Citations
- 881 So. 2d 565
Full opinion text
WELLS, Judge.
Palmas Y Bambú, S.A., and Productora De Semillas, S.A., two Costa Rican plant nurseries, appeal from an order directing a verdict in E.I. DuPont de Nemours, Inc.’s favor on the nurseries’ RICO claims in this multi-count action for damages to ornamental plants allegedly caused by use of DuPont’s Benlate 50 DF fungicide. DuPont cross-appeals from a $26,450,289 judgment in Palmas’ and Productora’s favor, claiming that a number of evidentiary errors and use of an adverse inference jury instruction regarding the purported 1992 testing of Benlate in Monte Vista, Costa Rica, mandate reversal. We affirm the directed verdict on Palmas’ and Pro-ductora’s RICO claims because the nurseries failed to establish that their injuries were directly caused by the predicate acts proved below and because they failed to establish the existence of an enterprise distinct from the entity charged with violating Florida’s RICO act. Moreover, to the extent that the RICO claims were in actuality claims of improper labeling, the claims are preempted by federal legislation. We also find that the adverse inference instruction given to the jury regarding alleged Benlate testing in Monte Vista, Costa Rica, was erroneous and mandates reversal of the remainder of the judgment against DuPont.
Background
Palmas and Productora maintain that DuPont had knowledge of a defect in its early formulation of the commercial plant fungicide Benlate WP; that DuPont recklessly reformulated Benlate to create Ben-late DF, also a defective product; and that after Benlate DF users reported plant damage, DuPont perpetuated a coverup and distributed Benlate DF in Costa Rica by misrepresenting and concealing the defective nature of the product, resulting in substantial damage to their nursery plants. Productora sued DuPont in Miami-Dade County Circuit Court, Case No. 97-18186; Palmas sued DuPont in Miami-Dade County Circuit Court, Case No. 97-18181. Each alleged product defect, negligence, and common law fraud claims. The nurseries also sought treble damages under the Florida RICO (Racketeer Influenced and Corrupt Organization) Act. The cases were consolidated for discovery, then later for trial before the same jury.
Pretrial, the nurseries alleged that in 1992 DuPont conducted secret Benlate tests in Monte Vista, Costa Rica, and that DuPont had destroyed both the plants and test results that established Benlate’s defective nature. The nurseries sought to strike DuPont’s pleadings, to have DuPont sanctioned for destruction of evidence, and to have an adverse inference jury instruction read to the jury. DuPont vehemently denied that any Benlate testing had taken place at Monte Vista or that any test results existed. Following a number of evi-dentiary hearings on this matter, the trial court concluded that DuPont had conducted Benlate tests in Monte Vista and had destroyed the results of those tests. Finding that DuPont’s denials about the testing and the results had not deceived anyone, the trial court denied the request to strike DuPont’s pleadings and decided instead on what it described as the “less draconian sanction” of giving a permissive adverse inference jury instruction. That instruction advised the jury that Benlate testing had occurred at Monte Vista; that “DuPont had the obligation to preserve the evidence from those tests, but nonetheless destroyed the evidence”; and that the jury could, but was not obligated to, infer from these facts that the test results were unfavorable to DuPont.
Following a six-week trial, the jury returned a verdict for the nurseries on all claims. Thereafter, in response to DuPont’s motions to set aside the verdict, for new trial, and for remittitur, the trial court set aside the RICO verdict and its trebling of damages. The trial court also decreased the damages awarded to Producto-ra by $110,791, while otherwise rejecting DuPont’s post-trial motions to set aside the verdict or grant a new trial. Judgment was entered against DuPont in favor of Palmas in the amount of $12,600,000, and against DuPont in favor of Productora in the amount of $13,850,289. The nurseries appeal from the directed Verdict on the RICO claims; DuPont appeals from the $26,450,289 judgments in the nurseries’ favor.
I.
The Nurseries’ Appeal
The nurseries appeal from the trial court’s order directing a verdict on their RICO claims, arguing that the trial court erred in concluding that reliance was an element of a civil RICO claim — an element they say they proved. We disagree and affirm the directed verdict not only because the nurseries failed to establish causation, that is, damage flowing from reliance, but also because they failed to prove that the RICO defendant, or person, DuPont was distinct from the RICO enterprise, and because the RICO count, at least in part, is preempted by federal law.
A.
Causation: Damage Flowing From Reliance
The nurseries sought a treble damages award against DuPont in this products liability case under the provisions of section 772.104 of the Florida Statutes. That section provides that “[a]ny person who proves by clear and convincing evidence that he or she has been injured by reason of any violation” of Florida’s RICO act, may recover “threefold the actual damages sustained_” § 772.104, Fla. Stat. (2003). Thus, to recover, the nurseries had to prove that they were injured “by reason of’ DuPont’s alleged criminal activities.
