Agropur MSI, LLC v. Sterling Technology, Inc.

Filing 128

OPINION AND ORDER granting in part and denying in part 83 Defendant's Motion in Limine; granting in part and denying in part 97 Plaintiff's Motion in Limine; granting 99 Plaintiff's Motion in Limine; granting 101 Plaintiff's Motion in Limine; denying 109 Plaintiff's Motion in Limine. Signed by District Judge Barbara B. Crabb on 6/7/16. (jat)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - AGROPUR MSI, LLC,

OPINION AND ORDER

Plaintiff,

15-cv-96-bbc

v.
STERLING TECHNOLOGY, INC.,
Defendant.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Plaintiff Agropur MSI, LLC alleges that defendant Sterling Technology, Inc. sold it
colostrum powder that contained an excessive amount of gluten, in violation of the parties’
contract and various warranties. On March 15, 2015, I granted plaintiff summary judgment
as to liability with respect to plaintiff’s claims and dismissed defendant’s counterclaims on
the ground that they were filed after the contractual limitations period expired. The case is
set for a trial on damages on June 13, 2016. This order addresses the parties’ motions in
limine.
OPINION

A. Defendant’s Motions in Limine
1. Motion to exclude references to defendant’s counterclaim, dkt. #83 at 4
Defendant initially asserted a counterclaim related to a separate transaction between
the two parties. In this counterclaim, defendant alleged that plaintiff sold it agglomerated

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colostrum that was contaminated with various foreign objects, such as metal shavings and
warehouse beetles. I dismissed this claim in an order entered on March 15, 2016 because
it was not brought within one year from the date the contamination was discovered, as was
required by the parties’ contract. Defendant requests that plaintiff be prohibited from
making any reference to this counterclaim or its dismissal at trial. Plaintiff does not oppose
defendant’s motion in limine on this issue, so defendant’s motion will be granted. However,
as plaintiff notes, if defendant presents facts related to the dismissed counterclaim, plaintiff
will be entitled to present evidence that the claim was dismissed as untimely.

2. Defendant’s motion to exclude reference to Lockner’s March 12, 2015 hold letter, dkt.
#83 at 7
Whether a party acted reasonably in attempting to mitigate its damages attributable
to a breach of contract is a question of fact for a jury. Frieburg Farm Equipment, Inc. v. Van
Dale, Inc., 756 F. Supp. 1191, 1193 (W.D. Wis. 1991) (“These cases illustrate the
Wisconsin courts’ close adherence to the general principle that whether an injured party has
acted reasonably to minimize damages is a question of fact for the jury.”).

At trial,

defendant intends to argue that plaintiff failed to take reasonable steps to mitigate its
damages. It is likely that in support of this argument, defendant will assert that plaintiff
could have sold the protein powder as animal feed earlier than it did, and had it done so, it
would have received a higher price per pound. In response, plaintiff intends to argue that
its decision to delay selling the powder was warranted for a number of reasons, including the

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fact that it was under an obligation to preserve the powder pursuant to a litigation hold. In
support of the fact that it was under a litigation hold, plaintiff intends to offer a litigation
hold letter sent by defendant’s former counsel that asked plaintiff to preserve all product that
is the subject matter of this lawsuit. Defendant seeks to exclude this letter on the ground
that its author later explained at a deposition that she had “repeated discussions with
[plaintiff’s counsel] about his responsibility to sell off the [powder] to mitigate [plaintiff’s]
damages.”
Defendant’s argument for excluding the letter has no merit. The letter clearly is
relevant to plaintiff’s contention that its decision to delay selling the powder was reasonable.
The fact that the letter’s author later contradicted or clarified what she said in the letter is
not grounds for excluding it; at best, her subsequent deposition testimony raises a dispute
as to the scope of the hold and should be presented to a jury.

3. Motion to exclude any reference to the reason for the gluten contamination, dkt. #83 at
10
During his deposition, plaintiff’s Vice-President of Quality Control, Shawn Wegner,
testified that it was his belief that the gluten contamination was attributable to the drying
process used by defendant. Defendant asks that plaintiff be prohibited from discussing this
issue at trial because it is not relevant now that the court has found liability. Plaintiff
opposes this motion because it contends that this information is relevant to rebut
defendant’s argument that plaintiff should have performed gluten testing immediately upon

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receiving the colostrum. However, as discussed later in this opinion, I am granting plaintiff’s
motion to exclude argument or evidence that plaintiff should have immediately conducted
such testing upon receiving the colostrum. Accordingly, the basis for plaintiff’s opposition
to defendant’s motion in limine on this issue is rendered moot and defendant’s motion will
be granted.

4. Motion to exclude any reference to insurance, dkt. #83 at 11
Defendant has requested that plaintiff be prohibited from making any reference to
any insurance coverage that may satisfy an award of damages in this matter. I am granting
this motion as unopposed. However, as plaintiff notes, if defendant suggests at trial that it
may have difficulty satisfying a damages award or that a high damages award will threaten
its ability to stay in business, plaintiff will be permitted to present evidence of any insurance
coverage that may be available to satisfy a damages award.

