White Acres, LLC v. Shur-Green Farms, LLC
| Decision Date | 15 September 2022 |
| Docket Number | 354175 |
| Court | Court of Appeal of Michigan — District of US |
| Parties | WHITE ACRES, LLC, H&H TURKEY FARMS, CROCKERY CREEK TURKEY FARMS, LLC, HIGH LEAN PORK, INC., GREAT LAKES PORK, INC., HURON PORK, LLC, FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN, SIETSEMA FARMS FEEDS, LLC, NATIONWIDE AGRIBUSINESS INSURANCE COMPANY, and FRANKENMUTH INSURANCE COMPANY, Plaintiffs-Appellants, v. SHUR-GREEN FARMS, LLC, SUPERIOR FEED INGREDIENTS, LLC, RESTAURANT RECYCLING, LLC, HERITAGE INTERACTIVE SERVICES, LLC, and GLYCERIN TRADERS, LLC, Defendants, and ZOETIS OF DELAWARE, INC., Defendant-Appellee. |
UNPUBLISHED
Kent Circuit Court LC No. 15-007614-CB
Before: Gadola, P.J., and Swartzle and Cameron, JJ.
In this negligence action, plaintiffs alleged defendant, Zoetis of Delaware, Inc. (Zoetis), was liable for damages caused by the introduction of a substance called Lascadoil into animal feed.[1] Plaintiffs later moved to amend their complaint against Zoetis to include a claim for breach of an implied warranty of merchantability. The trial court granted summary disposition to Zoetis under MCR 2.116(C)(10) and denied plaintiffs' motion to amend. Plaintiffs moved for reconsideration, which the trial court also denied. Plaintiffs appeal to this Court as of right. We affirm.
In 2014, Lascadoil-an oil not fit for human or animal consumption-was improperly introduced into animal feed given to turkeys and hogs, killing thousands of turkeys and requiring the quarantining of thousands of hogs. The Lascadoil originated with Zoetis, as a waste byproduct from Zoetis's production of an animal pharmaceutical called Lasalocid Sodium. Although a waste byproduct, Zoetis sells Lascadoil because it is suitable for use as a biofuel.
The chain from Zoetis's production of Lascadoil to its introduction into animal feed is a long one. Following Zoetis's production process, ownership of the Lascadoil passed between several corporate entities-(1) Heritage Interactive Services, LLC (Heritage), (2) Shur-Green Farms LLC (Shur-Green), (3) Glycerin Brokers, LLC (Glycerin), (4) Superior Feed Ingredients, LLC (Superior Feed), and (5) Restaurant Recycling, LLC (Restaurant Recycling)-before being added to animal feed by Sietsema Farms Feeds, LLC (Sietsema). Notably, when selling the Lascadoil to Heritage, Zoetis undisputedly informed Heritage of its limited uses and provided Heritage with safety information about Lascadoil. Indeed, the contract between Zoetis and Heritage set forth the limited uses for Lascadoil and provided that Heritage could only use or resell Lascadoil for "non-food" purposes or as a "fuel." It is also undisputed that this safety information was given to the next entity in the chain, Shur-Green, which entered into a contract with Heritage. However, at some point in the supply chain, there was a breakdown in communication, and the limited use and the risks of Lascadoil were not conveyed down the chain. An investigation by the United States Food and Drug Administration (FDA) appeared to place the blame largely on Shur-Green, which received safety information on Lascadoil and its limited uses from entities farther up the supply chain, yet failed to convey this information to customers downstream, instead referring to the product by names such as "soyoil" or "used cooking oil." Ultimately, after the Lascadoil passed through several corporate hands, Sietsema-unaware of Lascadoil's dangers and limited uses-used Lascadoil in animal feed and then sold the contaminated feed to turkey and hog farmers, who fed it to the animals. As a result of the contamination, turkey farms saw higher than normal mortality rates, hogs had to be quarantined, and the farmers suffered considerable economic losses.
Plaintiffs-the farmers, Sietsema, and their respective insurers-filed suit against Zoetis, alleging that Zoetis was negligent for failing to ensure that Lascadoil did not end up in the animal-feed supply chain. Plaintiffs later moved to amend their complaint to include a claim for breach of an implied warranty of merchantability. The trial court granted summary disposition to Zoetis under MCR 2.116(C)(10), concluding (1) that plaintiffs failed to establish that Zoetis owed or breached a duty as required to support a negligence claim and (2) that the economic loss doctrine barred plaintiffs' tort claim against Zoetis. The trial court also denied plaintiffs' motion to amend, because that amendment would be futile.
