Friday, May 29, 2020
Numerous cases have been filed in recent years alleging damage to soybean crops as a result of dicamba drift. However, one significant case has involved alleged dicamba drift damage to a peach crop. In 2019, the federal trial court judge hearing the case allowed much of the case to go to the jury. In early 2020, the jury returned a $265 million judgment against Monsanto/Bayer and BASF. $15 million of that amount was to compensate the peach farmer. $250 million was punitive damages. Is that allocation of damages proper and reasonable? A defective Ferrari may have something to say about the allocation.
Dicamba drift, a defective Ferrari and allocation of damages – it’s the topic of today’s post.
The Bader Case
Monsanto introduced dicamba-tolerant seeds for cotton in 2015 and for soybeans in 2016. The seeds were popular with many farmers to control weeds that had become tolerant to other herbicides, including Roundup. However, at the time the seeds were released, the EPA had not yet approved the newer formulations of dicamba (BASF’s Engenia and Monsanto’s XtendiMax with Vaporgrip and Roundup Xtend with VaporGrip) to be sprayed on crops. Those newer formulations were less volatile and less likely to vaporize and drift to nearby crops for which they were not intended. Starting in 2016, numerous crop damage complaints arose in certain parts of the country, particularly in southeast Missouri. Bader Farms, Inc., the largest peach farm in Missouri, claimed that its entire peach crop was destroyed by dicamba drift from nearby cotton fields that were planted with Monsanto’s Roundup Ready Xtend cotton seeds. Those seeds had been genetically modified to withstand dicamba and glyphosate.
Specifically, the peach farm claimed that its orchard was destroyed after the defendants (Monsanto/Bayer and BASF) conspired to develop and market dicamba-tolerant seeds and dicamba-based herbicides. Bader Farms, Inc. claimed that the damage to the peaches occurred when dicamba drifted from application to neighboring fields. It claimed that the defendants released its dicamba-tolerant seed with no corresponding dicamba herbicide that could be safely applied. As a result, farmers illegally sprayed an old formulation of dicamba herbicide that was unapproved for in-crop, over-the-top, use and was "volatile" or prone to drift.
While many cases had previously been filed on the dicamba drift issue, Bader Farms, Inc. did not join the other litigation because those cases focused on damages to soybean crops. Monsanto moved to dismiss the claims for failure to warn; negligent training; violation of the Missouri Crop Protection Act; civil conspiracy; and joint liability for punitive damages. BASF moved to dismiss those same counts except the claims for failure to warn. The trial court granted the motion to dismiss in part. Monsanto argued that the failure to warn claims were preempted by the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), but the plaintiff claimed that no warning would have prevented the damage to the peaches.
The trial court determined that the peach farm had adequately plead the claim and denied the motion to dismiss this claim. Both Monsanto and BASF moved to dismiss the negligent training claim, but the trial court refused to do so. However, the trial court did dismiss the claims based on the Missouri Crop Protection Act, noting that civil actions under this act are limited to “field crops” which did not include peaches. The trial court did not dismiss the civil conspiracy claim based on concerted action by agreement, but did dismiss the aiding and abetting portion of the claim because that cause of action is not recognized under Missouri tort law. The parties agreed to a separate jury determination of punitive damages for each defendant.
The Jury Verdict
In mid-February of 2020, after a three-week trial, the jury returned a $265 million verdict against Monsanto/Bayer and BASF, with $250 million of that being punitive damages. Trial evidence revealed that the defendants anticipated drift before the new, less volatile, formulation was released. The jury concluded that the companies negligently released the dicamba-tolerant seeds without the necessary herbicide to prevent off-target drift, and that they were negligent when they released the less volatile herbicide. The jury also determined that the companies conspired to “create an ecological disaster to increase profits.”
The companies are appealing. They deny that Bader Farms, Inc. suffered any damage from dicamba drift. The experts for the companies testified that armillaria root rot fungus was the cause of the damage to the peach crop. They claimed that armillaria had gotten into the soil and had been slowly infecting and killing the peach trees. While the expert for Bader Farms testified that the damage was caused by dicamba drift, he also admitted that he was not a peach expert and agreed that armillaria was present in the orchard and was damaging the trees. The companies also pointed out the peach farm did not sustain any monetary damage and that peach profits actually increased during the timeframe at issue.
After the jury returned its verdict, both parties have filed numerous briefs with the court. Last week, Bader Farms, Inc. motioned to bar Monsanto’s request for “post-trial judicial notice” of screen shots from the farm’s website that Monsanto believes would establish that dicamba drift was not the cause of the loss of the peach crop.
