Neighboring farmers have Lanham Act standing where false ads allegedly prompted pesticide use

In re Dicamba Herbicides Litig., MDL No. 2820, 2019 WL
460500 (E.D. Mo. Feb. 6, 2019)
Plaintiffs, twenty-one soybean farmers from eight states (Arkansas,
Illinois, Kansas, Mississippi, Missouri, Nebraska, South Dakota, and Tennessee),
alleged that their soybean crops were damaged by the herbicide dicamba when
neighboring farmers planted genetically modified dicamba-resistant seeds and sprayed
that crop with dicamba. USDA permitted the sale of the dicamba-resistant seeds
in January 2015, but the plaintiffs argue that commercial sale was wrongful
because the EPA hadn’t yet approved a dicamba herbicide for use over the top of
crops grown from those seeds. (The seeds could allegedly tolerate other
herbicides, like Monsanto’s Roundup.)  Allegedly,
the amount of dispersal of an herbicide varies and there are other herbicides
that wouldn’t have drifted in the same way; dicamba had previously been a
problem because of its volatility and propensity to drift, sometimes taking
other herbicides with it. In 2017, the EPA approved new low-volality dicamba
herbicides for over-the-top crop use during the growing season, XtendiMax and
Engenia.
However, the plaintiffs alleged that the new herbicides are “unsuitable
for in-crop use because they too, like the earlier versions of dicamba, are
volatile and prone to move off-target and damage nearby, sensitive crops.” This
is allegedly a further win for defendants insofar as it
induces farmers to defensively purchase dicamba-resistant seed to avoid
damages.
I’m here for the Lanham Act claim, though the other claims
are also interesting. On causation, Monsanto argued that it wasn’t the source
of the old, pre-2017 herbicide, but the causation theory was that “Monsanto
marketed and sold its dicamba-resistant seed to third-party farmers knowing
that they would spray dicamba that may harm nearby, non-resistant crops.” The
only reason to buy and plant the seeds, the plaintiffs alleged, was to use it
with dicamba herbicides, whether new or old. 
The manufacturer of the herbicide wasn’t the key to causation.
Defendants challenged plaintiffs’ Lanham Act standing. The
alleged false advertising was that the Xtend seeds could be safely employed
utilizing over-the-top application of dicamba herbicides and that the dicamba
would not drift.  Lexmark requires a plaintiff to plead: (1) an injury within the
“zone-of-interest,” that is, “to a commercial interest in sales or business
reputation,” (2) that was “proximately caused by the defendant’s
misrepresentations.” Plaintiffs need not be defendants’ competitors to state a
claim. The plaintiff must be a commercial actor suffering commercial injuries
instead of being a “consumer who is hoodwinked into purchasing a disappointing
product.” That was sufficiently pled here: the plaintiffs were commercial
actors, not consumers of defendants’ products, and thus they fell within the Lanham
Act’s zone of interest.
Monsanto argued that there was no standing for 2016 claims
because it was illegal for third party farmers to use dicamba herbicides with
its Xtend seeds in 2016, so the intervening criminal conduct severed the causal
chain connecting Monsanto’s misrepresentations to any wrongdoing. That is not an
automatic Article III rule; standing was sufficiently alleged.
Proximate cause: Monsanto argued that the plaintiffs were at
best indirect victims of the allegedly false advertising. But consumer
deception is always an intervening step before the harm materializes in a false
advertising case (and in a Lanham Act case it materializes to a third party,
usually the competitor who’s lost a sale as a result, even if it also
materializes as harm to the consumer). Monsanto argued that there had to be harm
to a consumer for there to be proximate cause, but the court recognized that
this made no sense.  (The Lanham Act should
be triggered where there is false advertising that changes consumer behavior—if
the plaintiff’s product was exactly the same as the defendant’s and exactly the
same price and there was nothing better on the market, a misrepresentation of
superiority that diverted purchasers to the defendant wouldn’t necessarily harm
those purchasers in a tangible way, setting aside the moral disrespect of fraud,
but it distorts the competitive environment and harms other market actors, who
are the targets of the Lanham Act’s solicitude per Lexmark.)  Even if the direct
victims of Monsanto’s fraud ended up with crops that were fine, plaintiffs
still alleged commercial injury because Monsanto’s misrepresentations caused
third parties to use dicamba that destroyed plaintiffs’ crop, so plaintiffs had no soybeans to sell.
Interestingly, the fact that plaintiffs successfully pled a
Lanham Act claim seemed to comfort the court in concluding that they couldn’t
bring tort claims based on ultrahazardous activity—that concept usually involves
only the actual use of the product in question, not promotion of its use.  “Ultimately, plaintiffs’ claim is that
“lying” about the safety of an ultrahazardous activity—the spraying of
dicamba—is itself an ultrahazardous activity. That claim is certainly
actionable, but not under the ultrahazardous activity doctrine.” 
So too with trespass and nuisance—Monsanto’s extensive seed
licensing agreement with farmers did not allow it to terminate the agreement
for misuse of dicamba, so they didn’t control whether the dicamba particles migrated
to plaintiffs’ land. There was no “ongoing” promotion, aiding, abetting,
assisting, or contributing to the trespass/nuisance, and no need to hybridize a
cause of action using trespass/nuisance plus misrepresentation theories. 
Failure to warn claims/consumer fraud act claims under the
laws of Illinois and Nebraska: Monsanto argued that FIFRA preempted these
claims.  Plaintiffs argued that FIFRA
preempts labeling-based claims, but that their claims were based in part on
non-labeling material, such as in-person discussion and websites (Facebook,
Twitter, Instagram, YouTube, Snapchat, Pinterest, and Linked In).  (Today I learned that Monsanto or its agents
allegedly use Snapchat.)  Though a few
cases hold otherwise, the court approved a more literal reading of the preemption
statute, limiting its reach to labeling and packaging.
Second, plaintiffs argued that they weren’t seeking requirements
that are “in addition to or different from” FIFRA, as required for preemption. FIFRA
bars “misbranding,” which occurs if a label contains a “false or misleading”
statement or if it “does not contain adequate instructions for use, or if its
label omits necessary warnings or cautionary statements.” Although FIFRA doesn’t
provide a private cause of action for misbranding, states are allowed to do
so.  The state law requirement need only
be substantively identical; it need not be phrased in the identical language.  To the extent that plaintiffs alleged that
the labels failed to contain instructions that would, if followed “prevent harm
to the environment,” that did go beyond FIFRA, which only requires instructions
that will, if followed, prevent “unreasonable harm,” so their claim was
preempted to a tiny extent, but there was still room for their failure to warn
claims.
The court reached a similar result on Nebraska Consumer
Protection Act and Illinois Consumer Fraud Act claims. However, the court
dismissed the Nebraska statutory claim because of its regulatory state harbor.
Both states’ laws have safe harbors; Illinois says: “Nothing in this Act shall
apply to any of the following: (1) Actions or transactions specifically
authorized by laws administered by any regulatory body or officer acting under
statutory authority of this State or the United States.”  Although Monsanto’s advertising claims were
submitted to the EPA as part of EPA registration procedures, “exemption is not
available for statements that manage to be in technical compliance with federal
regulations, but which are so misleading or deceptive in context that federal
law itself might not regard them as adequate.”

