The Iowa Supreme Court has ruled against Wells Dairy in a case of ice cream production interruption. Wells Dairy of Le Mars entered into a contract in January of 1999 to produce Häagen-Dazs ice cream for the Pillsbury Company.
On March 27 of 1999 there was an explosion in the refrigeration system at Wells’ south ice cream manufacturing facility in Le Mars that stopped the Haagen-Daze production. Pillsbury filed suit against Wells in July of 2000 requesting damages resulting from the explosion for breach of contract and negligence.
Then in August Pillsbury formed a joint venture with the Nestlé-U.S.A. Food Group to combine Nestlé’s ice cream division assets and Pillsbury’s Häagen-Dazs division assets. Wells Dairy then sought to have Pillsbury’s suit dismissed arguing they had no standing to assert its claims against because the company had assigned its interest to their new joint venture with Nestle.
Wells also asserted that a clause in their agreement with Pillsbury dealing with major disasters relieved them of liability for the explosion. The district court in Plymouth County ruled in favor of Wells that the disaster clause relieved them of liability, and that Pillsbury had no claim in the case as the company has sold its interest in Häagen-Dazs.
The Iowa Supreme Court overturned the district court ruling, saying a jury could interpret the Pillsbury’s joint contract to mean the Wells facility disruption claim is to be treated differently than any other assets in the agreement.
And the high court said Wells’ interpretation of the disaster clause is inconsistent with the common understanding and the purpose of such a clause. The high court has sent the issue back to the district court for further proceedings.
See the text of the complete ruling on the link below.