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In re Syngenta AG Mir 162 Corn Litigation

United States District Court, D. Kansas

January 19, 2018

IN RE SYNGENTA AG MIR 162 CORN LITIGATION
v.
Syngenta AG, et al., No. 16-2788-JWL This Document Relates To: Louis Dreyfus Company Grains Merchandising LLC

          MEMORANDUM AND ORDER

          JOHN W. LUNGSTRUM UNITED STATES DISTRICT JUDGE.

         This single case within this MDL presently comes before the Court on the motion (Doc. # 3376 in the MDL docket) filed by defendants Syngenta AG; Syngenta Crop Protection AG; Syngenta Corporation; Syngenta Crop Protection, LLC; and Syngenta Seeds, LLC (collectively “Syngenta”) to dismiss certain claims brought by plaintiff Louis Dreyfus Company Grains Merchandising LLC (“LDC”). For the reasons set forth below, the motion is granted in part and denied in part. Specifically, the Court dismisses LDC's Lanham Act and fraud claims, as well as any negligence claim to the extent based on particular theories on which the Court has previously ruled, and the motion is granted to that extent. The motion is denied with respect to Syngenta's argument under the contractual economic loss doctrine. In addition, as discussed below, LDC's motion to strike portions of Syngenta's reply brief (in support of the motion to dismiss) (Doc. # 3472) is granted in part and denied in part.

         I. Background

         This MDL includes hundreds of similar suits filed against Syngenta by corn farmers and others in the corn industry. 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. The farmer plaintiffs (corn producers), who did not use Syngenta's products, have alleged 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 tort claims by producers under the law of eight different states.[1]

         The particular case within the MDL to which this order relates was brought by plaintiff LDC in the District of Minnesota. LDC alleges that it operates grain elevators and that it buys, sells, and exports corn.[2] By its first amended complaint, LDC asserts claims against Syngenta under the federal Lanham Act and state-law claims for negligence, fraudulent misrepresentation, and tortious interference with business expectations.

         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. Lanham Act Claims

         LDC alleges that Syngenta violated the federal Lanham Act, 15 U.S.C. § 1125(a)(1)(B), by making certain false or misleading representations regarding Chinese import approval of corn containing MIR 162. Specifically, LDC bases its Lanham Act claims on specific representations by Syngenta beginning in July 2011 and continuing through 2013. Among other arguments, Syngenta argues that LDC has not pleaded a plausible theory that any such representations caused LDC's alleged harm, based on the Court's reasoning in an earlier summary judgment ruling. The Court agrees, and it therefore dismisses LDC's Lanham Act claims.[3]

         In its prior order, the Court granted summary judgment in favor of Syngenta on the Lanham Act claims by the Kansas class of corn producers, which were based on representations made by Syngenta in a Grower Letter dated August 17, 2011. See In re Syngenta AG MIR 162 Corn Litig., 249 F.Supp.3d 1224, 1229-31 (D. Kan. 2017) (Lungstrum, J.). One of the bases for the Court's ruling was the lack of causation because of the timing of the August 2011 representation:

Plaintiffs do not take issue with Syngenta's premise that, in order to prove causation in fact here, plaintiff must show both that farmers read and were influenced by the Grower Letter and that the impact of the letter was great enough to cause the embargo that allegedly caused the price drop in this country. . . .
Plaintiffs have not addressed at all Syngenta's argument based on the fact that, by the time of the Grower Letter in August 2011, Syngenta had been selling Viptera for many months and planting for the 2011 season had been completed. Thus, under plaintiffs' own theory of liability here (under which contamination of the entire corn supply through cross-pollination and commingling was inevitable without additional safeguards), there was already more than enough corn containing MIR 162 in the system to cause the alleged trade disruption. Thus, there is no evidence that sales occurring after the Grower Letter affected the fact or duration of plaintiffs' economic injuries. That lack of evidence . . . means that plaintiffs have failed to provide the necessary evidence of causation. Syngenta is therefore entitled to summary judgment on plaintiffs' Lanham Act claims.

See Id. at 1230-31 (footnote omitted).

