Opinion
Cause No. IP 00-1689-C H/K
November 21, 2001
ENTRY ON DEFENDANT UAP'S MOTION FOR SUMMARY JUDGMENT
The 1998 apple crop of plaintiff Paul G. Hainlen, Jr. was damaged by apple scab despite his use of fungicides intended to prevent such damage. He has sued the sellers of the fungicides on several theories. Growers Service Corporation, which does business as UAP — Great Lakes and Platte Chemical Company ("UAP" in this entry), is the only remaining defendant in this case and has moved for summary judgment. As explained below, defendant UAP's motion for summary judgment is granted.
The parties agree that the following facts in this case are not disputed.
1. Plaintiff Paul G. Hainlen, Jr. does business as Hainlen Orchard. He raises apples, peaches, pears, pumpkins, grain, and sweet corn.
2. Hainlen Orchard's primary crop is apples, which comprise between 40 and 47 acres, depending on whether non-bearing apple trees are counted.
3. Hainlen Orchard raises, harvests, and sells the apples grown in its orchards.
4. Hainlen Orchard also operates a mill that processes apples into cider, which is then sold to grocery stores under the Hainlen Orchard name.
5. Paul Hainlen considers farming his business and has been engaged in that business for more than 50 years.
6. Although Paul Hainlen's son Len works with him, Paul Hainlen typically makes the decisions concerning which fungicides to apply, and he applies those fungicides himself.
7. Paul Hainlen keeps up with the changing business of fruit growing by reaching periodicals such as Michigan Fruit Grower, American Fruit Grower, and Facts for Fancy Fruit.
8. Paul Hainlen has applied pesticides almost his entire life and has performed "almost all of" Hainlen Orchard's pesticide applications the past 20 years.
9. Paul Hainlen is licensed by the State of Indiana to apply pesticides. He had to attend meetings and took a test to earn that license.
10. Paul Hainlen has also been purchasing pesticides for many years.
11. Through 1998, the year of his claim, Paul Hainlen purchased most of his pesticides through Richard Demski of a UAP Great Lakes dealership in Michigan.
12. Hainlen had purchased and used both Topsin® and Polyram®, the two fungicides involved in this litigation, in years prior to 1998, although he had not used Topsin® since 1990.
13. For many years prior to 1998, Hainlen Orchard received invoices from UAP that required his signature on the front.
14. The front of the invoices contained the following notice in bold type: "Purchaser acknowledges and agrees to the terms and conditions of sale noted above and on the reverse side hereof. IMPORTANT WARRANTY INFORMATION ON BACK."
15. The reverse of the invoices contained the following conditions, with the headings in bold type:
WARRANTY EXCLUSIONS TERMS AND CONDITIONS * * *
LIMITATION OF LIABILITY
4. IN NO EVENT SHALL SELLER BE, LIABLE FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, OR FOR DAMAGES IN THE NATURE OF PENALTIES. SELLER SHALL NOT BE LIABLE TO BUYER OR BY WAY OF INDEMNIFICATION, TO CUSTOMERS OF BUYER, FOR ANY DAMAGES, SUMS OF MONEY, CLAIMS OR DEMANDS WHATSOEVER, RESULTING FROM OR BY REASON OF, OR RISING OUT OF, THE MISUSE, OR THE FAILURE TO FOLLOW LABEL WARNINGS OR INSTRUCTIONS FOR USE, OF THE GOODS SOLD BY SELLER TO BUYER. BUYER'S OR USER'S EXCLUSIVE REMEDY, AND SELLER'S TOTAL LIABILITY SHALL BE FOR DAMAGES NOT EXCEEDING THE COST OF THE PRODUCT.
* * *
WARRANTY DISCLAIMER
5. SELLER IS A DISTRIBUTOR OF PRODUCTS MANUFACTURED AND WHICH MAY BE WARRANTED BY OTHERS. THE GOODS SOLD TO YOU BY THIS AGREEMENT ARE FURNISHED "AS IS" BY SELLER ARE SUBJECT ONLY TO THE MANUFACTURER'S WARRANTIES, IF ANY, WHICH APPEAR ON THE LABELS OF THE PRODUCTS SOLD TO YOU.
SELLER MAKES NO WARRANTIES, GUARANTEES, OR REPRESENTATIONS OF ANY KIND TO BUYER OR USER, EITHER EXPRESS OR IMPLIED, OR BY USAGE OF TRADE, STATUTORY, OR OTHERWISE, WITH REGARD TO THE PRODUCT SOLD, INCLUDING, BUT NOT LIMITED TO MERCHANTABILITY; FITNESS FOR A PARTICULAR PURPOSE, USE OR ELIGIBILITY OF THE PRODUCT FOR ANY PARTICULAR TRADE USAGE.
