You are on page 1of 7


Secur interest
ity inter farm
est in f arm equipment
remains perf erroneous
ected despite err oneous
termination of ffinancing
inancing statement
The U.S. Bankruptcy Court for the Eastern District of Arkansas, has ruled that a
filing officer’s erroneous termination of a properly filed financing statement filed by
the Farm Service Agency (“FSA”) did not cause the FSA’s secured claim to become
an unsecured claim, and therefore avoidable by the bankruptcy trustee. In re

INSIDE Masters, 273 B.R. 773 (Bankr. E.D. Ark. 2002).
Prior to filing his Chapter 13 bankruptcy petition, the debtor signed two promis-
sory notes payable to the FSA. Id. at 774. The debtor later converted his case to a
Chapter 7 bankruptcy. Id. Thereafter, the trustee for the Chapter 7 bankruptcy
• Agricultural law conducted a UCC lien search in the appropriate county office. Id. at 775. Because this
office had erroneously terminated the FSA’s financing statement several months
bibliography earlier, the trustee did not locate any record of an outstanding perfected lien in the
FSA’s favor. Id. The FSA did not learn that the financing statement had been
• Managing agricultural terminated until after the bankruptcy filing and the trustee’s subsequent lien
risks after Starlink™ search. Id. After learning of the error, the FSA re-recorded its own copy of the original
financing statement, which showed the original filing date. Id.
The farm equipment and vehicles in which the FSA claimed a lien had already been
sold by the trustee in accordance with an order of the bankruptcy court. Id. The
trustee retained $41,453.09 from the sale of the collateral, an amount which was less
than what the debtor allegedly owed to the FSA. Id. The $41,453.09 was also subject
to the estate’s claim for administrative expenses and a first lien claimed by another
entity for $14,000.00. Id.
The FSA argued that under Arkansas law a secured party does not bear the burden
created in the event that an error is made by a filing officer when filing a financing
statement. Id. Specifically, the FSA relied on Ark. Code Ann. § 4-9-401(1) (Michie
Supp. 1999) which stated that, “presentation for filing of a financing statement and
Solicitation of articles: All AALA tender of the filing fee or acceptance of the statement by the filing officer constitutes
members are invited to submit filing under this chapter.” Id. The trustee argued that when the financing statement
articles to the Update. Please in- was terminated by the filing officer, the FSA’s claim became unperfected, and could
therefore be avoided pursuant to 11 U.S.C. § 544 (1994). Id. The trustee also argued
clude copies of decisions and leg-
that it would be more equitable to rule in his favor “because [the] FSA has other
islation with the article. To avoid
remedies to recover its loss as compared to the bankruptcy estate, which would have
duplication of effort, please no- no standing to seek relief against any other entity or person.” Id. at 777.
tify the Editor of your proposed The bankruptcy court premised its analysis on the rule that questions arising in
article. bankruptcy pertaining to the “validity, nature, and effect of liens are governed by the
law of the state where the property is situated.” Id. at 775 (citing In re STN Enter,
Inc., 45 B.R. 959, 962 (Bankr. D. Vt. 1985)). The bankruptcy court noted that the

IN FUTURE parties had not cited any controlling precedent by either the Arkansas Supreme
Court or the Eighth Circuit Court of Appeals that interpreted § 4-9-401(1) in relation
to clerical mistake. Id. The court did, however, point out that the Arkansas Supreme

I SSUES Court had previously relied on the Official Comments to Article 9 of the Uniform
Commercial Code as persuasive authority. Id. at 775-776 (citing Herringer v.
Mercantile Bank of Jonesboro, 315 Ark. 218 (1993) (citing with approval official
comments to UCC Article 9 enacted as Ark. Code Ann. § 4-9-204)).
• Pronsolino case Specifically, the court noted that Ark. Code Ann. § 4-9-401(1) mirrored § 9-403 of
update the Uniform Commercial Code, and that the official comments to § 9-407 state that
“under § 9-403(1) the secured party does not bear the risk that the filing officer will
not properly perform his duties: under that section the secured party has complied
• U.S. v. Hart case with the filing requirements when he presents his financing statement for filing and
the filing fee has been tendered or the statement accepted by the filing officer.” Id.
• Sugar Cane Growers at 775 (quoting U.C.C. § 9-407 cmt. (1) (1972)). The bankruptcy court also cited
Co-op of Florida case treatise materials, case law from other circuits, and case law from other bankruptcy
courts to support this view. Id. at 776.
Continued on page 2


Ag law bibliography/Cont. from p. 3
The bankruptcy court dismissed the ganisms the Best Way to Ensure Nutri-
trustee’s equity argument by relying on a Spectar, Patent Necessity: Intellectual tionally Adequate Food? – pp. 65-90
Second Circuit decision stating that “‘[i]f Property Dilemmas in the Biotech Do- • Janis, Sustainable Agriculture, Patent
one balances interests between a credi- main and Treatment Equity for Develop- Rights, and Plant Innovation – pp. 91-
tor who does his best to file and is pre- ing Countries, 24 Hous. J. Int’l L. 227-278 118
vented by the clerk from doing so, and (2002). • Cripps, Patenting Resources: Bio-
another who does his best to search and technology and the Concept of Sustain-
is prevented by the clerk from finding Pesticides able Development – pp. 119-134
what he is looking for, the loss may well Note, Dancing Around the Issue of • Brush, Genetically Modified Organ-
FIFRA Preemption: Does it Really Still isms in Peasant Farming: Social Impact
be held to fall on the second creditor
Matter that the Supreme Court Has Not and Equity – pp. 135-162
rather than the first because of first • Mgbeoji, Patents and Traditional
Made a Decision? 16 J. Nat. Resources &
creditor’s priority of effort.’” Id. at 777 Envtl. L. 125-150 (2002). Knowledge of the Uses of Plants: Is a
(quoting Ex-Cello Corp. v. Oneida Nat’l Comment, A Pesticide Database Sys- Communal Plant Regime Part of the So-
Bank & Trust Co. of Cent. New York (In tem Would Improve the Safety and Pro- lution to the Scourge of BioPiracy? – pp.
