Starbucks Corporation v. Wellshire Farms, Inc. et al

Filing 154

OPINION. Signed by Judge Noel L. Hillman on 3/11/2015. (tf, )

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
GEORGE R. HIRSCH
SILLS CUMMIS & GROSS, P.C.
600 COLLEGE ROAD EAST
PRINCETON, NJ 08540
ROBERT J. CURRAN (pro hac vice)
JAMES M. SHAKER (pro hac vice)
TERUYUKI S. OLSEN (pro hac vice)
RYAN, SWANSON & CLEVELAND, PLLC
1201 THIRD AVENUE, SUITE 3400
SEATTLE, WA 98101-3034
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
(“Starbucks”) locations throughout the United States and Canada. 1
Presently before the Court is the motion of third party
defendant SK Food Group, Inc. (“SK Food”) to dismiss the claims
against it asserted by defendant/third party plaintiff Wellshire
Farms, Inc. (“Wellshire”).

Also pending is SK Food’s motion to

1

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 $75,000.
2

seal its motion to dismiss.

For the reasons expressed below, SK

Food’s motion to seal and motion to dismissed will both be
denied without prejudice.
BACKGROUND
According to Starbucks’s complaint, in 2007 Starbucks
entered into a contract with SK Food, 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 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 to receive 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 by Wellshire, and issued a “Corrective Action Plan” to
SK Food.

Soon thereafter, Starbucks 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 provide Black Forest ham
3

for Starbucks sandwiches.
After tests revealed bacteria in the ham sandwiches, on
December 23, 2010 Starbucks ordered all sandwich assemblers to
stop making sandwiches using Wellshire ham.

Starbucks entered

into a settlement agreement with four of the ham sandwich
assemblers to compensate them for their losses. 2

In return, the

ham sandwich assemblers assigned their rights to Starbucks to
bring claims against Wellshire and Hahn for their losses.
In 2011, Wellshire filed suit in the District of New Jersey
against SK Food and Hahn regarding the Starbucks ham sandwich
issues.

See Civil Action No. 11-1859 (JEI/KMW).

Wellshire

claimed that it contracted with Hahn to produce the ham that was
provided to three sandwich assembly companies, including SK
Food, which prepared the warm breakfast ham sandwiches.
Wellshire claimed that SK Food’s assembly process, where SK Food
would slice the ham, store it, and then assemble it with eggs,
cheese and rolls it supplied, caused the sandwiches to be
contaminated with listeria monocytongenes, rather than from the
ham itself.

SK Food denied Wellshire’s claims, and filed a

counterclaim against Wellshire and a third party complaint
against Hahn.

The parties settled the case in September 2012

2

Starbucks’ complaint does not indicate whether it has asserted
claims against SK Food or otherwise resolved any claims between
them.
4

pursuant to a confidential settlement agreement.
In this case, Starbucks has asserted claims against
Wellshire for breach of the implied warranty of merchantability
and breach of the implied warranty of fitness for particular
purpose, negligent misrepresentation, and unfair and deceptive
trade practices. 3

Wellshire has filed a third party complaint

against SK Food that asserts two counts.

The basis for the

first count is redacted, and the second count contains redacted
information but reveals it is a claim for SK Food’s breach of
the duty of good faith and fair dealing it owed to Wellshire.
Wellshire was permitted to file a redacted third party complaint
by the Magistrate Judge’s Order granting its motion pursuant to
Local Civil Rule 5.3(c)(1).

(See Docket No. 85.)

The

Magistrate Judge found that good cause existed to seal portions
of Wellshire’s third party complaint because it referred to
terms of a private settlement agreement.
SK Food has filed a motion to dismiss Wellshire’s third
party complaint.

SK Food’s motion is significantly redacted, as

is Wellshire’s opposition.

Concurrently, SK Food has filed a

motion to seal pursuant to L. Civ. Rule 5.3(c)(1), which
Wellshire joins.

3Starbucks

has also asserted claims against both Wellshire and
Hahn for breach of the ham sandwich assembler agreements and
Starbucks’ third-party beneficiary rights, as well as a claim
for negligence.
5

In order to restrict public access to information, a party
must demonstrate: (a) the nature of the materials or proceedings
at issue; (b) the legitimate private or public interests which
warrant the relief sought; (c) the clearly defined and serious
injury that would result if the relief sought is not granted;
and (d) why a less restrictive alternative to the relief sought
is not available.

