Am. Vanguard Corp. v. United States

AMERICAN VANGUARD CORPORATION, Plaintiff, v. UNITED STATES OF AMERICA, Defendant.

No. 16-694 C

United States Court of Federal Claims

Reissued: March 22, 2019

January 28, 2019

Barry M. Hartman, Kirkpatrick & Lockhart, Washington, D.C., for plaintiff.

Tara K. Hogan, United States Department of Justice, Washington, D.C., for defendant.

ORDER AND OPINION

Hodges, Senior Judge.

Plaintiff American Vanguard Corporation filed this claim, alleging that a Stop Sale, Use, or Removal Order issued by the Environmental Protection Agency constituted an unconstitutional taking of its property. The alleged property is American's pentachloronitrobenzene (PCNB) business, including personal and intangible property used for manufacturing, selling, and/or distributing PCNB and PCNB-related products.

Defendant filed a motion for summary judgment maintaining inter alia that plaintiff is not entitled to compensation for economic losses suffered as a result of congressionally authorized enforcement actions taken by the EPA. Plaintiff filed a partial motion for summary judgment in opposition, contending essentially that it had a cognizable Fifth Amendment property interest, and that the said property was "taken."

For the reasons stated below, we find that plaintiff does not possess a cognizable property interest in the property allegedly taken. Plaintiff's complaint must be dismissed.

BACKGROUND

Congress maintains a comprehensive legislative scheme regarding the regulation of pesticides and the EPA's approval of pesticide registrations. The Federal Insecticide, Fungicide, and Rodenticide Act provides that the EPA's approval of registrations is conditioned on a determination that a pesticide, including its use directions and composition, "will not generally cause unreasonable adverse effects on the environment." 7 U.S.C. § 136a(c)(5)(D). The Act defines "unreasonable adverse effects" as "any unreasonable risk to man or the environment, taking into account the economic, social, and environmental costs and benefits of the use of any pesticide." 7 U.S.C. § 136(bb).

Registration requires an applicant to disclose the "complete formula of the pesticide," including data related to certain impurities of toxicological significance, by submitting a form called a Confidential Statement Formula, or CSF.¹ 7 U.S.C. § 136a(c)(1)(D); 40 C.F.R. § 152.50(f). The form instructs the applicant to list impurities greater than or equal to 0.1% or impurities of lesser amount determined by the EPA to be of toxicological significance and to propose certified limits. 40 C.F.R. § 158.320(c), (d). Selling or distributing registered pesticide the composition of which differs at the time of its sale or distribution from its CSF description is unlawful. 7 U.S.C. § 136j(a)(1)(C).

The Act generally prohibits the sale or distribution of a pesticide product unless it is registered. 7 U.S.C. § 136a(a). To ensure compliance, the EPA may issue a "stop sale, use, or removal order" where "there is reason to believe that on the basis of inspections or tests" that a pesticide is in violation of the Act or has been or is intended to be distributed or sold in violation of its provisions. 7 U.S.C. § 136k(a). Such orders are to be issued only where the EPA has reason to believe that there is a potential hazard to human health or the environment or to address serious violations that present a threat of harm.

American manufactures, distributes, and sells a variety of agricultural and non-agricultural pesticide products, such as herbicides, insecticides, and fungicides, domestically and internationally. One of its product lines is based on an active ingredient known as PCNB, which has been registered with the EPA since 1985. PCNB is a fungicide that may be formulated into end-use products for terrestrial food crop and non-crop applications. American contends that these products prevent mold fungus growth on grass and are applied on various crops. It adds that effective application of the product must occur in October and November and that it is busiest in September and October.

American detected an impurity in its PCNB products in 1993 and informed the EPA. (ECF No. 49 at 16 ( [Redacted] ).) EPA assigned the report internally for non-expedited review, but took no further action. Pursuant to section 136a-1 of the Act, which required the EPA to review older pesticides for compliance with current regulatory standards, the EPA completed its review of PCNB to determine whether the PCNB should be reregistered in 2006. EPA concluded that for most uses of PCNB, the adverse environmental effects outweighed the benefits of the uses. As a result, EPA found that PCNB was ineligible for reregistration; it did not initiate proceedings to cancel registrations, however.²

EPA in 2009 learned that Australian researchers and the Australian authority in charge of regulating pesticides revealed the presence of dioxins in PCNB products. EPA then requested that American provide samples of PCNB for analysis. The result of the analysis completed in January 2010 showed the presence of dioxin in the samples. EPA officials then met with plaintiff to discuss elimination of the PCNB impurities.³ EPA's Office of Pesticide Programs referred the matter to the Office of Enforcement & Compliance in the summer of 2010 to determine if enforcement action was appropriate.

