Meyer Natural Foods LLC and Crum & Forster Specialty Insurance Company v. Greater Omaha Packing Co., Inc.

Summary

The Nebraska Supreme Court affirmed summary judgment for Greater Omaha Packing Co. in a dispute arising from allegedly E. coli-contaminated beef processed for Meyer Natural Foods. The court held that the processing agreement required property insurance but did not require coverage for E. coli contamination, and that the agreement was predominantly for services rather than the sale of goods under the Uniform Commercial Code. The court further concluded that Meyer failed to comply with the contractual procedure for rejecting contaminated products and could not recover avoidable damages.

Holdings

1. The amended agreement required Greater Omaha to maintain property insurance on Meyer's property in its possession in the specified amount, but did not require coverage for E. coli contamination or prohibit exclusions for such contamination.
2. The agreement was principally for processing services and only incidentally involved goods; therefore, article 2 of the Uniform Commercial Code did not apply.
3. Meyer could not recover damages because it failed to comply with the agreement's requirement to return or hold rejected products at Greater Omaha's expense and thereby failed to avoid damages that could have been avoided.
4. Greater Omaha breached the express warranty that the processed meat would not be adulterated or misbranded under applicable law, because the E. coli-contaminated products were adulterated under Nebraska law; however, Meyer was not entitled to recover damages because it failed to mitigate and failed to use the contractual return remedy.
5. Summary judgment was proper on Meyer's negligence and indemnity claim because Meyer presented no evidence of negligence on the day its cattle were fabricated.

Questions Presented

1. Whether Greater Omaha maintained property insurance as required by the amended processing agreement and whether the agreement required insurance coverage for E. coli contamination.
2. Whether the processing agreement was principally a contract for the sale of goods subject to article 2 of the Uniform Commercial Code.
3. Whether Meyer properly rejected the contaminated beef under section 10 of the agreement and whether its failure to return or hold the product barred recovery of damages.
4. Whether Greater Omaha breached its express warranty that the processed meat would not be adulterated under applicable law.
5. Whether evidence of sanitation violations created a genuine issue of material fact concerning Greater Omaha's negligence and contractual indemnity liability.

Disposition

affirmed