Ackerman v. American Cyanamid Co.

586 N.W.2d 208, 36 U.C.C. Rep. Serv. 2d (West) 972, 47 ERC (BNA) 1880, 1998 Iowa Sup. LEXIS 230, 1998 WL 734223

• Court: Supreme Court of Iowa
• Decided: October 21, 1998
• Docket: 96-2034
• Status: Published

Opinions

HARRIS, Justice.

This is the second appeal in this litigation arising from application of a herbicide to cropland. The sticking point is determining the extent to which federal legislation, the federal insecticide fungicide and rodenticide act (FIFRA) has preempted the area. The case comes to us on further review of a court of appeals decision that left plaintiffs with only one state court remedy. We agree the plaintiffs are left with only one remedy, but disagree as to which one. We conclude the plaintiffs are free to seek recovery in our courts on their claim of negligent design and testing. We therefore affirm in part, reverse in part, and remand for determination on the merits of the one remaining claim.

In the mid-1980s, defendant American Cyanamid Company manufactured and marketed a herbicide named Scepter. Pursuant to FIFRA, American Cyanamid registered Scepter with the environmental protection agency (EPA), and the EPA approved the Scepter label submitted by American Cyan-amid. The label contained a section on “rotational crop restrictions” that told farmers how soon they could plant various crops on fields that had been treated with Scepter. Of particular significance for this ease, the label stated that corn could be planted eleven months after the last application of Scepter.

In 1987 and 1988, Clifford Ackerman, a farmer, used Scepter to control weeds in his soybean fields. He bought the herbicide from Allison-Kesley Ag Center, an independent dealer in agricultural supplies. Allison-Kesley told Ackerman that Scepter was safe for follow corn.¹ Ackerman applied Scepter to his soybean field in 1987 and planted corn on the same fields the following spring. Although he had waited eleven months after the last application of Scepter to plant his follow corn, the 1988 corn crop did not do well. It was later learned that Scepter was causing carryover damage in some parts of the United States, apparently because conditions prevented the herbicide from degrading prior to the next crop. American Cyanamid agreed to pay Ackerman for the damage to his 1988 crop.

Ackerman applied Scepter again in 1988 and, when he again experienced difficulty with his 1989 crop, an American Cyanamid representative met with him regarding a settlement. Given the option of a preharvest or postharvest settlement, Ackerman signed a release for a preharvest settlement in the amount of $8627.92. After checking his crop though, Ackerman estimated the loss at $41,-309.40 and attempted to take the postharvest settlement option of $31,900. The release however had already been forwarded for approval and American Cyanamid ultimately determined it would only pay the preharvest settlement amount.

Ackerman filed this petition against American Cyanamid seeking damages for the carryover damage to his 1989 crop. Ackerman, in addition to a number of counts no longer at issue, sought recovery on two theories: breach of implied warranty of merchantability and negligent design and testing. The petition attacked the settlement agreement head-on, charging it was the product of fraudulent misrepresentation and breach of contract. The district court granted American Cyanamid’s motion for summary judgment on the claims no longer at issue, finding they were preempted by FIFRA. Following a bench trial, the district court dismissed the claims of breach of implied warranty and negligent design and testing, finding they were barred by the release signed by Acker-man.

Ackerman appealed. Our court of appeals affirmed in part and reversed in part. It determined the release was not a binding contract and reversed the dismissal of the breach-of-implied-warranty and negligent-design-and-testing claims. On remand the district court dismissed the two remaining claims, based on its belief it lacked subject matter jurisdiction because the claims were preempted by FIFRA.

Ackerman again appealed. Except for a theory based on oral representations we discuss later, the court of appeals dismissed the breach-of-implied-warranty claim. It also dismissed the negligent-design-and-testing claim. Both dismissals were grounded on the district court’s holding that it, under the circumstances, lacked subject matter jurisdiction to entertain the claim. The court cited Schuver v. E.I. Du Pont de Nemours & Co., 546 N.W.2d 610 (Iowa 1996), and Clubine v. American Cyanamid Co., 534 N.W.2d 385 (Iowa 1995), for authority.

