Syngenta Litigation Sees Several New Developments

April 14, 2016
Kristine A. Tidgren

The multidistrict Syngenta litigation, which is now deep in discovery for the first bellwether trial, saw several important developments last week. Judge Lungstrum entered several orders worth noting.

Grain Exporters’ Motion to Dismiss Third-Party Complaint and Counterclaims

First, on April 4, the court granted the motion of ADM, Cargill, and Rail Transfer to dismiss the third-party claims and counterclaims Syngenta had filed against them last November. Syngenta had claimed in its third-party complaint that if Syngenta is found to have been at fault, it would be the exporters, grain elevators, and transporters of the grain who were really to blame. It was these third-party defendants, Syngenta argued, who actively “commingled” the Viptera and Duracade corn with the rest of the corn supply and transported it to the rest of the world. Syngenta’s stated:

If there is any judgment imposing liability based on the presence of Viptera in the corn supply and the alleged consequent loss of the Chinese market, any liability is placed where it should be: on the grain elevators, transporters, and exporters who indiscriminately commingled corn and corn grain as they purchased, stored, transported, resold, and exported corn, including by intentionally delivering commingled corn including a mixture of Viptera and non-Viptera corn (and corn by-products) into export channels.

In his order dismissing Syngenta’s counterclaims and third-party complaint, Judge Lungstrum did not evaluate the substance of Syngenta's claims. Rather, he ruled that they were expressly preempted by the United States Grain Standards Act (GSA), 7 U.S.C. §§ 71-87k.

The GSA, which was enacted in 1916 to implement a uniform federal grain inspection and grading system, includes an express preemption clause:

No State or subdivision thereof may require the inspection or description in  accordance  with  any  standards  of  kind,  class,  quality,  condition,  or other characteristics of grain as a condition of shipment, or sale, of such grain  in  interstate  or  foreign  commerce,  or  require  any  license  for,  or impose  any  other  restrictions  upon  the  performance  of  any  official inspection or weighing function under this chapter by official inspection personnel. Otherwise nothing in this chapter shall invalidate any law or other  provision  of  any  State  or  subdivision  thereof  in  the  absence  of  a conflict with this chapter.

The court noted that Syngenta itself conceded that the GSA “precludes the imposition of any state tort law duty that would require the grain handlers to inspect, test, or describe corn according to the ‘characteristic’ of whether or not it contains Viptera,” which “necessarily precludes any duty on anyone to segregate or channel Viptera.”

Syngenta, however, argued that this preemption did not extend to its claim that the grain exporters negligently sold and shipped the corn to China, knowing that it contained the Viptera trait. The court disagreed, finding that allowing such an exception “would impose, as a condition of shipment or sale, a requirement of inspection … in accordance with a standard concerning a characteristic of the corn.”  Specifically, the grain handlers would be required to test the corn for the presence of Viptera or ban the sale of any corn to China. This requirement, the court ruled, would violate Congress’s clear intent to preempt any state regulation of grain in foreign commerce based upon the characteristics of the grain.

Three days after ruling on the motion to dismiss, Judge Lungstrum issued another ruling, this one in Syngenta’s favor--at least for now.

Syngenta’s Motion to Strike Expanded Class Allegations

When they asserted their original class claims, the plaintiffs specifically excluded corn producers who purchased or planted Viptera or Duracde from the putative class definition. For example, the definition they asserted for their class of plaintiffs seeking relief under the Lanham Act was as follows:

The “Nationwide Corn Producers Class” consists of all corn producers in the United States who priced their corn for sale after November 18, 2013. Excluded from the Nationwide Corn  Producers  Class  are  .  .  .  corn producers who purchased or planted the Viptera® or Duracade TM corn, or any corn sold with the MIR162 and/or Event 5307 genetically engineered corn traits.

In January, the plaintiffs filed their second amended class action master complaint. In this complaint, the plaintiffs asked to include “all corn producers in the United States who priced their corn for sale after November 18, 2013” in their class definition for the Lanham Act claims. Similarly, they sought only to exclude those producers who had 1) purchased Viptera or Duracade from Syngenta or a licensed dealer and 2) signed a stewardship agreement with Syngenta from the class definition for the state law tort claims.

Syngenta filed a motion asking the court to strike these expanded class allegations. In support of its motion, Syngenta argued that the plaintiff could not assert class allegations on behalf of purchasers and users of the products because no named class representative was a purchaser or user of Viptera or Duracade. Syngenta also argued that 1) purchasers and users of Viptera were barred from asserting the state law tort claims by the economic loss doctrine, 2) the Lanham Act claims were barred as to the purchasers and users because they were consumers, and 3) the new claims were barred by the statute of limitations.

The court granted the motion to strike the expanded allegation on the grounds that the plaintiffs  did  not  identify  any  named  plaintiffs  who  would  be members of a subclass consisting of purchasers and users of Syngenta’s products. The court found that the interests of the users and purchasers were different and could be antagonistic to those of the non-purchasers. For example, the claims of the plaintiffs depended in part “on contamination of corn through cross-pollination resulting from the use of Syngenta’s products.” Consequently, the court found that none of the named plaintiffs were adequate representatives of the producers and users of Viptera or Duracade. The court stated that such a representative would be necessary because a subclass of purchasers and users would have to be carved out of the putative class. The court did, however, grant leave for the plaintiffs to amend their complaint to name plaintiffs who would be members of such a subclass. If the plaintiffs name such representatives by April 28, 2016, the court would then allow Syngenta to again seek dismissal of the individual claims for the substantive reasons asserted in its motion to strike.

We will keep you posted. The next scheduling conference is set for April 22.

 

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