Starbucks Corporation v. Wellshire Farms, Inc. et al
Filing
139
OPINION. Signed by Judge Noel L. Hillman on 11/20/2014. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
STARBUCKS CORPORATION,
Civil No. 14-0041 (NLH/AMD)
Plaintiff,
OPINION
v.
WELLSHIRE FARMS, INC., and
HAHN BROS., INC.,
Defendants.
WELLSHIRE FARMS, INC.,
Third-Party Plaintiff,
v.
SK FOOD GROUP, INC.,
Third-Party Defendant.
APPEARANCES:
JUDITH BOND JENNISON
JAMES F. WILLIAMS (pro hac vice)
J. CAMILLE FISHER (pro hac vice)
PERKINS COIE LLP
1201 THIRD AVENUE
SUITE 4900
SEATTLE, WA 98101
On behalf of Starbucks Corporation
CATHERINE JEAN BICK
JAMES MURDOCK ANDREWS
MATTHEW N. FIOROVANTI
GIORDANO HALLERAN & CIESLA, P.C.
125 HALF MILE ROAD
SUITE 300
RED BANK, NJ 07701
On behalf of Wellshire Farms, Inc.
MARGARET F. CATALANO
TIMOTHY BOYD PARLIN
HEATHER R. BEYGO (pro hac vice)
KIMBERLY L. LIMBRICK (pro hac vice)
CAROLL, MCNULTY & KULL, LLC
120 MOUNTAIN VIEW BOULEVARD
PO BOX 650
BASKING RIDGE, NJ 07920
On behalf of Hahn Bros., Inc.
VALERIE A. HAMILTON
SILLS CUMMIS & GROSS, P.C.
600 COLLEGE ROAD EAST
PRINCETON, NJ 08540
On behalf of SK Food Group, Inc.
HILLMAN, District Judge
This case concerns the quality of ham in breakfast and
lunch sandwiches sold at plaintiff Starbucks Corporation
locations throughout the United States and Canada.
Presently
before the Court is the motion of defendant Hahn Brothers, Inc.
to dismiss the claims against it asserted by Starbucks.
Starbucks has opposed Hahn’s motion, and so has defendant
Wellshire Farms, Inc.
For the reasons expressed below, Hahn’s
motion will be denied without prejudice.
BACKGROUND
According to Starbucks’s first amended complaint, in 2007,
Starbucks entered into a contract with third-party defendant SK
Food Group, Inc., in which SK Food agreed to assemble, package,
and deliver warm breakfast ham sandwiches to Starbucks locations
in the western United States and Canada.
In 2008, Starbucks
changed its breakfast sandwich program, and provided SK Food
2
with new specifications for its ham sandwiches.
After SK Food
conducted a blind taste test that resulted in Starbucks
selecting what it thought was Wellshire Farms Black Forest ham,
Starbucks hired SK Food and other sandwich assembly companies to
use Wellshire ham in making warm and cold ham sandwiches for
distribution to Starbucks stores throughout the United States
and Canada.
In September 2010, Starbucks started getting customer
complaints about the ham in Starbucks sandwiches.
Customers
complained that the ham was discolored, had an unusual taste,
and appeared spoiled.
Starbucks informed Wellshire of the
complaints, and in October 2010, Starbucks issued “Stop Sell and
Discard” notices for the warm breakfast sandwiches.
Starbucks
also investigated, discovered quality issues with the ham being
provided from Wellshire, and issued a “Corrective Action Plan”
to SK Food.
In November 2010, Starbucks continued to receive complaints
about the ham from customers around the United States.
Starbucks claims that when it began to search for a new ham
supplier, Wellshire pleaded with Starbucks to maintain its
supplier relationship.
Starbucks then learned for the first
time that Hahn, and not Wellshire, was actually producing the
ham.
Starbucks claims that Wellshire had entered into an
agreement with Hahn to satisfy its obligation to produce Black
3
Forest ham for Starbucks sandwiches.
In December 2010, Starbucks had laboratory tests performed
on the ham, and the test results revealed that a sample
contained potentially harmful bacteria.
On December 10, 2010,
Starbucks issued a second “Stop Sell and Discard” notice for its
ham sandwiches.
On December 18, 2010, SK Food notified
Starbucks that it would no longer use Wellshire’s ham for the
sandwiches.
Two days later, a third-party audit revealed
deficiencies in the way Hahn cooked and processed the ham.
