Peterson v. BASF Corp., C3-02-857.

• Decision Date: 11 March 2003
• Docket Number: No. C3-02-857.,C3-02-857.
• Citation: 657 N.W.2d 853
• Parties: Ronald PETERSON, et al., Respondents, v. BASF CORPORATION, a foreign corporation, Appellant.
• Court: Minnesota Court of Appeals

657 N.W.2d 853

Ronald PETERSON, et al., Respondents, v. BASF CORPORATION, a foreign corporation, Appellant.

No. C3-02-857.

Court of Appeals of Minnesota.

March 11, 2003.

Douglas J. Nill, Douglas J. Nill Law Office; and Hugh V. Plunkett III, Michael Schwartz, Robert K. Shelquist, Yvonne M. Flaherty, Lockridge Grindal Nauen P.L.L.P., Minneapolis, MN, for respondents.

James A. O'Neal, Bruce Jones, Faegre & Benson, LLP, Minneapolis, MN; and Kenneth F. Johannson, Johannson, Rust, Fagerlund, Yon & Stock, P.A., Crookston, MN; for appellant.

Lawrence S. Ebner, pro hac vice, McKenna Long & Aldridge LLP, Washington, DC, for amicus CropLife America.

Bruce M. Kleven, Minneapolis, MN, for amicus American Sugarbeet Growers Association.

Mike Hatch, Attorney General, Julie Ralston Aoki, Assistant Attorney General, St. Paul, MN, for amicus State of Minnesota.

Evan M. Tager, pro hac vice, Mayer, Brown, Rowe & Maw, Washington, DC, for amicus Chamber of Commerce of the United States. Madge S. Thorsen, Kelly & Berens, P.A., Minneapolis, MN, for amicus Scholars of the AEI-Brookings Joint Center for Regulatory Studies.

Scott W. Johnson, Minneapolis, MN, for amicus National Association of Manufacturers and American Chemistry Council.

Wayne D. Struble, Bowman and Brooke LLP, Minneapolis, MN, for amicus Product Liability Advisory Council.

William F. Mohrman, Morhman & Kaardal, Minneapolis, MN, for amicus Washington Legal Foundation.

Considered and decided by HUDSON, Presiding Judge, SCHUMACHER, Judge, and G. BARRY ANDERSON, Judge.

OPINION

HUDSON, Judge.

In this nationwide class action under the New Jersey Consumer Fraud Act, appellant BASF Corporation argues that: (a) it is entitled to judgment notwithstanding the verdict (JNOV) on the jury's determination that it engaged in consumer fraud; (b) it is entitled to JNOV on the verdict for damages as to the years 1992 and 1995-96; (c) it is entitled to a new trial based on errors in jury instructions and the improper admission of evidence; and (d) the district court improperly certified the class. Respondent farmers filed a notice of review challenging district court determinations as to prejudgment interest and moved to strike portions of BASF's brief. Eight amici filed briefs. We affirm and grant the motion to strike in part.

FACTS

Respondents, farmers who purchased the herbicide Poast from New Jersey-based BASF Corporation from 1992 to 1996, brought a class action against BASF under the New Jersey Consumer Fraud Act (NJCFA), N.J. Stat. Ann. § 56:8-2 (West 2001). The action was based on the claim that BASF had defrauded thousands of American farmers by marketing its herbicide as two separate products, Poast and Poast Plus, for different uses at different prices through a "system of deceit." Peterson v. BASF Corp., 618 N.W.2d 821, 824 (Minn.App.2000), review denied (Minn. Jan. 26, 2001).

Poast and Poast Plus are post-emergence grass herbicides that contain the same active ingredient, sethoxydim. Sethoxydim was invented, patented, and manufactured by Nippon Soda Company of Japan. Nippon licensed the molecule to BASF, which first used it to develop Poast.

BASF began the regulatory process to register Poast with the EPA in the late 1970s and early 1980s. The biggest hurdle to obtaining EPA registration was establishing the acceptable residue tolerance and determining whether the herbicide would leave a residue on the crops or pose a risk in food. BASF complied with these and other requirements and obtained EPA registration for Poast around 1982 for a large number of both major and minor crops.¹

By 1983, BASF had registered Poast with the individual states, labeled it for use on major crops, and began marketing the product. It proved to be both safe and highly effective in controlling weeds that were grasses. In contrast, earlier herbicides marketed for this purpose were not consistently effective, and the only other alternative, weeding by hand, was expensive. As word spread, both BASF and state agriculture departments received requests to use Poast on minor crops. BASF decided to enter the minor crop market and conducted additional efficacy and phytotoxicity testing. By about 1985, it began introducing the product into the minor crop market. Because the 1982 EPA registration already included these minor crops, BASF did not need to obtain any additional EPA approval, although it had to obtain state registrations and change the product label.

