Holden Farms, Inc. v. Hog Slat, Inc.

Citation347 F.3d 1055
Decision Date28 October 2003
Docket NumberNo. 02-2786 MN.,02-2786 MN.
PartiesHOLDEN FARMS, INC., a Minnesota Corporation; Rod Garness; Eugene C. Ward; Randy Swanson; Rick Anderson d/b/a Circle A Farms; Tim Sanborn; AJ Farms, a Minnesota General Partnership; Dennis Kofstad; Marlin Kruckeberg; and Pork Avenue, LLP, a Minnesota Limited Liability Partnership, Appellants, v. HOG SLAT, INC., a North Carolina Corporation; BCM Manufacturing, Ltd., a Canadian Corporation; and Double L Group Ltd., an Iowa Corporation, Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Before WOLLMAN, RICHARD S. ARNOLD, and MURPHY, Circuit Judges.

RICHARD S. ARNOLD, Circuit Judge.

In this case an ultimate buyer sues up the stream of commerce alleging warranty, contract, and tort claims against the direct seller, tort and warranty claims against the distributor, and tort and warranty claims against the manufacturer. The District Court dismissed all claims on motions to dismiss and for summary judgment. We affirm in part and reverse in part.

I.

Holden Farms and the nine other plaintiffs (whom we shall sometimes collectively call Holden Farms) produce and market hogs. Between August 29, 1994, and September 5, 1997, plaintiffs entered into ten contracts with Hog Slat, a North Carolina corporation, for the construction of hog nurseries. Seven of the ten contracts were entered into by Barry Holden on behalf of Holden Farms. The other three contracts were entered into by the remaining plaintiffs. The plaintiffs and Hog Slat agree that all of the contracts were fully integrated agreements. Five of the ten total contracts contained a choice-of-law clause stating that "[t]his Contract is controlled and governed, and the parties agree to be bound, by North Carolina law." The other five contained a choice-of-law clause stating that "[t]his Contract is controlled and governed, and the parties agree to be bound, by Iowa law."

Holden Farms and the nine other plaintiffs desired to expand their operations. As part of that expansion, Holden Farms wished to build hog nurseries, and contracted with Hog Slat for that purpose. Hogs are placed in a nursery after they are born but before they are finished for sale. The nurseries are built with slatted floors, supported by beams, so that the hogs' refuse does not contaminate their living space. The contracts provided that Hog Slat would install a plastic flooring manufactured by BCM Manufacturing, a Canadian corporation, and distributed by Double L Group, an Iowa corporation. BCM and Double L were not parties to any of the contracts.

In April 1994, Holden Farms acted as host for a sales presentation by Double L and Hog Slat to explain the advantages to hog farmers of a new plastic flooring, Filter Eeze Maxima, to be used in the hog nurseries. Double L was BCM's sole distributor of Maxima flooring in the United States. As part of promoting the Maxima flooring to Holden Farms, Double L prepared a letter and promotion brochure. The letter was provided to Holden Farms by a Double L representative named Borcherding. The letter stated that Mr. Borcherding was a "representative of BCM Manufacturing," but it was apparently understood by Holden Farms that Mr. Borcherding also represented Double L. Importantly for this case, the letter also stated that the "Filter-Eeze Ten-year non-prorated warranty is proven!" The brochure, prepared by Double L, but carrying a Hog Slat logo, also referred to a ten-year warranty. The executed contracts explicitly stated, however, that all warranties extended under the contracts were "only for one (1) year from the date of substantial completion or for such period as the manufacturer's warranty, whichever is less." The contracts did not mention any ten-year warranty, although they did refer to a manufacturer's warranty.

Installation of the first three nurseries was completed by Hog Slat in October 1994, and the other seven nurseries were completed over the next several years. Hog Slat followed BCM's installation specifications, which called for the use of steel beams to support the flooring. In the summer of 1998, Holden Farms began to notice problems with the flooring in the first three nurseries built. The constant exposure to hog waste caused the steel support beams to swell and corrode, which in turn caused the plastic floor to buckle. The hogs were able to lift the buckling slats with their snouts, creating gaps in the flooring that they fell through into the manure pit below. Approximately 50 feeder hogs were killed as a result, and Holden Farms had to replace the flooring.

