Klingaman and Fiedler Obtain Appellate Victory for Restaurant Chain in Case Arising out of e.coli Outbreak

July 19, 2012

On June 29, 2012, the Wisconsin Supreme Court issued an opinion upholding a jury verdict finding an international restaurant chain zero percent at fault in a case arising out of an e. coli outbreak. The outbreak took place in the summer of 2000, when more than 150 patrons of two Milwaukee-area locations of the restaurant chain became ill, and a three-year-old child died, from e. coli poisoning resulting from contaminated meat processed and distributed to the restaurants by a meat processor/distributor.

Russell A. Klingaman and Noah D. Fiedler represented the restaurant chain in the defense of the affirmative claims brought by the deceased child’s surviving parents, as well as cross-claims asserted by the meat processor/distributor. Prior to the 2009 trial, the parents settled with the restaurant chain and the meat processor/distributor, leaving the restaurant chain's cross-claims for breach of warranty and consequential damages against the meat processor/distributor for trial. The jury found the restaurant chain zero percent at fault for the outbreak, and awarded it approximately $7.5 million in lost profits and consequential damages for the meat processor/distributor’s breach of implied warranty, notwithstanding limiting language in a written express guaranty.

The meat processor/distributor appealed the verdict. The restaurant chain retained Mr. Klingaman and Mr. Fiedler as appellate co-counsel, cross-appealed the court's denial of indemnity for a $1.5 million settlement payment made to the parents under Wisconsin's advance-payment statute, and sought attorneys’ fees from the meat processor/distributor under Wisconsin's version of the tort-of-another doctrine. The appellate court upheld the jury verdict and awarded the restaurant chain the $1.5 million settlement payment because the payment was not voluntary, and the jury had completely absolved the restaurant chain of fault.

The Wisconsin Supreme Court upheld the court of appeals' decision in its entirety. The Court's decision regarding implied warranty sharpened Wisconsin's applications of Uniform Commercial Code (UCC) sections relating to the exclusion or modification of implied warranties and limitation of remedies, but relied mainly on the written guaranty’s language to deny the meat processor/distributor’s claimed exclusion or limitation of remedy for implied warranty. The analysis of the restaurant chain’s equitable indemnification claim affirmed Wisconsin case law holding that a settlement payment made under threat of liability is not a "voluntary" payment. The restaurant chain obtained indemnification because it was exposed to potential liability through the wrongful acts of the meat processor/distributor, and the jury found that the restaurant chain was zero percent at fault. Finally, the Supreme Court denied the restaurant chain's request for attorneys’ fees expended in defending the parents’ claims. The restaurant chain argued that the jury found that it was a wholly innocent party to the meat processor/distributor's provision of tainted meat, and that it was drawn into litigation as a result of the meat processor/distributor's conduct. The Supreme Court concluded that because the restaurant chain had not demonstrated that the meat processor/distributor had engaged in wrongful conduct as to the restaurant chain, that "[the restaurant chain] was not an unrelated, third party notwithstanding the jury's ultimate apportionment of fault."

Hinshaw & Culbertson LLP is a U.S. based law firm with offices nationwide. The firm's national reputation spans the insurance industry, the financial services sector, and other highly regulated industries. Hinshaw also serves as counsel to the professional services sector, and provides business advisory and transactional services to clients of all sizes.