Court Opinion

ID: 4383906
Source: CourtListenerOpinion
Date Created: 2019-04-03 21:00:12.624743+00
Date Added: 2024-06-11T14:50:13.326253
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 18-1818

      STARR SURPLUS LINES INSURANCE COMPANY, as Subrogee to
                    ADVANCEPIERRE FOODS, INC.,

                      Plaintiff, Appellant,

                                v.

                      MOUNTAIRE FARMS INC.,

                       Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF MAINE

          [Hon. Jon D. Levy, Chief U.S. District Judge]

                              Before

                    Lynch, Stahl, and Barron,
                         Circuit Judges.

     Eileen K. Bower, with whom James J. Sanders, Emily A. Golding,
Clyde & Co US LLP, Paul C. Catsos, Elizabeth K. Peck, and Thompson
Bowie & Hatch LLC were on brief, for plaintiff-appellant.
     Kevin King, with whom John J. Deboy, Neil K. Roman, Covington
& Burling LLP, David B. McConnell, Joseph G. Talbot, and Perkins
Thompson PA were on brief, for defendant-appellee.

                          April 3, 2019
            BARRON, Circuit Judge.              This appeal concerns a suit in

the   District   of   Maine    by    the    insurer       of   a   chicken    products

manufacturer to recoup the losses that it paid to the manufacturer

for the losses that the manufacturer incurred when its products

were recalled following a salmonella outbreak.                     Subrogated to the

rights of the manufacturer, the insurer sought damages from the

manufacturer's chicken supplier for claims under Maine law for

breach of warranty and strict product liability.                      In support of

those   claims,       the    insurer's          complaint      alleged       that   the

manufacturer received two truckloads of raw chicken from the

supplier that was contaminated with Salmonella Enteriditis and was

therefore "defective" under Maine law. The supplier filed a motion

to dismiss, which the District Court granted as to all claims.

The District Court did so after ruling that the complaint's

allegations did not suffice to plausibly allege that the raw

chicken that the supplier sent to the manufacturer was "defective."

The   District   Court      also    concluded      that     the    insurer's    strict

liability claim was independently barred by the economic loss

doctrine.   We affirm.

                                           I.

            The insurer is Starr Surplus Lines ("Starr").                     Starr is

subrogated to the rights that its insured, AdvancePierre, had under

a contract with Mountaire Farms ("Mountaire").                     Starr's complaint

alleges the following facts, which we accept as true in reviewing

                                       - 2 -
the grant of a motion to dismiss.                   See Fantini v. Salem State

Coll., 557 F.3d 22, 26 (1st Cir. 2009).

            Mountaire is a regional fresh chicken producer located

in North Carolina.        In December 2014, Mountaire entered into a

contract (the "Contract") with AdvancePierre, which is a national

manufacturer of "value-added proteins and sandwich products to

foodservice,        retail,     schools,         and    convenience       channels."

AdvancePierre's      products      are    sold    under   various      brand    names,

including Barber Foods.

            Mountaire     agreed        under    the   Contract   to    deliver    raw

chicken     parts    to   AdvancePierre's          Barber    Foods     facility     in

Portland, Maine (the "Portland Facility").                    In February 2015,

Mountaire shipped 120,000 pounds of fresh boneless chicken breasts

to the Portland Facility in connection with three separate purchase

orders that AdvancePierre made under the Contract.                     AdvancePierre

logged each purchase order, which was assigned a unique lot number,

into its computer system, along with the supplier information and

the time and date that the products that had been ordered were

received.

            The fresh chicken that AdvancePierre purchased from

Mountaire was "contaminated with Salmonella Enteritidis at the

time of delivery to AdvancePierre."                     AdvancePierre used this

chicken     from    Mountaire      to     produce      value-added     raw     chicken

products,    such    as   frozen    raw     stuffed     chicken   breasts       (e.g.,

                                         - 3 -
"Chicken   Kiev,   Chicken    Cordon       Bleu,   [Chicken        Stuffed   with]

Broccoli Cheese"), at the Portland Facility.

           Between   February        and   June       of   2015,    clusters     of

individuals (initially a total of six) in Minnesota and Wisconsin

became infected with Salmonella Enteritidis.                  These cases were

reported to the federal Food Safety Inspection Service ("FSIS") on

June 24, 2015.

           Through   genetic    testing,        the    FSIS    identified      "PFG

pattern combinations" of the salmonella pathogen in all six of

these patients that were "unique and new to the [Center for Disease

Control ("CDC")] Pulse Net Database."              The FSIS then linked the

unique   PFG   pattern   combinations      to   chicken       products   made   by

AdvancePierre at the Portland Facility.               Later, the FSIS learned

of two additional individuals who had contracted a Salmonella

Enteritidis    infection     after    being     exposed       to    AdvancePierre

products produced at the Portland Facility on the same production

dates as the products linked to the other infected individuals.