INEFFECTIVENESS, OR OTHER UNINTENDED CONSEQUENCES MAY RESULT BECAUSE OF SUCH FACTORS AS PRESENCE OF OTHER MATERIALS, OR THE MANNER OF USE OR APPLICATION, ALL OF WHICH ARE BEYOND THE CONTROL OF SELLER. IN NO CASE SHALL SELLER BE LIABLE FOR CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES RESULTING FROM THE USE OR HANDLING OF THIS PRODUCT. ALL SUCH RISKS SHALL BE ASSUMED BY THE BUYER OR ITS CUSTOMERS.
TESTS HAVE NOT BEEN CARRIED OUT UNDER ALL POSSIBLE USE CONDITIONS AND SELLER CANNOT AND DOES NOT WARRANT THAT THE PRODUCTS ARE COMPATIBLE WITH ALL OTHER CHEMICALS.
THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS ORDER WITH RESPECT TO MERCHANDISE TO BE DELIVERED HEREUNDER, SHALL BE GOVERNED BY THE LAW OF THE STATE FROM WHICH SUCH GOODS ARE TO BE SHIPPED. THIS WRITING CONTAINS ALL OF THE REPRESENTATIONS AND AGREEMENTS BETWEEN BUYER AND SELLER.
16. Paul Hainlen testified that when he signed the invoices, he was familiar with the language on the reverse, and that it meant: "They say they make no guarantee on their products."
17. UAP's 1998 invoices for the Topsin® and Polyram® involved in this case contained the disclaimers and limitations quoted above.
18. Paul Hainlen was aware that any invoices he receives from an agricultural dealer will have the same disclaimers and limitations.
19. Paul Hainlen further agreed that the disclaimers and limitations on the back of the UAP invoices were similar to those he had read on pesticide labels "many times."
20. Paul Hainlen reads the entire label of every pesticide he uses at least once per year.
21. Indeed, Paul Hainlen testified that he was so familiar with the disclaimers that he did not have to read them during his deposition.
22. Hainlen also stated that when he purchased a pesticide, he knew that disclaimers and limitations would be on the label and that this language was "all the same" on all the labels.
23. Such disclaimers and limitations were included on both the Topsin® and Polyram® labels used in 1998.
24. The Topsin® M WSB label for use in crop year 1998 contained the following disclaimers and limitations, with the heading in bold type:
WARRANTY AND DISCLAIMER
Elf Atochem North America warrants that this material conforms to the chemical description on the label and is reasonably fit for the purposes referred to in the Directions for Use, subject to the risks referred to therein. ELF ATOCHEM MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY OR FITNESS OR MERCHANTABILITY OR ANY OTHER EXPRESS OR IMPLIED WARRANTY. IN NO CASE SHALL ELF ATOCHEM OR SELLER BE LIABLE FOR CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES RESULTING FROM THE USE OR HANDLING OF THIS PRODUCT INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, BUSINESS REPUTATION, OR CUSTOMERS; LABOR COST; OR OTHER EXPENSES INCURRED IN PLANTING OR HARVESTING.
Elf Atochem and Seller offer this product and the Buyer and user accept it subject to the foregoing conditions of sale and warranty which may be varied only by agreement in writing signed by a duly authorized representative of Elf Atochem.
25. The Polyram® label for use in crop year 1998 contained the following disclaimers and limitations, with the heading in bold type:
CONDITIONS OF SALE AND WARRANTY
The directions for 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 the 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 use of the product in a manner inconsistent with its labeling, all of which are beyond the control of PLATTE CHEMICAL CO. ("PLATTE") or the Seller. All such risks shall be assumed by the Buyer.
PLATTE warrants that this product conforms to the chemical description on the label and is reasonably fit for the purposes referred to in the Directions for Use, subject to the inherent risks referred to above. PLATTE MAKES NO OTHER EXPRESSED OR IMPLIED WARRANTY OF FITNESS OR MERCHANTABILITY OR ANY OTHER IMPLIED WARRANTY. IN NO CASE SHALL PLATTE OR THE SELLER BE LIABLE FOR CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES RESULTING FROM THE USE OR HANDLING OF THIS PRODUCT. PLATTE and the Seller offer this product, and the Buyer and User accept it, subject to the foregoing Conditions of Sale and Warranty which may be varied only by agreement in writing signed by a duly authorized representative of PLATTE.
26. Consistent with their normal practice, Paul Hainlen and Richard Demski met in early 1998 to discuss the appropriate pesticide program for Hainlen to use in 1998.