re Mut. Bd. & Packaging Corp.) , 342 F.2d tection of our Drinking Water, 8 Wis. 163-186
294, 297-98 (2d Cir.1965)). Envtl. L. J. 53-72 (2002). • Tromans, Promise, Peril, Precaution:
— Harrison M. Pittman, Staff The Environmental Regulations of Ge-
Attorney, National Center for Agricul- Public lands netically Modified Organisms – pp. 187-
tural Law Research and Information, Kerr & Salvo, Evolving Presidential 206
University of Arkansas School of Law Policy Toward Livestock Grazing in Na- • Applegate, The Prometheus Principle:
This material is based upon work supported by tional Monuments, 10 Pa. St. Envtl. L. Using the Precautionary Principle to Har-
the U.S. Department of Agriculture, under Rev. 1-12 (2001). monize the Regulation of Genetically
Agreement No. 59-8201-9-115. Any opinions, Note, Another Nail in the Coffin For Modified Organisms – pp. 207-264
findings, conclusions, or recommendations ex- Ranchers’ Claims to Semi-ownership of • Gupta, Advance Informed Agreement:
pressed in this publication are those of the Federal Lands? (Public Lands Council v. A Shared Basis for Governing Trade in
author and do not necessarily reflect the view of Babbitt [Public Lands Council III], 529 Genetically Modified Organisms? –
the U.S. Department of Agriculture. U.S. 728, 2000), 22 Pub. Land & Re- pp.265-282
sources L. Rev. 147-160 (2001). • Note, The Great, Global Promise of
Genetically Modified Organisms: Over-
Rural development coming Fear, Misconceptions, and the
Madison, A Place in the Country: Rural Cartagena Protocol on Biosafety – pp.
Dwellings and the Paradox of Rurality, 283-324
25 Environs 29-42 (2001).
Ragsdale, Alternative Communities Taxation
VOL. 19, NO. 6, WHOLE NO. 224 June 2002 for the High Plains: An Exploratory Es- Harris, Summary of Selected Provi-
AALA Editor..........................Linda Grim McCormick say on Holistic Responses to Issues of sions of the Job Creation and Worker
2816 C.R. 163, Alvin, TX 77511 Environment, Economy, and Society, 34 Assistance Act of 2002, 19 Agric. L. Up-
Phone: (281) 388-0155 date 4-6 (April 2002).
Urban Law. 73-92 (2002).
Contributing Editors: Harrison M. Pittman, University Sustainable & organic farming Torts
of Arkansas, Fayetteville, AR; Drew L. Kershen,
Oklahoma University, Norman, OK; Thomas P. Redick,
Davidson, Sustainable Development Comment, Forgiving Nuisance and
St. Louis, MO; John T. Walsh, St. Louis, MO. and Agriculture in the United States, 32 Trespass: Is Oregon’s Right-to-Farm Law
Envtl. L. Rep. 10543 (2002). Constitutional?, 16 J. Envtl. L. & Litig.
For AALA membership information, contact Donna
French Dunn, Executive Director, 4115 South Duff Murphy, Structural Distortions in 445 (2001).
Avenue, Suite C, Ames, IA 50010-6600. Phone: (515) World Agricultural Markets: Do WTO Comment, Michigan’s Right to Farm
956-4255. Rules Support Sustainable Agriculture? Act: Have Revisions Gone Too Far? 2002
Agricultural Law Update is published by the 27 Colum. J. Envtl. L. 605-611 (2002). L. Rev. Mich. St. U.-Det. C. L. 213-242
American Agricultural Law Association, Publication Runge, Environmental Protection: (2002).
office: Maynard Printing, Inc., 219 New York Ave., Des From Farm to Market in M. Chertow & D. Comment, The Pennsylvania Farmer
Moines, IA 50313. All rights reserved. First class postage
paid at Des Moines, IA 50313. Esty (eds), Thinking Ecologically: The Receives No Real Protection From the
Next Generation of Environmental Policy Pennsylvania Right to Farm Act, 10 Pa.
This publication is designed to provide accurate and St. Envtl. L. Rev. 81-104 (2001).
authoritative information in regard to the subject matter
covered. It is sold with the understanding that the Symposium, Sustainable Development,
publisher is not engaged in rendering legal, accounting, Agriculture, and the Challenge of Geneti- Water rights: agriculturally related
or other professional service. If legal advice or other
expert assistance is required, the services of a competent
cally Modified Organisms, 9 Ind. J. Glo- Tarlock, The Future of Prior Appro-
professional should be sought. bal Legal Stud. 1-325 (2001). priation in the New West, 41 Nat. Re-
• Applegate & Aman, Introduction: sources J. 769-793 (2001).
Views expressed herein are those of the individual
authors and should not be interpreted as statements of Syncopated Sustainable Development –
policy by the American Agricultural Law Association. pp. 1-12 If you desire a copy of any article or
• Sagaoff, Biotechnology and Agricul- further information, please contact the
Letters and editorial contributions are welcome and
should be directed to Linda Grim McCormick, Editor, ture: The Common Wisdom and Its Crit- Law School Library nearest your office.
2816 C.R. 163, Alvin, TX 77511. ics – pp. 13-34 The AALA website < http://www.aglaw-
• Tarlock, Ideas Without Institutions: > has a very extensive Agricul-
Copyright 2002 by American Agricultural Law
Association. No part of this newsletter may be The Paradox of Sustainable Development tural Law Bibliography. If you are look-
reproduced or transmitted in any form or by any means, – pp. 35-50 ing for agricultural law articles, please
electronic or mechanical, including photocopying, consult this bibliographic resource on the
recording, or by any information storage or retrieval
• Pimentel, Overview of the Use of
system, without permission in writing from the Genetically Modified Organisms and AALA website.
