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Amcor Flexibles Inc v. Fresh Express Inc

United States District Court, N.D. California, San Francisco Division

July 1, 2014

AMCOR FLEXIBLES INC, Plaintiff,
v.
FRESH EXPRESS INC, Defendant.

ORDER DENYING DEFENDANT'S MOTION TO DISMISS [Re: ECF No. 14]

LAUREL BEELER, Magistrate Judge.

INTRODUCTION

Plaintiff Amcor Flexibles, Inc. ("Amcor") sued Defendant Fresh Express, Inc. ("Fresh Express") for breach of contract and unlawful and unfair business practices. See Complaint, ECF No. 1.[1] Fresh Express moves to dismiss Amcor's Complaint. See Motion to Dismiss, ECF No. 14. Pursuant to Civil Local Rule 7-1(b), the court found this matter suitable for determination without oral argument and vacated the June 19, 2014 hearing. Upon consideration of the Complaint, the briefs submitted, and the applicable legal authority, the court DENIES Fresh Express's motion.

STATEMENT

I. FACTS

A. The 2006 Supplier Agreement and the Purchase Order Standard Terms

On or about February 8, 2006, Amcor and Fresh Express entered into a 2006 Film Supplier Agreement ("2006 Supplier Agreement" or "Master Agreement") in which Amcor agreed to procure raw materials and manufacture finished fresh salad bags for Fresh Express. Complaint ¶ 9 & Ex. A. The term of the 2006 Supplier Agreement was from February 1, 2006 to December 31, 2006, and each year it was to renew automatically for an additional year unless terminated by either party. Id. ¶ 10 & Ex. 1. Paragraph 9 of the 2006 Supplier Agreement provides that "[e]ither party may terminate this Agreement without cause by giving the other party ninety (90) days written notice." See id., Ex. A.

Incorporated into the 2006 Supplier Agreement was the so-called "Vendor Packet, " which included Fresh Express Incorporated Purchase Order Standard Terms and Conditions ("Purchase Order Standard Terms"), the Seller Guaranty and Indemnification Agreement, and the Nondisclosure Agreement. See id., Ex. B. Specifically, Paragraph 11 of the 2006 Supplier Agreement states:

11. Terms and Conditions: This [2006 Supplier] Agreement is a part of and incorporates the Purchase Order and the Fresh Express Standard Terms and Conditions, the Seller Guarantee and Indemnification Agreement and the Nondisclosure agreement ("Vendor Packet"). This [2006 Supplier] Agreement, along with the Purchase Order and the Fresh Express Vendor Packet constitute the final, complete and exclusive statement of the terms of the agreement between the parties pertaining to the subject matter of this agreement. If there are any conflicts between the terms of this [2006] Supplier Agreement and the terms of the Vendor Packet, the terms of the Vendor Packet shall prevail.

Id., Ex. A.

The Purchase Order Standard Terms that were incorporated into the 2006 Supplier Agreement includes provisions for the purchaser's limitations of liability and a shortened two-year statute of limitations for certain kinds of legal claims. Specifically, Paragraph 19 of the Purchase Order Standard Terms provides:

19. Limitation on Purchaser's Liability (Statute of Limitations): Except as provided herein, in no event shall [Fresh Express] be liable for incidental or consequential damages. [Fresh Express's] liability on any claim of any kind for any loss or damage arising out of or in connection with or resulting from this agreement or from the performance or breach thereof shall in no case exceed the price allocable to the goods or services or unit thereof, which gives rise to the claim. [Fresh Express] shall not be liable for penalties of any description. Any action resulting from any breach on the part of [Fresh Express] as to the goods or services delivered hereunder must be commenced within two years after the cause of action has accrued.

Id., Ex. B.

The Purchase Order Standard Terms also contains provisions allowing Fresh Express to terminate the agreement for its convenience and making clear that the Purchase Order Standard Terms prevails over the 2006 Supplier Agreement, in the event of conflict. Specifically, Paragraph 2 of the Purchase Order Standard Terms provides:

2. Termination for Convenience of Purchaser: [Fresh Express] reserves the right to terminate this purchase order or any part hereof for its sole convenience. In the event of such termination, [Amcor] shall immediately stop all work hereunder, and shall immediately cause its suppliers or subcontractors, if any, to cease such work. [Amcor] shall be paid a reasonable termination charge consisting of: (i) a percentage of the order price reflecting the percentage of the work performed and products produced prior to the notice of termination, (ii) plus actual direct costs resulting from termination, and (iii) profit margin built in the [2006] Supplier Agreement. [Amcor] shall not be paid for any work done and products produced after receipt of the notice of termination, nor for any costs incurred by [Amcor's] suppliers or subcontractors with [Amcor] could reasonably have avoided.

Id., Ex. B. And Paragraph 13 provides:

13. Entire Agreement: This purchase order and any documents referred to on the face hereof, including any nondisclosure agreement or guaranty executed by the [Amcor] for the benefit of [Fresh Express], constitute the entire agreement between the parties. Notwithstanding anything to the contrary, the parties may enter into a Supplier Agreement. Any conflict between the terms of this purchase order and those of the Supplier Agreement or Guaranty, the terms and conditions of this purchase order and of the Guaranty shall prevail.

Id., Ex. B.

Finally, Paragraph 20 of the Purchase Order Standard Terms states that the laws of California shall apply to all disputes arising under it. Id., Ex. B.

B. The 2009 Agreement

In September 2009, Amcor and Fresh Express entered into a letter agreement ("2009 Agreement") under which Fresh Express was to be the exclusive purchaser of Amcor's newly-developed Evolution Laminated Paper Bag ("Evolution"). Id. ¶ 13 & Ex. C. The exclusivity was to apply for a period of 36 months, followed by "automatic annual renewals on an Evergreen basis." Id. at ¶ 17 & Ex. C.

The 2009 Agreement also sets forth Fresh Express's agreement to maintain its "Base Business" with Amcor for business other than the Evolution product. Id. ¶ 15. The Base Business provision provides that the terms of the 2006 Supplier Agreement (referred to in the provision as the "Master Agreement") and the Vendor Packet shall apply to ...


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