Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 1 of 10 MANNING CURTIS BRADSHAW & BEDNAR PLLC Alan C. Bradshaw #4801 abradshaw@mc2b.com Christopher M. Glauser, #12101 cglauser@mc2b.com 136 East South Temple, Suite 1300 Salt Lake City, UT 84111 Telephone: (801) 363-5678 Facsimile: (801) 364-5678 Attorneys for Plaintiff IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH GARDEN OF LIFE, LLC, Plaintiff, v. RHEMA HEALTH PRODUCTS INC., Defendant. Case No. COMPLAINT FOR BREACH OF CONTRACT; BREACH OF IMPLIED WARRANTY OF MERCHANTABILITY; AND BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING JURY TRIAL DEMANDED INTRODUCTION 1. Plaintiff Garden of Life, LLC ( GOL ), by and through its attorneys, brings this action against Defendant Rhema Health Products Inc. ( Defendant or Rhema ), arising out of Defendant s breach of the material terms of two written agreements a January 22, 2015 Manufacturing Agreement (the Manufacturing Agreement ) and a December 31, 2014 Quality {01440587.DOCX /}
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 2 of 10 Agreement (the Quality Agreement ) by providing raw food materials contaminated with salmonella. 2. Under the Manufacturing Agreement and the Quality Agreement (together, the Agreements ), Defendant agreed to manufacture certain dietary supplement products for GOL pure and free from adulteration[,] consistent with federal regulations and as prescribed by the terms and requirements of the contractual agreements. 3. Defendant breached those obligations by supplying food products that were found to have been contaminated with the Salmonella Virchow bacterium, which is known to cause serious illness. This contamination was the result of Defendant s manufacturing process, but was unknown to GOL until the U.S. Food and Drug Administration ( FDA ) tested and confirmed the presence of Salmonella, requiring GOL to recall all contaminated products. 4. GOL hereby makes the following allegations in support of its Complaint and Demand for Jury Trial: PARTIES 5. Plaintiff GOL is a limited liability company incorporated under the laws of the State of Delaware, with its principal place of business in Palm Beach Gardens, Florida. GOL s sole member is Atrium Biotech Investments, Inc., which is organized under the laws of Delaware, with a domicile in Florida or Delaware. 6. GOL produces and sells a variety of dietary supplement products, including probiotic, protein, vitamin, and green food products. In the normal course of its business, GOL has contracted with manufacturing companies, including Defendant, to develop, manufacture, and supply GOL with dietary supplement products. {01440587.DOCX /} 2
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 3 of 10 7. Defendant Rhema Health Products Inc. is a company that is incorporated under the laws of the State of Washington, with its principal place of business in British Columbia, Canada. 8. Defendant is in the business of formulating, developing, and manufacturing nutraceutical products for third-party retailers, including GOL. JURISDICTION, VENUE, AND GOVERNING LAW 9. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. 1332, in that there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000. 10. Venue is proper in this judicial district pursuant to 28 U.S.C. 1391(a)(2) and 1391(d). 11. Per the terms of the Manufacturing Agreement, both parties agree that the Agreement is governed by and shall be construed in accordance with the laws of the State of Florida. 12. Jurisdiction exists over Rhema in this Court because Rhema manufactured and packaged the contaminated product at issue in Utah. FACTS 13. On January 22, 2015, GOL entered into the Manufacturing Agreement, a valid and legally binding written contract with Defendant (attached hereto as Exhibit A). The Manufacturing Agreement was agreed to and signed by both parties. By signing the Manufacturing Agreement, Defendant agreed to be the sole manufacturer of GOL s Raw Organic Meal Shake & Meal product ( Raw Meal ). {01440587.DOCX /} 3