5. Defendant’s motion to exclude testimony of Mike Homewood, dkt. #83 at 12
Defendant has requested that plaintiff be prohibited from presenting the testimony
of Mike Homewood. Defendant contends that plaintiff disclosed Homewood as a “rebuttal
expert” after plaintiff had already disclosed two other “rebuttal experts” in March 2016, both
of whom plaintiff deposed before Homewood was disclosed. Defendant contends that
plaintiff identified Homewood as a witness only because plaintiff was displeased with the
testimony of its other “rebuttal experts.” However, plaintiff contends that Homewood is not

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a “rebuttal expert,” but rather a fact witness who will testify regarding his sale of scrap food
products for plaintiff on other occasions.
I am denying plaintiff’s motion to exclude Homewood’s testimony because the subject
matter of the testimony regarding the prices Homewood was able to get for selling plaintiff’s
scrap food materials during the relevant time frame bears on the reasonableness of plaintiff’s
efforts to mitigate damages attributable to defendant’s breach. The fact that plaintiff may
have more than one witness capable of testifying about the prices it has received for similar
scrap food materials is not a basis for excluding Homewood’s testimony. Defendant does
not contend that Homewood was not timely disclosed and the substance of Homewood
testimony was known to defendant before the discovery cut-off. Defendant could have made
arrangements to depose Homewood; its failure to do so is not a basis for excluding
Homewood’s testimony.

6. Motion to exclude reference to plaintiff’s vendor approval policy, dkt. #83 at 6
Finally, defendant’s motion to exclude reference to plaintiff’s vendor approval policy,
dkt. #83, is moot because this policy is relevant only as evidence rebutting defendant’s
argument that plaintiff should have tested the colostrum immediately upon receipt. As
explained in the next paragraph, plaintiff had no obligation to inspect and test the
colostrum.

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B. Plaintiff’s Motions in Limine
1. Motion to exclude evidence and argument regarding defendant’s obligation to test product
prior to discovery of breach, dkt. #101
Plaintiff seeks to preclude defendant from arguing that defendant should not be held
liable for plaintiff’s damages because plaintiff should have inspected and tested the colostrum
powder to ensure that it was “gluten-free” prior to mixing, packaging and sending it to its
distributer for sale. I am granting this motion because plaintiff was not required to inspect
the colostrum to ensure it was gluten-free prior to using it and defendant’s suggestion that
the duty to mitigate includes such an onerous testing or inspection requirement is not
supported by the law.
No duty of inspection fell on plaintiff because defendant had expressly warranted that
the product was gluten-free. Under Wisconsin law, when a seller expressly warrants that a
product satisfies some condition, the buyer is under no obligation to conduct an inspection
to determine whether that condition is satisfied in fact; instead, the buyer is free to rely on
the warranty of the seller. Jones v. Pittsburgh Plate Glass Co., 246 Wis. 462, 466, 17
N.W.2d 562, 564 (1945) (“[T]here is no duty of inspection in the case of an express
warranty. The purchaser may rely on the representations of the seller and even though he
be negligent in discovering the defect, may rely on the warranty.”). Accordingly, plaintiff
cannot rely on an alleged failure to inspect to support an argument that plaintiff failed to
mitigate damages.
In many respects, the facts of the this case and the arguments set forth by the parties

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bear a strong resemblance to those before the court in Blommer Chocolate Co. v. Bongards
Creameries, Inc., 644 F. Supp. 234, 238 (N.D. Ill. 1986). In that case, the defendant
Bongard Creameries sold plaintiff Blommer Chocolate whey powder that was contaminated
with salmonella. Blommer used the whey to make chocolate, which it then sold to
consumers. After the contamination was discovered, Blommer sued Bongards. Bongards
sought to avoid liability by arguing that Blommer should have tested the product before
using it to make chocolate to ensure it was salmonella-free. The District Court for the
Northern District of Illinois rejected this argument because Bongards had warranted that the
whey was salmonella-free. Discussing the Uniform Commercial Code, the district court held
that “[t]he whole point of obtaining a warranty is to get a product that will not have to be
meticulously combed in a search for defects.” Id. at 237. Moreover, the court held, because
this “failure to inspect” did not operate as a defense to liability, it could not be “resurrected
under the label of failure to mitigate damages.” Id. at 238. Although the district court in
Blommer Chocolate was analyzing an alleged obligation to inspect under Illinois law, its
reasoning is equally applicable to this case, which is also subject to the Uniform Commercial
Code. In particular, to allow defendant to avoid damages based on plaintiff’s alleged failure
to conduct an inspection would “put the law of damages squarely at odds with the principle
that a plaintiff is not expected to anticipate and guard against a defect.” Id.
Accordingly, I am granting plaintiff’s motion in limine to exclude evidence and
argument regarding the need for testing prior to discovery of breach. Dkt. #101. I am also
granting plaintiff’s motion to exclude the testimony of Kelly Black, dkt. #100, to the extent

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she intends to testify regarding plaintiff’s alleged obligation to inspect and test component
ingredients upon receipt.

