United States District Court, D. South Dakota, Northern Division
OPINION AND ORDER
CHARLES B. KORNMANN United States District Judge.
Dakota
Style Foods, Inc. ("Dakota Style") initially filed
a complaint against SunOpta Grains and Foods, Inc.
("SunOpta") with the Third Judicial Circuit, County
of Clark, South Dakota, alleging strict products liability,
negligence, breach of the implied warranty of
merchantability, breach of the implied warranty of fitness
for a particular purpose, breach of express warranties, and
breach of contract. For relief, Dakota Style is requesting a
declaratory judgment, permanent injunction, and monetary
damages. On August 12, 2016, SunOpta removed the case to the
federal district court under 28 U.S.C. §§
1332(a)(1) and 1441(a). SunOpta has filed a motion (Doc. 11)
for an order dismissing, with prejudice, Dakota Style's
strict products liability, negligence, breach of the implied
warranty for a particular purpose, breach of express
warranty, and breach of contract claims. Furthermore, SunOpta
moves the Court to deny Dakota Style's request for
declaratory judgment and permanent injunction.
FACTS
This
case arises from a recall of sunflower products that were
allegedly exposed to Listeria monocytogenes
("Listeria"). Listeria is an organism that can
cause serious and sometimes fatal infections in young
children, elderly adults, and individuals with weakened
immune systems. Pregnant women exposed to Listeria also have
an increased risk of having a miscarriage or stillbirth.
Healthy individuals may suffer short-term symptoms such as
high fever, severe headache, stiffness, nausea, diarrhea, and
abdominal pain.
The
plaintiff, Dakota Style, is a South Dakota corporation in the
business of packaging and distributing snack foods. The
defendant, SunOpta, is a Minnesota corporation in the
business of processing and supplying organic and non-GMO food
products.
On
March 26, 2014, Dakota Style entered into a contract with
SunOpta for the purchase of Dakota Style's sunflower
kernel requirements, up to 2, 500, 000 pounds, for delivery
by SunOpta to Dakota Style between November 1, 2014, and
October 31, 2015. On April 23, 2015, Dakota Style and SunOpta
agreed to a second "requirements contract" for up
to 2, 500, 000 pounds of sunflower kernels to be delivered by
SunOpta to Dakota Style between November 1, 2015, and October
31, 2016. That same day, Dakota Style and SunOpta entered
into a separate contract for the purchase of Dakota
Style's sunflower in-shell requirements for up to 2, 000,
000 pounds to be delivered by SunOpta to Dakota Style between
November 1, 2015, and October 31, 2016.
On May
2, 2016, SunOpta notified Dakota Style that it was
voluntarily recalling some of its sunflower products due to
the potential presence of Listeria. SunOpta advised that the
affected products were processed at its facility between
February 1, 2016, and February 19, 2016. SunOpta informed
Dakota Style that it delivered approximately 88, 000 pounds
of sunflower kernels that were subject to the recall between
February 8, 2016, and March 14, 2016. On May 18, 2016,
SunOpta reported to Dakota Style that it was expanding its
recall of roasted sunflower kernels that were processed
between February 20, 2016, and April 20, 2016. Finally, on
May 31, 2016, SunOpta notified Dakota Style that it would be
further expanding its recall to all sunflower products that
were processed between May 31, 2015, and January 31, 2016, at
SunOpta's facility in Crookston, Minnesota. For each
recall, SunOpta instructed Dakota Style to "immediately
examine your inventory and quarantine any product subject to
this recall." Compl. ¶ 14. SunOpta further advised
that Dakota Style could "either destroy the affected
product or return the recalled product." Id.
ANALYSIS
1.
Standard of Review
"In
deciding a motion to dismiss under Rule 12(b)(6), a court
assumes all facts in the complaint to be true and construes
all reasonable inferences most favorably to the
complainant." U.S. ex rel. Ravnor v. Nat'l Rural
Utilities Co-op. Fin., Corp., 690 F.3d 951, 955 (8th
Cir. 2012). "To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to
'state a claim to relief that is plausible on its
face.' " Mountain Home Flight Serv., Inc. v.
Baxter Cty., Ark., 758 F.3d 1038, 1042 (8th Cir. 2014)
(quotins Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007)). "A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged." Id. (quoting
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556
(2007)). "Threadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not
suffice." U.S. ex rel. Ravnor v. Nat'l Rural
Utilities Co-op. Fin., Corp., 690 F.3d 951, 955 (8th
Cir. 2012). "[A]lthough a complaint need not contain
'detailed factual allegations, ' it must contain
facts with enough specificity 'to raise a right to relief
above the speculative level.' " Id.
2.
South Dakota Law Governs Substantive Issues
Subject
matter jurisdiction is established by diversity of
citizenship in this case. "It is, of course,
well-settled that in a suit based on diversity of citizenship
jurisdiction the federal courts apply federal law as to
matters of procedure but the substantive law of the relevant
state." Jacobs ex rel. Estate of Jacobs v.
Evangelical Lutheran Good Samaritan Soc, 849 F.Supp.2d
893, 896-97 (D.S.D. 2012) (citing Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 78 (1938)). "In a
choice-of-law analysis for a diversity action brought in
federal district court, the choice-of-law rules are
substantive for Erie purposes, and the choice-of-law
rules of the forum state are applied to determine the
litigating parties' rights." Id. The forum
state is "the state in which a lawsuit is filed."
FORUM STATE, Black's Law Dictionary (10th ed. 2014).
Dakota Style initially filed its claim with the Third
Judicial Circuit of South Dakota. SDCL § 53-1-4 states:
"A contract is to be interpreted according to the law
and usage of the place where it is to be performed, or, if it
does not indicate a place of performance, according to the
law and usage of the place where it is made." The
complaint asserts "SunOpta contracted with Dakota Style
for the sale of in-shell sunflower seeds and sunflower
kernels, and prepared said products for delivery to Dakota
Style's packaging facility in Clark County, South
Dakota." Compl. ¶ 4. The place of performance for
each sales contract was at Dakota Style's packaging
facility in South Dakota. Therefore, South Dakota law governs
the substantive issues in this case.
3.
UCC Governs the Sales Contracts between Dakota Style and
SunOpta
The
first question before the Court is whether the transactions
between Dakota Style and SunOpta fall within the scope of the
Uniform Commercial Code ("UCC"). "In order for
the UCC to govern the transaction, the sale must be for the
sale of goods." City of Lennox v. Mitek Indus.,
Inc., 519 N.W.2d 330, 332 (S.D. 1994). SDCL §
57A-2-106(1) states:
In this chapter unless the context otherwise requires
"contract" and "agreement" are limited to
those relating to the present or future sale of goods.
"Contract for sale" includes both a present sale of
goods and a contract to sell goods at a future time. A
"sale" consists in the passing of title from the
seller to the buyer for a price (§ 57A-2-401). A
"present sale" means a sale which is accomplished
by the making of the contract.
The
definition of "goods" includes "growing
crops." SDCL § 57A-2-105. Dakota Style and SunOpta
entered into several "contracts for sale" for the
purpose of selling a bulk amount of sunflower products at a
future date. Therefore, the ...