August 31, 2009

LIABILITY CONCERNS ASSOCIATED WITH WEB-DISTRIBUTED LABELING CropLife America
This paper identifies a number of potential liability concerns relating to EPA’s proposed creation of a web-distributed labe ling (“WDL”) system for FIFRA-registered pesticide products. “Liability” in this c ontext encompasses two broad categories: (i) liability for violation of FIFRA and/or correspo nding state pesticide laws (“enforcement liability”), and (ii) state-law damages suits, primarily for product liability and/or misapplication of pestic ides (“product/tort liability”). As discussed below, several fundamental aspects of the pr oposed WDL system raise seri ous concerns regarding the liability exposure of registrant s, distributors, dealers/retailers, and applicators/users. 1 The objective of flagging these liability concerns early in the WDL planning process is to promote discussion among EPA and stakeholders so that liability risks can be addressed and mitigated rather than impair or impede the system’s adoptio n and implementation. Types of Labeling- Related Liability Because labeling plays a pivotal role in th e registration, distribution, promotion, sale, and use of pesticides, it is a significan t source of potential enforcement and product/

1 This paper does not attempt to assess the Fe deral Government’s own potential liability, if any, under the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b )(1) & 2680, if, for example, an EPA-hosted WDL sy stem were to fail to provid e parties in the chain of distribution or use with timely access to a product’s current labeling.tort liability. The following briefly summarizes the some of the principal types of labeling-related liability that pesticide registrants, distributors, retailers, and applicators or users endeavor to avoid. 1. Enforcement Liability FIFRA enumerates at least three unlawful acts that are specifically directed to labeling:

• § 12(a)(1)(E) makes it unlawful “for a ny person ... to distribute or sell ... any pesticide which is misbranded.” See also § 2(q) (multi-part definition of “misbranded”).

• § 12(a)(2)(A) makes it unlawful “for any person ... to detach, alter, deface, or destroy, in whole or part, any labeling required under [FIFRA].”

• § 12(a)(2)(G) makes it unlawful “for any person ... to use any registered pesticide in a manner inconsistent with its labeling.” See also § 2(ee) (definition of “[t]o use any registered pe sticide in a manner inconsistent with its labeling”). FIFRA also specifies at least two additional unlawful acts that can implicate a product’s labeling:

• § 12(a)(1)(B) makes it unlawful “for a ny person ... to distribute or sell .... any registered pesticide if any claims made fo r it as part of its distribution or sale substantially differ from any claims madefor it as a part of the statement required in connection with its regi stration under FIFRA § 3.” The § 3 “statement” required for registration includes the product’s labeling. See FIFRA § 3(c)(1)(C).

• § 12(a)(2)(S) makes it unlawful “for any person ... to viol ate any regulation issued under [§ 3(a)].” One such regulation is 40 C.F.R. § 152.130(a), which provides that “[a] registrant may distri bute or sell a registered product with the ... labeling currently approv ed by the Agency.” See also § 2(gg) (definition of “[t]o distribute or sell”).

2State pesticide statutes cont ain analogous provisions. See, e.g. , Cal. Food & Ag. Code § 12992 (prohibition against misbranding); N.Y. Env. Cons . Law § 33-1301 (e) (same). From a registrant’s viewpoint, the mostsignificant, labeling-related enforcement liability pitfall probably is FIFRA’s broa d prohibition against misbranding, which prohibits, inter alia , “false or misleading” statements , and requires label warnings and use directions to be “adequate to protect h ealth and the environment.” FIFRA § 2(q). EPA long ago stated that § 2(q), “which defi nes a ‘misbranded’ pesticide and enumerates specific labeling deficiencies that constitute misbranding,” represents “[t]he statutory standard that is the basis for Agency regul ation of pesticide labeling.” 49 Fed. Reg. 37960 (Sept. 26, 1984). More recently, in Bates v. Dow AgroSciences LLC , 544 U.S. 431 (2005), the Supreme Court indicated that de spite EPA’s initial approval of a product’s labeling, pesticide registrants “have a continuing obligation to adhere to FIFRA’s labeling requirements,” including the requirement that a product’s “l abel complies with the statute’s prohibition on misbranding.” Bates , 544 U.S. at 438. Further, although FIFRA § 24(b) (“Uniformity”) establishes EP A’s primacy over pesticide labeling, the Court indicated in Bates that “[a]s part of their supplementary role, States have ample authority to review pesticide labels to ensure that they comply with both federal and state labeling requirements.” Id. at 442. This would include, for example, “a State ... making the violation of a federal labeling ... requireme nt a state offense,” or “imposition of state sanctions for violating state rules that me rely duplicate federal requirements.” Ibid. The § 12(a)(1)(B) prohibition against advertising or promotiona l statements that “substantially differ” from a product’s labeling al so directly affects registrants, as well as