We granted further review on the application of both American Cyanamid and Ackerman. Our review of a district court’s grant of a motion to dismiss is on error. Iowa R.App. P. 4; Henry v. Shober, 566 N.W.2d 190, 191 (Iowa 1997).

I. The federal preemption doctrine is grounded upon the supremacy clause of the federal constitution:

This Constitution, and the Laws of the United States which shall be made in Pursuance thereof ... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.

U.S. Const, art. VI, cl. 2. Preemption may be found where congress’ intent to preempt the field is either expressly stated or implicit in congressional policies. Clubine, 534 N.W.2d at 386-87.

FIFRA is a comprehensive federal statute regulating pesticide use, sales, and labeling. Schuver, 546 N.W.2d at 612. The EPA is the administrative agency in charge of setting appropriate regulations. Wisconsin Pub. Intervenor v. Mortier, 501 U.S. 597, 601, 111 S.Ct. 2476, 2480, 115 L.Ed.2d 532, 540 (1991). Before a pesticide may be sold, it must be registered and its labeling approved by the EPA. Welchert v. American Cyanamid, Inc., 59 F.3d 69, 71 (8th Cir. 1995). The review process requires an applicant to submit a proposed label to the EPA for approval. Id. This label must address numerous concerns, including the ingredients, directions for use, and adverse effects of the product. Id.; see also 40 C.F.R. §§ 152.50, 156.10 (1997). In addition to the written material on the actual container, the term “label” also includes written, printed, or graphic material accompanying the container, to which reference is made. Clubine, 534 N.W.2d at 387; see also Welchert, 59 F.3d at 71.

FIFRA specifically sets forth the authority the states shall have concerning the labeling of pesticides:

(a) In general

A state may regulate the sale or use of any federally registered pesticide or device in the state, but only if and to the extent the regulation does not permit any sale or use prohibited by this subchapter.

(b) Uniformity

Such state shall not impose or continue in effect any requirements for labeling or packaging in addition to or different from those required under this subchapter.

7 U.S.C. § 136v (1994). It is the preemptive effect of subsection (b) that is at issue in this case.

We discussed the preemptive effect of FI-FRA on state law claims in Schuver, 546 N.W.2d at 613, and in Clubine, 534 N.W.2d at 387, in which we found that label-based common-law claims were preempted by FI-FRA. In both cases we relied heavily on Cipollone v. Liggett Group, Inc., 505 U.S. 504, 508, 112 S.Ct. 2608, 2613, 120 L.Ed.2d 407, 417 (1992), which involved preemption under the public health cigarette smoking act of 1969. The Cipollone court held the preemption clause of the act barred all state law claims predicated on the labeling required under that act, an act which, although not identical, closely parallels the language of FIFRA. Cipollone, 505 U.S. at 523-24, 112 S.Ct. at 2621, 120 L.Ed.2d at 427. We noted that both failure to warn and labeling-based claims brought as common-law causes of action against manufacturers of pesticides are preempted by § 136v.² Schuver, 546 N.W.2d at 613; Clubine, 534 N.W.2d at 387. Other state appellate courts have also held that FIFRA preempts labeling-based common law causes of action. See, e.g., Kawamata Farms, Inc. v. United Agri Prods., 86 Hawai'i 214, 948 P.2d 1055, 1064 (1997); Hottinger v. Trugreen Corp., 665 N.E.2d 593, 598 (Ind.Ct.App.1996); Jenkins v. Amchem Prods., Inc., 256 Kan. 602, 886 P.2d 869, 876 (1994); Hochberg v. Zoecon Corp., 421 Mass. 456, 657 N.E.2d 1263, 1265 (1995); McAlpine v. Rhone-Poulenc Ag. Co., 285 Mont. 224, 947 P.2d 474, 477 (1997); Ackles v. Luttrell, 252 Neb. 273, 561 N.W.2d 573, 577 (1997); Quest Chem. Corp. v. Elam, 898 S.W.2d 819, 821 (Tex.1995); All-Pure Chem. Co. v. White, 127 Wash.2d 1, 896 P.2d 697, 699 (Wash.1995).

