RICHARD H. KYLE, District Judge.
Plaintiff General Mills Operations, LLC, f/k/a General Mills Operations, Inc. ("General Mills") purchased meatballs from Defendant Five Star Custom Foods, Ltd. ("Five Star") for use in its Progresso line
Except where otherwise indicated, the material facts are undisputed. Both General Mills and Five Star are companies in the food-products industry. They have had a business relationship since 2001, and General Mills continues to be a customer of Five Star. (Paar Aff. Ex. 1 (Phillips Dep.) at 10.)
Five Star is a custom food products manufacturer. As such, it is subject to federal regulation — specifically, its meat-based products are regulated by the United States Department of Agriculture ("USDA"), while non-meat products are regulated by the Food and Drug Administration ("FDA"). (Id. at 11-12.) Five Star supplies General Mills with various custom manufactured meat-based products, including the "Big Meatballs Cooked Italian" used in General Mills' Progresso Italian-Style Wedding Soup.
In the fall of 2007, General Mills ordered two shipments of meatballs from Five Star, to be delivered by September 28 and October 5. As was its usual practice, General Mills sent purchase orders to Five Star via an automated fax system. The face of its purchase order form states: "This purchase order contract, along with General Mills' standard Purchase Order Terms and Conditions dated [1/29/04]
General Mills asserts that Five Star breached its contract and breached express warranties based on the following relevant provisions in the Terms and Conditions:
(Paar Aff. Ex. 8; Bryan Aff. Ex. E (emphases added).)
Additionally, the purchase order states on its face that "[t]he goods must conform to all current General Mills' specifications as furnished to Seller." (Paar Aff. Ex. 6; Bryan Aff. Exs. C, D.) General Mills mailed a copy of the ingredient specifications ("Specifications") for its "Meatballs Italian Cooked" to Five Star on January 18, 2006. (Paar Aff. Ex. 9; id. Ex. 1 (Phillips Dep.) at 109-12.) Five Star does not dispute receiving these Specifications, and it acknowledges that they applied to the meatballs at issue here. (Phillips Dep. at 109-12.) The Specifications provide:
(Paar Aff. Ex. 9, at 3 (emphases added).)
Five Star obtains the ingredients for its products from a variety of suppliers. One of Five Star's beef suppliers was Westland Meat Packing Company ("Westland"). Westland's beef was used in two orders of meatballs supplied to General Mills. In February 2008, the Food Safety Inspection Service ("FSIS")
When Five Star learned of the recall, it traced the Westland beef that it had incorporated into its products and notified the customers who had purchased those products. On February 18, 2008, Five Star initially notified General Mills of the recall and identified two purchase orders of meatballs, totaling 32,460 pounds, which contained Westland beef. (Id. Ex. 2.) It also informed General Mills that 25.26 % per batch of those meatballs was Westland meat. (Id.) General Mills also received a follow-up memorandum about the recall from Five Star's President, Jeff Bledsoe, stating that "FSIS officials may contact you to confirm that you have received notification and are cooperating in this action." (Id. Ex. 3.) The memorandum went on to provide:
(Id.) General Mills was thus required to identify and destroy all soup containing the recalled meatballs in its inventory, as well as soup that it had already sold to grocery stores and other customers.
General Mills commenced this action in January 2010, asserting claims for breach of contract, breach of express warranties, breach of the implied warranty of merchantability, breach of the implied warranty of fitness for a particular purpose, and negligence. Nearly a year later, Five Star (with leave of the Court) filed a Third-Party Complaint asserting claims against Cattleman's Choice, Inc. d/b/a Westland. (See Doc. No. 34.)
Summary judgment is proper if, drawing all reasonable inferences in favor of the nonmoving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the burden of showing that the material facts in the case are undisputed. Id. at 322, 106 S.Ct. 2548; Whisenhunt v. Sw. Bell Tel., 573 F.3d 565, 568 (8th Cir. 2009). The Court must view the evidence, and the inferences that may be reasonably drawn from it, in the light most favorable to the nonmoving party. Weitz Co., LLC v. Lloyd's of London, 574 F.3d 885, 892 (8th Cir.2009); Carraher v. Target Corp., 503 F.3d 714, 716 (8th Cir.2007). The nonmoving party may not rest on mere allegations or denials, but must show through the presentation of admissible evidence that specific facts exist creating a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Wingate v. Gage Cnty. Sch. Dist., No. 34, 528 F.3d 1074, 1078-79 (8th Cir.2008).
Where, as here, the Court confronts cross-motions for summary judgment, this approach is only slightly modified. When considering the defendant's motion, the Court views the record in the light most favorable to the plaintiff, and when considering the plaintiff's motion, the Court views the record in the light most favorable to the defendant. Int'l Bhd. of Elec. Workers, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002). "Either way, summary judgment is proper if the record demonstrates that there is no genuine issue as to any material fact." Id.
