Iowa warehouse must pay Hormel $4M
Published 10:40 am Wednesday, April 18, 2012
IOWA CITY, Iowa — A federal court on Tuesday ordered an Iowa warehouse operator to pay Hormel Foods Corp. more than $4 million to cover losses to its products caused by flooding in 2008, one day after a jury ruled in favor of the food processing company.
On Monday afternoon, a federal jury in Cedar Rapids found that Crystal Distribution Services, Inc., of Waterloo breached its contract with Hormel by failing to keep its warehouse clean, store products at specified temperatures and pay Hormel for losses caused by its negligence.
The jury placed the losses suffered by Hormel at $4.02 million, and court officials Tuesday entered a judgment in Hormel’s favor for that amount. Jurors found that Hormel had already been reimbursed by its insurance company for roughly $3 million of the damage, so the company will have to pay that back with the proceeds of the lawsuit.
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“Hormel Foods is pleased with the verdict and appreciates the jury’s time and attention in this case,” Austin, Minn.-based Hormel said in a statement after the weeklong trial.
Lawyers for Crystal, which traces its history back to the late 1800s and operates three warehouses in Waterloo, did not return phone messages.
The dispute centered on the loss of Hormel products at a Crystal warehouse in Waterloo during historic flooding in 2008, when heavy rains caused damage to homes and businesses throughout eastern Iowa.
Water from the Cedar River flowed into the basement of the nearby Crystal warehouse, which had stored Hormel products for years. Products in the basement could not be moved because the elevators stopped working, and the refrigeration system that kept the products at certain temperatures eventually failed, according to court records.
The products were damaged by the water and condensation that formed on the packaging as temperatures rose. The United States Department of Agriculture, which has an inspector on site, detained the products because they were considered unsafe and had Crystal dispose of them at a sanitary landfill.
Hormel asked Crystal to cover the value of its lost products, while Crystal asked Hormel for about $100,000 for cost of disposal. Hormel filed the lawsuit in 2009, contending Crystal breached its contract.
In a brief before the trial, Hormel argued that Crystal should have installed additional sump pumps and drain plugs to keep water out, and should have moved the product to higher floors of the warehouse or to refrigerated trailers in the parking lot. Crystal’s decision to relocate its computer server to higher ground while leaving millions of dollars of product in the basement was inexplicable, Hormel argued.
Jurors indicated Monday in a note to U.S. Magistrate Judge Jon Scoles that they were deadlocked over whether Crystal was negligent. Scoles told jurors to continue deliberating, and they later ruled against the company.