L. Civ. R. 5.3(c)(2).

The basis for SK

Food’s motion to seal is that the Magistrate Judge’s Order
granting the redaction of Wellshire’s third party complaint
satisfies the elements to justify the redaction of the parties’
briefs on the motion to dismiss.
The Court finds that the order allowing the filing of a
redacted third party complaint cannot, by itself, support the
redaction of the briefing relating to SK Food’s motion to
dismiss.

Even though the Magistrate Judge considered the four

elements of L. Civ. Rule 5.3(c)(2) and determined that Wellshire
met those elements relative to the filing of its third party
complaint, SK Food must raise its arguments for why the seal
should continue for its motion to dismiss.

The Court

understands that in filing its motion, SK Food was unable to
openly refer to Wellshire’s claims against it due to Wellshire’s
redaction of the very claims it seeks to dismiss.

The viability

of the Magistrate Judge’s Order must be revisited, however, now
that SK Food is asking the Court to perform a substantive
6

analysis of Wellshire’s claims.

See In re Cendant, Corp., 260

F.3d 183, 192 (3d Cir. 2001) (citation omitted) (“It is wellsettled that there exists, in both criminal and civil cases, a
common law public right of access to judicial proceedings and
records.”); Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786-87
(3d Cir. 1994) (citation omitted) (explaining that protective
orders and orders of confidentiality are functionally similar,
and require similar balancing between public and private
concerns, and the “burden of justifying the confidentiality of
each and every document sought to be covered by a protective
order remains on the party seeking the order”); id. (quoting
City of Hartford v. Chase, 942 F.2d 130, 136 (2d Cir. 1991)
(“‘We do not . . . give parties carte blanche either to seal
documents related to a settlement agreement or to withhold
documents they deem so ‘related.’ Rather, the trial court--not
the parties themselves--should scrutinize every such agreement
involving the sealing of court papers and [determine] what, if
any, of them are to be sealed, and it is only after very
careful, particularized review by the court that a
Confidentiality Order may be executed.’”).
After reviewing the un-redacted briefs, the Court is not
convinced that some general elements of the parties’ settlement
agreement cannot be revealed so that Wellshire’s claims against
SK Food can be assessed, while at the same time protecting the
7

confidentiality of the particulars of the parties’ settlement. 4
See Pansy, 23 F.3d at 786 (explaining that “orders of
confidentiality

. . . are intended to offer litigants a measure

of privacy, while balancing against this privacy interest the
public's right to obtain information concerning judicial
proceedings,” but that “whether an order of confidentiality is
granted at the discovery stage or any other stage of litigation,
including settlement, good cause must be demonstrated to justify
the order”).
To that end, the Court directs the parties to confer and
file a renewed motion to seal, jointly if they can agree,
regarding Wellshire’s third party complaint and SK Food’s motion
to dismiss.

The parties are encouraged to propose a less

restrictive alternative to the current redactions that would
allow the Court to balance the parties’ desire for
confidentiality of their private agreement with the right of the
public to access judicial proceedings and records.

Once the

scope of the order to seal, if any, is determined, the Court
will then consider SK Food’s motion to dismiss, which SK Food
may renew by letter brief if it chooses to rest on its current

4

The Court does not have an un-redacted version of Wellshire’s
third party complaint. The Court directs Wellshire to send to
chambers an un-redacted copy of its third party complaint, in
addition to the parties’ courtesy copies of their un-redacted
briefing relating to the renewed motion to seal.
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briefing. 5
Accordingly, the Court will deny SK Food’s motion to seal
and motion to dismiss without prejudice.

An accompanying Order

will be entered.

Date:
March 11, 2015
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

5

When reviewing the terms of the settlement agreement, it
appears that Wellshire’s claims against SK Food may not be
precluded, but it also appears that there may be an issue
concerning ripeness. See National Park Hospitality Ass'n v.
Department of Interior, 538 U.S. 803, 808 (2003) (“The ripeness
doctrine is drawn both from Article III limitations on judicial
power and from prudential reasons for refusing to exercise
jurisdiction, but, even in a case raising only prudential
concerns, the question of ripeness may be considered on a
court's own motion.” (internal quotations and citation
omitted)). The Court will issue a full analysis of SK Food’s
motion to dismiss once the parameters of any sealing order are
set.
9