27. Demski recommended that Hainlen use a mixture of Topsin®, an Elf Atochem (n/k/a Atofina Chemicals, Inc.) product, and Polyram®, a product of Platte Chemical Co., a subsidiary of UAP.
28. Paul Hainlen testified that he "think[s]" that Demski told him that "if you use Topsin and Polyram once a week like I tell you to, you won't have any apple scab." For purposes of summary judgment, the court assumes Demski made that statement. See Paragraph 43, below.
29. Paul Hainlen agreed, however, that at this time Demski would not have known: (1) what the scab pressure was going to be in 1998; (2) whether Hainlen's spray equipment was properly calibrated; (3) whether Hainlen would spray every seven days.
30. Paul Hainlen purchased Topsin® and Polyram® from UAP.
31. Hainlen Orchard's apple crop suffered from apple scab in 1998.
32. Paul Hainlen enlisted the services of Dr. Daniel Meador, Professor of Horticulture Emeritus of the University of Illinois.
33. Although he did not view Hainlen's crop in 1998, Dr. Meador has opined that Hainlen suffered from apple scab that year due to a Topsin®-resistant strain of apple scab.
34. Paul Hainlen also believes that a Topsin®-resistant strain of apple scab caused his losses in 1998.
35. The Topsin® label contains instructions concerning practices to avoid problems with Topsin® resistance:
Resistance Management: To avoid the development of tolerant or resistant strains of fungi, TOPSIN M WSB should always be tank-mixed with a fungicide of different chemistry, and/or a fungicide of different chemistry should be alternated with TOPSIN M WSB at each application.
36. Paul Hainlen testified that Demski's advice to use Topsin® and Polyram® together was consistent with the instructions provided on the label of Topsin® concerning resistance to the product.
37. Indeed, Paul Hainlen testified that Demski said nothing inconsistent with the labels of Topsin® or Polyram®.
38. Hainlen's complaint against UAP includes claims of breach of express warranty; breach of the implied warranties of merchantability and fitness for a particular purpose under Article 2 of the Uniform Commercial Code as adopted in Indiana; and a material misrepresentation claim pursuant to § 2-721 of the U.C.C. (mistakenly referred to as § 2-725 in the complaint).
39. Paul Hainlen testified that he had no evidence that Demski should have known of the alleged Topsin® resistance:
Q: And do you have any evidence that Mr. Demski should have known that [Topsin wouldn't work] since he was following the label?
A: I have [no] evidence, but with the experience the man has, he should have — he surely has run into it before.
40. In choosing what herbicide program to use on his apples, Paul Hainlen put a lot of faith in the recommendations of his salesman, Richard Demski.
41. Hainlen had known Demski for 20 to 25 years prior to 1998.
42. Hainlen relied on Demski to make recommendations about what Hainlen should use to control apple scab.
43. Sometime in March 1998, Demski told Hainlen, "If you use Topsin and Polyram once a week like I recommend, you won't have any apple scab."
44. Demski recommended to Hainlen that Topsin M and Polyram be applied every seven days.
45. Hainlen applied Topsin M and Polyram to his orchard as a tank mix on April 6, 12, 19, and 25; and May 2, 9, 16 and 23, 1998.
46. About May 10, 1998, Hainlen noticed that apple scab was developing on the leaves of apple trees in his orchard.
47. Hainlen began to notice apple scab lesions on fruit in early June.
48. After early June, the apple scab spread "everywhere."
49. The apple scab damaged a substantial portion of Hainlen's 1998 crop, and some of it became unsaleable.
Discussion
This is a diversity case governed by Indiana law. The briefing on summary judgment has left plaintiff with two contested claims against UAP — for breach of warranty and for misrepresentation under § 2-721 of the Uniform Commercial Code, enacted in Indiana as Indiana Code § 26-1-2-721. The briefing has also narrowed the case to two issues that must be decided on summary judgment. The first is whether the contract provisions limiting damages to the price of the products involved are enforceable. The second is whether plaintiff's claims are preempted by the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), 7 U.S.C. § 136 et seq.
I. Damage Limits
Hainlen claims that Demski's oral assurances amounted to an express warranty that is enforceable under Indiana's enactment of the U.C.C. The court assumes for purposes of summary judgment that Hainlen reasonably relied to his detriment on Demski's assurances. To avoid the contractual provision that restricts his damages to the cost of the fungicide, Hainlen contends it is unconscionable and causes the remedy "to fail of its essential purpose." Such contractual provisions generally are enforceable. However, Indiana Code § 26-1-2-719(2) provides that a limit will not be enforced if it would cause a remedy to fail of its essential purpose. Indiana Code § 26-1-2-719(3) provides that consequential damages may be limited or excluded unless doing so would be "unconscionable."
