Opposition Brief — BASF Corp. v. Peterson (No. 06-144)

(4) | FILED

No. 06-144 OCT 11 2006

nen een OEE

Supreme Court of the Anited States

¢

BASF CORPORATION,

Petitioner,

RONALD PETERSON, ET AL..,

Respondents.

+

On Petition For A Writ Of Certiorari

To The Supreme Court Of Minnesota

¢

RESPONDENTS’ BRIEF IN OPPOSITION

®

HuGH V. PLUNKETT III DOUGLAS J. NILL

Phoenician East Counsel of Record

4723 North 65th Street DOUGLAS J. NILL, P.A.

Scottsdale, AZ 85251 1100 One Financial Plaza

(480) 429-8488 120 South Sixth Street

: Minneapolis, MN 55402

J. MICHAEL SCHWARTZ (612) 573-3669

LOCKRIDGE GRINDAL

NAUEN, P.L.L.P.

100 Washington Avenue,

Suite 2200

Minneapolis, MN 55401

(62) 329-6900

Counsel for Respondents

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (462) 342-2831

i

QUESTIONS PRESENTED

In Peterson v. BASF Corp., 675 N.W.2d 57 (Minn. 2004)

(Peterson III), the Minnesota Supreme Court affirmed the

April 2, 2002 jury verdict judgment for Respondents (Farm-

ers), ruling that the Federal Insecticide, Fungicide, and

Rodenticide Act (FIFRA) — a health and safety law — does

not preempt Farmers’ “fraudulent marketing” claim.

On May 2, 2005, Case No. 04-81, this Court remanded

Petitioner BASF Corporation’s (BASF) challenge to Peter-

son III “for further consideration in light of Bates v. Dow

AgroSciences, LLC,” 544 U.S. 431 (2005) (state claims

addressing marketing responsibilities of pesticide sellers

to consumers are not preempted by FIFRA).

The Questions Presented:

1. Did the Minnesota Supreme Court, applying

Bates to BASF’s “fraudulent marketing”

scheme while viewing the full trial record,

err in reaffirming the jury verdict judgment?

No. Peterson v. BASF Corp., 711 N.W.2d 470,

479 (Minn. 2006) (Peterson VI), (“{FJarmers’

claims that BASF engaged in fraud, decep-

tion, and unconscionable conduct ... are

based on BASF’s marketing and adver-

tising actions and not on the content of the

product labels.”); id. at 481-82 (“the funda-

mental debate is simply about how the

farmers’ claims are accurately character-

ized ...we conclude that the record sup-

ports the farmers’ characterization of their

claims”); id. at 481 (BASF’s arguments have

“little credibility”).

ii

QUESTIONS PRESENTED - Continued

2. _ Did the Minnesota Supreme Court err in

rejecting BASF’s moot and “procedurally

waived” First Amendment argument on re-

mand?

No. Peterson VI, 711 N.W.2d at 474 (“As

Bates only involved the issue of FIFRA pre-

emption, we review only the preemption as-

pect of our decision in Peterson III.”); id. at

482 (BASF’s complaints about the Minne-

sota trial court’s “evidentiary rulings or jury

instructions” were “procedurally waived” by

BASF after intermediate state appellate

court ruling).

ill

LIST OF PARTIES

Ronald Peterson

Barry Thune

Owen Larson

—

7 PF STP PF Pf PP

Owen Larson Farms, Inc.

Duane Evenson

Jeffrey Nesvig

Richard Moen

Christopher Grove

Christopher Grove Farms, Inc.

10. David Abentroth

11. Glenn Asbeck

12. Asbeck, Inc.

13. Donald Steinbeisser

14. Joe G. Steinbeisser & Sons, Inc.

‘15. Stephen Pust

16. Stephen Pust Farms, Inc.

17. All persons who purchased the herbicide Poast

between January 1, 1992 and December 31, 1996 for

use on their crops, except North Dakota residents

who purchased Poast in North Dakota — who settled a

separate class action lawsuit with BASF Corporation

in 1997 for $3.5 million and national injunctive relief.

18. BASF Corporation

iv

RULE 29.6 STATEMENT

Class Representatives include Owen Larson Farms,

Inc., Christopher Grove Farms, Inc., Asbeck, Inc., Joe G.

Steinbeisser & Sons, Inc., and Stephen Pust Farms, Inc.

These small family-owned farm corporations, incorporated

in the States of Minnesota and Montana, have no parent

’ companies and no publicly-traded stock.

TABLE OF CONTENTS

| Page

QUESTIONS PRESENTED ......ccssssessccssssssscssssssssecessens

I a covevecrvecarcsonsastevsnsosontmees iii

RULE 29.6 STATEMENT, .....ccccccscsssscecccssssssvccescesssvecesees iv

TABLE OF AUTHORITIES ......ccssscsccssssssessessssssecssessssee ix

a cicecthesansw SuscteirboeiSedecan 1

OPINIONS BELOW...csccscscsccosesscsssvssesccsssssscccsssovecesssene 1

NO JURISDICTION FOR ISSUES WAIVED IN

OE EE Ea

SUMMARY ARGUMENT. ........csscsseeeeeses Bo Seis 3

A. Minnesota Supreme Court, Applying Bates to

BASF’s Fraudulent Marketing Schemes, Deci-

sively Reaffirmed Jury Verdict Judgment......... 3

1. BASF’s Fraudulent Marketing And Adver-

SE ihivshetinahoiabisbeseesoveestgrdeusbniesaveidenisteoteniaies 3

2. BASF Mis-Characterizes The Record ......... 3

a. Pretends Jury Verdict Never Occurred.... 3

b. Misrepresents The Facts .............-...00000 3

c. Ignores EPA’s Conclusion It Has No

Jurisdiction Over BASF’s “Marketing”

IIIT sicacicivchensensicers slebiicnidiedibipwimanasniires 4

d. Cannot Challenge Established Facts ....

3. Moot And Procedurally Waived Arguments ..

a. First Amendment Is Beyond Bates Re-

b. Trial Evidentiary And Jury Instruction

Rulings Were “Procedurally Waived” In

I a iis staccccenabsensincminiacmegtoegneeuees 5

TABLE OF CONTENTS -= Continued

Page

B. Bates And Peterson In A Nutshell ...................00 6

D, eaBae Te AL CR0 ov cccervcsincnsecetccscovesever 6

2. _Peterson Is An “Off-Label” Case...............4. 7

3. “Label” Claims Are Not Preempted............. 8

4. “Off-Label” Claims Are Off The Radar Of

~ ATEN OR la PM SEPA I 8

STAT ISREEIN ES OF THE CAGES ceccccocctercscscerevsscvecccoccovecees 9

A. BASF Engaged In A National “System Of

Deceit” To Extract Inflated Prices From Minor

Fk Sa ACEI tre RIC Sicaet Soom ONDE es A 10

B. Peterson I Remanded For Trial ..................:000008 10

C. Dec. 6, 2001 “Marketing And Pricing” Fraud

I WI ihc snitiseinieleciatiintatincicitigsaeeaedehideles 11

D. Peterson II And III Affirm Jury Verdict Judg-

I isis Neicicntnstanitrntensdicediisiie bs betaine aie seniihioneiiaeatiaa tes 12

