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Cheminova A/S v. Griffin L.L.C.

January 22, 2002

CHEMINOVA A/S APPLICANT,
v.
GRIFFIN L.L.C., RESPONDENT



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

Applicant Cheminova A/S has requested judicial confirmation of a final arbitration order issued pursuant to the data-sharing provisions of the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq. ("FIFRA" or the "Act"). Respondent Griffin L.L.C. has countered by moving to dismiss on the grounds that neither FIFRA, the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"), nor the Administrative Dispute Resolution Act, 5 U.S.C. § 571 et seq. ("ADRA"), provides authority for judicial enforcement of FIFRA arbitration awards; and that even if Congress had authorized judicial enforcement, due process concerns require this Court to decline to enforce this award. As detailed below, the plain meaning of Section 3(c)(1)(F) of FIFRA and the arbitration rules promulgated thereunder compel the conclusion that arbitration awards are judicially enforceable. Furthermore, due process concerns do not prevent judicial enforcement. Respondent's motion to dismiss will therefore be denied, and the final arbitration order will be confirmed.

BACKGROUND

In 1996, Griffin L.L.C. ("Griffin") applied to the United States Environmental Protection Agency ("EPA") for registrations to sell pesticides containing malathion. Instead of submitting its own data to support its registration application, Griffin chose to take advantage of FIFRA's data-licensing provision, Section 3(c)(1)(F), which permits an applicant to rely on data submitted by a prior registrant without that registrant's permission. 7 U.S.C. § 136a(c)(1)(F). Griffin relied on and cited to 118 studies previously submitted to EPA by Cheminova A/S ("Cheminova"). As required by statute and regulation, Griffin offered to compensate Cheminova for the use of its data and certified to the EPA that it had done so. (Cheminova's Response to Opposition of Griffin to Application to Confirm Arbitration Award [hereinafter App.'s Opp.] at 3-4.) In six separate letters, Griffin offered to compensate Griffin "to the extent required by FIFRA section 3(c)(1)(F)." (App.'s Opp., Ex. A.) In 1998, Griffin received its registrations from the EPA and began selling malathion.

After the parties failed to reach an agreement as to the compensation owed for the data, Cheminova requested binding arbitration. (App.'s Opp. at 5; Griffin's Motion to Dismiss [hereinafter Resp.'s Mot.] at 5.) The arbitration proceedings, in which both Griffin and Cheminova participated fully, lasted for approximately eighteen months. Initial statements were filed at the end of 1999 and the beginning of 2000, and both parties participated in the disclosure and discovery process, as well as pre-hearing proceedings to resolve discovery disputes. After six months of discovery, the three-member arbitration panel conducted a full evidentiary hearing in Washington, D.C. The hearings spanned a total of 11 days in September and December 2000. Both parties presented evidence and a total of 16 witnesses testified. Post-hearing briefs were filed, and closing arguments were held before the arbitration panel on March 20, 2001. On March 25, 2001, the panel issued a Provisional Arbitration Award and invited comment from the parties.

Over the course of the arbitration proceedings, both parties presented evidence regarding, inter alia, the costs of producing or replacing the data relied upon, as well as Griffin's historic and expected sales of and profits from malathion products. Griffin argued that its smaller market share justified a reduction in compensation. Griffin also noted that a fire that had broken out at a supplier's plant in Mexico in September 2000 had reduced its ability to produce malathion products. Griffin asserted that even if the plant could meet demand, its return on the product line would be minimal. (Resp.'s Mot. at 6.) Cheminova responded that Griffin's experience and marketing prowess would enable it to expand its market share, *fn1 and that in any event, market share was not relevant because Griffin enjoyed an equal opportunity to compete in the malathion market. (Id.)

After considering this and other evidence, the arbitration panel entered a final award on June 29, 2001. It directed Griffin to pay to Cheminova: (1) $13,264,090 by August 15, 2001; (2) interest through the earlier of August 15, 2001 or the date of payment; and (3) interest after August 15 for any amount outstanding. (Resp.'s Mot. at 5.) According to the final arbitration decision, that figure was based on an assessment of the costs incurred by Cheminova and its predecessor-in-interest in generating the data actually relied on by Griffin. Those costs were adjusted for inflation and assessed between the parties on an almost equal share basis because the arbitration panel concluded that allocating costs on the basis of market opportunity best effectuated FIFRA's goals. (Resp.'s Opp., Ex. F at 15-17.

