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In re Syngenta AG MIR162 Corn Litigation

United States District Court, D. Kansas

May 15, 2017

Syngenta Seeds, Inc., et al., No. 16-2280-JWL This Document Relates To Funk, et al. No. 14-md-2591-JWL


          John W. Lungstrum United States District Judge

         This single case within this MDL presently comes before the Court on the motion to dismiss (Doc. # 2482 in the MDL docket) filed by Defendants Syngenta Crop Protection, LLC; Syngenta Biotechnology, Inc.; Syngenta Seeds, LLC; and Syngenta Corporation (collectively “Syngenta”).[1] For the reasons set forth below, the motion is granted in part and denied in part. The motion is granted with respect to the following claims, which are hereby dismissed: (a) the request for a declaratory judgment (Count I); (b) the claim under the IDCSA (Count V); (c) the negligence claim (Count VI); (d) the contract claim based on a failure to provide first quality seed (Counts II and III); (e) contract claims based on a failure to provide a portfolio of seeds, to the extent based on seeds received from Syngenta before February 25, 2015 (Counts II and III); and (f) claims for breach of the implied covenant of good faith to the extent based on the theory that the breach hindered plaintiffs' own contractual performance (Count III), although plaintiffs are granted leave to amend their complaint, on or before May 30, 2017, to plead such claims adequately. Thus, all moving defendants other than Syngenta Seeds, LLC are hereby dismissed from this action. The motion is otherwise denied. Moreover, in light of these rulings, the remaining parties are ordered to show cause, by responses filed by May 30, 2017, why the Court should not suggest to the JPML that this case be remanded to its transferor court.

         I. Background

         This MDL includes hundreds of similar suits filed against Syngenta by corn farmers. The suits generally relate to Syngenta's commercialization of genetically-modified corn seed products known as Viptera and Duracade (containing the trait MIR 162) without approval of such corn by China, an export market. Those plaintiffs, who did not use Syngenta's products, allege that Syngenta's commercialization of its products caused the genetically-modified corn to be commingled throughout the corn supply in the United States; that China rejected imports of all corn from the United States because of the presence of MIR 162; that such rejection caused corn prices to drop in the United States; and that corn farmers were harmed by that market effect. The Court certified state-wide classes for claims under the law of eight different states.[2]

         The particular case within the MDL to which this order relates was brought by plaintiffs William Funk and Funk Seed, LLC (collectively “Funk”), who were seed distributors that entered into contracts with Syngenta. In Count I, Funk seeks a declaratory judgment to the effect that Noncompetition Agreements (NCAs) between the parties are unenforceable and a Master Agreement (MA) between the parties is terminated. In Count II, Funk alleges that Syngenta breached a Sales and Distribution Agreement (SDA) between the parties by (a) failing to provide Funk with “first quality seed, ” (b) failing to provide certain types of seeds, (c) failing to provide certain assistance to Funk, and (d) disclosing confidential information. In Count III, in the alternative to Count II, Funk alleges that Syngenta, by engaging in the same conduct at issue in Count II, breached an implied covenant of good faith and fair dealing. In Count IV, Funk alleges that Syngenta breached an express warranty in the SDA by failing to provide seed that conformed to the label description. In Count V, Funk alleges that Syngenta violated the Indiana Deceptive Consumer Sales Act (IDCSA) by making certain misrepresentations. In Count VI, Funk alleges that Syngenta was negligent in its commercialization of Viptera and Duracade.[3]

         II. Governing Standards

         The Court will dismiss a cause of action for failure to state a claim only when the factual allegations fail to “state a claim to relief that is plausible on its face, ” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), or when an issue of law is dispositive, see Neitzke v. Williams, 490 U.S. 319, 326 (1989). The complaint need not contain detailed factual allegations, but a plaintiff's obligation to provide the grounds of entitlement to relief requires more than labels and conclusions; a formulaic recitation of the elements of a cause of action will not do. See Bell Atlantic, 550 U.S. at 555. The Court must accept the facts alleged in the complaint as true, even if doubtful in fact, see id., and view all reasonable inferences from those facts in favor of the plaintiff, see Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006). Viewed as such, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atlantic, 550 U.S. at 555. The issue in resolving a motion such as this is “not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

         III. Statutes of Limitation

         A. Contractual Limitation

         Syngenta argues that most of Funk's claims-all except the declaratory judgment count and contractual claim relating to Syngenta's alleged breach of confidentiality-are barred by the one-year statute of limitations included in the parties' SDA. Article 10 of the SDA (which was attached to the complaint) provides in relevant part as follows:


         Funk has alleged that it received deliveries of seed from Syngenta between September 2013 and April 2015, and Syngenta thus argues that because Funk accepted seed more than one year before it filed this suit on February 25, 2016, these claims are time-barred.

