Courts: Decision concerns charge that firm defrauded growers in fungicide settlements.
February 03, 1999 | From Times Staff and Wire Services
DuPont Co., the largest chemical firm in the U.S., can face new fraud lawsuits that accuse the company of tricking growers into accepting lower settlements for damage caused by a fungicide the firm made, a federal appeals court ruled Tuesday.
The U.S. 9th Circuit Court of Appeals in San Francisco held that growers in Hawaii, California and other states can use allegations that DuPont hid evidence that the fungicide Benlate was contaminated with weed killer.
The decision exposes DuPont to millions of dollars in new liability.
The Delaware-based firm has already paid growers and attorneys at least $1 billion to settle about 500 lawsuits involving Benlate, which was taken off the market in 1991.
After those settlements, many growers filed new suits when they discovered that DuPont had improperly withheld its test results showing that Benlate was contaminated.
Based on allegations in those new suits, two U.S. District courts found that DuPont “had intentionally engaged in fraudulent conduct” by withholding the evidence.
One judge even ordered the U.S. attorney in Atlanta to prosecute DuPont for criminal contempt. But on Dec. 31, 1998, the company paid $11.25 million in a civil settlement to resolve the matter.
DuPont officials couldn’t comment on the 9th Circuit decision because they hadn’t seen it. But Cathy Andriadis, a DuPont spokeswoman, expressed surprise at the ruling.
Stephen Cox, a San Francisco attorney who represented Hawaii orchid growers in a Benlate suit against DuPont, estimated the decision could expose DuPont to at least $300 million in damages based on earlier settlements.
“That doesn’t take into account the potential for punitive damages, which could be awarded in these types of suits,” Cox said.
In the Hawaii case, a lower-court judge said terms of the voluntary settlements between growers and DuPont disallowed a second fraud suit despite the withholding of the tests. The 9th Circuit disagreed.
Under Delaware law–which governed settlements reached with some growers–parties with evidence of fraudulently procured settlements could either void the settlements or take the money and file new fraud suits, the appeals court said.
“Enforcing such a settlement would undermine the policy of encouraging voluntary settlements,” the 9th Circuit said. “If litigants cannot assume the representations of the opposing party are made in good faith, they will be reluctant to settle.”
Shares of DuPont closed at $51.56, up 63 cents on the New York Stock Exchange.