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Milnot Holding Corporation v. Thruway Produce, Inc.

United States District Court, W.D. New York

February 11, 2014

MILNOT HOLDING CORPORATION, Plaintiff,
v.
THRUWAY PRODUCE, INC., Defendant. THRUWAY PRODUCE, INC., Third-Party Plaintiff,
v.
R.M. ZINGLER FARMS, LYNOAKEN FARMS, INC., K.M. DAVIES CO., INC., ORCHARD DALE FRUIT FARM, INC. and C.W. COLD STORAGE, INC., Third-Party Defendants.

DECISION AND ORDER

CHARLES J. SIRAGUSA, District Judge.

INTRODUCTION

This is a diversity action for breach of a contract between an apple supplier and a baby food manufacturer. Now before the Court is Plaintiff's motion for partial summary judgment. (Docket No. [#114]). The application is granted.

BACKGROUND

Unless otherwise noted, the following are the undisputed facts of this case viewed in the light most-favorable to defendant Thruway Produce, Inc. At all relevant times, Plaintiff owned Beech-Nut Nutrition Corporation ("Beech-Nut"), which operated a food processing plant in Canajoharie, New York. The Beech-Nut plant produced "an assortment of baby and toddler food products." Complaint [#1] at ¶ 8. In 2005, Plaintiff and Defendant entered into a contract whereby Defendant agreed to be the exclusive supplier of apples to Plaintiff, "for the 2005/2006 season." Id. at ¶ 9. Defendant purchased the apples from various growers, stored the apples at various storage facilities, and provided the apples to Plaintiff as needed.

It is undisputed that Defendant knew that Plaintiff would use the apples to make baby food and related food products. The parties' contract required Defendant to provide apples that were free of the rodenticides Brodifacoum and Bromadiolone, which are commonly found in baits used to kill rats and mice.[1] However, on four occasions in 2006, Plaintiff found Brodifacoum and/or Bromadiolone mixed in with apples that had been supplied by Defendant. More specifically, Plaintiff discovered rodenticide amongst Defendant's apples on January 23, 2006, January 27, 2006, February 13, 2006 and March 20, 2006.[2]

On January 23, 2006, as a load of apples was moving along Plaintiff's production line, an employee discovered several rodenticide pellets, [3] some of which were embedded in apples and some of which had fallen into the processing machinery. Plaintiff notified Defendant of the incident, and Defendant responded that one of its suppliers, Orchard Dale, used rodenticide pellets similar to what was found.[4] Plaintiff determined, though, that the apples being processed at the time of the discovery were not Orchard Dale's. Instead, it appears that the apples being processed came from three of Defendant's suppliers: C.W. Cold Storage ("C.W."), Lynoaken Farms ("Lynoaken") and K.M. Davies ("Davies"). Nevertheless, Plaintiff returned all of Orchard Dale's apples to Defendant, along with the remainder of the apples that were being processed at the time of the rodenticide discovery.

On January 27, 2006, as apples were being processed, one of Plaintiff's employees discovered two rodenticide pellets in the processing machinery. The apples that were being processed at that time came from Lynoaken and Davies. Plaintiff notified Defendant of the discovery the same day, and Defendant agreed to take back the remainder of the lot of apples being processed at the time.

On February 13, 2006, Plaintiff contacted an Investigator with the U.S. Food and Drug Administration's ("FDA") Office of Criminal Investigation about the two aforementioned incidents. Plaintiff indicated that it was unsure whether the rodenticide came from Defendant's suppliers or from a person inside the plant.[5] The FDA Investigator made an appointment to meet with Plaintiff on February 21, 2006. Later that same day, one of Plaintiff's forklift drivers was dumping a load of apples into the processing hopper when he observed foreign objects mixed in with the apples. Upon inspection, Plaintiff found four rectangular plastic containers, with holes cut in them, which appeared to be homemade rodent bait stations. The boxes contained a bluish-green rodenticide material in both solid and granular form. The same material was discovered adhering to the apples that had just been dumped into the hopper, and to the bin from which the apples had been dumped. Plaintiff determined that the bin from which the apples had come belonged to a grower named Zingler ("Zingler"), and that the apples had been previously stored at C.W. Cold Storage. Plaintiff notified Defendant of the incident the same day. Plaintiff also recontacted the FDA Investigator and informed him about the latest incident.

On or about February 16, 2006, Defendant notified Plaintiff that C.W. Cold Storage admitted using homemade plastic rodent traps like the ones discovered.

On February 21, 2006, Plaintiff met with the FDA Investigator, and provided him with reports and photographs concerning the three incidents of contamination.

On February 22, 2006, Defendant notified Plaintiff that it had found a rodenticide pellet in one of Orchard Dale's bins of apples.

On February 23, 2006, the Canojoharie Police Department informed Plaintiff that it had received a copy of a letter that had been sent to Ag. & Markets, which alleged that Defendant was permitting contaminants to enter into the food product. The following day, Plaintiff met with representatives of the Canojoharie Police and Ag. & Markets, and provided them with copies of reports relating to the rodenticide incidents. On February 27, 2006, an FDA Investigator met with Plaintiff to discuss the incidents, review the evidence and tour the processing plant. The following day, February 28, 2006, FDA Investigators returned and conducted additional investigation into the three rodenticide incidents.

Between March 1, 2006 and March 20, 2006, Plaintiff met with FDA investigators on approximately eleven occasions, to discuss the three rodenticide incidents and Plaintiff's subsequent handling of the food products ...


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