Ackerman contends the preemptive reach of Cipollone and its progeny has been eroded by the later opinion of Medtronic, Inc. v. Lohr, 518 U.S. 470, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996). Medtronic holds that certain state common-law claims are not preempted by the federal medical device amendments of 1976. Medtronic, 518 U.S. at 492-95, 116 S.Ct. at 2255-58, 135 L.Ed.2d at 720-21. At first blush Medtronic might seem to be a retreat from the preemptive analysis employed in Cipollone, and followed in Schuver and Clubine. But five cases decided after Medtronic show that it does not alter the law regarding preemption. Four cases expressly hold that Medtronic does not change the preemptive reach of FIFRA. See Hawkins v. Leslie’s Poolmart, 965 F.Supp. 566, 571-72 (D.N.J.1997); Ackles, 561 N.W.2d at 579; Lewis v. American Cyanamid Co., 294 N.J.Super. 53, 682 A.2d 724, 730-31 (N.J.Super.Ct.App.Div.1996); Didier v. Drexel Chem. Co., 86 Wash.App. 795, 938 P.2d 364, 367 (Wash.Ct.App.1997). In the fifth case, Grenier v. Vermont Log Buildings, Inc., 96 F.3d 559, 563 (1st Cir.1996), the court held that this claim, “whether presented as a negligence claim or a claim for breach of implied warranty, is preempted by FIFRA.” Medtronic was cited for two propositions: (1) where congress has included an express preemption clause in the statute, courts must begin their analysis with the language of that provision; and (2) the term “requirements” presumptively includes state causes of action as well as the laws and regulations. Grenier, 96 F.3d at 563. The court never considered that Medtronic might have impliedly overruled the decisions holding that FIFRA preempts claims based on labeling. Rather the court cited a pre-Med-tronic case in support of its holding, and noted that case, unlike Medtronic, involved FIFRA itself. Id. (citing King v. E.I. Du Pont De Nemours & Co., 996 F.2d 1346 (1st Cir.1993)).

With the Cipollone holding left intact, our task remains to identify whether Ackerman’s claims are predicated upon labeling and packaging requirements in addition to and different from those required by FI-FRA. Of course any direct challenge to the adequacy of a label or warning is preempted. We also examine whether a claim is merely another way of alleging the label or warning was inadequate. Such an indirect challenge is also preempted. See Schuver, 546 N.W.2d at 614. But under Cipollone we assume matters outside the realm of the statute’s express preemption provision are not preempted. Cipollone, 505 U.S. at 517, 112 S.Ct. at 2618, 120 L.Ed.2d at 423. There is a presumption against preemption which counsels a narrow construction of preemption provisions. Id. at 523, 112 S.Ct. at 2621, 120 L.Ed.2d at 427. In considering whether Ackerman’s claims are preempted by FI-FRA, we express no opinion on whether they are viable under state law; we assume ar-guendo that they are. Id. at 524, 112 S.Ct. at 2621, 120 L.Ed.2d at 427.

II. Count I of Ackerman’s petition states a clear claim for breach of implied warranty of merchantability under Iowa Code section 554.2314 (1997). Ackerman’s petition states in part:

5. The plaintiff had the herbicide applied to approximately 370 acres of crop ground in 1988, in Butler County, Iowa.

6. At the time of the sale of the herbicide, the manufacturer was aware of the custom of rotation of crops year to year between soybean and corn and represented that the product would not carryover and damage corn planted in a subsequent crop year.

10. In selling the Scepter product, the seller impliedly warranted that the product was merchantable.

11. The plaintiff used the herbicide in an ordinary manner and in doing so suffered loss to his corn crop in the subsequent year.

12. The product is not fit for the ordinary purposes for which it was intended in that it carried over to subsequent year’s and damaged the corn crop which was planted in a rotation after the bean crop.