On
December 21, 2010, Starbucks issued its final “Stop Sell and
Discard” notice for all ham sandwiches, and on December 23,
2010, Starbucks ordered all sandwich assemblers to stop making
sandwiches using Wellshire ham.
According to Starbucks’ complaint, in order to minimize the
financial impact of Starbucks’ decision to cease the production
of ham sandwiches, Starbucks entered into a settlement agreement
with the ham sandwich assemblers to compensate them for their
losses.
In return, the ham sandwich assemblers assigned their
rights to Starbucks to bring claims against Wellshire and Hahn
for their losses.
Accordingly, Starbucks has asserted claims against
Wellshire for beach of the implied warranty of merchantability
(Count One) and breach of the implied warranty of fitness for
particular purpose (Count Two), both under the UCC.
4
Also
against Wellshire, Starbucks has asserted claims for negligent
misrepresentation (Count Six) and unfair and deceptive trade
practices (Count Seven).
Starbucks has asserted claims against
both Wellshire and Hahn for breach of the ham sandwich assembler
agreements and Starbucks’ third-party beneficiary rights (Counts
Three and Four), as well as a claim for negligence (Count Five).
Hahn has moved to dismiss Starbucks’ claims against it,
arguing that Starbucks’ claims are barred by the three-year
statutes of limitations provided under Maryland law.
Starbucks,
as well as Wellshire, 1 have opposed Hahn’s motion, arguing
primarily that the determination of what state’s law to apply to
the case is a fact-based analysis that is premature at this
motion to dismiss stage, where the proper law to apply is not
readily apparent from the face of the complaint.
DISCUSSION
A.
Standard for Jurisdiction
This Court has jurisdiction over this matter pursuant to 28
U.S.C. § 1332 because there is complete diversity of citizenship
between the parties and the amount in controversy exceeds
1
According to the parties’ papers, in 2011, Wellshire filed suit
in the District of New Jersey against Hahn and SK Food regarding
the Starbucks ham sandwich issues. The parties settled their
claims. Even though Wellshire has not asserted any cross-claims
against Hahn in this case, Wellshire has opposed Hahn’s motion
to dismiss because Wellshire contends that it is directly
impacted by Hahn’s motion due to Starbucks’ conflated claims
against Wellshire and Hahn.
5
$75,000.
B.
Standard for Motion to Dismiss
When considering a motion to dismiss a complaint for
failure to state a claim upon which relief can be granted
pursuant to Federal Rule of Civil Procedure 12(b)(6), a court
must accept all well-pleaded allegations in the complaint as
true and view them in the light most favorable to the plaintiff.
Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005).
It is well
settled that a pleading is sufficient if it contains “a short
and plain statement of the claim showing that the pleader is
entitled to relief.”
Fed. R. Civ. P. 8(a)(2).
Under the
liberal federal pleading rules, it is not necessary to plead
evidence, and it is not necessary to plead all the facts that
serve as a basis for the claim.
F.2d 434, 446 (3d Cir. 1977).
Bogosian v. Gulf Oil Corp., 562
However, “[a]lthough the Federal
Rules of Civil Procedure do not require a claimant to set forth
an intricately detailed description of the asserted basis for
relief, they do require that the pleadings give defendant fair
notice of what the plaintiff’s claim is and the grounds upon
which it rests.”
Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S.
147, 149-50 n.3 (1984) (quotation and citation omitted).
A district court, in weighing a motion to dismiss, asks
“‘not whether a plaintiff will ultimately prevail but whether
the claimant is entitled to offer evidence to support the
6
claim.’”
Bell Atlantic v. Twombly, 550 U.S. 544, 563 n.8 (2007)
(quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974)); see also
Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in
Twombly expounded the pleading standard for ‘all civil actions’
. . . .”); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.
2009) (“Iqbal . . . provides the final nail-in-the-coffin for
the ‘no set of facts’ standard that applied to federal
complaints before Twombly.”).
Following the Twombly/Iqbal
standard, the Third Circuit has instructed a two-part analysis
in reviewing a complaint under Rule 12(b)(6).
First, the
factual and legal elements of a claim should be separated; a
district court must accept all of the complaint's well-pleaded
facts as true, but may disregard any legal conclusions.
578 F.3d at 210 (citing Iqbal, 129 S. Ct. at 1950).
Fowler,
Second, a
district court must then determine whether the facts alleged in
the complaint are sufficient to show that the plaintiff has a
“‘plausible claim for relief.’”
at 1950).
Id. (quoting Iqbal, 129 S. Ct.
A complaint must do more than allege the plaintiff's
entitlement to relief.
