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Judge Breaks Off Hershey Suit In Delaware

A federal district judge has bounced a lawsuit brought by food giant Solae Inc. as it continues to trade barbs with Hershey Canada over liability for a salmonella-tainted additive that found its way into a sundae product.

Judge Joseph Farnan Jr. of the U.S. District Court for the District of Delaware ruled against Solae on Friday, granting the defendant's motion to dismiss the amended complaint due to a lack of personal jurisdiction.

"In this case, the only contact with the state of Delaware that Solae alleges is Hershey Canada's filing of the UCC financing statement," the opinion read. "Accordingly, the court concludes that this contact is insufficient to give rise to specific jurisdiction over Hershey Canada."

From the beginning, Hershey Canada has been fighting Solae's attempts to duke it out in a Delaware court, arguing that a $20 million suit over the same issue is already unfolding in an Ontario court.

The Canadian unit of the famous chocolatier had insisted that the Delaware suit should not be allowed to go forward since the company has no operations in the state and has not done business there, according to court papers.

"Hershey Canada contends that the seven jars of allegedly-contaminated sundae product recalled from the United States as a result of the incident were recalled from Michigan, not Delaware," court documents said.

Solae, however, alleged that Hershey Canada's filing of a financial statement in Delaware tied it to the state.

Judge Farnan disagreed. "The court concludes that this contact is insufficient to give rise to specific jurisdiction over Hershey Canada," he said in his opinion. "The court concludes that the filing of a UCC financing statement is not sufficient to establish 'continuous and substantial' activity within the forum necessary to subject Hershey Canada to general personal jurisdiction."

The news marks another blow for Solae, which lost its bid last August to have the suit removed to a U.S. court after an Ontario Superior Court judge ruled that the litigation should proceed in Canada.

Ontario Superior Court Justice Harvey Spiegel ruled that the Hershey suit belonged in the Canadian courts, rejecting St. Louis-based Solae's request to defend itself against the product liability claims in its country of origin.

"Beyond the fact that it is the place of incorporation of Solae and Hershey, the plaintiff's parent company, there is very little to connect this litigation to Delaware," Justice Spiegel ruled. "On the other hand, I find this litigation has a number of strong connections with Ontario."

Hershey filed suit against Solae in 2007 after receiving an allegedly tainted shipment of soy lecithin from the supplier the year before, according to court documents.

The tainted goods forced Hershey Canada to temporarily close down its plant in Smith Falls, Ontario, and lay off hundreds of workers, according to the chocolate maker.

The company was also compelled to issue a widespread recall of several million chocolate items produced at the factory, including its well-known Symphony candy bars, court papers say.

After an internal investigation, Hershey allegedly traced back the problem to Solae, a company that is primarily owned by DuPont. Hershey fired off a negligence and breach-of-contract suit against the supplier, seeking damages for the revenue lost and the alleged injury inflicted on the Hershey's brand name due to the tainted shipment.

Given the likelihood of litigation, the company is also asking for millions of dollars in anticipation of a legal onslaught from the customers who ate the corrupted products from the factory in the fall of 2006.

Though a Solae spokesman said that the company cannot comment on issues related to current legal activities, he was quick to point out that the judge did not issue a ruling on the quality of the case itself.

"The decision of the judge in Canada relates specifically to the jurisdiction of the legal dispute," he said. "There has been no decision on the merits of the case."

The plaintiff is represented by attorneys from Crowell & Moring LLP among others. The defendant is represented by attorneys from Kirkland & Ellis LLP among others.

The case is Solae LLC v. Hershey Canada Inc., case number 07-140-JJF, in the U.S. District Court for the District of Delaware.