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Foster Poultry Farms v. Alkar-Rapidpak-Mp Equipment

April 10, 2012




On December 13, 2010, Plaintiff Foster Poultry Farms ("Foster Farms") filed a Complaint against Defendant Alkar-Rapidpak-MP Equipment, Inc. ("Alkar") in Stanislaus County Superior Court. On January 6, 2011, Alkar removed the action to this Court because the parties are citizens of different states and more than $75,000 is at issue. Foster Farms' original Complaint alleged claims for: (1) breach of contract; (2) breach of express warranty; (3) breach of implied warranty; (4) implied contractual indemnity; (5) promissory estoppel; and (6) unjust enrichment. On June 8, 2011, the Court issued an order granting Alkar's motion to dismiss. See Court's Docket, Doc. No. 32. On July 5, 2011, Foster Farms filed a motion for reconsideration of the Court's order with respect to the first, second, and third causes of action. On November 21, 2011, the Court granted reconsideration, denied Alkar's motion to dismiss the first and second causes of action, and granted the motion as to the third cause of action without prejudice. On December 1, 2011, Foster Farms filed a First Amended Complaint ("FAC") alleging causes of action for: (1) breach of contract; (2) breach of express warranty; (3) fraud; (4) negligent misrepresentation; (5) breach of contract (May 2003 agreement); and (6) promissory estoppel. Alkar now moves to dismiss the third, fourth, fifth, and sixth causes of action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.*fn1 For the reasons that follow, the motion will be granted.


Under Federal Rule of Civil Procedure 12(b)(6),a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. Marceau v. Blackfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). The Court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). As the Supreme Court has explained:

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

To avoid a Rule 12(b)(6) dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face[.]" Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 2010) (citations omitted). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).

If a Rule 12(b)(6) motion to dismiss is granted, "[the] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995). In other words, leave to amend need not be granted when amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).


In 2002, Foster Farms entered into a written agreement with Alkar to purchase turkey pasteurization equipment (the "2002 Purchase Agreement"). FAC ¶¶ 11-13. The written agreement contained a broad provision wherein Alkar warranted against "all claims of others of any kind," including patent infringement:

By acceptance of this Agreement, Seller warrants to and for the benefit of Buyer . . . (d) that all goods delivered are validly owned by Seller and are delivered to Buyer free from all liens, encumbrances, and claims of others of every kind and nature . . . (f) that all goods delivered are absolutely free from infringement of any patent[.]

Id. ¶ 14. After Foster Farms paid Alkar in excess of $2.2 million and installed the equipment, Unitherm Food Systems, Inc. ("Unitherm"), one of Alkar's primary competitors, advised Foster Farms of their pending patent that might have application to the Alkar equipment. Id. ¶¶ 2, 15. Foster Farms promptly communicated Unitherm's threat to Alkar. Id. ¶ 15.

On May 23, 2003, Robert Hanson, Alkar's Vice President of Research and Technology, sent a responsive letter to Foster Farms (the "Hanson Letter"). Id. ¶ 16. The Hanson Letter stated:

Regarding patent issues on our equipment, Alkar-RapidPak stands behind our products -- including indemnification against patent infringement. Enclosed are the patent indemnification terms that we include in all of our standard contracts.

Regarding the use of an Alkar-RapidPak surface pasteurizer as part of a process including pre-browning, bagging, post-pasteurization, and cooling of pre-cooked food products, we are aware of industry installations in operation since at least as early as 1999 that follow that process.

Please keep me informed of any further support I can give you on this issue.

Id., Ex. B. The letter appended a three-paragraph indemnification clause, which Foster Farms alleges constitutes either a modification of the 2002 Purchase Agreement, or a post-delivery promise to indemnify against patent infringement. Id. ¶¶ 2, 17, 33. Based upon these assurances, Foster Farms continued production on the food processing line containing Alkar's equipment, continued its business relationship with Alkar, and continued to purchase supplies from Alkar. Id. ¶ 18.

Alkar filed a protest in the U.S. Patent and Trademark Office against Unitherm's pending patent application but, on October 23, 2007, Unitherm's patent issued. Id. ¶ 20. On March 17, 2009, Unitherm sued Foster Farms for patent infringement. Id. ¶ 21. On May 21, 2009, Foster Farms wrote to Alkar to inform it that Unitherm's complaint implicated the warranty provisions of the purchase agreement, contractual obligations to defend against claims of patent infringement, and Alkar's representations in the Hanson Letter that it would indemnify and defend against patent infringement. Id. ¶ 22. In order to facilitate the defense of Unitherm's patent infringement action, ...

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