A California federal court judge has denied a motion to dismiss a $2 million lawsuit over a shipment of molasses allegedly tainted with lead, ruling the licorice maker had shown sufficient evidence that the supplier’s 45-day notice provision in its sales contract was unreasonable.
American Licorice filed the lawsuit against Total Sweeteners last year after the company had to recall its Red Vines Black Licorice Twists in 2012.
The California Department of Public Health found that some of the licorice samples contained lead levels up to 0.33 parts per million, which could cause children to ingest more than twice the daily recommended maximum level from just one serving.
American Licorice argued that, under its’ sales contract with the supplier the company was required to provide molasses that complies with state and federal regulations
U.S. District Judge Edward M. Chen granted partial summary judgment to Total Sweeteners Inc., finding the company’s sales contract expressly warranted that the molasses would comply with federal and state regulations. He flatly rejected the molasses supplier’s argument that American Licorice’s claims regarding the allegedly contaminated syrup should be waived since the licorice maker didn’t notify Total Sweeteners within 45 days of receipt.
American Licorice argued the lead in the allegedly tainted molasses was not detectable at the time of delivery and had no reason to test for lead. Total Sweeteners asserted that the licorice maker knows molasses has some naturally occurring lead and
should have known to test for it upon receiving the shipment.
Judge Chen observed that since the question of whether the notice period required under the contract is reasonable is controlled by Illinois law is “ordinarily a question for a jury.”
Judge Chen granted summary judgment to Total Sweeteners on its argument that its sales contract with American Licorice governed the dispute rather than a purchase order for the allegedly tainted molasses shipment. Judge Chen ruled Total Sweeteners’ shipment of molasses was not sufficient evidence to show that the company agreed to the terms of the purchase order.
Judge Chen observed that the original complaint failed to invoke the purchase order. American Licorice first raised the issue in response to Total Sweeteners’ affirmative defenses.
Judge Chen also determined that the consequential damages limitation in the sales contract is enforceable, ruling that a sophisticated party such as American Licorice must have been aware of the risk of contamination and could have mitigated the risk by testing its’ ingredients.
“Nevertheless, plaintiff chose to sign a contract which allocated the risks to itself, and then further chose not to take steps … to mitigate those risks,” Judge Chen ruled.
The case cited by this article is: American Licorice Company v. Total Sweeteners, Inc., Case No. 13-1929 (U.S. Dist. Ct., N.D. Cal.)