Everkrisp Vegetables Inc. v. Tobiason Potato Co.

870 F. Supp. 2d 745, 77 U.C.C. Rep. Serv. 2d (West) 572, 2012 U.S. Dist. LEXIS 61964, 2012 WL 1574462
CourtDistrict Court, D. North Dakota
DecidedMay 3, 2012
DocketCase No. 3:10-cv-112
StatusPublished
Cited by3 cases

This text of 870 F. Supp. 2d 745 (Everkrisp Vegetables Inc. v. Tobiason Potato Co.) is published on Counsel Stack Legal Research, covering District Court, D. North Dakota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Everkrisp Vegetables Inc. v. Tobiason Potato Co., 870 F. Supp. 2d 745, 77 U.C.C. Rep. Serv. 2d (West) 572, 2012 U.S. Dist. LEXIS 61964, 2012 WL 1574462 (D.N.D. 2012).

Opinion

ORDER ON DEFENDANTS BRUCE OTTO, SUSAN OTTO, AND CRYSTAL SEED POTATO COMPANY’S MOTION TO DISMISS AND FOR SUMMARY JUDGMENT

RALPH R. ERICKSON, Chief Judge.

Before the Court is Defendants Bruce and Susan Otto’s motion to dismiss them as individual defendants in this action and Crystal Seed Potato Company, Inc.’s (hereafter “Crystal Seed”) motion for summary judgment and/or to limit damages (Docs. # 86, 93). Susan Otto asserts she has no ownership interest in Crystal Seed and no involvement in the production of [747]*747seed potatoes and, therefore, she is entitled to be dismissed from this action. Bruce Otto claims that, as a part-owner of Crystal Seed, he is protected as a matter of law by the corporate veil and should be dismissed from this action. Crystal Seed asserts that it is entitled to summary judgment because North Dakota law precludes the warranty claims, it made no false statements during the sale of the seed potatoes, and recovery under a strict liability theory is limited by application of the economic loss doctrine.

Plaintiffs Everkrisp Vegetables Inc. and Bickman Farms (hereafter collectively referred to as “Everkrisp”) have filed a brief in opposition to the motions (Doc. # 109). Everkrisp concedes that Susan Otto should be dismissed from this action, but asserts that Bruce Otto should remain personally liable for failure to keep the warehouse clean and sanitary. Everkrisp also contends the seed potatoes contained a latent defect in violation of an express warranty and its claim for consequential damages is allowed under the Uniform Commercial Code. As to its strict liability claim, Everkrisp maintains that there is a material fact regarding whether the seed potatoes had something “inherent in it, which caused it to harm itself’ which renders summary judgment improper. The Court, having considered the evidence and arguments of the parties, now issues this memorandum opinion and order.

SUMMARY OF DECISION

Applying the “foreseeability approach” established in Dakota Gasification Co. v. Pascoe Bldg. Sys., 91 F.3d 1094, 1099 (8th Cir.1996), the alleged damages caused by bacterial ring rot, a known disease in seed potatoes, was something that was clearly forseeable when Everkrisp purchased the seed potatoes. Thus, the economic loss doctrine applies to Everkrisp’s tort claims. Crystal Seed’s motion for summary judgment on the tort claims is granted.

The Court finds the warranty disclaimer on the invoices sent to Everkrisp was conspicuous and complied with North Dakota’s Uniform Commercial Code provisions relating to exclusion or modification of warranties, N.D. CentCode § 41-02-33. The Court further finds that there is insufficient evidence in the record to raise a fact question on whether there was unequal bargaining power between the parties. Likewise, there is insufficient evidence in the record to establish whether or not Everkrisp was free to bargain for a more comprehensive remedy if it deemed the limitation on damages to the purchase price inadequate. Because there is no procedural or substantive unconscionability in enforcing the limitations of remedies provision. Crystal Seed’s motion for summary judgment to limit damages is granted.