E. Bates Embraces Peterson ...........cc::eesesesecsseseseeees 12

F. Peterson VI Decisively Reaffirms Jury Verdict

Es seininssciincncicehibstsatiandisiinihsncsdccsahbiovadeintediods 12

FRE OEE SO BES weicevicivinsnviconcnteasunrsseinunvcectenins 12

A. Poast And Poast Plus Are The Same Herbicide... 12

B. BASF’s Scheme: “Opportunistically Exploit”

I CR FIN ites ckctcocinsninsecpninnncumvetiocenes 13

C. BASF’s Exploitation Scheme: Concealment Of

Material Facts And Overt False Statements..... 14

vii

TABLE OF CONTENTS -— Continued

Page

D. BASF’s Enforcement Scheme: Criminal Prose-

cution Of Farmers As A “Marketing” Strategy

— While Deceiving Farmers, Distributors, Food

Processors, And Regulatory Authorities ............ 16

E. BASF’s Deceit Unravels: Farmers And State

Officials React When Truth Of EPA Registra-

tion Status Of Poast Plus Becomes Known....... 18

F.- BASE’s “Syetem OF Desi” occccccccssccvssercecssccezceoes 20

PF whcrviici acids iinaceiabiniii ainda cit a eae 22

I. MINNESOTA SUPREME COURT, APPLYING

BATES TO BASF’S FRAUDULENT MARKET-

ING SCHEMES, DECISIVELY REAFFIRMS

JURY VERDICT JUDGMENT............eceeeeeeeeseeee 22

A. A Presumption Against Preemption............ 22

B. Jury Verdicts For Fraudulent Marketing

Schemes Do Not Establish “Labeling And

Packaging” Requirements ................::seeeceee 22

1. First Bates Test Is Dispositive: BASF

Complaint That Jury Verdict Requires

“Labeling And Packaging” Change Vio-

lates Commonsense And Misrepresents

And Denies Historical Record................ 23

a. Violates Commonsenseé..............0.+0+ 23

b. Misrepresents And Denies Histori-

OE IE iasicitae cia dee 23

c. “{IJ Can Take Hard Answers, But

Don’t Lie... Just — You Don’t Lie”... 24

TABLE OF CONTENTS — Continued

Page

2. Second Bates Test Is Never Reached:

Peterson Is Not A “Misbranding” Case

Challenging Accuracy Of Statements

EES ER ae 25

C. Regulatory Compliance Has No Relation

EE 25

1. EPA Allows “Split And Subset Label-

ing” But Does Not Address Marketing

SET CEE oe a 25

2. BASF’s Regulatory And Marketing Ex-

perts Conceded At Trial That Regula-

tory Compliance Has No Relation To

COMSUMET FAUT ....0..000rrere0recvsersesneveeerens 26

D. BASF’s Injudicious Second Petition Is A

a cidecnbits 27

1. Factual Argument BASF Lost Before

ae Deer al doadialinaintciten 27

I ccccnsduoesonseunnonss 27

b. State Registration And Crop Safety... 28

2. “Procedurally Waived” And Misplaced

Effort To Reargue Trial Evidentiary

And Jury Instruction Rulings................ 29

il. MINNESOTA SUPREME COURT REJECTED

BASF’S MOOT AND PROCEDURALLY WAIVED

FIRST AMENDMENT COMPLAINT ON RE-

1x

TABLE OF AUTHORITIES

Page

CASES

Adarand Constructors, Inc. v. Mineta, 534 U.S. 102,

SEE Bric Gk CE) vcnivniicccctdelutaaiscenbiammstdaiitinticnditaeiisiéiipieias 2

Bates v. Dow AgroSciences, LLC, 544 U.S. 431

Ga eaTe i espslicicees-cesccsennscedbishsieituinthialphuciguloudlandstiindaaabtaiaenbestsiaiiamasil passim

Central Hudson Gas & Elec. Corp, v. Public Service

og Es Bk, Re ome 30

Chevron U.S.A., Inc. v. Natural Res. Def. Council,

IE RF: DUE FC ccc cevccccineiichcetateiesiieaiiaiiceaieebivtgimiiidied 4

Friedman v. Rogers, 440 U.S. 1 (1979) 0.0... .eceeeeeseseeeeeeeee 30

Glover v. U.S., 531 U.S. 198, 121 S.Ct. 696 (2001)............. 3

Graver Tank & Mfg. Co. v. Linde Air Prods. Co.,

Se Sa oe Cate ilcresevncniaiccinnichissdmiccabeiaitteedeiei bares 5

Greater New Orleans Broadcasting Assn. v. U.S.,

ee rk Fee Ge venciveractansadenenadaieiienitmanteiaiiaiicuciande 30

Hernandez v. New York, 500 U.S. 352 (1991)................000e 5

Illinois ex rel. Madigan, Attorney General v. Tele-

marketing Assoc., Inc., 538 U.S. 600 (2003) ................. 30

Mannheim Video, Inc. v. County of Cook, 884 F.2d

1043 (7th Cir. 1989), cert. denied, 495 U.S. 957

Ce ch scictictetctiinstienaiicieta nadia deeiieitbaieiei eee as 4

Matthews v. Huwe, 269 U.S. 262 (1925)... cee seeeec cerns 2

Nike v. Kasky, 539 U.S. 654 (2003)...........ccccsseecceecceereeeeees 30

Peterson v. BASF Corp., 711 N.W.2d 470 (Minn.

OO) ORI OE VE FB siveinnicincettiniaciendisidtamembinida passim

Peterson v. BASF Corp., 675 N.W.2d 57 (Minn.

INE Be Pr reins ce etcbdcipibadecenenabelenectsiinnnaeiiniten passim

xX

TABLE OF AUTHORITIES — Continued

: Page

Peterson v. BASF Corp., 657 N.W.2d 853 (Minn.

Agp..BOGS) (Pasar aOR £2) .ocvdsvecessccescevesesssvcsenss: 2, 12, 25, 29

Peterson v. BASF Corp., 618 N.W.2d 821 (Minn.

App. 2000), rev. denied (Minn. Jan. 26, 2001)

IID IEF wiiiksciesisisatcsdecnthisdtienidibcinteedabuisebidiuiimedeins 2, 10, 25

Peterson v. BASF Corp., 12 F. Supp. 2d 964 (D.Minn.

CIID winintedsoctiindisstibtebtintioksseaiidedacisiieadcdes 2,10

Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984)............ 6

Stratton v. Stratton, 239 U.S. 55 (1915) oo... eeeeseeseeeeeeeees 2

STATUTES

Fe BE joncaicineetbeet thieniiuntitetisninie carsvorersseresereroress 16

Fe UE icthciniilich saiescatieniatinstnhenccuamlééarteciciprumiectebbiiia 20

N.J. Stat. Ann. §§ 56:8-1-116 (1997).........ccscccccessersecsseees 9

RULES AND REGULATIONS

ee Be ioc inccandietbintendivatinicianesgeeninas RE a nap Aho 26

Se eT se PAID cu sstediccsonsincinstectanepbineclomabidindanesundeuseniatis 26

ee re IU baibliastinss sacenneonetietaapcntucnibbteciaenieuta 10, 26

Es Oe SENG ackcisdcnicnntesdanonincebdbiienlcnsadiuscacodnatuiabedcaansans 13

OTHER AUTHORITIES

Dunnell Minn. Digest, Torts, § 1.03 (4th ed. 2000) .......... 29

R. Stern, E. Gressman, S. Shapiro, K. Geller,

Supreme Court Practice (8th ed. 2002).............ccccceeeeeeees 2

1

DENY PETITION

The Court should deny BASF’s injudicious second

petition for certiorari.

BASF’s petition ignores the Bates preemption test,

544 U.S. at 444, and the Minnesota Supreme Court’s

thorough analysis applied to BASF’s fraudulent scheme.

Peterson VI, Petitioner’s Appendix (PA)la: “[{Farmers’]

claims under the New Jersey Consumer Fraud Act are not

preempted by [FIFRA], because they concern non-label

deceptive statements and conduct and do not constitute a

requirement for labeling or packaging.”

BASF’s first issue is misleading. The Environmental

Protection Agency (EPA), under FIFRA, allows a company

to container label a product for fewer than all registered

uses (“split and subset labeling”), but plainly does not

address fraudulent marketing schemes. Peterson VI,

PA17a: “[Flarmers’ claims do not challenge the legality of

BASF’s subset [container] labeling, but rather its misrep-

resentations about the products....” Nothing about the

jury verdict requires BASF to do anything other than

honestly market its product.

BASF’s second issue is moot. BASF argues that

isolated evidence of its fraudulent marketing scheme is

protected commercial speech under the First Amendment.

This trial “evidentiary ruling” argument, beyond the Bates

remand, Peterson VI, PA5a, was “procedurally waived” by

BASF after an intermediate state court appeal, PA19a.

OPINIONS BELOW

Twelve Minnesota appellate judges have studied the

facts of this case as determined by the jury and unani-

mously and decisively rejected BASF’s preemption and

First Amendi’» at arguments:

¢ Peterson v. BASF Corp., 711 N.W.2d 470 (Minn.

2006) (Peterson VI) (reaffirming jury verdict judg-

ment after remand from Supreme Court);

¢ Peterson v. BASF Corp., 675 N.W.2d 57 (Minn. 2004)

(Peterson III) (affirming jury verdict judgment);

2

¢ Peterson v. BASF Corp., 657 N.W.2d 853 (Minn.

App. 2003) (Peterson II) (affirming jury verdict

‘ judgment); and

¢ Peterson v. BASF Corp., 618 N.W)2d 821 (Minn.

App. 2000), rev. denied (Minn. 2001) (Peterson I)

(remanding for trial).’

NO JURISDICTION FOR ISSUES

WAIVED IN STATE COURT

This Court does not address issues procedurally

waived by a petitioner in state court. The Minnesota

Supreme Court on remand recognized that BASF’s trial

court “evidentiary rulings or jury instructions” issues were

“procedurally waived” by BASF after Peterson II, an

intermediate Minnesota appellate court ruling. Peter-

son VI, PA19a. BASF’s trial “evidentiary ruling” (First

Amendment) and “‘ury instruction” (FIFRA requirements)

issues in its petition for certiorari are beyond the review of

this Court. Stratton v. Stratton, 239 U.S. 55 (1915) (if

there is discretionary review by a higher court, the exer-

cise of such discretion must be sought); Matthews v. Huwe,

269 U.S. 262, 265-66 (1925); R. Stern, E. Gressman, S.

Shapiro, K. Geller, Supreme Court Practice, § 3.12, p. 165

(8th ed. 2002) (“If the judgment of the trial court is subject

under state law to discretionary review by a higher court,

such review must be sought.”).’

' Other opinions below, in state and federal court: Peterson v. BASF

Corp., A04-2464 (Minn. App. 2005) (Peterson V), rev. denied (Minn.

2005) (reversing jurisdiction ruling, declining to reach “merits” of

BASF’s “settlement” motion); Peterson v. BASF Corp., A04-1553 (Minn.

