Ibp, Inc. v. Hady Enterprises, Inc.
| Decision Date | 26 February 2002 |
| Docket Number | No. 3:99-CV-402/LAC.,3:99-CV-402/LAC. |
| Citation | 267 F.Supp.2d 1148 |
| Parties | IBP, INC., Plaintiff, v. HADY ENTERPRISES, INC., Defendant. |
| Court | U.S. District Court — Northern District of Florida |
Robert Anthony Eimmanuel, Charles Phillip Young, Emmanuel Sheppard & Condon, Pensacola FL, George W Walker, Mitchel H Boles, Richard H Gill, Copeland Franco Screws & Gill. Montgomery, AL, for Plaintiff.
Danny Lee Kepner, John Bassett Trawick, Susan Adair Woolf, Shell Fleming Davis, Pensacola, FL, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
THIS CAUSE came for trial on January 14, 2002 before the Court. The Court's jurisdiction arises under Title 28, United States Code, Section 1332 as this is a civil action between parties of diverse citizenship. See 28 U.S.C.A. § 1332 (West 1993).1 The issues having been duly tried over two days, the Court makes and enters its Findings of Fact and Conclusions of Law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.
Plaintiff IBP, INC. (IBP), a Delaware corporation with its principal place of business in South Dakota, is the world's largest beef producer. IBP produces, processes, packages, and labels beef products, including beef livers, for exportation to foreign countries. Since 1977, IBP has supplied beef livers to Egypt. By 1998, IBP was supplying approximately 20 million pounds of beef livers to Egypt annually.
Defendant HADY ENTERPRISES, INC. (Hady Enterprises), an Illinois corporation with its principal place of business in Illinois, is a trading company that exports and imports frozen meat products via the Port of Pensacola in Pensacola, Florida.2 Hady Enterprises has only two shareholders, Salem Hady and Serag Khodir.3 Khodir also serves as Hady Enterprises' President and chief officer and Hady serves as Hady Enterprises' director.
In November 1997, the Egyptian Government issued Ministerial Decree 465 (Decree 465). Decree 465 requires that all beef livers exported to Egypt during or after January 1998 be packaged under certain guidelines, including, among other requirements, inserting Arabic-language labels into the beef livers' poly-bags, evincing uniformity with the regulations. Decree 465 requires that the packaging indicates that the animal is slaughtered according to the Islamic rituals of "Halal."4
However, other nations, such as Russia, do not require the strict preparation and packaging requirements that the Egyptian government mandated under Decree 465. Therefore, while Decree 465-compliant beef livers would be more than adequate to be sold on the Russian market, beef livers prepared for the Russian market would not meet the strict requirements of Decree 465 and could not be sold on the Egyptian market. Due to the stringent requirements of Decree 465, beef livers sold on the Egyptian market command a higher market price. The Russian market's collapse in August 1998 accentuated the price difference between the markets.
At the times relevant to this action, IBP prepared Halal beef livers at only four of its eleven beef packing plants.5 During the production process of Decree 465-compliant beef livers, IBP inserts USDA-approved, edible, Arabic-language labels into the poly-bags in contact with the beef livers. IBP did not place edible, Arabiclanguage labels into the poly-bags of beef livers destined for the Russian market.
In July 1998, Hady Enterprises requested that IBP produce beef livers complying with Decree 465 and provided IBP with a sample of the labels that Hady Enterprises wanted IBP to use when packaging the livers. IBP could not accommodate Hady Enterprises' request because Mirasco, Inc., a company that had served as IBP's primary exporter to Egypt for over twenty years, had already purchased IBP's supply of Decree 465-compliant beef livers.
From approximately June 1998 to August 1998, Hady Enterprises sent IBP purchase orders for 1,034,718 pounds of select beef livers (Pl.Ex. 3).6 Hady Enterprises stated on the purchase orders that the beef livers were "for Russia" (Id.). Hady Enterprises' purchase of the IBP product represented to IBP that Hady Enterprises would not tamper with the product labels or the boxes, boxes that clearly exhibited IBP's logo (Pl.Ex. 27, Attachs.C, D).7 Based on Hady Enterprises' representations, IBP filled the orders by packaging, labeling, and processing the livers for Russia. As part of the packaging process, IBP placed straps over the boxes after they were closed. IBP then sent the frozen beef livers to Hady Enterprises' warehouse at the Port of Pensacola in Pensacola, Florida. Each of the 25 loads of beef livers received by Hady Enterprises was accompanied by a separate United States Department of Agriculture, Food and Safety Inspection Services Form 9060-5, Meat and Poultry Export Certificate of Wholesomeness, which showed the country of export designation as Russia (Pl.Exs.2, 22).
