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IN RE STARLINK CORN PRODUCTS LIABILITY LITIGATION

July 11, 2002

IN RE STARLINK CORN PRODUCTS LIABILITY LITIGATION THIS DOCUMENT IS APPLICABLE TO MARVIN KRAMER, ET AL, PLAINTIFFS,
V.
AVENTIS CROPSCIENCE USA HOLDING, INC., ET AL, DEFENDANTS.



The opinion of the court was delivered by: James B. Moran, Senior United States District Judge

        MEMORANDUM OPINION AND ORDER

This controversy arises from the discovery of genetically modified corn in various food products. Plaintiffs Marvin Kramer, Mitchell and Claude Corbin, Corbin Farms LLC, Clint Killin, Charles Dupraz, William Furlong, Jemar, Inc., Marvin Luiken, Keith Mudd, Edward Olsen, Gerald Greiger, Verlon Ponto, Jon Untiedt, David Christoffer, Alan Roebke, Mica Schnoebelen, Joseph and Ardene Wirts, Southview Farms, Dennis and Donald Olsen, Gordon Stine, Don Sutter, and Bartt McCormack d/b/a Buford Station Farms allege that defendants Aventis CropScience USA Holdings, Inc. (Aventis) and Garst Seed Company (Garst) disseminated a product that contaminated the entire United States' corn supply, increasing their costs and depressing corn prices. Before us are fifteen separately filed cases, consolidated here for pretrial purposes by the Panel for Multidistrict Litigation. See 28 U.S.C. § 1407. Plaintiffs have filed a 57-count master second amended consolidated class action complaint, alleging common law claims for negligence, strict liability, private nuisance, public nuisance and conversion on behalf of a nationwide class of corn farmers against Garst, and on behalf of ten statewide classes against Aventis, as well as statutory claims against Aventis under the Tennessee Consumer Protection Act of 1997, Tenn. Code Ann. §§ 47-18-101 et seq., and the North Carolina Unfair Trade Practices Act N.C. Gen. Stat § 75-1.1 (1999). Defendants filed a motion to dismiss, arguing that the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), 7 U.S.C. § 136 et seq., preempts plaintiffs' state law claims, that the economic loss doctrine bars any recovery, and that the complaint fails to state a claim under any of plaintiffs' purported legal theories. For the following reasons, defendants' motion to dismiss is granted in part and denied in part.

BACKGROUND

Corn replicates by the transfer of pollen from one corn plant to another, including cross-pollination from one breed to another. Once airborne, corn pollen can drift over considerable distances, meaning that different corn varieties within a farm, and from neighboring farms, regularly cross-breed. With few exceptions, there are not procedures in place to segregate types of corn. Different corn breeds within an individual farm are commingled at the harvesting stage. Corn from hundreds of thousands of farms is then further commingled as it is gathered, stored and shipped through a system of local, regional and terminal grain elevators. Elevators, storage and transportation facilities are generally not equipped to test and segregate corn varieties. The commingled corn is then marketed and traded as a fungible commodity.

In light of these general practices in the corn Industry, the EPA required special procedures with respect to StarLink. These included mandatory segregation methods to prevent StarLink from commingling with other corn in cultivation, harvesting, handling, storage and transport, and a 660-foot "buffer zone" around StarLink corn crops to prevent cross-pollination with non-StarLink corn plants. The limited registration also made Aventis responsible for ensuring these restrictions were implemented, obligating it (a) to inform farmers of the EPA's requirements for the planting, cultivation and use of StarLink; (b) to instruct farmers growing StarLink how to store and dispose of the StarLink seeds, seed bags, and plant detritus; and (c) to ensure that all farmers purchasing StarLink seeds signed a contract binding them to these terms before permitting them to grow StarLink corn.

StarLink was distributed throughout the United States from approximately May 1998 through October 2000. The limited registration initially limited StarLink cultivation to 120,000 acres. In January 1999, Aventis petitioned the EPA to raise this limit to 2.5 million acres. The EPA agreed, subject to an amended registration that required Aventis to

(a) inform purchasers (i.e. "Growers") at the time of StarLink seed corn sales, of the need to direct StarLink harvest to domestic feed and industrial non-food uses only;
(b) require all Growers to sign a "Grower Agreement" outlining field management requirements and stating the limits on StarLink corn use;
(c) deliver a Grower Guide, restating the provisions stated in the Grower Agreement, with all seed;
(d) provide all Growers with access to a confidential list of feed outlets and elevators that direct grain to domestic feed and industrial uses;
(e) write to Growers prior to planting, reminding them of the domestic and industrial use requirements for StarLink corn;
(f) write to Growers prior to harvest, reminding them of the domestic and industrial use requirements for StarLink corn;
(g) conduct a statistically sound follow-up survey of Growers following harvest, to monitor compliance with the Grower Agreement.

