Lynnbrook Farms v. Smithkline Beecham Corp.

• Citation: 79 F.3d 620
• Decision Date: 22 April 1996
• Docket Number: No. 95-2051,95-2051
• Parties: , Prod.Liab.Rep. (CCH) P 14,534 LYNNBROOK FARMS, Plaintiff-Appellant, v. SMITHKLINE BEECHAM CORPORATION, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 620

79 F.3d 620

64 USLW 2606, Prod.Liab.Rep. (CCH) P 14,534

LYNNBROOK FARMS, Plaintiff-Appellant, v. SMITHKLINE BEECHAM CORPORATION, Defendants-Appellees.

No. 95-2051.

United States Court of Appeals Seventh Circuit.

Argued Oct. 27, 1995.

Decided March 21, 1996.

Rehearing and Suggestion for Rehearing En Banc Denied April

22, 1996.

Appeal from the United States District Court for the Central District of Illinois, Peoria Division, No. 94-C-1227; Michael M. Mihm, Judge.

Matthew C. Potts, Whitney & Potts, Ltd., Elmwood, IL and James A. Davis (argued), Davis & Associates, Tremont, NE, for Plaintiff-Appellant.

Michael A. Pollard, John M. McGarry, Thomas R. Nelson, Baker & McKenzie, Chicago, IL, Scott A. Smith and Janell M. Gabor (argued), Popham, Haik, Schnobrich & Kaufman, Minneapolis, MN, for Defendant-Appellee.

Before FLAUM, ROVNER and EVANS, Circuit Judges.

FLAUM, Circuit Judge.

This case requires us to determine whether certain state common law causes of action asserted against a manufacturer of animal vaccines are preempted by federal law. Plaintiff, Lynnbrook Farms ("Lynnbrook"), sued Smithkline Beecham Corporation ("SBC") alleging that its cattle were injured and many were killed after being inoculated with animal vaccines manufactured by SBC. The district court granted summary judgment in favor of SBC, finding Lynnbrook's claims were preempted in their entirety by the United States Department of Agriculture's ("USDA") declaration of preemption issued through its Animal and Plant Health Inspection Service ("APHIS"). We affirm.

I.

The relevant facts are undisputed for purposes of our consideration of the preemption issue. The parties agree that we should accept as true the material allegations contained in Lynnbrook's complaint. In 1992, Lynnbrook vaccinated its cattle with two vaccines manufactured and sold by SBC--CattleMaster 4 and Ultrabac 7/Somubac. Lynnbrook followed all directions and correctly administered the vaccines. Both of the vaccines used by Lynnbrook were specifically licensed by APHIS, the agency charged by the USDA with regulating animal vaccines. 9 C.F.R. § 101.2. Lynnbrook employed the vaccines to prevent its cattle from contracting debilitating or mortal infections and diseases. Notwithstanding the inoculation of Lynnbrook's cattle with these vaccines, the cattle did contract infections and diseases that ultimately killed some of the cattle and debilitated others to an extent that Lynnbrook had to sell or dispose of them at a loss. We assume that the vaccines used were either not effective in preventing the maladies they were designed to guard against, or that the vaccines caused other harm to Lynnbrook's cattle.

Lynnbrook proceeded to sue SBC for the damages it incurred due to the loss of its cattle. Lynnbrook sought recovery under theories of strict products liability, misrepresentation, false advertising, and breach of implied warranties of merchantability and fitness. SBC moved for summary judgment, contending that Lynnbrook's claims were preempted by APHIS regulations promulgated pursuant to the Virus-Serum-Toxin Act ("VSTA"), 21 U.S.C. §§ 151-159. APHIS declared that "states are not free to impose requirements which are different from, or in addition to, those imposed by USDA regarding the safety, efficacy, potency or purity of a product." 57 Fed.Reg. 38759 (August 27, 1992). SBC maintained that this express declaration of preemption encompassed all of Lynnbrook's claims. Lynnbrook contested both the validity and the scope of the preemption provision. The district court agreed with SBC and granted summary judgment in its favor on all counts.

II.

We review the district court's grant of summary judgment de novo. Green v. Shalala, 51 F.3d 96, 99 (7th Cir.1995). Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(e). Even accepting the facts as recited above and giving Lynnbrook the benefit of all reasonable inferences (as we must in a summary judgment situation, see Smith v. Shawnee Library Sys., 60 F.3d 317, 320 (7th Cir.1995)), a finding that Lynnbrook's claims are preempted by federal law would entitle SBC to judgment as a matter of law.

At the outset, we note that the validity and scope of APHIS' preemption statement is one of first impression at the circuit court level. According to our research, all other courts that have addressed the issue, including the district court below, have reached a conclusion similar to that which we reach today, i.e., that state common law claims of the type asserted in this case are preempted by the APHIS regulation. See Lynnbrook Farms v. Smithkline Beecham Corp., 887 F.Supp. 1100 (C.D.Ill.1995); Murphy v. Smithkline Beecham Corp., 898 F.Supp. 811 (D.Kan.1995); Brandt v. The Marshall Animal Clinic and SmithKline Beecham Corp., 540 N.W.2d 870 (Minn.Ct.App.1995).

