Restaurant Recycling, LLC v. Employer Mutual Casualty Company et al

Filing 36

ORDER granting 14 Motion to Dismiss/General(Written Opinion) Signed by Senior Judge David S. Doty on July 14, 2017. (JRC)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 17-7(DSD/SER)
Restaurant Recycling, LLC,
Plaintiff,
v.

ORDER

New Fashion Pork, LLP,
Intervenor Plaintiff,
v.
Employer Mutual Casualty Company
d/b/a EMC Insurance Companies and
Hamilton Mutual Insurance Company,
Defendants.
Brandon M. Schwartz, Esq., Michael D. Schwartz, Esq. and
Schwartz Law Firm, 600 Inwood Avenue North, Suite 130,
Oakdale, MN, counsel for plaintiff.
David C. Kim, Esq., Dean M. Zimmerli, Esq. and Gislason &
Hunter LLP, 2700 South Broadway, New Ulm, MN, counsel for
intervenor plaintiff.
Beth A. Jenson Prouty, Esq. and Arthur Chapman, 500 Young
Quinlan Building, 81 South 9th Street, Minneapolis, MN.,
counsel for defendants.
This matter is before the court upon the motion for judgment
on the pleadings by defendants Employer Mutual Casualty Company
d/b/a

EMC

Company.1

Insurance

Companies

and

Hamilton

Mutual

Insurance

Based on a review of the file, record, and proceedings

herein, and for the following reasons, the court grants defendants’

1

Unless otherwise stated, the court will refer to defendants
collectively as EMC.

motion.

BACKGROUND
This insurance coverage dispute arises out of an underlying
claim by intervenor plaintiff New Fashion Pork (NFP)2 against
plaintiff Restaurant Recycling, LLC and Superior Feed, LLC.3

NFP

is a pork producer that owns and operates feed mills where it
blends grain, fat, and other ingredients to create feed for its
swine.

ECF No. 9-1 ¶ 6.4

Restaurant Recycling is a manufacturer

and supplier of fat products for animal feed.

Id. ¶ 7.

NFP

alleges that, between July 1, 2014, and September 24, 2015,
Restaurant Recycling delivered four shipments of fat products to
NFP that were contaminated with lasalocid and lascadoil. Id. ¶¶ 910.

Lasalocid is a medication regulated by the Food and Drug

Administration that is generally used in chicken and turkey feed,
but it is not approved for use in swine.

Id. ¶ 11.

Lascadoil is

a byproduct created in the production of lasalocid and is only
approved for use as biofuel.

Id. ¶ 10.

NFP claims that it used Restaurant Recycling’s fat products to

2

Before NFP was allowed to intervene, see ECF No. 28,
Restaurant Recycling argued that defendants’ motion should be
denied because NFP was a not a party to the action. Because NFP
has intervened, this argument is moot.
3

Superior Feed is not a party to this action.

4

The underlying complaint is not attached to an affidavit or
declaration. The court will refer to it by its docket number.
2

produce feed for its swine and the contaminated feed caused serious
health problems in its swine.

Id. ¶¶ 14-15.

On November 23, 2016,

NFP filed an amended complaint in Ramsey County alleging breach of
contract, breach of implied warranty of merchantability, breach of
implied warranty of fitness for a particular purpose, negligence,
strict liability, and fraud.5
EMC insured Restaurant Recycling under Policy No. 4D5-66-11-15
from

July

2,

2014

to

July

2,

commercial liability coverage.

2015,

which

provided

See ECF No. 9-2.

general

The policy

contains an absolute pollution exclusion. Specifically, the policy
does not cover: “‘Body injury’ or ‘property damage’ which would not
have occurred in whole or part but for the actual, alleged or
threatened discharge, dispersal, seepage, migration, release or
escape of ‘pollutants’ at any time.”

Id. at 44.

The policy

defines “pollutants” as “any solid, liquid, gaseous or thermal
irritant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste. Waste includes material to be
recycled, reconditioned or reclaimed.”

Id. at 38.

On January 3, 2017, Restaurant Recycling filed this action
seeking a declaration that EMC is obligated, pursuant to the
policy, to provide defense and coverage for all claims asserted by

5

At the hearing, the parties informed the court of a possible
settlement that would resolve the underlying litigation but not the
insurance coverage dispute. On June 22, counsel for Restaurant
Recycling informed the court that the underlying litigation had
been settled for $15,000. See ECF. No. 32.
3

NFP and for any damages awarded.

Defendants now move for judgment

on the pleadings.

DISCUSSION
I.

Subject Matter Jurisdiction
Because the underlying litigation was settled for an amount

less than $75,000, the court requested that the parties submit
letters on whether the court retained jurisdiction.

Both parties

concluded that the settlement agreement did not divest the court of
jurisdiction.

The court agrees.