Under Indiana law, there was no failure of essential purpose here. Apart from the preemptive effect of federal law, discussed below, the remedy of a refund of the purchase price is available and effective. That remedy is simply not as generous as Hainlen would now like. In Martin Rispens Son v. Hall Farms, Inc., 621 N.E.2d 1078, 1085-86 (Ind. 1993), the Supreme Court of Indiana rejected an identical challenge to a similar limit on the remedy for breach of warranty for agricultural seed. Enforcing the limit would serve precisely the intended purpose of the limitation, yet would still leave a remedy. The fact that some remedy remained distinguished the case from Riley v. Ford Motor Co., 442 F.2d 670 (5th Cir. 1971) (applying Alabama law), which held that an exclusive remedy of repair and replacement of defective parts failed of its essential purpose when the car could not be repaired successfully. See Martin Rispens, 621 N.E.2d at 1086 (discussing Riley).
This case is indistinguishable from Martin Rispens on this issue. The contractual limit on damages to the purchase price still leaves a remedy, and enforcement of the limit serves the intended purpose. Indiana law does not draw a distinction for these purposes between sales of seed and sales of fungicide.
The limitation of remedy is also not unconscionable. In Martin Rispens, the Supreme Court of Indiana also rejected a similar claim of unconscionability. The court said it was not unconscionable for the seed producer and distributor in that case to allocate by contract the risks of latent defects in the seeds. 621 N.E.2d at 1087. In Martin Rispens the court found, however, that there was a disputed issue of fact as to whether the parties in fact agreed to the allocation of risk. The buyer's testimony that he had not read the limitations on damages required a trial. Id. at 1087-88.
In this case, the same legal principles apply. Indiana law also does not draw a distinction for these purposes between seed and fungicide. The manufacturer, distributor, and buyer of fungicide can choose by contract to allocate the risks that the fungicide will not succeed in protecting a crop. A manufacturer who is willing to insure the success of its buyers' crops could reasonably expect to receive a high price for its fungicide. A buyer who prefers the lower price of fungicide without such a guarantee of recovery of lost profits may make such a choice.
This case differs from Martin Rispens in one relevant way. The undisputed facts in this case show that the limit on remedy was part of the parties' bargain. Hainlen was not only aware of the limit on remedy, he was so familiar with it he did not need to refer to the text during his deposition. He also understood that the limit had been part of his contracts for years, and he expected that a similar limit would be part of any manufacturer's contract.
Accordingly, the undisputed facts show that Hainlen's damages under any theory are limited to the purchase price of the product. UAP is entitled to summary judgment on the issue.
II. FIFRA Preemption
The Federal Insecticide, Fungicide and Rodenticide Act provides for exclusive regulation of the contents of labels for fungicides, insecticides, and rodenticides. Shaw v. Dow Brands, Inc., 994 F.2d 364, 369-70 (7th Cir. 1993). The Seventh Circuit has held that FIFRA preempts claims under state law based on alleged misrepresentations that essentially restate the information presented on the product label. Kuiper v. American Cyanamid Co., 131 F.3d 656, 666 (7th Cir. 1997) (affirming summary judgment on FIFRA preemption theory).
Hainlen attempts to distinguish this case from Kuiper on the theory that Demski made representations about the performance of the two pesticides in combination. "Neither the Polyram label nor the Topsin label have anything to say about how the two products would perform in combination." Pl. Br. at 9. Despite this assertion, UAP's Topsin label provided explicit information on this subject. The Topsin label said:
Resistance Management: To avoid the development of tolerant or resistant strains of fungi, TOPSIN M WSB should always be tank-mixed with a fungicide of different chemistry, and/or a fungicide of different chemistry should be alternated with TOPSIN M WSB at each application.
Polyram is a fungicide of a different chemistry, and Demski's alleged assurances are not substantially different from this label information. Polyram was one species of the genus of "fungicides of different chemistry" recommended by the Topsin label. Accordingly, the court sees no basis for distinguishing this case from the Seventh Circuit's decision in Kuiper. Hainlen's claims are preempted by FIFRA.
For the foregoing reasons, defendant UAP's motion for summary judgment is granted. UAP's counterclaim remains pending. The court will hold a scheduling conference on Thursday, December 13, 2001, at 4:30 p.m. in Room 330, U.S. Courthouse, Indianapolis, Indiana. Counsel shall confer prior to the scheduled conference to discuss methods of resolving the remaining counterclaim.
So ordered.