Plaintiffs contend the trial court erred in granting Zoetis's motion for summary disposition on the basis of the economic loss doctrine. Plaintiffs also argue that the trial court erred when it rejected their negligence claim, concluding Zoetis owed plaintiffs no duty. According to plaintiffs, the trial court should have denied Zoetis's motion for summary disposition because Zoetis owed plaintiffs a legal duty "to keep contaminated soybean oil out of the food chain." We disagree.
Generally, this Court "review[s] de novo a trial court's decision on a motion for summary disposition." El-Khalil v Oakwood Healthcare, Inc, 504 Mich. 152, 159; 934 N.W.2d 665 (2019).
A motion under MCR 2.116(C)(10) . . . tests the factual sufficiency of a claim. When considering such a motion, a trial court must consider all evidence submitted by the parties in the light most favorable to the party opposing the motion. A motion under MCR 2.116(C)(10) may only be granted when there is no genuine issue of material fact. [Id. at 160 (quotation marks, citations, and emphasis omitted).]
This Court also reviews de novo the interpretation of contracts. Kloian v Domino's Pizza LLC, 273 Mich.App. 449, 452; 733 N.W.2d 766 (2006). "If the contractual language is unambiguous, courts must interpret and enforce the contract as written, because an unambiguous contract reflects the parties' intent as a matter of law." Cadillac Rubber & Plastics, Inc v Tubular Metal Sys, LLC, 331 Mich.App. 416, 422; 952 N.W.2d 576 (2020) (citation omitted).
The trial court granted Zoetis's motion for summary disposition, in part, because "the distribution chain is made up of a series of contractual or quasi-contractual links, and the damages sought by the plaintiffs constitute purely economic losses." The trial court concluded any recovery by plaintiffs was governed by the economic loss doctrine and was therefore limited by the remedies available under the Uniform Commercial Code (UCC). Plaintiffs dispute this conclusion on the bases that (1) there was no transaction between plaintiffs and Zoetis, (2) the claims emanate from a service agreement between Zoetis and Heritage, rather than a sale of goods, and (3) the case should be decided in tort law because it involves a "disaster" outside of contract law rather than a minor defect in quality. These arguments lack merit, and the trial court did not err by concluding that the economic loss doctrine barred plaintiffs' tort claim.
The economic loss doctrine is a judicially-created doctrine, derived from the UCC, which limits tort actions seeking to recover economic damages resulting from commercial transactions. Quest Diagnostics, Inc v MCI WorldCom, Inc, 254 Mich.App. 372, 376; 656 N.W.2d 858 (2002). The doctrine provides that when "a plaintiff seeks to recover for economic loss caused by a defective product purchased for commercial purposes, the exclusive remedy is provided by the UCC[.]" Neibarger v Universal Coop, Inc, 439 Mich. 512, 527-528; 486 N.W.2d 612 (1992). That is, "[i]f a commercial purchaser were allowed to sue in tort to recover economic loss, the UCC would be rendered meaningless and contract law would drown in a sea of tort." Quest Diagnostics, Inc, 254 Mich.App. at 377 (quotation marks and citation omitted). In adopting the economic loss doctrine, the Michigan Supreme Court explained:
[When] a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only economic losses. This doctrine hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts. [Neibarger, 439 Mich. at 520-521 (quotation marks and citation omitted).]
Thus, the first issue is whether this case involves the sale of goods for commercial purposes, or the sale of products for use by consumers. This "requires consideration of the underlying policies of tort and contract law as well as the nature of the damages." Id. at 531. As explained by this Court, the doctrine applies when the parties to the litigation "were involved, either directly or indirectly, in a transaction for goods," Quest Diagnostics, Inc, 254 Mich.App. at 379, and more specifically, when "(1) the parties or others closely related to them had the opportunity to negotiate the terms of the sale of the good or product causing the injury, and (2) their economic expectations can be satisfied by contractual remedies." Id. at 380. However, privity of contract is not required. Sullivan Indus, Inc v Double Seal Glass Co, Inc, 192 Mich.App. 333, 344; 480 N.W.2d 623 (1991). Instead, the focus is on "the type of loss" the plaintiff is alleging. Id. "Allegations of only economic loss do not implicate tort law concerns with product safety, but do implicate commercial law concerns with economic expectations." Id.
In this case, plaintiffs seek to recover for economic losses related to the sale of goods between commercial entities for commercial purposes. Zoetis sold the...
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