Pig Imp. Co., Inc. v. Middle States Holding Co.

• Decision Date: 10 September 1996
• Docket Number: Civil Action No. 94-599-SLR.
• Citation: 943 F.Supp. 392
• Parties: PIG IMPROVEMENT CO., INC., Plaintiff, v. MIDDLE STATES HOLDING CO. and Delmarva Farms Corp., Defendants.
• Court: U.S. District Court — District of Delaware

943 F.Supp. 392

PIG IMPROVEMENT CO., INC., Plaintiff, v. MIDDLE STATES HOLDING CO. and Delmarva Farms Corp., Defendants.

Civil Action No. 94-599-SLR.

United States District Court, D. Delaware.

September 10, 1996.

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COPYRIGHT MATERIAL OMITTED

John D. Balaguer, of White & Williams, Wilmington, DE (Thomas A. Allen, and Kimberly M. Dolan, of White & Williams, Philadelphia, and Charles T. Patterson, of Eidsmoe, Heidman, Redmond, Fredregill, Patterson & Schatz, Sioux City, IA, of counsel), for plaintiff.

Anthony G. Flynn, and Timothy Jay Houseal, of Young, Conaway, Stargatt & Taylor, Wilmington, DE (James P. Ulwick, and Kevin F. Arthur, of Kramon & Graham, P.A., Baltimore, MD, of counsel), for defendant.

MEMORANDUM OPINION

SUE L. ROBINSON, District Judge.

I. INTRODUCTION

This is a civil action between the citizens of different states, and the matter in controversy exceeds the sum of $50,000. Therefore, the court has original jurisdiction pursuant to 28 U.S.C. § 1332(a)(1).

Before the court is a motion for summary judgment filed by plaintiff Pig Improvement Company, Inc. ("PIC") against defendants Middle States Holding Company, Inc. and Delmarva Farms Corporation (collectively "Delmarva") on Delmarva's amended counterclaim. (D.I. 58) PIC, the largest supplier of genetically improved breeding stock for the United States swine¹ industry, supplied breeding stock to Delmarva from 1988 to December 1992 and brought suit to collect $81,089 from Delmarva in breach of contract. Delmarva, which was the largest commercial hog producer in the State of Maryland during the years relevant to this litigation,² filed a counterclaim alleging breach of contract, breach of warranty, and various counts in negligence and in fraud. More specifically, Delmarva claims that PIC is responsible for economic losses caused by the introduction of Porcine Reproductive and Respiratory Syndrome ("PRSS") into Delmarva's herd. For the reasons that follow, the motion will be granted in part and denied in part.

II. STANDARD OF REVIEW

Rule 56 of the Federal Rules of Civil Procedure provides that a summary judgment shall be entered in favor of a moving party where it appears "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." A party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories and admissions of file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Where the nonmoving party opposing summary judgment has the burden of proof at trial on the issue for which summary judgment is sought, that party must then make a showing sufficient to establish the existence of an element essential to its case. If the nonmoving party fails to make a sufficient showing in this regard, the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The standard for granting summary judgment "mirrors the standard for a directed verdict." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Therefore, the mere existence of some evidence in support of the nonmoving party will not be sufficient to support a denial of a motion for summary judgment; there must be enough evidence to enable a jury to reasonably find for the nonmoving party on that issue. Id. at 249, 106 S.Ct. at 2510-11. In making its determination, the court should view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor. Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir.1994).

To determine which state's law governs the controversy before it, a Delaware federal court sitting in diversity would apply Delaware choice-of-law rules. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In both tort and contract actions, Delaware courts apply the "most significant relationship" test to determine which law applies to the dispute, assuming the laws of the probable jurisdictions in fact conflict with one another. See, Oliver B. Cannon & Son, Inc. v. Dorr-Oliver, Inc., 394 A.2d 1160 (Del.Super.1978); Travelers Indemnity Co. v. Lake, 594 A.2d 38 (Del.Super.1991). Several states are implicated by this test, including Maryland, the location of Delmarva's hog farms and the place of delivery of the hogs; Kentucky, the location of PIC's headquarters and the point-of-origin of some shipments of breeding stock to Delmarva; Delaware, the location of Delmarva's headquarters and one of its farms; and Iowa, the state law chosen in PIC's conditions of sale.

