Amchem Products, Inc. v. GAF Corp.

• Decision Date: 07 May 1979
• Docket Number: No. 76-3801,76-3801
• Citation: 594 F.2d 470
• Parties: 9 Envtl. L. Rep. 20,610 AMCHEM PRODUCTS, INC., Plaintiff-Appellant, v. GAF CORPORATION and Douglas M. Costle, Administrator, Environmental Protection Agency, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 470

594 F.2d 470

9 Envtl. L. Rep. 20,610

AMCHEM PRODUCTS, INC., Plaintiff-Appellant, v. GAF CORPORATION and Douglas M. Costle, Administrator, Environmental Protection Agency, Defendants-Appellees.

No. 76-3801.

United States Court of Appeals, Fifth Circuit.

May 7, 1979.

Kirk M. McAlpin, Atlanta, Ga., John D. Conner, William J. Wellman, Kenneth W. Weinstein, Washington, D. C., Ernest G. Szoke, Amchem Products, Inc., Ambler, Pa., for plaintiff-appellant.

William D. Mallard, Jr., Asst. U. S. Atty., Atlanta, Ga., John W. Lyon, Office of General Counsel, Environmental Protection Agency, Washington, D.C., Robert J. Castellani, First Asst. U. S. Atty., Atlanta, Ga., John W. Stokes, Jr., U. S. Atty., Atlanta, Ga., for defendant-appellee Costle.

J. D. Fleming, Jr., Atlanta, Ga., John A. Chandler, Atlanta, Ga., for defendant-appellee GAF.

Appeal from the United States District Court for the Northern District of Georgia.

Before WISDOM, TJOFLAT and VANCE, Circuit Judges.

TJOFLAT, Circuit Judge:

The primary issue on this appeal is the effective date of the amendments to the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 7 U.S.C. §§ 135-135k (1976) (superseded Oct. 21, 1976 by 7 U.S.C. §§ 136-136y), enacted by the Federal Environmental Pesticide Control Act of 1972 (FEPCA), Pub.L. No. 92-516, 86 Stat. 973 (1972). Those amendments provide, in pertinent part, that an applicant for registration of a pesticide under FIFRA must offer compensation for the use of scientific test data submitted by a prior applicant. Amchem Products, Inc. (Amchem) appeals from a judgment holding that the amendments were not in effect when GAF Corporation (GAF) applied for a registration on the basis of test data developed and submitted by Amchem. We reverse.

I

A. Facts

Amchem is a developer, producer, and marketer of herbicides, plant growth regulators, and plant hormones. GAF is a manufacturer of basic chemicals. In 1961 these two companies entered into a screening agreement under the terms of which GAF was to develop new chemical compounds with possible agricultural uses and then submit these chemicals to Amchem for evaluation and development as commercial products. Pursuant to this agreement GAF submitted and Amchem tested a compound now known as ethephon. Amchem determined that ethephon had substantial commercial value as a plant growth regulator and formulated it into a marketable product with the trade name Ethrel.

Before Amchem could sell Ethrel in interstate commerce, it had to obtain registrations for specific uses of the product from the Environmental Protection Agency (EPA) as required by FIFRA. Amchem submitted extensive scientific test data regarding the safety and efficacy of Ethrel in support of its applications. This data was developed by Amchem over a period of several years and at a cost of several million dollars. EPA issued registrations for the use of Ethrel on cherries and tomatoes on April 24, 1973, and for apples on July 26, 1973.

On November 12, 1973, GAF filed with EPA an application for registration of its product Cepha, a plant growth regulator with ethephon as the active ingredient. GAF's application set forth the chemical composition of Cepha, a proposed label, and stated that Cepha was identical to the already registered product Ethrel. EPA requested only one scientific study from GAF in support of its application. Registrations for use of Cepha on cherries, tomatoes, and apples were issued on February 28, 1974. EPA acknowledges that it registered Cepha in reliance upon test data submitted by Amchem in support of the Ethrel application and that Cepha could not have been registered without consideration of that data. This data was neither shown to nor made available to GAF for inspection; EPA simply used it internally. Amchem never gave permission for its data to be used in this fashion, and GAF never offered to compensate Amchem for the use of the data.