As noted, the jury returned a total verdict of $265 million. $250 million of that is punitive damages designed to punish the companies involved. In other words, the punitive damages were roughly 16 times that of the compensatory damages awarded to Bader Farms, Inc. Is that reasonable? Where do the courts draw the line between compensatory and punitive damages? A recent case sheds some light on the issue. In Adeli v. Silverstar Auto, Inc., No. 19-1481/19-1602, 2020 U.S. App. LEXIS 16206 (8th Cir. May 21, 2020), the plaintiff claimed that the defendant intentionally misrepresented the condition of a used Ferrari that it sold to him. The jury agreed and awarded the plaintiff $20,201 in compensatory and incidental damages (approximately $7,000 of the amount was for compensatory damages) and $5.8 million in punitive damages on his claims for fraud, breach of express warranty, and deceptive trade practices under Arkansas Law. The defendant then moved to alter or amend the judgment, claiming that the jury’s $5.8 million punitive damage award was unconstitutionally excessive under the Due Process Clause of the Fourteenth Amendment. The trial court agreed and reduced the punitive damage award to $500,000. The defendant appealed claiming, among other things, that the punitive damage award should have been further reduced. The farm claimed that the $5.8 million amount was correct and shouldn’t have been reduced.
The appellate court noted that while juries have considerable flexibility in determining the amount of punitive damages, the Due Process Clause bars the imposition of “grossly excessive or arbitrary punishments on a tortfeasor.” In other words, the award is excessive if it “shocks the conscience” of the court or “demonstrates passion or prejudice on the part of the trier of fact.” While that standard doesn’t establish a bright line, there are factors that guide courts in determining a proper award of punitive damages. Those factors are: (1) the degree of reprehensibility of the defendant’s conduct; (2) the disparity between actual or potential harm suffered and the punitive damage award; and (3) the difference between the punitive damage award and the civil penalties authorized in comparable cases.
The appellate court believed that the defendant’s conduct was reprehensible. The defendant knew that the car’s headers were cracked and needed replaced, having been advised as such by a Ferrari technician. The defendant advertised the car for sale, however, as having completed a pre-purchase inspection by a Ferrari dealership. The plaintiff asked for a copy of the pre-purchase inspection, but was sent instead an invoice from the Ferrari dealer that reflected the defendant’s choice not to repair the tire pressure monitoring system. It didn’t disclose the defendant’s choice not to fix the cracked headers. The defendant represented the car as “turnkey” and “ready to go.” The plaintiff bought the car for $90,000, signing an “as is” purchase contract. On his way home from picking up the car, the plaintiff detected a fuel smell. The next day the plaintiff had the car towed to a garage that specialized in Ferraris which discovered a fuel leak and the cracked headers, making it unsafe to drive. The garage identified over $30,000 worth of repairs. The defendant refused to take the car back.
As for the disparity between the harm and punitive damages, the appellate court factored the incidental damages into the total harm that the plaintiff suffered and upheld the trial court’s finding of a 1:24.75 ratio ($20,021/$500,000). A single-digit ratio was not required, given the fraud that the defendant engaged in. On the comparable civil penalty factor, the appellate court cited other comparable caselaw finding a ratio between actual and punitive damages close to the 1:24.75 ratio set by the trial court. Ultimately, the appellate court affirmed the trial court’s award of $500,000 of punitive damages.
Application to Bader Farms
From the time the jury in Bader Farms returned its verdict, the parties have been battling over the proper amount of punitive damages. The companies claim that the punitive damage award is unconstitutionally too high. But, the ratio in Bader Farms is approximately 1:16.7. That’s a lower ratio than the court approved in Adeli. Bader Farms, Inc., in a recent filing in its case, claims that the Ferrari case supports an even higher punitive damage award. Whether the court agrees will be based on the multi-factor Due Process analysis noted above.
The dicamba trait may be presently at its highest use rate. Technology has not improved the potential drift issue, but education and wider usage of the dicamba trait likely has. However, the present tough financial condition of many farmers could make it more likely that unapproved types of dicamba will be used this crop growing season. In future years, the use of the dicamba trait may drop with newer technologies taking a larger part of market share. In particular, the Enlist trait appears to be safer more sprayer-friendly compared to dicamba and comes with rules that are easier to follow and less potential for drift.
As for the case involving the peach farm, it will be interesting to see how the ultimate damage award shakes out.