Universal Cooperatives, Inc. v. AAC Flying Serv., Inc.

• Decision Date: 26 March 2013
• Docket Number: No. 12–1970.,12–1970.
• Citation: 710 F.3d 790
• Parties: UNIVERSAL COOPERATIVES, INC.; Universal Crop Protection Alliance, LLC, Plaintiffs–Appellants v. AAC FLYING SERVICE, INC.; Cartillar Enterprises, Inc.; Crider's Flying Service; Folden Aviation, Inc.; Forrest Flying Services, Inc., Defendants–Appellees French Agri Services, Inc., Defendant Johnson Flying Services, Inc.; Ken Grubbs Aero, Inc.; Miles Flying Service, Inc.; Scott Flying Service, Inc.; Whirlwind Aviation, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

710 F.3d 790

UNIVERSAL COOPERATIVES, INC.; Universal Crop Protection Alliance, LLC, Plaintiffs–Appellants

v.AAC FLYING SERVICE, INC.; Cartillar Enterprises, Inc.; Crider's Flying Service; Folden Aviation, Inc.; Forrest Flying Services, Inc., Defendants–Appellees

French Agri Services, Inc., Defendant

Johnson Flying Services, Inc.; Ken Grubbs Aero, Inc.; Miles Flying Service, Inc.; Scott Flying Service, Inc.; Whirlwind Aviation, Inc., Defendants–Appellees.

No. 12–1970.

United States Court of Appeals,

Eighth Circuit.

Submitted: Jan. 15, 2013.

Filed: March 26, 2013.

Alan Marshall Anderson, argued, Aaron C. Nyquist, on the brief, Minneapolis, MN, for appellants.

Geffrey W. Anderson, argued, Raven M. Atchison, on the brief, Fort Worth, TX, for appellees.

Before RILEY, Chief Judge, WOLLMAN and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

Universal Crop Protection Alliance, LLC, a formulator and distributor of a herbicide known as 2,4–D (or 2,4–D Amine), and its parent company, Universal Cooperatives (collectively, “Universal”), successfully defended a lawsuit brought by a group of cotton farmers in Arkansas state court for damages arising from off-target aerial application of the herbicide. Universal now sues several aerial herbicide applicators (collectively, “Crop Dusters”) who were not parties to the cotton farmers' litigation, seeking to recover its attorney's fees incurred during the cotton farmers' litigation. The district court ¹ dismissed the complaint for failure to state a claim, predicting that, under the circumstances presented, the Arkansas Supreme Court would not recognize a cause of action against a third party for attorney's fees incurred in separate litigation. Universal appeals, and we affirm.

I. Background

In 2006, the Crop Dusters used airplanes or helicopters to apply 2,4–D to rice fields in northeast Arkansas, resulting in numerous complaints by cotton farmers of off-target spray drift. The use of 2,4–D is heavily regulated, and it is approved for aerial application only under limited atmospheric temperature and wind conditions. In addition, the herbicide was not approved for any use on rice fields in Arkansas during 2006 (although it has been approved for such use in other years both before and after 2006). The Arkansas State Plant Board and the University of Arkansas Extension Service investigated the 2006 complaints and concluded that the spray drift most likely resulted from application of 2,4–D during unapproved atmospheric conditions, contrary to label instructions and various regulations. They also found that some of the Crop Dusters failed to keep required weather and usage records.

About seventy cotton farmers sued a group of 2,4–D manufacturers and distributors, including Universal, in Arkansas state court for damages arising from the off-target spray drift.² No aerial applicators of the herbicide were named as defendants. The Arkansas state court conducted a five-week bellwether trial on the claims of eight of the cotton farmers. Universal defended by placing the blame for any damages on non-party aerial applicators. The jury returned a verdict for Universal and the other manufacturers and distributors. Universal later settled the case without any admission of liability while an appeal was pending.

Universal then initiated the instant diversity action against the Crop Dusters, seeking to recover about $1.5 million in attorney's fees it incurred in defending the cotton farmers' litigation.³ Universal asserted five alternative theories for recovery: (1) negligence, (2) the Arkansas Deceptive Trade Practices Act (“ADTPA”), (3) implied indemnity, (4) a cause of action set forth in the Restatement (Second) of Torts § 914(2), and (5) a third-party-litigation exception to the American Rule for attorney's fees. The district court dismissed the complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, predicting that the Arkansas Supreme Court would not apply any of the five asserted theories under the circumstances of this case. On appeal, Universal abandons the implied indemnity theory but challenges the district court's ruling on the remaining four theories.

II. Discussion

We review a dismissal for failure to state a claim de novo. Federer v. Gephardt, 363 F.3d 754, 757 (8th Cir.2004). The plaintiff's material factual allegations must be accepted as true, and dismissal may be affirmed only where no relief could be granted under any set of facts provable under the allegations. Id. In this diversity action, we must predict how the Supreme Court of Arkansas would rule on issues of state law. Friedberg v. Chubb & Son, Inc., 691 F.3d 948, 951 (8th Cir.2012).

