Opinion ID: 152639
Heading Depth: 1
Heading Rank: 3

Heading: The Negligent Misrepresentation/Fraud and NJCFA Claims

Text: As noted, the District Court held that Plaintiffs' claims of negligent misrepresentation/fraud and violation of the NJCFA are preempted by FIFRA. We turn to that issue. FIFRA sets up the basic system of pesticide regulation in the United States, and it covers, inter alia, the use, sale, and labeling of pesticides. FIFRA requires a manufacturer seeking to register a pesticide to submit to the EPA a complete copy of the labeling of the pesticide, a statement of all claims to be made for it, ... any directions for its use, and a full description of the tests made and the results thereof upon which the claims are based, or alternatively a citation to [supporting] data that appear in the public literature. 7 U.S.C. § 136a(c)(1)(C), (F). The EPA will register the pesticide if it determines that the pesticide is efficacious and will not cause unreasonable adverse effects on humans and the environment, and that its label complies with FIFRA's prohibition on misbranding. Mortellite, 460 F.3d at 488. Under FIFRA, a pesticide is misbranded if its labeling contains statements that are false or misleading in any particular, the pesticide's labeling does not contain directions for use which are necessary for effecting the purpose for which the product is intended, or the label does not contain a warning or caution statement which may be necessary ... to protect health and the environment. 7 U.S.C. § 136(q)(1). Importantly for present purposes, FIFRA provides that a State may regulate the sale or use of any federally registered pesticide or device in the State, but only if and to the extent the regulation does not permit any sale or use prohibited by this Act. 7 U.S.C. § 136v(a). Additionally, it provides that states shall not impose or continue in effect any requirements for labeling or packaging in addition to or different from those required under this Act. 7 U.S.C. § 136v(b). Thus, the states have joint control with the federal government in regulating the sale and use of pesticides with only the exception of the EPA's exclusive supervision of labeling. Novartis does not contend that the state law relied upon by Plaintiffs permits a sale or use prohibited by FIFRA. Accordingly, the preemption issue before us turns not on whether Novartis's brochure is related to the sale or use of a pesticide, but rather on whether it constitutes labeling within the meaning of FIFRA. Moreover, even if the brochure constitutes labeling, the law relied upon by Plaintiffs is not preempted unless it imposes a requirement or requirements ... in addition to or different from those required under FIFRA. Id.; Bates, 544 U.S. at 444, 125 S.Ct. 1788. In Bates, a group of Texas peanut farmers alleged that a newly marketed pesticide manufactured and distributed by defendant Dow severely damaged their crops. The pesticide bore a label stating that use of the pesticide was recommended in all areas where peanuts are grown, but the farmers alleged that Dow should have known that the pesticide would stunt the growth of peanuts in soils with pH levels of 7.0 or greater. Bates, 544 U.S. at 435, 125 S.Ct. 1788. When the farmers applied the pesticide to their western Texas farms, where the soil typically has a pH level of 7.2 or higher, crops were damaged. The farmers brought claims of strict product liability, negligence, fraud, breach of warranty, and violation of the Texas Deceptive Trade Practices Act, Tex. Bus. & Com.Code Ann. § 17.01, et seq. In the course of determining whether these claims were preempted by FIFRA, the Supreme Court articulated the following two-part test: For a particular state rule to be pre-empted, it must satisfy two conditions. First, it must be a requirement for labeling or packaging; rules governing the design of a product, for example, are not pre-empted. Second, it must impose a labeling or packaging requirement that is  in addition to or different from those required under this subchapter. A state regulation requiring the word poison to appear in red letters, for instance, would not be pre-empted if an EPA regulation imposed the same requirement. Id. at 444, 125 S.Ct. 1788 (italics in original). The Supreme Court in Bates: (1) held that plaintiffs' claims of strict product liability, negligent testing, and breach of express warranty were not preempted, because [n]one of these common law rules requires that manufacturers label or package their products in any particular way; (2) concluded that plaintiffs' claims under the Texas Deceptive Trade Practices Act were not preempted, to the extent that statute might provide a remedy for the breach of an express warranty; and (3) remanded the case to the Court of Appeals to determine whether, consistent with the Supreme Court's reasoning, plaintiffs' fraud and failure-to-warn claims were preempted. Id. at 444-47, 125 S.Ct. 1788. FIFRA defines label as the written, printed, or graphic matter on, or attached to, the pesticide or device or any of its containers or wrappers. 