Meyer Natural Foods LLC v. Greater Omaha Packing Co., S-18-108

• Decision Date: 15 March 2019
• Docket Number: No. S-18-108,S-18-108
• Parties: MEYER NATURAL FOODS LLC and Crum & Forster Specialty Insurance Company, Appellants, v. GREATER OMAHA PACKING CO., INC., Appellee.
• Court: Nebraska Supreme Court

302 Neb. 509

925 N.W.2d 39

MEYER NATURAL FOODS LLC and Crum & Forster Specialty Insurance Company, Appellants,

v.GREATER OMAHA PACKING CO., INC., Appellee.

No. S-18-108

Supreme Court of Nebraska.

Filed March 15, 2019.

Thomas A. Grennan and Adam J. Wachal, of Gross & Welch, P.C., L.L.O., Omaha, for appellants.

Michael F. Coyle and Jordan W. Adam, of Fraser Stryker, P.C., L.L.O., Omaha, for appellee.

Heavican, C.J., Miller -Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.

Heavican, C.J.

INTRODUCTION

Meyer Natural Foods LLC (Meyer), together with Crum & Forster Specialty Insurance Company, sued Greater Omaha Packing Company, Inc. (GOP), for breach of contract following a purported E. coli "O157:H7" contamination of beef owned by Meyer and processed by GOP. The district court for Douglas County granted summary judgment in favor of GOP. Although our reasoning differs from that of the district court, we affirm.

BACKGROUND

On April 27, 2006, Meyer and GOP entered into a processing agreement, which was amended on May 17, whereby GOP would slaughter Meyer's cattle, process the beef, and fabricate the same into various beef products. GOP engaged in the processing of Meyer beef 1 day per week for 5 years, until May 2011.

Processing of beef by GOP generally entails that after cattle are "harvested," the carcasses are chilled for 24 hours. Once chilled, the beef is "fabricated," a practice in which workers process the chilled carcasses into larger cuts of beef known as intact cuts (e.g., tenderloins, rib eyes, briskets) and into smaller pieces of beef known as nonintact cuts or trim (used to make products such as ground beef). Intact cuts are shrink wrapped and shipped in boxes, referred to as "boxed beef." The nonintact beef, or trim, is placed into large cardboard "combo bins" containing approximately 2,000 pounds of a combination of raw beef trim. The trim is then shipped to processing facilities across the United States for the purpose of making ground beef. When making ground beef, trim is mixed and ground with other nonintact beef products. This requires that the large cardboard combo bins of beef trim be tested for the presence of E. coli prior to the production of ground beef.

On April 25, 2011, Meyer delivered 1,600 head of cattle to GOP for slaughter, processing, and fabrication pursuant to the agreement. On April 27, GOP slaughtered the cattle delivered by Meyer. Also pursuant to the agreement, in the days following the slaughter and rendering, GOP tested the beef for the presence of various strains of E. coli .

The Meyer beef that had been fabricated by GOP on April 27, 2011, was then sealed and delivered to Meyer's offices in Omaha, Nebraska, under a "hold," per GOP's standard procedure known as the Hazard Analysis and Critical Control Point plan, which is approved by the U.S. Department of Agriculture.

Under the plan, the combo bins are tested and then sealed. Once sealed, the combo bins may be placed on refrigerated trailers and shipped, but cannot be opened until the results of the E. coli testing are returned. Any combo bins containing trim testing presumptively positive for the presence of impermissible pathogens are diverted to "cookers" for a lethality treatment, which is industry standard.

In this case, an independent laboratory found that of the 211 samples tested, 37 resulted in a presumptive positive finding of the presence of E. coli O157:H7. The 37 presumptive positive samples constituted a 17¹/_/2-percent finding of E. coli contamination. This percentage was over three times the number of presumptive positives necessary to trigger an "event day," in which there is a very high percentage of presumptive positive findings for E. coli .

On April 28, 2011, GOP met with Meyer and informed them of the presumptive positive test results for the presence of E. coli . Meyer immediately recalled the trucks. The beef that had tested presumptively positive for E. coli O157:H7 was either sent to a cooker so that the product could ultimately be sold at a reduced charge or transported to a landfill because it was altogether unsafe for human consumption.

