Del. Superior Court Allows Case Alleging That Faulty Freezers Sent Hamburger Flying, but Dismisses Some Claims
According to the opinion issued Monday, though the freezers were installed by August 2017, they had a number of issues that kept Golden State from being able to use them as intended, including failing parts, missing systems and doors installed on the wrong side.
June 10, 2020 at 04:46 PM
4 minute read
The original version of this story was published on Delaware Law Weekly
The company that owns an Alabama hamburger plant can proceed with its negligence counterclaim involving defective freezers the manufacturer allegedly failed to fix, a Delaware Superior Court judge decided Monday.
Judge Eric M. Davis of the Delaware Superior Court determined Irvine, California-based Golden State Foods Corp. provided sufficient information for its claim that the $3.715 million freezers it agreed to purchase from food processing technology manufacturer GEA Systems North America, which is headquartered in York, Pennsylvania, had been improperly installed and maintained, with Golden State suffering losses due to the freezers launching hamburger patties around its plant.
In the same decision, six other counterclaims brought against GEA were dismissed. At a Jan. 21 hearing, the court determined Golden State could also proceed with its claim of a breach of implied-in-fact contract but not with its allegation that GEA breached its covenant of good faith and fair dealing. Two breach of contract counterclaims which GEA didn't move to dismiss are still pending.
GEA filed its Superior Court complaint against Golden State in November of 2018, alleging Golden State hadn't paid the full amount owed for three spiral freezers it agreed to purchase in 2016 to use in its hamburger patty production facility in Opelika, Alabama.
In September 2019, Golden State filed counterclaims against GEA and a third-party claim against Allianz Global Risks U.S. Insurance, alleging breaches of contract, negligence, gross negligence, fraudulent inducement, intentional and negligent misrepresentation, unjust enrichment and indemnification.
Davis determined several of those counterclaims to be barred either by the state's economic loss doctrine or by the contract between the companies, while the claim of negligent misrepresentation was dismissed because the Delaware Court of Chancery has exclusive jurisdiction in that area.
According to the opinion issued Monday, though the freezers were installed by August 2017, they had a number of issues that kept Golden State from being able to use them as intended, including failing parts, missing systems and doors installed on the wrong side. An email from Golden State executives to GEA's vice president and a project manager and engineer stated the freezers' flaws had led to hamburger patties "flying around like popcorn," and failing parts were said to have left the freezers inoperable for large parts of the 17-hour shifts for which they were supposed to be used.
GEA reportedly said it would fix the freezers but did not do so, with Golden State alleging as part of its negligence counterclaim that GEA's seven-month delay in finding solutions was done in an attempt to continue collecting payments from Golden State.
Hutchinson Robbins Jr. of Miles & Stockbridge in Baltimore, the firm that is representing GEA, said the case is proceeding in the Superior Court's complex commercial litigation division rather than in the Court of Chancery because it's a contractual dispute, not a corporate one.
In its motion to dismiss, GEA's arguments included that Delaware law, not Alabama law, should be applied in the case, while Golden State responded Alabama law should take precedent. Davis wrote that the court isn't required to conduct a choice of law analysis because there doesn't appear to be a conflict between the applicable laws in the two states.
Robbins said while it's frequent that laws from more than one state could be applied in a case, it's uncommon for one law to not be chosen.
"The allegations here were that there were multiple documents comprising one contract, and so the potential for conflict in choice of law is very real," Robbins said. "Typically, the parties have agreed upon a choice of law, and even if there are multiple components to their contract, it's going to be one choice of law that governs the whole thing."
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