Court Opinion

ID: 814880
Source: CourtListenerOpinion
Date Created: 2013-01-07 16:15:43+00
Date Added: 2024-06-11T18:00:53.520229
License: Public Domain

United States Court of Appeals
          For the Eighth Circuit
      ___________________________

              No. 12-1731
      ___________________________

       General Mills Operations, LLC

     lllllllllllllllllllll Plaintiff - Appellee

                         v.

        Five Star Custom Foods, Ltd.

    lllllllllllllllllllll Defendant - Appellant

       Westland Meat Company, Inc.,
 also known as Hallmark Meat Packing Co.;
        Hallmark Meat Packing, Inc.

   lllllllllllllllllllllThird Party Defendants
      ___________________________

              No. 12-1826
      ___________________________

       General Mills Operations, LLC

     lllllllllllllllllllll Plaintiff - Appellant

                         v.

        Five Star Custom Foods, Ltd.

    lllllllllllllllllllll Defendant - Appellee
    Westland Meat Company, Inc., also known as Hallmark Meat Packing Co.;
                       Hallmark Meat Packing, Inc.

                       lllllllllllllllllllllThird Party Defendants
                                        ____________

                     Appeal from United States District Court
                    for the District of Minnesota - Minneapolis
                                   ____________

                           Submitted: November 14, 2012
                              Filed: January 7, 2013
                                  ____________

Before MURPHY, BENTON, and SHEPHERD, Circuit Judges.
                          ____________

BENTON, Circuit Judge.

       General Mills Operations, LLC purchased meatballs from Five Star Custom
Foods, Ltd. After delivery and use of the meatballs, Five Star’s supplier of ground
beef issued a recall. Accordingly, General Mills destroyed its products containing the
meatballs. It sued Five Star for breach of contract and breach of warranties. The
district court1 granted summary judgment to General Mills on the breach-of-contract
claim, and to Five Star on the breach-of-warranty claims. The parties cross-appeal.
Five Star also challenges the award of attorneys’ fees to General Mills. Having
jurisdiction under 28 U.S.C. § 1291, this court affirms the grant of summary judgment
to General Mills and the award of attorneys’ fees. General Mills’ cross-appeal is
dismissed as moot.

      1
      The Honorable Richard H. Kyle, United States District Judge for the District
of Minnesota.
                                          -2-
                                         I.

      Five Star is a manufacturer and supplier of food products. General Mills is a
manufacturer of food products that are sold to retail consumers. For over ten years,
Five Star sold products to General Mills, including meatballs for Progresso soups.

       This case involves two orders for meatballs by General Mills in September
2007. The orders were subject to General Mills’ Terms and Conditions (printed on
the reverse of the purchase order) and General Mills’ Ingredient Specifications. The
meatballs were delivered on September 29 and October 5, 2007, and used in Progresso
soups.

       Five Star purchased some of the beef used to manufacture the meatballs from
Westland Meat Company, Inc. In February 2008, Westland voluntarily recalled over
143 million pounds of beef, including some used in General Mills’ meatballs. Video
footage from the Humane Society allegedly showed Westland employees improperly
handling cattle designated for slaughter. There were no reports of illness from the
beef, but after discussions with the United States Department of Agriculture and the
Food Safety Inspection Service, Westland issued the voluntary recall. The USDA
issued a Product Recall Recommendation describing the circumstances of the recall,
issued a Recall Release to the public, and held a Technical Briefing for members of
the industry. The recall reached only the retail level, meaning that end consumers
were not required to destroy their products.

       Per instructions from the USDA, Five Star notified its customers, providing
instructions on destroying affected products. General Mills complied, destroying all
of the affected soups. In 2010, General Mills sued Five Star for negligence, breach
of contract, breach of express warranties, and breach of the implied warranties of
merchantability and fitness for a particular purpose. General Mills voluntarily
dismissed the negligence claim. The parties cross-moved for summary judgment. The

                                        -3-
district court granted summary judgment to General Mills on the breach-of-contract
claim, and to Five Star on the breach-of-warranty claims. General Mills Operations,
LLC v. Five Star Custom Foods, Ltd., 789 F. Supp. 2d 1148, 1160 (D. Minn. 2011).
The parties stipulated to $1,473,564 in damages and $150,000 in attorneys’ fees.

                                            II.

      Five Star argues that the district court should not have granted summary
judgment to General Mills on the breach-of-contract claim. This court reviews de
novo a grant of summary judgment, construing all facts and making all reasonable
inferences favorable to the nonmovant. Cent. Platte Natural Res. Dist. v. U.S. Dep’t
of Agric., 643 F.3d 1142, 1146 (8th Cir. 2011). “The court shall grant summary
judgment if the movant shows that 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).

