BAMBU v. EI Dupont De Nemours & Co., Inc.

• Decision Date: 26 May 2004
• Docket Number: No. 3D02-1026, No. 3D02-1027, No. 3D02-1172, No. 3D02-1177.
• Citation: 881 So.2d 565
• Parties: Palmas Y BAMBU, S.A., a Costa Rican company, and Productora de Semillas, S.A., a Costa Rican company, Appellants/Cross-appellees, v. E.I. DUPONT DE NEMOURS & COMPANY, INC., a Delaware corporation, Appellee/Cross-appellant.
• Court: Florida District Court of Appeals

881 So.2d 565

Palmas Y BAMBU, S.A., a Costa Rican company, and Productora de Semillas, S.A., a Costa Rican company, Appellants/Cross-appellees, v. E.I. DUPONT DE NEMOURS & COMPANY, INC., a Delaware corporation, Appellee/Cross-appellant.

Nos. 3D02-1026, 3D02-1027, 3D02-1172, 3D02-1177.

District Court of Appeal of Florida, Third District.

May 26, 2004.

Rehearing Denied August 13, 2004.

Podhurst Orseck Josefsberg Eaton Meadow Olin & Perwin and Aaron S. Podhurst; Colson Hicks Eidson and Marc Cooper and Maureen E. Lefebvre; Kozyak Tropin & Throckmorton and Janet L. Humphreys and Harley S. Tropin and Adam M. Moskowitz and Detra P. Shaw-Wilder, for appellants/cross-appellees.

Shook Hardy & Bacon and Edward A. Moss and Thomas M. Sherouse and Daniel B. Rogers; Hicks & Kneale and Mark Hicks and Dinah Stein, for appellee/cross-appellant.

Before SCHWARTZ, C.J., and COPE, and WELLS, JJ.

WELLS, Judge.

Palmas Y Bambu, S.A., and Productora De Semillas, S.A., two Costa Rican plant nurseries, appeal from an order directing a verdict in E.I. DuPont de Nemours, Inc.'s favor on the nurseries' RICO claims in this multi-count action for damages to ornamental plants allegedly caused by use of DuPont's Benlate 50 DF fungicide. DuPont cross-appeals from a $26,450,289 judgment in Palmas' and Productora's favor, claiming that a number of evidentiary errors and use of an adverse inference jury instruction regarding the purported 1992 testing of Benlate in Monte Vista, Costa Rica, mandate reversal. We affirm the directed verdict on Palmas' and Productora's RICO claims because the nurseries failed to establish that their injuries were directly caused by the predicate acts proved below and because they failed to establish the existence of an enterprise distinct from the entity charged with violating Florida's RICO act. Moreover, to the extent that the RICO claims were in actuality claims of improper labeling, the claims are preempted by federal legislation. We also find that the adverse inference instruction given to the jury regarding alleged Benlate testing in Monte Vista, Costa Rica, was erroneous and mandates reversal of the remainder of the judgment against DuPont.

Background

Palmas and Productora maintain that DuPont had knowledge of a defect in its early formulation of the commercial plant fungicide Benlate WP; that DuPont recklessly reformulated Benlate to create Benlate DF, also a defective product; and that after Benlate DF users reported plant damage, DuPont perpetuated a coverup and distributed Benlate DF in Costa Rica by misrepresenting and concealing the defective nature of the product, resulting in substantial damage to their nursery plants. Productora sued DuPont in Miami-Dade County Circuit Court, Case No. 97-18186; Palmas sued DuPont in Miami-Dade County Circuit Court, Case No. 97-18181. Each alleged product defect, negligence, and common law fraud claims. The nurseries also sought treble damages under the Florida RICO (Racketeer Influenced and Corrupt Organization) Act. The cases were consolidated for discovery, then later for trial before the same jury.

Pretrial, the nurseries alleged that in 1992 DuPont conducted secret Benlate tests in Monte Vista, Costa Rica, and that DuPont had destroyed both the plants and test results that established Benlate's defective nature. The nurseries sought to strike DuPont's pleadings, to have DuPont sanctioned for destruction of evidence, and to have an adverse inference jury instruction read to the jury. DuPont vehemently denied that any Benlate testing had taken place at Monte Vista or that any test results existed. Following a number of evidentiary hearings on this matter, the trial court concluded that DuPont had conducted Benlate tests in Monte Vista and had destroyed the results of those tests. Finding that DuPont's denials about the testing and the results had not deceived anyone, the trial court denied the request to strike DuPont's pleadings and decided instead on what it described as the "less draconian sanction" of giving a permissive adverse inference jury instruction. That instruction advised the jury that Benlate testing had occurred at Monte Vista; that "DuPont had the obligation to preserve the evidence from those tests, but nonetheless destroyed the evidence"; and that the jury could, but was not obligated to, infer from these facts that the test results were unfavorable to DuPont.

