Keahole Point Fish LLC v. Skretting Canada Inc.

• Court: U.S. District Court — District of Hawaii
• Writing for the Court: KEVIN S.C. CHANG
• Citation: Keahole Point Fish LLC v. Skretting Canada Inc., 971 F.Supp.2d 1017 (D. Haw. 2013)
• Decision Date: 04 September 2013
• Docket Number: Civil No. 11–00675 KSC.
• Parties: KEAHOLE POINT FISH LLC, Plaintiff, v. SKRETTING CANADA INC. aka Skretting North America; Does 1–10, Defendants. Skretting Canada, Inc. aka Skretting North America, Counterclaimant, v. Keahole Point Fish LLC; DOES 1–10, Counter–Defendants.

971 F.Supp.2d 1017

KEAHOLE POINT FISH LLC, Plaintiff,

v.SKRETTING CANADA INC. aka Skretting North America; Does 1–10, Defendants.

Skretting Canada, Inc. aka Skretting North America, Counterclaimant,

v.Keahole Point Fish LLC; DOES 1–10, Counter–Defendants.

Civil No. 11–00675 KSC.

United States District Court, D. Hawai‘i.

Sept. 4, 2013.

Brandon M. Segal, Claire Wong Black, David A. Nakashima, Alston Hunt Floyd & Ing, Honolulu, HI, for Plaintiff/Counter–Defendants.

D. Matthew Doden, Jeffrey C. Johnson, Joanne M. Hepburn, K & L Gates LLP, Seattle, WA, Patricia M. Napier, Randall C. Whattoff, Goodsill Anderson Quinn & Stifel LLLP, Honolulu, HI, for Defendants/Counterclaimant,

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; ORDER DENYING AS MOOT 1) DEFENDANT'S SUPPLEMENTAL MOTION FOR SUMMARY JUDGMENT ON THE DOCTRINE OF RES IPSA LOQUITUR AND ANY SIMILAR THEORIES AND 2) PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT RE: CIRCUMSTANTIAL EVIDENCE UNDER STRICT PRODUCTS LIABILITY (“QUASI”-RES IPSA)

KEVIN S.C. CHANG, United States Magistrate Judge.

Before the Court are 1) Defendant Skretting Canada Inc. aka Skretting North America's (“Defendant”) Motion for Summary Judgment, filed May 17, 2013; 2) Defendant's Supplemental Motion for Summary Judgment on the Doctrine of Res Ipsa Loquitur and Any Similar Theories, filed July 8, 2013; and 3) Plaintiff Keahole Point Fish LLC's (“Plaintiff”) Motion for Partial Summary Judgment Re: Circumstantial Evidence Under Strict Products Liability (“Quasi”— Res Ipsa ), filed July 8, 2013.

These matters came on for hearing on August 29, 2013. David Nakashima, Esq., appeared on behalf of Plaintiff. Jeffrey Johnson, Esq., Patricia Napier, Esq., and Randall Whattoff, Esq., appeared on behalf of Defendant. After careful consideration of the motions, the supporting and opposing memoranda, the arguments of counsel, and the applicable law, the Court HEREBY GRANTS IN PART AND DENIES IN PART Defendant's Motion, and DENIES AS MOOT Defendant's Supplemental Motion and Plaintiff's Motion for the reasons set forth below.

BACKGROUND

I. Factual History

This action arises out of allegations that the Kona Pacific poultry meal feed that Plaintiff purchased from Defendant was defective because of nutrient deficiencies, namely taurine, and inferior ingredients.

A. Kona Blue

In late 2005 or early 2006, Kona Blue, Plaintiff's predecessor, requested that Defendant prepare a custom diet for its Seriola rivoliana. Def.'s CSF, Decl. of Jeffrey C. Johnson (“Johnson Decl.”), Ex. A.¹ At Kona Blue's request, Defendant provided Kona Blue with four feed options with reductions in fishmeal in December 2007, including one option that substituted poultry meal for some fishmeal. Id. Kona Blue selected the poultry meal diet, resulting in a possible annual savings of $150,000 in feed costs. Def.'s CSF, Decl. of Christopher Beattie (“Beattie Decl.”) at ¶ 5 and Ex. A.²

In December 2007, Defendant began shipping the Kona Pacific poultry meal feed to Kona Blue. Id., Johnson Decl., Ex. D. Since 2007, all product sheets for the Kona Pacific diet contained the following disclaimer: “Individual results from the use of Skretting feed products may vary due to management, environment, genetic, health and sanitation differences. Therefore, Skretting does not warrant or guarantee individual results and reserves the right to modify it without prior notice.” Id., Beattie Decl. at ¶¶ 11–12, Exs. E & F. Kona Blue began feeding the Kona Pacific poultry meal feed to its Seriola rivoliana in early 2008. Id., Johnson Decl., Ex. D. According to Neil Sims, Kona Blue's president, Chris Beattie, Defendant's general manager, advised him that Kona Pacific feed would provide a balanced diet. Id., Johnson Decl., Ex. E; Pl.'s CSF, Additional Material Facts (“AMF”) at ¶ 3 & Ex. 3.³ The Kona Pacific feed formula was based on the nutritional and dietary requirements of salmon. Pl.'s CSF, AMF at ¶¶ 6–8.