Ackerman contends his claims are not label based, but a direct contention that the product cannot be applied to bean fields in Iowa without causing carryover damage to crops, and hence is not fit for the ordinary purpose for which it is intended. This, he argues, has nothing to do with what the label says or does not say. On the-contrary we think the claim has much to do with what the label says or does not say. This was our holding in Clubine where we held a similar claim of breach of implied warranty of merchantability was preempted. Clubine, 534 N.W.2d at 387. It was also our holding in Schuver. Schuver, 546 N.W.2d at 613; see also Taylor, 54 F.3d at 563; Didier, 938 P.2d at 368.

We think Ackerman’s claim does challenge the label. In essence the claim comes down to this. If the Scepter label had been different, and the waiting period between the application of Scepter and planting of corn had been lengthened, the label would have been merchantable. In other words, American Cyanamid could have avoided liability for breach of implied warranty of merchantability by altering its label in the language regarding safe rotation of crops. We think Ackerman’s claim stands on the use of the product in accordance with label instructions and follow crop guidelines. It should be dismissed as preempted.³

III. The court of appeals determined that some portions of Ackerman’s claim were viable because they were dependent on oral representations made by American Cyanam-id which were not preempted by FIFRA. Although the court did not refer to any specific oral representation made by American Cyanamid, we assume the court was referring to a count of Ackerman’s petition which alleges American Cyanamid represented that “the product would not carryover and damage corn planted in a subsequent crop year.” There is simply no factual basis in the record for preserving a claim based on oral representations. Ackerman testified he never received any written materials, or spoke to anyone from American Cyanamid concerning the product or its label.

IV. Count II of Ackerman’s petition states a claim for negligence in marketing Scepter and for failing to warn the customer of carryover on subsequent crops. These are common-law-duty-to-warn claims and are clearly preempted by FIFRA and are not challenged on appeal. See Schuver, 546 N.W.2d at 614.

Other portions of Ackerman’s petition indicate his negligence claim is premised upon the design and production of Scepter. The petition reads in part:

2. The defendant was negligent in its production and marketing of Scepter in the following respects:

a. It failed to design a product which would not carryover and damage corn crops planted in subsequent years.

He also alleges that American Cyanamid was negligent in testing the effects of Scepter.

Cipollone held that claims for negligent testing which are based solely upon the manufacturer’s testing or research practices, not related to advertising or promotion, are not preempted by FIFRA. Cipollone, 505 U.S. at 524-25, 112 S.Ct. at 2621-22, 120 L.Ed.2d at 428; Worm v. American Cyan-amid Co., 5 F.3d 744, 747 (4th Cir.1993). But merely to call something a design or testing claim does not automatically avoid FIFRA’s explicit preemption clause. See Gh"enier, 96 F.3d at 564. The line between a claim for mislabeling and a claim for a defective product is razor thin, and can turn on “whether one could reasonably foresee that the manufacturer, in seeking to avoid liability for the error, would choose to alter the product or the label.” Worm, 5 F.3d at 747.

American Cyanamid relies heavily on Schuver where we concluded the negligent-testing-and-marketing claim was label-based, and therefore preempted by FIFRA. Schu-ver, 546 N.W.2d at 614-15. The gist of Schu-vefs negligence claim was that the pesticide should not have been used in his county because the soil’s pH was not at the appropriate level. Id. at 614. Citing to Hue v. Farmboy Spray Co., 127 Wash.2d 67, 896 P.2d 682, 692-93 (Wash.1995), we concluded this sort of caution should go on the label. So the claims of negligence were preempted because they called for additional or different label information from that required under FIFRA. Schuver, 546 N.W.2d at 615.

