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Starbucks Corporation v. Wellshire Farms, Inc.

United States District Court, D. New Jersey

March 11, 2015

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, GEORGE R. HIRSCH, SILLS CUMMIS & GROSS, P.C., PRINCETON, NJ.

ROBERT J. CURRAN, (pro hac vice), JAMES M. SHAKER, (pro hac vice), TERUYUKI S. OLSEN, (pro hac vice), RYAN, SWANSON & CLEVELAND, PLLC, SEATTLE, WA, 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 ("Starbucks") locations throughout the United States and Canada.[1] Presently before the Court is the motion of third party defendant SK Food Group, Inc. ("SK Food") to dismiss the claims against it asserted by defendant/third party plaintiff Wellshire Farms, Inc. ("Wellshire"). Also pending is SK Food's motion to seal its motion to dismiss. For the reasons expressed below, SK Food's motion to seal and motion to dismissed will both be denied without prejudice.

BACKGROUND

According to Starbucks's complaint, in 2007 Starbucks entered into a contract with SK Food, 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 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 to receive 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 by Wellshire, and issued a "Corrective Action Plan" to SK Food. Soon thereafter, Starbucks 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 provide Black Forest ham for Starbucks sandwiches.

After tests revealed bacteria in the ham sandwiches, on December 23, 2010 Starbucks ordered all sandwich assemblers to stop making sandwiches using Wellshire ham. Starbucks entered into a settlement agreement with four of the ham sandwich assemblers to compensate them for their losses.[2] In return, the ham sandwich assemblers assigned their rights to Starbucks to bring claims against Wellshire and Hahn for their losses.

In 2011, Wellshire filed suit in the District of New Jersey against SK Food and Hahn regarding the Starbucks ham sandwich issues. See Civil Action No. 11-1859 (JEI/KMW). Wellshire claimed that it contracted with Hahn to produce the ham that was provided to three sandwich assembly companies, including SK Food, which prepared the warm breakfast ham sandwiches. Wellshire claimed that SK Food's assembly process, where SK Food would slice the ham, store it, and then assemble it with eggs, cheese and rolls it supplied, caused the sandwiches to be contaminated with listeria monocytongenes, rather than from the ham itself. SK Food denied Wellshire's claims, and filed a counterclaim against Wellshire and a third party complaint against Hahn. The parties settled the case in September 2012 pursuant to a confidential settlement agreement.

In this case, Starbucks has asserted claims against Wellshire for breach of the implied warranty of merchantability and breach of the implied warranty of fitness for particular purpose, negligent misrepresentation, and unfair and deceptive trade practices.[3] Wellshire has filed a third party complaint against SK Food that asserts two counts. The basis for the first count is redacted, and the second count contains redacted information but reveals it is a claim for SK Food's breach of the duty of good faith and fair dealing it owed to Wellshire. Wellshire was permitted to file a redacted third party complaint by the Magistrate Judge's Order granting its motion pursuant to Local Civil Rule 5.3(c)(1). (See Docket No. 85.) The Magistrate Judge found that good cause existed to seal portions of Wellshire's third party complaint because it referred to terms of a private settlement agreement.

SK Food has filed a motion to dismiss Wellshire's third party complaint. SK Food's motion is significantly redacted, as is Wellshire's opposition. Concurrently, SK Food has filed a motion to seal ...


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