The 6th Circuit Court of Appeals recently resolved a Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) dispute between two agricultural-chemical distributors, Drexel Chemical Company and Albaugh, Inc. The dispute involved Drexel’s ability to recover certain “data compensation” costs from Albaugh pursuant to a contract between the two. The court ruled that according to the parties’ contract, only “data compensation” costs that were actually paid during the contract’s term were recoverable. In contrast, costs incurred during the contract’s term but not paid until after the contract’s termination were not recoverable. Additionally, the court ruled that the contract’s generic description of recoverable “costs” was not specific enough under Tennessee law to include attorney’s fees and arbitration costs. The court’s ruling demonstrates the importance of carefully describing the scope of “data compensation” costs in any FIFRA data cost-sharing contract. The Drexel opinion is also notable for the 6th Circuit’s ruling regarding when a data compensation “offer to pay” is “irrevocable.” The 6th Circuit rejected Drexel’s argument that data compensation liability is irrevocable upon the mere submission of an offer to pay, thereby suggesting that an original data submitter must prove something more before establishing a right to data compensation. This ruling could have a potentially significant impact on future data compensation cases, particularly those involving companies who abandon their pesticide registrations after submitting offers to pay but before making any actual payment.
I recently published an article with more detail about this ruling, but in summary, the Drexel opinion underscores the importance of carefully delineating the scope of recoverable “data compensation” costs under FIFRA cost-sharing contracts. Because potentially millions of dollars in “data compensation” costs may be at issue, it is important for parties to expressly clarify in their cost-sharing contracts whether the submission of an offer to pay is sufficient to trigger a party’s payment obligations and whether arbitration costs and attorney’s fees are within the meaning of recoverable “data compensation” costs.