Over this 29-month period, StarLink cultivation expanded from 10,000 acres to 350,000 acres.

In October 2000, after numerous reports that human food products had tested positive for Cry9C, a wave of manufacturers issued recalls for their corn products. On October 12, 2000, Aventis, at EPA's urging, applied to cancel the limited registration, effective February 20, 2001. Fear of StarLink contamination nonetheless continues to affect corn markets. Many U.S. food producers have stopped using U.S. corn, replacing it with imported corn or corn substitutes. South Korea, Japan and other foreign countries have terminated or substantially limited imports of U.S. corn. Grain elevators and transport providers are now mandating expensive testing on all corn shipments.

Plaintiffs allege that the widespread StarLink contamination of the U.S. corn supply is a result of defendants' failure to comply with the EPA's requirements. Aventis did not include the EPA-mandated label on some StarLink packages, did not notify, instruct and remind StarLink farmers of the restrictions on StarLink use, proper segregation methods and buffer zone requirements, and did not require StarLink farmers to sign the obligatory contracts. Prior to the 2000 growing season Aventis allegediy instructed its seed representatives that it was unnecessary for them to advise StarLink farmers to segregate their StarLink crop or create buffer zones because Aventis believed the EPA would amend the registration to permit StarLink use for human consumption. In July 2001, however, an EPA Scientific Advisory Panel reaffirmed its previous position on StarLink's allergenic qualities. Further, the FDA has declared StarLink to be an adulterant under the Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq.

DISCUSSION

Fed. R. Civ. P. 8(a)(2) only requires "a short and plain statement of the claim showing that the pleader is entitled to relief." When deciding a Rule 12(b)(6) motion we must assume the truth of all well-pleaded factual allegations, making all possible inferences in the plaintiff's favor. Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund. 25 F.3d 417, 420 (7th Cir. 1994). We will dismiss a claim only if it appears "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 4546 (1957).

I. Preemption

FIFRA, 7 U.S.C. § 136 et seq., regulates the use, sale and labeling of pesticides such as the Cry9C protein found in StarLink corn. The EPA approved StarLink's label and issued a limited registration for it to be distributed. Defendants argue that FIFRA preempts plaintiffs' state law claims.

FIFRA does not preempt all state laws respecting pesticides. Wisconsin Public Intervenor v. Mortier, 501 U.S. 597, 614 (1991). The statute expressly authorizes states to regulate pesticide use. 7 U.S.C. § 136v(a). But it also prohibits states from imposing any labeling requirements beyond those imposed by the EPA. 7 U.S.C. § 136v(b).

The Supreme Court has made clear that "requirements" includes both positive law, in the form of statutory and regulatory obligations, and any common law standards which could give rise to civil damages. Cippolone v. Liggett Group, Inc., 505 U.S. 504 (1992) (interpreting preemption clause in Public Health Cigarette Smoking Act of 1969, 15 U.S.C. § 1331-1340). FIFRA uses nearly identical language to the Cigarette Act, and its preemptive effect is equivalent. Shaw v. Dow Brands, Inc., 994 F.2d 364, 370-71 (7th Cir. 1993).*fn2 FIFRA therefore preempts any claims based on the inadequacy of StarLink's label or defendants' failure to warn StarLink farmers.

Moreover, plaintiffs cannot avoid preemption by artful pleading. We must scrutinize their allegations to ensure that they are not disguised failure-to-warn claims. See, e.g., Greiner v. Vermont Log Building, 96 F.3d 559, 564 (1st Cir. 1996). If a claim amounts to a constructive challenge to the EPA-approved label, FIFRA preempts it. Courts have, however, recognized certain types of claims as falling outside of FIFRA. See, e.g., Worm v. American Cyanamid Co. (WormI) 970 F.2d 1301, 1308 (4th Cir. 1992) (state remedy for failure to comply with EPA requirements); Lowe v. Sporicidin Int'l, 47 F.3d 124, 130 (4th Cir. 1995) (off-label representations inconsistent with the label); New York State Pesticide Coalition v. Jorling, 874 F.2d 115, 119 (2d Or. 1989) (failure to warn third parties); National Bank of Commerce v. Dow Chemical Co., 165 F.3d 602, 609 (8th Cir. 1999) (design defects). Portions of the complaint implicate each of these, so we discuss them in turn.

First, plaintiffs allege that defendants sold StarLink seeds without the EPA-required label, and otherwise failed to comply with the limited registration's terms. There is no federal private right of action to redress FIFRA violations. Only the EPA has standing to enforce it. No Spray Coalition, Inc. v. City of New York, 252 F.3d 148, 150 (2d Cir. 2001). FIFRA does not, however, prevent states from creating civil remedies for violating the federal standard. See, e.g., Lowe, 47 F.3d at 128; MacDonald v. Monsanto, 27 F.3d 1021, 1024 (5th Cir. 1994). The statute only prohibits additional requirements, not identical ones. 7 U.S.C. § 136v(b). Although potential civil liability obviously increases the manufacturer's incentive to comply, if the state is merely adopting as its standard of care that which is already required under federal law, no additional obligation is imposed.*fn3 FIFRA, therefore, does not preempt plaintiffs' negligence per se claims.