App. 2005) (Peterson IV), rev. denied (Minn. 2005) (jury verdict judg-

ment was a “final .. . common fund” judgment ending BASF'’s interest);

Peterson v. BASF Corp., 12 F. Supp. 2d 964 (D. Minn. 1998) (Peterson)

(remanding to state court).

* BASF also waived its trial “evidentiary” and “jury instruction”

issues by never articulating a challenge to the Peterson VI “procedural

waiver” ruling in its petition for certiorari. See Adarand Constructors,

Inc. v. Mineta, 534 U.S. 102, 105, 110-11 (2001) (Court will not address

standing when petition for certiorari did not contest lower court ruling

(Continued on following page)

3

SUMMARY ARGUMENT

A. Minnesota Supreme Court, Applying Bates to

BASF’s Fraudulent Marketing Schemes, Deci-

sively Reaffirmed Jury Verdict Judgment

1. BASF’s Fraudulent Marketing And Advertising

The Minnesota Supreme Court, applying Bates to BASF’s

“fraudulent marketing” scheme, decisively reaffirmed the jury

verdict. Peterson VI, PA13a-14a,-._ <mers’ claims that BASF

engaged in fraud, deception, and unconscionable conduct ... _

are based on BASF’s marketing and advertising actions

and not on the content of the product labels.”).

2. BASF Mis-Characterizes The Record

a. Pretends Jury Verdict Never Occurred

This case was tried to a 12-member jury over five

weeks in November and December, 2001 with a unani-

mous finding that BASF engaged in “an unconscionable

commercial practice, deception, fraud, false pretense, false

promise, or misrepresentation in relation to BASF’s

murketing and pricing strategies” and a “knowing

omission, suppression or concealment of the truth” as part

of its marketing scheme. Respondent Farmers’ Appendix

(RFA)1-3 (Dec. 6, 2001 Special Verdict Form).

b. Misrepresents The Facts

Upon viewing the full record, the Minnesota Supreme

Court determined that BASF’s appeals mis-characterize the

record: “[T]he fundamental debate is simply about how the

farmers’ claims are accurately characterized . .. we conclude

that the record supports the farmers’ characterization of their

claims.” Peterson VI, PA18a-19a;17a ([BASF’s state registration

and crop “safety ... testing”] arguments have “little credibil-

ity”), see generally Supreme Court Practice, § 6.30, p. 430

that petitioner lacked standing); Glover v. U.S., 531 U.S. 198, 205 (2001)

~(Court does not decide issues not articulated in petition for certiorari).

4

(“Court relies heavily upon the good faith «f petitioner’s counsel

in accurately stating ... pertinent facts”).

c. Ignore’s EPA’s Conclusion It Has No Juris-

diction Over BASF’s “Marketing” Scheme

Peterson III acknowledged the EPA's edict in this case

that the EPA does not regulate company “marketing” of a

herbicide — “a [BASF] marketing decision in which the

EPA had no input.” PA74a (emphasis added); PX82; PX334

(“it is related to a marketing strategy and is not a

regulatory matter”) (emphasis added).’ No authority

supports BASF’s overzealous disregard of the EPA's state- -

ment in this case. Chevron U.S.A., Inc. v. Natural Res. Def.

Council, 467 U.S. 837, 844-45 (1984) (court defers to agency’s

reasonable interpretation of statute it administers); Mann-

heim Video, Inc. v. County of Cook, 884 F.2d 1043, 1047 (7th

Cir. 1989) (“ostrich-like tactic of pretending that potentially

dispositive authority against a litigant’s contention does not

exist is... unprofessional”) (emphasis added).

d. Cannot Challenge Established Facts

BASF cannot challenge jury-established facts:

¢ Split/Subset Labeling And Different Trade

Names For Same Product: Peterson VI, PA17a

(“Based on the record ... the farmers’ claims do

not challenge the legality of BASF’s subset labeling

[product container labeling for fewer than all EPA-

registered uses], but rather its misrepresentations

about the products. . . .”) (emphasis added);

* Same produci: Peterson VI, PA17a (“Based on the

record”... BASF’s duty was to “refrain from decep-

tive [marketing] statements”) (emphasis added);

* PX82 is Farmers’ Trial Exhibit 82 presented to the jury; a letter

from EPA responding to a North Dakota Department of Agriculture

inquiry. PX334 is Farmers’ Trial Exhibit 334; a confidential internal

BASF memorandum to BASF management stating the EPA was upset

that BASF had deceived the North Dakota Pesticide Control Board.

5

Peterson IiI, PA71a (“[E]vidence was presented

that Poast and Poast Plus are essentially the same

product ... this evidence was presented to illustrate

what the farmers alleged was a scheme to exploit the

farmers through consumer fraud.”),

- © State Registration And Crop Safety: Peterson VI,

PA17a-18a (BASF’s argument bears “little credibil-

ity... evidence was submitted [to the jury) that

established that the choice in this case to limit state

registration and availability of Poast Plus for use on

minor crops was a marketing decision intended to

maximize profits, not generated by safety concerns.”)

(emphasis added); Peterson IJ, PA38a (“There was

clearly evidence ... that BASF believed that Poast

Plus had been sufficiently tested for use on minor

crops.”) (emphasis added); id. at PA39a (farmers pre-

sented evidence, including expert testimony, from

which “jury could [conclude]” that BASF’s state

registration decisions were part of BASF’s national

system of deceit) (emphasis added).

See, e.g., Hernandez v. New York, 500 U.S. 352, 366 (1991) (“in

the absence of exceptional circumstances, we . .. defer to state-

court factual findings”); Graver Tank & Mfg. Co. v. Linde Air

Prods. Co., 336 U.S. 271, 275 (1949) (“[this Court] cannot ...

review concurrent findings of fact by two courts below in the

absence of a very obvious and exceptional showing of error”).

3. Moot And Procedurally Waived Arguments

a. First Amendment Is Beyond Bates Remand

The Minnesota Supreme Court denied BASF’s attempt

to re-argue its First Amendment issue on remand. “As Bates

only involved the issue of FIFRA preemption, we review

only the preemption aspect of our decision in Peterson III.”

Peterson VI, PAS5a.

b. Trial Evidentiary And Jury Instruction Rulings

Were “Procedurally Waived” In State Court

The -Minnesota Supreme Court rejected BASF’s

complaints about the trial court’s “evidentiary rulings or

6

jury instructions” as “procedurally waived” in state court,

Peterson VI, PA19a, including BASF’s argument that

isolated evidence before the jury of BASF’s “less than

candid responses” about the registration status of BASF’s

products was protected commercial speech. Peterson III,

PA76a (emphasis added). This Court does not address

issues procedurally waived in state court.

B. Bates And Peterson In A Nutshell

1. Bates Is A“Label” Case

Bates is a label-based product performance case:

claims by farmers addressing the effectiveness of the

product on the crop even though the EPA approved the

product (container) label: (1) crop safety claims — the

herbicide killed or injured the crop it was intended to

protect; or (2) efficacy claims — the herbicide did not kill

the weeds. Who is responsible? The EPA? The farmer who

purchased a product that did not work? Or the company

that sold the product for profit?

Before Bates, the coordinated chemical industry

persuaded some courts to dismiss injured farmers’ claims

for the simplistic reason that the “EPA approved the

label.” Yes, the EPA approved the product (container) label

in reliance upon the common-sense notion that a company

would not seek EPA registration to sell a product that did

not work. No, the EPA did not step into the shoes of the

company and guarantea the effectiveness of the product

and the honesty of «he ¢ompany’s marketing campaign.

Label-based claims, like Bates, address the pesticide

seller’s sale of a product that did not work. The EPA, under

FIFRA, only evaluates the safety of a pesticide (herbicide) as

it affects people and the environment. Congress wrote FIFRA

as a vehicle for the EPA to evaluate the relative safety of the

product for people and the environment. Ruckelshaus v.

Monsanto Co., 467 U.S. 986, 991-92 (1984). Congress has

never granted the EPA authority to regulate or govern a

pesticide seller’s marketing and pricing schemes.

7

Bates clarifies that the EPA, under FIFRA, does not

address the effectiveness of a product — whether it will work

— as marketed by the company. Bates affirms that state

claims addressing marketing responsibilities of pesticide

sellers to consumers are not preempted by FIFRA.

2. Peterson Is An “Off-Label” Case

Well beyond the “label” claims in Bates, Peterson presents

“off-label” claims of fraudulent “marketing and pricing.”

Trial evidence established that BASF defrauded

thousands of farmers by deceptively marketing the same

herbicide as different products — Poast and Poast Plus — at

different prices as a “system of deceit” to extract inflated

prices for the same herbicide from minor crop farmers.

BASF concealed from farmers and state regulatory

authorities that cheaper Poast Plus, sold to soybean growers,

a “major” national crop, was approved by the EPA for use on

the same crops as more expensive Poast sold to growers of

“minor” crops such as sunflowers, sugarbeets, potatoes,

vegetables-and fruits. The EPA directly informed state regula-

tory officials, upon inquiry, that BASF’s market-segmentation

scheme was “a company marketing decision in which the

EPA had no input.” PA74a (emphasis added); PX82.