publisher. Pesticides in Agriculture – pp. 51-64 —Drew L. Kershen, Professor of Law,
• Messer, Food Systems and Dietary The University of Oklahoma,
Perspective: Are Genetically Modified Or- Norman, OK

Ag icultural
ricultur law
al la bibliogr
w bibliog aphy
raph quarter
y: second quarter 2002
Agribusiness corporations ing and Production Contracts, available Trade – pp. 7-12
Smith, Food Fight: An Appraisal of the at < • Ives, The Benefits of Biotechnology,
Fruit and Vegetable Dispute Resolution ag/ag_contracts > Posted marketing and the Intersection of GAT/WTO and Other
Corporation, 11 Minn. J. Global Trade production contracts from many compa- Trade Issues – pp. 13-20
285-309 (2002). nies relating to livestock, grain, and other • Kaufman, Legal Regulations Associ-
crops. ated With Biotechnology and Other Re-
Cooperatives Missouri Farm Bureau Task Force on quired Procedures and Tests – pp. 21-28
Antitrust Production Contracts, Checklists for Live- • Laurie, Biotechnology and Agricul-
Comment, The Perils of the Capper- stock and Grain Production Contracts, ture – pp. 29-37
Volstead Act and Its Judicial Treatment: available at < • Lappe, Biotechnology and Agricul-
Agricultural Cooperation and Integrated mofborg.nsf >. Click on “Contract Pro- ture – pp. 39-47
Farming Operations, 38 Willamette L. duction Checklists.” • Fevrher, Biotechnology and Agricul-
Rev. 263-319 (2002). ture: A Fresh Perspective – pp. 49-52
Finance and credit • Beusam, Biotechnology and Agricul-
Energy issues Burkett, Production Credit Associa- ture: Differences Between the United
Herrick, Federal Financing of Green tions, Their History, and the Controversy States and Europe – pp. 53-56
Energy: Developing Green Industry in a Over Their Tax-exempt Status, 29 S. U. L. • Busch, Assumptions About Biotech-
Changing Energy Marketplace, 31 Pub. Rev. 1-24 (2001). nology and Agriculture – pp. 57-61
Cont. L. J. 257-275 (2002). • Saphen, The Bio-safety Protocol: A
Food and drug law Landmark International-envrionmental
Environmental issues Comment, Are Kosher Food Consum- Trade Agreement – pp. 63-71
Bloomquist, The Agricultural Perspec- ers No Longer Entitled to Protection From • Treaty: Cartagena Protocol on
tive: TMDLs in the Context of a Clean and Fraud and Misrepresentation in the Mar- Biosafety to the Convention on Biological
Healthful Environment, 22 Pub. Land & ketplace? (Commack Self-Service Kosher Diversity pp. 77-107
Resources L. Rev. 19-29 (2001). Meats, Inc. v. Rubin, 106 F. Supp. 2d 445,
Casenote, Getting Ripped—Destroying E.D.N.Y. 2000), 75 St. John’s L. Rev. 485- Land reform
Wetlands for Wine (Borden Ranch P’ship 508 (2001). Comment, The Controversial Land
v. United States Army Corps of Eng’rs, Code of the Russian Federation: A Bal-
261 F.3d 810, 9th Cir. Cal. 2001, petition Forestry anced Approach to Resolving Russia’s
for cert. filed, 70 U.S.L.W. 3562, U.S. Colligan, Forest Land Taxation in the Land Reform Question and Encouraging
February 22, 2002, NO. 01.1243), 6 Great New Millennium: Stewardship Foreign Investment, 42 Santa Clara L.
Plains Nat. Resources J. 170-188 (2002). Incentivized, 78 Denv. U. L. Rev. 413-428 Rev. 577-606 (2002).
Houck, The Clean Water Act TMDL (2001). Palomar, Land Tenure Security as a
Program V: Aftershock and Prelude, 32 Sugden, The Timber Industry Perspec- Market Stimulator in China, 12 Duke J.
Envtl. L. Rep. 10386-10420 (2002). tive: TMDLs and Forestry, Trying to Make Comp. & Int’l 7-74 (2002).
Yeo & Hoagland, United States v. a Square Peg Round, 22 Pub. Land &
Smithfield: A Paradigmatic Example of Resources L. Rev. 47-60 (2001). Land use regulation
Lax Enforcement of the Clean Water Act Land use planning and farmland
by the Commonwealth of Virginia, 23 Hunting, recreation & wildlife preservation techniques
Wm. & Mary Envtl. L. Pol’y Rev. 513-556 L. Heard et. al, A Compresensive Re- Becker, Promoting Agricultural Devel-
(1999). view Of Farm Bill Contributions To Wild- opment Through Land Use Planning Lim-
life Conservation 1985-2000 (USDA- its, 36 Real Prop. Probate & Trust J. 619-
Equine law NRCS, Tech. Rep. WHMI-2000, Dec. 671 (2002).
Comment, Walking Through the New 2000).
Jersey Equine Activity Statute: A Look at Lund, Nineteenth Century Wildlife Law: Livestock and packers & stockyards
Judicial Statutory Interpretation in Ju- A Case Study of Elite Influence, 33 Ariz. Comment, Impact of Livestock Animal
risdictions With Similar Limited Liabil- St. L. J. 935-984 (2001). Disease Outbreaks on International
ity Laws, 12 Seton Hall J. Sport L. 65-105 Popescu, Notes on the USDA Wildlife Trade: A Study Focusing on the Current
(2002). Habitat Incentives Program (WHIP), 19 Foot-and-mouth Disease and Mad Cow
Agric. L. Update 4-7 (March 2002). Disease Crisis, 8 ILSA J. Int’l & Comp. L.
Farm labor 255-270 (2001).
General & social welfare International trade Note, Searching for the Montana Open
Comment, Biting the Hand that Feeds Gonzalez, Institutionalizing Inequal- Range: A Judicial and Legislative
You: How Federal Law Has Permitted ity: The WTO Agreement on Agriculture, Struggle to Balance Tradition and Mod-
Employers to Violate the Basic Rights of Food Security, and Developing Countries, ernization in an Evolving West, 63 Mont.
Farmworkers and How This Has Begun 27 Colum. J. Envtl. L. 433-490 (2002). L. Rev. 197-228 (2002).
to Impact Other Industries, 4 U. Pa. J. Note, Trade Epidemic: The Impact of
Lab. & Employment L. 601-621 (2002). the Mad Cow Crisis on EU-U.S. Rela- Marketing boards, marketing orders
Comment, Farmworkers and FIFRA: tions, 25 B.C. Int’l & Comp. L. Rev. 343- & marketing quotas
Laboring Under the Cloud, 31 Sw. U. L. 371 (2002). Schoen, Hogan & Falchek, Glickman
Rev. 93-123 (2001). Note, Perking Up the Coffee Industry v. Wileman Bros. & Elliott: California
Through Fair Trade, 11 Minn. J. Global Fruit Marketing Orders Prune the First
Farm policy and legislative analysis Trade 337-372 (2002). Amendment, 10 Widener J. Pub. L. 21-82
Domestic Symposium, Uruguay and Beyond: The (2000).
