Dakota Style Foods, Inc. v. Sunopta Grains & Foods, Inc.

• Decision Date: 10 July 2018
• Docket Number: 1:16-CV-01036-CBK
• Citation: 329 F.Supp.3d 794
• Parties: DAKOTA STYLE FOODS, INC. ; Plaintiff, v. SUNOPTA GRAINS AND FOODS, INC., Defendant.
• Court: U.S. District Court — District of South Dakota

329 F.Supp.3d 794

DAKOTA STYLE FOODS, INC. ; Plaintiff,

v.SUNOPTA GRAINS AND FOODS, INC., Defendant.

1:16-CV-01036-CBK

United States District Court, D. South Dakota, Northern Division.

Signed July 10, 2018

Filed July 11, 2018

Arthur M. Hopper, Austin, Hinderaker, Hopper, Strait & Benson LLP, Watertown, SD, Michael R. Moline, Pro Hac Vice, Lommen Abdo, P.A., Minneapolis, MN, for Plaintiff.

Bruce G. Jones, Faegre & Benson, Rachael Dettmann Spiegel, Pro Hac Vice, Shane A. Anderson, Pro Hac Vice, Faegre Baker Daniels LLP, Minneapolis, MN, Todd P. Langel, Pioneer Hi-Bred International, Inc., Johnston, IA, for Defendant.

ORDER

CHARLES B. KORNMANN, United States District Judge

BACKGROUND

Dakota Style Foods, Inc. ("Dakota Style") filed suit against SunOpta Grains and Foods, Inc., ("SunOpta") to recover damages incurred by Dakota Style as a result of SunOpta's recall of shelled sunflower kernels. SunOpta voluntarily recalled roasted sunflower kernel products due to the potential presence of listeria monocytogenes on May 2, 2016, May 18, 2016, and May 31, 2016. The recall ultimately covered approximately one year's products sold to Dakota Style.¹ Dakota Style filed claims for strict products liability, negligence, breach of implied warranties, breach of express warranties, breach of contract, and declaratory judgment in state court. On August 12, 2016 SunOpta removed the case to federal court and on December 13, 2016 this court dismissed Dakota Style's claims for strict products liability, negligence, and declaratory judgment. SunOpta filed an answer to plaintiff's complaint, which included counterclaims for breach of sales contract, breach of contract, unjust enrichment, conversion, promissory estoppel, and fraud related to plaintiff's alleged failure to pay its outstanding balance with SunOpta or verify that product for which plaintiff was reimbursed by SunOpta was subject to recall.

On May 1, 2018, plaintiff filed a motion for partial summary judgment and defendant filed a motion for summary judgment. Plaintiff requests summary judgment for breach of contract and breach of implied and express warranties and requests that SunOpta's counterclaims be dismissed. SunOpta objects to plaintiff's request, arguing, inter alia , that Dakota Style has sustained no damages as the majority of product was sold to the end consumer and paid for by Dakota Style's customers, that the bulk of product delivered to Dakota Style was not contaminated by listeria monocytogenes, and that there is a factual dispute as to whether product specifications were included in the parties' contracts and whether SunOpta knew that Dakota Style used its sunflower kernels for human consumption.

Defendant requests summary judgment on Dakota Style's claim for consequential damages, Dakota Style's outstanding balance to SunOpta, the purchase price of kernel product not covered by the recall, and for the purchase price of product covered by the recall which SunOpta alleges Dakota Style already sold. Dakota Style objects to defendant's request, arguing, inter alia , that Dakota Style is a third-party beneficiary of SunOpta's insurance contract, that limiting damages to the purchase price is unconscionable, that Dakota Style was forced to reimburse merchants for the defective products, and that Dakota Style is entitled to set-off for its outstanding balance.

Both parties request oral argument on their summary judgment motions. Because the court is able to resolve the pending motions for summary judgment without oral argument, the requests for oral argument should be denied.

DECISION

I. Standard of Review

The purpose of summary judgment is to determine whether there is a "genuine issue for trial" with regard to a claim or defense or "part of each claim or defense." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Fed. R. Civ. P. 56(a). Summary judgment should be granted only where there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). If facts are disputed, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment."