       A successful breach-of-contract claim under Minnesota law has four elements:
“(1) formation of a contract; (2) performance by plaintiff of any conditions precedent;
(3) a material breach of the contract by defendant; and (4) damages.” Parkhill v.
Minn. Mut. Life Ins. Co., 174 F. Supp. 2d 951, 961 (D. Minn. 2000). At issue here
is the third element – whether Five Star materially breached the contract. Because
General Mills accepted the meatballs, it has the burden to establish a breach. Minn.
Stat. § 336.2-607(4).

         Several contract provisions are at issue in this case. The Terms and Conditions
state:

         5. GOODS: The Goods shall conform in all respects to the description
         on the face of this Order, and/or [General Mills’] then current
         specifications furnished to [Five Star]. The Goods, including, without
         limitation, tools and equipment shall be new, of first class commercial
         type and of the latest approved design, unless otherwise specified on the

                                           -4-
      face of this Order. Workmanship and materials shall be of the best
      quality and free from defects that might render the Goods unsuitable or
      inefficient for the purpose for which it is to be used. [Five Star] warrants
      and guarantees its Goods for the period of time normally specified for
      the type of Goods involved. During the warranty period, all Goods or
      parts disclosing defects in design, material, and/or workmanship shall be
      replaced and delivered to the job site by [Five Star] without cost or delay
      to [General Mills]. This warranty is in addition to and not in lieu of, any
      other warranties or guarantees made by [Five Star] or created or implied
      as a matter of law. The above warranties, as well as all other warranties
      contained herein, including, without limitation, the warranties in
      paragraphs 6, 8, 9, 10, 12, 18, 20, 21, 25 and 26 shall collectively be
      defined herein as “Warranties.”

      ....

      25. COMPLIANCE WITH LAW: [Five Star]’s performance under this
      Order shall be in compliance with all applicable federal, state, and local
      laws, ordinances, regulations, rules and statutes (“Laws”).

The Ingredient Specifications include:

      REGULATORY

      ....

      This ingredient shall be of food grade and in all respects, including
      labeling in compliance with the Meat Inspection Act of 1906 as
      amended.

      ....

      Stunning, slaughter, and processing practices must meet or exceed the
      requirements established by the USDA and the World Animal Health
      Organization for safe trade in animal products.

                                          -5-
       These regulations require the meatballs to be of food grade, and for the beef to
be procured pursuant to USDA regulations. Five Star contends, however, that there
is no admissible evidence establishing the alleged breach of those duties. Even
viewing the record most favorably to the nonmovant, the court should not consider
statements that are inadmissible hearsay. Novotny v. Tripp County, 664 F.3d 1173,
1178 (8th Cir. 2011); Fed. R. Civ. P. 56(c)(2). Five Star argues that General Mills
relies exclusively on the Recall Release issued by the USDA Public Affairs Office.
That release stated: “all beef product produced during the period of time for which
evidence indicates such activity occurred had been determined by FSIS to be unfit for
human consumption, and is, therefore, adulterated.”

       Five Star objects that the press release is inadmissible hearsay. General Mills
responds that it is not hearsay because it was not offered to prove the truth of the
matter asserted. See Fed. R. Evid. 801(c)(2); see also Stevens v. Moore Bus. Forms,
Inc., 18 F.3d 1443, 1449 (9th Cir. 1994) (press release admissible to prove
knowledge), citing Kunz v. Utah Power & Light Co., 913 F.2d 599, 605 (9th Cir.
1990) (press release admissible to prove notice). General Mills asserts that the press
release is offered to show why it destroyed the beef, not the truth of the matter
asserted – that the Westland beef was actually adulterated. There must be some
evidence, however, demonstrating that the beef did not comply with the contract. As
to that, the press release is hearsay.