R. Claassen et. al., Agri-environmen- WTO, Agriculture and the Law, 10 Mich.
tal Policy at the Crossroads: Guideposts St.–U. Detroit C. L. J. Int’l L. 1-107 Patents, trademarks & trade secrets
On a Changing Landscape (USDA-ERS, (2001). Medelson, Patently Erroneous: How the
AER Rep. No. 794, 2001). • Kennedy, International Trade in Ag- U.S. Supreme Court’s Decision in Farm
riculture: Where We’ve Been, Where We Advantage Ignores Congress and Threat-
Farmer-processor bargaining — pro- Are, and Where We’re Headed – pp. 1-5 ens the Future of the American Farmer,
duction contracts • Kiely, WTO and Market Access: Sub- 32 Envtl. L. Rep. 10698 (2002).
Iowa State Attorney General, Market- sidies, Tarification and Barriers to Freer Continued on p. 2

Managing agagricultural
ricultur risks
al r Starlink™:
isks after Star role
link™: the role of
injunctions and contr biotech
acts in containing biotec crop
h cr risks
op risks
By Thomas P. Redick and John T. Walsh. districts restricting the commingling of (whether biotech seeds or non-biotech
biotech and traditional crops. Until grow- seeds—any crop that cannot be com-
As is the case with many traumatic epi- ers’ districts are established, civil law- mingled with food).
sodes in the growth of strategic indus- suits seeking injunctions may provide a
tries, agricultural biotechnology has tool for enforcing standards for agricul- The Starlink™ litigation revisited
weathered the storm from Starlink™ tural management (or if adequate, in- The Starlink™ recall led to the filing of
corn, the transgenic, potentially aller- dustry stewardship). a number of putative class actions. As
genic variety of biotech crop that ended Since the Starlink™ recall, biotech in- these cases proceed, plaintiffs’ attorney
up in corn flakes and taco shells across dustry stewardship has progressed to will try to prove that Aventis produced
the Midwest in 2000. While many com- address the appropriate level of agricul- Starlink™ with knowledge that its corn
mentators have addressed the legal theo- tural management for biotech crops that could become commingled, causing mas-
ries underlying the Starlink™ litigation cannot be commingled with food crops. sive recalls and loss of export markets.
—nuisance law, consumer fraud and other New “planting distances” have been rec- Starlink™ corn was approved for animal
theories—this article will address the ommended by authorities such as the feed by the EPA, but not for food uses. As
complex questions of agricultural man- American Seed Trade Association a condition of approval, Aventis was asked
agement that permit problems like (“ASTA”). At the same time, however, to maintain an adequate identity preser-
Starlink™ to be nipped in the bud. We many new biotech crops containing in- vation program to keep Starlink™ out of
will also describe the civil litigation “ham- dustrial or pharmaceutical applications the food supply. Aventis apparently
mer” for requiring adherence to sound have entered the agricultural market- thought that commingling problems,
agricultural management methods (what place (including some non-biotech ver- should they arise, would be worked out
responsible life sciences companies call sions that lack significant premarket with food regulators to allow some per-
“stewardship”).1 regulatory review). These crops are not centage of unapproved Starlink™ in food
Perhaps the most remarkable untold invariably adhering to the newly adopted (a “tolerance”).
story behind the Starlink™ corn saga is planting distances, according to internal After the corn was commingled with
its sister crop in the Aventis product industry sources. other corn bound for food use, the EPA’s
“pipeline”—the Liberty Link™ soybean Injunctive relief stands as a viable scientific advisory panel imposed a zero
—that never made it to commercial option for limiting the spread of biotech tolerance standard for the commingling
launch. This article will tell a “tale of two or other industrial/pharmaceutical crops of Starlink™ during the recall. The EPA
seeds” (the Aventis Liberty Link™ soy- that have not followed careful agricul- has admitted that it made a mistake
bean produced by Aventis CropSciences, tural management practices. Industry when it approved Starlink™ for “feed
Inc.) and its corporate sister, Starlink™ stewardship models do not always pro- only” without providing adequate iden-
Corn (also produced by Aventis), and vide a clear contractual mandate to take tity preservation measures. This mis-
discuss the legal tools for reducing the all necessary steps to avoid commingling take was compounded by the decisions to
risk of billion dollar liabilities. While of these crops with food crops. Under the impose “zero tolerance” for the recall
both Starlink™ and Liberty Link™ were threat of an injunction, however, indus- from food supplies. The result was a
driven from the market by lawyers armed try stewardship can be improved to meet recall of Starlink™ whose cost has re-
with lawsuits, one of those lawsuits was the standard of care appropriate to a portedly exceeded one billion dollars by
never filed (Liberty Link™ wilted under particular biotech crop and local condi- many estimates. The litigation will con-
the threat of injunctive relief). The other tions. tinue to work its way through the courts,
lawsuit against Starlink™ corn is still Arbitration under the rules established and costs may continue to rise if new
proceeding, enriching both defense and by the American Seed Trade Association Starlink™ corn plants sprout and com-
plaintiff lawyers. Given the wide varia- can provide one alternative to costly liti- mingle with each growing season.
tion in the cost of prevention (Liberty gation. These rules tend to be written by The health risks of Starlink™ are still
Link™ model) as opposed to the cost of a seed companies to protect their own in- being assessed by regulators, who have
cure (the Starlink™ model), there can be terests, however, so as to keep the costs not identified any actual cases of per-
little doubt that there is a “market” for of seed marketing under control. Defend- sonal injuries. Allegations abound, in-
more cost-effective approaches to agri- ing thousands of complex warranty claims cluding one case of anaphylactic shock
cultural management like the Liberty would drive some seeds off the market allegedly caused by Starlink™ in a wrong-
Link™ model. Over time, the injunction because of resulting low profit margins. ful death lawsuit pending in California.
model may be supplanted by efforts at ASTA seed arbitration rules can promote Consumers are suing in putative class
legislative creation of particular growers innovation by reducing seed company actions pending in various courts (many
costs in resolving warranty claims. are consolidated in Chicago under fed-
This arbitration system can also lead eral Multidistict Litigation Rules), and
Thomas P. Redick, Gallop, Johnson & to unjust results, however, whenever a some are suing for a refund of their
Neuman, LC, St. Louis, MO. Mr. Redick seed marketing practice has the poten- money spent in buying food tainted with
is chair of the Committee on Agricultural tial to cause an economic cataclysm like Starlink™. These cases will delve fur-
Management for the American Bar Asso- the Starlink™ recall. As a result, a nec- ther into the health effects of Starlink™
ciation Section on Environment, Energy essary companion to the ASTA arbitra- while farmers pursue the economic im-
and Resources, and the liaison for that tion system is the threat of injunctive pacts with nuisance cases.