Many federal courts have held that when a plaintiffs negligent-design-and-testing claim does not set forth specific allegations that the product functioned improperly, or that the company was negligent in its manufacturing or testing, the claim is preempted because it is essentially predicated on the product’s labeling. See Grenier, 96 F.3d at 564-65; Taylor, 54 F.3d at 561-62; Worm, 5 F.3d at 747-48. State courts from other jurisdictions are in accord. See Barnes v. Sandoz Crop Protection Corp., 189 Ariz. 46, 938 P.2d 95, 97 (Ariz.Ct.App.1997); McAlpine, 947 P.2d at 477-78.

The majority of courts however have held that FIFRA does not preempt design-and-testing claims. See Lyall v. Leslie’s Poolmart, 984 F.Supp. 587, 595 (E.D.Mich.1997); Reutzel v. Spartan Chem. Co., 903 F.Supp. 1272, 1282 (N.D.Iowa 1995); Helms v. Sporicidin Int’l, 871 F.Supp. 837, 841 (E.D.N.C. 1994); Higgins v. Monsanto Co., 862 F.Supp. 751, 757-59 (N.D.N.Y.1994); Jillson v. Vermont Log Bldgs., Inc., 857 F.Supp. 985, 991-92 (D.Mass.1994); Bingham v. Terminix Int’l Co., 850 F.Supp. 516, 521-22 (S.D.Miss.1994); Wright v. How Chem., 845 F.Supp. 503, 509-11 (M.D.Tenn.1993); Cantley v. Lorillard Tobacco Co., 681 So.2d 1057, 1061 (Ala.1996); Romah v. Hygienic Sanitation Co., 705 A.2d 841, 854-56 (Pa.Super.1997); Fide v. E.I. DuPont de Nemours & Co., 542 N.W.2d 769, 772 (S.D.1996); All-Pure Chem. Co. v. White, 127 Wash.2d 1, 896 P.2d 697, 702 (Wash.1995).

There are many factors which militate in favor of finding that Ackerman’s negligent-design-and-testing claim is not preempted by FIFRA. Ackerman’s claim is distinguishable from Schuver in that Acker-man also alleges a design defect in the production of Scepter. Ackerman’s claim does not call for additional or different information on the label from that required by FI-FRA. Ackerman also directly assails the design and testing of Scepter. This is illustrated in two ways. First, Ackerman’s interrogatory answers indicate the claim is only predicated on the product itself and not the labeling:

Interrogatory No. 12: Describe and explain in detail the alleged defect in the Scepter alleged in your petition at law.

Answer:

The defect in Scepter was that it carried over to the following crop year and negatively affected the corn yield.

Interrogatory No. 14: Explain in detail your allegations in your petition at law that defendant American Cyanamid was negligent and the factual basis therefore.

Answer:

American Cyanamid should have discovered through testing that there was a carryover problem.

Second, because this case has already been tried before the court, we have the benefit of trial testimony. Ackerman’s expert testified at length concerning the testing and design problems of Scepter. He pointed to numerous studies which indicated American Cyan-amid knew Scepter caused carryover damage and was not adequately degradable in certain weather conditions. Yet American Cyanam-id rushed Scepter onto the market so farmers would purchase its product rather than that of their competitors. In essence Acker-man does not simply allege that adequate testing would have caused American Cyan-amid to alter the Scepter label, but directly asserts that adequate testing and proper design would have caused American Cyanamid to alter the product itself.

By recognizing the negligent-design-and-testing claim, we are not requiring information on the Scepter label “different from” or “in addition to” the information FIFRA requires. We are simply recognizing an affirmative duty on manufacturers of potentially dangerous chemicals to guard against design or manufacturing defects in their chemicals. This does not interfere with FIFRA’s purpose of requiring uniform national standards of labeling.

Further, by recognizing claims for negligence such as Ackerman’s here, we are only requiring that pesticides such as Scepter be safely designed. This falls neatly within the FIFRA “savings” clause:

A state may regulate the sale or use of any federally registered pesticide or device in the state, but only if and to the extent the regulation does not permit any sale or use prohibited by this subchapter.

7 U.S.C. § 136v(a). Imposition of a common-law duty of care in the design and testing of harmful chemical products does not permit any sale or use prohibited by FIFRA, nor does it in any way frustrate the will of congress. FIFRA does not preempt Acker-man’s claim for negligent design and testing.

