(CN) - General Mills deserves $1.4 million in damages after having to destroy cans of Progresso soup containing meatballs subject to a recall, the 8th Circuit ruled.
In early 2008, the Humane Society publicized footage that allegedly depicted employees at Westland Meat improperly handling cattle designated for slaughter. Though there were no reports of illness, Westland issued a voluntary recall of more than 143 million pounds of beef after talks with the U.S. Department of Agriculture and the Food Inspection Service.
In a statement describing the recall, the USDA said that the implicated beef product had been deemed "unfit for human consumption, and is, therefore, adulterated."
The recall affected retailers only, including Five Star Custom Foods, which used the beef it bought from Westland to manufacture meatballs.
Five Star has sold its meatballs and other products to General Mills for over 10 years. Meatballs subject to the recall had been delivered to General Mills, for use in Progresso soups, in fall 2007.
When Five Star notified General Mills of the recall, General Mills followed directions to destroy all of the affected soups. In the ensuing lawsuit, and a federal judge in Minneapolis granted the General Mills summary judgment as to its breach-of-contract claim against Five Star. The parties stipulated to $1.4 million in damages, plus $150,000 in attorneys' fees.
A three-judge panel of the St. Louis-based federal appeals court affirmed Monday.
Though Five Star argued that the USDA press release was hearsay, but court found otherwise.
"The press release sets out findings from an investigation pursuant to authority granted by law, and is therefore admissible," Judge William Benton wrote for the panel.
"Further, as the District Court noted, additional evidence supported the conclusion that the meat was procured in violation of regulations and that it was adulterated."
Five Star's own corporate designee even testified that Five Star's "understanding was that the beef 'had been recalled by the USDA because it didn't meet the USDA's regulations,'" according to the ruling.
Though Five Star challenged the designee's qualifications to make such a statement, the appellate panel remained firm.
"The designee certainly is competent to testify, however, as to Five Star's understanding - that is the precise function of the corporate designee," Benton wrote. "This admission illustrates that all parties had the same understanding: the recall issued because Westland did not comply with USDA regulations. The admission is particularly relevant because Five Star in turn directed General Mills (albeit at the behest of the USDA) to destroy the meatballs." (Parentheses in original.)
General Mills also did not need to prove contamination of the meatballs shipment, the court found.
"All of the recalled beef was deemed unfit for human food - that is why the recall was issued," Benton wrote. "By the terms of the contract, General Mills ordered meatballs of food grade for use in food products, which is not what it received."
The panel concluded by refusing to revive the breach of warranty claim dismissed against Five Star.
This claim is moot because both parties confirmed at oral argument "that the stipulated damages would be awarded for either breach of contract, breach of warranty, or both," according to the ruling.
The panel also affirmed the award of attorney's fees to General Mills.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.