A. Negligence

“Under Arkansas law, in order to prevail on a claim of negligence, the plaintiff must prove that the defendant owed a duty to the plaintiff, that the defendant breached the duty, and that the breach was the proximate cause of the plaintiff's injuries.” Branscumb v. Freeman, 360 Ark. 171, 200 S.W.3d 411, 416 (2004) (emphasis omitted). With respect to duty, Arkansas law does not recognize universal liability for a negligent action but rather requires a duty running from the negligent actor specifically to the plaintiff. “There is no such thing as ‘negligence in the air.’ ... [A]n act is never negligent except in reference to, or toward, some person or legally protected interest.” Hill v. Wilson, 216 Ark. 179, 224 S.W.2d 797, 800 (1949).

Universal alleges that the Crop Dusters acted negligently by failing to follow the herbicide label instructions, spraying the herbicide during inappropriate weather conditions, and failing to maintain required records, all in violation of federal and state regulations. See Young v. Blytheville Sch. Dist., ––– S.W.3d ––––, 2013 Ark. App. 50, 6 (2013) (“In Arkansas, the violation of statutes may be considered evidence of negligence.”). To be sure, the Crop Dusters likely owed a duty of care to those with a “particular interest” in having the herbicide applied in accord with regulations, such as their customers and any nearby land users whose interests one might reasonably expect to be “invaded” by aerial spray drift. See id. at 6 (quoting Restatement (Second) of Torts, § 286 (1965)). However, there is no allegation that Universal falls within the group of those to whom the Crop Dusters owed such a duty. Instead, Universal merely distributed herbicide that passed through a chain of commerce to the Crop Dusters, who then applied it. There is no authority in Arkansas law for the proposition that the user of a product owes a duty of care in its use to an upstream supplier of the product. Cf. Dulin v. Circle F Indus., Inc., 558 F.2d 456, 464 (8th Cir.1977) (“In the field of products liability the chain of indemnity ordinarily runs down the chain of distribution and not in the reverse direction.”).

Because the Crop Dusters owed no duty to Universal, we affirm the dismissal of Universal's negligence claim.

B. The Arkansas Deceptive Trade Practices Act

After making unlawful a list of specific trade practices, seeArk.Code Ann. § 4–88–107(a)(1)–(9), the ADTPA adds a catch-all provision prohibiting “[e]ngaging in any other unconscionable, false, or deceptive act or practice in business, commerce, or trade,” id. § 4–88–107(a)(10). “An ‘unconscionable’ act is an act that ‘affront[s] the sense of justice, decency, or reasonableness.’ ” Baptist Health v. Murphy, 365 Ark. 115, 226 S.W.3d 800, 811 n. 6 (2006) (quoting Black's Law Dictionary 1561 (8th ed. 2004)) (alteration in original). “Any person who suffers actual damage or injury as a result of an offense or violation as defined in this chapter has a cause of action to recover actual damages, if appropriate, and reasonable attorney's fees.” Ark.Code Ann. § 4–88–113(f).

Universal contends its allegation that the Crop Dusters applied herbicide in violation of state and federal law is sufficient to state a claim for an unconscionable trade practice because unconscionable conduct “includes conduct violative of public policy or statute.” See Baptist Health, 226 S.W.3d at 811. However, there is no indication in Baptist Health, or in the plain text of the ADTPA, that every allegation of illegal conduct by a business automatically states a claim for a violation of the ADTPA. We cannot convert the relatively nuanced modifying phrase chosen by the state legislature for the catch-all provision—“unconscionable, false, or deceptive”—into a general reference to any unlawful conduct. See Rose v. Ark. State Plant Bd., 363 Ark. 281, 213 S.W.3d 607, 614 (2005) (stating that a statute must be construed based on “the ordinary meaning of the language used ... so that no word is left void, superfluous or insignificant, and ... [to] give meaning and effect to every word in the statute”). Indeed, “when general words follow specific words in a statutory enumeration the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words.” Hanley v. Ark. State Claims Comm'n, 333 Ark. 159, 970 S.W.2d 198, 201 (1998). Here, the specific prohibitions enumerated in subsections (1) through (9) of section 4–88–107(a) each involve false representation, fraud, or the improper use of economic leverage in a trade transaction.⁴ Thus, the catch-all provision for “any other unconscionable, false, or deceptive act or practice in business, commerce, or trade” in subsection (10) must be interpreted to reach similar instances of false representation, fraud, or the improper use of economic leverage in a trade transaction. It would appear that the term “unconscionable” in subsection (10) corresponds to acts in the nature of an improper use of economic leverage in a trade transaction. See, e.g., Baptist Health, 226 S.W.3d at 811 (affirming as unconscionable for ADTPA purposes a hospital's policy of denying practice rights to physicians who held ownership interests in another local...