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Judge: No fraud claims, but Kraft can press contract suit vs supplier of buttermilk spray used for cheese powder

By Scott Holland | Aug 14, 2015

Kraft macaroni cheese original

Kraft Foods' breach of contract lawsuit against a supplier lost steam this week when a federal judge in Chicago granted the defendant’s request to dismiss three of the four counts it faced.

Northfield-based Kraft is suing SunOpta Ingredients, of Edina, Minn., which had sold Kraft a dried buttermilk product for more than 20 years until 2013, when Kraft allegedly learned SunOpta was no longer selling a pure buttermilk powder. The product — a “high heat spray dried buttermilk product Kraft used to make its cheese powder from 1993 to 2013” —actually included other ingredients such as whey powder, why protein concentrate and dried milk. After discovering the true nature of the product, Kraft sued SunOpta in November 2014 for breach of contract, common law fraud, violation of the Illinois Deceptive Business Practices Act and violation of the Illinois Consumer Fraud Act.

However, U.S. District Judge Jorge L. Alonso, in an Aug. 10 opinion, granted SunOpta’s request to dismiss all but the breach of contract claim. The common law and consumer fraud claims require Kraft to meet a higher standard than the breach of contract allegation, Alonso wrote, noting Kraft failed to specifically provide “the ‘who, what, where, when and how’ of the alleged misrepresentations. … Kraft does not meet this burden. The alleged fraud is too sketchily drawn.”

Although Kraft’s complaint does draw attention to SunOpta documents identifying the buttermilk product as 100 percent buttermilk, Alonso said Kraft doesn’t offer enough evidence for him to infer “it is plausible, not merely possible, that SunOpta intended to deceive Kraft and induce Kraft to act based on the deception.”

“The court cannot infer ‘more than the mere possibility of misconduct,’” Alonso wrote. “SunOpta’s supplying the buttermilk blend instead of pure buttermilk product is ‘just as much in line’ with alternative explanations, such as a miscommunication, misunderstanding, internal mix-up or some other sort of honest mistake, as with fraud.”

Alonso dismissed those counts without prejudice. He did the same for the deceptive business practices claim, which Kraft did not address in its response to the motion to dismiss.

He did let stand the breach of contract claim. A status hearing on the case is set for Tuesday, Aug. 25.

“Kraft has plausibly alleged that SunOpta breached its contractual duties by supplying Kraft with a product that did not conform to Kraft’s specifications,” Alonso wrote. “Kraft specified that it was offering to purchase ‘buttermilk product;’ based in part on definitions found in federal regulations, the parties understood ‘buttermilk product’ to mean pure dried buttermilk, not a blend of buttermilk powder and other ingredients; SunOpta warranted that its product would comply with Kraft’s specifications; and Kraft suffered damages because SunOpta provided an inferior buttermilk blend instead of the pure ‘buttermilk product’ Kraft sought.”

SunOpta further tried to gain dismissal on the breach of contract claim related to statue of limitations deadlines, but Alonso noted the orders and shipments between the parties in 2013 alone are sufficiently recent so as to validate the claims dating to 1993.

Kraft is represented in the action by attorneys from the firm of Roeser Bucheit & Graham LLC, of Chicago.

SunOpta is represented by the firm of Locke Lord LLP, of Chicago and Morristown, N.J.

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Locke Lord LLP