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WFM Private Label, L.P. v. 1048547 Ontario, Inc.

United States District Court, W.D. Texas, Austin Division

June 18, 2018

WFM PRIVATE LABLE, L.P., Cross-Claimant,
v.
1048547 ONTARIO, INC. d/b/a SKOTIDAKIS GOAT FARM, Cross-Defendant.

          ORDER

          SAM SPARKS, SENIOR UNITED STATES DISTRICT JUDGE.

         BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and specifically Cross-Claimant WFM Private Label, L.P. (Whole Foods)' Motion for Summary Judgment [#70], Cross-Defendant 1048547 Ontario, Inc. d/b/a Skotidakis Goat Farm (SGF)'s Response [#77] in opposition, and Whole Foods' Reply [#79] thereto.[1] Having considered the case file and the applicable law, the Court enters the following opinion and order.

         Background

         This is a contract dispute case. Whole Foods contracted with SGF to supply Greek yogurt for sale under the Whole Foods Market 365 Everyday Value private label. Some yogurt contained higher sugar content than disclosed on the product labels, resulting in a product withdrawal, numerous consumer lawsuits, and other expenses. Whole Foods and SGF dispute liability under their contract.

         In 2012, Whole Foods and SGF executed a vendor agreement in which SGF agreed to supply Whole Foods various plain and flavored Greek yogurt products. Mot. Summ. J. [#70-3] Ex. 3 (Vendor Agreement). SGF provided nutritional information for the yogurt. Resp. [#77] at 3. In doing so, SGF relied on 2010 and 2011 nutritional tests performed by Maxxam Analytics International Corporation (Maxxam), a third-party laboratory company based in Canada. See id; Mot. Summ. J. [#70-7] Ex. 7 (SGF Specifications E-mail). SGF reviewed and approved nutritional information before the products were sold. See Mot. Summ. J. [#70-6] Ex. 6 (Technical Specifications).

         In late September 2013, SGF received updated test results from Maxxam for several of its yogurt products. Resp. [#77] at 4-5. One of the products tested-the 0% plain yogurt-was also a product SGF supplied to Whole Foods. See Id. The new Maxxam test results reflected higher sugar content than the previous test results relied upon for product labeling. Compare Mot. Summ. J. [#70-12] Ex. 12 (SGF Consumer Reports E-mail) at 7 (indicating 1.8 grams of total sugars per 100 grams of 0% plain yogurt), with SGF Specifications E-mail at 7 (indicating 1.0 grams of total sugars per 100 grams of 0% plain yogurt). SGF did not notify Whole Foods of the new test results at the time. Resp. [#77] at 4.

         Shortly thereafter, in early November 2013, Whole Foods contacted SGF with a customer inquiry regarding nutritional information of its plain yogurt products. See Mot. Summ. J. [#70-13] Ex. 13 (Customer Inquiry E-mail). The customer asked how the sugar content of the Whole Foods Market 365 Everyday Value private label plain yogurt was "significantly lower" than other Greek yogurt brands. Id. SGF assisted Whole Foods in responding to this and other customer inquiries, but again did not notify Whole Foods of the new Maxxam test results. See id.; Mot. Summ. J. [#70-14] Ex. 14 (another customer inquiry).

         On July 14, 2014, Consumer Reports contacted Whole Foods for an upcoming article on the sugar content of the Whole Foods Market 365 Everyday Value private label plain yogurt. See SGF Consumer Reports E-mail at 3-4. Consumer Reports notified its nutritional testing showed Whole Foods' plain yogurt contained five times the sugar content listed on the product labeling. Id; see also Mot. Summ. J. [#70-17] Ex. 17 (Consumer Reports Article). Whole Foods requested input and any additional nutritional testing from SGF. See SGF Consumer Reports E-mail atl. SGF sent Whole Foods the 2013 Maxxam test results on the same day. See Id. Consumer Reports published its article on July 17, 2014. See Consumer Reports Article.

         In August 2014, Whole Foods voluntarily withdrew the Whole Foods Market 365 Everyday Value private label plain yogurt after confirming the sugar content of the yogurt exceeded the sugar content listed on the product label. See Mot. Summ. J. [#70] at 5-7; see also Mot. Summ. J. [#70-20] Ex. 20 (Test Results).

         Eleven putative class action lawsuits were filed against Whole Foods and its affiliates for the mislabeling of sugar content on the company's plain yogurt. See Mot. Summ. J. [#70-18] Ex. 18 (Underlying Lawsuits). The lawsuits were centralized before this Court by the Judicial Panel on Multidistrict Litigation. See In Re: Whole Foods Market, Inc., Greek Yogurt Marketing and Sales Practices Litigation, No. 1:14-mc-02588-SS (W.D. Tex. Dec, 122014).

         On September 5, 2014, SGF confirmed its intent to indemnify Whole Foods in the Underlying Lawsuits. See Mot. Summ. J. [#70-26] Ex. 26 (Indemnity Letter). Five days later, Whole Foods effectively terminated the Vendor Agreement by permanently discontinuing all plain and flavored private label yogurt products from SGF, citing "allegations made relating to products produced by [SGF]." Mot. Summ. J. [#70-33] Ex. 23 (Termination Letter). SGF made two payments to Whole Foods totaling $75, 000 for litigation expenses incurred in the Underlying Lawsuits. Resp. [#77] at 15. Whole Foods settled the Underlying Lawsuits in November 2016. See Mot. Summ. J. [#70] at 8.

         In July 2015, SGF initiated a lawsuit against Maxxam in the Ontario Superior Court of Justice for inaccuracies in the 2010 and 2011 Maxxam nutritional tests SGF relied upon in its contract with Whole Foods. See Mot. Summ. J. [#70-9] Ex. 9 (Maxxam Lawsuit). SGF asserted Maxxam's testing was "wholly inaccurate and the amount of the total sugars in the yogurt were under-reported." Id. at 5.

         In this case, Whole Foods filed a crossclaim against SGF, asserting six claims for breach of contract and fraud. See Am. Cross-Compl. [#37] at ¶¶ 57-100. SGF filed one counterclaim for breach of contract. See Am. Counterclaim. [#49] at ¶¶ 13-21. Whole Foods moves for summary judgment on its affirmative claims and SGF's counterclaim. See Mot. Summ. J. [#70]. The motion is fully briefed and ripe for consideration.

         Analysis

         I. Legal Standard-Summary Judgment

         Summary judgment shall be rendered when the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir. 2007). A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Washburn, 504 F.3d at 508. Further, a court "may not make credibility determinations or weigh the evidence" in ruling on a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.

         Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. Id. The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006). Rule 56 does not impose a duty on the court to "sift through the record in search of evidence" to support the nonmovant's opposition to the motion for summary judgment. Id.

         "Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Disputed fact issues that are "irrelevant and unnecessary" will not be considered by a court in ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.

         II. ...


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