Court Affirms $2 Million Supply Chain Damages Award from 2008 Contaminated Beef Recall
A federal court in Minnesota has determined that General Mills Operations,
LLC was entitled to an award of prejudgment interest of 10 percent per year
from the date it provided a written notice of claim to the company that
supplied it with contaminated beef products subject to a recall in 2008. Gen.
Mills Operations, LLC v. Five Star Custom Foods, Ltd., No. 10-15 (D.
Minn., decided February 24, 2012). According to the court, the only matters
in dispute in this contract action were whether General Mills’ May 27, 2008,
letter informing the defendant that it had incurred losses of at least $1.4
million constituted a “written notice of claim” under Minnesota’s prejudgment
interest statute and the appropriate interest rate to apply.
While the letter indicated that costs could continue to accrue and did not
include evidentiary support, it did demand prompt payment of $1.4 million
“in full settlement of this issue.” The court found this sufficient as a written
notice of claim, citing cases in which “courts repeatedly have held that
prejudgment interest under Section 549.09 is available ‘irrespective of a
defendant’s ability to ascertain the amount of damages for which he might be
liable.’”
Regarding the interest rate, the statute was apparently amended in August
2009 to provide a rate of 10 percent per year for all judgments in excess of $50,000, with an effective date of August 1, 2009, applicable “to judgments and awards finally entered on or after that date.” Before amendment, the
interest rate was the “secondary market yield of one year United States treasury
bills.” The court found a split of authority in the state on its application.
The defendant urged the court to calculate interest on the judgment at
the U.S. Treasury rate for the time period before August 1, 2009, and at 10
percent thereafter. At least one Minnesota court of appeals had applied the
law this way. Several others, however, used the prejudgment interest rate of
10 percent to periods both before and after August 1, 2009, for judgments
entered after that date. The court predicted that the state’s high court would
adopt the latter interpretation and entered an order awarding $552,000 in
prejudgment interest. Added to the stipulated damages and attorney’s fees,
the final award was nearly $2.2 million.