Everkrisp concedes Susan Otto had no control or ownership interest in Crystal Seed and, therefore, should be dismissed as a defendant in this action. Susan Otto’s motion to dismiss is granted. The North Dakota Supreme Court has set forth several factors to be considered when determining whether the corporate veil should be pierced, including, for example, insufficient capitalization for the purposes of the corporate undertaking, failure to observe corporate formalities, insolvency of the debtor corporation at the time of the transaction in question, and the existence of the corporation as merely a facade for individual dealings. Hilzendager v. Skwarok, 335 N.W.2d 768, 774 (N.D.1983). Everkrisp has failed to meet its burden of establishing any of the Hilzendager factors and thus Bruce Otto’s motion to dismiss is granted.

PROCEDURAL BACKGROUND

On May 5, 2011, this Court granted Tobiason Potato Company’s motion to dismiss under N.D. CentCode § 28-01.3-04 [748]*748(liability of a nonmanufacturing seller) (Doc. # 73). In doing so, the Court determined North Dakota law applied in this diversity action. Judgment dismissing all claims against Tobiason was entered on this same day (Doc. # 74).

Everkrisp alleges the following claims against Crystal Seed and Bruce and/or Susan Otto: Breach of Express Warranty (Count II); Breach of Implied Warranty (Count IV); Negligent Misrepresentation (County VT); and Strict Liability (Count VIII) (Doc. # 1). Everkrisp seeks damages resulting from the loss of its 2009 potato crop and contamination of its soils and lands.

FACTUAL BACKGROUND

The Court previously set forth the factual background giving rise to the claims in this case in its Order dismissing Tobiason as a defendant in this action. Because the parties are familiar with the facts and they have been previously recited by the Court, the Court will refer to the facts in this Order only as necessary to decide the pending issues.

Crystal Seed is a grower of potato seed buds (Doc. # 52, Answer at ¶ 5). Bruce Otto owns 49.9 percent of the corporation, Robert Otto owns 49.9 percent of the corporation, and John Otto owns .2 percent of the corporation (Doc. # 106, Dep. Bruce Otto pp. 10-11). Bruce Otto handles almost all of the operations of the corporation. Id. at 13.

Tobiason is a wholesale potato dealer licensed under North Dakota law to purchase and sell certified seed potatoes. Tobiason and Everkrisp have had a business relationship for over 35 years (Doc. # 51, Answer ¶ 7). On September 30, 2008, Everkrisp purchased “Blue Tag” certified seed potatoes from Tobiason (Doe. #51, Answer ¶ 7; Doc. # 1, Complaint at ¶ 7; Doc. # 106, Dep. Etchart p. 22). The terms of the contract between the parties were contained in the invoices (Doc. # 106, Dep. Etchart p. 24). There were no oral terms outside of the terms on the invoices. Id. The invoices contained the following liability disclaimer:

Buyer and seller recite that they are both merchants and have negotiated the terms of this sale. The grade of the seed potatoes sold herein has been or will be determined by a federal/state inspection service. Seller makes no warranty as to the accuracy of such inspection. SELLER MAKES NO WARRANTY EXPRESSED OR IMPLIED OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE EXCLUSIVE REMEDY FOR DAMAGES arising out of this transaction whether for breach of contract, warranty, negligence or any other reason, shall be limited to the purchase price of the seed lot involved in the claim. Seller is not responsible for consequential commercial damages arising from disease, loss of crop yield quality, crop production or any other factor affecting the crop produced by this seed. This sale is subject to the provisions of § 4-10-04 N.D.C.C. and N.D.S.P.C. § Reg. 74-04-01-03.

(Doc. # 1-6) (emphasis in original).

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870 F. Supp. 2d 745, 77 U.C.C. Rep. Serv. 2d (West) 572, 2012 U.S. Dist. LEXIS 61964, 2012 WL 1574462, Counsel Stack Legal Research, https://law.counselstack.com/opinion/everkrisp-vegetables-inc-v-tobiason-potato-co-ndd-2012.