           Based on this testing, the FSIS issued a public health

alert on July 1, 2015.       On July 2, 2015, AdvancePierre initiated

a recall with respect to 58,320 pounds of chicken products made on

specific dates in 2015 at the Portland Facility.                       "[A]t the

insistence of [the] FSIS," AdvancePierre soon thereafter expanded

the recall to encompass a total of 1,707,494 pounds of raw chicken

products produced by AdvancePierre at the Portland Facility on

                                     - 4 -
specific production dates between February 2015 and May 2015.

Using   its    computer     system,    AdvancePierre    determined    that    the

chicken   products       associated     with   the    Salmonella   Enteritidis

outbreak and the subsequent recall were made with chicken from the

two truckloads of raw chicken parts that Mountaire had supplied in

February 2015.

              As a result of the recall, AdvancePierre incurred losses

in excess of $10 million, "including but not limited to return and

destruction      of   the    recalled     chicken     products,    lost   sales

opportunities, loss of business, and loss of customers."                  Starr

paid AdvancePierre $10 million for the losses that it had sustained

in connection with the recall.           Starr subrogated to the rights of

AdvancePierre under the Contract with Mountaire.

              Starr then filed suit against Mountaire in Cumberland

County Superior Court in Maine.           Starr brought claims under Maine

law for breach of the implied warranty of merchantability, see Me.

Rev. Stat. tit. 11, § 2-314, breach of the implied warranty of

fitness for a particular purpose, see id. § 2-315, and strict

product liability, see Me. Rev. Stat. tit. 14, § 221, based on the

allegation     that   the    chicken    that   Mountaire    had    supplied    to

AdvancePierre      was    contaminated     with      Salmonella    Enteritidis.

Mountaire removed the action to the United States District Court

for the District of Maine on the basis of diversity jurisdiction.

See 28 U.S.C. § 1332(a).

                                       - 5 -
             Mountaire filed a motion to dismiss for failure to state

a claim under Federal Rule of Civil Procedure 12(b)(6), which the

District Court granted as to all claims.     See Starr Surplus Lines

Ins. Co. v. Mountaire Farms Inc., No. 2:18-CV-00067-JDL, 2018 WL

3676839, at *3 (D. Me. Aug. 2, 2018). The District Court concluded

that, under Maine law, salmonella is an inherent, unavoidable, and

recognized component of raw chicken that is eliminated by proper

cooking methods and that the complaint failed plausibly to allege

that the chicken from Mountaire was contaminated with any pathogen

other than such salmonella.       See id.   The District Court thus

concluded that Starr's complaint did not sufficiently allege a

"defect" in the chicken from Mountaire, as it was required to do

in order to state a claim for breach of warranty and strict product

liability.      See id.   The District Court also determined that

Starr's strict liability claim was independently barred by the

economic loss doctrine, which precludes recovery in tort for

economic loss unaccompanied by personal injury or property damage.

See id. at *3-4.     Starr then filed this timely appeal.

                                  II.

             We review the grant of a motion to dismiss de novo.   See

Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st

Cir. 2012).    We "accept[] all well-pleaded facts as . . . true and

draw[] all reasonable inferences in favor of [the non-moving

party]."     Fantini, 557 F.3d at 26.    "We may augment these facts

                                 - 6 -
and    inferences     with    data     points    gleaned      from    documents

incorporated by reference into the complaint, matters of public

record, and facts susceptible to judicial notice."              Haley v. City

of Boston, 657 F.3d 39, 46 (1st Cir. 2011).

             In undertaking our review, we first set aside legal

conclusions and those factual allegations "too meager, vague, or

conclusory to remove the possibility of relief from the realm of

mere conjecture."      In re Curran, 855 F.3d 19, 25 (1st Cir. 2017)

(internal quotation marks omitted).           We then consider whether the

remaining well-pleaded allegations are "sufficient to support the

reasonable      inference    that    the   defendant   is    liable     for    the

misconduct alleged."         García-Catalán v. United States, 734 F.3d

100, 103 (1st Cir. 2013) (citations and internal quotation marks

omitted).

                                      III.

             We begin with Starr's breach of warranty claims.                 Under

Maine law, "in order to maintain a claim for breach of the implied

warranties of merchantability and fitness for particular purpose,"

the "plaintiff must show some defect in the product at the time it

was sold."      Walker v. Gen. Elec. Co., 968 F.2d 116, 119 (1st Cir.