2. Motion to exclude evidence related to the sale price of the powder before Agropur had
permission to sell, dkt. #109
In opposition to defendant’s contentions that plaintiff’s duty to mitigate required it
to sell the protein powder in March or April 2014, and that had it done so, it would have
received approximately $4.00 per pound rather than the 70 cents it ultimately received,
plaintiff has moved to exclude all evidence of the price of the powder prior to August 2015.
Plaintiff contends that up until that point, it had a legal obligation to preserve the protein
powder for litigation purposes. However, the reasonableness of plaintiff’s decision to delay
selling the product and whether the duty to preserve evidence prevented it from selling all
of the product are disputed issues that must be resolved at trial. Accordingly, I am denying
plaintiff’s motion to exclude evidence related to the sale price of the powder before plaintiff
had affirmative permission to sell from defendant.

3. Plaintiff’s Motion to Exclude Testimony of Drew Vermeire, dkt. #97
Plaintiff also moves to exclude the following testimony offered by defendant’s expert,
Drew Vermeire: (1) Vermeire’s opinion regarding the price of the protein product in March
and April 2014; (2) Vermeire’s opinion that plaintiff should have sold the protein product
immediately after discovering it was contaminated; and (3) Vermeire’s “commercial

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reasonableness” opinion. Again, plaintiff contends that this testimony is rendered irrelevant
by the fact that plaintiff was under a litigation hold that prevented it from selling the protein
powder prior to August 2015. However, as discussed above, the existence of this hold and
whether it rendered plaintiff’s delay in selling reasonable are disputed issues.
Plaintiff also requests that Vermeire’s opinion regarding the April 2014 price data be
excluded as “improper supplementation.” I am denying this request because Vermeire
needed to supplement his report to include the April 2014 price data after defendant learned
that it took plaintiff a month to broker a sale of the protein powder. When Vermeire issued
his original report, he was not aware of the fact that plaintiff was incapable of selling the
protein immediately. It was only after he learned of the delay that he decided to supplement
his report. This supplemental opinion was disclosed more than a week before Vermeire’s
deposition and plaintiff had a full opportunity to question him about the price data set forth
in the report. Accordingly, I am denying plaintiff’s motion to exclude Vermeire’s opinion
regarding the April 2014 price data.
However, I am granting plaintiff’s motion to exclude Vermeire’s opinions regarding
the commercial reasonableness of holding the powder, the need to immediately sell the
powder and how the powder might lose value due to the “Maillard reaction.” Although all
of these matters relate to the allegedly proper storage and disposition of food ingredients,
Vermeire did not discuss any of these opinions in his initial report, which dealt exclusively
with calculating the resale price of the protein powder.

Defendant fails to offer any

explanation for why Vermeire did not disclose his opinions with respect to these issues in

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his original report and fails to explain how they might qualify as proper supplementation
under Rule 26(e).

ORDER
IT IS ORDERED that
1. Defendant Sterling Technology, Inc.’s motion to exclude any reference to the fact
that defendant’s counterclaim was dismissed, dkt. #83 at 4, is GRANTED.
2. Defendant’s motion to exclude reference to plaintiff’s “vendor approval policy,”
dkt. #83 at 6, is denied as MOOT.
3. Defendant’s motion to exclude reference to Lockner’s March 12, 2015 hold letter,
dkt. #83 at 7, is DENIED.
4. Defendant’s motion to exclude reference to the cause of the colostrum
contamination, dkt. #83 at 5, 10, is GRANTED.
5. Defendant’s motion to exclude reference to defendant’s insurance coverage, dkt.
#83, 11, is GRANTED.
6. Defendant’s motion to exclude the testimony of Mike Homewood, dkt. #83 at 12,
is DENIED.
7. Plaintiff Agropur MSI, LLC’s motion to exclude evidence and argument regarding
testing prior to the discovery of the breach, dkt. #101, is GRANTED.
8. Plaintiff Agropur MSI, LLC’s motion to exclude the testimony of Kelly Black, dkt.
#99, is GRANTED.

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9. Plaintiff’s motion to exclude evidence of sales price before plaintiff had permission
to sell, dkt. #109, is DENIED.
10. Plaintiff’s motion to exclude the testimony of Drew Vermeire, dkt. #97, is
GRANTED in part and DENIED in part. Vermeire will be allowed to testify about the sale
price of the protein powder in March and April of 2014. However, Vermeire will not be
allowed to testify about the matters described in paragraph 2 of his supplemental report or
the “commercial reasonableness” of plaintiff’s delay.

Entered this 7th day of June, 2016.
BY THE COURT:
/s/
BARBARA B. CRABB
District Judge

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