committee to the American Agricultural relief under consumer fraud statutes and
Law Association. nuisance law. As an adjunct to ASTA Nipping a billion dollar debacle in the
John T. Walsh is a member of the St. arbitration, injunctive relief (or the threat bud—the Liberty Link™ soybean
Louis firm of Gallop, Johnson & Neuman, of it, made in confidential negotiations In stark contrast to Starlink™, Aventis
LC in trial practice, including commer- with the offending seed company) can chose a commendable level of caution
cial litigation involving injunctions restrain any seed marketing practices when it agreed not to market a soybean
against seed companies. that border upon “the next Starlink™” that might have caused an economic cata-

clysm (by commingling with export mar- Given the magnitude of the economic of one quarter mile around his open fields
kets). The threat of injunctive relief by harm that can be caused by an unap- of a biotech CF corn. This corn would
soybean growers helped Aventis to see proved variety, an attorney general seek- provide enormous benefits, if produced
the light, and prevented a potential trade ing to apply public nuisance law should without food commingling, after it is
loss in excess of two billion dollars per have little difficulty persuading a sym- purified and used to treat cystic fibrosis
year. pathetic state or federal court judge to patients. While over 100 acres of this new
The story begins with an alert growers’ declare the sale a public nuisance.4 Given biotech corn will reportedly be grown in
association. The American Soybean As- the added element of inadequate disclo- Iowa during 2003, USDA officials have
sociation (“ASA”) realized in late 1997 sure to farmers that may be present, the informed grain industry sources that
that the European Union (“EU”) had no consumer fraud statutes of many states measures are being implemented to en-
present intention of approving new vari- might also be invoked.5 sure male sterility, adequate planting
eties of genetically enhanced (“GE”) crops distances, segregated harvesting pro-
for import. Corn shipments to the EU The threat posed by industrial and cesses and machinery, and other mea-
were being channeled away from export pharmaceutical crop varieties sures designed to prevent the potential
shipments in the hope of preserving the For those who have long supported for commingling with food.
flow of corn export to the EU. To prevent innovation in agricultural biotechnology, Moreover, if the APHIS distance is not
commingling of unapproved-in-EU vari- the arrival of a second wave of “output” followed to the letter, this “LMO event”
eties of GE soybeans, ASA called upon traits seems a blessed event—those crops might have to be reported under the
eleven biotech seed companies to refrain with features that benefit end users and biosafety protocol’s “may contain LMO”
from marketing any new variety of GE consumers, not just the growers (who standard for all commodities shipments
soybean that lacked approval in major adopted lowered-input-cost biotech crops from the US that “may contain” that
overseas markets, in particular the lu- in rapid-fire fashion, finding herbicide LMO (including non-corn shipments that
crative EU market.2 resistant soybeans and B.t. corn to re- may contain corn as foreign material).
Aventis disregarded this request at duce costs and chemical usage). If these Moreover, if the pattern from Starlink™
first, proceeding with plans to market new crops are managed well and kept out corn were to repeat itself, there would be
the Liberty Link™ soybean (which had of the food supply, they could usher in a an FDA-mandated recall of any corn prod-
no approval for export to the EU after new era of increased consumer accep- ucts that are produced from corn that
harvest). ASA entered into several months tance of biotech crops. cross-pollinated with CF corn.
of negotiations to educate Aventis (its If even one of these crops were to cause
corporate predecessor AgrEvo USA) about a recall that is one-tenth the size of the Lessons learned: seed company stew-
the potential risk of pollen transfer or billion-dollar-and-rising Starlink™ re- ardship and ASTA arbitration
movement of seeds between fields (a po- call, investors in this second wave of The lessons from Starlink™ and Lib-
tential private nuisance) and post-har- biotech crops will pull back and leave erty Link™ for biotech companies are
vest commingling in the soybean export them for a less fearful generation to clear. While these seeds were state of the
market (a potential public nuisance). ASA attempt to market. There is very little art and would have promoted sustain-
asked Aventis to follow a detailed iden- room for error in the post-Starlink™ able reductions in soil loss (through her-
tity preservation system, including the world. This is due in part to Starlink™ bicide resistance and “no till” produc-
contested items of a high premium for leaving behind a legacy of low tolerance tion), they posed a threat to other crops'
growers, dedicated domestic facilities to for traces of biotech crops in food prod- marketability because these newcomers
divert the GE soybeans away from export ucts. lacked regulatory approval.
channels, and an assumption of liability As this article went to press, there While growers threatening injunctions
for any nuisances or other liability that were troubling reports of plans by grow- can manage risks that elude the atten-
growers and Aventis might jointly cause.3 ers of new pharmaceutical applications tion of seed companies, most risks of
Aventis did not market the Liberty of agricultural biotechnology. The trade biotech crops can be better managed by
Link soybean, announcing in press re- journal Feedstuffs reported that an Iowa the seed companies themselves. Two tools
leases that it was serving the public farmer plans to grow a new seed contain- lie at their disposal—one is the arbitra-
interest by acting to protect export mar- ing a pharmaceutical protein that will tion rules established by the American
kets. ASA agreed in its own public state- treat cystic fibrosis (“CF corn”). See, Seed Trade Association (“ASTA”). Sec-
ments that Aventis had acted responsi- Robert Heuer, Cooperatives at a Cross- ond, the company can establish “stew-
bly and commended Aventis publicly for roads: Challenge Will Be How to Expand ardship” programs to ensure that grow-
its discretion. The business press re- Search for Capital, Feedstuffs (May 20, ers understand the need to avoid com-
ported the Aventis had invested millions 2002). This grower reports a quarter mile mingling of certain unapproved crops
of dollars in developing Liberty Link soy- separation distance for this corn, which with food or export supply of other crops.