“It is well established that the

requirements for diversity jurisdiction must be satisfied only with
respect to the [amount alleged in the complaint at] the time of
filing.”

Scottsdale Ins. Co. v. Universal Crop Protection All.,

LLC, 620 F.3d 926, 931 (8th Cir. 2010).

Furthermore, “subsequent

events reducing the amount in controversy do not destroy diversity
jurisdiction.”

Id.

As a result, the court retains subject matter

jurisdiction.
II.

Standard of Review
The same standard of review applies to motions under Federal

Rules of Civil Procedure 12(c) and 12(b)(6).

Ashley Cty., Ark. v.

Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009).

Thus, to survive

a motion for judgment on the pleadings, “a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.”
4

Braden v. Wal–Mart Stores,

Inc., 588 F.3d 585, 594 (8th Cir. 2009) (citation and internal
quotation marks omitted).

“A claim has facial plausibility when

the plaintiff [has pleaded] factual content that allows the court
to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009).

Although a complaint need not contain detailed factual

allegations, it must raise a right to relief above the speculative
level.

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

“[L]abels and conclusions or a formulaic recitation of the elements
of a cause of action” are not sufficient to state a claim.

Iqbal,

556 U.S. at 678 (citation and internal quotation marks omitted).
The court does not consider matters outside of the pleadings
under Rule 12(c).

Fed. R. Civ. P. 12(d).

The court, however, may

consider matters of public record and materials that do not
contradict

the

complaint,

as

well

as

“necessarily embraced by the pleadings.”

materials

that

are

Porous Media Corp. v.

Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (citation and
internal quotation marks omitted).

In this case, the court

properly considers the insurance policy.
III. Coverage
In Minnesota, the interpretation of an insurance policy is a
question of law.6

Am. Family Ins. Co. v. Walser, 628 N.W.2d 605,

6

The parties do not dispute that Minnesota law applies to the
insurance policy.
5

609 (Minn. 2001).

The court interprets an insurance policy in

accordance with general principles of contract construction, giving
effect to the intent of the parties.

Thommes v. Milwaukee Ins.

Co., 641 N.W.2d 877, 879 (Minn. 2002). The court gives unambiguous
language its plain and ordinary meaning and construes ambiguous
language against the drafter and in favor of the insured.

Id. at

880; Nathe Bros., Inc. v. Am. Nat’l Fire Ins. Co., 615 N.W.2d 341,
344 (Minn. 2000).

Language is ambiguous if it is “reasonably

subject to more than one interpretation.” Columbia Heights Motors,
Inc.

v.

Allstate

Ins.

Co.,

275

N.W.2d

32,

34

(Minn.

1979).

However, the court “guard[s] against invitations to find ambiguity
where none exists.”

Metro. Prop. & Cas. Ins. Co. v. Jablonske, 722

N.W.2d 319, 324 (Minn. Ct. App. 2006) (citation and internal
quotation marks omitted).
The insured must first establish a prima facie case of
coverage.

SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 311

(Minn. 1995), overruled on other grounds by Bahr v. Boise Cascade
Corp.,

766

N.W.2d

910,

919

(Minn.

2009).

If

coverage

is

established, the burden shifts to the insurer to prove that a
policy

exclusion

applies.

Id.

at

313.

The

court

strictly

construes exclusions against the insurer, in light of the insured’s
expectations.

Thommes,

641

N.W.2d

at

880.

If

the

insurer

demonstrates that an exclusion applies, the insured bears the
burden of proving an exception to the exclusion.

6

SCSC Corp., 536

N.W.2d at 314.

The parties do not address whether Restaurant

Recycling has established a prima facie case of coverage and
instead move directly to whether the absolute pollution exclusion
applies.
A.

Contaminant

Restaurant Recycling argues that the pollution exclusion does
not apply because lasalocid can be administered to swine and other
animals at safe levels and, therefore, is not a contaminant.7

The

court is not persuaded.
The parties agree that a contaminant is defined as “one that
contaminates” and to contaminate is “to make impure or unclean by
contact or mixture.”

Brouse v. Nationwide Agribusiness Ins. Co.,

No. A14-1729, 2015 WL 4507996, at *4 (Minn. Ct. App. July 27, 2015)
(quoting The American Heritage Dictionary of the English Language
406 (3d ed. 1992)).

Although courts should be mindful that “there

must be a limit to the construction of what constitutes an irritant
or contaminant,” Auto-Owners Ins. Co. v. Hanson, 588 N.W.2d 777,
781 (Minn. Ct. App. 1999), the mere fact that a substance is safe
at certain levels does not necessarily exclude it from being a
contaminant.