Id.; see also Phillips v. Cnty. of
Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (stating that the
“Supreme Court's Twombly formulation of the pleading standard
can be summed up thus: ‘stating . . . a claim requires a
complaint with enough factual matter (taken as true) to suggest’
the required element.
This ‘does not impose a probability
7
requirement at the pleading stage,’ but instead ‘simply calls
for enough facts to raise a reasonable expectation that
discovery will reveal evidence of’ the necessary element”).
A court need not credit either “bald assertions” or “legal
conclusions” in a complaint when deciding a motion to dismiss.
In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 142930 (3d Cir. 1997).
The defendant bears the burden of showing
that no claim has been presented.
Hedges v. U.S., 404 F.3d 744,
750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor,
Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)).
Finally, a court in reviewing a Rule 12(b)(6) motion must
only consider the facts alleged in the pleadings, the documents
attached thereto as exhibits, and matters of judicial notice.
S. Cross Overseas Agencies, Inc. v. Kwong Shipping Grp. Ltd.,
181 F.3d 410, 426 (3d Cir. 1999).
A court may consider,
however, “an undisputedly authentic document that a defendant
attaches as an exhibit to a motion to dismiss if the plaintiff’s
claims are based on the document.”
Pension Benefit Guar. Corp.
v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.
1993).
If any other matters outside the pleadings are
presented to the court, and the court does not exclude those
matters, a Rule 12(b)(6) motion will be treated as a summary
judgment motion pursuant to Rule 56.
8
Fed. R. Civ. P. 12(b).
C.
Analysis
Hahn argues that it is clear from the face of Starbucks’
complaint that Maryland has the most significant relationship to
Starbucks’ claims against Hahn, and therefore Maryland’s threeyear statutes of limitations for negligence-to-property and
contract claims apply, rather than New Jersey’s six-year
statutes of limitations for those claims. 2
Because the three-
year statutes of limitations apply, and Starbucks did not file
its claims against Hahn until after the expiration of the threeyear limitations period, Starbucks’ claims against Hahn must be
dismissed.
In order to come to this conclusion, Hahn follows New
Jersey’s “most significant relationship” test set forth in the
Restatement (Second) of Conflict of Laws, which is applicable in
this Court as a federal court sitting in diversity.
See Gen.
Star Nat'l Ins. Co. v. Liberty Mut. Ins. Co., 960 F.2d 377, 379
(3d Cir. 1992) (explaining that federal courts sitting in
diversity apply the forum state's choice-of-law rules); P.V. v.
Camp Jaycee, 962 A.2d 453, 459–60 (N.J. 2008) (setting forth New
Jersey’s choice of law principles).
This test requires the
Court to determine whether an actual conflict exists between the
2
Hahn also points out that Washington’s statute of limitations
is six years for contact claims, and three years for property
damage-based negligence claims.
9
laws of the competing states and, if so, to determine which
state has the most significant relationship to the parties and
cause of action.
Camp Jaycee, 962 A.2d at 460.
In this case, Hahn contends that an actual conflict exists
between the various states’ statutes of limitations, and that
Maryland’s statute of limitations should apply because Maryland
has the most significant relationship to Starbucks’ purported
third-party beneficiary rights to the contract between Hahn and
Wellshire.
Hahn contends that everything related to the
allegedly defective ham, as pleaded in Starbucks’ complaint with
regard to processing and testing, occurred in Maryland.
Therefore, Hahn argues that Maryland law must apply to
Starbucks’ breach of contract of its third-party beneficiary
rights and negligence claims.
Since the alleged customer
complaints began in September 2010, the three year statute of
limitations expired in September 2013.
Because Starbucks did
not institute this action against Hahn until February 2014, Hahn
argues that Starbucks’ claims against it are time-barred. 3
3
In its opposition to Hahn’s motion, Starbucks explains the
procedural history of this case. On July 5, 2013, Starbucks
filed suit against Wellshire and Hahn in the Western District of
Washington. On December 17, 2013, the Western District of
Washington granted Hahn’s motion to dismiss for lack of personal
jurisdiction, and on December 18, 2013, the case was transferred
to this Court pursuant to Wellshire’s motion to transfer. Once
the case was in this Court, on February 11, 2014, Starbucks
filed a first amended complaint, which re-added Hahn as a
defendant. Starbucks argues that even if Maryland law were to
10
A statute of limitations defense is not included in the
enumerated defenses listed in Federal Civil Procedure Rule
12(b), but the Third Circuit has instructed that a statute of
limitations defense may be raised in a Rule 12(b)(6) motion to
dismiss where it is clear on the face of complaint that the
action is not brought within the statute of limitations.
