STARR SURPLUS LINES INSURANCE COMPANY v. MOUNTAIRE FARMS INC

Filing 29

ORDER granting 18 Motion to Dismiss for Failure to State a Claim By JUDGE JON D. LEVY. (akr)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
STARR SURPLUS LINES
INSURANCE COMPANY,
as subrogee to AdvancePierre
Foods, Inc.,
Plaintiff,
v.
MOUNTAIRE FARMS INC.,
Defendant.

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ORDER ON DEFENDANT’S MOTION TO DISMISS
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.

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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.

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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

1 Under Maine law, to prevail on its claim for breach of the implied warranty of merchantability, Starr must
show that (1) Mountaire is a merchant of raw chicken products; (2) the raw chicken was defective; and (3) the
defect caused the plaintiff’s damages. Acadia Ins. Co. v. Fluid Mgmt., Inc., No. 2:15-cv-00008-JAW, 2015 WL
3869696, at *7-8 (D. Me. June 23, 2015). To prevail on its claim for breach of the implied warranty of fitness for
a particular purpose, Starr must show that (1) it relied upon Mountaire’s skill and judgment; (2) it made known
to Mountaire that it wanted chicken to create raw products; (3) the raw chicken was not reasonably fit for such
purpose; and (4) that it incurred damages from breach of the implied warranty. Ross v. Diamond Match Co., 102
A.2d 858, 859 (Me. 1953). Finally, Maine’s strict liability statute states that “one who sells any goods or products
in a defective condition unreasonably dangerous to the user . . . is subject to liability for [ensuing] physical harm
. . . .” 14 M.R.S.A. § 221 (2018).
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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 courts, it is commonly known that Salmonella

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occurs naturally in chicken and that raw chicken can only be safely consumed after
it is cooked at high temperatures:
[P]eople have been cooking and eating poultry for hundreds of years,
presumably without knowing the exact temperature and amount of
cooking time required to eliminate salmonella bacteria which may be
present in the meat. Even without such knowledge, salmonella food
poisoning has not proven to be the natural consequence of consuming
poultry. We thus think it is common knowledge that there is a danger of
illness from eating poultry which has not been properly prepared.
Leno v. Ehli, 339 N.W.2d 92, 99 (N.D. 1983); see also González Cabán v. JR Seafood,
132 F. Supp. 3d 274, 287 (D.P.R. 2015) (noting Salmonella is “natural” material in
chicken); Texas Food Indus. Ass’n v. Espy, 870 F. Supp. 143, 148 (W.D. Tex. 1994)
(“[O]rdinary methods of cooking and preparing food kills the Salmonella pathogen.”)
(discussing American Public Health Assoc. v. Butz, 511 F.2d 331, 334 (5th Cir. 1975));
Supreme Beef Processors, Inc. v. U.S. Dep’t of Agric., 275 F.3d 432, 439 (5th Cir. 2001)
(“[N]ormal cooking practices for meat and poultry destroy the Salmonella
organism. . . .”).
In Craten v. Foster Poultry Farms Inc., a recent decision in which, as here,
chicken containing Salmonella was linked to human illness, the District of Arizona
dismissed the plaintiffs’ strict liability and implied warranty claims, noting that “[i]t
is undisputed that Salmonella occurs naturally in chicken and that the bacteria are
killed through proper cooking . . . which is how raw chicken products are intended to
be used.”

305 F. Supp. 3d 1051, 1064 (D. Ariz. 2018).

Applying, in part, the

reasonable expectation test, the Court found that the strict liability and warranty
claims “fail[ed] as a matter of law because Salmonella is natural to poultry, killed
through proper cooking, and because no poultry processor or reasonable consumer
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expects raw, improperly cooked, or improperly handled chicken to be safe for
consumption.” Id. (emphasis added). As in Craten, the application of the reasonable
expectation test to the allegations of the Complaint requires the dismissal of Starr’s
claims.
Starr’s claims likewise fail under the foreign-natural test, which “provides
there is no liability if the food product is natural to the ingredients.” Cargill, 55 A.3d
at 5 (quoting Newton v. Standard Candy Co., No. 8:06CV242, 2008 WL 752599, at *2
(D. Neb. Mar. 19, 2008)). Just as in Kobeckis, which held that “live trichinar in raw
pork and raw pork products is [a] . . . natural . . . attribute of pork” and there was
therefore no seller liability if the pork was safe for consumption when properly
cooked, 225 A.2d at 423, there is no liability for Salmonella, which is natural to raw
chicken and destroyed when properly cooked (see collected cases, supra).
Accordingly, Starr’s claims cannot succeed under either the reasonable
expectation or foreign-natural test.2 Even if, however, Starr’s strict liability claim
could survive these tests, it is further barred by the economic loss doctrine.
B.

