Britz Fertilizers, Inc. v. Bayer Corp.
| Decision Date | 16 October 2009 |
| Docket Number | No. 1:06-CV-00287-OWW-DLB.,1:06-CV-00287-OWW-DLB. |
| Citation | 665 F.Supp.2d 1142 |
| Parties | BRITZ FERTILIZERS, INC., Plaintiff, v. BAYER CORPORATION; Bayer CropScience, LP; et al., Defendants. |
| Court | U.S. District Court — Eastern District of California |
Eric J. Sousa, George Pete Rodarakis, Roger M. Schrimp, Damrell Nelson Schrimp Pallios Pacher and Silva PC, Modesto, CA, Ted R. Frame, Frame & Matsumoto, Coalinga, CA, for Plaintiff.
Stephen Teale Clifford, T. Mark Smith, Clifford & Brown, P.C., Bakersfield, CA, for Defendants.
Before the court are two motions both jointly filed by Defendants Bayer Corporation and Bayer CropScience LP (collectively, "Bayer"). In the first motion, Bayer moves for summary judgment or, in the alternative, summary adjudication on the seven claims asserted by Plaintiff Britz Fertilizers, Inc. ("Britz") in its Amended Complaint (Doc. 40), one of which is for breach of a "Contract to Indemnify." In a second, separate motion, Bayer moves for summary adjudication on the issue of whether a particular distribution agreement, i.e., the "Aventis Distribution Agreement," applies to Britz's claim for breach of a Contract to Indemnify. Britz opposes both motions. The following background facts are taken from the parties' submissions in connection with the motions and other documents on file in this case.1
Britz is a distributor of agricultural chemical products. (Doc. 38 at 7.)2 Britz is a California corporation with its principal place of business in Fresno, California. Bayer Corporation is an Indiana Corporation with its principal place of business in Pittsburgh, Pennsylvania. Defendant Bayer CropScience LP is a Delaware limited partnership with its principal place of business in North Carolina. The partners of Bayer CropScience LP are entities which are citizens of Delaware, Indiana, and Germany, and none of them are incorporated or have a principal place of business in California. Jurisdiction is undisputably premised on diversity of citizenship. 28 U.S.C. § 1332.
In 2002, one of Britz's customers was Ahmad Skouti ("Skouti"), a grape grower in Fresno and Madera County. Britz considered Skouti one of its "full-service" customers meaning that, in addition to selling chemicals to Skouti, Britz, through its Pest Control Advisor, Buck Hedman, monitored Skouti's vineyards, provided recommendations to Skouti as to which chemicals to apply, and offered advice as to how to apply those chemicals. Britz distributed a chemical to Skouti known as "Ethrel," a growth regulator that is supposed to hasten a grape's ripening process and increase its sugar content.
Initially, Britz purchased Ethrel from the agricultural company known as Aventis with whom Britz had a distribution agreement. Aventis (i.e., Aventis CropScience) and Britz entered into a distribution agreement effective January 1, 2000, through October 31, 2000 ("Aventis Distribution Agreement"). Exhibit "A" to the Aventis Distribution Agreement specifically includes the distribution of "ETHREL." Through written amendments, Britz and Aventis twice extended the term of the Aventis Distribution Agreement from November 1, 2000, to October 31, 2001, and then from November 1, 2001, to October 31, 2002. Each amendment contained Exhibit "A" which specifically includes the distribution of "ETHREL." Britz acknowledges that it executed the original of and the amendments to the Aventis Distribution Agreement, and that it included the distribution of Ethrel.
In addition to the Aventis Distribution Agreement, on or about January 1, 2002, Britz entered into a distribution agreement with Bayer Corporation for the period of January 1, 2002, through December 31, 2002 ("Bayer Distribution Agreement"). The Bayer Distribution Agreement does not specifically mention "Ethrel." In June 2002, however, after the Bayer Distribution Agreement commenced and before it expired, Bayer acquired Aventis.
In June 2002, a division of Bayer acquired Aventis, which resulted in the creation of "Bayer CropScience." A press release, dated June 3, 2002, announced Bayer's acquisition of Aventis and the emergence of "Bayer CropScience." In part, the press release states:
Leverkusen, June 3, 2002—The new Bayer CropScience subgroup, formed through the merger of Bayer's Crop Protection Business Group with Aventis CropScience SA, will begin operating on June 4, 2002. The industry's new number two company is thus being given the green light following a thorough examination by the antitrust authorities. The European Commission approved the acquisition in April and the United States Federal Trade Commission . . . gave the go-ahead on May 30. Closing of the EUR 7.25 billion deal on June 3, marks the biggest acquisition in Bayer's history.[3]
According to the President of Britz, David A. Britz, he saw this press release on or about June 3, 2002.
