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Starr Surplus Lines Insurance Co. v. Mountaire Farms Inc.

United States Court of Appeals, First Circuit

April 3, 2019

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]

          Eileen K. Bower, with whom James J. Sanders, Emily A. Golding, Clyde & Co U.S. 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.

          Before Lynch, Stahl, and Barron, Circuit Judges.

          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 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., "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 specific production dates between February 2015 and May 2015. Using its computer system, AdvancePierre determined that the chicken products associated with the Salmonella ...


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