7 U.S.C. § 136(p)(1). FIFRA defines labeling as: all labels and all other written, printed, or graphic matter (A) accompanying the pesticide or device at any time; or (B) to which reference is made on the label or in literature accompanying the pesticide or device, except to current official publications of the Environmental Protection Agency, the United States Departments of Agriculture and Interior, the Department of Health and Human Services, State experiment stations, State agricultural colleges, and other similar Federal or State institutions or agencies authorized by law to conduct research in the field of pesticides. 7 U.S.C. § 136(p)(2). It is undisputed that the AG600 marketing brochure was not on, or attached to AG600, and so it cannot qualify as a label. It is equally unquestionable, though, that the brochure qualifies as all other written, printed, or graphic matter. Given that the brochure is not referenced on the AG600 label, and that there is no other writing accompanying the product which references it, the question of whether the brochure qualifies as labeling thus comes down to whether the brochure was accompanying AG600, as that term is used in the statute. The case law on the meaning of accompanying in this and similar contexts is sparse but helpful. The Federal Food, Drug, and Cosmetic Act of June 25, 1938, 21 U.S.C. § 301, et seq., defined labeling as all labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying such article. Kordel v. United States, 335 U.S. 345, 347-48, 69 S.Ct. 106, 93 L.Ed. 52 (1948). The term label was defined as a display of written, printed, or graphic matter upon the immediate container of any article. Id. at 348 n. 2, 69 S.Ct. 106. The Supreme Court was asked in Kordel to determine whether this definition of labeling, similar to that in FIFRA, covered sales literature that was not distributed with a drug. The Court declined to read accompanying such article as limited to materials accompanying such article in the package or container. Rather, it was the content of the materials, not their physical proximity, that controlled: One article or thing is accompanied by another when it supplements or explains it, in the manner that a committee report of the Congress accompanies a bill. No physical attachment one to the other is necessary. It is the textual relationship that is significant. Id. at 350, 69 S.Ct. 106. The Court acknowledged that Congress had not intended that the labeling provisions of the Act regulate drug advertising generally. It held, however, that advertising matter was nevertheless labeling where it performs the same function as it would if it were on the article or on the containers or wrappers. Id. at 351, 69 S.Ct. 106. The Supreme Court concluded that the particular material before it was labeling because it instructed the ultimate users how to use the drugs: It explained their uses. Nowhere else was the purchaser advised how to use them. It constituted an essential supplement to the label attached to the package. Id. at 348, 69 S.Ct. 106. Justice Black's dissenting opinion agreed with this aspect of the Court's decision. He summarized the Court's holding as follows: I agree that a drug is misbranded within the meaning of the statute if false and misleading written, printed, or graphic matter is either placed upon the drug, its container or wrappers, or used in the sale of the drug as a supplement to the package label to advise consumers how to use the drug. Id. at 352, 69 S.Ct. 106. The decision of the Second Circuit in New York State Pesticide Coalition, Inc., v. Jorling, 874 F.2d 115 (2d Cir.1989), appears to be the only federal appellate decision which speaks directly to the meaning of accompanying in the context of FIFRA. It too focuses on the content of material alleged to be labeling, rather than the manner of its distribution, and on whether it instructs the ultimate user on how to use the product. In Jorling, the Court resolved the question of whether a New York law, designed to assure public awareness that poisonous chemicals are being utilized, created labeling requirements under FIFRA, and was therefore preempted. Id. at 116. The New York law at issue required all commercial pesticide applicators to: (1) enter into a written contract with the owner of the premises where extermination is to occur; (2) provide a list of the chemicals to be applied along with any warnings which appear on the pesticide's... label; (3) give the prospective purchaser a notification `cover sheet' which provides further warnings and safety information; (4) post signs on the perimeter of the premises, instructing persons not to enter the area for a 24 hour period; and (5) in some instances notify the public in newspapers of prospective use over large tracts. Id. at 116-17. The plaintiffs in the case, a coalition of pesticide applicators, argued that the New York notification requirements constituted labeling under FIFRA and were therefore preempted because those provisions required additional written, printed, or graphic matter which accompan[ies] the pesticide or device at any time. Id. at 118-19. The Jorling Court disagreed, concluding that even though these notification materials would be present in some spatial and temporal proximity to the pesticides, the materials would not accompany the pesticides, as that term is used under FIFRA. Id. at 119. As the Jorling Court advised, `[l]abeling' is better understood by its relationship, rather than its proximity, to the product. Id. The Court instructed that FIFRA `labeling' is designed to be read and followed by the end user. Id. It then concluded: In enacting § 24(b), Congress clearly sought