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Mobay Chemical Corp. v. Gorsuch

argued: April 28, 1982.

MOBAY CHEMICAL CORPORATION, APPELLANT IN 81-2190 AND 81-2191
v.
ANNE M. GORSUCH, ADMINISTRATOR ENVIRONMENTAL PROTECTION AGENCY, APPELLEE; PENNWALT CORPORATION, APPELLANT IN 81-2469 V. ANNE M. GORSUCH, ADMINISTRATOR ENVIRONMENTAL PROTECTION AGENCY, APPELLEE



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA. D.C. Civil Nos. 79-0591 and 81-0373. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. D.C. Civil No. 80-2400

Before: Aldisert, Weis and Becker, Circuit Judges

Author: Weis

Opinion OF THE COURT

WEIS, Circuit Judge.

In this appeal, two pesticide manufacturers contend that the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) permits an uncompensated taking of their proprietary data. In addition, one manufacturer asserts that certain regulations promulgated by the Environmental Protection Agency are inconsistent with the statute and were adopted without proper observance of the Administrative Procedure Act. We reject the constitutional challenges but, finding lack of compliance with the APA, grant the EPA six months to adopt regulations in the appropriate manner.

Three cases have been consolidated here. In the suit brought in the Eastern District of Pennsylvania, Pennwalt Corporation challenged the constitutionality of the 1978 amendments to FIFRA, 7 U.S.C. § 136 et seq., but the district court granted summary judgment in favor of the EPA. Mobay Chemical Corporation mounted a similar attack in the Western District of Pennsylvania, and questioned certain implementing regulations promulgated in 1979 by the EPA. After trial, the district court upheld the statute and regulations. Mobay Chemical Corp. v. Costle, 517 F.Supp. 254 (W.D. Pa. 1981). In a separate action, the court modified an injunction against the EPA entered in Mobay Chemical Corp. v. Costle, 447 F.Supp. 811 (W.D. Mo. 1978), before the 1978 amendments were enacted and before the case had been transferred to Pennsylvania. Because the 1978 legislation authorized what the Missouri court had enjoined, the injunction was modified to reflect the statutory changes. Mobay Chemical Corporation v. Costle, 517 F.Supp. 252 (W.D. Pa. 1981).

I

FIFRA was enacted originally in 1947. Ch. 125, 61 Stat. 163 (1947). It makes the EPA responsible for regulating pesticides by "registering" only those products whose use will not harm the environment. 7 U.S.C. § 136a. As part of the licensing process, applicants must submit test data to the EPA demonstrating the safety and efficacy of their products. The development of new pesticides requires a great deal of time, money and skill, and consequently the test data represent a substantial investment by applicants.

As amended by the Federal Environmental Pesticide Control Act of 1972, FIFRA permitted applicants to designate portions of their data as trade secrets and prohibited the EPA from disclosing this information. Section 10(a) & (b), Pub. L. No. 92-516, 86 Stat. 973 (1972). In addition, the statute was changed so that data submitted in support of an application could not be considered by the agency in support of a subsequent application, unless two conditions were met. First, the later applicant had to compensate the original submitter for use of the data, and second, the original submitter did not designate the data as trade secrets. § 3(c)(1)(D). The 1975 amendments to this section further limited the protection against use of information to data submitted on or after January 1, 1970. Act of Nov. 28, 1975, Pub. L. No. 94-140, 89 Stat. 755 (1975).

The Federal Pesticide Act of 1978 removed the trade secret protection over test data provided by § 10(b) of the earlier legislation. Pub. L. No. 95-396, 92 Stat. 819 (1978). Applicants were granted a 10-year period of exclusive use for information about new chemicals contained in pesticides registered after September 30, 1978. Section 3(c)(1)(D)(i), 7 U.S.C. § 136a(c)(1)(D)(i). But the EPA may, without the permission of the original applicant, use data presented after December 31, 1969, which is not entitled to exclusive use, in support of another application for 15 years following the original submission. In this event, the later applicant must offer to compensate the original submitter. Section 3(c)(1)(D)(ii), 7 U.S.C. § 136a(c)(1)(D)(ii). If the parties cannot agree on the amount of compensation, either may initiate binding arbitration proceedings. Id. No limitation exists on the EPA's use of data that does not qualify for either the 10-year period of exclusive use or the 15-year period of compensation. Section 3(c)(1)(D)(iii), 7 U.S.C. § 136a(c)(1)(D)(iii).

The 1978 amendments also provide for broader disclosure of test data. The EPA may make available to the public any information about the safety and efficacy of pesticides. Section 10(d), 7 U.S.C. § 136h(d). See also, § 3(c)(2)(A), 7 U.S.C. § 136a(c)(2)(A). If necessary, the agency also may disclose trade secret data to contractors with the United States, so long as adequate security measures are taken. Section 10(e), 7 U.S.C. § 136h(e). The EPA may not, however, disclose data to foreign or multinational pesticide producers, unless the original submitter consents. Section 10(g), 7 U.S.C. § 136h(g).

Both Pennwalt and Mobay contend that the test data are trade secrets and, as such, constitute intellectual property of "incalculable value." In their view, the FIFRA provisions allowing the EPA to use and disclose the information amount to a taking without just compensation. The companies also argue that the provision for binding arbitration denies them the right to a judicial determination of just compensation.

We have reviewed the statutory amendments only briefly because the challenges made to the constitutionality of the use provisions mirror the contentions advanced in Chevron Chemical Co. v. Costle, 641 F.2d 104 (3d Cir.), cert. denied, 452 U.S. 961, 69 L. Ed. 2d 972, 101 S. Ct. 3110 (1981). There, we reviewed at length the legislative history of the amendments and their predecessors, and analyzed the claims of property deprivation. We rejected the constitutional challenges, concluding that, in the "use" context, applicants do not have a property interest in data submitted to the EPA beyond that conferred by FIFRA itself

As a panel, we are bound by Chevron. United States Court of Appeals for the Third Circuit, Internal Operating Procedures Ch. VIIIC (1980). Moreover, the arguments advanced in this appeal fail to convince us that Chevron should be reconsidered by the court en banc. We therefore reiterate that an applicant does not have a property interest in data submitted to the EPA that would prevent the agency from using the information in considering other requests for registration. Since there is no protected property interest as against use of the data, we also reject the contention, as we did in Chevron, that the compulsory arbitration provision deprives the original submitters of the right to a judicial determination of just compensation. For the same reason, we will ...


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