The jury found that BASF’s misconduct was uncon-

scionable. BASF led to state regulatory authorities, food

processors, farmers and dealers to conceal a federal regula-

tory action; namely, the EPA registration of Poast Flus for

the same crops as Poast, using the same safety data. BASF

threatened and encouraged the criminal prosecutions of

farmers for “off-label” use of cheaper Poast Plus as a market-

ing “strategy.” BASF considered the “risk” of farmers discov-

ering the truth, and whether United States farmers could be

“controlled in future” if BASF’s fraudulent marketing and

pricing schemes for Poast and Poast Plus were discovered.

3. “Label” Claims Are Not Preempted

As this Court said in Bates, 544 U.S. at 444:

Rules that require manufacturers to design reasonably

safe products, to use due care in conducting appropriate

testing of their products, to market products free of

manufacturing defects, and to honor their express war-

ranties or other contractual commitments plainly do not

qualify as requirements for “labeling and packaging.”

Consumer fraud statutes, applied to fraudulent

marketing schemes, likewise do not impose label “re-

quirements” nor impede the EPA’s mandate under FIFRA

to evaluate the safety of products for people and the

environment. Consumer fraud statutes only impose a duty

upon global chemical companies to honestly market their

product. Peterson VI, PAl7a (“duty ... to... refrain

from deceptive statements”) (emphasis added). The

unanimous Peterson jury, on December 6, 2001, found that

BASF violated honesty in the marketing of its herbicide.

Nothing about the jury verdict requires BASF to do

anything other than honestly market its products.

4. “Off-Label” Claims Are Off The Radar Of

Preemption

Fraudulent marketing representations — off-label

claims — are far beyond FIFRA preemption. Bates, 544

U.S. at 444 n.17 (“To the extent that ... fraud claims are

based on oral representations made by Dow’s agents, they

fare not preempted).”). The EPA through the Solicitor

General acknowledged during the January 10, 2005 oral

argument in Bates that fraudulent marketing representa-

tions are not preempted: “/WJe agree that ... off-labeled,

false misrepreser -ation[s] [are] ... not preempted.” Tr.

43:4-7 (question by Justice O’Connor and response by

Lisa S. Blatt, Esq., Assistant to the Solicitor General).’

* See supremecourtus.gov/oral_arguments/argument_transcripts /03-

388. pdf.

9

STATEMENT OF THE CASE

This is a consumer fraud case brought under the New

Jersey Consumer Fraud Act (NJCFA), N.J. Stat. Ann.

§§ 56:8-1-116 (1997), on behalf of farmers in all 50 states who

purchased Poast herbicide from New Jersey-based BASF” in

1992-96. The class enly exempts those North Dakota farmers

who settled a separate class action lawsuit with BASF in 1997

for $3.5 million and national injunctive relief. See, e.g., PX358

(national reduction in price of Poast).

BASF engaged in a national “system of deceit”—

intentional misrepresentations, unconscionable commer-

cial practices, and omissions — by marketing the same

herbicide as different products — Poast and Poast Plus — to

extract inflated prices from minor crop farmers.

¢ Peterson VI, PAla-24a (“(Flarmers’ claims that

BASF engaged in fraud, deception, and uncon-

scionable conduct ... are based on BASF’s mar-

keting and advertising actions and not on the

content of the product labels.”) (emphasis added).

¢ Peterson III, PA76a (“BASF made material mis-

representations in advertisements ... [and en-

gaged in many other] .. . efforts to prevent farmers

from learning that Poast Plus was approved for use

on the same crops as Poast.”);

¢ Peterson II, PA36a (“jury could conclude that

BASF’s marketing scheme and exploitation of fed-

eral regulations, rather than its lawful use of fed-

eral regulations, concealed that Poast and Poast

Plus were registered for the same uses and consti-

tuted fraud under the NJCFA”):

¢ Peterson I, PA86a (remanding for a jury to deter-

mine whether BASF’s herbicide marketing and

pricing schemes deceived farmers and wrongfully

exploited the federal EPA and state regulatory

* BASF is a subsidiary of a global chemical corporation, BASF

Aktiengesellschaft (BASF AG), with gross yearly sales exceeding $55

billion.

10

process as a “system of deceit” to exact inflated

prices from minor crop farmers).

A. BASF Engaged In A National “System Of Deceit” To

Extract Inflated Prices From Minor Crop Farmers

BASF’s misconduct and deceit arose when BASF’s

original product, Poast, faced competition in the national

soybean (major crop) market. In the minor crop market,

Poast had a dominant position. To meet competition in major

crops, while retaining a premium price in minor crops, BASF

deceptively devised Poast Plus and marketed expensive

Poast to minor crop growers and cheaper Poast Plus to major

crop growers. It was a market-segmentation scheme.

The EPA and BASF regarded Poast and Poast Plus as the

same herbicide and both products were EPA-registered for the

same crops based on the same residue safety data submitted

to the EPA under oath by BASF. Both products were applied

at the same amount of active ingredient per acre. BASF

admitted in federal court and at trial that Poast was $4/acre

($32 per gallon of product) more expensive during the class

period. See, e.g., Peterson, 12 F. Supp. 2d at 967.

B. Peterson I Remanded For Trial

Peterson I rejected BASF’s federal preemption defense

by distinguishing between regulatory compliance and

congumer fraud, Peterson I, PA85a-86a (emphasis added):

BASF’s registering of one herbicide for use on differ-

ent crops was specifically permitted by the EPA. 40

C.F.R. § 152.130(b) (1994). [Farmers] presented evi-

dence, however, to suggest that BASF designed a plan

to conceal the fact that Poast Plus was EPA registered

for use on minor crops and to discourage any off-label

use of Poast Plus ... Thus, [farmers] have shown that

a genuine issue of material fact exists as to whether

BASF’s system of deceit falls within the broad protec-

tion of the [NJCFA].

11

C. Dec. 6, 2001 “Marketing And Pricing” Fraud

Jury Verdict 4

On December 6, 2001, 12 jurors unanimously found:

We, the jury in this case, find as a Special Verdict the

following facts by way of answers to the following

questions submitted to us by the Court:

1. Did Defendant BASF Corporation, engage in an un-

conscionable commercial practice, deception, fraud,

false pretense, false promise, or misrepresentation

in relation to BASF’s marketing and pricing

strategies for Poast and Poast Plus herbicides?

Answer: YES _X NO

2. Did BASF engage in a knowing omission, sup-

pression or concealment of the truth in relation to

BASF’s marketing and pricing strategies for

Poast and Poast Plus herbicides?

Answer: YES X_ NO

If you answered “Yes” to any one of Questions 1

and/or 2 above, then answer Question No. 3.

3. Did BASF’s conduct or actions as you have found

above cause an ascertainable loss to Plaintiffs?

Answer: YES _X_ NO

If you answered Question No. 3 above “Yes”, then go

to Question No. 4.

4. What, if any, was the monetary value of Plaintiffs’

loss caused by BASF’s conduct or actions as you

found above for the years 1992 to 1996?

1992 $ 2,000,000

1993 $ 5,000,000

1994 $ 3,000,000

1995 $ 4,000,000

1996 $ 1,000,000

RFA1-3 (emphasis added). On April 2, 2002, the trial court

entered a “final ... common fund” money judgment for

Farmers.

12

D. Peterson II And III Affirm Jury Verdict Judgment

_ The Minnesota Court of Appeals and Supreme Court,

viewing the full record, affirmed the jury verdict judg-

ment. Peterson II, PA25a-53a; Peterson III, PAla-24a.

E. Bates Embraces Peterson

Bates affirms that state claims addressing marketing

responsibilities of pesticide sellers to consumers are not

preempted by FIFRA. 544 U.S. at 444-45. Bates acknowl-

edges that “off-label” claims are off the radar of preemp-

tion. Jd. at 444 n.17. Bates embraces Peterson confirming

BASF’s fraudulent “marketing and pricing” scheme.

F. Peterson VI Decisively Reaffirms Jury Verdict

Judgment

- The Minnesota Supreme Court unanimously and

decisively reaffirmed the jury verdict judgment: “(Farmers’]

claims under the [NJCFA] are not preempted by [FIFRA],

because they concern non-label deceptive statements and

conduct and do not constitute a requirement for labeling or

packaging.” Peterson VI, PAla (emphasis added).

STATEMENT OF FACTS

A. Poast And Poast Plus Are The Same Herbicide

Poast and Poast Plus are a post-emergence grass herbi-

cide with the same active ingredient (sethoxydim), EPA-

approved for the same crops, based on the same residue test

data, to control the same grasses, with the same applications

and pounds of active ingredient per acre. Tr.2424:19-

2425:10;2776:12-2777:13. BASF’s EPA registration submis-

sion certified that Poast Plus was “tolerant” for the same

minor crops as Poast. PX244 (field/forage/vegetables/fruits).