Meyer filed suit against GOP. As set forth in its second amended complaint, Meyer alleged breach of contract, breach of warranty, breach of an indemnity obligation, failure to obtain insurance, and breach of the guarantee. Meyer filed an amended motion for partial summary judgment, requesting the court to find that GOP failed to obtain and maintain " ‘property insurance’ " on the value of Meyer's property. Prior to the district court's ruling on Meyer's motion, GOP filed its own motion for summary judgment.

The district court concluded the evidence was clear that GOP had a property insurance policy with Liberty Mutual Fire Insurance Company, which policy remained in full force and effect for the duration of the agreement. The court found that the policy provided insurance coverage for any nonowned personal property in GOP's care, custody, and control that GOP " ‘agreed, prior to loss, to insure.’ " The court further found that the policy's liability limit was $98,836,333 per occurrence, complying with the terms of the addendum to section 18. The court noted that the addendum to section 18, which replaced the original language in section 18 of the processing agreement, required only that GOP "maintain property insurance on Meyer Natural Angus property in its possession, with a total value of $1,800,000," with which GOP complied. The court interpreted the agreement and addendum as not requiring GOP to carry property insurance coverage for an E. coli O157:H7 contamination. Therefore, the court held that Meyer's contention that GOP failed to obtain insurance as required by the contract failed as a matter of law.

The court then found that Meyer's claims against GOP with regard to breach of contract, breach of warranty, breach of indemnity obligation, and breach of guarantee failed as a matter of law due to Meyer's failure to return the rejected processed meat to GOP, which the court found was the remedy provided under the agreement for products failing to meet a specification or warranty provided by GOP. The court subsequently granted GOP's renewed amended motion for summary judgment and denied Meyer's amended motion for summary judgment.

ASSIGNMENTS OF ERROR

Meyer alleges 11 assignments of error, which can be condensed and restated as 4: The trial court erred in (1) finding that GOP carried property insurance in accordance with the agreement and overruling Meyer's motion for partial summary judgment; (2) finding that the agreement did not require GOP to carry property insurance for E. coli contamination and, as such, granting GOP's motion for summary judgment; (3) incorrectly interpreting section 10 of the agreement to conclude that Meyer had accepted the E. coli contaminated beef under the agreement or under the Uniform Commercial Code; and (4) finding that GOP was not negligent and therefore not liable for indemnity under the agreement.

STANDARD OF REVIEW

Summary judgment is proper when the pleadings and the evidence admitted at the hearing disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.¹ An appellate court will affirm a lower court's grant of summary judgment if the pleadings and admitted evidence show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.²

In reviewing a summary judgment, the court views the evidence in the light most favorable to the party against whom the judgment was granted and gives such party the benefit of all reasonable inferences deducible from the evidence.³

The meaning of a contract is a question of law, in connection with which an appellate court has an obligation to reach its conclusions independently of the determinations made by the court below.⁴

ANALYSIS

GOP's Property Insurance Pursuant to Agreement.

Meyer assigns that the trial court erred in finding that GOP carried property insurance in accordance with the agreement and, accordingly, overruling Meyer's motion for partial summary judgment. The crux of Meyer's argument is that the insurance policy's exclusion of coverage for damage resulting from E. coli constituted a breach of section 18 of the agreement, which required GOP to "maintain property insurance on Meyer Natural Angus Property in its possession, with a total value of $1,800,000." Incorporated into Meyer's claim that GOP failed to carry insurance in accordance with the terms of the agreement is Meyer's claim that the agreement did not permit the exclusion of E. coli insurance in GOP's insurance policy.

A contract written in clear and unambiguous language is not subject to interpretation or construction and must be enforced according to its terms.⁵ A contract is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings.⁶ A determination as to whether an ambiguity exists in a contract is to be made on an objective basis, not by the subjective contentions of the parties; thus, the fact that the parties have suggested opposite meanings of a disputed instrument does not necessarily compel the conclusion that the instrument is ambiguous.⁷ Further, we will not rewrite the contract to provide terms contrary to those which are expressed. Nor is it the province of a court to rewrite a contact to reflect the court's view of a fair bargain.⁸ The parties to a contract must be held to the plain language of the agreement they entered into.⁹

Turning to the record, we note that GOP and Meyer first entered into an agreement that contained a provision requiring GOP to maintain comprehensive property insurance. We need not pass on the extent to which the original...