In or about July 2002, Britz sold some Ethrel to Skouti. Along with other agricultural chemicals in a "tank mix," Skouti applied the Ethrel to certain vineyards he owned in Fresno and Madera County, and to a vineyard he leased in Fresno County from Walter Johnsen (collectively, the "Vineyards"). After Skouti applied the Ethrel in the tank mix, the Vineyards sustained damage.
Britz claims that, as with nearly all of the Ethrel it purchased in 2002, Britz purchased the Ethrel it sold to Skouti, which Skouti then applied to the Vineyards, from "Bayer" and not from Aventis.4 For argument purposes only, "Bayer is willing to concede this point with the caveat that the billing statements [for the Ethrel sold to Britz at this time] stated `Bayer CropScience' and not `Bayer Corporation.'" (Doc. 138 at 4.) In other words, Bayer is conceding, for argument purposes, that Britz purchased the Ethrel at issue from Bayer, but not that Ethrel was a product of "Bayer Corporation." Bayer claims that Ethrel was a product of "Bayer CropScience."
In response to an inquiry by Britz, Bayer Vice President and Assistant General Counsel, William G. Ferguson, wrote David Britz a letter dated September 10, 2002. In the letter, Ferguson advised Britz that he was not aware of many details regarding a potential claim by Skouti, but that Bayer would defend and indemnify for losses caused by its products in a situation where the "distributor [Britz] acted as a purely `pass through entity.'" The September 10, 2002, letter, which contains the subject line "Ethrel Claim (Grapes)— Mr. Ahmad Skouti," reads in pertinent part as follows:
I understand that you are concerned that the subject individual may file a lawsuit against Bayer CropScience and/or Britz Fertilizer with respect to the use of the (former Aventis) product Ethrel on grapes.
Although I do not have many details on this claim, I understand that you request clarification of Bayer's position with respect to the defense of such a lawsuit.
In reply, I would refer to you to your current Distributor Agreement with Aventis CropScience, specifically to the section dealing with `Indemnification.' As you will note, it would be Bayer's position that it would defend and indemnify any claim related to its product in a situation where the distributor acted as a purely `pass through' entity. That is, where there were no claims and/or proof of independent negligence or acts on the part of the distributor, e.g., making recommendations off-label, improper storage, handling or transportation, etc. Were such independent acts alleged, the distributor would be expected to defend them, since those would be theories of liability independent of any actions of Bayer, and the distributor would be in the best position to know the facts involved.
With respect to being named in a lawsuit, of course, as you may know given the current state of litigation in the United States, neither Bayer nor anyone else can control who might be named in a particular lawsuit, or which allegations might be made. This would be purely up to the plaintiff and his attorney, hopefully on some allegedly factual basis rather than a `shot gun' approach.
(Smith Decl. Ex. D.) At the time Skouti applied the Ethrel to the Vineyards in or about July 2002, and at the time of Ferguson's September 10, 2002, letter, the Aventis Distribution Agreement had not yet expired—it was set to expire on October 31, 2002. The "Indemnification" provision in the Aventis Distribution Agreement states, in relevant part, that "Aventis CropScience shall indemnify, defend, and hold DISTRIBUTOR [Britz] harmless from any third party claims, losses, damages and expenses, including reasonable attorneys fees, arising out of or resulting from Aventis CropScience's negligence, breach of warranty or defective product." (Schrimp Decl. Ex. C.)
The Bayer Distribution Agreement, which was in effect at the time of Ferguson's September 10, 2002, letter, also contains an "Indemnity" provision. This provision states, in relevant part, that "Bayer Corp. will indemnify Distributor against all claims for property damage or personal injury suffered by third persons caused by goods supplied to Distributor hereunder whether arising in warranty, negligence or otherwise, except to the extent the claims are based on any one of the following: a) The negligence of Distributor . . . ." (Schrimp Decl. Ex. D) (emphasis added).
On or about December 18, 2002, Skouti and lessor Johnsen filed a lawsuit against Britz in the Fresno County Superior Court (...
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