BASF’s Regulatory Affairs Director and its regulatory trial

expert both testified that BASF would never EPA-register

Poast Plus for minor crops without crop safety clearance

studies. Tr.1340:14-18;1343:1-8;2673:6-12. Under trade names

Vantage and Torpedo, Poast Plus was legally used on

~

13

hundreds of varieties of minor crops across the country, i.e.,

delicate roses and violets and fruit-bearing trees, without crop

injury. Tr.2012:14-2013:18;3110:9-3117:1.

B. BASF’s Scheme: “Opportunistically Exploit” Minor

Crop Farmers

BASF’s exploitation of minor crop farmers originated at

BASF’s New Jersey headquarters in 1988. Tr.:19-25;13:1-25.

BASF decided to price Poast at a premium for minor crop

farmers and introduce the same herbicide, cheaper Puast

Plus, to meet competition in major crops. BASF was concerned

that its scheme would be uncovered, PX217 (emphasis added):

Does it make sense to position Poast on a high

price level in high value [minor] crops and intro-

duce a 2nd grasskiller for soybeans, cotton,

sugarbeets for example on a lower price level?

Will the farmer be controlled in future?

In 1989, at the direction of parent BASF AG, with instruc-

tions emanating from New Jersey headquarters, BASF imple-

mented its exploitive United States’ “marketing scheme.” PX237.

BASF’s “Confidential” marketing plan for Poast included these

predatory elements: “ACTIVE MARKET SEGMENTATION.

OPPORTUNISTIC EXPLOITATION OF NON-SOYBEAN

MARKET POTENTIAL.” PX234 (emphasis in original).

By 1992, BASF had registered Poast Plus with the

EPA as safe for use on the same minor crops as Poast.

PX244;Tr.2149:8-2150:1;2424:19-2425:10. BASF attested

to the EPA that no new residue studies were needed:

No new residue data is included and is not needed be-

cause the proposed label directions for use in the sbove

listed crops for Poast Plus are identical to those for the

registered product Poast Herbicide (EPA Reg. No. 7969-

58) in terms of number of applications, pounds of active

ingredient per acre, and PHI [preharvest interval].

* Acompany must demonstrate the relative safety of a herbicide as

it relates to people and the environment. 40 C.F_R. § 158.20 (1993).

14

PX244 (emphasis added); Tr.2684:22-2685:22. Poast and

Poast Plus are indistinguishable when used by farm-

ers except that Poast was $4.00/acre ($32.00/gallon) more

expensive than Poast Plus. PX285;Ty.1291:11-1294:13;

2174:7-25;2236:1-2238:20.

C. BASF’s Exploitation Scheme: Concealment Of

Material Facts And Overt False Statements

The EPA and BASF regarded Poast and Poast Plus as

the same herbicide, PX336:

Any crops currently registered for use on the POAST

label can be placed into the POAST PLUS label. All that

is needed is a proposed POAST PLUS label, containing

that particular use, to submit to the EPA for approval.

BASF concealed from farmers and agriculture officials —

and lied when directly confronted — the truth that Poast and

Poast Plus were EPA-registered for the same crops. Tr.1876:1-

1879:5. BASF’s “secret” registration for Poast Plus was a

marketing decision. PX336. The deceit is acknowledged in an

October 23, 1992 memo from BASF’s public relations firm to

BASF’s marketing division: “[WJe run the risk of some

people knowing POAST PLUS is also registered, but not

labeled, for [minor crops].” PX41 (emphasis added).

To conceal the EPA registration of Poast Plus and ad-

vance its “Opportunistic Exploitation” scheme, BASF’s mar-

keting was blatant lies and half-truths. BASF claimed

through advertising materials that Poast was the “only”

product with registered residue tolerances for minor crops.

" North Dakota Agriculture Commissioner Sarah Vogel detailed, to

the EPA, North Dakota’s discovery that BASF had lied about the Poast

Plus registration, PX365 (emphasis added):

On May 18, 1994, I received a letter from Mr. Sanders [of

the EPA] stating, ‘... the crops, which appear on the Poast

label, were accepted [registered] for use on the Poast Plus

label in 1992. Your problem appears to stem from a com-

pany marketing decision in which the EPA had no in-

put.’ ... This was the first time that the Department of

Agriculture learned about BASF’s secret label.

15

Tr.447:20-449:1. BASF’s” product line catalog deceptively

stated: “Poast Plus for postemergence grass control in multi-

ple crops. Registered for use on cotton, soybeans, peanuts,

alfalfa.” PX270 (emphasis added); Tr.445:6-20. BASF execu-

tives testified the term “registered” was misleading. Tr.2223:6-

12;445:8-20;461:7-21. BASF’s concealment and lies regarding

the EPA’s registration of Poast Plus for minor crops was

perpetuated through publications, radio spots, ad slicks, bill

stuffers, and postcards directed at minor crop farmers:

Sugarbeets

Poast “[clontrols more grasses than any other sugar

beet herbicide.” PX263;264,

Dry Beans

“Poast is the only over-the-top grass herbicide devel-

oped for dry beans.” PX263;264.

Vegetables

“For grass control in vegetables, Poast herbicide

stands alone. No other herbicide, pre or postemer-

gence, controls so many grasses in all these varieties.”

PX263;264.

Potatoes

Poast “[clontrols more grasses than any other potato

herbicide.” PX263;264.

Flax and Sunflowers

“Poast from BASF is the only postemergence herbicide

registered for use in flax and sunflowers.” RFA826

(emphasis added). “Poast from BASF is the only

postemergence herbicide registered for use in flax.”

PX263;264 (emphasis added).

These promotional pieces misrepresented and con-

cealed that Poast Plus was registered with the EPA for

the same crops to control the same grasses, based on the

same residue safety data submitted for Poast. Tr.2772:17-

25. “As far as what the plant sees, they'd see the same

amount of active ingredient.” Tr.2777:1;1567:19-1569:9.

Class representatives testified they were misled by

Poast and Poset, Plus advertisements (Tr.1183:25-1187:

7;1287:9-1288:16;4445:25-1446:3;1670:11-22) and repre-

sentations by BASF field representatives at growers’

16

meetings (Tr.1395:25-1396:17;1443:10-1445:15;1644:18-1645:

5;1669:13-1670:10). Farmers did not understand they had

been deceived by BASF until North Dakota and South

Dakota uncovered BASF’s marketing fraud and allowed

farmers to use Poast Plus on minor crops. Tr.1292:7-

1294:23;1448:24-1449:7;1643:15-1644:20.

D. BASF’s Enforcement Scheme: Criminal Prosecu-

tion Of Farmers As A “Marketing” Strategy -

While Deceiving Farmers, Distributors, Proces-

sors And Regulatory Authorities

To exploit minor crop farmers, BASF recognized that

it must actively enforce the use of Poast Plus only on

major crops. PX247;250. BASF knew that if farmers

realized that-cheaper Poast Plus was the same herbicide

as Poast and EPA registered for the same crops, farmers

would question the use of expensive Poast. PX251;2172:18-

24. If BASF could not prevent the use of cheaper Poast

Plus on minor crops, it would experience millions of dollars

in lost profits on the same sales volume. RFA691. BASF

recognized that the greatest risk for losing control — “will

the farmer be controlled?” — were areas, like the Red

River Valley of Minnesota/North Dakota, where the same

farmers grow major and minor crops side-by-side and

purchased Poast and Poast Plus. PX247;251.

BASF urged that farmers be criminally prosecuted for

“off-label” use of cheaper Poast Plus on minor crops

(PX258;Tr.1863:12-21) — not pursuant to the EPA’s under-

lying taxpayer mandate to regulate the safety of herbi-

cides for man and the environment — but criminal

prosecution for “off-label” use only pursuant to BASF’s

“marketling] . . . strategy” to “enforce” the use of expensive

Poast herbicide on minor crops.© PX82;300;Tr.2011:16-

2012:6;2012:14-2013:21;2022:1-2024:24;2026:3-2033:12.

* FIFRA provides the EPA and state agriculture departments with

enforcement mechanisms for violations of product labels (“off-label”

use), including civil administrative penalties and criminal sanctions

and fines. 7 U.S.C. § 136j-m.

17

As BASF’s registration specialist acknowledged in a

May 11, 1995 internal memorandum: “We already have a

registration for POAST PLUS in sunflowers, but we

[marketing] have chosen not to include the use in our

current label.” PX336. Enforcement of BASF’s marketing

ploy to restrict the Poast Plus label became the means for

BASF’s enforcement of its “Opportunistic Exploitation” of

minor crop farmers. PX333;300.

BASF sent mailings to 5000 food processors and over

3000 dealers under the guise of maintaining the “safety of

the food supply” and stewardship. In the mailing, BASF

listed the four major crops on the Poast Plus label as its EPA

registration (approved “residue tolerances”), while omitting

that Poast Plus was also EPA-registered with the same

“residue tolerances” for the same minor crops as Poast.

PX35;249. The deceptive purpose of these mailings was to

enlist food processors and dealers to restrict the use of Poast

Plus to only the major crops in order to “protect the food

supply” and “avoid residue problems.” Id. Yet, BASF had

already certified to the EPA that there were no residue or

crop safety (tolerance) problems in using Poast Plus on minor

crops. Tr.2684:22-2685:22. BASF fraudulently and uncon-

scionably used food processors and dealers to enforce its

“Opportunistic Exploitation” of minor crop farmers and

conceal the EPA registration of Poast Plus. PX249.