Economic Loss Doctrine

Mountaire further alleges that the economic loss doctrine bars Starr’s strict
liability claim because Starr only alleges economic harm to AP’s raw chicken product
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Starr argues that it has not merely alleged that Mountaire sold chicken containing Salmonella, but that
Mountaire sold chicken that contained Salmonella and was also linked to human illness, which renders the
chicken “adulterated” as that term is defined by the PPIA. See 21 U.S.C.A. §§ 453, 458. If Mountaire sold
adulterated chicken (which is prohibited by the PPIA), Starr argues, it would be liable under both strict liability
and breach of warranties theories. See ECF No. 19 at 2-3. Although the parties dispute whether the PPIA’s
definition of an adulterated product can apply to the products at issue here and, if they do, whether liability can
attach to Mountaire, compare id. with ECF No. 20 at 1-3, it is not necessary to wade into this legal thicket.
Whether or not Mountaire’s product could be retroactively deemed adulterated has no bearing on the application
of either the reasonable expectation or foreign-natural test. Although a determination that its product was
adulterated could subject Mountaire to liability under the PPIA or, potentially, for negligence, see Craten, 305 F.
Supp. 3d at 1064, it would not establish strict liability or liability for breach of implied warranties. See id. at
1060, 1064.
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itself. Under the economic loss doctrine, “courts do not permit tort recovery for a
defective product’s damage to itself or, in other words, where the injury suffered is
merely the failure of the product to work properly rather than personal injury or
resulting injury to other property.” Fireman’s Fund Ins. Co. v. Childs, 52 F. Supp. 2d
139, 142 (D. Me. 1999); see also Oceanside at Pine Point Condo. Owners Ass’n v.
Peachtree Doors, Inc., 659 A.2d 267, 270-71 (Me. 1995) (adopting the economic loss
doctrine in Maine for product liability claims).
Starr alleges damages in excess of ten million dollars, “including but not
limited to return and destruction of the recalled chicken products, lost sales
opportunities, loss of business, and loss of customers.”

ECF No. 1-3 at ¶ 20.

Additionally, at the hearing in this case, Starr asserted that there was harm flowing
from the product recall and associated costs. Economic loss includes “damages for
inadequate value, costs of repair and replacement of defective product, or consequent
loss

of

profits—without

claim

of

personal

injury

or

damage

to

other

property.” Fireman’s Fund, 52 F. Supp. 2d at 142 (quoting Oceanside, 659 A.2d at
270 n.4) (internal quotation marks omitted). Accordingly, the damages alleged by
Starr fall within the ambit of the economic loss doctrine. Further, costs associated
with product recalls are purely economic and thus barred by the economic loss
doctrine. See e.g., Medefil, Inc. v. Scientific Protein Labs, LLC, No. 13-cv-04773, 2015
WL 3962820, at *3 (N.D. Ill. June 26, 2015) (“costs associated with [product] recall . .
. loss of profits and sales . . . were barred by the economic loss doctrine.”); Aliki Foods,
LLC v. Otter Valley Foods, Inc., 726 F. Supp. 2d 159, 167-68 (D. Conn. 2010) (holding
that the product recall associated with defective, frozen food product containing
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Listeria was barred by the economic loss doctrine because the Complaint had not
sufficiently alleged damaged to other property).
Because the Complaint does not allege facts plausibly identifying other sources
of loss in addition to financial losses barred by the economic loss doctrine, Starr has
not asserted a viable strict liability claim.
IV. CONCLUSION
For the foregoing reasons, Mountaire’s Motion to Dismiss (ECF No. 18) is
GRANTED and the Complaint is dismissed.
SO ORDERED.
Dated this 2nd day of August, 2018.
/s/ JON D. LEVY
U.S. DISTRICT JUDGE

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