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Severn Peanut Co. v. Industrial Fumigant Co.
Citations: 826 F. Supp. 2d 871; 2011 U.S. Dist. LEXIS 131397; 2011 WL 5928584Docket: No. 2:11-CV-14-BO
Court: District Court, E.D. North Carolina; November 13, 2011; Federal District Court
Defendants Industrial Fumigant Co. (IFC) and Rollins filed a Motion to Dismiss against Plaintiffs Severn Peanut Co. and Meherrin Agriculture Chemical Co., who alleged negligence, negligence per se, and breach of contract following an explosion at Severn's peanut storage dome on August 29, 2009. The Defendants argued that the economic loss doctrine bars the negligence claims and that the contract excludes the damages claimed by the Plaintiffs. The court, presiding under diversity jurisdiction and applying North Carolina law, reviewed the claims after the complaint was filed on April 8, 2011, and the motion was submitted on May 23, 2011. A hearing took place on October 26, 2011. The background involves a contract between IFC and Severn for the application of fumigant Fumitoxin, which was followed by a fire and subsequent explosion that caused $20 million in damages attributed to improper pesticide use. The court indicated that under Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss is appropriate only if the plaintiffs fail to present a plausible claim for relief. In this instance, the court determined that the Plaintiffs provided sufficient facts to survive the Motion to Dismiss. North Carolina's economic loss doctrine generally prevents a party from bringing tort claims for breaches of contract, as parties are expected to allocate risks through their contractual agreements. However, the doctrine has four exceptions that allow for tort recovery: (1) when injury occurs to someone else's person or property; (2) when injury damages property of the promisee outside the contract's subject; (3) when the promisor has a legal duty to safeguard the property; or (4) in cases of willful injury or conversion of the promisee's property. The current case aligns with the second exception, as the negligent application of Fumitoxin allegedly caused damage to the promisee's property, allowing the negligence claims to proceed. In an alternative argument, defendants assert that the contractual terms exclude the damages claimed by the plaintiffs. The contract includes clauses limiting liability for consequential damages, but the plaintiffs' claims for loss of peanuts and Dome may constitute direct damages, which are not barred at this stage. Therefore, the defendants' motion to dismiss the claims is denied, allowing the plaintiffs to pursue their direct damage claims despite the contractual limitations on consequential damages. The ruling clarifies that the economic loss doctrine's applicability to services contracts remains contested; however, its application in this case does not alter the outcome of the motion.