Illinois Supreme Court Justice Joy V. Cunningham
A grocery retailer can sue their wholesalers to make them pay for allegedly contributing to an E.coli outbreak traced back to contaminated cilantro without having first notified the wholesalers of the "defect," the Illinois Supreme Court ruled, because a product liability lawsuit filed by consumers allegedly harmed by the contaminated food had provided all the notice the wholesalers should have needed.
The underlying issue began in late June 2016 when the Chicago Department of Public Health started receiving complaints of E. coli contamination. An investigation traced the source to cilantro served at two Carbon restaurants and further learned Carbon’s distributor, Martin Produce, brough from two wholesalers, Jack Tuchten Wholesale Produce and La Galera Produce.
Over the next year, more than 50 people filed personal injury complaints against Carbon. After the consolidation of those cases, plaintiffs added claims against Martin. In May 2017, Carbon filed a counterclaim for contribution against Martin, and that October it filed a third-party complaint against Martin and several wholesalers, including Tuchten. In March 2018 it amended that complaint to include La Galera.
That June, the personal injury plaintiffs named every business in the supply chain as defendants, but five days later Carbon amended its third-party complaint abandoning claims against Tuchten and La Galera. In March 2020 the personal injury plaintiffs reached a global settlement.
In April 2019, Martin filed the operative complaint: a third-party complaint for contribution against Tuchten and La Galera alleging they breached implied warranties of merchantability. In July 2022, the wholesalers moved for summary judgment, arguing Martin failed to directly notify them of its claim before filing the lawsuit as the Uniform Commercial Code requires.
A March 2023 circuit court ruling denied those motions based on a finding of remaining factual disputes on the issue of notice, as Martin had argued the flurry of legal activity surrounding the E. coli situation provided all parties sufficient awareness of potential liability. But in May, the judge granted a motion to reconsider and reversed the decision.
An Illinois First District Appellate Court panel later reversed that judgment, writing “The circuit court failed to realize that although the personal injury lawsuit exception did not apply here, the consumer lawsuits could still be the vehicle by which the wholesalers in this case received actual pre-suit knowledge of the defective product. Those earlier personal injury lawsuits clearly informed all sellers within the chain of distribution, including the wholesalers, that the cilantro they sold was considered defective.”
The appeals panel remanded the complaint to circuit court, but Tuchten and La Galera asked the Supreme Court to review the summary judgment.
Justice Joy Cunningham wrote the opinion, filed May 22.
The court said its 1996 opinion, Connick v. Suzuki Motor Company, addressed the UCC notice requirement and its parameters, stating a general rule that buyers must directly notify sellers of concerns before they are allowed to pursue recovery for a warranty breach claim. But there are two exceptions: when a consumer has suffered a personal injury or when the seller is already aware of the defect.
“In this case, there is no question that Martin did not directly notify the wholesalers of its claim,” Cunningham wrote. “Nor can Martin rely on the second exception to the direct notice requirement because it is not a consumer plaintiff who suffered personal injuries. Rather, the issue before this court concerns the first Connick exception — whether the wholesalers had ‘actual knowledge’ of the alleged product defect, excusing Martin from the requirement to provide direct notice.”
Cunningham noted the appellate court’s framing of the procedural timeline, specifically the personal injury plaintiffs filing at least 10 months before Martin’s third-party complaint. The wholesalers argued allegations can’t alone confer actual knowledge, but the Supreme Court rejected that position.
“The wholesalers do not cite any authority for the proposition that actual knowledge requires something more than mere allegations of a defect, nor can they,” Cunningham wrote. “In Connick, we held only that the seller must be ‘somehow apprised of the trouble with the particular product purchased by a particular buyer.’ ”
The court further rejected the argument that actual knowledge can only come through personal observation and inspection of an alleged defect.
“In fact, there is no Illinois caselaw holding, as a matter of law, that a seller must have the opportunity to observe or inspect the defect to have actual knowledge of the defect,” Cunningham wrote. “Actual knowledge can arise from any number of sources.”
With the appellate ruling affirmed, the matter heads back to circuit court.
The wholesalers were represented before the Illinois Supreme Court by attorneys Nicholas J. Parolisi Jr. and Phillip G. Litchfield, of Litchfield Cavo LLP, of Chicago; and Timothy J. Young and Thomas M. Wolf, of Lewis Brisbois Bisgaard & Smith LLP, of Chicago.
Martin Produce was represented by attorneys Daniel J. Arnett and Mark R. Bennett, of the Arnett Law Group LLC, of Chicago.