Where, as here, a private party alleges mail or wire frauds as the criminal, or predicate, acts underpinning a civil RICO claim, that party must prove more than the defendant’s intentional participation in a scheme to defraud in violation of the federal mail or wire fraud statutes. The claimant must also show that his injury was caused by, that is, his damage was “by reason of,” the predicate mail or wire fraud acts. To sustain this burden, reli-anee on the predicate mail or wire fraud acts must be demonstrated:
When a private plaintiff relies on a violation of the mail or wire fraud statutes as a predicate act for civil RICO, he faces an additional hurdle before he can obtain recovery: he must show not only that the mail or wire fraud statutes have been violated, but also that he has suffered injury as a result of the violation. Section 1964(c)[the federal counterpart of section 772.104 of the Florida Statutes] provides civil remedies to those persons who are injured “by reason of’ racketeering activity.... A civil RICO plaintiff must show ... that he was injured by reason of the defendant’s acts of deception. As the Supreme Court stated in Sedima [Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)], “the plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation.” The Court went on to hold that the plaintiffs damages must “flow .from the commission of the predicate acts.” Section 1964(c), as interpreted by the Supreme Court and lower courts, thus imposes a proximate cause requirement: the plaintiffs injury must have been proximately caused by the commission of the predicate acts.
There is some question whether the proximate cause requirement limits damages recoverable to those caused directly by the predicate act (e.g., by reliance on fraudulent misrepresentations) or to those caused indirectly by the predicate act (e.g., by purchasing property at a price that has been artificially inflated by a scheme to defraud). We have taken the more restrictive view, holding that a plaintiff has standing to sue under section 1964(c) only if his injury flowed directly from the commission of the predicate acts. This means that, when the alleged predicate act is mail or wire fraud, the plaintiff must have been a target of the scheme to defraud and must have relied to his detriment on misrepresentations made in furtherance of that scheme. See O’Malley v. O’Neill, 887 F.2d 1557, 1563 & n. 9 (11th Cir.1989) ....
Pelletier v. Zweifel, 921 F.2d 1465, 1499 (11th Cir.1991)(emphasis added)(some citations omitted).
As this court has confirmed, “indirect injuries, that is injuries sustained not as a direct result of predicate acts ... will not allow recovery under Florida RICO.” O’Malley v. St. Thomas Univ., Inc., 599 So.2d 999, 1000 (Fla. 3d DCA 1992)(adopt-ing the reasoning in O’Malley v. O’Neill, 887 F.2d 1557 (11th Cir.1989)).
In a civil RICO action predicated upon mail or wire fraud, “[t]he plaintiff has the burden of proving: (1) that the defendant intentionally participated, (2) in a scheme to defraud, (3) the plaintiff of money or property, (4) by means of material misrepresentations, (5) using the mails or wires, (6) and that the plaintiff relied on a misrepresentation made in furtherance of the fraudulent scheme, (7) that such misrepresentation would have been relied upon by a reasonable person, (8) that the plaintiff suffered injury as a result of such rebanee, and (9) that the plaintiff incurred a specifiable amount of damages.” Sikes v. Teleline, Inc., 281 F.3d 1350, 1360-61 (11th Cir.2002)(footnotes omitted); see Green Leaf Nursery v. E.I. DuPont De Nemours and Co., 341 F.3d 1292, 1306 (11th Cir.2003)(to establish a RICO fraud claim predicated on mail or wire fraud, plaintiffs must make the same showing of reasonable reliance that is required to establish common law fraud). Thus, where a civil RICO plaintiff fails to prove that he actually saw or was aware of, let alone relied upon, any false mail or wire communication, judgment is properly entered against him. Beck v. Prupis, 162 F.3d 1090, 1097 (11th Cir.1998); Special Purpose Accounts Receivable Co-op. Corp. v. Prime One Capital Co., L.L.C., 202 F.Supp.2d 1339, 1349 (S.D.Fla.2002)(secured creditors lacked standing to assert alleged acts of mail and wire fraud as predicate acts supporting their claims against joint venture company, vehicle leasing corporation, and corporate officer for violations of RICO, inasmuch as creditors could not have relied upon misrepresentations that allegedly were made by defendants to third-party lessees as part of the underlying scheme to defraud creditors of their lease proceeds and motor vehicles); TransPetrol, Ltd. v. Radulovic, 764 So.2d 878, 881 (Fla. 4th DCA 2000) (dismissing civil RICO claim upon finding that, like the plaintiff in Beck, TransPetrol did not allege that it had relied on defendants’ alleged false statements or documents, and thus the production of false documents could not have been the proximate cause of TransPetrol’s injury); State v. American Tobacco Co., No. CL95-1466 AH, 1996 WL 788371, at *1 (Fla.Cir.Ct. Dec.13, 1996)(“a private party suing for relief under Florida’s RICO Act must allege and prove proximate cause and detrimental reliance when seeking civil damages under the Act on a fraud theory”)(emphasis in original).