Meanwhile, BASF had been developing Poast Plus. When using Poast, the farmers had to add crop oil, an adjuvant, to the herbicide to ensure that it spread and penetrated the leaves properly. With Poast Plus, BASF included adjuvants in the solution sold to farmers. In 1992, BASF obtained EPA registration for Poast Plus for the same major and minor crops for which Poast was already registered. Because Poast and Poast Plus contain the same active ingredient—sethoxydim—and are applied at the same rate, the tolerances established for Poast applied to Poast Plus and no new residue testing was required. The Poast and Poast Plus labels registered with the EPA are identical and cover the same major and minor crops. BASF, however, obtained state registrations and labeled Poast Plus for use only on four major crops: soybeans, cotton, peanuts, and alfalfa. Further, it marketed Poast Plus at a lower price than Poast. Thus, minor-crop farmers could only purchase Poast at the higher price, while major-crop farmers could purchase Poast Plus at a lower price.

The farmers' lawsuit was based on the claim that in its marketing, BASF fraudulently concealed and omitted that the less expensive Poast Plus was registered with the EPA for use on the same minor crops as the more expensive Poast. The jury heard extensive testimony on the issue of whether Poast and Poast Plus were the same products or not. BASF introduced evidence that the products had different chemical formulas because they contained different inert ingredients and that they had different tank-mix capabilities. In addition, witnesses for BASF testified that Poast Plus was "hotter" than Poast, leading to the possibility of increased crop risk and risk of skin irritation. BASF also noted that Poast Plus is separately patented as a unique product, and that because of their chemical differences, the EPA required BASF to register the products separately and give them different names.

The farmers offered evidence that the products are the same: Poast and Poast Plus are EPA-registered for the same major and minor crops; Poast and Poast Plus are based on the same residue data; and Poast and Poast Plus contain the same active ingredient, sethoxydim. The products control the same weed grasses using the same number of applications, pounds of active ingredient per acre, and time of application. The farmers also asserted that BASF used deceptive formulations of the same product, in order to lead the farmers to believe that Poast was more expensive because it contained more sethoxydim, when the products were the same. They also produced testimony explaining or disputing BASF's claims as to the effect of the different inert ingredients and other distinctions between the products.

The jury also heard evidence as to the fraudulent acts and omissions of which the farmers accused BASF. The farmers showed that BASF engaged in an advertising campaign claiming that only Poast was registered with the EPA for minor crops, despite the fact that Poast Plus was EPA-registered for the same minor crops. Other evidence showed that BASF used mailings to food processors and dealers, an article submitted to The Sugarbeet Grower magazine, and a position paper emphasizing the dangers of "off-label" use, despite the fact that Poast Plus had been approved for minor crops. In another strategy, BASF turned in its own dealers to the North Dakota agriculture inspectors for selling Poast Plus to minor-crop farmers in violation of state pesticide laws, leading to criminal prosecutions of dealers and farmers. Further, the farmers introduced evidence to show that BASF personnel lied to the North Dakota Pesticide Control Board to conceal the fact that Poast Plus was EPA-registered for the same crops as Poast. Once the board learned from EPA officials that this was merely a marketing strategy, North Dakota, as well as South Dakota, obtained so-called "rule 24(c)" special local needs registrations with the EPA, allowing their farmers to use Poast Plus on minor crops.

The jury returned a verdict finding that BASF violated the NJCFA and that the violations caused ascertainable losses to the farmers in the years 1992 to 1996. The jury awarded damages of $15,000,000. The district court trebled the damages and added prejudgment interest and attorney fees. After denial of posttrial motions, BASF appealed. Respondents filed a notice of review and filed motions to strike portions of BASF's brief with this court.

ISSUES

I. Is BASF entitled to JNOV as to the jury determination that it violated the New Jersey Consumer Fraud Act?

II. Is BASF entitled to JNOV as to damages awarded for 1992 and 1995 to 1996?

III. Is BASF entitled to a new trial based on errors in jury instructions and improper admission of evidence?

IV. Did the district court improperly certify the class?

V. Were the damages readily ascertainable such that prejudgment interest should be awarded as of the date of their accrual and should prejudgment interest be awarded on the trebled damages?

ANALYSIS

I

BASF first contends that it is entitled to JNOV because as a matter of law it did not violate the New Jersey Consumer Fraud Act (NJCFA), N.J. Stat. Ann. 56:8-2 (West 2001). In addressing this claim, we are guided by the standard of review for an order denying JNOV as well as the law-of-the-case doctrine. First, an appellate court will review the evidence in the light most favorable to the verdict. Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn.1998). If the verdict ...