3pesticide distributors and reta ilers. EPA has indicated th at this “differing claims” prohibition extends to “collate ral information,” in cluding television, radio, and print advertisements, and website content. See Draft PR Notice 2007-B at 4. The distinction between “collateral information” and “labeling” as defined in § 2(p)(2), however, is not always clear. Without question, a principal enforcement liability concern of pesticide applicators and users is avoiding the § 12(a)(2)(G) prohi bition against using a pesticide in a manner inconsistent with its labeling. Because “[a] pesticide label is the user’s direction for using pesticides safely and effectively,” 70 Fed. Reg. 12276, 12281 (Mar. 11, 2005), EPA long has focused on the enforceability of label language. See, e.g. , EPA PPDC Workgroup Discussion Paper on Enforcemen t of Web-Distributed Labeling (June 5, 2009); PR Notice 2000 -5 (Guidance for Mandatory and Advisory Labeling Statements). Inasmuch as FIFRA § 26(a) a ffords the States “primary en forcement responsibility for pesticide use violations,” state pesticide enfo rcement personnel need to possess or access, and often must interpret, the requirement s set forth on a product’s EPA-approved labeling. As a practical matter, interpreta tions of the same nationally uniform label language can vary from state to state. Further, some states do not “recognize” FIFRA § 2(ee), which defines use inconsistent with labeling in a way that, in many instances, affords applicators flexibility to use a product for unlisted pest s, at rates lower than the labeling specifies, or by methods of application that are not listed.

42. Product/Tort Liability Damages suits alleging injury (e.g., person al injury; crop, environmental, or other property damage; consumer fraud) resulting from sale, distribution, app lication, or use of FIFRA-registered pesticides ar ise under state law. Nevertheless, there often is a link between state-law liability and a pestic ide’s EPA-approved product labeling. For example, virtually every state’s prod uct liability law, whether established by statute and/or common-law judicial precedent, recognizes a cause of action for selling or distributing potentially hazardous products with inadequate instructions or warnings. See generally Restatement (Third) of Torts § 2 (1997 ). But because pesticide labeling is comprehensively regulated by EPA, it falls into a special category. See generally Wisconsin Public Intervenor v. Mortier , 501 U.S. 597, 613 (1991) (discussing “FIFRA’s historic focus on labeling”). The Supreme Court held in Bates that FIFRA § 24(b) (“Uniformity”), which prohibits a State fro m imposing “any requirements for labeling ... in addition to or different from those require d under [FIFRA],” expressly preempts statelaw causes of action against pesticide manufactu rers for failure-to-warn, provided that a product is not misbra nded under FIFRA. See Bates , 544 U.S. at 454. The Court indicated that “[i]f a defendant so requests, a c ourt should instruct the jury on the relevant FIFRA misbranding standards, as well as any regulations that give content to those standards ... a manufacturer should not be he ld liable under a state labeling requirement subject to [§ 24(b)] unless th e manufacturer is also liable for misbranding as defined by
FIFRA.” Ibid.

