San Francisco partner Mordecai D. Boone and associate Kristine M. Futoran recently won an appeal on behalf of Harris Freeman & Co., Inc., a spice wholesaler and importer. The First District Court of Appeal granted Harris Freeman's appeal of the trial court's order denying its Motion to Compel Arbitration in the underlying breach of contract and business tort action. The Plaintiff and Appellee, Union International Food Company, a retail spice product manufacturer, alleges that defendant and appellant Harris Freeman sold it contaminated whole white pepper, which Union then ground and incorporated into its own commercial spice products. Harris Freeman strongly disputed that its pepper was contaminated in any way. In 2009, Union became the target of a state and federal agency investigation of a multi-state Salmonella Rissen outbreak, which eventually resulted in the recall and embargo of Union's products. Union thereafter filed its complaint alleging that Harris Freeman provided Union with contaminated whole white pepper, and therefore, is purportedly responsible for Union's multi-million dollar business losses.
However, the parties had a long-standing relationship for the sale and purchase of spices, all pursuant to identical contracts each including an arbitration provision, and on which Union based its claims. Accordingly, Harris Freeman moved to compel arbitration. The Alameda County Superior Court denied its motion holding that Harris Freeman's contracts failed to sufficiently incorporate the arbitration rules by reference and were possibly unconscionable.
Harris Freeman appealed, arguing the parties' contracts were not unconscionable considering the commercial context and facts and that the arbitration terms were sufficiently incorporated by reference. The Court of Appeal granted Harris Freeman's appeal, reversing the trial court's order denying its Motion to Compel Arbitration. It held that Harris Freeman produced "overwhelming evidence" that it provided Union with its contracts containing the relevant arbitration provision, and that the arbitration terms and rules were incorporated by reference properly.
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