Next, plaintiffs assert that defendants made voluntary statements regarding StarLink beyond those on the EPA-approved label that contributed to the contamination. Claims based on off-label representations are preempted if they merely reiterate information contained in the label. Lowe, 47 F.3d at 130. They are not preempted, however, to the extent the representations substantially differ from the label. Id.*fn4 The complaint alleges that Aventis instructed seed representatives to tell farmers that StarLink was safe for human consumption and that the EPA was going to issue a tolerance for Cry9C in food products. Such statements directly contradict the approved label and therefore fall within Lowe.

Plaintiffs also advance the theory that defendants failed to adequately inform those who handled corn further down the distribution chain, e.g., grain elevator operators and transport providers, of the required warnings. Courts have noted the distinction between failure to warn the initial purchaser and failure to warn third parties.

FIFRA "labeling" is designed to be read and followed by the end user. Generally it is conceived as being attached to the immediate container of the product in such a way that it can be expected to remain affixed during the period of use. . . . By contrast, the target audience of the [state] notification program is those innocent members of the general public who may unwittingly happen upon an area where strong poisons are present as well as those who contract to have pesticides applied.

New York State Pesticide Coalition, 874 F.2d at 119; see also Mortier, 501 U.S. at 603 (upholding regulation requiring placards be posted to notify third parties of pesticide use). Parties who handle StarLink corn down the supply chain will not see the label on the original seed bag and, consequently, will not know that a particular batch of corn is unfit for human consumption and must be segregated and handled differently. States can reasonably require that pesticide manufacturers share the same EPA-approved warnings with parties beyond the immediate purchaser. Similar to permitting state causes of action for directly violating FIFRA, because the state standard here would mirror the federal one in substance, it does not interfere with the EPA's prerogative with respect to labeling and does not constitute an additional requirement.

Finally, plaintiffs allege that StarLink corn is a defective product. They assert that, as currently designed, StarLink cannot be safely used for its intended non-food purposes because it will inevitably commingle and cross-pollinate with the food supply. The EPA's approval of a product's FIFRA label does not constitute a finding or an endorsement that its design is safe. See generally Jeffers v. Wal-Mart Stores, Inc., 171 F. Supp.2d 617, 623-24 (S.D.W. Va. 2001). Here we must be careful to determine whether their allegations are really challenging the product design, which is permissible, or effectively challenging the accompanying warnings, which would be preempted. The test most frequently articulated is, when confronted with a type of harm, would the manufacturer change the design or the label to prevent its recurrence? Worm v. American Cyanamid Co. (Worm II), 5 F.3d 744, 747-48 (4th Cir. 1993).

Defendants' failure to prevent commingling has nothing to do with StarLink's design. Plaintiffs acknowledge that, although it is not the general practice, there are means to segregate types of corn such that they maintain their identity.*fn5 It is a matter of ensuring that everyone who handles the corn adheres to certain procedures. Confronted with commingling, a manufacturer would more likely change the warnings than the design. This constitutes a failure to warn, not a design defect, and therefore FIFRA preempts it.

The allegations regarding StarLink's tendency to cross-pollinate with non-StarLink corn can be read two ways. One is that defendants should have known that the 660-foot buffer zone was insufficient to prevent cross-pollination. The 660-foot requirement was incorporated in the limited registration and would have been communicated to farmers by the EPA-approved label. A state standard of care demanding more than a 660-foot buffer would be an additional requirement in the form of a different warning. FIFRA preempts such a claim.

It is also possible to view plaintiffs' cross-pollination charge as asserting that no buffer zone could prevent it. The theory posits that given the way corn reproduces, cross-pollination between corn targeted for non-food uses and corn intended for the human food supply is inevitable. Defendants, therefore, had a duty to design insect-resistant corn such that it is fit for human consumption — use a protein that is safer than Cry9C. This still attacks the label because it is premised on the idea that the buffer zone warning was not sufficient to prevent cross-pollination. The EPA approved the label with the knowledge that StarLink was unfit for human consumption. It deemed the 660-foot buffer zone an adequate warning to preserve the integrity of the food supply. Plaintiffs' defect claims implicitly challenge this warning and are therefore preempted.

In summary, plaintiffs may proceed on the theory that defendants (1) violated duties imposed by the limited registration; (2) made representations to StarLink growers that contradicted the EPA-approved label; and (3) failed to inform parties ...


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