However, Nebraska’s exemption was broader: “the Consumer Protection Act shall
not apply to actions or transactions otherwise permitted, prohibited, or
regulated under laws administered by the Director of Insurance, the Public
Service Commission, the Federal Energy Regulatory Commission, or any other
regulatory body or officer acting under statutory authority of this state or
the United States.”  Being “regulated” is
enough, rather than being “specifically authorized.” Thus plaintiffs’ statutory
claim failed. I think this reading doesn’t make much sense, insofar as the FTCA
and other federal statutes regulate pretty much any commerce you can think of;
in this interpretation, the only commercial transactions covered by Nebraska’s
consumer protection law would be those that did not arise “in commerce” for
purposes of allowing the federal government to exercise its Commerce Clause
authority—what is likely a null set even after the ACA case.  I have my doubts that Nebraska could have meant
to negate its law entirely in this way.  But
since EPA regulates pesticide ads under FIFRA, Monsanto’s conduct was within
the safe harbor.  [What about seed ads? I
thought those were the real problem.]
The Illinois Consumer Fraud Act protects “any person who
suffers actual damages as a result of a violation of the Act.” Non-consumers
“may sue under the ICFA if they allege (and ultimately prove) the nexus between
the objectionable conduct and the consumer injury or harm.” A non-consumer has
standing to sue under the ICFA where the “conduct involves trade practices
addressed to the market generally or otherwise implicates consumer protection
concerns.” The allegedly unfair and deceptive conduct—the publishing of false
information to cause farmers to defensively buy dicamba-resistant seed—sufficiently
implicated consumer protection concerns.  The complaint also satisfied Rule 9(b), whether
or not that was required for all ICFA claims.
Breach of warranty claims met varying fates depending on the
state. In Kansas, a non-purchasing, non-using third party can only recover for
breach if they’re (1) “expected to use, consume or be affected by the goods,”
and (2) “injured in person by breach of the warranty.” That didn’t happen
here.  Arkansas, South Dakota, and
Tennessee gave effect to defendants’ prominent disclaimers of implied
warranties of fitness and merchantability, even though plaintiffs, as
nonpurchasers, couldn’t have read those disclaimers. “[T]o give the non-purchasing
plaintiffs more rights than purchasers themselves would have is an untenable
result.”
The Magnuson-Moss Warranty Act prohibits disclaimers of
implied warranties when an express warranty is provided, but only applies to
consumer products, not agricultural products.
Also, Missouri has a law protecting crops, who knew?  It is unlawful for anyone intentionally to
cause the loss of any crop. Further, “any person or entity who knowingly
damages or destroys any field crop product that is grown for personal or
commercial purposes…shall be liable for double damages.” A claim under this law
was properly alleged, as was a design defect claim.

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