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Starr Surplus Lines Insurance Co. v. Mountaire Farms Inc.

United States District Court, D. Maine

August 2, 2018

STARR SURPLUS LINES INSURANCE COMPANY, as subrogee to AdvancePierre Foods, Inc., Plaintiff,
v.
MOUNTAIRE FARMS INC., Defendant.

          ORDER ON DEFENDANT'S MOTION TO DISMISS

          JON D. LEVY, U.S. DISTRICT JUDGE

         The Plaintiff, Starr Surplus Lines Insurance Company (“Starr”), asserts that Mountaire Farms Inc. (“Mountaire”) delivered raw chicken products contaminated with Salmonella bacteria to AdvancePierre Foods, Inc. (“AP”) that resulted in a recall of more than 1, 700, 000 pounds of AP's product and an insurance payout of ten million dollars by Starr to AP. Starr, as subrogee, seeks repayment of the amount paid under the insurance policy. In its Complaint, Starr brings claims for breach of the implied warranty of merchantability, 11 M.R.S.A. § 2-314 (2018) (Count I), breach of the implied warranty of fitness for a particular purpose, 11 M.R.S.A. § 2-315 (2018) (Count II), and a claim for strict liability, 14 M.R.S.A. § 221 (2018) (Count III). Mountaire has moved to dismiss Starr's Complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted (ECF No. 18). For the reasons that follow, I grant the Motion.

         I. FACTUAL BACKGROUND

         The following factual allegations from the Complaint are accepted as true for the purposes of the Motion to Dismiss.

         AP uses raw chicken parts at its Portland facility to create ready-to-cook chicken dishes for retail. In 2014, Mountaire contracted with AP to deliver raw chicken parts to AP throughout 2015. In February 2015, Mountaire shipped approximately 120, 000 pounds of fresh, boneless chicken breasts to AP's Portland facility. Soon thereafter, individuals in Minnesota and Wisconsin became infected with Salmonella Enteritidis (“Salmonella”), which was reported to the United States Food Safety Inspection Service (“FSIS”). The FSIS linked the illnesses to AP's raw chicken and issued a public health alert on July 1, 2015, leading AP to initiate a recall that eventually included 1, 707, 494 pounds of raw chicken product. As a result of the recall, AP sustained losses in excess of ten million dollars, including damages resulting from “the return and destruction of the recalled chicken products, lost sales opportunities, loss of business, and loss of customers.” ECF No. 1-3 at ¶ 20. AP used its computer system to trace the source of the Salmonella to two truckloads of raw chicken parts it had received from Mountaire in February 2015. AP submitted an insurance claim to Starr under a Starr Response Product Contamination Policy for damages sustained in connection with the recall. Pursuant to the insurance policy, Starr paid AP ten million dollars, the policy limit. Starr now brings this subrogation action to recover all payments it made to AP associated with the product recall.

         II. STANDARD OF REVIEW

         Mountaire moves to dismiss the Complaint for failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, the Complaint “must contain sufficient factual matter to state a claim to relief that is plausible on its face.” Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 53 (1st Cir. 2013) (internal quotation marks omitted). In evaluating a motion to dismiss, the Court will accept well-pleaded facts as true and draw all reasonable inferences in the Plaintiff's favor. Id. at 52-53. Determining the plausibility of a claim is a context-specific task that requires the court “to draw on its judicial experience and common sense.” Id. at 53 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)).

         III. DISCUSSION

         Mountaire makes four arguments for dismissal: (1) all of Starr's claims fail because Salmonella is an inherent and recognized characteristic of raw chicken; (2) Starr's strict liability claim is barred by the economic loss doctrine; (3) AP's contract with Mountaire waives all prior warranties, including the implied warranties of merchantability and fitness for a particular purpose; and (4) Starr's claims are preempted under the Poultry Products Inspection Act (“PPIA”), 21 U.S.C.A. § 451, et seq. (2018). I address Mountaire's first two arguments. Finding these determinative, I do not address the contractual waiver or preemption arguments.

         A. Salmonella as a Product Defect

         Mountaire alleges that Starr's claims for breach of merchantability, breach of fitness for a particular purpose, and strict liability all fail because it is widely known that Salmonella is inherent in raw chicken and is eliminated through cooking. As such, Mountaire argues, Salmonella cannot render the chicken “defective, ” “unfit for its particular purpose, ” or “unreasonably dangerous, ” which are the essential elements of each of Starr's claims, respectively.[1]

         There are two tests that the Maine Law Court has applied when faced with a defective food product claim. The traditional test, called the “foreign-natural test, ” provides that a food manufacturer cannot be strictly liable for supplying a product with natural ingredients that is free of foreign ingredients. See Kobeckis v. Budzko, 225 A.2d 418, 423 (Me. 1967) (holding that pork seller did not breach implied warranty of fitness for a particular purpose because the injury-causing trichinae was a “natural” rather than “foreign” attribute of raw pork). In Estate of Pinkham v. Cargill, Inc., the Law Court rejected the foreign-natural test in the context of food strict liability claims, instead adopting the “reasonable expectations test.” 55 A.3d 1, 5 (Me. 2012). “The reasonable expectation test provides that, regardless whether a substance in a food product is natural to an ingredient thereof, liability will lie for injuries caused by the substance where the consumer of the product would not reasonably have expected to find the substance in the product.” Id. (quoting Jackson v. Nestle-Beich, Inc., 589 N.E.2d 547, 548 (Ill. 1992)).

         Cargill involved a consumer who was seriously injured after eating a turkey sandwich with pieces of bone in the turkey. Id. at 3. Applying the reasonable expectations test, the Law Court concluded that whether the average consumer would reasonably expect to find a bone in turkey meat, and therefore whether the processed turkey was defective, were disputed questions of fact that precluded summary judgment. Id. at 7. Cargill did not expressly address warranty claims and thus it is unclear whether the reasonable expectation test adopted in Cargill also applies to warranty claims, or whether the foreign-natural test adopted more than forty years earlier by Kobeckis still applies to warranty claims. It is unnecessary, however, to determine which test controls under current Maine law to decide the motion to dismiss in this case because Mountaire prevails under either test.

         Applying the more demanding reasonable expectation test to the facts alleged in Starr's Complaint, an average consumer-and certainly a sophisticated commercial consumer such as AP, Starr's subrogor-should reasonably expect that raw, uncooked chicken is not safe for human consumption. Although the Law Court noted in Cargill that “whether a consumer would reasonably expect to find a particular item in a food product is normally a question of fact that is left to a jury, ” 55 A.3d at 7, the reasonable expectations of AP can be determined as a matter of law because, as recognized by numerous ...


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