United States District Court, D. South Dakota, Northern Division
CHARLES B. KORNMANN, UNITED STATES DISTRICT JUDGE.
Style Foods, Inc. ("Dakota Style") filed sued
against SunOpta Grains and Foods, Inc., ("SunOpta")
to recover damages incurred by Dakota Style as a result of
SunOpta's recall of shelled sunflower kernels. SunOpta
voluntarily recalled roasted sunflower kernel products due to
the potential presence of listeria monocytogenes on May 2,
2016, May 18, 2016, and May 31, 2016. The recall ultimately
covered approximately one year's products sold to Dakota
Style.Dakota Style filed claims for strict
products liability, negligence, breach of implied warranties,
breach of express warranties, breach of contract, and
declaratory judgment in state court. On August 12, 2016
SunOpta removed the case to federal court and on December 13,
2016 this court dismissed Dakota Style's claims for
strict products liability, negligence, and declaratory
judgment. SunOpta filed an answer to plaintiffs complaint,
which included counterclaims for breach of sales contract,
breach of contract, unjust enrichment, conversion, promissory
estoppel, and fraud-related to plaintiffs alleged failure to
pay its outstanding balance with SunOpta or verify that
product for which plaintiff was reimbursed by SunOpta was
subject to recall.
1, 2018, plaintiff filed a motion for partial summary
judgment and defendant filed a motion for summary judgment.
Plaintiff requests summary judgment for breach of contract
and breach of implied and express warranties and requests
that SunOpta's counterclaims be dismissed. SunOpta
objects to plaintiff's request, arguing, inter
alia, that Dakota Style has sustained no damages as the
majority of product was sold to the end consumer and paid for
by Dakota Style's customers, that the bulk of product
delivered to Dakota Style was not contaminated by listeria
monocytogenes, and that there is a factual dispute as to
whether product specifications were included in the
parties' contracts and whether SunOpta knew that Dakota
Style used its sunflower kernels for human consumption.
summary judgment on Dakota Style's claim for
consequential damages, Dakota Style's outstanding balance
to SunOpta, the purchase price of kernel product not covered
by the recall, and for the purchase price of product covered
by the recall which SunOpta alleges Dakota Style already
sold. Dakota Style objects to defendant's request,
arguing, inter alia, that Dakota Style is a
third-party beneficiary of SunOpta's insurance contract,
that limiting damages to the purchase price is
unconscionable, that Dakota Style was forced to reimburse
merchants for the defective products, and that Dakota Style
is entitled to set-off for its outstanding balance.
parties request oral argument on their summary judgment
motions. Because the court is able to resolve the pending
motions for summary judgment without oral argument, the
requests for oral argument should be denied.
Standard of Review
purpose of summary judgment is to determine whether there is
a "genuine issue for trial" with regard to a claim
or defense or "part of each claim or defense."
Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986); Fed.R.Civ.P. 56(a).
Summary judgment should be granted only where there is
"no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a). If facts are disputed, "[o]nly
disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of
summary judgment." Anderson v. Liberty Lobby.
Inc., 477 U.S. 242, 248 (1986). The moving party bears
the burden of showing that the material facts in the case are
undisputed and "inferences to be drawn from the
underlying facts . . . must be viewed in the light most
favorable to the party opposing the motion." Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);
United States v. Diebold. Inc., 369 U.S. 654, 655
(1962) (per curiam). However, a nonmoving party "may not
rest on mere allegations or denials" and "must do
more than show that there is some metaphysical doubt as to
the material facts." Anderson at 256; and
Matsushita at 587. Where "the factual context
renders respondents' claim implausible"-for
instance, "if the claim is one that simply makes no
economic sense"-then "respondents must come forward
with more persuasive evidence to support their claim than
would otherwise be necessary." Matsushita at
587. In sum, an issue of fact is genuine if, based upon the
evidence in the record, a reasonable jury could return a
verdict for the nonmoving party. Anderson at 248.
Breach of Express Warranty
court determined in its previous ruling in this matter that
South Dakota law governs substantive issues and the UCC
governs the sales contracts between Dakota Style and SunOpta.
Dakota Style Foods. Inc. v. SunOpta Grains and Foods.
Inc., 2016 WL 7243534, *2 (D.S.D. 2016). Dakota Style
requests that this court grant its motion for summary
judgment as to breach of express warranty. In order to
recover money damages for a breach of express warranty in
South Dakota, Dakota Style must prove the following elements:
(1) an affirmation of fact or promise made by the seller to
the buyer relating to the goods;.
(2) such affirmation of fact or promise became a part of the
basis of the bargain;
(3) that the injured party, in making the purchase, relied on
the representations, affirmations of fact or promises;
(4) that the goods sold by the seller failed to comply with
the promises or affirmations of fact made by the seller;
(5) that the buyer, because of such failure, was financially
(6) that such failure to comply was a proximate cause of the
financial injury suffered by the buyer.