5Further, even as a matter of state tort la w, a pesticide registrant’s compliance with EPA labeling requirements can serve as the ba sis for a regulatory compliance defense.
See Restatement (Third) of Torts § 4 cmt. e (1997). State-law suits alleging that a pesticide was misapplied also are directly linked to product labeling, and more specifically, to compliance with precau tionary measures or directions for use. Claims that a pesticide was applied in a manner inconsistent with its labeling may serve as the basis for negligence -based causes of action against commercial or private applicators. Conversely, proof of compliance with a pesticide’s labeling can provide a persuasive, if not dispositive, defense to such claims. Pesticide labeling also often includes warra nties, disclaimers, and/or limitations of liability, which EPA reviews for certain purposes. See OPP Label Review Manual (3d ed.) at 12-6. Such statements, whose force a nd effect are governed by state law, play an important role in the legal and commercial relationships between pesticide registrants and

users. Areas of Concern A WDL system structured or operated in a manner that increases the exposure of all or some registrants, distri butors, dealers/retailers, or app licators/users to the types of enforcement or product/tort liability discussed above would undermine the attractiveness and utility of the proposed WDL system. For this reason, it is important that EPA work with industry stakeholders in addressing and reduc ing potential liability concerns relating to the system.

6Because the WDL system still is in a format ive stage, it is difficult at this point in time to identify specific sources of potential liability with precision. Nevertheless, the following general list of liability concerns relating to the pr oposed system provides a basis for initial consideration and discussion: 1. Voluntary vs. Mandatory System — A level playing field for product labeling is very important to pesticide regi strants, who produce and distribute competing products. In particular, each registrant is responsible for develo ping in accordance with EPA requirements, submitting for review an d approval, and disse minating, its own product labels and labeling. But now EPA not only is proposing to become directly involved in the process of making product-s pecific labeling available to the chain of distribution and use, but also is re commending that the WDL system be voluntary. EPA has indicated that under a volun tary system, each registrant would decide whether or not to participate, and possibly which of its pr oducts would or would not be included. According to EPA, while a ma ndatory program would ensure that only one system is being used, it would require rulemaking and would be more difficult and time-consuming to implement. The issue of whether the WDL system should be voluntary or mandatory has many potential enforcement liabili ty and product/tort liability implications. In particular, a voluntary system likely would produce an uneven playing field. Depending upon the circumstances, a voluntary system could increase potential liab ility exposure for registrants that choose to participate (e.g., in the event that an EPA-hosted system fails to provide timely access to a product’s most curren t labeling), or increase liability exposure

7for those registrants that do not (e.g., in the event that a non-participating registrant’s marketed product labeling already in the chai n of distribution is not as current as a competing product’s labeling that is r eadily accessible thro ugh the WDL system). In contrast, a mandatory system would ha ve the force and effect of law, and the labeling of all registrants’ similar or comp eting products presumab ly would be accessible in the same manner and at the same time. Under a mandatory, EPA-hosted system, however, registrants would be required to cede to EPA at leas t some control over dissemination of their own product labeling. If such a mandatory system nevertheless permitted registrants to contin ue physically distributing labeling (in addition to making the same labeling available through the WDL system), that could diminish some of the perceived benefits of the system. Similar potential liability issues may arise in connection with utilization of the WDL system by distributors, dealers/re tailers, and commercial or professional applicators. For example, under a voluntary system, an applicato r’s decision to use a product and follow labeling that has not been placed on the system, rather than using a product and following labeling that is on the system, potentially could have liability consequences. With a voluntary system, a ny tort lawsuit against an applicator, distributor, dealer/retailer and/or registra nt could focus on the question of why the product/label at issue was not included in the system. Additionally, in a voluntary system, those products and labels that participate in the system could be unfavorably compared to those that are not included in the system.

8As these examples illustrate, a voluntary vs. mandatory WDL system is a complex question from a liability viewpoint. It warrants considerable further analysis and discussion. 2. Scope of WDL System — EPA has recommended that the WDL system encompass pesticide products that are for ag ricultural or non-agricultural professional or commercial use. Further, while EPA has indi cated that general-use consumer/residential products should continue to have their full labeling accompany product containers, individual registrants could choose, in additi on, to have their prod uct labeling posted on the WDL system. From a liability prevention viewpoint, it is essential that EPA not only identify with greater precision the categories or types of products that would or would not be covered by the WDL system (regardless of whether it is voluntary or mandatory), but also set forth the rationale for inclusion or exclusion. In additio n to developing a better definition of the scope of the system, ther e should be a mechanism for registrants to obtain from EPA a prompt a nd definitive determination wh ether a particular end-use product or type of product is covered by the system. As to excluded products (i .e., products that must be physically accompanied with container labeling), EPA’s suggestion that an individual registrant nevertheless may choose to post product labeli ng on the WDL system is a poten tial source of confusion and also creates the specter of an uneven pl aying field between re sidential-use product registrants that choose to post labeling on the WDL system and those that do not.