         The Court concludes, however, that some of these claims are not subject to the one-year limitations period contained in Article 10 of the SDA. In determining the scope of the provision, the Court first rejects Funk's argument that it applies only to warranty claims, as the limitation applies by its terms to “all claims.” Article 10 is titled “Warranties”, but the scope of that entire article is plainly not limited to warranty claims, as Article 10 specifically refers to contract and tort claims as well.[4] The Court next concludes that the plain meaning of Article 10 limits the reach of the one-year limitation to claims relating to the condition of the product received from Syngenta. Article 10 first states that no “claim” may be asserted against Syngenta unless Funk reports within 30 days “any condition that might lead to a complaint;” and it then provides in the next sentence that all “claims” must be asserted within one year from the date of acceptance of the product. In light of those two provisions, it is not reasonable to interpret the one-year limitation period as applying to any claims other than claims based on the condition of the product received from Syngenta. See Prior Lake State Bank v. National Surety Corp., 80 N.W.2d 612, 616 (Minn. 1957) (contractual provisions shortening the time for bringing an action are permitted but “are not especially favored and are construed strictly against the party invoking them”).[5] The one-year period thus applies to Funk's claims relating to Syngenta's failure to provide first quality seed (Counts II and III), Syngenta's failure to provide a certain portfolio of seeds (Counts II and III), and Syngenta's failure to provide seeds conforming to the label (Count IV). It does not apply to Funk's claims that Syngenta breached by failing to provide assistance and by disclosing confidential information, Funk's claim under the IDCSA, or Funk's negligence claim.[6]

         Funk also argues that the Article 10 limitation should apply only to the signatories of the SDA-Funk Seed, LLC and Syngenta Seeds, Inc. The claims within the scope of this provision, however, have been asserted only against Syngenta Seeds, LLC, the successor to Syngenta Seeds, Inc. Funk argues that the limitation would not apply to Mr. Funk individually, but the Court rejects that argument, as Funk has alleged that “plaintiffs” (plural, referring to Mr. Funk and Funk Seed, LLC) entered into the SDA with Syngenta. Thus, to the extent that Mr. Funk is able to assert a contractual claim under the SDA, he is subject to its terms.

         Funk argues that the requirement that claims be “asserted” within one year does not mean that a lawsuit must be filed within that period, as a claim could be “asserted” merely by raising the issue with Syngenta. The Court rejects that interpretation as inconsistent with the entirety of Article 10. According to the plain terms of that article, Funk may only “assert” a claim (within one year) if it has first reported to Syngenta (within 30 days of discovery); thus, assertion of a claim for purposes of this provision requires more than merely raising the issue with Syngenta. The Court concludes that the plain meaning of the provision requires that any legal action be initiated within the one- year period.

         Finally, the Court rejects Funk's argument that the one-year limitation should not be applied because it is unreasonably short. See Id. (parties to a contract may limit the time in which to bring an action “provided the limitation is not unreasonably short”); see also Henning Nelson Constr. Co. v. Fireman's Fund Am. Life Ins. Co., 383 N.W.2d 645, 651 (Minn. 1986) (whether such a contractual limitation is reasonable is decided on a case-by-case basis). Funk argues that the period is unreasonable because it could expire before the wrong by Syngenta is discovered. That argument applies only to Funk's statutory and negligence claims, however, which the Court has ruled are not subject to this limitation. Funk has not shown that its contract and warranty claims would be subject to any discovery rule, and the condition of the seeds should be determinable at the time of receipt of those seeds. Moreover, it is not unreasonable for the one-year clock to restart for each delivery, as the condition of the seeds may vary among the different batches received. Funk has not cited any authority suggesting that one year is an unreasonably short period for the assertion of a claim based on the condition of such a product. See Hayfield Farmers Elevator & Mercantile Co. v. New Amsterdam Casualty Co., 282 N.W. 265, 269 (Minn. 1938) (noting that numerous courts, including that court, have upheld limitations requiring suit within one year of the wrongful act).