Swenson v. Chevron Chemical Co., 234 N.W.2d 38, 42
(S.D. 1975) (internal citations omitted). SDCL §
57A-2-313(1)(b) provides that "[a]ny description of the
goods which is made part of the basis of the bargain creates
an express warranty that the goods shall conform to the
description." Further, "[i]t is not necessary to
the creation of an express warranty that the seller use
formal words such as 'warrant' or 'guarantee'
or that he have a specific intention to make a
warranty." SDCL § 57A-2-313(2). As this court has
previously noted, "[p]urchase agreements may incorporate
by reference another document containing technical
specifications for the product, and this will likely create
an express warranty by description." James River
Equip. Co. v. Beadle Cry. Equip., Inc., 646
N.W.2d 265, 269 (S.D. 2002); Dakota Style Foods. Inc. v.
SunOpta Grains and Foods. Inc. at *5. The
contracts between Dakota Style and SunOpta specifically state
"[a]s per attached product specifications." The
product specification states that "[t]he product shall
be manufactured in accordance with Good Manufacturing
Practice 21 CFR, Part #110"; "shall conform in
every respect with the provisions of the Federal Food, Drug
and Cosmetic Act, as amended, and to all applicable State and
Local Regulations"; and "shall meet the Kashruth
requirements of the Union of Orthodox Jewish Congregations of
America." The product specifications provide nutritional
data, a flavor profile, and indicate that the sunflower
kernels are "[n]utritionally-dense whole food."
argues that the product specifications that Dakota Style
references do not create an express warranty for two reasons:
(1) that the product specifications were not included in the
contracts with Dakota Style; and (2) that the product
specifications disclaim any warranty through inclusion of the
following statements: "This information is presented in
good faith, and great care was used in its preparation.
However, no warranty, guarantee, or freedom from patent
infringement is implied or intended. This information is
offered solely for your consideration and verification."
Dakota Style, as the party having moved for summary judgment
for breach of express warranty, has the burden of proving, by
a preponderance of the evidence, that the product
specifications were part of the parties' agreements.
Dakota Foundry, Inc. v. Tromley Indus. Holdings.
Inc., 737 F.3d 492, 495 (8th Cir. 2013).
The Product Specifications Were Included in the Contracts
with Dakota Style
clear to this court, given the statement in the contracts
"[a]s per attached product specifications," that
product specifications were part of the contracts. This is
consistent with the fact that virtually no description of the
products Dakota Style purchased are included in the sales
contracts. SunOpta, however, argues that there is a factual
issue as to whether the product specifications were provided
to Dakota Style as part of the contract, stating that
Michael Todd, the SunOpta employee who negotiated the
sunflower contracts with Dakota Style, testified he did not
believe he included the product specifications when he sent
contracts to Dakota Style, and even stated he looked back at
emails to see if he had, and no emails substantiated that
product specifications were sent with the contracts.
Todd also stated via affidavit that "SunOpta does not
make its product specifications generally available to the
public." The contracts themselves, two of which were
finalized just over a year before the initiation of this
dispute, are hand signed and include a provision requesting
that the signed copy be returned to SunOpta. SunOpta is
uniquely in possession and control of these documents; yet,
it has failed to submit any evidence that other
specifications were provided to Dakota Style, that Dakota
Style was provided or may have otherwise obtained the
specifications exclusive of the contract negotiations, or
that its files in fact contain no product specifications and
the reference included in the contracts was in error. It is
immaterial that Dakota Style's Vice President, Riley
Dandurand, was unable, at deposition, to remember the exact
date that the product specifications were received when he
was nonetheless able to specify that "when we would
enter a contract we would get [the product specifications]
from SunOpta's . . . QA or quality control
must do more than "show there is some metaphysical
doubt" as to the incorporation of product specifications
in its contracts with Dakota Style. Matsushita at
587. Moreover, because this court finds that it is
implausible that product specifications would not have been
included in the contracts, that Dakota Style would have had
such product specifications absent their inclusion in the
contracts, and that SunOpta would not be able to dispute the
specifications Dakota Style provides, SunOpta must "come
forward with more persuasive evidence to support [its] claim
than would otherwise be necessary." Id. No
reasonable jury could return a verdict for SunOpta, based on
the evidence that it has provided, that the product
specifications provided by Dakota Style were not included in
the contracts. As such, this matter is not a genuine issue of
fact that must be preserved for trial. This court therefore
finds that the product specifications serve as an express
warranty pursuant to SDCL § 57A-2- 313(1)(b).
SunOpta's Purported Disclaimer of Express Warranty is
claims that a statement included on its product
specifications disclaims any warranty that might arise as a
result of those specifications. SDCL § 57A-2-316(1)
Words or conduct relevant to the creation of an express
warranty and words or conduct tending to negate or limit
warranty shall be construed wherever reasonable as consistent
with each other; but subject to the provisions of this
chapter on parol or extrinsic evidence (§ 57A-2-202)
negation or ...