Importers Service Corp. v. Gp Chemicals Equity

• Decision Date: 24 August 2009
• Docket Number: Civil Action No. 1:07-CV-0745-JOF.
• Citation: 652 F.Supp.2d 1292
• Parties: IMPORTERS SERVICE CORPORATION, Plaintiff, v. GP CHEMICALS EQUITY, LLC, Defendant.
• Court: U.S. District Court — Northern District of Georgia

652 F.Supp.2d 1292

IMPORTERS SERVICE CORPORATION, Plaintiff, v. GP CHEMICALS EQUITY, LLC, Defendant.

Civil Action No. 1:07-CV-0745-JOF.

United States District Court, N.D. Georgia, Atlanta Division.

August 24, 2009.

COPYRIGHT MATERIAL OMITTED

Eugenia Wooten Iredale, Shattuck Ely, Fellows Johnson & La Briola, Atlanta, GA, for Plaintiff.

Courtney Chanin Camp Enloe, Georgia Pacific Corporation, George L. Murphy, Jr., Taylor Higgins Ludlam, Audra Ann Dial, Kilpatrick Stockton-Atlanta, Atlanta, GA, for Defendant.

OPINION AND ORDER

J. OWEN FORRESTER, Senior District Judge.

This matter is before the court on Defendant's motion for summary judgment [56]; Defendant's motion for leave to file excess pages [82]; and Plaintiff's motion to strike [86].

I. Background

A. Procedural History and Facts

Plaintiff, Importers Service Corporation, filed suit against Defendant, Georgia-Pacific Resins, Inc., on April 2, 2007, alleging state law claims of breach of contract, fraud, and unjust enrichment, as well as a violation of Georgia's Fair Business Practices Act, and federal claims under the Lanham Act, 15 U.S.C. § 1125(a)(1)(A). Georgia-Pacific Resins, Inc., had changed its name to GP Chemicals Equity, LLC, and the complaint was amended by consent to reflect the proper name. Defendant also filed a counterclaim for breach of contract and negligent misrepresentation.

The parties' dispute revolves around the product known as NovaRes 1190 which is used as a densifying agent in the compounding of citrus beverages. In other words, it assists in keeping flavoring oils in suspension in beverages. Because Defendant had never marketed a product like NovaRes to the beverage and food industry, in 2000, it began discussions with Plaintiff to assist Defendant with the selling, marketing, and promoting of NovaRes. Prior to entering into an agreement, Plaintiff worked with its customers to determine if NovaRes was a viable product, developed a marketing plan, and gained regulatory approval for NovaRes. Plaintiff also tested the efficacy of the product and made adjustments to the product's formulation.

The parties entered into a Distributor's Agreement on March 10, 2003. That Agreement is central to the parties' dispute. The Agreement sets forth the responsibilities of Plaintiff which generally relate to identifying, contacting, and soliciting customers. See Agreement, ¶ ¶ 3-4, 10. At some point in 2003, Plaintiff asserts that Defendant was not able to provide it with sufficient quantity of quality NovaRes product. Plaintiff asserts this caused a delay in entry into the market. Plaintiff contends it was unable to fill an order for 10,000 pounds of NovaRes from a customer during this time, so the order was cancelled. Plaintiff also states it was not able to fill an order from Shasta, a large beverage distributor. Plaintiff asserts it had approximately fifty other customers to whom it was not able to provide samples of NovaRes. Some of the NovaRes provided by Defendant to Plaintiff in 2003 had unacceptable odors, black specks, and dusting. Defendant was also forced to correct a packaging problem in 2003. Defendant met with two customers without bringing along Plaintiff. Plaintiff asserts that this negatively affected Plaintiff's ability to market NovaRes, undermined its credibility, and dissuaded customers from purchasing product. In 2005, Defendant delayed in filling out paperwork that had to be completed before Plaintiff could complete a sale to a significant customer.

The Agreement stated that Defendant "may terminate this Agreement forthwith by notice to ISC ... if ISC fails to meet the quantity thresholds for purchases and sales of [NovaRes] set forth in Exhibit E." See Agreement, ¶ 14(g). Exhibit E to the Agreement defines "quantity thresholds" as follows:

The first 12 months after the Effective Date: 150,000 pounds of Product per calendar quarter purchased and paid for by Qualified Customers.

Months 13 through end of the terms of the Agreement [sic] 250,000 pounds of Product per calendar quarter purchased and paid for by Qualified Customers.

Id., Exh. E. The Effective Date of the Agreement is defined as:

[T]he earlier to occur of (1) the date ISC has sold One Hundred Fifty Thousand (150,000) pounds or more of [NovaRes] to Qualified Purchasers in any twelve (12) month period; or (2) the date which is 24 months from the date [NovaRes] receives GRAS certification and/or Food and Drug Administration approval for use in the Market.