Holden Farms filed suit against Hog Slat, BCM, and Double L. It alleged that Hog Slat was in breach of its contracts violated its express and implied warranties, and was liable for negligent design and negligent misrepresentation. Holden Farms alleged, as well, that BCM violated its warranty and was liable for negligent design and negligent misrepresentation. Finally, plaintiff alleged that Double L had violated its warranty and was liable for negligent misrepresentation. Plaintiff sought replacement-cost damages, business-interruption damages, and other expenses.

Hog Slat moved to dismiss the claims against it pursuant to Federal Rule of Civil Procedure 12(b)(6) on the grounds that the claims were barred by the statute of limitations, the parol-evidence rule, and the economic-loss doctrine. A Magistrate Judge recommended dismissal of the contract and warranty claims against Hog Slat because the claims were barred by the one-year time limitation for bringing claims agreed to in the contract and by the parol-evidence rule. Determining that the choice-of-law clause governed the tort claims, the Magistrate Judge recommended that the tort claims be dismissed except as to the loss of the hogs. Under Iowa and North Carolina law, recovery for injuries based on the flawed flooring was precluded by the economic-loss doctrine. The doctrine provides that a buyer may not recover from a seller or other person claimed to have made warranties with respect to sold goods in a tort action for economic loss to the goods themselves. Recovery may be had for such loss only in a warranty or contract action. The District Judge adopted the Magistrate Judge's recommendation.

Double L filed an answer generally denying the allegations and filed cross claims against Hog Slat and BCM. Hog Slat filed an answer as to the remaining claims against it and brought cross claims against BCM and Double L. BCM filed an answer generally denying all claims.

Next, Hog Slat brought a motion for summary judgment. Soon after, BCM brought its own motion for partial summary judgment, excepting damages concerning the hogs. Double L moved for summary judgment on all claims. The District Court granted Hog Slat's motion as to the negligent-misrepresentation claim, holding that Hog Slat owed Holden Farms no duty. The Court, however, preserved the negligent-design claims but reiterated that it had limited those claims to the loss of the hogs. Double L was granted summary judgment on all claims against it, and BCM was granted summary judgment on all claims against it except those relating to damages from the loss of the hogs.

The District Court's ruling left Holden Farms with only the claims for the loss of hogs surviving. The parties stipulated to the dismissal of all remaining claims, making the order of the District Court final. This appeal followed. We affirm in part and reverse and remand in part.

II

"In considering a motion to dismiss, we must assume that all the facts alleged in the complaint are true. The complaint must be liberally construed in the light most favorable to the plaintiff. A Rule 12(b)(6) motion to dismiss a complaint should not be granted unless it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle the plaintiff to relief. Whether a complaint states a cause of action is a question which this court reviews de novo." Coleman v. Watt, 40 F.3d 255, 258 (8th Cir. 1994) (internal citations omitted).

We review a grant of summary judgment de novo. Summary judgment is appropriate "if 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 the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56. The non-moving party is entitled to all reasonable inferences based on the facts. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

We shall address the claims against each party in turn.

III.

Holden Farms argues that the District Court erred when it dismissed its contract claims against Hog Slat, dismissed its non-hog-loss tort claims against Hog Slat, and granted Hog Slat's summary-judgment motion on its negligent-misrepresentation claim. We disagree.

A.

The District Court dismissed Holden Farms' breach-of-contract claim against Hog Slat because the one-year time limitation for bringing suit, set out in Article IV(G) of the contracts, had expired.1

Holden Farms argues that the limiting language bars only actions for violation of warranty, but does not preclude other claims for breach of contract. It concedes that the warranty period had expired, but argues that the limitation made in Article IV(G) applied only to the promises made in that Article. It places great weight on the title of Article IV(B): "Contractors Additional...

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