ProSynthesis Labs. v. Eurofins Microbiology Labs.

• Decision Date: 11 May 2023
• Docket Number: 22-cv-655-slc
• Parties: PROSYNTHESIS LABORATORIES, INC., d/b/a Unjury Protein, Plaintiff, v. EUROFINS MICROBIOLOGY LABORATORIES, INC., Defendant.
• Court: U.S. District Court — Western District of Wisconsin

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PROSYNTHESIS LABORATORIES, INC., d/b/a Unjury Protein, Plaintiff, v. EUROFINS MICROBIOLOGY LABORATORIES, INC., Defendant.

No. 22-cv-655-slc

United States District Court, W.D. Wisconsin

May 11, 2023

OPINION AND ORDER

STEPHENL.CROCKER MAGISTRATE JUDGE

This lawsuit arises out of laboratory testing and analysis that defendant Eurofins Microbiology Laboratories, Inc. performed in 2022 on samples of protein powder produced by plaintiff Prosynthesis Laboratories, Inc. (d/b/a/ Unjury Protein). Unjury alleges that its product samples were contaminated at Eurofins's facility, which caused the samples to incorrectly tested positive for Salmonella, resulting in millions of dollars in damages. Unjury has asserted claims for negligence and violations of the Wisconsin Deceptive Trade Practices Act (DTPA), Wis.Stat. § 100.18. Before the court is Eurofins's motion to dismiss both claims under Fed.R.Civ.P. 12(b)(6). Dkt. 9.

Eurofins's motion relies heavily on terms and conditions that Unjury's president accepted in 2017, including a provision that Iowa law governs the construction, validity and performance of the terms and conditions.^[1] Although the agreement purports to cover all orders thereafter accepted by Eurofins, Unjury fails to discuss the agreement in its complaint and largely ignores it in its brief. Nonetheless Unjury does not deny making the agreement, and it recognizes the agreement's effect on Unjury's claims: Unjury cites both Iowa and Wisconsin law in opposing Eurofins's challenges to its negligence claim and drops a footnote in its brief, requesting leave to amend its complaint “with additional facts concerning the parties' transactional history” in the event the court “find[s] merit in Eurofins' contractual arguments.” Dkt. 19, at 10 n.45.

For the reasons below, the court concludes that even without considering the 2017 agreement, Unjury's own allegations about its long-running business relationship with Eurofins preclude Unjury's claim under the DTPA, which will be dismissed with prejudice. The court also concludes that Unjury's negligence claim is barred by Iowa's economic loss doctrine. However, in an abundance of caution, the court will dismiss the negligence claim without prejudice and allow Unjury an opportunity to amend its complaint to allege any additional facts that may affect the outcome of that claim.

A court resolving a motion to dismiss takes all well-pled facts in the complaint as true and draws all reasonable inferences in favor of the non-moving party. Reger Development, LLC v. National City Bank, 592 F.3d 759, 763 (7^th Cir. 2010). The court draws the following facts from Unjury's complaint and the signed, written agreement that Eurofins filed with its motion to dismiss:

ALLEGED FACTS

I. The Parties

Plaintiff ProSynthesis Laboratories, Inc., d/b/a Unjury Protein, is a Virginia corporation with its principal place of business in Sterling, Virginia. Jerome Krachenfels and his late wife Martha founded Unjury in 2002. Since that time, Unjury has designed, manufactured, and sold protein products for patients and customers having a range of medical conditions and health goals.

Defendant Eurofins Microbiology Laboratories, Inc. is a Delaware corporation with its principal place of business in Des Moines, Iowa and an office in Madison, Wisconsin. Eurofins is a network of laboratories that tests food for various industries, including the food and pharmaceutical industries.

II. The Business Relationship

Unjury alleges that it began a business relationship with Eurofins several years ago, after extensive research and based on Eurofins's representations about the quality and nature of its services, including statements on its website that:

• Eurofins “is the world leader in food, environment, pharmaceutical, and cosmetic product testing” with over 60,000 staff in more than 940 laboratories.

• Eurofins is “committed to provide the highest quality services, accurate results in time, and expert advice by its highly qualified staff.”

• “[T]he reliability and accuracy of [Eurofins] data help[s] customers make adequate decisions and meet their increasingly stringent quality and safety standards and the expanding demands of regulatory authorities around the world.”

• “Few testing laboratories can combine the level of expertise, technological leadership, attention to quality and customer service that have made Eurofins the global leader in many of the fields where it is active.”

• “Large investments in innovation, technology, IT, and logistics . . . ensure that customers enjoy high standards of quality.”