         Even so, the press release falls within the public-records hearsay exception.
The exception provides that a “record or statement of a public office” is not hearsay
if it sets out, in a civil case, “factual findings from a legally authorized investigation.”
Fed. R. Evid. 803(8)(A)(iii). The cases Five Star cites where press releases were
inadmissible hearsay do not foreclose admissibility as a public record. In fact, Five
Star’s only published opinion supports this point. See Zeigler v. Fisher-Price, Inc.,
302 F. Supp. 2d 999, 1021 n.10 (N.D. Iowa 2004). Five Star cites Zeigler for the
proposition that “a press release regarding a product recall was hearsay unless used

                                            -6-
as an admission by party-opponent under Fed. R. Evid. 801(d)(2).” This ignores the
court’s statement, “To the extent the press release can be construed as stating
conclusions or opinions of the CSPC, it also was admissible under Federal Rule of
Evidence 803(8)(c).” Id., citing Patterson v. Cent. Mills, Inc., 64 F. Appx. 457, 462
(6th Cir. 2003).2

       Many press releases are certainly hearsay. Rule 803(8), however, is construed
broadly. Patterson, 64 F. Appx. at 462, citing Beech Aerospace Servs., Inc. v.
Rainey, 488 U.S. 153, 162 (1988). In Patterson, the Sixth Circuit addressed
statements in “press releases and other publications” of the Consumer Products Safety
Commission about defective labeling of t-shirts. Id. at 459, 462. The district court
required the personal statements of Board members to be redacted (e.g., “as a mother,
I hope parents will wisely choose the safer alternative of tight-fitting cotton
sleepwear”), but allowed other statements of facts, opinions, and conclusions of the
agency. Id. at 462. The Sixth Circuit affirmed this approach. Id. Similarly here, the
press release sets out findings from an investigation pursuant to authority granted by

      2
       None of Five Star’s other cases discuss Rule 803(8), nor discuss in detail the
admissibility of press releases. See Smith v. Pfizer, Inc., No. 3:05-0444, 2010 WL
1754443, at *1 n.1 (M.D. Tenn. Apr. 30, 2010) (ruling that the “government’s press
releases” would be inadmissible hearsay, but not describing the contents of the
releases, the purpose for which they were offered, or the grounds on which they were
excluded); Sullivan v. Chesapeake La., L.P., No. 09-0579, 2009 WL 3735798, at *2
(W.D. La. Nov. 6, 2009) (noting that “unauthenticated press releases” are inadmissible
hearsay, but not mentioning authenticated press releases or releases issued as a result
of a government investigation); Century Colo. Springs P’ship v. Falcon Broadband,
Inc., No. 05-cv-02295-REB-MJW, 2006 WL 521791, at *3 & n.3 (D. Colo. Mar. 2,
2006) (ruling that a press release, issued by a business, was hearsay, while denying
only the argument that the release was an admission by a party opponent); Mwani v.
Bin Ladin, No. 99-125 (CKK), 2002 U.S. Dist. LEXIS 27826, at *22-23 (D.D.C.
Sept. 30, 2002) (ruling that press releases from the State Department and the President
were hearsay, but not discussing the releases’ contents or Rule 803(8)); In re
Draganoff’s Estate, 252 N.Y.S.2d 104, 108 (N.Y. Sur. Ct. 1964) (stating that a
proffered press release was hearsay without discussing its contents).
                                         -7-
law, and is therefore admissible. See also Byrd v. ABC Prof’l Tree Serv., Inc., 832
F. Supp. 2d 917, 921 n.3 (M.D. Tenn. 2011).

       Further, as the district court noted, additional evidence supported the conclusion
that the meat was procured in violation of regulations and that it was adulterated. See
General Mills, 789 F. Supp. 2d at 1157 n.12. On the same day the press release
issued, the USDA conducted a Technical Briefing about the recall. A transcript of this
briefing is in the record. The Undersecretary for Food Safety delivered, inter alia, a
summary of the investigation:

             First of all, I do want to remind everyone that this is still an
      ongoing investigation and therefore we may not be able to answer all of
      your questions today. As a result of the USDA’s ongoing investigation,
      the FSIS, the Food Safety and Inspection Service, just recently obtained
      evidence that [Westland] had a practice that allowed them to
      occasionally slaughter cattle that had already passed ante mortem
      inspection but had become nonambulatory prior to entering the slaughter
      operation without notifying our public health veterinarian. This practice
      is not compliant with FSIS regulations.

            Therefore, FSIS determined that their products were unfit for
      human food because the cattle did not receive complete and proper
      inspection.

       This illustrates the same point as the press release. Although Five Star attacks
the Technical Briefing as also hearsay, it similarly falls under the exception in Rule
803(8) for the reasons explained. Five Star also asserts that both statements contradict
the Product Recall Recommendation. It used qualifiers like “allegedly” and “may be
adulterated” to describe Westland’s situation. In any event, all three documents show
that FSIS had evidence of practices that violated regulations. Then, as a result of that
ongoing investigation, Westland agreed to recall the beef.