See League of Minn. Cities Ins. Tr. v. City of Coon

Rapids, 446 N.W.2d 419, 421 (Minn. Ct. App. 1989) (“It defies logic
to suggest that a chemical compound does not qualify as a pollutant

7

For purposes of this motion, Restaurant Recycling does not
dispute that lascadoil is a pollutant under the policy.
7

merely

because,

at

some

highly

diluted

noticeably irritate the human body.
be

very

few,

if

any,

level,

it

does

not

If that were so, there would

chemicals

which

would

qualify

as

‘pollutants.’”); see also Hastings Mut. Ins. Co. v. Safety King,
Inc., 778 N.W.2d 275, 297 (Mich. Ct. App. 2009) (“Chlorine added as
a disinfectant in a public pool would not usually be considered a
‘contaminant,’ but chlorine added in the same concentration in
someone’s drinking water would be considered a ‘contaminant.’”).
Accordingly, although lasalocid can be administered to swine safely
at some levels, it may still qualify as a contaminant.
Restaurant Recycling next claims that, even if lasalocid is a
contaminant at certain levels, the policy exclusion does not apply
because the underlying complaint fails to allege that the swine
feed contained unsafe or illegal levels of lasalocid.
argument

has

no

merit.

Although

the

complaint

does

This
not

specifically allege that lasalocid was administered at unsafe or
illegal levels to swine, one may logically conclude from the damage
claimed - such as the death of nursery pigs - that Restaurant
Recycling’s fat product was contaminated with unsafe levels of
lasalocid.

See ECF No. 9-1 ¶¶ 14-15.

Because the property damage

in the underlying action was allegedly caused by harmful levels of
lasalocid, the court finds that lasalocid is a pollutant as defined

8

by the policy.8
B.

Dispersal

All parties agree that the plain meaning of “disperse” is “to
cause to break up” or “to cause to become spread widely.”

Hobson

v. Indian Harbor Ins. Co., No. 316714, 2015 WL 1069242, *4 (Mich.
Ct. App. Mar. 10, 2015). As alleged, Restaurant Recycling received
contaminated soy oil and blended it with recycled restaurant
grease.

Compl. ¶ 25.

NFP then blended the contaminated fat

product with grain to create swine feed. ECF No. 9-1 ¶ 13.

In

other words, contaminants were dispersed throughout fat and then
dispersed again throughout the swine feed.

Moreover, but for the

dispersal of the contaminants throughout the fat and the swine
feed, NFP’s swine would not have been harmed.

See Townsends of

Ark., Inc. v. Millers Mut. Ins. Co., 823 F. Supp. 233, 240-41
(holding that a pollutant was dispersed when it contaminated
chicken feed and that feed was mixed with other ingredients).9
NFP argues that the contaminants were not dispersed because

8

Given this finding, the court need not address Restaurant
Recycling’s arguments that lasalocid is not an irritant, chemical,
or waste.
9

NFP and Restaurant Recycling argue that because Townsends
was decided after discovery, the court should not resolve the case
at this stage. It fails, however, to cite to any disputed facts
that require the benefit of discovery.
Furthermore, the
interpretation of an insurance policy is decided as a question of
law. Walser, 628 N.W.2d at 609. Accordingly, discovery is not
needed for the court to apply the plain meaning of an unambiguous
insurance policy.
9

they were never separated from the fat product.
wholly without merit.

This argument is

Under the plain meaning of “disperse,” a

substance need not be spread widely in its pure state; therefore,
whether the contaminants were separated from the fat product is
irrelevant.

NFP also argues that the damage to its swine was not

caused by the dispersal of lasalocid and lascadoil but rather by
their presence in the feed.

This argument is likewise frivolous;

the contaminants would not have been present in the feed but for
having been dispersed into the fat product and then into the feed.
Restaurant Recycling also argues that the contaminants were
not dispersed because “disperse” means “to cause to break up” or
“to cause to become spread widely.” Therefore, it asserts, the act
of dispersal must be knowing and intentional.

But Restaurant

Recycling cites no cases in support of this argument.

Indeed,

other courts have found a dispersal regardless of an actor’s
intent.

See, e.g., Hanson, 588 N.W.2d at 778, 781 (holding that

the flaking of lead paint chips caused by the opening and shutting
of a window constituted a dispersal); Townsends, 823 F. Supp. at
240-41 (holding that a pollutant was dispersed when it contaminated
chicken feed and that feed was mixed with other ingredients).
Further, Restaurant Recycling’s intentions are irrelevant; the
insurance policy only requires that the dispersal be the proximate
cause of the damage. Here, but for Restaurant Recycling’s actions,
the contaminants would not have been dispersed into the fat product

10

and swine feed. Because the underlying litigation arises out of an
alleged dispersal of a pollutant, the pollution exclusion provision
applies.

As a result, EMC has no duty to defend or indemnify

Restaurant Recycling under the insurance policy.

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.

Defendants’ motion for judgment on the pleadings [ECF No.

14] is granted; and
2.

The case is dismissed with prejudice.

LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: July, 14 2017
s/David S. Doty
David S. Doty, Judge
United States District Court

11