The nurseries based their RICO claims on nine “predicate” acts:
(1) a letter, dated August 11, 1989, from T.R. Vaux, DuPont’s Benlate sales manager, to purchasers of Benlate 50 DF, stating that a number of batches of the product were contaminated with low levels of atrazine (Plaintiffs’ Exhibit 108);
(2) a letter, dated August 24, 1989, from Ron Hamlen, DuPont’s registration specialist, to the EPA, stating that a small portion of the 1989 Benlate 50 DF was contaminated with low levels of atrazine (Plaintiffs’ Exhibit 121);
(3) a letter, dated December 27, 1989, from John A. Krol, DuPont’s vice president of Ag Products, to all purchasers of Benlate 50 DF, stating that a small portion of Benlate was inadvertently contaminated with atrazine herbicides and had been recalled from the market and that the Benlate currently available was safe to purchase (Plaintiffs’ Exhibit 120);
(4) a letter dated April 3, 1991, from Leon J. De Leon to Jaime Gurdian of Abonos Superior, DuPont’s distributor, stating that the Benlate 50 DF shipped to Costa Rica was not contaminated (Plaintiffs’ Exhibit 90);
(5) a letter dated November 6, 1992, from Thomas C. Humphrey to DuPont customers stating that based on scienti-fíe testing, DuPont was not able to cause any crop damage from applications of Benlate and that DuPont had decided to no longer pay claims (Plaintiffs’ Exhibit 112);
(6) a letter dated September 26, 1991, from Thomas M. Burke, DuPont’s outside litigation counsel to Glen Baldwin, DuPont’s in-house counsel stating that from a litigation aspect, it was better to leave as unresolved the cause of various growers’ damage (Plaintiffs’ Exhibit 89);
(7) DuPont’s 1-800 Benlate hot-line assurances from as early as July 1991 until early 1992 that DuPont had been unable to detect a problem with Benlate or reproduce damage in plants (Plaintiffs’ Exhibits 59 and 60);
(8) a letter dated July 1993 from Morris Bailey, DuPont’s Benlate resolution manager, to one of plaintiffs’ representatives stating that based upon DuPont’s testing and research, Benlate could not have contributed to the reported plant damage and that DuPont did not see any plant damage in its Benlate tests (Plaintiffs’ Exhibit 75);
(9)a nationally covered press conference conducted on June 16th, 1993, by a DuPont employee stating that DuPont’s 1992 testing did not reveal any scientific evidence indicating that Benlate was defective (Plaintiffs’ Exhibit 36, Defendant’s Exhibit 53).
As the trial court noted in its order granting a directed verdict, with one exception (predicate act number 8) relating to a communication which occurred after the nurseries had stopped using Benlate, the jury heard no evidence that the nurseries saw or knew about any of these acts, all but one of which were directed to other persons. The trial court, therefore, correctly found that the nurseries did not submit “any evidence that they relied on any particular predicate act.”
In light of our holding in O’Malley that RICO plaintiffs must prove direct injury, not just any injury that may be traced to a predicate act, we reject the nurseries’ arguments that they might still recover under a number of alternative (target/third party, fraud-on-the-regulator, and body of public information) theories that allegedly relax the reliance requirement. See Byrne v. Nezhat, 261 F.3d 1075, 1110, 1111 (11th Cir.2001)(“[a RICO] plaintiff lacks standing to assert, as the basis for mail fraud, misrepresentations directed toward another person or entity.... “When the alleged predicate act is mail ... fraud, the plaintiff must have been a target of the scheme to defraud and must have relied to his detriment on misrepresentations made in furtherance of that scheme’ ”)(quoting Pelletier, 921 F.2d at 1499-1500) (emphasis added); Johnson Enters, v. FPL Group, Inc., 162 F.3d 1290, 1318 (11th Cir.l998)(contractor suffered no direct injuries as a consequence of misrepresentations made to a franchising authority which approved franchise applications); Bivens Gardens Office Bldg., Inc., v. Barnett Banks of Fla., Inc., 140 F.3d 898, 906, 908 (11th Cir.l998)(“a party whose injuries result ‘merely from the misfortunes visited upon a third person by the defendant’s acts’ lacks standing to pursue a claim under RICO.... [T]he test for RICO standing is whether the alleged injury was directly caused by the RICO violation, not whether such harm was reasonably foreseeable”)(quoting Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992)); Allocco v. City of Coral Gables, 221 F.Supp.2d 1317, 1363 (S.D.Fla.2002)(“a plaintiff cannot base a RICO claim for fraud on misrepresentations made to third parties”)(applying Florida RICO); Special Purpose Accounts Receivable Co-op. Corp. v. Prime One Capital Co., L.L.C., 202 F.Supp.2d 1339, 1349 (S.D.Fla.2002)(a plaintiff cannot base a RICO claim for fraud on misrepresentations made to third parties because the injury is not “direct”); see also Sandwich Chef of Texas, Inc. v. Reliance Nat. Indem. Ins. Co., 319 F.3d 205, 223-24 (5th Cir.2003)(refusing to accept “fraud on the regulator” as a “direct and contemporaneous RICO injury,” confirming that the “target” theory recognized by the Fourth Circuit in Summit Properties Inc. v. Hoechst Celanese Corp., 214 F.3d 556 (5th Cir.2000) and by the Fifth Circuit in Procter