Five Star argues that General Mills' negligence claim (Count I) is precluded as a matter of law by the economic-loss doctrine. (See Five Star Mem. in Supp. at 12.) General Mills has agreed to abandon the claim;
Five Star argues the mere fact its meatballs were recalled does not, as a matter of law, mean they were unfit or defective in any way since there is no evidence they contained potentially-contaminated meat from downer cattle. In support of its position, Five Star relies heavily on products-liability cases. The Eighth Circuit has ruled that "purchasers of an allegedly defective product have no legally recognizable claim where the alleged defect has not
General Mills responds that the warranties at issue — including that the meatballs were free from defects, of food grade, in compliance with regulations, and met the Specifications — were breached because the meatballs were not in compliance due to the recall. According to the Eighth Circuit, however, "[e]vidence of a defect is an indispensable element of any express or implied warranty claim." Coop. Power Ass'n v. Westinghouse Elec. Corp., 60 F.3d 1336, 1344 (8th Cir.1995); accord, e.g., O'Neil, 574 F.3d at 503-04 (affirming dismissal of warranty claims where the alleged defect had not manifested itself in plaintiffs' product). This Court previously followed Briehl in a case involving recalled cribs. See O'Neil v. Simplicity, Inc., 553 F.Supp.2d 1110, 1115-16 (D.Minn.2008) (Kyle, J.), aff'd, 574 F.3d 501. Although there had been reports of children being injured, and even dying, as a result of a failure in the crib's drop-side feature, the crib purchased by the O'Neils had not exhibited this problem. See id. The Court dismissed the O'Neils' warranty claims, concluding that the fact the crib had been recalled "does not ipso facto mean that the crib has a manifest defect sufficient to permit their claims to proceed." Id. at 1116. In the Court's view, the same is true here.
There is no dispute that a recall occurred. However, General Mills has presented no evidence that the recalled meat was contaminated or defective in any way. At most, it can only claim that Westland's meat may have included meat from downer cattle. There is no evidence that such meat was sold to Five Star and, even if it had been, there is no evidence it was used in the meatballs Five Star supplied to General Mills. In short, there is no evidence of an actual manifestation of any defect in the meatball product to support a claim for breach of an express or implied warranty. Five Star is therefore entitled to summary judgment on the warranty claims.
Although the parties largely conflate the warranty claims and the breach-of-contract claim, the contract claim differs in an important way. Unlike warranty claims, evidence of a defect is not an essential element of a breach-of-contract claim. To establish breach of contract, General Mills must show that (1) a contract was formed, (2) it performed any required conditions precedent,
In this case, Five Star admits that it had a duty to supply General Mills with meatballs that complied with USDA regulations. (Phillips Dep. at 108-09.) It also acknowledges that General Mills had no choice but to destroy its soup containing the meatballs due to the recall. (Id. at 115-16 ("Q.... General Mills believes that
A contract claim like the one here is distinguishable from O'Neil, Briehl, and other products-liability cases on which Five Star relies. The difference is explored in Coghlan v. Wellcraft Marine Corp., 240 F.3d 449 (5th Cir.2001), a case involving plaintiffs who purchased a boat that the defendant-manufacturer said was made entirely of fiberglass. When they discovered the boat was actually made of a less durable wood-fiberglass hybrid, they sued the manufacturer on claims including violations of consumer-protection laws, deceptive trade practices, misrepresentation, and breach of contract. Id. at 451. Reversing the district court's dismissal of these claims, the Fifth Circuit stated:
Id. at 455 n. 4 (emphases added). Just as in Coghlan, General Mills' contract claim does not seek damages rooted in any alleged defect in the product. Instead, the claim is based solely on Five Star's failure to do what it agreed to do — supply meatballs that complied with all of the Terms and Conditions and Specifications.
Notably, the alleged contract in this case did not simply require Five Star's meatballs to be of food grade and fit for human consumption. Rather, the Terms and
This does not end the inquiry, however, because Five Star also argues that the contract with General Mills is unenforceable for a variety of reasons. First, it argues the Terms and Conditions did not apply to the transactions at issue because it never received them. (Five Star Mem. in Supp. at 14-15.) General Mills contests this, offering testimony that (a) it mailed a copy of the applicable Terms and Conditions to Five Star on February 4, 2004, and (b) its auto-fax system transmitted two-sided purchase orders, and the Terms and Conditions were on the backside of the two meatball orders at issue. Five Star fails to rebut this evidence, instead asking the Court to take notice that "[a]s a matter of common knowledge, fax machines do not generally transmit double-sided documents." (Five Star Mem. in Supp. at 14.) Regardless, resolution of this dispute is immaterial because it is undisputed that the front side of the purchase orders explicitly stated that "General Mills' standard Purchase Order Terms and Conditions ... shall govern all terms and conditions of sale." (E.g., Paar Aff. Ex. 6.) Thus, the purchase order incorporated the Terms and Conditions by reference, and Five Star was at the very least on notice of their existence and responsible to obtain and become familiar with them if they were not included with the
Five Star further contends that the Terms and Conditions are unenforceable because they were unconscionable, inconspicuous, illegible, and hidden in boilerplate. (Five Star Mem. in Supp. at 16-21.) The Court addresses each in turn.
