally, the purchase order states on its face that “[t]he goods must conform to all current General Mills' specifications as furnished to Seller.” (Paar Aff. Ex. 6; Bryan Aff. Exs. C, D.) General Mills mailed a copy of the ingredient specifications (“Specifications”) for its “Meatballs Italian Cooked” to Five Star on January 18, 2006. (Paar Aff. Ex. 9; id. Ex. 1 (Phillips Dep.) at 109–12.) Five Star does not dispute receiving these Specifications, and it acknowledges that they applied to the meatballs at issue here. (Phillips Dep. at 109–12.) The Specifications provide:

This ingredient shall be of food grade in all respects, including labeling, in compliance with the Meat Inspection Act of 1906 as amended.

The Beef or Beef By–Product in this ingredient must be sourced from countries or regions where USDA recognized BSE ³ controls are in place in accordance with the recommendations of the World Animal Health Organization.

Stunning, slaughter, and processing practices must meet or exceed the requirements established by the USDA and the World Animal Health Organization for safe trade in animal products.(Paar Aff. Ex. 9, at 3 (emphases added).)

Five Star obtains the ingredients for its products from a variety of suppliers. One of Five Star's beef suppliers was Westland Meat Packing Company (“Westland”). Westland's beef was used in two orders of meatballs supplied to General Mills. In February 2008, the Food Safety Inspection Service (“FSIS”) ⁴ issued a Class II recall of all products containing beef produced by Westland between February 1, 2006, and February 15, 2008. ( See Paar Aff. Ex. 3.) The recall was due to Westland's supposed failure to contact FSIS when it identified non-ambulatory disabled, or “downer,” cows that became non-ambulatory after passing ante-mortem inspections but before slaughter. In such situations, regulations at the time required the producer to notify FSIS and call a public-health veterinarian to conduct an examination. Westland's alleged failure to consistently do this was deemed noncompliant, and the recall followed. There is no evidence, however, that any of the Westland beef supplied to Five Star or incorporated into General Mills' meatballs came from downer cattle.

When Five Star learned of the recall, it traced the Westland beef that it had incorporated into its products and notified the customers who had purchased those products. On February 18, 2008, Five Star initially notified General Mills of the recall and identified two purchase orders of meatballs, totaling 32,460 pounds, which contained Westland beef. ( Id. Ex. 2.) It also informed General Mills that 25.26 % per batch of those meatballs was Westland meat. ( Id.) General Mills also received a follow-up memorandum about the recall from Five Star's President, Jeff Bledsoe, stating that “FSIS officials may contact you to confirm that you have received notification and are cooperating in this action.” ( Id. Ex. 3.) The memorandum went on to provide:

As part of this action, the options stated below for final disposal of retrieved product, should be undertaken ...

• Product is to be incinerated or

• Product is to be disposed at a lined landfill or

• Product is to be disposed for inedible rendering, not intended for pet food.

( Id.) General Mills was thus required to identify and destroy all soup containing the recalled meatballs in its inventory, as well as soup that it had already sold to grocery stores and other customers.⁵ The recall cost General Mills more than one million dollars.

General Mills commenced this action in January 2010, asserting claims for breach of contract, breach of express warranties, breach of the implied warranty of merchantability, breach of the implied warranty of fitness for a particular purpose, and negligence. Nearly a year later, Five Star (with leave of the Court) filed a Third–Party Complaint asserting claims against Cattleman's Choice, Inc. d/b/a Westland. ( See Doc. No. 34.) ⁶ Meanwhile, both General Mills and Five Star have moved for summary judgment on General Mills' claims.⁷

STANDARD OF DECISION

Summary judgment is proper if, drawing all reasonable inferences in favor of the nonmoving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the burden of showing that the material facts in the case are undisputed. Id. at 322, 106 S.Ct. 2548; Whisenhunt v. Sw. Bell Tel., 573 F.3d 565, 568 (8th Cir.2009). The Court must view the evidence, and the inferences that may be reasonably drawn from it, in the light most favorable to the nonmoving party. Weitz Co., LLC v. Lloyd's of London, 574 F.3d 885, 892 (8th Cir.2009); Carraher v. Target Corp., 503 F.3d 714, 716...