to set minimum standards for pesticide labeling, see Cox v. Velsicol Chemical Corp., 704 F.Supp. 85, 86-87 (E.D.Pa.1989), not to prevent states from regulating the sale and use of the poisonous chemical substances through mandatory written, printed, or graphic materials revealing the ingredients. [The District Court] properly noted that FIFRA's prohibition of state labeling in addition to or different from that approved by the EPA has as its main focus ... preserving the force of the information contained in the FIFRA label. Notification requirements such as cover sheets, signs, and newspaper advertisements do not impair the integrity of the FIFRA label. Rather, they serve to further the purpose of the statute by enlisting state aid to prevent unreasonable adverse effects [of pesticide use] on the environment. 7 U.S.C. § 136a(c)(5). To hold otherwise would preempt a wide range of state activities which Congress did not subject to the jurisdiction of the EPA. Id. at 119-20. While, as the District Court stressed, these precedents do rule out physical proximity to the product as the controlling factor, they also speak persuasively to the necessity of constraining the scope of accompanying if Congress's intent is to be served. As the Jorling Court stressed, Congress explicitly preserved the states' right to regulate the `sale and use' of pesticides while reserving `labeling' to federal control. Id. at 118. The labeling provisions of FIFRA were thus clearly not intended to regulate sales literature generally and the legal obligations that can arise therefrom. Congress's objective was much narrower. It sought to impose uniformity of labeling throughout the country, Bates, 544 U.S. at 452, 125 S.Ct. 1788, [9] and to protect the integrity of that uniform labeling. Jorling, 874 F.2d at 119. Novartis's AG600 marketing brochure cannot be read as providing a supplement to the AG600 label. Its function is to point out the advantages of the new product to wholesalers and retailers, as well as farmers. Importantly, it contains no instructions for the use of AG600. If we were to construe the term labeling as including the AG600 brochure, then all sales and marketing materials would necessarily be included within the scope of that term. We are confident that such was not the intent of Congress. In light of the foregoing, the District Court erred when it concluded that Novartis's marketing brochure qualified as labeling under FIFRA. Plaintiffs' claims of negligent misrepresentation/fraud and violation of the NJCFA are not preempted by FIFRA.
The District Court, however, as an alternative basis for its summary judgment ruling on the claims of negligent misrepresentation/fraud and violation of the NJCFA, concluded that the record reflects Plaintiffs never received and/or relied upon any written representations outside of the product label before purchasing and using AG600. Indian Brand Farms, 2007 WL 4571087, at  n. 5, 2007 U.S. Dist. LEXIS 94443, at  n. 5. Thus, the District Court ruled that even if these claims were not preempted by FIFRA, and even if the statements in the marketing brochure were fraudulent misrepresentations, Plaintiffs could not prevail because they failed to show that they relied on the statements to their detriment. We are unpersuaded by this alternative analysis. In New Jersey, a successful claim of fraud requires proof of five elements: (1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 691 A.2d 350, 367 (1997). Negligent misrepresentation is ... [a]n incorrect statement, negligently made and justifiably relied upon, [and] may be the basis for recovery of damages for economic loss... sustained as a consequence of that reliance. H. Rosenblum, Inc. v. Adler, 93 N.J. 324, 461 A.2d 138, 142-43 (1983). Regarding the reliance element, it is enough for a plaintiff to show indirect reliance. The New Jersey Supreme Court has explained this concept in the following manner: Indirect reliance allows a plaintiff to prove a fraud action when he or she heard a statement not from the party that defrauded him or her but from that party's agent or from someone to whom the party communicated the false statement with the intention that the victim hear it, rely on it, and act to his or her detriment. Kaufman v. i-Stat Corp., 165 N.J. 94, 754 A.2d 1188, 1195 (2000) (citing Judson v. Peoples Bank & Trust Co., 25 N.J. 17, 134 A.2d 761 (1957); Metric Inv., Inc. v. Patterson, 101 N.J.Super. 301, 244 A.2d 311 (App.Div.1968)). [T]o state a claim under the [NJCFA], a plaintiff must allege each of three elements: (1) unlawful conduct by the defendants; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendants' unlawful conduct and the plaintiff's ascertainable loss. N.J. Citizen Action v. Schering-Plough Corp., 367 N.J.Super. 8, 842 A.2d 174, 176 (App.Div.2003). The proscribed unlawful conduct includes, inter alia, any unconscionable commercial ... fraud, false pretense, [or] misrepresentation and the knowing ... omission of any material fact with intent that others rely upon such ... omission. N.J. Stat. Ann. § 56:8-2. While the required causal relationship may be shown under some circumstances without evidence that would satisfy the reliance requirement of common law fraud, evidence of the kind of indirect reliance which satisfies the common law requirement would clearly satisfy the causal relationship requirement of the NJCFA. See Varacallo v. Mass. Mut. Life Ins. Co., 332 N.J.Super. 