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Southern Minnesota Beet Sugar Cooperative v. Agri Systems

United States District Court, D. Minnesota

December 17, 2019

Southern Minnesota Beet Sugar Cooperative, Plaintiff,
Agri Systems d/b/a ASI Industrial, Inc., Defendant.


          Wilhelmina M. Wright United States District Judge

         This matter is before the Court on Defendant Agri Systems's motion for partial summary judgment. (Dkt. 26.) For the reasons addressed below, Agri Systems's motion is granted in part and denied in part.


         Plaintiff Southern Minnesota Beet Sugar Cooperative (SMBSC) is a Minnesota cooperative that processes sugar beets for sugar production. Defendant Agri Systems (ASI) is a Montana corporation that designs and constructs storage facilities.

         In April 2014, SMBSC and ASI entered into a contract, the Design-Build Agreement (Agreement), for ASI to design and construct six sugar-storage silos for SMBSC's use. An integral part of the silo design is the reclaimer system, a device that empties the sugar stored within the silo. A reclaimer stirs the sugar so as to move the sugar from the perimeter to the center of the silo so that the sugar flows out of the silo during the emptying process. The type of reclaimer system at issue here is a “top-down” reclaimer, which stirs the sugar from the top of the silo while the sugar empties from the bottom. A top-down reclaimer system presents the risk that machinery will be sucked into the sugar as it is stirred.

         The reclaimer system designed by ASI for SMBSC's silos had a T-shaped walkway-the gantry-that hung from a circular rail attached to the perimeter of the silo. Attached to the reclaimer system were rotating trolleys, wheeled devices through which a large metal pin was inserted, that moved along the track. The reclaimer device hung from cables attached to the rotating trolleys that pulled the reclaimer through the sugar at the top of the silo. The trolleys that ASI selected for the reclaimer system included a pin that was parallel to the reclaimer's direction of travel, rather than perpendicular to it.

         The silo project was completed in the summer or fall of 2015. On December 30, 2015, the reclaimer system in one of the six new ASI silos fell to the bottom of the silo into the sugar. SMBSC ceased using the five remaining silos, sought alternative storage options, and subsequently found replacement storage for the sugar in Eaton, Colorado, and a market sale in Atlanta, Georgia. SMBSC shipped the sugar to those destinations and sent ASI the invoice.

         After several attempts to repair the reclaimer system and resolve the areas of dispute between the parties, SMBSC commenced this lawsuit against ASI. SMBSC's complaint alleges six counts: (I) breach of contract - failure to perform; (II) breach of express warranty; (III) breach of implied warranty; (IV) contract void as against SMBSC; (V) professional negligence; and (VI) product defect. ASI now moves for summary judgment on Counts III through VI of SMBSC's complaint.


         Summary judgment is proper when “there is no genuine dispute as to any material fact” and the moving party “is entitled to judgment as a matter of law.” Fed R. Civ. P. 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). A district court views the evidence and any reasonable inferences drawn from the evidence in the light most favorable to the nonmoving party. Krenick v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995). The moving party bears the initial burden of production. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When this burden is met, to defeat the motion, the nonmoving party must cite “particular parts of materials in the record” that support the contention that a genuine dispute of material fact exists. Fed.R.Civ.P. 56(c)(1)(A).[1]

         I. SMBSC's Breach-of-Implied-Warranty Claim (Count III)

         ASI seeks summary judgment on SMBSC's breach-of-implied-warranty claim. Under Minnesota law, “[t]o establish breach of an implied warranty of fitness for a particular purpose, a plaintiff must prove that: (1) the seller had reason to know of the buyer's particular purpose; (2) the seller had reason to know the buyer was relying on the seller's skill or judgment to furnish suitable goods; [and] (3) the buyer actually relied on the seller's skill or judgment.” Travelers Prop. Cas. Co. of Am. v. Saint-Gobain Tech. Fabrics Canada Ltd., 474 F.Supp.2d 1075, 1084 (D. Minn. 2007) (citing Willmar Cookie Co. v. Pippin Pecan Co., 357 N.W.2d 111, 115 (Minn.Ct.App. 1984); Minn. Stat. § 336.2-315). ASI does not argue that it is entitled to judgment as a matter of law based on the elements of this claim. Instead, ASI seeks summary judgment on three alternative grounds.

         First, ASI maintains that the Agreement is not governed by the Uniform Commercial Code (UCC). Rather, because the Agreement is a contract for services, not goods, the Agreement's implied warranty disclaimer controls and SMBSC's breach-of-implied-warranty claim must fail, according to ASI. Minnesota has incorporated the UCC into Minnesota laws pertaining to contracts for the sale of goods. See Minn. Stat. § 336.2-102. When a “hybrid” contract-a contract involving both the sale of goods and the provision of services-is at issue, the “predominant factor” test determines whether the contract should be treated as one for goods or for services. Duxbury v. Spex Feeds, Inc., 681 N.W.2d 380, 386 (Minn.Ct.App. 2004). This test asks “whether the predominant factor in the transaction is the transfer of goods or the provision of services, ” assessing relevant factors such as “the language of the contract, the business of the supplier, and the ‘intrinsic worth' of the goods involved.” Id. “In practice, courts generally rely on the relative costs of the services and the goods” to determine the primary purpose of the contract. Id. at 387.

         When the predominant factor test is applied here, the Agreement is a contract for goods, which is governed by the UCC. The purpose and central focus of the contract are the procurement of six sugar-storage silos, a good. The cost of materials used to construct the silos was vastly higher than the labor, engineering, and construction costs, a consideration that supports the conclusion that the Agreement is a contract for goods. These two factors outweigh ...

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