93. Definition of “Web -Distributed Labeling” — To help minimize liability, the types of labeling or labeling information th at should and should not be uploaded into the WDL system need to be sp ecified with clarity and precision so that contents of the system are consistent and pred ictable. Up to this point, EPA has identified various types of product-specific materi als and information which could be made accessible through the WDL system. For example, in addition to the most current version of “state

approved” marketed product labeling, EPA has suggested that other informational materials, ranging from Material Safety Data Sheets, to technical bulletins, to rate calculators, could be made available. The Ag ency has indicated that a product’s master labeling (i.e., labeling containing all approved uses) also coul d be made available through the system. Allowing each registrant to decide fo r itself what types of product-specific information to include in the WDL system and/or on labeling physically attached to a product’s container would engender lack of uniformity, and in turn, produce potential liability concerns. As with a voluntary sy stem, a lack of uniformity in which type information is provided in a WDL system would result in different types of review in tort liability lawsuits. There needs to be a clear and uniform se t of definitions, rules, or procedures regarding what information must appear on the label, what information must be included on labeling physically attached to a product’s container, and what labeling or labeling information would be accessible thr ough the WDL system. EPA also needs to draw a clear line of demarcation between labeling and non-labeling “collateral information.”

104. Operation of the WDL System — One of the most fundamental potential liability concerns in connection with the WDL system is that registrants would be relying upon an EPA-hosted WDL sy stem to provide distributors, dealers/retailers, and applicators/users with access to important part s of their product labeling (e.g., allowable uses; directions for use; suppl emental technical information). If the EPA system, due to circumstances beyond the control of the registrant, were to fail to provide timely access to a product’s current labeling, it is unclear to what extent, if any, the registrant, distributor, dealer/retailer, or applicator/distributor would ha ve liability exposure for the WDL system’s shortcomings. A corollary to this issue is whether regi strants or other parties in the chain of distribution or use that voluntarily participat e in or utilize the WDL system, first would be required, from the viewpoint of product liability prevention, to pe rform some sort of due diligence on the system’s capabilities and performance. At the very least, EPA would need to construct a highly durable and efficient system from both a technological and human resources viewpoint, and provide the necessary assurances of performance capabilities to potential participants and other stakeholders. The concept of a limited pilot program appears to afford a viable way of testing the system while still in an incipient stage. But even a pilot program (i.e., a program involving a limited number of produc ts), should be consciously designed in a way that minimizes potential liability. Similar concerns would arise if EPA, ra ther than hosting a WD L website, were to require each registrant to post its own labeling on its own website. At a minimum, EPA

11would have to establish a uniform set of t echnological and operationa l guidelines that, to ensure a level playing field, each particip ating registrant woul d have to follow. Registrants’ adherence to such guidelines should represent a “safe harbor” for EPA enforcement purposes, but issues could arise about some regi strants’ financial ability to construct and maintain a WDL-compatible we bsite that complies w ith EPA’s guidelines. Further, under such a system of registrant-hos ted websites, issues c ould arise about thirdparty liability (e.g., vendors that construc t and maintain WDL websites under contract with individual registrants). 5. Allocation of Responsibilities — The WDL system would need to clearly delineate and allocate functional responsibilitie s among EPA, registra nts, distributors, dealers/retailers, and applicators/users. Fo r example, EPA would have to specify exactly what its own role would be in operating an d maintaining the system (e.g., whether EPA or EPA contractor personnel would upload labeling into an EPA-hosted system, or whether that function would be performed by individual registrants that log into the system). As another key example, the re sponsibility and timing for downloading and printing a product’s labeling to get it into the hands of applicators/users would have to be clarified. A third example is the responsibility for monito ring and replacing labeling, which would have a limited lifespan on a WDL sustem. In allocating responsibilities, the WDL sy stem must preserve registrants’ free enterprise commercial prerog atives. These include, for example, business decisions regarding which particular end-use labels (i.e., products) to market, and when.