To further reinforce the risk of off-label use of Poast

Plus, BASF used its public relations firm to draft a Posi-

tion Paper that was mailed to a wide variety of agencies

and processors involved with minor crops that could

influence farmers regarding off-label use of Poast Plus.

PX253;Tr.1857:13-1858:13. The Position Paper stressed

“hefty fines” for off-label use and the dangers to consumers

and the environment (PX252A;253B), even though BASF

knew that Poast Plus was EPA approved as safe for use on

the same crops as Poast. PX244. The Position Paper falsely

stated that Peast was, “[T]he only postemergence product

registered to control grasses in [minor crops] ... ” PX252A

(emphasis added); Tr.3588:15-24.

18

E. BASF’s Deceit Unravels: Farmers And State

Officials React When Truth Of EPA Registration

Status Of Poast Plus Becomes Known

BASF’s own sales force predicted that BASF’s

fraudulent “Opportunistic Exploitation” scheme would

fail, PX402 (emphasis added) (Tr.2231-33):

One more group can be added to the growing list of

people who are not happy with the sethoxydim mar-

ket segmentation scheme from BASF. A research

agronomist from Pillsbury Green Giant called to

discuss quote “the similarity between the two seth-

oxydim formulations.” To him, it was very clear that

their company and the food processors in general

were being singled out and asked to pay a much

higher price for post emergence grass control.

The grim concern of BASF and parent BASF AG at the

dawn of the scheme — “Will the farmer be controlled” —

proved prescient. RFA450 (emphasis added). Minor crop

farmers began disregarding BASF’s container (marketing)

label restricting Poast Plus to major crops. RFA1466;780;793;969

(BASF memo describing scheme as “becoming transparent”).

BASF egregiously enacted a strategy to use state

agriculture departments to perpetuate its “Opportunistic

Exploitation” scheme by using their agriculture inspectors to

“monitor and enforce the use of Poast over Poast Plus”.

PX217. BASF turned in its own dealers to Agriculture

Inspectors for selling Poast Plus to farmers growing minor

crops. PX251;276;384. This resulted in “hefty fines” to

dealers and farmers despite the fact that EPA approved

Poast Plus safe on minor crops. RFA849;Tr.1727:2-17. As

prosecutions increased, BASF took the extreme step of lying

to state Agriculture Departments regarding EPA registration

of Poast Plus. See, e.g., Tr.1730:13-1731:12. For example,

BASF executives lied to the North Dakota Pesticide Control

Board (“Control Board”) to conceal the EPA registration of

Poast Plus for the same crops as Poast. Tr.1876:1-24;1877:20-

24;1929:2-18. A BASF memorandum noted the need to

“develop a strategy” if North Dakota officials had al-

ready lewrned the truth (PX71) (emphasis added):

19

North Dakota State has indicated that they have re-

quested information from EPA and may know by the

time of the March 28 meeting that Poast Plus is also la-

beled in all these crops and that BASF has chosen not to

extend this label to the marketplace. . . . This will involve

some nebulous argumentation . .. that EPA could re-

quest side-by-side residue work for Poast Plus and

Poast.

Minutes of the.March 1994 Control Board demon-

strate BASF’s overt lies:

BASF was asked if they could expand the Poast Plus

label {to all minor crops on the Poast label]. They said

they could not because of economics. When questioned

on whether the EPA may allow them to expand the

Poast Plus label based on the current residue package

submitted on sethoxydim, BASF did not know. How-

ever, they feared if they put this issue to question

with the EPA, the EPA may require BASF to do

residue testing for the Poast Plus as well.

PX73 (emphasis added);Tr.1888:25-1889:12. The Control

Board wrote the EPA to determine if Poast Plus could be

registered for use on minor crops. The EPA responded:

A review of our records indicate that the crops, which

appear on the Poast label, were accepted (registered)

for use on the Poast Plus label in 1992. Your problem

appears to stem from a company marketing deci-

sion in which EPA has no input.

RFA385 (emphasis added); Tr.1888:25-1890:7. A confidential

internal BASF memorandum to management states that the

EPA was upset that BASF had deceived the Control Board:

Mr. Taylor (EPA) told me he did not appreciate get-

ting put in the middle of this issue since it is related

to a marketing strategy and is not a regulatory

matter. Furthermore, EPA has already granted regis-

tration of POAST PLUS in most of the crops for which

POAST is labeled, without requiring additional resi-

due data from BASF. Mr. Taylor knows that the

statement made to Ms. Vogel and attributed to BASF

is incorrect, and he is not pleased that BASF

misdirected her as to where the issue really lies.

20

PX82 (emphasis added). At trial, a BASF executive, admit-

ted that the statements he and another BASF executive

made to the Control Board were false, but that he was

told to make them by senior executive William Wisdom. -

Tr.458:1-23.

As BASF turned in dealers and farmers for off-label use of

Poast Plus, minor crop farmers petitioned regulators for the right

to use cheaper Poast Plus. PX396;397. After BASF’s lies were

uncovered by North and South Dakota authorities, RFA857-58,

North and South Dakota issued 7 U.S.C. § 136v(c(1) (Rule 24{c))

registrations to use cheaper Poast Plus on minor crops.’

PX298;129. Although BASF opposed the Rule 24(c) labels,

BASF’s own trade and lobbying organization (American Crop

Protection Association) refused to support BASF’s opposition.

PX291. North Dakota Agriculture Commissioner Vogel bluntly

responded to BASF’s opposition: “(BASF] has eroded public

respect for the registration process.” PX291 (emphasis added).

The EPA rejected BASF’s opposition. PX132;Tr.2669:17-

2670:20;Tr.2689:5-9. Minnesota and Montana officials also

considered a Rule 24(c) label for Poast Plus after learning

that North and South Dakota had done so. PX133;300;313

(“[BASF] believe[s] the state of Minnesota may also have

granted a 24(c) registration for Poast Plus for the’ same

uses.”). The matter became moot for Minnesota and all

other states because, after the actions of North and South

Dakota and commencement of the Tompkins class action in

North Dakota, BASF reduced the price of Poast to equal

Poast Plus nationwide in 1997. Clerk Doc. 563.

F. BASF’s “System Of Deceit”

The unanimous Peterson II court concluded, PA28a-29a:

-The farmers showed that BASF engaged in an advertising

campaign claiming that only Poast was registered with

* BASF’s reaction to the North and South Dakota 24(c) registrations

was predatory. BASF, through a personal telephone call from Executive

William Wisdom, maliciously threatened to personally sue North Dakota

Agriculture Commissioner Sarah Vogel. Tr.1759: 14-25-1760: 1-11.

21

the EPA for minor crops, despite the fact that Poast Plus

was EPA-registered for the same minor crops. Other evi-

dence 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 corps. 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 prose-

cutions of dealers and farmers. Further, the farmers intro-

duced 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 lo-

cal needs registrations with the EPA, allowing their farm-

ers to use Poast Plus on minor crops.

Farmers’ FIFRA expert, Dr. Charles Benbrook, testified: “It

was, for approximately a five-, six-year period, price gouging.”

Tr. 1939:17. Agriculture Commissioner Vogel and Jack Peterson,

head of pesticide enforcement for North Dakota, bluntly and

repeatedly testified that BASF had lied to them: “[I] can take

hard answers, but don’t lie. Just - you don’t lie.” Tr.1878:5-6;

1559; 1746:2-23;1748:22-1749:9;1753:14-15;1756:1-7;1758:13-20;

1765:17-1766:5;1788:6-11;1830:19-25;1878:7-1879:14. BASF’s

management conceded that BASF’s marketing for Poast Plus

was misleading, Tr.461:11-20:

A. (Chris Coombs) (reading from BASF marketing

materials) Okay. Poast Plus is registered for use

on the following crops only. Cotton, soybeans,

peanuts azid alfalfa.

Q. Stop theve. Do you consider it to be a mate-

rial omission to say that Poast Plus is regis-

tered for use on the following crops only,

cotton, soybeans, peanuts and alfalfa, when

you knew that it was registered on all of the

same crops as Poast?

A. Yes, I would consider that.

22

ARGUMENT

I. MINNESOTA SUPREME COURT, APPLYING

BATES TO BASF’S FRAUDULENT MARKETING

SCHEMES, DECISIVELY REAFFIRMS JURY VER-

DICT JUDGMENT

Bates holds that state claims addressing marketing

responsibilities of pesticide sellers to consumers are not

preempted by FIFRA, 544 USS. at 443-49:

¢ FIFRA is not intended to deprive injured parties

of compensation under state claims addressing

pesticide sellers’ marketing responsibilities to

consumers;

e Jury verdicts do not establish “labeling and

packaging” requirements; and

¢ Off-label claims are beyond FIFRA.

A. Presumption Against Preemption

This Court in Bates emphasized: “[Wle have long pre-

sumed that Congress does not cavalierly pre-empt state-law

causes of action. In areas of traditional state regulation, we

assume that a federal statute has not supplanted state law

unless Congress has made such an intention ‘clear and mani-

fest.’” 544 U.S. at 449 (emphasis added; citations omitted).