B. The Statutory Provisions

FIFRA was enacted in 1947 as a regulatory statute for pesticides. Prior to its amendment by FEPCA, FIFRA prohibited the shipment in interstate commerce of any pesticide ¹ not registered with EPA. To obtain a registration, an applicant had to submit the complete formula of the pesticide, a proposed label with warnings and directions for use, and any test data required by EPA to support the safety and efficacy of the product. The statute provided that information relative to product formulas was not to be disclosed except to specified persons. 7 U.S.C. § 135a(c)(4) (1976). FIFRA was silent as to the status of supporting test data except to say that when such data was submitted by EPA to an advisory committee for evaluation it was confidential in the hands of that committee. Id. § 135b(c). It was the consistent practice of EPA to refer to test data submitted by a prior applicant when considering a subsequent application for registration of a product with the same ingredients. ²

FEPCA completely rewrote FIFRA. Among the substantive changes made were the extension of FIFRA to completely intrastate use of pesticides and the requirement that pesticides be classified for general or restricted use. Important changes were also made in the treatment to be accorded test data. Section 3(c)(2) of FIFRA as amended, 86 Stat. 980, required EPA to make public, within 30 days after issuance of a registration, the data relied upon to support the registration. This requirement did not apply to trade secrets. Additionally, section 3(c)(1)(D), Id. at 979-80, prohibited EPA from considering previously submitted data in support of a subsequent application unless the second applicant offered to compensate the first one. If the data were trade secret, the permission of the first applicant was also required. The relevant provisions are set forth in the margin. ³

FEPCA was enacted on October 21, 1972. The effective dates of its amendments to FIFRA are controlled by section 4 of FEPCA, which provides in relevant part:

Sec. 4. (a) Except as otherwise provided in the Federal Insecticide, Fungicide, and Rodenticide Act, as amended by this Act, and as otherwise provided by this section, the amendments made by this Act shall take effect at the close of the date of the enactment of this Act, provided if regulations are necessary for the implementation of any provision that becomes effective on the date of enactment, such regulation shall be promulgated and shall become effective within 90 days from the date of enactment of this Act.

(b) The provisions of the Federal Insecticide, Fungicide, and Rodenticide Act and the regulations thereunder as such existed prior to the enactment of this Act shall remain in effect until superseded by the amendments made by this Act and regulations thereunder: Provided, That all provisions made by these amendments and all regulations thereunder shall be effective within four years after the enactment of this Act (c)(1) Two years after the enactment of this Act the Administrator shall have promulgated regulations providing for the registration and classification of pesticides under the provisions of this Act and thereafter shall register all new applications under such provisions.

(2) After two years but within four years after the enactment of this Act the Administrator shall register and reclassify pesticides registered under the provisions of the Federal Insecticide, Fungicide, and Rodenticide Act prior to the effective date of the regulations promulgated under subsection (c)(1).

86 Stat. 998-99. At the core of this lawsuit is the relation of section 4 to section 3(c)(1)(D).

C. The Proceedings to Date

Amchem filed this suit in district court in July 1974 seeking a declaration that GAF's registration was void, temporary injunctions against the distribution or sale of GAF's product, and damages from GAF in the amount of its profits from the sale of Cepha. After extensive discovery and a full hearing, the court entered judgment against Amchem in March 1975. In its opinion, Amchem Products, Inc. v. GAF Corp., 391 F.Supp. 124 (N.D.Ga.1975), the court explained that Amchem could not claim the benefit of FIFRA's new compensation-for-data provision (section 3(c)(1)(D) ) because it did not become effective upon enactment of FEPCA. The court read section 4(c)(1) of FEPCA to give EPA up to two years to promulgate regulations implementing section 3(c)(1) (D). EPA did not do this until November 19, 1973, seven days after GAF filed its application. Therefore GAF's application was properly processed by EPA under the pre-FEPCA provisions of FIFRA which, the court held, did not restrain EPA from considering Amchem's data. In answer to Amchem's argument that its data was trade secret and could not be misused regardless of section 3(c)(1) (D), the court found that Amchem had not made out a prima facie case of trade secret.

On November 28, 1975, after an appeal had been filed but prior to oral argument before this court, Congress amended section 3(c)(1)(D). Language was inserted providing that the section applied to "all applications for registration or reregistration submitted on or after October 21, 1972," (the date of enactment of FEPCA) and that the data that was compensable under the section was "data submitted on or after January 1, 1970." Insecticide, Fungicide, and Rodenticide Act, Pub.L. No. 94-140, § 12, 89 Stat. 755. Because the amendments related to important issues in this case, we vacated the district court's judgment and remanded the cause for reconsideration in light of the 1975 amendment. Amchem Products, Inc. v. GAF Corp., 529 F.2d 1297 (5th Cir. 1976).

On remand the district court held that the 1975 amendments had no effect on the merits of this case and readopted its prior opinion. Amchem Products, Inc. v. GAF Corp., 422 F.Supp. 390 (N.D.Ga.1976). The case is now before us for the second time.

II

The primary question for decision is the effective date of section 3(c)(1) (D). Our objective is, of...