                                          -8-
       Further, as noted by the district court, Five Star admitted that its understanding
was that the beef “had been recalled by the USDA because it didn’t meet the USDA’s
regulations.” This admission is in a deposition of Five Star’s corporate designee. See
Fed. R. Civ. P. 30(b)(6). Five Star contends that its designee is not competent to
testify about the actual reasons for the recall, because he had no personal knowledge
of the events at Westland. See Fed. R. Evid. 602. The designee certainly is
competent to testify, however, as to Five Star’s understanding – that is the precise
function of the corporate designee. This admission illustrates that all parties had the
same understanding: the recall issued because Westland did not comply with USDA
regulations. The admission is particularly relevant because Five Star in turn directed
General Mills (albeit at the behest of the USDA) to destroy the meatballs.

       Sufficient, admissible evidence established that the beef was procured in
violation of USDA regulations, and that it was therefore deemed adulterated. Five
Star breached the contract. Five Star correctly notes that contract terms are not read
in isolation, rather the contract is read as a whole. Halla Nursery, Inc. v. City of
Chanhassen, 781 N.W.2d 880, 884 (Minn. 2010). They argue that the regulatory
section of the Ingredient Specifications, read as a whole, does not establish liability
for Five Star, because Westland was an approved facility with proper procedures in
place. Given their plain meaning, the contract terms do not support this argument.
See Brookfield Trade Ctr. v. County of Ramsey, 584 N.W.2d 390, 394 (Minn. 1998)
(“In interpreting a contract, the language is to be given its plain and ordinary
meaning.”). The terms require “[s]tunning, slaughter, and processing practices [that]
meet or exceed the requirements established by the USDA.”

        Five Star contends that General Mills must prove that the specific product
received was adulterated, or procured in a noncompliant manner. This argument is
without merit. The cases cited by Five Star support the position that receiving a good
that is not in compliance with the contract results in a breach. Coghlan v. Wellcraft
Marine Corp., 240 F.3d 449, 451 (5th Cir. 2001) (boat hull manufactured of a less

                                          -9-
durable material than specified in the contract); US Salt, Inc. v. Broken Arrow, Inc.,
No. 07-1988 (RHK/JSM), 2008 WL 398818, at *4 (D. Minn. Feb. 11, 2008) (salt did
not meet specifications in contract for washing, drying, and color). All of the recalled
beef was deemed unfit for human food – that is why the recall issued.3 By the terms
of the contract, General Mills ordered meatballs of food grade for use in food
products, which is not what it received.

      Five Star also argues that this event did not trigger the contract’s recall
provision, and thus there is no breach of contract. Paragraph 27 says:

      27. RECALL: [General Mills] shall have the sole right, exercisable in
      its discretion, to initiate and direct the content and scope of a recall,
      market withdrawal, stock recovery, product correction and/or advisory
      safety communication (any one or more referred to as “Recall Action”)
      regarding the Goods. At [General Mills]’s option, [General Mills] may
      direct [Five Star] to, and upon such direction [Five Star] shall, conduct
      such Recall Action. [General Mills] shall determine in its discretion the
      manner, text and timing of any publicity to be given such matters in the
      event a Recall Action is initiated or directed by [General Mills], [Five
      Star] agrees to fully cooperate and take all such steps as are reasonably
      requested to implement the Recall Action in a timely and complete
      manner. Any and all action to be taken in connection with a Recall
      Action shall be in accordance with FDA policies and other Laws. [Five
      Star] shall bear the costs associated with any Recall Action which results

      3
       This case is distinguishable from Land O’Lakes Creameries, Inc. v. Commodity
Credit Corp., 185 F. Supp. 412 (D. Minn. 1960), where the issue was how much
insect infestation in barrels of dried milk was required to prove that the whole
shipment was unfit for human consumption. Here, all of the meat from Westland was
deemed to be unfit for human consumption.
                                         -10-
      from [Five Star]’s negligence or willful misconduct or that the Goods do
      not comply with [Five Star]’s Warranties under this Order.