• Eurofins's New Berlin, Wisconsin laboratory “serv[es] as a local hub for access to the entire Eurofins network” with “experience with a broad array of food, food ingredients, spices, and raw materials.”

Dkt. 1 at ¶¶ 11-12.

Unjury alleges that Eurofins made these misrepresentations “to the public, including Unjury's patients and customers within the State of Wisconsin and throughout the world.” Id. at ¶ 32.^[2]

III. Written Terms and Conditions Signed by Unjury

On January 5, 2017,^[3] Krachenfels signed and accepted a “Client Information Form” on behalf of Unjury. The form includes “General Terms and Conditions of Business” for the testing of Unjury's protein powder products. See dkt. 12-1. Section 1.1 of the agreement states that it applies to “[a]ll orders accepted by Eurofins Scientific, Inc. or any of its subsidiaries or affiliates (collectively ES).” Id. at 1. The agreement includes the following terms related to limitation of liability:

9.1 Except to the extent that such limitations are not permitted or void under applicable law: (a) ES (together with its workers, office clerks, employees, representatives, managers, officers, directors, agents and consultants and all ES partners and affiliates, the “ES Indemnifying Parties”) shall be liable only for the proven direct and immediate damage caused by the ES Indemnifying Party's willful misconduct in connection with the performance of an order and then, only if ES has received written notice thereof not later than six (6) months after the date of the customer's knowledge of the relevant claim (unless any longer period is prescribed under applicable law and cannot be contractually limited), and (b) in all cases (whether arising under contract, tort, negligence, strict liability, through indemnification or otherwise), the ES Indemnifying Parties' liability per claim or series of related claims, and the customer's exclusive remedy, with respect to ES' services which fall under these Terms and Conditions, shall be limited to the lesser of: (I) the direct and immediate loss or damage caused by the ES Indemnifying Party's willful misconduct in connection with the performance of the order and (ii) ten times the amount ES actually received from the customer in relation to the order up to fifteen thousand dollars ($15,000).

9.2 The ES Indemnifying Parties shall not be liable for any indirect, direct or consequential loss or damage (including, but not limited to, loss of business, profits, goodwill, and business opportunities or similar) incurred by the customer or by any third party.

9.3 It is a condition of ES' acceptance of an order that the customer indemnifies the ES Indemnifying Parties for any losses, injuries, claims and costs which the ES Indemnifying Parties may suffer as a result of arising from or in any way connected with its role under or services or products or software provided pursuant to these Terms and Conditions, except to the extent that the ES Indemnifying Parties are required to bear them according to these Terms and Conditions, and by placing an order the customer agrees to provide that indemnification.

Id. at 3-4.

The agreement also provides the following under a section entitled “Disclaimer and Miscellaneous”:

13.1 ALL TERMS, CONDITIONS, AND WARRANTIES (INCLUDING ANY IMPLIED WARRANTY AS TO THE MANNER, QUALITY AND TIMING OF THE TESTING SERVICE AND RESULTS, EQUIPMENT, PRODUCTS OR SOFTWARE SUPPLIED BY ED ARE EXCLUDED TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW. THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF ES CONTAINED IN THESE TERMS AND CONDITIONS ARE EXCLUSIVE.

13.2 These Terms and Conditions may be modified in writing from time to time by ES and orders will be governed by the most recent version of these Terms and Conditions that is in effect at the time ES accepts the order.^[4]

Id. at 3.

Finally, § 14.1 of the agreement states that the “construction, validity and performance of these Terms and Conditions” is governed by Iowa law and that “the commercial courts of Des Moines, Polk County, Iowa” shall have exclusive jurisdiction. Id.

IV. Unjury's Product Tests Positive for Salmonella

In the spring of 2022, Unjury was set to release highly anticipated single-serve packets of its savory line of protein powder. In April 2022, Unjury transported samples of two prospective products to Eurofins for standard microbiological pathogen testing as required by the Food and Drug Administration. On April 28, 2022, Eurofins sent the samples to its laboratory facility in New Berlin, Wisconsin and began analyzing them.

On May 2, 2022, Eurofins notified Unjury of a “presumptive positive result” for its chicken soup product, meaning that a pathogen had been detected. Unjury's supply chain director, Robin Jamison-Tiware, immediately called Eurofins to seek more information. Unjury asked about the possibility of inadequate controls at the Eurofins laboratory, but Eurofins dismissed Unjury's concerns.

On May 4, 2022, Eurofins emailed Unjury, stating, “There were no other presumptive/detected samples on the run, the controls were good and there was nothing that flagged our checks on the sample during data valuation.” Eurofins...