Syngenta Seeds, Inc. v. Bunge North America, Inc.

The U.S. Court of Appeals for the Eighth Circuit addressed allegations of breach and false advertising against an agricultural product storage and transport company, who not only stopped accepting genetically-modified strain of corn seeds—a variety that was not approved in China—but placed signs in its regional facilities and website indicating that the seeds were not approved for U.S. export markets. Syngenta Seeds, Inc. v. Bunge North America, Inc., Case No. 13-1391 (8th Cir., Aug. 8, 2014), (Bye, J.).

China maintains a zero-tolerance policy regarding the import of corn grown from seeds with genetically-modified traits China has not approved. Under this policy, China could prohibit an entire shipment of corn from entering the Chinese market if it contained corn—or traces of corn—with an unapproved genetically modified trait. Syngenta alleged that Bunge’s refusal to accept the corn grown from Syngenta’s Viptera seeds resulted in significant lost profits, loss of market share and good will, especially from farmers who had planted Viptera corn seeds thinking Bunge would purchase them. However, Bunge did not, and the farmers not only had to find non-Bunge warehouses to store their harvest, but also had to buy non-Viptera corn to fulfill their existing contracts with Bunge.

As a federally licensed warehouse operator, Bunge was required to enter into a licensing agreement with the federal government and under the United States Warehouse Act (USWA), is under a bonded obligation to treat depositors of agricultural products fairly. Syngenta claims that as an entity which sells seeds to Bunge’s agricultural depositors, it was harmed by Bunge’s refusal to accept Viptera seeds, and thus had a cause of action directly under the USWA or as a third party beneficiary of the license agreement. The 8th Circuit disagreed.

Reviewing the specific statutory language of § 247 of the USWA, the 8th Circuit saw nothing in the text or legislative history to indicate any Congressional intent to authorize injured third parties to sue a breaching warehouse operator directly. The circuit court also refused to find an implied private cause of action under the statute because “private rights of action to enforce federal law must be created by Congress.” And indeed, relying on Supreme Court direction in Alexander v. Sandoval, “[s]tatutes that focus on the person regulated rather than the individuals protected create ‘no implication of an intent to confer rights on a particular class of persons.” The circuit court next concluded that Syngenta was not a third-party beneficiary of the license agreement between Bunge and the federal government because a “nonparty becomes legally entitled to a benefit promised in a contract . . . only if the contracting parties so intended.” The court affirmed the district court’s dismissal of Syngenta’s USWA and third-party beneficiary claims on the pleadings.

Finally, Syngenta contends that the district court erred in granting summary judgment to Bunge on its false advertising claim under the Lanham Act for lack of standing (because Bunge was not Syngenta’s competitor) and that Bunge’s signs had not constituted “commercial speech.” But the district court reviewed the Lanham Act claim under the then-controlling but pre-Lexmark standard. The Supreme Court decision inLexmark resolved a circuit split, establishing the “zone-of-interest” test and the “proximate causality” requirement as the proper analysis for evaluating standing under the Lanham Act expressly rejecting the requirement that the challenged commercial speech be made by a competitor. (IP Update, Vol. 17, No. 4). The 8th Circuit explained that under Lexmark, standing exists where a defendant harms a plaintiff’s reputation by casting aspersions on its business by, for example, equating the product with an inferior product. Thus, when a party claims reputational injury from disparagement direct competition is unnecessary for proximate cause. The 8th Circuit thus vacated the grant of summary judgment and remanded for further proceedings.