Kellogg Company filed a lawsuit in a Michigan federal court against the Canadian packaging company in 2011, over allegations its tainted packaging cost the food giant millions of dollars and forced it to issue a nationwide recall of breakfast cereals.
Nausea and diarrhea
It claims FPC supplied defective liners with “offensive characteristics” (taste and odor) that purportedly caused nausea and diarrhea in some Kellogg cereal consumers and forced a “costly nationwide recall” of four company products.
The incident, which attracted global headlines, also saw the company change its packaging formulation for the affected products, according to Kellogg.
The cereal maker alleges violations of Michigan’s Uniform Commercial Code, breach of contract and express and implied indemnification. Alleging damages in excess of $75,000, Kellogg also seeks a declaratory judgment that it is not liable for payment of $3.3m in materials still in the packaging company’s possession or for the $1.04m in defective liners provided to Kellogg.
Speaking in court last week, Law360 reported Chief US District Judge Paul Maloney rejected a bid by IGI to leave the recall suit and said a trier of fact should determine if the wax it sold to FPC, which made the bags, was merchantable and met agreed-upon specifications.
“Questions of fact exist as to whether the wax was merchantable,” said Maloney. “There is also insufficient evidence contained in this motion that the wax complied with Kellogg’s specifications to warrant summary judgment,” and he called for a jury to decide if the cereal maker can prove warranties were breached in the case.
High level of hydrocarbons
Kellogg recalled several varieties of Corn Pops, Froot Loops, Apple Jacks and Honey Smacks in 2010 after consumers complained the cereal was making them ill. Kellogg eventually determined a high level of hydrocarbons in FPC’s cereal liners was the culprit.
FoodProductionDaily.com was one of the first news websites to name the chemical found in the tainted packaging.
“Kellogg Company has concluded its investigation into the off smells present in the package liners in some of its cereals,” said Adaire Putnam, a company spokeswoman at the time.
“Working with external experts in medicine, toxicology, public health, chemistry and food safety, we identified elevated levels of hydrocarbons, including methyl naphthalene, normally found in the paraffin wax and film in the liners.”
This specific wax is commonly used as a protective coating for foods including cheese, raw fruits and vegetables, and are approved by the FDA, she said.
Kellogg originally filed suit in 2011, claiming it had to issue vouchers to consumers who bought bad cereal, incurred investigation costs in determining the problem, suffered damage to its reputation and had to destroy inventory due to the recall. FPC then filed a third-party suit against IGI.
Ontario Sales Act
The cereals were sold in boxes, but the cereal itself was contained in a liner placed inside each box. The liner comprises paper, foil and wax, and until June was purchased under contract from Ontario, Canada-based FPC, which acquired the raw materials for the liners and then manufactured them.
Having ruled that Canadian law applies to the case, Judge Maloney rejected IGI’s arguments that FPC can’t prevail on its claims because under the Ontario Sales Act (a consumer protection law) a product must be purchased “by description,” whereas FPC purchased wax from IGI using its trade name.
Judge Maloney agreed with FPC’s argument that just because it identified the wax by its trademarked name on a purchase order, that does not prevent it from claiming an implied warranty of fitness. He said there are still factual issues in dispute regarding details of the purchasing agreement between FPC and IGI, so summary judgment is not appropriate.
FPC had argued Kellogg’s specifications that a specific type of wax, Microbond 8067A, be used in the liners negated the implied warranty at issue in the case, and Kellogg did not require any specific testing or create standards for the appropriate level of hydrocarbons in the wax FPC was required to use.
However, Judge Maloney noted problems with the cereal were not caused because of the specific wax itself, since Kellogg asserted it had used that exact type of wax without incident for decades and FPC itself provided liners using it for nearly a year without issue before the recall.
FoodProductionDaily.com contacted Kellogg for further comment but company spokesperson Kris Charles said she could not comment on a case pending litigation.
The hearing continues.