The Office of Enforcement & Compliance found that, based on the sample testing results, that adequate evidence that the PCNB products sold by plaintiff contained dioxin, an impurity of toxicological significance that was not identified on the CSF. During the review, they briefed the EPA's Director of the Waste and Chemical Enforcement Division (Ms. Kelley) and the Assistant Administrator for Enforcement's aide (Mr. Kushner). EPA issued a Stop Sale, Use, or Removal Order on August 2010, signed on behalf of Ms. Kelley by Mr. Lott, her deputy.

EPA's Order explained that a registrant may not sell or distribute a pesticide product with a composition that differs from the approved composition. It found that the CSF submitted by American had not identified the impurity and therefore had not reported adequately the composition of the product as required by 7 U.S.C. § 3 and 40 C.F.R. § 158.320. The EPA, as a result, ordered American to cease immediately the distribution, sale, or use of PCNB products that were in American's ownership, custody or control. Appx 5-6 (citing 7 U.S.C. § 136j(a)(1)(C)). The Order also required American to submit a written proposal for proper disposition of all violative PCNB products.

American then sent a letter to EPA, wherein it requested that EPA lift its Order and signaled its willingness to submit a revised CSF, along with all necessary supporting data, if such an amendment would provide a sufficient basis for lifting the Order. (ECF No. 49-1 at 231-233 (claiming that the Order had effectively suspended American's licenses for PCNB products and that by not utilizing the normal procedures for suspending or cancelling registrations under the Act,⁴ the EPA had not given American an opportunity to contest the Order or make adjustments in its registrations).) EPA disagreed with American's assertions that it was in compliance with the Act.

American filed a claim in late August 2010 in the District Court for the District of Columbia to enjoin the EPA Order. See Am. Vanguard Corp. v. Jackson, 803 F. Supp. 2d 8 (D.D.C. Aug. 17, 2011) (indicating that plaintiff had argued that Ms. Kelley lacked legal authority to issue the Order). The court found that the Order was in violation of the Administrative Procedures Act and vacated it. It ruled that the Order was issued illegally, as there was no evidence that the authority to issue such orders had been reassigned by the EPA from the Director of the Toxics and Pesticides Division to the Director of the Waste and Chemical Enforcement Division, Ms. Kelley. Id. at 14-16

American submitted an application to amend the registration of PCNB in September 2010, which included a revised CSF. The revised CSF identified the presence and concentration of the impurity and proposed an upper limit for the impurity. EPA approved plaintiff's amended registration for certain products/uses and authorized it to sell PCNB products in November 2011, after the court's ruling. American voluntarily discontinued certain uses of PCNB and resumed its domestic sale of PCNB products.

Thereafter, American filed this claim before our court, alleging that the EPA's Order was a violation of its Fifth Amendment right because it was a taking of private property without just compensation. It claims that it lost its PCBN business in the crop and turf sector and that it does not expect to recover that business for many years. American defines the taken property as its domestic PCNB business, which includes "manufacturing facilities and processes, technical know-how, intellectual property, customer lists, sales networks, distribution networks, product sales, and transferable licenses and registrations." Compl. 1. The Government filed a motion for summaryjudgment.⁵ Plaintiff submitted a cross-motion for partial summary judgment in response asking the court to find that a taking occurred and to proceed to trial on damages.

STANDARD OF REVIEW

The movant prevails on a Rule 56 summary judgment motion when it shows there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law. Cross-motions for summary judgment are reviewed under the same standard. Mingus Constructors, Inc., v. United States, 812 F.2d 1387, 1391 (Fed. Cir. 1987).

DISCUSSION

The Government argues that American's complaint should be dismissed for three separate reasons: American is estopped from arguing that the Order was authorized government conduct, a necessary element of a cognizable taking claim, because it previously took the position that EPA's action lacked legal authority; American does not have a legally cognizable property...