1992) (citing Lorfano v. Dura Stone Steps, Inc., 569 A.2d 195, 197

(Me. 1990); Faulkingham v. Seacoast Subaru, Inc., 577 A.2d 772,

774 (Me. 1990); Sylvain v. Masonite Corp., 471 A.2d 1039, 1040–41

(Me.   1984))    (footnotes    omitted).        Starr's     challenge    to     the

                                      - 7 -
dismissal of its breach of warranty claims turns in part on whether

the complaint plausibly alleges that the raw chicken that Mountaire

supplied to AdvancePierre -- as opposed to the chicken products

that   AdvancePierre   made   using     that    raw    chicken    --   contained

Salmonella Enteritidis.       But, the success of Starr's challenge

does not turn only on the plausibility of that allegation.

            Starr accepts that, under Maine law, raw chicken that

contains salmonella that can be eliminated by proper cooking cannot

be considered "defective."        See, e.g., Kobeckis v. Budzko, 225

A.2d 418, 423-24 (Me. 1967) (holding that raw pork containing

trichinar was not defective because "[t]he usual use of meat as a

food   is   when   cooked,      not     when    raw"     and     the   "warranty

implied . . . on   the   sale    of    uncooked       pork . . . is     that    the

pork . . . is   reasonably    fit      for    human   consumption      only    when

properly cooked"); see also Craten v. Foster Poultry Farms Inc.,

305 F. Supp. 3d 1051, 1064 (D. Ariz. 2018) ("It is undisputed that

Salmonella occurs naturally in chicken and that the bacteria are

killed through proper cooking[,] . . . which is how raw chicken

products are intended to be used."); Leno v. Ehli, 339 N.W.2d 92,

99 (N.D. 1983) (noting that "it is common knowledge that there is

a danger of illness from eating poultry which has not been properly

prepared"); González Cabán v. JR Seafood, 132 F. Supp. 3d 274, 287

(D.P.R. 2015) (noting that Salmonella is a "natural" material in

chicken).   Thus, Starr's challenge to the dismissal of its claims

                                      - 8 -
may succeed only if the complaint plausibly alleges that the raw

chicken that Mountaire sold to AdvancePierre was contaminated with

a type of salmonella that would persist despite proper cooking.

And there, as we will explain, the complaint comes up short.1

            In attempting to make the contrary case, Starr does not

dispute that "[t]he allegations in the . . . complaint do not"

once mention cooking, let alone "include a direct allegation that"

the chicken from Mountaire was contaminated with a type -- insofar

as there is such a type -- of salmonella resistant to proper

cooking.    Cardigan Mountain Sch. v. New Hampshire Ins. Co., 787

F.3d 82, 85 (1st Cir. 2015).             Instead, Starr argues that the

complaint   lays     out    a    plausible    circumstantial    case   for    so

concluding.      But, while "'circumstantial evidence often suffices'

to render an asserted claim plausible in the pleading context,"

id. at 87 (quoting García-Catalán, 734 F.3d at 103), that is not

the case here.

            In    arguing       otherwise,    Starr   first   points   to    the

complaint's allegation that, "[t]hrough genetic testing, the FSIS

identified PFG pattern combinations . . . in all of six of the

     1 The parties do dispute whether Maine law applies the
"foreign-natural" test, see Kobeckis, 225 A.2d at 423, or the
"reasonable expectation" test, see Estate of Pinkham v. Cargill,
Inc., 55 A.3d 1, 5 (Me. 2012), to defective food product claims.
We need not decide which test applies here, because we conclude
that chicken containing salmonella that can be killed by proper
cooking is not "defective" under either test.      Nor does the
plaintiff contend otherwise.

                                      - 9 -
patients     initially    infected     with   Salmonella     Enteritidis     in

Wisconsin and Minnesota."         In that same vein, Starr also notes,

the complaint alleges that "[t]hese genetic pattern combinations

were unique and new to the [Center for Disease Control ("CDC")]

Pulse Net Database, and enabled the FSIS to link the illnesses

directly to products produced at AdvancePierre."

             But,    "documents   incorporated    by   reference      into   the

complaint, matters of public record, and facts susceptible to

judicial notice," Haley, 657 F.3d at 46, confirm that Salmonella

Enteritidis is a common form of the salmonella pathogen that can

be eliminated by proper cooking. See, e.g., Salmonella Enteritidis

Infection,     CDC      Prevention     Guidelines      (March    1,     1992),

https://wonder.cdc.gov/wonder/prevguid/p0000003/p0000003.asp

(explaining that "if [the product] is thoroughly cooked, the

Salmonella [Enteritidis] organisms will be destroyed and will not

make the person sick").           Nor does the complaint at any point

directly allege otherwise.