On October 15, 2001, Cheminova applied to this Court for confirmation of the final arbitration award. In response, Griffin filed an opposition to the application and a motion to dismiss the proceedings, arguing that neither federal statute nor the United States Constitution permits summary judicial enforcement of arbitration awards under FIFRA. Cheminova filed its response on November 20, 2001, arguing that FIFRA, the FAA, and the ADRA provide authority to confirm the arbitration award, and that there is no constitutional impediment to judicial enforcement.

ANALYSIS

I. The FIFRA Arbitration Mechanism

Since 1970, pesticide manufacturers have been required to register their products with the EPA prior to sale or distribution. See 7 U.S.C. § 136a(a). In order to obtain a registration, an applicant must demonstrate, inter alia, that its pesticide will not cause "unreasonable adverse effects on the environment." 7 U.S.C. § 136a(c)(5). To meet this burden, registrants must either (1) submit their own test data or (2) cite to "data that appear in the public literature or that previously had been submitted to the Administrator." 7 U.S.C. § 136a(c)(1)(F). If a manufacturer elects to take advantage of the second option and rely on a prior registrant's data without its permission, EPA may consider the data submitted by the citing applicant (the "follow-on" or "me-too" registrant) "only if the applicant has made an offer to compensate the original data submitter." 7 U.S.C. § 136a(c)(1)(F)(iii). EPA regulations require a follow-on applicant to "offer to pay the [original data submitter] compensation to the extent required by FIFRA Section 3(c)(1)(D)" and advise EPA that it has done so. 40 C.F.R. § 152.93(b)(2)(iii). *fn2

If the original data submitter and the follow-on registrant cannot reach a negotiated agreement regarding compensation, either party may initiate "binding arbitration proceedings." 7 U.S.C. § 136a(c)(1)(F)(iii). Prior to 1978, under the original data-licensing provision, if the parties could not reach agreement, EPA determined the appropriate compensation. However, in 1978, in order to respond to "the logjam of litigation that resulted from controversies over data compensation and trade secret protection," Congress amended FIFRA to create the current arbitration mechanism. Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 573 (1985) (internal quotation marks omitted). Congress concluded that "EPA must be relieved of the task of [compensation] valuation because disputes regarding the compensation scheme had 'for all practical purposes, tied up their registration process,' and '[EPA] lacked the expertise necessary to establish the proper amount of compensation.' 123 Cong.Rec. 25709 (1977) (statement of Sen. Leahy, floor manager of S. 1678)." Id. The arbitration mechanism was the chosen alternative because legislators and the EPA agreed that compensation "[did] not require active government involvement . . . [and] should be determined to the fullest extent practicable, within the private sector." Id. (internal quotation marks omitted).

Under the 1978 amendments, the selection of arbitrators and the arbitration proceedings are governed by the rules adopted by the Federal Mediation and Conciliation Service ("FMCS"). 7 U.S.C. § 136a(c)(1)(F)(iii). Although FIFRA does not explicitly provide for judicial confirmation of arbitration awards, Section 37(c) of the FMCS rules, which was adopted by FMCS in 1980, states that the parties "shall be deemed to have consented that judgment upon the arbitration award may be entered" in federal or state court. 29 C.F.R. Part 1440, App. § 37(c).

II. Judicial Enforcement of Final Arbitration Orders

Federal policy and the law of this Circuit strongly favor judicial confirmation of binding arbitration decisions. See, e.g., Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 91 (2000); Revere Copper and Brass, Inc. v. Overseas Private Inv. Corp., 628 F.2d 81, 84 (D.C. Cir. 1980). Despite this clear preference, Griffin claims that this Court lacks jurisdiction to enforce an arbitration award issued under the procedures established by FIFRA because the statute provides only an administrative remedy for a registrant's failure to comply with an award. This appears to be a question of first impression, even though the FIFRA arbitration scheme has been in effect since 1978 and courts have historically enforced arbitration awards thereunder. See, e.g., Gowan Co. v. Mevinphos Task Force, No. 87-06738 (C.D. Cal.) (December 30, 1987 Order Confirming Arbitrator's Award of August 25, 1987 and March 7, 1988 Judgment Pursuant to Order Confirming Arbitrator's Award).

Since its adoption, the Supreme Court has twice rejected constitutional challenges to FIFRA. In Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), the Court decided that the Act's data-sharing provision did not effect an uncompensated taking in violation of the Fifth Amendment for data submitted after the 1978 amendments. 467 U.S. at 1006-08. One year later, in Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568 (1985), the Court revisited the FIFRA data-sharing scheme and rejected an Article III challenge to Congress's choice of binding arbitration as the mechanism for resolving compensation disputes among FIFRA registrants. 473 U.S. at 571. Nevertheless, the Court in Union Carbide specifically reserved the question of judicial enforcement of FIFRA arbitration awards: ...


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