(CN) - Domino Foods and other sugar companies must face claims from a molasses supplier that the maker of Red Vines blames for a recall of licorice "adulterated" with lead, a federal judge ruled.
American Licorice Company sued Total Sweeteners in 2013, alleging the company sold it 1.5 million pounds of spoiled syrup.
Total Sweeteners dba Batory Foods in turn filed a third-party complaint against Imperial Sugar Co.; Imperial Distributing and a subsidiary, Savannah Sugar Refinery; and Domino Foods, alleging breach of warranty and indemnity agreements.
Imperial and Domino moved to dismiss and transfer Total Sweeteners' lawsuit, but U.S. District Judge Edward Chen heavily denied the motion Tuesday.
American Licorice, which makes red and black licorice, says it uses molasses - aka bulk refiners syrup - as "the major constituent" of its black licorice.
The California Department of Public Health (CPHP) discovered excessive lead content in the Total Sweeteners-sold syrup, which led to a total recall of Red Vines product in 2012, American Licorice said.
"On or about Aug. 21, 2012, American Licorice was visited by the California Department of Public Health and informed that at least one lot of the Red Vines black licorice was tested and that the test results showed levels of lead in excess of the limit of 0.1 parts per million (ppm) set by the United States Food and Drug Administration and CDPH for candy frequently consumed by small children," the complaint states.
American Licorice further tested its product, which showed "black licorice produced prior to May 2012 contained significantly less lead than 0.1 ppm."
It said testing proved "that the elevated level of lead was due to the molasses received from defendants, not other ingredients."
Chen refused to dismiss claims against Total Sweeteners last year, ruling a sales contract appeared "to have been prepared by defendant, and covers the period from Jan. 1, 2012 to Dec. 31, 2012."
Looking at the third-party complaint Tuesday, Chen refused to dismiss the breach of warranty and indemnity claims against Imperial.
"Imperial does not challenge that the levels of lead in the black licorice may have rendered it 'adulterated,' but argues that Total Sweeteners has not plausibly alleged that this renders the molasses 'adulterated,'" the 13-page ruling states. "In other words, the 0.1 ppm standard applies to 'candy likely to be consumed frequently by small children,' but not necessarily to molasses. The argument is meritless. The black licorice here allegedly contained levels of lead that exceeded 0.1 ppm. Since the alleged source of the elevated lead was the molasses and not any other ingredient with which the molasses was mixed, the molasses had to have contained lead exceeding 0.1 ppm."
Domino had wanted the lawsuit sent to New York, but Chen said a transfer would be "antithetical to the policy of judicial efficiency."
Imperial need not face a contribution claim, however, because Total Sweeteners did not allege that it was "party to a joint, or joint and several obligation" with Imperial, according to the ruling.
"Here the alleged obligations owed by Total Sweeteners to American Licorice is distinct from the alleged obligation owed by Imperial to Total Sweeteners," Chen wrote.
"In conclusion, the court denies Domino's request to transfer the third-party action to New York. The court dismisses without leave to amend the claim for contribution. The court denies Domino's motion on all other grounds."
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