Summary of a Recent
Judicial Development in
Environmental Law

FIFRA Preempts State Laws that Interfere with Regulation
of Extraterritorial Failure-to-Warn Claims

Eric H. Foy
National AgLaw Center Research Associate

Summary of Decision

In Palmas Y Bambu, S.A. v. E.I. DuPont de Nemours & Co., Inc., 881 So.2d 565 (Fla. Dist. Ct. App. 2004), the Florida Third District Court of Appeals affirmed in part and reversed in part the Miami-Dade County Circuit Court's decision, which had entered judgment in favor of nurseries against a fungicide manufacturer. The nurseries brought the instant product liability action against the fungicide manufacturer alleging product defect, negligence, fraud, and violations of the Florida Racketeer Influenced and Corrupt Organizations Act (RICO). Both parties appealed the decision of the trial court. The instant court held that the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) applied extraterritorially to preempt failure-to-warn claims, and that nurseries failed to establish the existence of an enterprise separate and distinct from the entity sued to support their RICO claim.

Background

The plaintiffs in this case were two nursery operations located in Costa Rica. Id. at 568. They sued E.I. DuPont de Nemours & Co., Inc. (DuPont) for damages to their ornamental plants allegedly caused by the use of DuPont's Benlate 50 DF fungicide. Id. The plaintiffs brought product defect, negligence, and common law fraud claims, and sought treble damages under RICO. Id. Specifically, the plaintiffs alleged that DuPont had knowledge of a defect in its early formulation of Benlate; that DuPont recklessly reformulated Benlate to create Benlate DF, also a defective product; and that after Benlate DF users reported plant damage, DuPont perpetuated a cover-up and distributed Benlate DF in Costa Rica by misrepresenting and concealing the defective nature of the product, resulting in substantial damage to their nursery plants. Id. Although the plaintiffs sued DuPont in two different district courts, the cases were consolidated for discovery and tried before the same jury. Id.

At trial, the court instructed the jury that "Benlate testing had occurred at [a DuPont facility]; that DuPont had the obligation to preserve the evidence from those tests, but nonetheless destroyed the evidence; and that the jury could, but was not obligated to, infer from these facts that the test results were unfavorable to DuPont." Id. at 569. After a six-week trial, the jury returned a verdict in favor of the nurseries on all claims. Id. In response to the jury's verdict, DuPont motioned the court to set aside the verdict, to grant them a new trial, and to grant them remittitur. Id. The trial court set aside the RICO verdict and the trebling of damages, and also decreased the damages awarded to one of the nurseries. Id. However, the court rejected DuPont's post-trial motions to set aside the verdict or grant a new trial. Id. All parties appealed. Id.

Arguments

The nurseries appealed the directed verdict on the RICO claims, arguing that the trial court erred in concluding that reliance was an element of a civil RICO claim. Id. DuPont appealed the $26,450,289 judgment in favor of the plaintiffs. Id.

Analysis and Holdings

To recover treble damages under RICO, Fla. Stat. § 772.104, the nurseries had to prove that they were injured by reason of DuPont's alleged criminal activities. Id. RICO requires more than proof of DuPont's "intentional participation in a scheme to defraud in violation of the federal mail or wire fraud statutes." Id. It required proof that DuPont's alleged criminal activity was the proximate cause of the nurseries' injuries. Id. at 569-70. Without establishing proximate cause, a plaintiff lacks standing to bring a RICO action. Id. at 570. On the RICO issue, the court stated, "whether denominated as a lack of standing, a lack of reliance, or a lack of proximate causation, the necessary predicate proof of reliance was missing in this case," and therefore, "[a] verdict on the nurseries' RICO claim was . . . properly directed." Id. at 573.

The court held that the plaintiffs' RICO claim failed for an additional reason. The plaintiffs' sought recovery under Fla. Stat. § 772.103(3), which makes it unlawful for any person employed by, or associated with, any enterprise to conduct or participate in such enterprise through a pattern of criminal activity. Id. at 574. In other words, this provision anticipated an enterprise separate and distinct from the person charged with committing a civil RICO violation. Id. The court stated that the "nurseries failed to prove the existence of an enterprise separate and distinct from the person sued for RICO violations." Id.

Finally, at trial DuPont argued that the nurseries' RICO claims should be barred by FIFRA. Id. at 577. In making this argument, DuPont relied on previous Florida cases where failure-to-warn type claims had been barred by FIFRA. Id. at 577-78. The trial court rejected DuPont's argument concluding that FIFRA did not apply extraterritorially to preempt state claims that alleged a failure to warn growers outside of the United States. Id. at 578. However, the instant court disagreed, holding that FIFRA occupied the entire field regulating the labeling of dangerous pesticides produced in the United States but exported to foreign markets. Id. Therefore, state laws that interfere with FIFRA's regulatory domain, such as Florida's RICO provision, are preempted. Id.

In sum, the court ruled in favor of DuPont on the plaintiffs' RICO claims for the following reasons: (1) the nurseries failed to establish causation (i.e., damage flowing from reliance); (2) the plaintiffs failed to prove that the RICO defendant DuPont was distinct from the RICO enterprise; and finally (3) the RICO count was preempted by federal law. Id. Additionally, the court agreed with DuPont's claims of error, because the trial court's jury instruction concerning the testing at DuPont's facility invaded the province of the jury. Id. at 583.

The case was decided on May 26, 2004.