~

B. Jury Verdicts For Fraudulent Marketing

Schemes Do Not Establish “Labeling And

Packaging” Requirements

This Court in Bates, rejecting the chemical industry

complaint that product marketing claims are preempted

by FIFRA, a health and safety law, expressed a two-part

preemption test, 544 U.S. at 444 (emphasis in original):

For a particular state rule to be pre-empted, it must sat-

isfy two conditions. First, it must be a requirement “for

labeling or packaging”; rules governing the design of the

product, for example, are not pre-empted. Second, it must

impose a labeling or packaging requirement that is “in

23

~ addition to or different from those required under [FI-

FRA.”

1. First Bates Test Is Dispositive: BASF Com-

plaint That Jury Verdict Requires “Labeling

And Packaging” Change Violates Common-

sense And Misrepresents And Denies His-

torical Record

a. Violates Commonsense

Farmers’ jury verdict judgment, grounded in BASF’s

off-label “marketing” misconduct, is far beyond the Bates

preemption test. The jury verdict against BASF, under the

NJCFA, absolutely does not impose a “requirement for

‘labeling and packaging.’” The Minnesota Supreme Court

was clear, Peterson VI, PA13a-14a:

We concluded [in Peterson III], and we do so again, that

the farmers’ claims that BASF engaged in fraud, decep-

tion, and unconscionable conduct in violation of the

[NJCFA] are based on BASF’s marketing and advertis-

ing actions and not on the content of the product labels.

The jury verdict does not impede the EPA’s mandate

under FIFRA to evaluate the safety of products for people

and the environment. The unanimous jury found that

BASF violated honesty in the marketing of its herbicide.

Nothing about the jury verdict requires BASF to do

anything other than honestly market its product. Peterson

VI, PA17A (“The duty the farmers’ claims imposed on BASF

was ... to refrain from deceptive statements about their

EPA registration, their active ingredient composition, and

their relative efficacy on major and minor crops.”) (emphasis

added). FIFRA does not preempt consumer fraud claims; it

coexists with state remedies to prevent market fraud.

b. Misrepresents And Denies Historical

Record

BASF’s argument that the Minnesota fraudulent

“marketing and pricing” jury verdict is a requirement for

“labeling and packaging” misrepresents the historical

24

record by glaring omission. After North Dakota and South

Dakota uncovered BASF’s fraud and commencement of

the North Dakota class action, BASF did not change the

label but merely equalized the price of Poast and Poast

Plus. See Tompkins, et al. v. BASF Corp., Civil No. 96-59,

Traill County, ND (1996) (“Stipulation of Settlement” for

Tompkins) (executed March 14, 1997), at p. 8 (emphasis

added): “After filing of [farmers’] lawsuit, in contem-

plation of the 1997 growing season, [BASF] determined ©

unilaterally to effect a nationwide price reduction of

[Poast], thereby causing the price of Poast to be equiva-

lent to the price of Poast Plus on a per acre basis.”

ce. “{I]} Can Take Hard Answers, But

Don’t Lie... Just - You Don’t Lie”

BASF fails the “labeling and packaging” test for

another reason. BASF’s off-label marketing misconduct;

lies, deceit and smoking-gun evidence, is off the radar of

preemption:

¢ BASF internal marketing memo (PX234) discuss-

ing the “risk” of farmers across the United States

discovering the truth.

¢ BASF internal marketing memo (PX217) express-

ing grim concern that its deceitful scheme would be

uncovered by farmers: “Will the [North Ameri-

can] farmer be controlled in future?”

* “Opportunistic exploitation” of minor crop farmers

by threatening and encouraging the criminal prosecu-

tions of farmers for “off-label” use of cheaper Poast

Plus as a marketing “strategy.” PX232;258;82;300.

¢ BASF internal memorandum (PX334): EPA was

“not pleased” that BASF “misdirected” state

regulatory officials.

¢ BASF executive Chris Coombs at trial admitted

“false ... statements” to North Dakota Pesticide

Control Board but said he was told to make the

statements by BASF management. Tr. 458:12-24;

459:1-4; 461:9-19).

25

¢ North Dakota regulatory officials testifying at trial

about BASF’s lies and deceit: “[I] can take hard

answers, but don’t lie... Just ~ you don’t lie.”

(Tr. 1878:5-6).

Bates, 544 U.S. at 444 n.17 (off-label marketing miscon-

duct is outside preemption).

2. Second Bates Test Is Never Reached: Peter-

son Is Not A “Misbranding” Case Challeng-

ing Accuracy Of Statements On The Label

Peterson is an off-label “fraudulent marketing” case. It

is not a “misbranding” case, like Bates, with a label stating

the herbicide is “safe” for peanuts, when there is evidence

the defendant company knew the herbicide might kill the

peanut crop in certain soil conditions. Peterson does not

challenge the veracity of statements on the product con-

tainer label. Pints are pints; ounces are ounces. Peterson

VI, PA16a, quoting Peterson IJ (emphasis in original):

[T]he farmers here were not asserting that BASF’s

registration and container labels were false or mis-

leading, * * * [rjather, the farmers’ point was that

even if BASF’s labels were technically accurate,

BASF could and did commit consumer fraud by

leading farmers to believe that the cheaper Poast

Plus could only be used on major crops * * *.

C. Regulatory Compliance Has No Relation To

Consumer Fraud

1. EPAAllows “Split And Subset Labeling” But

Does Not Address Marketing Strategies

BASF’s claim that EPA approval of the Poast and Poast

Plus container labels also grants BASF license to perpetrate

a fraudulent “marketing and pricing” scheme is plainly false.

As recognized in Peterson VI, PAi7a, Peterson II, PA35a-36a

and Peterson I, PA85a, the EPA permits a company to

register an approved set of uses for a single active pesticide

ingredient but container label the product sold to consumers

for only some and not all of the registered uses. 40 C.F.R.

26

§§ 152.113 and 152.130(b) (“split and subset labeling”). The

EPA also allows companies to register alternate brand names

for a registered product. FIFRA § 3(e).

The EPA does not ascertain why companies spiit or

subset label their pesticides, beyond a demonstration that

a split or subset label “would not significantly increase the

risk of any unreasonable adverse effect on the environ-

ment.” 40 C.F.R. § 152.113(b) (emphasis added). BASF’s

registration specialist acknowledged in a May 11, 1995

internal memorandum: “We already have a registration for

POAST PLUS in sunflowers, but we [marketing] have

‘chosen not to include the use in our current label.” PX336.

Simply stated, the EPA does not address company market-

ing and pricing schemes. Peterson VI, PA17a (“farmers’

claims do not challenge the legality of BASF’s subset

[container] labeling, but rather its misrepresentations

about the products. . . .”).

2. BASF’s Regulatory And Marketing Experts

Conceded At Trial That Regulatory Compli-

ance Has No Relation To Consumer Fraud

Farmers’ claims were based on BASF’s broad scheme

of fraudulent “marketing and advertising” and not a claim

of “misbranded” product labels. Peterson IV, PAl5a-16a

(quoting Peterson III). During trial, BASF’s regulatory and

marketing experts and management conceded the EPA

and state herbicide regulatory process has no relation to

whether a company deceptively and fraudulently markets

and sells a product: Daniel Barolo (BASF FIFRA expert)

(EPA and state regulatory process has no relation to

~ consumer fraud), Tr.2697:7-11; Dr. Dale Dahl (BASF

marketing expert) (irregardless of EPA and patent

registrations, company can still commit consumer fraud in

the sale of its product), Tr.3352:5-17; William Wisdom

(BASF management) (EPA does not concern itself with

company marketing practices), Tr.1017:7-15.

27

D. BASF’s Injudicious Second Petition Is A

Game Of “Do-Over”

1. Factual Argument BASF Lost Before The

Jury

a. Same Product

BASF’s complaint that Poast and Poast Plus are not

identical, is a misrepresentation of Farmers’ fraudulent

“marketing and pricing” claim under the NJCFA. Poast and

Poast Plus are essentially the same product; that is, Poast

and Poast Plus have the same active ingredient (sethoxy-

dim), are EPA approved for the same crops, based on the

same residue test data, to control the same grasses, with the

same applications and pounds of active ingredient per acre.

Tr.2424:19-2425:10;2776:12-2777:13. Poast and Poast Plus

are indistinguishable when used by farmers except that

Poast was $4.00/acre ($32.00/gallon) more expensive than

Poast Plus. Tr.1291:11-1294:13;2174:7-25;2236:1-2238:20.

The unanimous Minnesota jurors and appellate judges

readily understood that BASF deceptively marketed Poast

and Poast Plus as different products, at different prices, as

a “system of deceit” to extract inflated prices from minor

crop farmers. The Minnesota Supreme Court on remand

re-emphasized:

“(W]e again reject BASF’s characterization of the farm-

ers’ claims as requiring that the two products be labeled

as one. While the farmers might have believed that

would have been a more honest approach for BASF to

take, that was not the factual or legal basis for their

claims. The duty the farmers’ claims imposed on BASF

was not to register and label Poast and Poast Plus as one

product, but rather, having registered and labeled them

separately, to refrain from deceptive statements about

their EPA registration, their active ingredient composi-

tion, and their relative efficacy on major and minor

crops.”).