         In the present case, LDC pleads (and argues) the same theory of causation-that Syngenta's representations misled purchasers of Viptera and that if Syngenta had not made such false or misleading representations, “growers could have avoided a trade disruption by refusing to buy or plant Viptera seed, ensuring that it would not contaminate the U.S. corn supply and cause the loss of the Chinese market.” Thus, as in the case of the claim by the Kansas producers, LDC's Lanham Act claims depend on a showing that the alleged representations caused enough sales of Viptera to cause the trade disruption (which disruption allegedly harmed LDC). LDC bases its claims on representations by Syngenta beginning in July 2011. LDC, however, also alleges that Syngenta commercialized Viptera in time for the 2011 growing season and that farmers would have purchased seed for that season between October 2010 and March 2011, in time for planting in Spring 2011. Thus, Viptera seed had already been planted by the time of the alleged representations beginning in July 2011. LDC further alleges that, because of cross-pollination and other processes, there was a “near-certainty that eventually some corn bound for China would be contaminated with the MIR 162 trait.” In light of these allegations that any widespread commercialization of Viptera would effectively have caused the contamination and resulting trade disruption, LDC's theory of causation based on representations after a full season of Viptera planting is simply not plausible, particularly in the absence of specific allegations that sales of Viptera were such that the presence of MIR 162 from the 2011 season would not have caused the trade disruption.

         Like the Kansas class plaintiffs, LDC did not respond directly to this specific argument by Syngenta based on causation and the timing of the representations. Thus, LDC has not explained how its theory of causation is plausible. LDC generally notes that the Court's prior ruling was based on a lack of evidence at the summary judgment stage, while the present motion is based solely on the pleadings. LDC argues that it should have the opportunity to discover evidence that farmers in fact relied on Syngenta's representations. Such evidence, however, does not bear on this issue of the presence of MIR 162 in U.S. corn prior to the representations on which LDC's Lanham Act claims are based. Whether at the summary judgment stage or the pleading stage, the stated theory of causation is not plausible given the dates of the alleged representations underlying these claims. Thus, the claims are subject to dismissal.

         IV. Contractual Economic Loss Doctrine

         A. LDC's Motion to Strike

         As a preliminary matter, the Court addresses LDC's motion to strike certain material from Syngenta's reply brief relating to Syngenta's argument that the economic loss doctrine (ELD) precludes certain negligence claims by LDC. The Court grants the motion in part and denies it in part.

         First, LDC moves to strike certain exhibits to the reply brief. The Court agrees with LDC that Syngenta has identified no proper basis for the Court's consideration of Exhibits A through K at this stage, when the Court's analysis is confined to the factual matters alleged in the amended complaint. The Court therefore strikes those exhibits (and any reliance thereon in the argument) and grants the motion to that extent.[4] The Court denies the motion with respect to Exhibits M and N, however; LDC has not explained why the Court may not consider a court decision and the brief submitted to that court that are related to a proper legal argument by Syngenta.

         Second, LDC moves to strike three arguments from Syngenta's reply brief, on the basis that those arguments were improperly raised for the first time in that brief. The Court denies that motion, as the arguments are properly related to issues raised in Syngenta's initial brief and in LDC's response brief. Syngenta's argument about the lack of an independent duty responds to LDC's own arguments about the existence of such a duty under Washington law.[5] Syngenta's argument that LDC had opportunities to allocate the risk of Chinese rejection relates directly to its initial argument based on the rationale of the ELD. Finally, LDC's request to strike Syngenta's citation to the Funk case, which Syngenta also cited in its initial brief, patently has no merit. It is clear, especially in the third instance, that LDC intended by its motion to create additional opportunities to argue points made by Syngenta without having to justify a surreply.

         B. Choice of Law

         Before addressing the ELD, the Court must determine which state's substantive law should govern LDC's common-law tort claims. Syngenta argues that the Court should apply the law of Connecticut, the site of LDC's headquarters. LDC argues that the claims should be governed by the law of Washington, where LDC has operations allegedly affected by Syngenta's conduct and the state from which LDC exports some corn. The Court concludes that Connecticut law should apply here.

         In an MDL such as this, the Court applies the choice of law rules of the state in which the particular action was originally filed, in this case Minnesota. See Johnson v. Continental Airlines Corp., 964 F.2d 1059, 1063 n.5 (10th Cir. 1992). Minnesota has adopted the significant contacts test for choice-of-law analyses. See Nodak Mut. Ins. Co. v. American Family Mut. Ins. Co., 604 N.W.2d 91, 94 (Minn. 2000) (citing Jepson v. General Cas. Co. of Wisc., 513 ...


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