       Where a contract provides a specific basis for recovery, it excludes additional
theories of recovery. See Art Goebel, Inc. v. N. Suburban Agencies, Inc., 567
N.W.2d 511, 515-16 (Minn. 1997). Because there was no negligence or willful
misconduct by Five Star (and the breach of warranty claims were dismissed by the
district court), Five Star contends that it is not liable. However, as the court in Art
Goebel explained, the contract terms must be read in the context of the entire
agreement. Art Goebel, 567 N.W.2d at 516; see also Halla Nursery, 781 N.W.2d at
884. To make a remedy exclusive, the contract “must clearly indicate the intent of the
parties to make the stipulated remedies exclusive.” Cont’l Grain Co. v. Fegles
Constr. Co., 480 F.2d 793, 796 (8th Cir. 1973), citing Indep. Consol. Sch. Dist. No.
24 v. Carlstrom, 151 N.W.2d 784, 786-87 (Minn. 1967). Several other provisions in
the contract refer to other remedies from a recall. Paragraph 10, for example, states,
“[Five Star] shall promptly pay or reimburse [General Mills] for all costs and damages
(including lost profits) incurred by [General Mills], including, without limitation,
costs for . . . recall.” Paragraph 27 is not the exclusive recall remedy. Further, even
considering just the language of Paragraph 27, it contemplates a recall issued by
General Mills, not the situation here.

      The district court properly granted summary judgment to General Mills on the
breach-of-contract claim.

                                         III.

      The district court granted summary judgment to Five Star on the breach-of-
warranty claims, ruling that General Mills needed to show an actual defect to prove
any breach of warranty. General Mills, 789 F. Supp. 2d at 1155.

                                         -11-
       The parties stipulated that $1,473,564 is the amount of damages in this case.
At oral argument, both parties confirmed that the stipulated damages would be
awarded for either breach of contract, breach of warranty, or both. Having found that
Five Star breached the contract, this court need not address whether it also breached
warranties. General Mills’ cross-appeal is therefore dismissed as moot. See
Beachwalk Homeowners Ass’n v. Gen. Star Indem. Co., 76 F. Appx. 494, 495 (4th
Cir. 2003); Laitram Corp. v. NEC Corp., 115 F.3d 947, 955-56 (Fed. Cir. 1997);
Abraham v. Pekarski, 728 F.2d 167, 169 (3d Cir. 1984); Univ. Computing Co. v.
Lykes-Youngstown Corp., 504 F.2d 518, 548 n.44 (5th Cir. 1974); cf. Minnesota ex
rel. N. Pac. Ctr., Inc. v. BNSF Ry. Co., 686 F.3d 567, 574-75 (8th Cir. 2012).

       Five Star argues that the district court should have treated the breach-of-
contract claims identically to the breach-of-warranty claims because the terms of the
contract are, in essence, express warranties. As noted, the district court ruled that
breach-of-warranty claims require the plaintiff to prove an actual defect in the product.
This court makes no statement on the accuracy of that ruling, although the district
court correctly said that “evidence of a defect is not an essential element of a breach-
of-contract claim.” General Mills, 789 F. Supp. 2d at 1155; see Parkhill, 174 F.
Supp. 2d at 961. Therefore, the district court properly analyzed these claims
separately.

                                          IV.

       Five Star asserts that the district court erred by awarding attorneys’ fees to
General Mills. This court reviews de novo the legal issues related to an award of
attorneys’ fees, and reviews the actual award for abuse of discretion. Pendleton v.
QuikTrip Corp., 567 F.3d 988, 994 (8th Cir. 2009). In order to award attorneys’ fees,
there must be a contractual agreement discussing the fees. Garrick v. Northland Ins.
Co., 469 N.W.2d 709, 714 (Minn. 1991). The parties stipulated to $150,000 in
attorneys’ fees.

                                          -12-
      The clause providing for attorneys’ fees is:4

      10. AUDIT/INSPECTION:
      ....
      (c)[Five Star] shall promptly pay or reimburse [General Mills] for all
      costs and damages (including lost profits) incurred by [General Mills],
      including, without limitation, costs for packaging, handling,
      transportation, recall, destruction, production, and other administrative
      costs including legal fees, which arise or result from the delivery of
      Goods by [Five Star] that is not in accordance with the Warranties or any
      other term in this Order.

       Five Star argues on appeal that the doctrine of ejusdem generis applies, so that
“legal fees” relates only to the administration of the recall. This argument was not
raised in the district court, and will not be considered for the first time on appeal.
Lopez v. Tyson Foods, Inc., 690 F.3d 869, 875 (8th Cir. 2012). As the district court
noted: “Five Star does not dispute that the contract provides for attorneys fees; it
merely argues that General Mills has no right to such fees because it cannot show that
there was any breach.” General Mills, 789 F. Supp. 2d at 1160. The district court
properly found that Five Star breached the contract, and appropriately awarded
attorneys fees to General Mills.

                                    *******

      The judgment is affirmed. General Mills’ cross-appeal is dismissed as moot.
                      ______________________________

      4
       General Mills argues that the indemnification clause also provides for
attorneys’ fees, but as this case does not involve a third-party claim, the
indemnification clause is not triggered.
                                         -13-