Id., ¶ 1.

ISC never sold 150,000 pounds of NovaRes during any twelve-month period. The other trigger of the Effective Date requires more discussion. With respect to determining when NovaRes was "certified" GRAS or Generally Recognized As Safe by the Flavor and Extract Manufacturers Association ("FEMA") of the United States, both parties focus on the deposition of John B. Hallagan, Legal Advisor to FEMA. The court takes the time to highlight portions of Mr. Hallagan's deposition since neither party considers the full extent of his testimony. For the purposes of context only, the court notes that the GRAS program is part of the Federal Food, Drug, and Cosmetics Act. It exempts from the statutory category "food additives" certain substances that are "generally recognized" by experts as having been demonstrated to be safe under conditions of intended use. The benefit of receiving GRAS certification is that if a substance is not classified as a "food additive," it does not need to have premarket approval from the Food & Drug Administration. FEMA's expert panel is a group of experts with authorization to add substantives to the GRAS list. FEMA, itself consists of more than 100 companies that manufacture or use flavors.

Mr. Hallagan testified that Plaintiff first applied for GRAS status around 2002 or 2003. See Hallagan Depo., at 7. He stated that the scientific staff of FEMA generally works with applicants in a "pre-submission" process to help them develop the applications. Id. Once the application is completed, it is submitted to FEMA's expert panel for evaluation of whether the product will be "generally recognized as safe." Id. The scientific director of FEMA provides a letter to the applicant informing it of the panel's decision. Id. at 8. Mr. Hallagan recalls that NovaRes was considered by the expert panel in 2002 and placed on hold at that time. Id. The panel then reviewed NovaRes in February 2003 and it was "determined to be GRAS." Id. at 8-9. He believed the letter stating that NovaRes has been granted GRAS approval was dated April 2003, but agreed that an exhibit showing the date was actually March 17, 2003, would be more accurate. Id. at 10-12.

Numerous modifications were made to that original letter at the request of Plaintiff and FEMA mailed out three additional letters, but those modifications do not "change the fact that the product received FEMA GRAS approval at the February 2003 meeting of the expert panel." Id. at 13. "The changes made [in the letter] were considered clarifications that do not affect the GRAS evaluation of the material. So the material was determined to be GRAS at the February `03 meeting." Id. at 15, 18. Even though these subsequent letters were issued, "[t]he product remained FEMA GRAS from February '03 and remains FEMA GRAS today." Id. at 18. Mr. Hallagan testified that the letters specified the "intended use" for the substance and that it was unusual to have more than one letter issued. Id. at 39.

In August 2005, the 22nd publication of the FEMA Expert Panel came out in the journal Food Technology with NovaRes listed as GRAS. Id. at 49. Roughly every two years, FEMA publishes a list of substances it has recognized as GRAS. Id. at 51. In preparation for the publication, a substance receives a FEMA GRAS number. Id. at 52. Mr. Hallagan could not recall when NovaRes received its number, but it could have been between several months or weeks before publication. Id. Prior to publication, a list of the substances is given to the Food & Drug Administration so that it can offer any opinion that it wishes. Id. at 53.

Mr. Hallagan further testified that the purpose of publishing the list in a journal was to comply with the statutory requirements of GRAS status which "include general recognition, and there's case law which goes back many years which shows that you can't have general recognition if nobody knows about the material." Id. at 55. The publication of the material allows the public, regulators, or anyone else an opportunity to see what has been determined to be GRAS and express objections or concerns. Id. There is no set publication date. FEMA typically waits until there is sufficient volume to justify publication. Time between publication can be as little as two years or as great as four to five years. Id. at 57. "But, obviously, within that time frame, the time varies for individual substances depending on when they were GRAS'd. So you could have one that was GRAS'd at the beginning of the interval, which has a longer period, and one at the end, which has a shorter period." Id. He then testified that if "a party were to make a judgment that something is GRAS, but then there's no publication or notification of it, no description of its condition or intended use, my opinion would be that the material is not, in fact, GRAS because there's no general recognition." Id. at 62. Mr. Hallagan went on to state:

Q: Between the time that the product receives FEMA GRAS granted by the expert panel and the publication of the letter, is the product considered GRAS?

A: Yes, it is.

MR. ELY: Objection to the form of the question.

Q: (By Ms. Ludlam) And so the publication of the GRAS list is merely public notification of that GRAS status, correct?

A: That's one way to look at it, yes. It's—It's acknowledgment in the publicly available literature that these materials have been determined to be GRAS by the expert panel.

Id. at 76. "The substance is GRAS upon the expert panel making...