Walker v. American Cyanamid Co.

• Decision Date: 02 December 1997
• Docket Number: No. 22822,22822
• Citation: 130 Idaho 824,948 P.2d 1123
• Parties: , 36 UCC Rep.Serv.2d 76 Roland L. (Von) WALKER and Dorothy Walker, husband and wife, d/b/a Walker Farms; Richard A. Egbert Limited Partnership, an Idaho Limited Partnership, Richard Egbert and Alta Egbert, General Partners; Wright Brothers Company, Inc., an Idaho corporation, Plaintiffs-Respondents-Cross Appellants, v. AMERICAN CYANAMID COMPANY, Defendant-Appellant-Cross Respondent. Idaho Falls, September 1997 Term
• Court: Idaho Supreme Court

Page 1123

948 P.2d 1123

130 Idaho 824, 36 UCC Rep.Serv.2d 76

Roland L. (Von) WALKER and Dorothy Walker, husband and wife, d/b/a Walker Farms; Richard A. Egbert Limited Partnership, an Idaho Limited Partnership, Richard Egbert and Alta Egbert, General Partners; Wright Brothers Company, Inc., an Idaho corporation, Plaintiffs-Respondents-Cross Appellants, v. AMERICAN CYANAMID COMPANY, Defendant-Appellant-Cross Respondent.

No. 22822.

Supreme Court of Idaho,

Idaho Falls, September 1997 Term.

Dec. 2, 1997.

Evans, Keane, Boise; Faegre & Benson, Minneapolis, MN, for appellant. Winthrop A. Rockwell argued.

McGrath, Marotz & Smith, Idaho Falls; Baker & Harris, Blackfoot; Racine, Olson, Nye, Cooper & Budge, Pocatello, for respondents. Dwight E. Baker and Gary L. Cooper argued.

JOHNSON, Justice.

This is a products liability case. We conclude: (1) federal law does not preempt the claims for breach of express warranty; (2) a limitation of liability provision on the product label is unenforceable because it is unconscionable; (3) there was sufficient proof of causation and damages; (4) pursuant to section 6-1606 of the Idaho Code (I.C.) the trial court correctly reduced the damages awarded for seed loss by the amount of crop loss insurance; and (5) attorney fees are proper under the commercial transaction provision contained in I.C. § 12-120(3).

I. THE BACKGROUND AND PRIOR PROCEEDINGS

In 1988, 1989, and 1990, Walker Farms (Walker) purchased an herbicide, ASSERT, manufactured by American Cyanamid Company (Cyanamid) to use on fields where Walker grew grain and potatoes in rotation. A Cyanamid employee told Walker that ASSERT posed absolutely no risk to potatoes, that ASSERT was safe, and that ASSERT did not even harm potatoes when sprayed directly on the plants. Walker applied ASSERT to its grain crops in 1988 and 1989 and then planted potatoes in the same fields.

The label on the ASSERT Walker purchased states that potatoes may be planted in rotation after applying ASSERT at recommended rates in certain grain crops. A disclaimer on the ASSERT label states:

The label instructions for the use of this product reflect the opinion of experts based on field use and tests. The directions are believed to be reliable and should be followed carefully. However, it is impossible to eliminate all risks inherently associated with use of this product. Crop injury, ineffectiveness or other unintended consequences may result because of such factors as weather conditions, presence of other materials, or the use or application of the product contrary to label instructions, all of which are beyond the control of American Cyanamid Company. All such risks shall be assumed by the user.

American Cyanamid Company warrants only that the material contained herein conforms to the chemical description on the label and is reasonably fit for the use therein described when used in accordance with the directions for use, subject to the risks referred to above.

Any damages arising from breach of this warranty shall be limited to direct damages and shall not include consequential commercial damages such as loss of profits or values or any other special or indirect damages.

American Cyanamid Company makes no other express or implied warranty, including other express or implied warranty of FITNESS or of MERCHANTABILITY.

Walker's potato crops, which were harvested in 1989 and 1990 on the same fields where Walker applied the ASSERT to its grain crops in 1988 and 1989, were irregular and substandard. Walker planted grain on these fields in 1990 instead of potatoes in order to avoid potato crop injury in 1991.

Walker sued Cyanamid for damages on numerous theories, including breach of express warranty. Among its defenses, Cyanamid contended that the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), 7 U.S.C. § 136-136y, preempted Walker's express warranty claims and that the limitation of liability provision contained on the ASSERT label limited Walker's recovery to a return of the purchase price. Walker contended that FIFRA does not preempt its express warranty claims and that the limitation of liability provision on the ASSERT label is unconscionable. The trial court ruled that FIFRA does not preempt Walker's express warranty claims and, after hearing all the evidence at trial, ruled that the limitation of liability provision on the ASSERT label is unconscionable. The trial court made the following findings to support its unconscionability ruling:

(1) Cyanamid's representative advised Walker that the use of ASSERT was safe for Walker's operation, its course of conduct proceeded on this premise, and Walker's assessment of the risks was influenced by Cyanamid's representatives;

(2) Walker had no alternative but to accept the exclusion because any product Walker purchased would have a similar disclaimer; and

(3) enforcement of the clause would leave Walker without any substantial recourse for any losses caused by ASSERT.

