Drexel Chemical Company v. Albaugh, Inc.

645 F. App'x 467
CourtCourt of Appeals for the Sixth Circuit
DecidedMay 18, 2016
Docket14-6340, 14-6363
StatusUnpublished

This text of 645 F. App'x 467 (Drexel Chemical Company v. Albaugh, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Drexel Chemical Company v. Albaugh, Inc., 645 F. App'x 467 (6th Cir. 2016).

Opinions

COOK, Circuit Judge.

After the second bench trial in this contract-interpretation dispute between two agricultural-chemical distributors, the trial court lamented that “much of the evidence submitted at trial does not aid the court in determining the parties’ intent.” The parties clarified nothing on appeal, so we decline to depart from the trial court’s interpretation of the parties’ ambiguous contract. We AFFIRM.

I.

In 1958, Novartis Crop Protection’s corporate predecessor registered atrazine as a pesticide under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), allowing it to sell and distribute atrazine in the United States. Before registering atrazine under FIFRA, the Environmental Protection Agency (EPA) reviewed health, safety, and environmental studies generated and submitted by Novartis’s predecessor to confirm that atrazine “will not generally cause unreasonable adverse effects on- the- environment.” 7 U.S.C. § 136a(c)(5)(D).

In the 1970s, plaintiff Drexel Chemical Company obtained its own registration under FIFRA, allowing Drexel to sell and distribute atrazine. To obtain the registration, Drexel cited Novartis’s health, safety, and environmental data and, as FI-FRA mandates, offered to pay Novartis for producing that data. 7 U.S.C. § 136a(c)(l)(F)(iii). The pesticide industry calls such payments “data compensation” and initial registrants like Novartis “original data submitters.” 7 U.S.C. § 136a(c)(l)(F). Through FIFRA-mandat-ed binding arbitration, 7 U.S.C. § 136a(c)(l)(F)(ni), (c)(2)(B)(iii), Drexel and Novartis split data-compensation costs on a market-share basis. Because the EPA often requests additional pesticide data, whose costs all registrants must share, 7 U.S.C. § 136a(c)(2)(B)(ii), Drexel and Novartis agreed to split future data-compensation costs on the same market-share basis to avoid further disputes.

In the late 1990s, defendant Albaugh purchased a majority share in a foreign company that formulated atrazine. Before Albaugh could import and distribute atra-zine in the United States, it too had to register with the EPA. 7 U.S.C. § 136a(a). Albaugh first offered to pay Novartis to cite its health, safety, and environmental studies. Dissatisfied with the data compensation Albaugh offered, Novartis threatened to oppose Albaugh’s registration with the EPA.

Drexel hatched a solution: a supplemental distributorship. This relationship, blessed by FIFRA, allows a distributor— [469]*469Albaugh — to sell pesticides under its own brand name but another entity’s — Drex-el’s — FIFRA registration, provided that the participants notify the EPA. See generally 40 C.F.R. § 152.132. In return for Albaugh’s use of Drexel’s atrazine registration, Albaugh would pay Drexel $750,000 in installments and “fifty percent (50%) of the costs of all future payments that Drexel makes to Novartis in the future as data compensation in order to maintain the Registration.” Drexel and Albaugh signed the contract in December 1998.

Meanwhile, the EPA was reviewing all atrazine registrations, concerned about the pesticide’s carcinogenicity. Novartis, and later Syngenta Crop Protection,1 submitted 190 studies to the EPA to prove otherwise. Concluding its review in 2003, the EPA cancelled all existing atrazine registrations, including Drexel’s. But it permitted reregistration, provided that the registrants offered to pay Syngenta for 100 selected studies that proved atrazine’s safety (“the Appendix B studies”) and also agreed to conduct more safety studies the EPA would identify in the future (data call-ins or “DCIs”). Those who refused the EPA’s reregistration terms could no longer import or sell atrazine. Drexel, then in the cost-splitting contract with Al-baugh, accepted the EPA’s terms, reregis-tered, and offered to pay Syngenta for the Appendix B studies. In 2004 and 2005 DCIs, the EPA asked atrazine registrants for additional safety studies. Syngenta undertook these studies alone, electing to recoup the costs from other atrazine registrants later. Both years Drexel timely offered to compensate Syngenta for the DCIs. In short, Drexel thrice offered to pay Syngenta during the contract period— for the Appendix B studies, the 2004 DCI, and the 2005 DCI — but made no actual payments.

In summer 2006, Drexel learned that Albaugh “was thinking about getting out of the [a]trazine business.” Drexel began to worry about paying Syngenta without Al-baugh’s help. Accordingly, Drexel asked Syngenta to invoice it $1.5 million in data-compensation costs. Drexel paid Syngenta and invoiced Albaugh for $750,000 in September 2006. Albaugh immediately terminated the contract. It ceased importing atrazine but continued to sell existing inventory until April 2007.

Syngenta initiated binding arbitration with Drexel in May 2007 to fix Drexel’s data-compensation costs for the Appendix B studies, 2004 DCI, and 2005 DCI. The arbitrators awarded Syngenta $131,3402 for the Appendix B studies and $2,393,662 for the 2004 and 2005 DCIs combined. The arbitrators again used the market-share approach to allocate costs. Drexel’s market share included both Drexel’s (5.1% for the Appendix B studies-1 and 6.2% for the DCIs) and Albaugh’s (1.2% for the Appendix B studies and 1.8% for the DCIs) atrazine market shares. Drexel and Syngenta split the arbitration costs. Some of the 2004 and 2005 DCI studies were still in progress, so the arbitrators directed the parties to split future costs under the same market-share approach. As of 2012, Drexel has paid $5,578,518.97 to Syngenta..

In 2008, Drexel sued Albaugh for breach of contract, seeking half its payments to Syngenta. Initially, the court held Al-baugh liable for fifty percent of actual [470]*470payments that Drexel made to Syngenta as data compensation before Albaugh’s termination on September 29, 2006. It therefore entered a $750,000 judgment for Drexel, plus prejudgment interest, representing half of the $1.5 million Drexel paid to Syngenta before Albaugh terminated.

The parties cross-appealed. We affirmed the $750,000 judgment but remanded for further proceedings. Drexel Chem. Co. v. Albaugh, Inc., 489 Fed.Appx, 63, 69 (6th Cir.2012) (Drexel I), We found the contract ambiguous “as to whether Al-baugh is responsible for payments that Drexel makes after the termination of the Agreement but relating to the period that the Agreement was in effect,” ie., the post-termination payments Drexel has made and will make to Syngenta for the Appendix B studies and the 2004 and 2005 DCIs. Id. at 67.

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645 F. App'x 467, Counsel Stack Legal Research, https://law.counselstack.com/opinion/drexel-chemical-company-v-albaugh-inc-ca6-2016.