         Accordingly, based on the limitation in Article 10 of the SDA, the Court dismisses as time-barred any claim in Counts II and III for failure to provide certain seeds and any claim in Count IV for breach of warranty, which claims relate to seeds received by Funk prior to February 25, 2015.

         B. Negligence

         Syngenta argues that Funk's negligence claim is untimely under Indiana's two-year statute of limitations, Ind. Code § 34-11-2-4.[7] Under Indiana law, a tort claim accrues when the plaintiff knows or could discover with ordinary diligence that it has sustained injury because of the tortious conduct. See Horn v. A.O. Smith Corp., 50 F.3d 1365, 1369 (7th Cir. 1995) (citing Wehling v. Citizens Nat'l Bank, 586 N.E.2d 840, 842-43 (Ind. 1992)).

         Syngenta argues as a matter of law that Funk knew or should have known of its negligence claim before February 25, 2014. Syngenta notes that China rejected the shipments of corn containing MIR 162 in November 2013, which fact was well publicized. Any injury would have been sustained by Funk after that date, however. Moreover, Funk has not alleged that it was injured when the price of corn dropped as a result of that rejection; rather, Funk has alleged that it suffered injury when the market for Viptera and Duracade was damaged, which would not necessarily have occurred at the same time that corn prices dropped. In its amended complaint, Funk has alleged that it first began to have problems selling Viptera and Duracade during the “2014 growing season, ” when growers told Funk that they would not buy the products because elevators would not take that corn. Thus, accepting that allegation as true, the Court cannot say as a matter of law that Funk should have known of its injury by February 2014.[8]

         Syngenta also argues that the Court should credit certain allegations in Funk's original complaint over those in the amended complaint. In its original complaint, Funk alleged that the market for Viptera had been irreparably damaged by December 2013 and that Funk “almost immediately” had problems selling Viptera and Duracade. The Court rejects this argument. First, the allegations are not necessarily inconsistent, as the Court, construing the allegations in Funk's favor, cannot conclude that “almost immediately” means that Funk suffered injury less than two months after December 2013. Moreover, even if the allegations were irreconcilable, the Court would consider the amended (superseding) allegations. Fed.R.Civ.P. 11 imposes certain obligations on attorneys in making allegations in complaints, and Syngenta may have recourse under that statute (although Syngenta has not established that any particular allegation is false here). Syngenta has not identified any authority, however, requiring this Court to disregard an allegation that conflicts with a preceding allegation.[9] Indeed, the fact of an inconsistency does not mean that the earlier allegation is the true one, as a party might amend to correct a misstatement. Funk's counsel has attested to the amended allegations under Rule 11, and the Court therefore accepts them as true at this stage. Accordingly, the Court denies the motion to dismiss this claim as time-barred.[10]

         IV. Declaratory Judgment

         In Count I of its amended complaint, Funk seeks a declaratory judgment to the effect that non-competition agreements between Syngenta and each plaintiff are unenforceable as unreasonable, and that a Master Agreement between the parties is therefore terminated (based on a provision that the Mater Agreement terminates when the non-competes do). Syngenta seeks dismissal of this count on the basis that there is no actual case or controversy here, as required by Article III of the Constitution, concerning the enforceability of the non-competes. In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), the Supreme Court set forth the applicable standard as follows:

Our decisions have required that the dispute be definite and concrete, touching the legal relations of parties having adverse legal interests; and that it be real and substantial and admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. . . . Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

See Id. at 127 (internal quotations and citations and footnote omitted).

         In applying that standard, a number of courts have held that, although an actual breach by the plaintiff is not required, an Article III case or controversy does not exist with respect to the enforceability of a non-competition agreement unless there has been conduct that will likely lead to litigation, such as threats of litigation by the defendant or steps taken by the plaintiff in preparation of competing in alleged violation of the agreement. For instance, in Bruhn v. STP Corp., 312 F.Supp. 903 (D. Colo. 1970), the plaintiffs alleged that they desired and intended to compete in the future and that the defendant had refused to release them from the non-compete upon request. See Id. at 905. Nevertheless, the court held that no justiciable controversy existed, as follows:

The act which would allegedly result in liability-plaintiffs' acceptance of employment in violation of the covenant-has not yet occurred. Also, none of the parties have taken steps or pursued a course of conduct which will necessarily lead to litigation in the immediate future. Plaintiffs' complaint does not allege that they have sought employment or begun preparations to sell or distribute products competitive to STP [the defendant]. It does not allege that defendant has threatened suit. Answers to interrogatories which have been filed by five of the plaintiffs indicate that they wish to sell or distribute products competitive to STP, but that none of them have any associates or business organizations with whom they plan to carry out such activities. Furthermore, none of the plaintiffs who have submitted answers to defendant's interrogatories have done anything to date regarding any such proposed activities. It is therefore clear that the plaintiffs are merely apprehensive, but have not nevertheless even begun to pursue a course of action which would lead them down the path toward litigation.
It is true that the defendant has refused to release plaintiffs from the terms of the covenant not to compete, but this in and of itself does not produce a case or controversy within the meaning of Article III of the U.S. Constitution. Possibly the acts of one party may crystallize the dispute sufficiently to warrant declaratory relief, but more is required than a mere refusal to release the plaintiff from the terms of a covenant not to compete. In the present dispute, there has been no threat of suit by the defendant, nor has the defendant claimed that any action heretofore taken by plaintiffs has resulted or will result in the immediate future in a breach of the covenant.

See Id. at 906-07 (citation omitted). A number of courts have followed this reasoning by the court in Bruhn. See Boudreaux v. OS Restaurant Servs., L.L.C., 2013 WL 5722714, at *4-6 (E.D. La. Oct. 21, 2013) (citing Bruhn in dismissing declaratory judgment action where complaint did not allege “either any specific threat of litigation or that [the plaintiff] has undertaken any specific course of action that will make litigation a certainty;” allegation that plaintiff's ability to support his family had been adversely affected was not sufficient); Klosek v. American Express Co., 2008 WL 4057534, at *19-20 (D. Minn. Aug. 26, 2008) (citing Bruhn; neither the existence of a non-compete nor the expressed desire to compete in the future is sufficient to establish a controversy; there must be allegations that the plaintiff engaged in activity that violates the non-compete or that the defendant intends to enforce it), aff'd, 370 F. App'x 761 (8th Cir. 2010); Lyman v. St. Jude Med. S.C., Inc., 423 F.Supp.2d 902, 905-06 (E.D. Wis. 2006) (following Bruhn; plaintiffs did not allege that they had taken any steps to compete or that the defendant had threatened suit); Mozdzierz Consulting, Inc. v. Mile Marker, Inc., 2006 WL 799222, at *4 (E.D. Mich. Mar. 28, 2006) (following Bruhn in dismissing action where plaintiffs had not alleged that they were seeking contracts that might compete); Weber v. Churchill Communications Corp., 1988 WL 10861, at *3 (S.D.N.Y. Feb. 10, 1988) (following Bruhn in granting summary judgment on declaratory judgment claim relating to a non-compete); see also Cohen v. Orthalliance New Image, Inc., 252 F.Supp.2d 761, 768 (N.D. Ind. 2003) (no actual controversy in absence of facts suggesting that competition was imminent). The Court is persuaded by the reasoning of these courts.[11]

         In its amended complaint, Funk has alleged that after it provided notice to Syngenta of the unenforceability of the non-competition agreements, Syngenta “failed and refused to terminate” those agreements; that Syngenta “continues to attempt to enforce” the agreements; that Mr. Funk's primary business has been selling seed; and that Mr. Funk “desires to establish and operate a new seed business.” As discussed in the cases cited above, however, neither Mr. Funk's desire to compete in the future nor Syngenta's refusal to terminate the agreements is sufficient to create an actual case or controversy here in the absence of an allegation that Mr. Funk or Funk Seed has taken some step towards competing or that Syngenta has threatened litigation.

         Funk has also alleged that Syngenta has maintained that it is entitled to certain payments under the SDA and that it will attempt to collect by executing on a security interest it has under the parties' Master Agreement. Such facts, taken as true, do not create a controversy concerning the non-competition agreements, however. The SDA is independent of the non-competes. Funk seeks a declaration that the Master Agreement has been terminated, but that request is based only on the precedent termination of the non-competes. Moreover, the Master Agreement provides that certain provisions, including the provision under which Syngenta may claim a security interest, survive termination. Thus, the fact that Syngenta may seek to enforce the security interest does not create a controversy concerning the enforceability of the non-competes.[12]

         Accordingly, the Court concludes that Funk has not alleged facts indicating that an actual case or controversy exists for purposes of compliance with Article III of the Constitution, and the Court therefore dismisses Count I of the amended complaint.

         V. Breach of Contract

         A. Failure to Provide ...

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