When Cyanamid raised the unconscionability issue again in post-trial motions, the trial court made the following additional statements in denying the motions:

As a further rationale for its unconscionability ruling, the court notes that this case involved a continuing relationship between two large commercial enterprises. The court is aware that it is not uncommon for such entities to enter into contracts for limitation of liability. However, when that occurs, both parties are aware of what could happen and why. This allows them to structure the contract in accordance with their relative positions, intent, and expectations.

This case involves a warranty rather than a negotiated contract. But negotiation is not the main issue. The issue is the expectations regarding other risks involved. It is one thing to accept the risk that a product will not perform its expected function, and quite another to accept the risk that it will have the unexpected result of causing harm for several years after application. Despite the rotational crop injury statement, it is simply unfair to shift this risk to the buyer.

The jury returned a verdict for Walker on its claims for (1) breach of written express warranty for its purchases of ASSERT in 1988, 1989, and 1990; (2) breach of oral express warranty in 1988 and 1989; and (3) breach of Idaho Consumer Protection Act, I.C. § 48-601 to 48-619, for the 1988 purchase.

The jury awarded Walker $3,428,703 in damages for potato crop losses and increased expenses. The trial court reduced this award by $315,333, the amount of crop insurance Walker received. The trial court also awarded Walker attorney fees pursuant to I.C. § 12-120(3) and § 48-608. Cyanamid appealed, and Walker cross-appealed.

II.

FIFRA DOES NOT PREEMPT WALKER'S EXPRESS WARRANTY CLAIMS.

Cyanamid asserts that Walker's express warranty claims are preempted by FIFRA. We disagree.

Under the Supremacy Clause of the United States Constitution, state law that conflicts with federal law is without effect. Zimmerman v. Volkswagen of America, Inc., 128 Idaho 851, 855, 920 P.2d 67, 71 (1996). When a federal statute includes a provision that expressly preempts state law, courts need not go beyond the statutory language. The task is simply one of statutory interpretation to " 'identify the domain expressly pre-empted' by that language." Medtronic, Inc. v. Lohr, 518 U.S. 470, ----, 116 S.Ct. 2240, 2250, 135 L.Ed.2d 700 (1996) (quoting Cipollone v. Liggett Group, 505 U.S. 504, 517, 112 S.Ct. 2608, 2618, 120 L.Ed.2d 407 (1992)).

There are two presumptions we must consider in determining whether FIFRA preempted Walker's express warranty claims. "First, because the States are independent sovereigns in our federal system, we have long presumed that Congress does not cavalierly pre-empt state-law causes of action." Medtronic, 518 U.S. at ----, 116 S.Ct. at 2250. Therefore, in preemption cases, particularly in those cases where Congress has legislated in an area traditionally occupied by the States, courts should "start with the assumption that the historic police powers of the States were not to be superseded by [federal legislation] unless that was the clear and manifest purpose of Congress." Id.

Second, the scope of a statute's preemption is guided by the proposition that " '[t]he purpose of Congress is the ultimate touchstone' in every pre-emption case." Id. (quoting Retail Clerks v. Schermerhorn, 375 U.S. 96, 103, 84 S.Ct. 219, 223, 11 L.Ed.2d 179 (1963)). Thus, the scope of a statute's preemption must rest primarily on "a fair understanding of congressional purpose." Medtronic, 518 U.S. at ----, 116 S.Ct. at 2250 (italics in original) (quoting Cipollone, 505 U.S. at 530, n. 27, 112 S.Ct. at 2624, n. 27).

Congressional intent is discerned primarily from the language of the preemption statute and the statutory framework surrounding it. Medtronic, 518 U.S. at ---- - ----, 116 S.Ct. at 2250-51. "Also relevant, however, is the structure and purpose of the statute as a whole as revealed not only in the text, but through the reviewing court's reasoned understanding of the way in which Congress intended the statute and its surrounding regulatory scheme to affect business, consumers, and the law." Id. at ----, 116 S.Ct. at 2251 (citation and internal quotes omitted).

Under FIFRA, the Environmental Protection Agency (EPA) is vested with the authority to regulate the use, sale, and labeling of pesticides. 7 U.S.C. §§ 136a, 136w. "Pesticide," as defined by FIFRA, includes herbicides like ASSERT. 7 U.S.C. § 136(u). No pesticide may be sold which is not registered with EPA. 7 U.S.C. § 136a(a). As part of the registration process an applicant must submit "a complete copy of the labeling of the pesticide, a statement of all claims to be made for it, and any directions for its use." 7 U.S.C. § 136a(c)(1)(C). EPA regulations implementing FIFRA require pesticide labels to include a rotational crop statement, but do not specify the content of this statement....