Five Star first argues that the reference to the Terms and Conditions on the front of the purchase order is inconspicuous and illegible due to its location and small print. It points to the fact this reference is in the lower left corner of the purchase order and in "extremely small print" that is almost "entirely illegible." While the print is not large, it is only slightly smaller than other information on the purchase order, such as the product, price, and delivery date, and the Court is able to read it without undue strain. Furthermore, the front of the purchase order contains significant blank space, making the type that is present easy to see. In the Court's view, the reference to the Terms and Conditions on the purchase order is sufficiently conspicuous.
Relatedly, Five Star argues the Terms and Conditions themselves are not sufficiently clear to enforce because they are boilerplate, in small print, and located on the back of the purchase order. Despite Five Star's attempts to argue otherwise, the Terms and Conditions (at least in the reprints both parties have submitted) are legible although the font is not large, and all are a uniform size. Where (as here) the parties are both sophisticated business entities with equal bargaining power who entered this agreement freely, the fact print is small and boilerplate is not enough to render the contract unenforceable. See, e.g., Dave's Cabinets, Inc. v. Komo Mach., Inc., Civ. No. 05-854, 2006 WL 1877075, at *5 (D.Minn. July 6, 2006) (Davis, J.) (enforcing a provision that was "in fine print" but "not unreadable" where, inter alia, the parties were sophisticated, the provision was in plain and unambiguous language, and it was the same size as every other term and condition on the page); Kline v. Kawai Am. Corp., 498 F.Supp. 868, 872-73 (D.Minn.1980) (MacLaughlin, J.) (enforcing forum-selection clause despite the fact it was boilerplate and not specifically negotiated where the parties were sophisticated, had business experience, and the agreement was readable and just over two pages long).
Similarly, the fact the terms were on the back of the purchase order does not necessarily render them unenforceable where they did not materially alter the parties' agreement. E.g., CFMOTO Powersports, Inc. v. NNR Global Logistics USA, Inc., Civ. No. 09-2202, 2009 WL 4730330, at *4-5 (D.Minn. Dec. 4, 2009) (Tunheim, J.) (enforcing terms and conditions found on the reverse side of every invoice sent between the parties where they did not materially alter the agreement). A purchase order is a written confirmation of an agreement between parties, and Minn.Stat. § 336.2-207 provides that a non-negotiated term contained in such a written confirmation is part of a contract for the sale of goods between merchants where it does not materially alter the agreement. See TRWL Fin. Establishment v. Select Int'l, Inc., 527 N.W.2d 573, 578-79 (Minn.Ct.App.1995) (citing Minn.Stat. § 336.2-207(2)). In determining whether a term constitutes a
Five Star next argues it would be unfair to hold it liable for the acts of Westland when it had no reason to know the meat producer had not been fully complying with regulations. Yet it would be even more unfair to make General Mills — the party even further removed from the problem's source — bear the costs associated with the recall. In terms of "fairness," shifting the costs onto Five Star, who may in turn be able to shift them to Westland (as it is already attempting to do via its Third-Party Complaint), is the more just result, in addition to being what the contract requires.
Although Five Star does not dispute receiving the Specifications or otherwise argue they were not part of the contract, it maintains that the provision requiring ingredients to meet or exceed USDA stunning, slaughter and processing regulations is unenforceable. (Five Star Mem. in Opp'n at 22-23.) Five Star argues it is unreasonable to interpret the provision as requiring Five Star to guarantee that the slaughterhouses where it gets its beef comply with all USDA regulations because doing so would render superfluous another provision in the Specifications that requires it to source beef only from countries where USDA-recognized BSE controls are in place.
Finally, the Court addresses the issue of attorney fees. General Mills asserts that it is entitled to recover attorney fees for Five Star's breach pursuant to the express terms of the contract. Specifically, it relies on paragraph 10 of the Terms and Conditions, which provides:
Based on the foregoing, and all the files, records, and proceedings herein,
(1) Count I of the Amended Complaint (Doc. No. 47) is
(2) General Mills' Motion for Summary Judgment (Doc. No. 73) is
(a) Summary judgment is
(b) Summary judgment is
(3) General Mills is entitled to recover reasonable attorney's fees.
(Second Bryan Aff. Ex. D (emphases added).)
