(CN) - A licorice maker that had to issue a total recall can pursue claims that its supplier and distributor sold it tainted molasses, a federal judge ruled, citing "ambiguous" conduct.
American Licorice Co. sued Total Sweeteners and Batory Foods some months ago over 1.5 million pounds of molasses it bought from Batory for black licorice. Total Sweeteners is a manufacturer, Batory a distributor.
Molasses, aka bulk refiners syrup, is "the major constituent" of black licorice, American Licorice claimed.
"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 original complaint states.
American Licorice said it was then "compelled" to recall the candy. More testing allegedly showed "black licorice produced prior to May 2012 contained significantly less lead than 0.1 ppm."
"Testing of all ingredients contained in Red Vines black licorice showed that the elevated level of lead was due to the molasses received from defendants, not other ingredients," the complaint stated.
"As a result of the testing, and based on the permissible limit or 0.1 ppm of lead for candy, American Licorice was compelled to expand its recall to include all Red Vines black licorice available for sale and in possession of consumers throughout the United States, including packaging containing mixed red and black licorice, and to halt production of Red Vines black licorice to ensure that all relevant product was removed from commerce and not available for consumption."
U.S. District Judge Edward Chen refused to dismiss the lawsuit Tuesday.
Though the molasses maker and distributor argued a February 2012 purchase order prepared by American Licorice was never adopted as part of a December 2011 contract between the parties, Chen said that "the parties' actions and intent were ambiguous, and a jury could reasonably infer that there was an intent that the purchase order modify the contract, but a jury could also reach the contrary conclusion."
The sales contract "appears to have been prepared by defendant, and covers the period from Jan. 1, 2012 to Dec. 31, 2012," according to the 18-page ruling.
"The contract provides a per pound price for the molasses, and specifies a total quantity of 1,500,000 pounds. It does not specify a delivery schedule, though there is a note stating 'Two truckload per order please,' and another indicating '[e]ven draws across contract period required unless otherwise specified.'"
Chen added: "After plaintiff sent the purchase order, defendant delivered molasses to plaintiff's facility in Union City, Calif., in accordance with the quantity, shipment, and price terms in that order, and thereafter billed plaintiff. Plaintiff subsequently sent defendant additional orders using the same form purchase order, and defendant continued to provide periodic shipment of molasses through at least August 2012. From February through August 2012, defendant was the only molasses supplier to plaintiff's Union City location, and the only supplier of molasses for the black licorice products that are the subject of this suit."
Chen said the facts in the case "appear to be largely undisputed," and again called the parties' conduct "ambiguous."
"Though the underlying facts in this case appear to be largely undisputed, the court finds the parties' course of conduct ambiguous as to whether defendant's shipment of molasses was simply pursuant to the original sales contract, or whether it was in response to plaintiff's purchase order and implicitly indicated assent to the terms contained therein," the ruling states. "Particularly given that the terms in the purchase order in many places directly contradict the terms of the sales order, this court declines to find, as a matter of law, that defendant's action in shipping the molasses evinces a clear intent to modify the contract by adopting the terms in the purchase order. Since conflicting inferences as to the parties' intent could reasonably be drawn from the parties' course of conduct, the court therefore finds this to be a question of fact appropriate for resolution by the jury. As such, it is not a proper issue for resolution on a motion to dismiss."
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.