bean, which it has now all but aban- would violate industry standards for safe
doned. planting distances to adjacent corn that Arbitration and injunctions using
The threat of injunctive relief was used may be destined for food uses. The Ameri- ASTA rules
to restrain the sale of Liberty Link™ can Seed Trade Association, in consulta- The ASTA Rules are designed to pro-
soybeans, and it could have easily been tion with the federal agency APHIS mote and simplify the seed trade, mak-
used to prevent the sale of Starlink™. (United States Agricultural Plant Health ing some of the UCC requirements more
While there are many claims now being Inspection Service), has set a one mile streamlined and tailored to seed market-
made to seek compensation for the losses planting distance for corn that seeks to ing practices. This includes a short time
caused by Starlink™, those predictable avoid problematic commingling of phar- frame for orders to be open (three days,
losses might also have created sufficient maceutical proteins with the food sup- not ten under the UCC). Also, brokers
threat of “irreparable harm” to merit an ply. See, Information of (sic) Field Test- can bind the grower and seed company.
injunction against Starlink™ prior to ing of Pharmaceutical Plants in 2002 To ensure prompt reporting of claims,
sale. Starlink™ corn was clearly sold (May 21, 2002) <http:// claims regarding quality (excluding ge-
without a full disclosure to growers of the> (Site netic quality claims) must be made within
risks of commingling, creating a con- visited June 10, 2002). three days of discovery or forty-fuve days
sumer fraud that could be actionable The farmer interviewed in Feedstuffs of sale (180 days for genetic quality). The
under statutes protecting consumers. is quoted as setting a separation distance Cont. on p.6

MANAGINGCont. from page 5 nity to market the seed corn that was the ceived before the end of 2001. As a
binding nature of ASTA Rules arbitra- subject of the dispute. The district court result, the grower is restricted from
tion should be confirmed in writing by found that the immediate need for relief introducing such grain/commodities
the parties. While somewhat ambiguous, was demonstrated by testimony that in into channels of trade where the poten-
the rules appear to allow appeal to the order for Ferry-Morse to make deliveries tial for export to such markets exists.
courts from a decision under ASTA arbi- for the 1983 growing season, the seed The grower must channel such grain/
tration. These rules, properly applied, corn needed to be in the hands of farmers commodities for feeding on farm, use
can help parties quickly resolve quality by the middle of April. The evidence in domestic feed lots or other uses in
allegations. In cases involving biotech indicated that the packaging and pro- domestic markets only. Growers should
cotton performance problems, seed arbi- cessing time required by Ferry-Morse refer to page 27 of Monsanto’s Technol-
tration has been used extensively. after it received the corn and before de- ogy Use Guide for information on crop
The use of arbitration does not pre- livery to farmers was at least thirty days. stewardship regarding the potential
clude issuance of an injunction, if that is The district court ordered Food Corn to movement of pollen to neighboring
a necessary component of the relief to be promptly deliver seed corn to Ferry-Morse crops. (Emphasis added).9
provided to growers and their customers as required by the exclusive license agree-
(e.g., the grain traders whose livelihood ment. On appeal, the Eighth Circuit af- The success or failure of channeling
may be threatened by unapproved vari- firmed, allowing injunctive relief to avoid programs for Roundup Ready Corn and
eties). The Federal Arbitration Act6 ar- economic losses. the forthcoming “Roundup Ready Wheat”
guably allows a preliminary injunction to Other courts have granted prelimi- will help to move Monsanto and the other
be issued in an arbitrable dispute. nary relief without regard to establish- companies with products emerging from
Teradyne, Inc. v. Mostek Corp., 797 F.2d ing the status quo, as long as there was a development forward toward a future
43, 47 (1st Cir. 1986). The sole restriction showing of potential irreparable harm where high-premium output traits are
that the Arbitration Act places on courts and at other times, as long as the injunc- grown without unintended commingling
is the requirement that courts stay the tion creates a common sense modus viv- in food supplies. Starlink™’s legacy has
trial of the action until arbitration has endi to keep peace between the contract- sensitized many growers, and alerted
been had in accordance with the parties’ ing parties, and avoids unnecessary eco- many attorneys to the risks posed by
agreement. 9 U.S.C. §3. nomic waste until the case is adjudi- commingling of unapproved varieties of
The First, Second, Third, Fourth, Sev- cated. Id. at 593. biotech crops. In Canada, for example,
enth, and Ninth Circuits have all upheld In sum, ASTA arbitration of claims plaintiff growers are seeking an injunc-
preliminary injunctions in arbitrable dis- arising from seed sales and injunctive tion against Monsanto’s proposal to mar-
putes when the trial court found injunc- relief against the sale of certain seeds ket Roundup Ready Wheat.10
tive relief to be necessary. “[T]he right to that should not be marketed can co-exist
arbitrate and to seek injunctive relief are and provide an alternative to waiting for Grower’s districts
not incompatible, ... a plaintiff should not commingling incidents to cause mass The states have broad powers to regu-
be obliged to abandon one in order to torts, as occurred with Starlink™ corn. late agriculture within their borders.11
pursue the other.” Sauer-Getriebe KG v. These powers include the abatement of
White Hydraulics, Inc., 715 F.2d 348, 350 Industry stewardship program for public nuisances, including specific
(7th Cir. 1983). See Ortho Pharmaceuti- commingling risks threats that come to the attention of the
cal Corp. v. Amgen, Inc., 882 F.2d 806 (3d Standards for controlling pollen drift legislature.12 As an adjunct to this broad
Cir. 1989) (if existing status quo is cur- are in a state of continuous flux, as the power, state legislatures may create ag-
rently causing one of the parties irrepa- American Seed Trade Association and ricultural districts with various powers
rable injury and thereby threatens to seed certifying agencies,7 accustomed to defined by statute.13 Cross-pollination of
nullify arbitration process, then it is nec- tolerances at 2% for unapproved content, varieties that would be better off sepa-
essary to alter the situation to prevent struggle to address market request for rated is not a new problem—“grower’s
injury); Bercovitch v. Baldwin School, “zero” or 1% tolerances.8 Planting dis- districts” in various jurisdictions across
964 F. Supp. 597, 604 (D. Puerto Rico tances to avoid pollen drift are a function the United States could emerge as tools
1997) (in the absence of injunctive relief, of the percentage tolerance—the lower to control agricultural nuisances from
student who was indefinitely suspended the tolerance, the farther the distance to GMOs.14 Districts can be declared off-
