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Starbucks Corporation v. Wellshire Farms, Inc.

United States District Court, D. New Jersey

November 21, 2014

STARBUCKS CORPORATION, Plaintiff,
v.
WELLSHIRE FARMS, INC., and HAHN BROS., INC., Defendants. WELLSHIRE FARMS, INC., Third-Party Plaintiff,
v.
SK FOOD GROUP, INC., Third-Party Defendant.

JUDITH BOND JENNISON JAMES F. WILLIAMS (pro hac vice) J. CAMILLE FISHER (pro hac vice) PERKINS COIE LLP, SEATTLE, WA, On behalf of Starbucks Corporation.

CATHERINE JEAN BICK, JAMES MURDOCK ANDREWS, MATTHEW N. FIOROVANTI, GIORDANO HALLERAN & CIESLA, P.C., RED BANK, NJ, On behalf of Wellshire Farms, Inc.

MARGARET F. CATALANO, TIMOTHY BOYD PARLIN, HEATHER R. BEYGO, (pro hac vice) KIMBERLY L. LIMBRICK, (pro hac vice) CAROLL, MCNULTY & KULL, LLC, BASKING RIDGE, NJ, On behalf of Hahn Bros., Inc.

VALERIE A. HAMILTON, SILLS CUMMIS & GROSS, P.C., PRINCETON, NJ, On behalf of SK Food Group, Inc.

OPINION

NOEL L. HILLMAN, District Judge.

This case concerns the quality of ham in breakfast and lunch sandwiches sold at plaintiff Starbucks Corporation locations throughout the United States and Canada. Presently before the Court is the motion of defendant Hahn Brothers, Inc. to dismiss the claims against it asserted by Starbucks. Starbucks has opposed Hahn's motion, and so has defendant Wellshire Farms, Inc. For the reasons expressed below, Hahn's motion will be denied without prejudice.

BACKGROUND

According to Starbucks's first amended complaint, in 2007, Starbucks entered into a contract with third-party defendant SK Food Group, Inc., in which SK Food agreed to assemble, package, and deliver warm breakfast ham sandwiches to Starbucks locations in the western United States and Canada. In 2008, Starbucks changed its breakfast sandwich program, and provided SK Food with new specifications for its ham sandwiches. After SK Food conducted a blind taste test that resulted in Starbucks selecting what it thought was Wellshire Farms Black Forest ham, Starbucks hired SK Food and other sandwich assembly companies to use Wellshire ham in making warm and cold ham sandwiches for distribution to Starbucks stores throughout the United States and Canada.

In September 2010, Starbucks started getting customer complaints about the ham in Starbucks sandwiches. Customers complained that the ham was discolored, had an unusual taste, and appeared spoiled. Starbucks informed Wellshire of the complaints, and in October 2010, Starbucks issued "Stop Sell and Discard" notices for the warm breakfast sandwiches. Starbucks also investigated, discovered quality issues with the ham being provided from Wellshire, and issued a "Corrective Action Plan" to SK Food.

In November 2010, Starbucks continued to receive complaints about the ham from customers around the United States. Starbucks claims that when it began to search for a new ham supplier, Wellshire pleaded with Starbucks to maintain its supplier relationship. Starbucks then learned for the first time that Hahn, and not Wellshire, was actually producing the ham. Starbucks claims that Wellshire had entered into an agreement with Hahn to satisfy its obligation to produce Black Forest ham for Starbucks sandwiches.

In December 2010, Starbucks had laboratory tests performed on the ham, and the test results revealed that a sample contained potentially harmful bacteria. On December 10, 2010, Starbucks issued a second "Stop Sell and Discard" notice for its ham sandwiches. On December 18, 2010, SK Food notified Starbucks that it would no longer use Wellshire's ham for the sandwiches. Two days later, a third-party audit revealed deficiencies in the way Hahn cooked and processed the ham. On December 21, 2010, Starbucks issued its final "Stop Sell and Discard" notice for all ham sandwiches, and on December 23, 2010, Starbucks ordered all sandwich assemblers to stop making sandwiches using Wellshire ham.

According to Starbucks' complaint, in order to minimize the financial impact of Starbucks' decision to cease the production of ham sandwiches, Starbucks entered into a settlement agreement with the ham sandwich assemblers to compensate them for their losses. In return, the ham sandwich assemblers assigned their rights to Starbucks to bring claims against Wellshire and Hahn for their losses.

Accordingly, Starbucks has asserted claims against Wellshire for beach of the implied warranty of merchantability (Count One) and breach of the implied warranty of fitness for particular purpose (Count Two), both under the UCC. Also against Wellshire, Starbucks has asserted claims for negligent misrepresentation (Count Six) and unfair and deceptive trade practices (Count Seven). Starbucks has asserted claims against both Wellshire and Hahn for breach of the ham sandwich assembler agreements and Starbucks' third-party beneficiary rights (Counts Three and Four), as well as a claim for negligence (Count Five).

Hahn has moved to dismiss Starbucks' claims against it, arguing that Starbucks' claims are barred by the three-year statutes of limitations provided under Maryland law. Starbucks, as well as Wellshire, [1] have opposed Hahn's motion, arguing primarily that the determination of what state's law to apply to the case is a fact-based analysis that is premature at this motion to ...


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