             Starr    places   great   emphasis   on   the   fact     that   the

complaint alleges that the "genetic pattern combinations" of the

salmonella pathogen found in the patients linked to the outbreak

"were unique and new to the CDC Pulse Net Database."            The complaint

further alleges that these "unique and new" "genetic pattern

combinations" "enabled the FSIS to link the illnesses directly to

products produced at AdvancePierre."          But, the key question with

                                     - 10 -
respect to the viability of Starr's breach of warranty claims is

not whether the type of salmonella alleged to have contaminated

the chicken supplied by Mountaire was found in the persons who

suffered the illnesses that led to the recall.          The key question

is whether that type of salmonella is resistant to proper cooking.

The   complaint's   allegations    concerning    the   "unique"   genetic

pattern combinations simply do not bear on that question.

           Starr next points to the complaint's allegation that a

total of eight individuals in Minnesota and Wisconsin became

infected   with   Salmonella   Enteritidis   after     being   exposed   to

products produced by AdvancePierre at the Portland Facility that

contained the chicken from Mountaire.           The complaint does not

allege, however, that any of the eight patients contracted the

Salmonella Enteritidis infection after eating properly cooked

AdvancePierre chicken products or even after eating the products

at all.    In fact, Starr's counsel represented at oral argument

only that the infected patients were "exposed" to AdvancePierre

products containing the chicken at issue and conceded that the

patients could have contracted the infections from merely touching

the raw AdvancePierre chicken products.         Nor does the complaint

"refer[] to individuals with relevant knowledge who are recalling

facts plausibly known to them" to help tip the allegations past

the point of plausibility.     Cardigan Mountain, 787 F.3d at 87.

                                  - 11 -
             These deficiencies are significant because, as we have

already        explained,            the        complaint         makes         no

allegation -- directly -- that the type of salmonella found in the

chicken    linked    to   the   infected   persons     could     not   have   been

eliminated by proper cooking.         In the absence of any allegation of

that sort, we do not see how the mere fact that those persons

became ill from that type of salmonella after being "exposed" to

the AdvancePierre chicken products provides a plausible basis for

inferring that the type of salmonella that those products were

contaminated with was of such a kind.

             Finally, Starr points to the complaint's allegations

that the FSIS determined that the outbreak was severe enough to

warrant a recall of the AdvancePierre products containing the

chicken from Mountaire and "therefore [that] these products [from

Mountaire]    were     adulterated     within    the   meaning    of   9   C.F.R.

§ 381.1(b)(iii)."         Starr then proceeds to argue that "if the

recalled     chicken      products    simply    contained      [the    type    of]

Salmonella that one expects to find in any chicken product, there

would be no basis for the FSIS to find that the products were

'adulterated' and should be recalled because they were unfit for

human consumption." In this way, Starr relies upon the allegations

concerning the recall to make the case that the complaint states

a valid claim, even if it is otherwise deficient in alleging that

                                     - 12 -
the chicken was contaminated with a form of salmonella that could

not be eliminated by proper cooking.

           Mountaire      counters     that     we     should    set    aside      the

complaint's allegation that the chicken from Mountaire "w[as]

adulterated within the meaning of 9 C.F.R. § 381.1(b)(iii)" as

conclusory.       See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

("[T]he   tenet    that   a   court    must    accept    as     true   all   of    the

allegations contained in a complaint is inapplicable to legal

conclusions.").     But, even if we were to disagree with Mountaire

on that point, it would not save Starr's case.

           Federal law governing recalls provides no basis for

concluding that, if chicken is "adulterated within the meaning of

9 C.F.R. § 381.1(b)(iii)," then the chicken is contaminated with

a type of salmonella that would persist despite proper cooking.

The Poultry Products Inspection Act ("PPIA") prohibits the sale of

poultry that is "adulterated," see 21 U.S.C. § 458(a)(2), and

poultry   is   deemed     "adulterated"        under    that     statute     "if    it

consists . . . of any filthy, putrid, or decomposed substance or

is for any other reason unsound, unhealthful, unwholesome, or

otherwise unfit for human food," id. § 453(g)(3); see also id.

§ 601(m)(3); 9 C.F.R. § 381.1(b)(iii).               The only respect in which

the complaint alleges that the chicken at issue was "adulterated"

under the PPIA is that it "contained pathogens including Salmonella

Enteritidis, which caused human illness. . . ."                  But, as we have

                                      - 13 -
explained, neither the fact that the chicken from Mountaire was

contaminated with Salmonella Enteritidis nor the fact that the

products into which it was incorporated were linked to an illness

outbreak permits the inference that the chicken from Mountaire was

"defective" under Maine law.