V. Dismissal of Ackerman’s other claims are not challenged or involved in this appeal. The only surviving one is his claim for negligent design and testing. Dismissal of that claim is reversed and the case is remanded for a determination of its merits on the basis of the record made during the bench trial. We are disinclined to determine, as we did in Clubine, that Ackerman should lose his claim on the merits because testing is so closely superintended by the EPA. See Clubine, 534 N.W.2d at 387-88. Especially under the facts here, where the claims rest on challenges both to design and to testing, a summary resolution by an appellate court is inappropriate. Most, though possibly not all, negligent-design-and-testing claims should turn on their merits. This process would be thwarted if, after holding such a claim is not preempted, we nevertheless dismiss as a matter of law because of EPA supervision. This was not our intent in our dispositional holding in Clubine, and any intimation to the contrary is overruled. In order to justify dismissal at the appellate level, future eases will have to reveal the extent of EPA supervision and disclose how the agency in effect supplanted the manufacturer in matters of design and testing.

DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

All justices concur except TERNUS, J., and CARTER and LAVORATO, JJ., who concur in part and dissent in part; and NEUMAN and CADY, JJ., who take no part.

1 . A "follow” crop is the one planted in a field following the previous planting season.

2 . The federal courts of appeals for the first, fourth, fifth, seventh, eighth, ninth, tenth, and eleventh circuits have all held that state law claims based on labels are preempted. See Wel-chert, 59 F.3d at 73; Taylor AG Indus, v. Pure-Gro, 54 F.3d 555, 561 (9th Cir.1995); Lowe v. Sporicidin Int'l, 47 F.3d 124, 129 (4th Cir. 1995); Bice v. Leslie's Poolmart, Inc., 39 F.3d 887, 888 (8th Cir. 1994); MacDonald v. Monsanto Co., 27 F.3d 1021, 1025 (5th Cir. 1994); King v. E.I. Du Pont de Nemours & Co., 996 F.2d 1346, 1349 (1st Cir. 1993); Shaw v. Dow Brands, Inc., 994 F.2d 364, 371 (7th Cir. 1993); Papas v. Upjohn Co., 985 F.2d 516, 518-19 (11th Cir. 1993); Arkansas-Platte & Gulf Partnership v. Van Waters & Rogers, Inc., 981 F.2d 1177, 1179 (10th Cir. 1993).

3 . An element of confusion is introduced at this point because, as we mentioned, the district court and court of appeals both considered preemption tantamount to lack of subject matter jurisdiction. And it is true that American Cyan-amid's position has been inappropriately bolstered by the assertion that federal preemption deprives a state court of subject matter jurisdiction. It is not true. The dismissal of the claim can nevertheless be affirmed on the basis of preemption. American Cyanamid has consistently urged throughout this litigation that Acker-man’s breach-of-warranty claim should be dismissed on the basis of preemption. See Harbit v. Voss Petro., Inc., 553 N.W.2d 329, 330 (Iowa 1996) (trial court ruling can be affirmed on any valid ground, whether urged or not).

state courts are not deprived of subject matter jurisdiction over claims involving federal preemption unless Congress has given exclusive jurisdiction to a federal forum. Musson Theatrical, Inc. v. Federal Express Corp., 89 F.3d 1244, 1253 (6th Cir. 1996); Dickman v. E.I. Du Pont de Nemours & Co., 278 IlI.App.3d 776, 215 IlI.Dec. 496, 663 N.E.2d 507, 510 (1996). In this instance Congress has not given federal courts exclusive jurisdiction over claims involving FI-FRA. See Hurt v. Dow Chem. Co., 963 F.2d 1142, 1144-45 (8th Cir. 1992); Murray v. Commonwealth Edison, 905 F.Supp. 512, 514 (N.D.Ill. 1995); Dickman, 663 N.E.2d at 510. Clubine and Schuver should be read with this understanding.