When the beef livers reached Hady Enterprises' Pensacola warehouse, at the direction of Khodir, Hady Enterprises employees (which were often day laborers), destrapped and opened the boxes of Russian-destined beef livers.8 Also at Khodir's direction, the employees re-bagged and re-labeled the beef livers with Arabiclanguage labels.9 This process was undertaken by either tearing open the poly-bags while the product was still partially frozen, inserting a label in contact with the product, and rebagging the livers or by cutting a slit in the poly-bags and sliding an Arabic language label into the bag in contact with the product.10 The employees also placed additional ink stamps on the outside of the plastic bags, which sometimes ran and contaminated the raw livers.11 As a result of Hady Enterprises' rebagging process, some of the beef livers were exposed to the open air.12 Other beef livers had torn portions of the IBP poly-bags left attached to the partially frozen beef livers and sealed underneath the new polybags.13 The employees returned the products to the IBP boxes, stamped the boxes and the beef livers with an additional Arabic ink stamp and restrapped the boxes with a strapping machine at the Pensacola facility.14 Among the changed labels, were the inclusion of Arabic-language labels that stated, "HALAL SLAUGHTERED, APROVED BY ISLAMIC AMERICAN SOCIETY," and (Pl.Ex. 28). By undergoing this process, Hady Enterprises aimed to present the Russian-prepared IBP beef livers as though they were packaged and processed in compliance with Decree 465, in order to sell the livers at a higher price on the Egyptian market.15
Hady Enterprises engaged in other unsavory practices in furtherance of this scheme. Khodir directed employees to complete documents, including filling out new Certificates of Wholesomeness, certifying that the exported products complied with the laws and regulations of the destination country without examining whether the certificates were accurate, yet representing them as accurate to USDA inspectors (Pl.Exs.9-10).16 Further, Hady, on Hady Enterprises' behalf, paid an Illinois notary to stamp documents indicating that the livers were Halal slaughtered, giving those documents an added "air of legitimacy" (Pl.Exs.71-73).17
After relabeling and repackaging the beef livers, Hady Enterprises exported the livers to Egypt via Hady's exporting business. The beef livers arrived in Port Said, Egypt in October 1998, were inspected by Egyptian authorities, and were unloaded into a cold storage warehouse owned and operated by Hady.18 In November 1998, an anonymous complaint was made to the Egyptian General Authority for Export & Import Control (GAIEC) about the livers and GAIEC inspected the livers that were in the Port Said cold storage facility. GAIEC determined that the IBP-boxed beef livers in the Port Said storage facility did not comply with Decree 465 and ordered them either exported or destroyed. Hady then exported the shipment to Holland and then to Russia and sold them on the Russian market. Until 1998, IBP had never been made aware of any complaints from Egypt about its beef livers.
On January 6, 1999, the Egyptian government enacted Egyptian Ministerial Decree no. 6, banning IBP from importing any additional products into Egypt. Contemporaneous with the ban, GAIEC issued its official inspection report (Pl.Ex. 18).19 The report states that GAIEC rejected the liver shipment and, as a result of the shipment, issued Ministerial Decree No. 6, the Egyptian ban of IBP.20 Further, soon after the ban, IBP correspondence with GAIEC Director Fakhr Eldin Abou El Ezz, made at Ezz's request, summarized the events surrounding the ban (PLEx. 26). The correspondence explains that the IBP ban was based on the rejection of the September 1998 Hady Enterprises shipment of IBP livers, due to improper labeling under Decree 465 (Id.).21
Since the issuance of the ban, IBP has been unable to sell its. products in Egypt. As a result, since January 1999, approximately sixty contracts between IBP and one of IBP's primary customers, Mirasco could not be filled (Pl.Ex. 28). Moreover, in 1998, the year before the ban, IBP sold approximately 20,000,000 pounds of beef livers prepared and packaged for Egypt via Mirasco. Since the ban's enactment, IBP has undertaken extensive efforts to have the ban lifted.
IBP has asserted five claims against Hady Enterprises: (1) breach of contract, (2) negligence, (3) defamation and disparagement, (4) tortious interference with contractual relations and (5) false designations of origin, false descriptions, and false representations violating Title 15, United States Code, Section 1125. The Court will consider each in turn.22
The first count of IBP's complaint alleges breach of...
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