See
Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384
n.1 (3d Cir. 1994).
In determining whether an action should be
dismissed for non-compliance with a statute of limitations, the
Third Circuit has cautioned that “[if] the bar is not apparent
on the face of the complaint, then it may not afford the basis
for a dismissal of the complaint under Rule 12(b)(6).”
Robinson
v. Johnson, 313 F.3d 128, 135 (3d Cir. 2002) (quotation
omitted).
Consequently, in resolving Hahn’s motion, this Court
must determine whether the face of Starbucks’ complaint reveals
that Maryland has the most significant relationship with the
claims and parties in this case.
Sections 6, 145 and 188 of the Restatement (Second) of
Conflicts of Laws, adopted by New Jersey for contract and
apply to its claims against Hahn, its first amended complaint
would relate back to its original complaint, which was filed
before the expiration of the three year limitation period.
Starbucks also argues that the UCC contains a 4-year limitations
period that applies instead of state law statutes of
limitations. The Court does not need to address these arguments
at this time.
11
negligence claims, direct the Court to consider:
(a) the place of contracting, (b) the place of negotiation
of the contract, (c) the place of performance, (d) the
location of the subject matter of the contract, and (e) the
domicil, residence, nationality, place of incorporation and
place of business of the parties.
[and]
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum, (c) the relevant
policies of other interested states and the relative
interests of those states in the determination of the
particular issue, (d) the protection of justified
expectations, (e) the basic policies underlying the
particular field of law, (f) certainty, predictability and
uniformity of result, and (g) ease in the determination and
application of the law to be applied.
Forestal Guarani S.A. v. Daros Intern., Inc., 613 F.3d 395, 400
-401 (3d Cir. 2010) (citing Restatement (Second) of Conflicts of
Laws § 188(2) § 6(2) (1971)); see also Pollard v. AEG Live, LLC,
2014 WL 4637017, 3 (D.N.J. 2014) (citing Restatement (Second) of
Conflict of Laws § 145(1) (1971)) (explaining that when
presented with a tort claim, the applicable Second Restatement
section is 145, which simply refers the Court back to the
principles of section 6 to determine the state with the “most
significant relationship to the occurrence and the parties”).
That Maryland law should apply to Starbucks’ claims against
Hahn cannot be determined from the face of Starbucks’ complaint.
As recited above, Starbucks claims that its damages from the
defective ham sandwich program were caused by Wellshire’s
12
clandestine assignment of its ham processing to Hahn to fulfill
Wellshire’s obligation to supply ham to Starbucks’ ham sandwich
assemblers.
Even though the complaint states that Hahn is a
Maryland corporation with a principal place of business in
Maryland, the complaint is otherwise silent as to the location
of all other events, except for the country-wide distribution of
the ham to sandwich assemblers, and the sandwiches’ shipment to
Starbucks locations throughout the United States and Canada.
There are no allegations concerning the details of the contract
between Wellshire, a New Jersey company, and Hahn, or where the
ham was processed or shipped from.
Although it could be guessed
that Hahn’s principal place of business in Westminster, Maryland
was where the ham was produced and where Starbucks eventually
tested it on-site, the complaint does not specify the location
or any other details about Wellshire and Hahn’s business
dealings.
Moreover, even if Maryland was the location of the ham
production, it is the relationship between New Jersey-based
Wellshire and Hahn that forms the basis of Starbucks’ claims.
What law applies to the contractual relationship between
Wellshire and Hahn is not stated in Starbucks’ complaint, and it
cannot be determined from the complaint.
It is based on that
contract between Wellshire and Hahn that Starbucks is claiming a
third-party beneficiary interest.
13
Additionally, it is Wellshire
and Hahn’s collective “breach of their duties by providing
defective ham from an unknown, unreliable, and potentially
unsafe ham supply source” that forms the basis for Starbucks’
negligence claims.
Starbucks’ complaint does not make it clear
that Maryland has the most significant relationship to the
events in this case so that Maryland’s statutes of limitations
bars Starbucks’ claims.
Consequently, a record more robust – as Plaintiff puts it than simply Starbucks’ complaint is necessary before the Court
can determine what state’s law applies to Starbucks’ claims
against Hahn.
Hahn’s motion will be denied without prejudice to
its right to raise the issue again should it determine the
appropriate time to do so.
An accompanying Order will be entered.
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
At Camden, New Jersey
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