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Foster Poultry Farms v. Alkar-Rapidpak-Mp Equipment

November 17, 2011

FOSTER POULTRY FARMS,
PLAINTIFF,
v.
ALKAR-RAPIDPAK-MP EQUIPMENT, INC. AND DOES 1-10, DEFENDANTS.



ORDER GRANTING PLAINTIFF'S MOTION FOR RECONSIDERATION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

[Doc. #36]

INTRODUCTION

On June 8, 2011, the Court issued an Order Granting Defendant Alkar-Rapidpak-MP Equipment, Inc.'s ("Alkar") Motion to Dismiss ("Order"). In the Order, the Court, inter alia, dismissed Plaintiff Foster Poultry Farms' ("Foster Farms") first, second and third causes of action based on the statute of limitations set forth in California Commercial Code § 2725. On July 6, 2011, Foster Farms filed a motion for reconsideration of the Court's Order with respect to the first, second and third causes of action. For the reasons that follow, Foster Farms' motion will be granted.

LEGAL STANDARD

A motion for reconsideration is appropriate where the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there was an intervening change in controlling law. Sch. Dist. No. 1J, Multnomah Cnty., Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).

DISCUSSION

1. Foster Farms' first, second and third causes of action are timely under California Code of Civil Procedure § 337.

On December 13, 2010, Foster Farms filed a Complaint against Alkar.*fn1 In the first, second, and third causes of action, Foster Farms brought claims for breach of contract, breach of express warranty, and breach of implied warranty. In the June 8, 2011 Order, the Court construed these causes of action as being governed by the statute of limitations set forth in California Commercial Code § 2725.

California Commercial Code § 2725(1) states that "an action for breach of any contract for sale must be commenced within four years after the cause of action has accrued." Cal. Com. Code § 2725(1). Under California Commercial Code § 2725(2), a "breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods[.]" Cal. Com. Code § 2725(2). Thus, an "exception to the four-year limitations period applies only when the seller explicitly has agreed to warrant its product for a defined period of time." Carrau v. Marvin Lumber and Cedar Co., 93 Cal. App. 4th 281, 291 (2001).

It appeared to the Court that Foster Farms' first, second and third causes of action were asserting claims solely for breach of warranty, which would make the claims governed by section 2725. In the Complaint, Foster Farms alleged that as a result of the breach of contract, breach of express warranty and breach of implied warranty, Foster Farms incurred damages.*fn2 Complaint at ¶¶ 30, 38 and 45. Within the contract entered into between Alkar and Foster Farms, Alkar warranted that all goods delivered are (1) "validly owned by Seller and are delivered to Buyer free from all liens, encumbrances, and claims of others of every kind and nature;" and (2) "are absolutely free from infringement of any patent[.]" Id. at ¶ 26. Since the warranty provisions that Foster Farms rely on do not warrant the goods for a defined period of time, the Court concluded that the statute of limitations began to accrue upon delivery on or before June 1, 2002. Foster Farms did not file the present action until December 13, 2010, which was well after the four-year statute of limitations period of section 2725 had expired. The Court therefore dismissed Plaintiffs' first, second and third causes of action without prejudice and with leave to amend in order to indicate how their claims were timely. See Order at 4-6, Doc. 32 at 4-6.

Instead of filing an amended complaint, Foster Farms filed the present motion for reconsideration. In their motion for reconsideration, Foster Farms clarifies that while their causes of action are denominated as breach of contract, breach of express warranty and breach of implied warranty, Foster Farms is actually asserting separate substantive causes of action for indemnity. Foster Farms relies on Carrier Corp. v. Detrex Corp., 4 Cal. App. 4th 1522 (1992). In Carrier, plaintiff, a manufacturer, sued defendant, the provider of a degreasing system, after plaintiff incurred expenses in taking pollution control measures when the degreasing system leaked solvent. Id. at 1524-26. Plaintiff asserted causes of action for breach of express warranty, implied warranty of merchantability, and implied warranty of fitness for a particular purpose, asking for indemnification as well as damages on all three counts. Id. at 1526. The trial court dismissed the complaint under section 2725 because the applicable warranty did not warrant the product for a defined period of time and the complaint was filed more than seven years after tender of delivery of the product. Id. at 1527.

The California Appellate Court disagreed, concluding that an indemnity claim is a separate substantive cause of action, independent of the breach of warranty. Id. The court held "that in a case involving indemnification for damages under express or implied warranty based on a sales contract, the traditional time limitations for commencement of actions will prevail over California Uniform Commercial Code section 2725." Id. at 1529. The court then applied the four-year statute of limitations set forth in California Code of Civil Procedure § 337, which applies to actions based upon written contracts. Id. at 1530. The court held that plaintiff's indemnity claim was timely because the claim began accruing when plaintiff suffered loss, which was when plaintiff discovered the pollution and began abatement procedures. Id.

In this case, unlike in Carrier, Foster Farms did not explicitly request indemnification for its breach of contract, breach of express warranty and breach of implied warranty causes of action. As stated above, Foster Farms alleged in the Complaint that it is seeking compensatory damages as a result of those breaches. Complaint at ¶¶ 30, 38 and 45. In addition, in the Complaint's "Prayer" for relief section, Foster Farms does not explicitly request indemnification, but instead requests compensatory damages. Complaint at 12. However, Foster Farms does allege in the Complaint that it is requesting Alkar to honor its indemnity obligations. Id. at ¶ 1 and 4. In addition, in light of Foster Farms' clarification in their motion for reconsideration that they are explicitly asserting causes of action for indemnity in their first, second and third causes of action, the Court reconsiders its prior Order and concludes that section 2725 does not apply to those causes of action.

Instead, the Court now applies the four-year statute of limitations period set forth in California Code of Civil Procedure § 337. Foster Farms' first, second and third causes of action began to accrue when Foster Farms alleges it suffered loss, which was when Alkar refused to pay Foster Farms' expenses in defending against Unitherm's patent infringement action in July 2010. Complaint at ¶ 20. Plaintiff filed the present action on December 13, 2010, which was within the four-year limitations period of section 337. Accordingly, Foster Farms' motion for reconsideration is GRANTED.

2. Alkar's motion to dismiss Foster Farms' first, second and third causes of action is granted in part and denied in part.

In light of the Court's conclusion above, the Court will reconsider Alkar's alternative arguments brought in its motion to dismiss. Foster Farms maintains that there is no other basis to grant Alkar's motion to dismiss Foster Farms' first, second and third causes of action. Motion for reconsideration at 11:3-4, Doc. 36 at 16. The Court concludes that Alkar's motion to dismiss Foster Farms' first and second ...


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