A choice-of-law analysis is not required, however, where the laws of the affected jurisdictions do not conflict. Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 813 (3d Cir. 1994); Oil Shipping B.V. v. Sonmez Denizcilik Ve Ticaret A.S., 10 F.3d 1015 (3d Cir. 1993). Because all four jurisdictions noted above have adopted without modification the provision of the U.C.C. relevant to the dispute at bar,³ the contract's choice-of-law (Iowa) is not in conflict with the law of the other affected jurisdictions. Therefore, the court has reviewed U.C.C. case law from all of the principal jurisdictions, as well as from other U.C.C. jurisdictions. (D.I. 59 at 13; D.I. 64 at 23 n. 3)

III. FACTS

For purposes of this proceeding, the following facts, viewed in the light most favorable to Delmarva, are essentially undisputed.⁴

A. The Business Relationship

From the commencement of their business relationship in 1988, PIC sent Delmarva breeding stock under written contracts signed by both parties. (D.I. 60 at A21-115) Gerald Klein, the sole shareholder of Middle States Holding Company and owner of Delmarva Farms Corporation, is an experienced attorney and businessman familiar with the Uniform Commercial Code. (D.I. 60 at A166-173) Klein testified in deposition that he neither questioned nor sought to negotiate a change in the forms used by PIC: "[I]f you want to buy breeding stock, you're basically using this paper work. But I did not undertake to renegotiate this document. Rather, I accepted it for purposes of these transactions." (D.I. 60 at A166-67, A114)

The terms of the PIC/Delmarva contract appear in a one-page document, front and back, on both the agreements of sale and the invoices. (D.I. 60 at A21-A115) The terms in dispute include the following language printed on the front, signature side of the agreement of sale:⁵

III. DISCLAIMER OF WARRANTIES:

The terms and conditions of this Agreement contain all warranties made by PIC to the customer. NO OTHER WARRANTIES, EXPRESSED OR IMPLIED, OTHER THAN THOSE SET FORTH HEREIN, ARE GIVEN. ALL PIGS SOLD HEREIN ARE SOLD "AS IS", AND PIC SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY

AND ANY WARRANTY OF FITNESS FOR ANY PARTICULAR PURPOSE. THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE HEREOF.

IV. Except for the credit provisions herein, PIC shall have no liability for losses resulting from communicable diseases, or from advice and information given by PIC, or for any consequential losses or other costs.

Customer certifies that the Conditions of Sale printed on the back hereof have been read and agreed to as part of this agreement, the same as though they were printed above the signatures. Customer further acknowledges receipt of the recommendations on isolation and acclimatization of breeding stock.

(D.I. 60 at A21) (captions emphasized in original). The conditions of sale, printed on the back of the agreement of sale and of the invoices used after February 1992,⁶ include the following language:

WARRANTIES OF PIC: PIC warrants that: Pigs supplied herein have been inspected and certified in accordance with federal and state animal health regulations. Pigs delivered (i) will have been owned by PIC for at least thirty (30) days or (ii) will have been owned by PIC for less than thirty (30) days but will have been acquired by PIC from a multiplier that is operated in accordance with standards established by PIC....

ISOLATION AND ACCLIMATIZATION: For isolation, purchaser shall completely isolate all animals purchased in a clean facility, physically separate from other swine for at least 21 days, shall follow the recommendations of a licensed veterinarian for isolation and for release of the purchased animals after the isolation period, and shall not begin acclimatization procedures for 21 days after delivery. Purchaser agrees and understands that PIC shall have no liability for replacement of animals due to presence of economically significant infectious agents unless purchaser complies with this isolation procedure. ...

CREDITS AND PROCEDURES: In case of complaint, purchaser shall call or write to PIC.... If the pig identified is determined to have been incapable of breeding after isolation and acclimatization, PIC will authorize slaughter following notification. A credit for the invoiced cost of the pig, less slaughter value, will be issued....

If the complaint is based on the presence of economically significant infectious agents in the animals, PIC will credit the invoiced cost of the animals less slaughter value, if the isolation procedures above have been followed and if purchaser's veterinarian provides PIC with evidence, satisfactory to PIC, of the existence of the agent, and if PIC receives from purchaser the notice and complaint required by the complaint process provided above, before the animals carrying the agent are removed from isolation.

PIC shall issue credits only if the complaint is received within five months after delivery, and if the above procedures are followed. ...

LIMITATION OF LIABILITY: PIC shall have no liability for risk of...