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the burden of showing that the material facts in the case are undisputed and "inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curiam). However, a nonmoving party "may not rest on mere allegations or denials" and "must do more than show that there is some metaphysical doubt as to the material facts." Anderson, at 256, 106 S.Ct. 2505 ; and Matsushita, at 587, 106 S.Ct. 1348. Where "the factual context renders respondents' claim implausible"—for instance, "if the claim is one that simply makes no economic sense"—then "respondents must come forward with more persuasive evidence to support their claim than would otherwise be necessary." Matsushita, at 587, 106 S.Ct. 1348. In sum, an issue of fact is genuine if, based upon the evidence in the record, a reasonable jury could return a verdict for the nonmoving party. Anderson, at 248, 106 S.Ct. 2505.

II. Breach of Express Warranty

This court determined in its previous ruling in this matter that South Dakota law governs substantive issues and the UCC governs the sales contracts between Dakota Style and SunOpta. Dakota Style Foods, Inc. v. SunOpta Grains and Foods, Inc., 2016 WL 7243534, *2 (D.S.D. 2016). Dakota Style requests that this court grant its motion for summary judgment as to breach of express warranty. In order to recover money damages for a breach of express warranty in South Dakota, Dakota Style must prove the following elements:

(1) an affirmation of fact or promise made by the seller to the buyer relating to the goods;

(2) such affirmation of fact or promise became a part of the basis of the bargain;

(3) that the injured party, in making the purchase, relied on the representations, affirmations of fact or promises;

(4) that the goods sold by the seller failed to comply with the promises or affirmations of fact made by the seller;

(5) that the buyer, because of such failure, was financially injured; and

(6) that such failure to comply was a proximate cause of the financial injury suffered by the buyer.

Swenson v. Chevron Chemical Co., 89 S.D. 497, 234 N.W.2d 38, 42 (1975) (internal citations omitted). SDCL § 57A-2-313(1)(b) provides that "[a]ny description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description." Further, "[i]t is not necessary to the creation of an express warranty that the seller use formal words such as ‘warrant’ or ‘guarantee’ or that he have a specific intention to make a warranty." SDCL § 57A-2-313(2). As this court has previously noted, "[p]urchase agreements may incorporate by reference another document containing technical specifications for the product, and this will likely create an express warranty by description." James River Equip. Co. v. Beadle Cty. Equip., Inc., 646 N.W.2d 265, 269 (S.D. 2002) ; Dakota Style Foods. Inc. v. SunOpta Grains and Foods, Inc., 2016 WL 7243534 at *5. The contracts between Dakota Style and SunOpta specifically state "[a]s per attached product specifications." The product specification states that "[t]he product shall be manufactured in accordance with Good Manufacturing Practice 21 CFR, Part # 110"; "shall conform in every respect with the provisions of the Federal Food, Drug and Cosmetic Act, as amended, and to all applicable State and Local Regulations"; and "shall meet the Kashruth requirements of the Union of Orthodox Jewish Congregations of America." The product specifications provide nutritional data, a flavor profile, and indicate that the sunflower kernels are "[n]utritionally-dense whole food."

SunOpta argues that the product specifications that Dakota Style references do not create an express warranty for two reasons: (1) that the product specifications were not included in the contracts with Dakota Style; and (2) that the product specifications disclaim any warranty through inclusion of the following statements: "This information is presented in good faith, and great care was used in its preparation. However, no warranty, guarantee, or freedom from patent infringement is implied or intended. This information is offered solely for your consideration and verification." Dakota Style, as the party having moved for summary judgment for breach of express warranty, has the burden of proving, by a preponderance of the evidence, that the product specifications were part of the parties' agreements. Dakota Foundry, Inc. v. Tromley Indus. Holdings, Inc., 737 F.3d 492, 495 (8th Cir. 2013).

A. The Product Specifications Were Included in the Contracts with Dakota Style

It is clear to this court, given the statement in the contracts "[a]s per attached product specifications," that product specifications were part of the contracts. This is consistent with the fact that virtually no description of the products Dakota Style purchased are included in the sales contracts. SunOpta, however, argues that there is a factual issue as to whether the product specifications were provided to Dakota Style as part of the contract, stating that

Michael Todd, the SunOpta employee who negotiated the sunflower contracts with Dakota Style, testified he did not believe he included the product specifications when he sent contracts to Dakota Style, and even stated he looked back at emails to see if he had, and no emails substantiated that product specifications were sent with the contracts.

Michael Todd...