Following a six-week trial, the jury returned a verdict for the nurseries on all claims. Thereafter, in response to DuPont's motions to set aside the verdict, for new trial, and for remittitur, the trial court set aside the RICO verdict and its trebling of damages. The trial court also decreased the damages awarded to Productora by $110,791, while otherwise rejecting DuPont's post-trial motions to set aside the verdict or grant a new trial. Judgment was entered against DuPont in favor of Palmas in the amount of $12,600,000, and against DuPont in favor of Productora in the amount of $13,850,289. The nurseries appeal from the directed verdict on the RICO claims; DuPont appeals from the $26,450,289 judgments in the nurseries' favor.

I. The Nurseries' Appeal

The nurseries appeal from the trial court's order directing a verdict on their RICO claims, arguing that the trial court erred in concluding that reliance was an element of a civil RICO claim — an element they say they proved. We disagree and affirm the directed verdict not only because the nurseries failed to establish causation, that is, damage flowing from reliance, but also because they failed to prove that the RICO defendant, or person, DuPont was distinct from the RICO enterprise, and because the RICO count, at least in part, is preempted by federal law.

A. Causation: Damage Flowing From Reliance

The nurseries sought a treble damages award against DuPont in this products liability case under the provisions of section 772.104 of the Florida Statutes. That section provides that "[a]ny person who proves by clear and convincing evidence that he or she has been injured by reason of any violation" of Florida's RICO act, may recover "threefold the actual damages sustained...." § 772.104, Fla. Stat. (2003). Thus, to recover, the nurseries had to prove that they were injured "by reason of" DuPont's alleged criminal activities.

Where, as here, a private party alleges mail or wire frauds as the criminal, or predicate, acts underpinning a civil RICO claim, that party must prove more than the defendant's intentional participation in a scheme to defraud in violation of the federal mail or wire fraud statutes. The claimant must also show that his injury was caused by, that is, his damage was "by reason of," the predicate mail or wire fraud acts. To sustain this burden, reliance on the predicate mail or wire fraud acts must be demonstrated:

When a private plaintiff relies on a violation of the mail or wire fraud statutes as a predicate act for civil RICO, he faces an additional hurdle before he can obtain recovery: he must show not only that the mail or wire fraud statutes have been violated, but also that he has suffered injury as a result of the violation. Section 1964(c)[the federal counterpart of section 772.104 of the Florida Statutes] provides civil remedies to those persons who are injured "by reason of" racketeering activity.... A civil RICO plaintiff must show ... that he was injured by reason of the defendant's acts of deception. As the Supreme Court stated in Sedima [Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)], "the plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation." The Court went on to hold that the plaintiff's damages must "flow from the commission of the predicate acts." Section 1964(c), as interpreted by the Supreme Court and lower courts, thus imposes a proximate cause requirement: the plaintiff's injury must have been proximately caused by the commission of the predicate acts.

There is some question whether the proximate cause requirement limits damages recoverable to those caused directly by the predicate act (e.g., by reliance on fraudulent misrepresentations) or to those caused indirectly by the predicate act (e.g., by purchasing property at a price that has been artificially inflated by a scheme to defraud). We have taken the more restrictive view, holding that a plaintiff has standing to sue under section 1964(c) only if his injury flowed directly from the commission of the predicate acts. This means that, when the alleged predicate act is mail or wire fraud, the plaintiff must have been a target of the scheme to defraud and must have relied to his detriment on misrepresentations made in furtherance of that scheme. See O'Malley v. O'Neill, 887 F.2d 1557, 1563 & n. 9 (11th Cir.1989) ....

Pelletier v. Zweifel, 921 F.2d 1465, 1499 (11th Cir.1991)(emphasis added) (some citations omitted).¹

As this court has confirmed, "indirect injuries, that is injuries sustained not as a direct result of predicate acts ... will not allow recovery under Florida RICO." O'Malley v. St. Thomas Univ., Inc., 599 So.2d 999, 1000 (Fla. 3d DCA 1992)(adopting the reasoning in O'Malley v. O'Neill, 887 F.2d 1557 (11th Cir.1989)). In a civil RICO action predicated upon mail or wire fraud, "[t]he plaintiff has the burden of proving: (1) that the defendant intentionally participated, (2) in a scheme to defraud, (3) the plaintiff of money or property, (4) by means of material misrepresentations, (5) using the mails or wires, (6) and that the plaintiff relied on a misrepresentation made in furtherance of the fraudulent scheme, (7) that such misrepresentation would have been relied upon by a reasonable person, (8) that the plaintiff suffered injury as a result of such reliance, and (9) that the plaintiff incurred a specifiable amount of damages." Sikes v. Teleline, Inc., 281 F.3d...