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 4 of 10 14. The Manufacturing Agreement was accompanied by the Quality Agreement (attached hereto as Exhibit B), the terms and requirements of which were incorporated in the Manufacturing Agreement by reference (collectively, the Agreements ). Specifically, the Manufacturing Agreement obligated Defendant to supply products that were pure and free from adulteration and Defendant guaranteed compliance with U.S. Food and Drug Administration ( FDA ) regulations. Defendant further agreed to manufacture and package the Products strictly in accordance with the Finished Goods Specifications and Packaging Specification and in accordance with th[e] Quality Agreement.... The term Products was defined to include Raw Meal. 15. Unbeknown to GOL at the time, Rhema failed to meet its contractual obligation when it manufactured and supplied several of GOL s Raw Meal products with Organic Moringa Leaf powder contaminated by Salmonella Virchow. 16. On January 28, 2016, GOL was informed by the Centers for Disease Control and Prevention ( CDC ) that epidemiologic and laboratory evidence indicated that Raw Meal products were the likely source of an outbreak of Salmonella Virchow infections reported in several states. 17. On February 1, 2016, the Utah Public Health Laboratory isolated Salmonella from an open container of Raw Meal collected from an infected patient and confirmed that the Salmonella isolates from the Raw Meal matched the outbreak strain. 18. After extensive sampling and testing of the product and its ingredients, the FDA confirmed the presence of Salmonella Virchow in an ingredient used in the Raw Meal products that Defendant supplied to GOL. The Organic Moringa Leaf powder used by Defendant in its {01440587.DOCX /} 4
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 5 of 10 manufacture of several lots of GOL s Raw Meal was determined to be the source of the contamination. 19. Upon learning this information, GOL acted reasonably and appropriately by promptly issuing two product recalls, on January 29, 2016 (hereinafter January 29, 2016 Recall ) and February 12, 2016 (hereinafter February 12, 2016 Recall ) respectively, in order to protect public health. The recall covered sixty-one lots of Raw Meal Organic Shake & Meal Original, Chocolate, Vanilla and Vanilla Chai products that were at risk of containing Salmonella and that were supplied by Defendant. 20. FDA classified this recall as a Class I recall, meaning that there was reasonable probability that the use of, or exposure to, a violative product will cause serious adverse health consequences or death. As noted in GOL s February 12 Recall, [h]ealthy persons infected with Salmonella often experience fever, diarrhea (which may be bloody), nausea, vomiting and abdominal pain. Salmonella infection, [i]n rare circumstances,... can result in the organism getting into the bloodstream and producing more severe illnesses such as arterial infections (i.e., infected aneurysms), endocarditis and arthritis, and can lead to death. 21. The recall was a necessary corrective action undertaken by GOL in order to protect public health and mitigate any losses from selling the contaminated product that Defendant had supplied and that GOL accepted without awareness of contamination. 22. Products resulting in a recall classified by the FDA as a Class I recall are not merchantable and should not have been supplied to GOL. 23. Defendant was the sole supplier of GOL s Raw Meal, which resulted in the Class I recall. {01440587.DOCX /} 5
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 6 of 10 24. Accordingly, Defendant materially breached several provisions of the Manufacturing Agreement and Quality Agreement, including, but not limited to Section IV.1 of the Manufacturing Agreement, which included the requirement that the products be pure and free from adulteration[.] 25. Moreover, the products supplied under the Agreements were subject to the implied warranty of merchantability, which Defendant, a merchant of goods of this kind, breached by supplying contaminated products. See, e.g., Fla. Code 672.314-672.316. 26. As a result of Defendant s manufacture and supply of contaminated Raw Meal, resulting in a Class I recall, GOL suffered extensive commercial injury, including, but not limited to, monetary and reputational damages, for which it now seeks to recover from Defendant. COUNT I: Breach of Contract 27. GOL repeats and realleges the allegations contained in paragraphs above as if fully set forth herein. 28. On January 22, 2015, GOL entered into the valid and binding written Agreements with Defendant. The Manufacturing Agreement, incorporating the Quality Agreement by reference, was signed by representatives of Defendant and GOL. 29. Based on the foregoing, by selling contaminated products to GOL, Defendant breached the terms of the Agreements, including, but not limited to, the provisions set forth above. 30. The terms breached by Defendant were material terms and went to the essence of the parties Agreements. {01440587.DOCX /} 6
