Products Liability Law Reporter

A federal district court held that the economic loss doctrine barred a company’s tort claims against a food supplier.

Echo Lake Foods Inc. sold precooked scrambled eggs to Hans Kissel Inc. for use as an ingredient in a breakfast taco filling that Hans Kissle planned to make and sell to a retail customer. Hans Kissle later brought a contract and tort suit against Echo Lake Foods, alleging that the cooked eggs were contaminated with Listeria, E. coli, and other bacteria, necessitating that Hans Kissle stop using the eggs, cancel all remaining orders, and deal with contaminated equipment. The plaintiff asserted that the defendant knew or had reason to know that it relied on the company to provide cooked egg products that were produced under sanitary conditions, safe, and fit for human consumption. The defendant moved to dismiss the plaintiff’s claims for negligence, negligent misrepresentation, and products liability.

Granting the motion, the district court found that under the economic loss doctrine, a product purchaser may not use negligence or strict liability theories to recover from a product manufacturer for loss that is purely economic. The court found that the plaintiff’s alleged losses from the contaminated eggs, including extra expenses, lost profits, and business interruption losses, seemed purely economic in nature. The court rejected the plaintiff’s argument that the “other property” exception to the economic loss rule applied here. The plaintiff’s finished breakfast taco filling was not separate property, the court said. Additionally, the contaminated eggs were an integral component of the finished breakfast taco filling product, which was composed predominantly of scrambled eggs. The alleged damage to the plaintiff’s finished products arose from a commercial bargain, the court held, and did not constitute other property for purposes of the economic loss doctrine.

The court added that egg contamination was reasonably foreseeable to the plaintiff, a food producer that required Echo Lake Foods to test for microbial contaminants. Additionally, public policy and safety reasons did not warrant a different holding, the court said. The policies underlying the economic loss doctrine, such as preserving the fundamental distinction between tort and contract law and protecting freedom of contract, are served by the doctrine.

Consequently, the court held that the economic loss doctrine barred the plaintiff’s tort claims.

Citation: Hans Kissle Inc. v. Echo Lake Foods Inc., 2024 WL 4186678 (E.D. Wis. Sept. 13, 2024).