In July 2008, Kona Blue reported to Defendant that it experienced some of the best fish survival in company history. Pl.'s CSF, Ex. 20. In October 2008, Kona Blue complained of slower growth and reduced feed response. Id., AMF at ¶¶ 6–9. Eventually, Kona Blue determined that overstocking, strep infection, and skin flukes caused the issues, and mortality rates in 2008 were in fact low. Def.'s CSF, Johnson Decl., Ex. D; Def.'s Reply CSF at ¶¶ 6–8. Defendant represents that Kona Blue thereafter reported successful results for nearly two years while its fish were consuming the Kona Pacific poultry meal feed. Def.'s CSF, Beattie Decl. at ¶ 6. At the end of 2009, Kona Blue was successfully harvesting Seriola rivoliana at average weights over four-and-a-half pounds, which was at or exceeding the farm's historical harvest weights. Id., Johnson Decl., Exs. A & D.

B. Acquisition by Plaintiff of Kona Blue

In February 2010, Plaintiff assumed control of the aquafarm. Id., Beattie Decl., Ex. D. Prior to its acquisition of the farm, Plaintiff conducted due diligence with respect to Kona Blue's practices, harvest data, and financial data. Id., Johnson Decl., Exs. E & F. Kona Blue disclosed that it requested that Defendant replace some fishmeal with poultry meal, and recommended another feed company to enable Plaintiff to consider other feeds. Id., Johnson Decl., Ex. E.

Plaintiff claims that after it began operations, Defendant further reduced the amount of fishmeal in the feed and replaced it with alternative protein materials that contained less taurine by weight. Pl.'s CSF, AMF at ¶ 9, Ex. 11. Defendant disputes this allegation, and maintains that not only did the formula not change when Plaintiff purchased the farm, but that there was no change to the formula from late 2007 until July 2011, when Plaintiff requested that the formulation return to the original Kona Pacific diet that did not include poultry meal. Def.'s CSF, Johnson Decl., Ex. C; Beattie Decl., Ex. H. Plaintiff represents that the purported fishmeal reduction resulted in poor eating and slowed growth. Pl.'s CSF, AMF at ¶ 10, Ex. 4. In addition, Plaintiff noticed increased susceptibility to bacterial infections, poor reaction to routine treatments, and abnormally high daily mortalities. Id. When Plaintiff queried Defendant about whether it had changed the formulation of the feed, Mr. Beattie responded that while the ingredients may vary over time, the formulation had not changed at all for a couple of years. Pl.'s CSF, AMF at ¶ 11, Ex. 2; Def.'s Reply CSF at ¶ 11; Def.'s CSF, Johnson Decl., Ex. B.

C. The Parties' Agreement Regarding the Purchase of Kona Pacific Feed

On January 13, 2010, Todd Madsen, Plaintiff's president, signed Defendant's Customer Record/Credit Application. The Application stated: “We hereby jointly and severally agree to pay your account ... according to your terms of sale and to pay interest at the rate set by [Defendant] on all amounts in arrears as outlined in the terms and conditions of sale.” Def.'s CSF, Beattie Decl., Ex. B. Invoices accompanying each order contained the terms and conditions of the sale of the feed, including payment terms, items purchased, quantity, and price. Id., Beattie Decl., Ex. C. Defendant also provided Plaintiff with product sheets containing its disclaimer that individual results may vary and that it does not warrant or guarantee individual results. ⁴Id., Johnson Decl., Ex. A; Beattie Decl., Ex. F.

D. Plaintiff's Switch to High Fishmeal Feed

In early 2011, Plaintiff hypothesized that taurine deficiency was the cause of problems with its fish. Id., Johnson Decl., Ex. B. In an email dated May 18, 2011, Mr. Madsen inquired with Mr. Beattie about ingredient information and indicated that Plaintiff was investigating whether feed formulation changes were contributing to growth issues. Id., Beattie Decl., Ex. G. On June 7, 2011, Gavin Shaw provided estimated taurine levels in the feed and calculated a weighted average of taurine for all feed sizes of approximately 0.17%. Id., Johnson Decl., Ex. B. Just one day prior, however, Plaintiff stopped purchasing the Kona Pacific poultry meal feed and ordered the high fishmeal feed. Id., Beattie Decl., Ex. I.

In August 2011, Plaintiff began purchasing a high fishmeal feed from EWOS, Defendant's competitor. By Plaintiff's accounts, following the switch to the EWOS feed, the health of the fish improved quickly and dramatically, mortalities dropped, and Plaintiff has since successfully raised four more Cohorts. Pl.'s CSF, Ex. 4. The EWOS feed had a higher taurine content than the Kona Pacific poultry meal feed.

II. Procedural History

Plaintiff commenced this action on November 3, 2011. On December 22, 2011, Plaintiff filed a First Amended Complaint, asserting the following claims: 1) negligence (Count 1); 2) intentional misrepresentation(Count 2); 3) negligent misrepresentation (Count 3); 4) products liability (Count 4); 5) implied warranty of merchantability (Count 5); 6) implied warranty of fitness (Count 6); and 7) unjust enrichment (Count 7).

Defendant filed a Counter–Complaint on December 29, 2011, alleging that Plaintiff breached its contract with Defendant by ordering and taking possession of Kona Pacific high fishmeal feed, but failing to pay $36,548.60.

STANDARD OF REVIEW

Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. SeeFed.R.Civ.P. 56(a). “A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir.2007) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)); T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). In a motion for summary judgment, the court...