Peterson VI, PA17a; Peterson III, PA71a (“[E]vidence was

presented that Poast and Poast Plus are essentially the

same product ... this evidence was presented to illustrate

. a scheme to exploit the farmers through consumer

28

fraud.”) (emphasis added); Peterson I], PA33a (“jury clearly

had evidence from which it could conclude that Poast and

Poast Plus were the same product, and we will not

substitute our judgment for that of the jury.”) (empha-

sis added); see, e.g., PX117 (BASF July 3, 1995 internal

memorandum discussing “market strategies” of “differ-

ential pricing of the same active ingredient”) (empha-

sis added).

b. State Registration And Crop Safety

BASF argues it was not required to register Poast Plus,

and did not register Poast Plus, for minor crops in any state.

BASF also complains the potential for crop injury prevented -

BASF from registering Poast Plus for minor crops.

BASF disingenuously ignores jury evidence that in a

variation of its market-segmentation scheme, BASF re-named

Poast Plus as Vantage and Torpedo, PX95;240;323;325, and

procured state registrations for their use on minor crops

throughout the United States at twice the price of identical

Poast Plus. PX135;Tr.2012:14-2013:18;3110:9-3117:1. Under

alternate trade names, Poast Plus was legally used on hun-

dreds of varieties of minor crops across the country, i.e., fruits,

Christmas trees, delicate roses and violets, without crop injury.

PX95;135; 240;321; 323;325; Tr.2012:14-2013:18;3110:9-3117:1.

The Minnesota Supreme Court, viewing the full trial record,

pointedly said on remand:

With regard to BASF’s third argument, that the farm-

ers’ claims would require marketing products in all 50

states and on all crops for which they are EPA-

registered, regardless of the manufacturer’s concerns for

safety and the need for additional testing, we note first

that this is a policy-oriented argument that is not

founded on the preemption criteria under FIFRA. More-

over, we are compelled to observe that under the facts

of this case the argument bears little credibility.

BASF assured the EPA that no additional testing was

required for its registration of Poast Plus for minor

crops because the results would be the same as those it

had submitted in support of its registration of Poast.

29

Furthermore, evidence was submitted that estab-

lished that the choice in this case to limit state registra-

tion and availability of Poast Plus for use on minor

crops was a marketing decision intended to maximize

profits, not generated by safety concerns.

Peterson VI, PA17a-18a (emphasis added); see also Peter-

son II, PA39a (farmers presented evidence, including

‘expert testimony, from which “jury could [conclude]”

that BASF’s state registration decisions were part of

BASF’s national system of deceit) (emphasis added).”

2. “Procedurally Waived” And Misplaced Ef-

fort To Reargue Trial Evidentiary And

Jury Instruction Rulings

- This Court does not address issues “procedurally

waived” in state court. NO JURISDICTION FOR ISSUES

WAIVED IN STATE COURT, p. 2, supra. To leave no stone

unturned, on remand the Minnesota Supreme Court went

beyond its “procedurally waived” ruling to squash BASF’s

argument, Peterson VI, PA24a (emphasis added):

BASF’s proposed instructions do not relate directly to

the charge before the jury, which was whether BASF

violated the NJCFA. Further, throughout the entire

trial, the jury heard numerous discussions of these is-

sues and the various witnesses’ descriptions of the effect

of the regulations. These topics were more properly the

subject of counsel's final argument rather than jury in-

structions, and the court did not abuse its discretion in

denying the request to include these instructions.

BASF’s state registration argument is a disguised effort to re-

argue causation, an issue resolved in Peterson III and II and outside

Bates, federal preemption, and BASF’s FIFRA petition issue. Peterson VI,

PA17a (“a policy-oriented argument that is not founded on the preemp-

tion criteria under FIFRA ... the argument bears little credibility”),

Peterson II], PA77a-81a;, Peterson II], PA36a-40a,; see generally Dunnell

Minn. Digest, Torts, § 1.03 (4th ed. 2000) (causation is a quintessen-

tial jury issue).

Il. MINNESOTA SUPREME COURT REJECTED

BASF’S MOOT AND PROCEDURALLY WAIVED

FIRST AMENDMENT COMPLAINT ON REMAND

BASF’s First Amendment issue (trial “evidentiary

ruling”), beyond moot and “procedurally waived” in state

court, is ridiculous. Fraudulent marketing representations

are never protected speech. See Illinois ex rel. Madigan,

Attorney General v. Telemarketing Assoc., Inc., 538 U.S.

600, 617 (2003); Greater New Orleans Broadcasting Assn.

v. U.S., 527 U.S. 173, 183 (1999); Central Hudson Gas &

Elec. Corp. v. Public Service Comm’n, 447 U.S. 557, 562-64

(1980); Friedman v. Rogers, 440 U.S. 1, 9-10 (1979). Unlike

Nike, Inc. v. Kasky, 539 U.S. 654 (2003), a political activist

challenging advertisements by Nike defending its treat-

ment of Southeast Asian workers, Peterson does not

involve ideological use of a consumer fraud statute without

personal injury to engage a public policy debate. The

Peterson plaintiffs are not ideological; they suffered direct

harm. They are at the opposite end of the spectrum:

farmers defrauded of millions of dollars by BASF’s deceit.

CONCLUSION

BASF’s “system of deceit” was addressed by the Fargo

(ND) Forum after BASF’s marketing deceit was uncovered

by the North Dakota Department of Agriculture, Clerk

Doc. 562:

Shame on chemical company... . Its not just the

money. BASF has been caught with their pants

down. They have seriously undermined farmer

confidence in the honesty of chemical companies

and the integrity of safety rules. Shame on them.

For all the foregoing reasons, the Court should deny

BASF'’s petition.

October 11, 2006

Respectfully submitted,

DOUGLAS J. NILL

Counsel of Record

DOUGLAS J. NILL, P.A.

1100 One Financial Plaza

120 South Sixth Street

Minneapolis, MN 55402

(612) 573-3669

HuGH V. PLUNKETT III

Phoenician East

4723 North 65th Street

Scottsdale, AZ 85251

(480) 429-8488

J. MICHAEL SCHWARTZ

LOCKRIDGE GRINDAL NAUEN, P.L.L.P.

100 Washington Avenue, Suite 2200

Minneapolis, MN 55401

(612) 339-6900

APPENDIX TABLE OF CONTENTS

December 6, 2001 Special Verdict Form

Cee eee eo eee eeereees

RFA1

STATE OF MINNESOTA IN DISTRICT COURT

COUNTY OF NORMAN NINTH JUDICIAL COURT

Ronald Peterson, Barry Cavs Rsv Seer

Thune, Owen Larson, Owen

Larson Farms, Inc., Duane in

Evenson, Jeffrey Nesvig, shales niet

Richard Moen, Christopher SPECIAL VERDICT FORM

Grove, Christopher Grove “1. KAT 98-6

Sales tas. ec dk Court File No. C9-98-656

troth, Glenn Asbeck, Asbeck

Inc. Donald Steinbeisser,

Joe G. Steinbeisser and

Sonds, Inc., Stephen Pust,

and Stephen Pust Farms,

Inc., individually and on

behalf of all others similarly

situated,

Plaintiffs,

v.

BASF Corporation,

a foreign corporation,

Defendants.

We the Jury, duly impaneled and sworn in the above-

captioned matter, give the following answers to the follow-

ing special verdict questions:

1. Did Defendant BASF Corporation, engage in a

unconscionable commercial practice, deception,

fraud, false pretense, false promise, or misrepre-

sentation in relation to BASF’s marketing and

pricing strategies for Poast and Poast Plus herbi-

cides?

RFA2

Answer: BS

YES NO

2. Did BASF engage in a knowing omission, sup-

pression or concealment of the truth in relation

to BASF’s marketing and pricing strategies for

Poast and Poast Plus?

Answer: Xx

YES NO

If you answered “Yes” to either Questions 1

and/or 2 above, then answer Question 3.

3. Did BASF’s conduct or actions as you have found

above cause an ascertainable loss to Plaintiffs?

Answer: p

YES NO

If you answered Question 3 above “Yes” then go

to Question 4.

4, What, if any, was the monetary value of Plain-

tiffs’ loss caused by BASF’s conduct or actions as

you found above for the years 1992 to 1996?

1992 $2,000,000

1993 $5,000.000

199[4] $3,000,000

1995 $4,000,000

1996 $1,000,000

Dated this 6th day of December, 2001, at 1:47 pm

o'clock _.m. in the County of Norman, Ada, Minnesota.

/s/ Clarisse Austinson

FOREPERSON

RFA3

After six hours of deliberation, ten of the jurors may

agree upon and return the special verdict form.

If only ten of twelve jurors concur, all concurring

jurors must sign:

1. 6.

2. 7.

3. 8.

4, 9,

5. 10.

This special verdict form was signed at ___ o'clock __.m.

Dated: , 2001.