from school would still be out of school avoid pollen drift. The planting distances limits to certain varieties that are likely
and would have lost opportunity to finish necessary to meet those tolerances in- to render the dominant crops in a region
sixth grade with his class if he had to volved with seed adjust to new informa- less marketable and can also provide a
await the outcome of arbitration; arbi- tion. protective function in preventing private
tration would have rendered student’s The Monsanto program for grower nuisance lawsuits.15 The public entity
claim futile), rev’d on other grounds, 133 stewardship in the Roundup Ready responsible will have broad discretion to
F.3d 141 (1st Cir. 1998). Corn™ program provides a “State of the take measures necessary to abate a liv-
One Eighth Circuit decision stands Art” model for biotech company steward- ing threat to agriculture and will be
alone in denying injunctive relief in arbi- ship in the post-Starlink era. This pro- exempted from the law of trespass for
tration. Merrill Lynch, Pierce, Fenner & gram includes instructions on “channel- actions taken to protect life, health, or
Smith v. Hovey, 726 F.2d 1286, 1291-92 ing” requirements, and solicits contact property.16
(8th Cir. 1984). Two months after the information from the grower to allow The California Legislature recently took
Hovey decision, however, a different panel notifications to go to them regarding steps to create a “non-biotech” growers
of Eighth Circuit judges affirmed the “regulatory status” and other issues. district—for rice only—in the entire state
grant of a preliminary injunction in an For commingling risks, the form pro- of California. Assembly Bill 2622 estab-
arbitrable dispute. Ferry-Morse Seed Co. vided to growers has fine print as follows: lished standards for keeping different
v. Food Corn, Inc., 729 F.2d 589 (8th Cir. HARVESTED GRAIN ADVISORY: varieties of rice separate from each other
1984). The district court found that Ferry- Grain/commodities harvested from while imposing fees on the sale of rice
Morse demonstrated that it would suffer Roundup Ready® Corn…is approved seeds that pose economic risks. Dubbed
irreparable harm if, during the pendency for U.S. food and feed use, but not yet the “Trojan Horse” by some biotech sup-
of the proceedings or arbitration pro- approved in certain export markets porters, the bill did not specifically men-
ceedings, it was deprived of the opportu- where approval is not likely to be re- tion biotechnology or genetic engineer-

ing.17 The stated purpose of the bill is to tion Improving Communication From Seed Production tection against unreasonable government regulation and
avoid the economic impacts of rice that Through Retail, Presentation to the Third Annual ABA/ privatenuisancelawsuits”).
cannot be exported (which currently CAST/AALA/ACP technology Roundtable on the Liability Irvinev.CitrusPestDist., 62 Cal. App. 2d 378, 144
and Labeling Genetically Modified Organisms, in St. P.2d 857 (Cal. Ct. App. 1944).
means biotech rice, but might also mean Louis, MO (May 26, 1999) (summarized on the NewsCAST 17
The complete text of the law follows:
rice that harbors diseases). This will help website at § 55040 Food & Agric. The powers and duties of the
California rice growers market their prod- 0002abab.htm.)(visitedJune11,2002). committee under this chapter shall include, but not be
ucts worldwide; some in the biotech in- Id. limited to, all of the following: (a) Identifying rices that
dustry believe the measure is targeted at See,e.g., Publicnuisancesinagriculturedefinedby have characteristics of commercial impact. (b) Recom-
them. The California Rice Commission, a CaliforniaAgricultureCode§§5904,5951-52,5985,6171- mendingtothesecretaryproposedregulationsestablish-
77, 7301, 9621 (infested plants, black currant, Meyer ingtermsandconditionsforplanting,producing,harvest-
trade group representing growers and lemon plants, non-complying honey, et al.). Thomas P. ing, transporting, drying, storing, or otherwise handling
millers, led the crusade to pass this bill. RedickandChristinaG.Bernstein, Nuisance Law and the riceidentifiedpursuanttosubdivision(a),including,but
California exports nearly 40 percent of Prevention of “Genetic Pollution:” Declining a Dinner notlimitedto,seedapplicationrequirements,fieldbuffer
its rice crop (over $320 million annually). Date with Damocles, 30 ELR 10328, 10334 (May, 2000). zones, handlingrequirements,and identitypreservation
Japan takes delivery of most of this, and See,e.g., Cal. Bus. & Prof. Code §17200 (Deering requirements. All rice identified pursuant to subdivision
its laws on biotech approvals are strict. Supp. 2000) ; Stoiber v. Honeychuck, 101 Cal. App. 3d (a) shall be subject to an identity preservation program.
903,927,162Cal.Rptr.194,206-07(Cal.Ct.App.1980) (c) Reviewing the efficacy of terms, conditions, and
Aventis had no approval in Japan for (prohibiting“wrongfulbusinessconductinwhatevercon- identity preservation programs imposed on the planting,
Liberty Link™ rice when the bill was textsuchactivitymightoccur”). producing, harvesting, transporting, drying, storing, or
passed. Rice industry experts appointed 6
Title 9, US Code, Section 1-14, first enacted Febru- otherwisehandlingofriceidentifiedpursuanttosubdivi-
by the California secretary of food and ary 12, 1925 (43 Stat. 883). sion (a) using the most current industry standards and
agriculture will appoint experts (with Foracomprehensivelistofseedcertifyingagencies, generallyacceptedscientificprinciples.(d)Recommend-
input from the rice commission) and will See <> ing to the secretary on all matters pertaining to this
(site visited September 13, 2001). chapter,including,butnotlimitedto,enforcementofthis
use all available legal mechanisms to 8
The leader in the U.S. has been the American chapter and setting the assessment rates. (e) The com-
enforce the standards. Biotech rice will OrganizationofSeedCertifyingAgencies,whichiscreat- mitteeshallrevieweachriceidentifiedashavingcharac-
have to be separated from conventional ing an “identity preserved” (“IP”) logo for use in markets teristics of commercial impact not less often than every
rice during production, distribution and requiring segregated crops. < twoyears,oruponreceiptofapetitionfromthepurveyor
particularly export. Special fees apply to ip.html> (site visited September 13, 2001). The move to of the rice. No purveyor of a rice identified as having
rice seed that is deemed to have “charac- a tolerance of 1% is driven by European politics, which characteristics of commercial impact may file more than
appear to be settling down to 1% tolerances at the time onepetitiononaparticularriceinanytwo-yearperiod.(f)
teristics of commercial impact.” Fees this article went to press. See Electronic mail memoran- Neither the recommendations of the committee nor any
range as high as $5 for every hundred dum from Mark Mansour, Keller & Heckman, to Thomas regulation adopted pursuant to this chapter shall be
pounds of seed, leading to $8 per acre Redick regarding presentation by Commissioner Byrne construedasestablishinganyproduction,processing,or
planted. The Califonia Rice Commission statingthat“onepercentiswhatcurrentscienceindicates markettolerance.(AddedbyStats.2000,ch.579,sec.1.)