A.

The Supremacy Clause of the Constitution declares that "the Laws of the United States ... shall be the supreme Law of the Land; ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const., Art. VI, cl. 2. The "Laws of the United States" encompasses both federal statutes and statutorily authorized federal agency regulations. City of New York v. F.C.C., 486 U.S. 57, 63, 108 S.Ct. 1637, 1641-42, 100 L.Ed.2d 48 (1988). With this understanding, the Supreme Court has delineated several avenues by which state law may be superseded by federal law, including when a federal agency acts within the scope of its congressionally delegated authority to preempt state law. Id. at 63-64, 108 S.Ct. at 1642; Louisiana Public Service Comm'n v. F.C.C., 476 U.S. 355, 369, 106 S.Ct. 1890, 1899, 90 L.Ed.2d 369 (1986); Fidelity Federal Savings and Loan Assoc. v. de la Cuesta, 458 U.S. 141, 152-54, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 699-700, 104 S.Ct. 2694, 2700-01, 81 L.Ed.2d 580 (1984). "In proper circumstances, [an] agency may determine that its authority is exclusive and preempt[ ] any state efforts to regulate in the forbidden area." City of New York, 486 U.S. at 64, 108 S.Ct. at 1641. SBC claims that this type of preemption governs this case. SBC's sole argument is that APHIS expressly preempted all state law claims pursuant to the power delegated to it under VSTA. ¹

In ascertaining whether an agency has acted properly in preempting state law, it is significant to note that an express Congressional authorization to displace state law in the delegating statute is unnecessary. de la Cuesta, 458 U.S. at 154, 102 S.Ct. at 3023. The Supreme Court has warned that a "narrow focus on Congress' intent to supersede state law [is] misdirected." Id.; City of New York, 486 U.S. at 64, 108 S.Ct. at 1642. Rather, the proper inquiry is to determine whether the power to preempt is within the bounds of authority granted to the agency by Congress, and if so, whether the agency has acted on this authority. Id. The Court has made it clear that the great deference generally afforded agency action is not discarded when the agency uses its delegated discretion to preempt. "Where Congress has directed an administrator to exercise his discretion," and the administrator promulgates regulations intended to preempt state law, "his judgments are subject to judicial review only to determine whether he has exceeded his statutory authority or acted arbitrarily." de la Cuesta, 458 U.S. at 154-55, 102 S.Ct. at 3023; see also Crisp, 467 U.S. at 699-700, 104 S.Ct. at 2700-01.

Thus, we engage in a three-part analysis to determine if the regulatory actions of APHIS preempt Lynnbrook's state law claims. First, we must ascertain whether the power to preempt is within the authority delegated to the USDA and APHIS by Congress and is a rational exercise of that authority. If so, we then ask whether APHIS intended its regulations to preempt state common law claims. Finally, if APHIS did seek to preempt state common law, we consider whether the regulations preempt the specific causes of actions asserted by Lynnbrook.

B.

In order to answer the first question, we examine the congressional mandate that forms the basis of the agency's authority. VSTA requires that all animal vaccines produced in the United States and all establishments that manufacture such vaccines be licensed by the USDA. 21 U.S.C. § 154. The Act also broadly confers on the USDA the authority to "make and promulgate from time to time such rules and regulations as may be necessary to prevent the preparation [and] sale ... of any worthless, contaminated, dangerous, or harmful virus, serum, toxin, or analogous product for use in the treatment of domestic animals...." Id. The USDA has delegated this responsibility and authority to APHIS. 9 C.F.R. § 101.2. APHIS, in turn, has promulgated an extensive regulatory scheme governing the design, manufacture, distribution, testing, and labelling of animal vaccines. See 9 C.F.R. §§ 101-24.

Prior to 1985, several courts held that the scope of VSTA, and hence the application of APHIS regulations, was limited to products made and sold in interstate commerce. In other words, VSTA did not grant the USDA and APHIS the authority to regulate animal vaccines manufactured and sold within an individual state. See Animal Health Institute v. U.S. Dept. of Agriculture, 487 F.Supp. 376 (D.Colo.1980); Grand Lab., Inc. v. Harris, 644 F.2d 729 (8th Cir.1981), cert. denied, 456 U.S. 927, 102 S.Ct. 1972, 72 L.Ed.2d 442 (1982). In response, Congress amended VSTA in 1985 to clearly place both interstate and intrastate vaccines within the ambit of federal control. 21 U.S.C. § 151; S.Rep. No. 145, 99th Cong., 1st Sess. 338-39 (1985), reprinted in 1985 U.S.C.C.A.N. 1676, 2004-05. The amendments reflect the Congressional finding that federal regulation was "necessary to prevent and eliminate burdens on commerce and to effectively regulate...