12The rules not only have to be clear, but also need to be care fully considered and formulated, because they may have poten tial liability-shifting consequences. For example, what would be the potential liability consequences for diffe rent parties within the chain of a product’s distribution and us e if the registrant’s only responsibility regarding web-distributed labelin g were to ensure that most current versions have been uploaded into the system , and distributors or dealers/reta ilers have the responsibility for downloading, printing, and disseminating the appropriate and current labeling to applicators? Such issues must be considered in advance so that the system is designed in a way to minimize liability throughout the chain of distribution a nd use. 6. Role of the States — EPA has suggested that one of the WDL-system’s principal functions should be to provide access to “state-approved labeling” for a specific product. As a result, EPA has indicated that users must be able to conduct labeling searches by state. It is essential that the WDL system not confuse a State’s authority under FIFRA § 24(a) to register a pesticide product (or deny registration to a pesticide product) that has been granted a registration by EPA, with a St ate’s lack of authority under FIFRA § 24(b) to regulate the content or format of pesticid e product’s labeling. The Supreme Court in Bates v. Dow AgroSciences LLC made it clear that only EPA has authority to require that “manufacturers label ... their products in any particular way.” 544 U.S. at 444. The Court explained that § 24(b) “retains a narrow, but s till important role ... it pre-empts competing state labeling standards - - imagin e 50 different labeling regimes prescribing

13then color, font size, and wo rding of warnings - - that would create significant inefficiencies for manufacturers.” Id. at 452. Thus, a State cannot directly, or indire ctly, regulate the content or format of pesticide labeling. The only pr oduct labeling that a State has authority to “approve” is labeling that is identical to the labeling th at EPA already has approved. (Even § 24(c) special local needs labeling is subject to EPA review.) For example, a State cannot condition the granting of a state pesticide registration on changes that it would like a registrant to make to a product’s EPA-approv ed labeling; that would be tantamount to the State regulating the product’s labeling and is expressly preempted by § 24(b). Some States can and do require every separately marketed end-use product (including products marketed with “subset labeling”) to receive a separate state registration. A WDL system that provides access to a marketed product’s subset labeling, and also indicates which states have registered that product, seems appropriate. But for the reasons discussed above, the WDL system shou ld not purport to provide access to a product’s “state-approved labeling.” This is more than a matter of semantics; it goes to the heart of § 24(b) and EPA’s congressional mandate to establish and maintain a system of nationally uniform labeling for each pesticide product. It also has liability implications for pesticide registrants, who, in accordance with § 24(b), look solely to EPA to regulate the content and format of th eir product labeling, and raise § 24(b) as an affirmative defense in state-law product-lia bility suits alleging failure to warn of inadequate labeling.

147. Need for Common Understanding Regardin g Nature, Scope, and Operation of the WDL System — As suggested by many of the areas of concern described above, to help avoid or mitigate potential liability, everyo ne involved in the WDL system (e.g., EPA personne l; state regulators; registrants, distributors, dealers/ retailers; applicators/users) would need to have a common understanding regarding the nature, scope, and functioning of the WDL sy stem. The best way to foster such an understanding may be for EPA to issue, follo wing adequate opportunity for stakeholder and public review and comment, a comprehe nsive and detailed WDL Operational Manual or similar document. The manual should be ma de available in final form well in advance of the WDL system’s launch, and should be supplemented with EP A-sponsored technical briefings. As experience with the system is gained, the manual can and should be revised. Recommendation In designing a WDL system, EPA, in consultation with industry and other stakeholders, should carefully explore the system’s potential enforcement and product/ tort liability implications, and should construct a nd operate the system in a way that minimizes potential liability exposure.

15