31, 752 A.2d 807, 817 (App.Div.2000). Plaintiffs concede that there was no credible evidence that [they] directly relied on the brochure before purchasing and applying AG600. Pl. Reply Br. at 16. Plaintiffs contend, though, that they have made a sufficient showing of indirect reliance to avoid summary judgment, given the evidence regarding the recommendations of AG600 by Rutgers scientists at a twilight meeting in May 1997, and the Blueberry Bulletin that was published on May 29, 1997. We agree with Plaintiffs as to all Plaintiffs except Indian Brand Farms. Dr. Sridhar Polavarapu of Rutgers testified that he relied on the marketing brochure in recommending to the farmers at the twilight meeting that they purchase and use AG600 on blueberries: Q: At one of these Twilight meetings, did you talk about the new product, AG600? A: Yes, I do recall talking about the new product. Q: And do you remember which meeting that was, Doctor? A: That's more than likely the May meeting, yeah. Q: Do you remember what you said about it? A: I probably said what I said in the newsletter, which is, you know, this is a newer product that is coming here and it is purportedly to be safer to the environment and because it doesn't have solvents. Basically, I would have said what is provided to me vis-a-vis the information, as per the information from the manufacturer.    Q: Okay. So, as we sit here today, what you do recall is that you did say something to the effect that it was purported to be a safer product, the AG600? A: It's based onbased on what I learned from the literature. Q: Yes. A: I would have said something like that. App. at A428-30. Further, Dr. Polavarapu testified that he relied on the marketing brochure in writing the Blueberry Bulletin article recommending the use of AG600 on blueberries: Q. And as you sit here today, you do recall reading something [regarding better crop safety] that was sent to you by Novartis back before you had the Twilight meeting with the farmers? A: Yes. Q: And this written material that was sent to you by Novartis did say specifically something to the effect that it was better for crop safety? A: Yes.    Q: And again, the only things you can think of now that were given to you by Novartis as you sit here today that you relied upon to make that statement [regarding crop safety in the Blueberry Bulletin ] was the brochure of three or four pages? A: Correct. Id. at A432-35. Plaintiffs, in turn, certified and/or testified that they relied upon the twilight meeting recommendation of Dr. Polavarapu and the Blueberry Bulletin in purchasing and mixing AG600. [10] In light of this evidence, Plaintiffs have made a sufficient showing that they indirectly relied upon the AG600 marketing brochure in making their decision to purchase or apply AG600. Novartis raises an issue, however, based on the dates of Plaintiffs' purchase and use of AG600, as to whether Plaintiffs could have indirectly relied on the brochure. Novartis points out that most Plaintiffs purchased or used AG600 prior to the May 29, 1997, publication date of the Blueberry Bulletin. See footnote 2, supra. However, this does not resolve whether the two Plaintiffs who clearly purchased and used AG600 after May 29, 1997Wm. Cappuccio & Sons and Clark Farmsdid so in reliance on the Blueberry Bulletin. Nor does it negate the possibility that Plaintiffs relied on Dr. Polavarapu's recommendation at the earlier twilight meeting. The testimony in the record indicates different dates for the twilight meeting, [11] but construing this testimony in a light most favorable to Plaintiffs, Plaintiffs (with the exception of Indian Brand Farms) have demonstrated that a genuine issue of material fact exists as to whether the farmers indirectly relied on the representations in the marketing brochure in their decision to purchase and mix AG600. The problem for Plaintiff Indian Brand Farms is that it purchased AG600 on April 21, 1997, and it applied AG600 on May 10, 1997, before either the twilight meeting or the publication of the Blueberry Bulletin. Thus, Indian Brand Farms is the only plaintiff that is temporally excluded from having indirectly relied on the AG600 marketing brochure. In light of the foregoing, the District Court's grant of summary judgment to Novartis on the claims of negligent misrepresentation/fraud and violation of the NJCFA based on written representations will be reversed as to all Plaintiffs except Indian Brand Farms. The District Court's grant of summary judgment on these claims as to Plaintiff Indian Brand Farms will be affirmed. Our discussion of the District Court's alternative holding regarding Plaintiffs' claims of negligent misrepresentation/fraud and violation of the NJCFA has thus far been limited to claims based on written representations. As noted in Part I.B above, the District Court also granted summary judgment to Novartis on the negligent misrepresentation/fraud and NJCFA claims to the extent they were based on alleged oral misrepresentations. We will affirm this grant of summary judgment, because we agree with the District Court that Plaintiffs have failed to identif[y] with any certainty any oral representations made by Novartis [regarding the use of AG600] that they relied on. Indian Brand Farms, 2007 WL 4571087, at , 2007 U.S. Dist. LEXIS 94443, at .