believes these fees will cover the costs of but that he stands by his word that the level should be § 55047 Food & Agric. The committee shall recom-
enforcing identity preservation stan- lowered if the scientists would recommend a change” mendtothesecretarythatregulationsbeadoptedbythe
(notaparticularlycomfortingreassurance).(Copyonfile secretary that accomplish all of the following purposes:
dards, but will not prevent seed buyers withauthor). (a) Maintain the integrity and prevent the contamination
from using the latest innovations in agri- 9
InstructionsforGrowersIntendingtoPlantRoundup ofricewhichhasnotbeenidentifiedashavingcharacter-
cultural biotechnology. Ready Corn or Roundup Ready Corn with Yieldgard istics of commercial impact. (b) Prevent the introduction
Stacked (Monsanto Company 004-01-0006), copy on file ofdisease,weeds,orotherpests.(c)Ensurethatpersons
Conclusion withauthor. selling,offeringforsale,orotherwisedistributingseedfor
There are many lessons that Starlink™ It’s official, Saskatchewan organic growers are theproductionofriceidentifiedashavingcharacteristics
corn and the Liberty Link™ rice and suing Monsanto, Aventis over GM contamination, ofcommercialimpact,orthatpersonsbringingriceiden-
CropChoicenews(January10,2002)(“Theplaintiffswill tifiedashavingcharacteristicsofcommercialimpactinto
soybean controls can teach for companies alsoseekaninjunctiontohaltMonsantofromintroducing the state for processing, notify the commission of the
willing to learn. With careful steward- Roundup Ready wheat, engineered to resist the herbi- locationofplantingsitesandofthedatesandprocedures
ship and arbitration, future matters cideRoundup(glyphosate)”)( forplanting,producing,harvesting,transporting,drying,
should avoid class action status and the leadstry.asp?RecID=553)(visitedJune11,2002). storing,orotherwisehandlingofriceidentifiedashaving
huge costs that entails. The threat of Statesorprovincesinoverseasmarketswithfederal characteristics of commercial impact. (d) Ensure that
injunctive relief can also help to prevent systems may exercise authority to ban GMOs, thereby persons receiving rice having been identified as having
adding another layer of regulatory complexity to a com- characteristics of commercial impact produced outside
future Starlink™ in progress. plex situation. There are reports that Brazil’s largest the state for processing notify the commission of the
Agricultural biotechnology potentially agriculturalregion(RiodelGrandeSul)istryingtomake locationofthereceiptandoftheproceduresforprocess-
provides beneficial enhancements to food itself GMO free. This raises the specter of U.S. leading ing, transporting, drying, storing, or otherwise handling
safety, environmental protection, and competitors in soy exports using non-GMO demand to thericetopreventcommercialimpacttootherriceandthe
industrial and medical applications (us- take the market share from U.S. growers unable to spread of weeds, disease, or other pests. (e) Ensure
ing agriculture as a low-cost production segregatetothespecificationsoftheEU,Japan,orother enforcement of terms and conditions imposed on the
markets. Untitled, Reuters Newswire, Sept. 28, 1999. planting,producing,harvesting,transporting,drying,stor-
system). The pipeline of agricultural in- 12
Id. At 5401. ing, or otherwise handling of rice identified as having
novation has to be protected from explo- 13
See,e.g., Cal. Food & Agric. Code §§52851, 52901 characteristics of commercial impact. (f) Encourage re-
sive mass tort litigation; in some in- et seq., (Deering 1997) (“nonapproved” varieties of cot- search and development of new types of rice. (Added by
stances, injunctive relief against a biotech tonrequirepermittoprotect“integrityofapprovedAcala Stats. 2000, ch. 579, sec. 1.)
company’s marketing plan may, ironi- orPimacotton”insinglevarietycottondistricts.) § 55060 Food & Agric. (a) Any person engaged in the
cally enough, prevent that unwilling de- See FarmlandInformationLibrary’sStateFarmland businessofselling,offeringforsale,orotherwisedistrib-
Protection Database at uting seed for the production of rice identified as having
fendant and unwitting tortfeasor from laws/kwagdis.html foranexcellentlistingofdistrictsand characteristicsof commercialimpact,shallannuallypay
causing economic losses in excess of one other statutes affecting farmland. Various states take to the commission an assessment in an amount not to
billion dollars. differingapproachestodistrictingandInternetdata: see, exceed five dollars ($5) per hundredweight (cwt.). (b)
e.g., the Ohio enabling statute (Ohio Rev. Code Ann. Thefirstin-statehandlerofpaddyorbrownriceidentified
See, e.g., Thomas Carrato, The Process of Agricul- §§929.01 et seq. (Banks-Baldwin Supp. 1999) available as having characteristics of commercial impact, or of
tural Genetic Engineering regulation, Stewardship or at; theTexas seed for the production of rice identified as having char-
Liability, Presentation to the Third Annual ABA/CAST/ mapofagriculturalstatisticaldistrictsat acteristics of commercial impact, brought into the state
AALA/ACPA Biotechnology Roundtable, Liability and Li- ~tass/distmap.htm; and the North Carolina summary of fromoutsideCalifornia,shallreportthereceiptoftherice
ability of Genetically Modified Organisms, St. Louis, MO commoditiesbycountyat or seed and pay an assessment to the commission in an
(May 26, 1999) (on file with author) (summary at http:// cntysumm/index.htm. amount not to exceed ten cents ($0.10) per hundred-
15 –sitevisitedJune See FarmlandInformationLibrary’sStateFarmland weight (cwt). The report and payment shall be made in
9,2002). Protection Database at the time and manner specified by the commission.
Stephen Censky of the American Soybean Associa- laws/kwagdis.html (benefitsofdistrictmayinclude“pro-