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 7 of 10 31. As a result of Defendant s breach of the Agreements, GOL sustained extensive commercial injury, including, but not limited to, monetary damages, loss of goodwill and foreseeable reputational harm, which is ongoing. COUNT II: Breach of Implied Warranty of Merchantability, Fla. Code 672.314-672.316 32. GOL repeats and realleges the allegations contained in paragraphs above as if fully set forth herein. 33. On January 22, 2015, GOL entered into the valid and binding written Agreements with Defendant. The Manufacturing Agreement, incorporating the Quality Agreement by reference, was signed by representatives of Defendant and GOL. 34. Defendant knew, or had reason to know, that GOL intended to sell the Raw Meal to consumers and that the particular purpose of the Raw Meal that GOL required was to be ingested by consumers. 35. Defendant is a merchant with respect to nutraceutical products like Raw Meal. Defendant knew, or had reason to know, that GOL would rely on its skill or judgment in furnishing suitable Raw Meal product. 36. Because the lots of Raw Meal that Defendant supplied to GOL were contaminated with Salmonella, such goods were not merchantable or fit for human consumption. 37. By providing GOL with Raw Meal that was not merchantable or fit for human consumption, Defendant breached an implied warranty of merchantability. 38. GOL did not become aware and had no reason to be aware that the products that Rhema supplied were contaminated with Salmonella until after those products were sold to consumers. Upon learning of the contamination, GOL promptly recalled the contaminated products to avoid illness and mitigate damages. {01440587.DOCX /} 7
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 8 of 10 39. As a result of Defendant s breach of the implied warranty of merchantability, GOL sustained extensive commercial injury, including, but not limited to, monetary damages and reputational harm, which is ongoing. COUNT III: Breach of Implied Covenant of Good Faith and Fair Dealing 40. GOL repeats and realleges the allegations contained in paragraphs above as if fully set forth herein. 41. On January 22, 2015, GOL entered into the valid and binding written Agreements with Defendant. The Manufacturing Agreement, incorporating the Quality Agreement by reference, was signed by representatives of Defendant and GOL. 42. The Agreements contained an implied covenant of good faith and fair dealing that required the parties to act fairly and in good faith with each other, and to act reasonably to fulfill the intent of the parties to the Contract. 43. Implied in the Agreements was the obligation of Defendant to adhere to each express provision and requirement in the Agreements and to provide GOL with merchantable product which was fit for human consumption and pure and free from adulteration. 44. By failing to adhere to the requirements of the Agreements in the manufacture or supply of Raw Meal, and by providing GOL with contaminated product, thereby breaching the express provisions of the Agreements, Defendant failed to act in good faith with GOL and failed to act reasonably to fulfill the intent of the parties Agreement. Thus, Defendant breached the implied covenant of good faith and fair dealing. 45. As a result of Defendant s breach of the implied covenant of good faith and fair dealing, GOL sustained extensive commercial injury, including, but not limited to, monetary damages and reputational harm, which is ongoing. {01440587.DOCX /} 8
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 9 of 10 REQUESTS FOR RELIEF WHEREFORE, Plaintiff prays for judgment against Defendant as follows: 1. Awarding compensatory and continuing damages in favor of plaintiff against defendant for all damages sustained as a result of defendant s wrongdoing, in amounts to be proven at trial; 2. Awarding plaintiff its reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and 3. Awarding such other and further relief as the Court may deem equitable and just. {01440587.DOCX /} 9
Case 2:16-cv-01222-BCW Document 2 Filed 12/02/16 Page 10 of 10 JURY DEMAND Plaintiff hereby demands a jury trial on all issues in this matter so triable. Dated: December 2, 2016 Respectfully submitted, MANNING CURTIS BRADSHAW & BEDNAR PLLC /s/ Alan C. Bradshaw Alan C. Bradshaw Christopher M. Glauser Attorneys for Plaintiff Jeffrey A. Simes Joanne Gray Michael K. Murray GOODWIN PROCTER LLP The New York Times Building 620 Eighth Avenue New York, NY 10018 Phone: (212) 813-8800 Fax: (212) 355-3333 JSimes@goodwinlaw.com JGray@goodwinlaw.com Mmurray@goodwinlaw.com Amanda Russo GOODWIN PROCTER LLP 901 New York Avenue N.W. Washington, DC 20001, Suite 9 Phone: (202) 346-4000 Fax: (202) 346-4444 ARusso@goodwinlaw.com Attorneys for Plaintiff {01440587.DOCX /} 10