          Nor does the complaint allege that the FSIS was required

under the relevant federal laws to make -- or that the FSIS in

this instance made -- any other determinations about the chicken

products at issue.   In fact, the published FSIS guidance materials

cited by Mountaire confirm that the FSIS may in some instances

deem poultry products to be "adulterated" under the PPIA merely

because the "products are associated with an illness outbreak."

HAACP Plan Reassessment for Not–Ready–To–Eat Comminuted Poultry

Products and Related Agency Verification Procedures Notice, 77

Fed. Reg. 72,686, 72,689 (Dec. 6, 2012); see also Craten, 305 F.

Supp. 3d at 1059-60.   Thus, the mere fact of the FSIS-orchestrated

recall does not give rise to the plausible inference that the type

of salmonella found in the AdvancePierre chicken products could

not be eliminated by proper cooking.    The fact of the recall might

simply reflect that the FSIS linked particular chicken products to

an outbreak of salmonella.

          We recognize that "this is a commercial case between two

businesses," and we do not mean to suggest that, as a categorical

matter, "a seller of raw chicken products has no recourse against

                               - 14 -
a raw chicken supplier when the federal government determines that

the supplied chicken is adulterated and warrants a massive Recall."

But, after considering "the cumulative effect of the factual

allegations contained in the complaint," A.G. ex rel. Maddox v.

Elsevier, Inc., 732 F.3d 77, 82 (1st Cir. 2013) (citation and

internal quotation marks omitted), we conclude that Starr failed

to allege "something more than facts showing that a claim is

conceivable," In re Curran, 855 F.3d at 27.          We therefore affirm

the District Court's dismissal of Starr's breach of warranty

claims.

                                      IV.

             Starr's complaint also alleges, separate from its breach

of warranty claims, that Mountaire is strictly liable for selling

"raw chicken products to AdvancePierre in a defective condition

that was unreasonably dangerous in a way not contemplated or

expected by users and consumers" in violation of Me. Rev. Stat.

tit. 14, § 221.      Section 221 allows a plaintiff to recover in tort

from a seller "for physical harm" to the plaintiff "or to his

property" resulting from "goods or products [sold] in a defective

condition unreasonably dangerous to the user or consumer or to his

property."     Id.

             A plaintiff "alleging damage or injury from a faulty or

defective     product"    may,   as    Starr   did   here,   bring   "[a]

lawsuit [under Maine law] . . . based on a number of theories,

                                  - 15 -
including . . . strict liability . . . and breach of warranty."

Oceanside at Pine Point Condo. Owners Ass'n v. Peachtree Doors,

Inc., 659 A.2d 267, 269–70 (Me. 1995) (citation and footnote

omitted).     Under either theory, though, the plaintiff still must

show that the product at issue was "defective" under Maine law.

             Here, as we have explained, the complaint does not

sufficiently plead facts permitting us to plausibly infer that the

raw chicken that Mountaire sold to AdvancePierre was contaminated

with a type of salmonella that could not be eliminated by proper

cooking and thus was defective under Maine law.2      Nor does Starr

contend that its strict liability claim may survive if we conclude

that the complaint fails to allege facts that could suffice to

show that the chicken supplied by Mountaire to AdvancePierre was

defective.

             We thus affirm the District Court's dismissal of Starr's

strict liability claim on this basis alone.    See MacDonald v. Town

of Eastham, 745 F.3d 8, 11 (1st Cir. 2014) ("We are not bound by

the district court's reasoning but, rather, may affirm an order of

dismissal on any ground evident from the record.").     We therefore

do not reach the question whether the District Court correctly

     2 As we noted earlier, the parties do dispute whether the
"foreign-natural" test, see Kobeckis, 225 A.2d at 423, or the
"reasonable expectation" test, see Estate of Pinkham, 55 A.3d at
5, applies under Maine law.    But, neither party suggests that
chicken that contains salmonella that can be killed by proper
cooking methods is "defective" under either test.

                                - 16 -
determined that "[e]ven if . . . Starr's strict liability claim

could survive these [defective product] tests, it is further barred

by the economic loss doctrine."            Starr Surplus Lines, 2018 WL

3676839, at *3-4.

                                      V.

           For   the   foregoing    reasons,   we   affirm   the   District

Court's   dismissal    of   Starr's   breach   of   warranty   and   strict

liability claims.      Each party shall bear its own costs.

                                   - 17 -