A federal appeals court in San Francisco on Monday reinstated a string of racketeering suits that charge chemical giant DuPont with hiding evidence about a widely used fungicide so it could settle crop-loss cases on the cheap.
The ruling by the U.S. 9th Circuit Court of Appeals was a victory for six nursery operators in Hawaii and a setback for E.I. DuPont de Nemours & Co., which has paid $1.9 billion in damages and legal costs over the last 15 years in cases involving the chemical, known as Benlate.
In an unusual rebuke, the three-judge panel also ordered the six cases reassigned from Manuel L. Real, a controversial federal district judge in Los Angeles who, as a visiting judge in Hawaii, had dismissed the suits.
"Although we do not question the impartiality of the visiting district judge, there are some unusual factors that indicate to us that a reassignment is advisable to preserve the appearance of justice," the panel said in its unanimous ruling.
DuPont said in a statement that it had not decided whether to seek review by the U.S. Supreme Court. The statement added that the ruling involved "technical legal points" and was not a comment on the merits of the suits. "If the case proceeds in the trial court, we will aggressively defend against the allegations," DuPont said.
Plaintiffs' attorney Stephen Cox of San Francisco said the decision meant "that at long last, my clients are going to be able to present their case to a jury, and let a jury determine whether or not DuPont's fraudulent withholding of evidence was a significant factor in the settlements that were achieved."
The plaintiffs, who grow orchids and other ornamental plants, were among hundreds of commercial growers who sued DuPont during the 1990s over crop damage. They accused the company of allowing Benlate, which is used to attack plant diseases, to become contaminated by sulfonylureas, a powerful herbicide. The six nurserymen settled their claims for about $10 million in April 1994.
Soon after, it emerged in other cases that DuPont had "concealed, withheld and lied about" test data confirming the Benlate contamination problem, the appeals court ruling said.
This led to hefty fines for discovery abuse in other lawsuits, including a $1.5-million penalty in one case and $11.25 million in sanctions against DuPont and one of its law firms in another.
The Hawaii plaintiffs sued DuPont under state laws and the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, claiming the company and its lawyers, by hiding evidence, had fraudulently induced them to settle for less.
A federal judge in Hawaii dismissed their claims on grounds that the settlement agreement was binding, but the 9th Circuit reversed the decision and sent the cases back to the trial court.
The second time in district court, Judge Real got the case and dismissed it. Monday's ruling cited a litany of errors by Real, including his conclusion that certain claims were barred by the statute of limitations.
In reassigning the case, the court criticized Real for adopting "with only a few minor changes" a 64-page proposed order drafted by lawyers for DuPont. Although adopting findings drafted by parties in a case is not unusual, the appeals court said it was a "regrettable practice" to adopt "the findings drafted by the prevailing party wholesale."
In addition, the panel said, although the Hawaii Supreme Court had been asked to weigh in on certain questions of state law, Real did not wait for that advice before dismissing the claims. Real could not be reached late Monday.
A controversial member of the federal judiciary, Real, 81, faced disciplinary proceedings this year after he improperly seized control of a bankruptcy case in an effort to protect a woman he had sentenced to probation in a loan fraud case. But in late September, a disciplinary council made up of 9th Circuit judges declined to impose sanctions over strong dissents from two members.
In the Benlate cases, Cox said his clients would be seeking compensatory damages equal to two to three times the $10 million they got in the original settlement. In addition, he said, they would be seeking additional damages allowed under the RICO act, and attorneys fees.
In its most recent quarterly filing with the Securities and Exchange Commission, DuPont said 73 Benlate cases were still pending as of Sept. 30, including some over crop loss and others alleging health damage from Benlate exposure. Citing liability concerns, the company took Benlate off the market in 2001.