Monsanto Company v. William Ruckelshaus, Administrator, Environmental Protection Agency ( 1985 )

McMILLIAN, Circuit Judge.

The Environmental Protection Agency (EPA) appeals from an order entered in the District Court for the Eastern District of Missouri granting permanent injunctive relief. The district court enjoined EPA and the Scientific Advisory Panel (SAP) from further consideration of a pesticide registration application submitted by an unidentified applicant until EPA discloses to Monsanto Co. the identity of the applicant and the active ingredient of the pesticide. Pursuant to a consent decree, EPA and Monsanto established the SAP and designated review by the SAP as a remedy to any competitive harm Monsanto may have suffered as a result of EPA’s admittedly improper disclosure of certain information provided by Monsanto to EPA in connection with Monsanto’s registration of its commercially successful herbicide Roundup. EPA argues that the district court improperly modified the terms of this consent decree in granting permanent injunc-tive relief because Monsanto had not met the heavy burden of showing the necessity of the modification. In addition, EPA argues that the district court misunderstood the nature of SAP review and ignored Monsanto’s waiver of the information in the consent decree. Finally, EPA argues that the district court did not fully consider statutory provisions prohibiting disclosure by EPA of confidential information of registration applicants. For the reasons discussed below, we reverse the order of the district court.

This proceeding arose out of Monsanto’s constitutional challenge¹ of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), as amended, 7 U.S.C. § 136 et seq. (1982). FIFRA authorized EPA to consider one company’s submitted registration data in support of another company’s registration application for a similar chemical, subject to certain restrictions.² During the pendency of Monsanto’s constitutional action, the district court entered a pretrial order to protect Monsanto’s registration application information from disclosure by EPA to other applicants. The order required EPA to give Monsanto sixty days notice and to disclose to Monsanto the identity of the entity seeking disclosure before EPA could disclose the information. FIFRA prohibits the disclosure of information that “contains or relates to trade secrets or commercial or financial information.” Id. § 136h(b). Contrary to the district court’s order and FIFRA, EPA disclosed confidential information submitted in connection with Monsanto’s registration of its commercially successful herbicide Roundup to a Washington, D.C., attorney who had filed a request for the information under the Freedom of Information Act (FOIA), 5 U.S.C. § 552(a) (1982). This disclosure was admittedly improper.

Monsanto then obtained an order from the district court requiring EPA to show cause why the court should not hold EPA in contempt. The district court ordered EPA to retrieve the improperly disclosed documents and also ordered the Washington attorney to return the documents and all copies of the documents. The attorney did so and submitted an affidavit attesting that neither he nor his client had retained any copies of the documents. In addition, the district court required the attorney to disclose the identity of his client. The attorney refused on the grounds of attorney-client privilege.

On August 31, 1982, after a period of negotiation, Monsanto and EPA entered into a consent decree, which the district court later approved and entered as a final judgment. The consent decree established a remedy for any competitive harm Monsanto may have suffered as a result of EPA’s improper disclosure of the Roundup information. The purpose of the agreement was to prevent EPA approval of registration applications for any pesticide that a new applicant may have developed through the use of Monsanto’s confidential information about Roundup. The consent decree provided that EPA would screen all registration applications received after May 7, 1982, for products that have the same or similar active ingredient as that in Roundup. EPA would then divert all such registration applications to the SAP to determine “whether the materials submitted with the covered applications have been developed independently of the disclosed information.” Monsanto Co. v. Gorsuch, No. 79-0366-0(1), slip op. at 2 (E.D.Mo. Aug. 31, 1982) (consent decree). Although EPA notified Monsanto when it diverted registration applications to the SAP and although Monsanto had the right to “make presentations” to the SAP, the consent judgment did not give Monsanto the right to a full-scale adversarial proceeding at which Monsanto could challenge the independent development of products diverted to the SAP review.

Importantly, Monsanto waived access “to the other’s [the applicant who EPA had referred to SAP review] data or formula information without the other’s consent.” Id. at 3. Moreover, the consent decree expressly recognized that “all deliberations of the [SAP] shall be in executive session.” Id. In other words, the SAP review was not to be open to the public or to the parties. The consent decree relied upon the SAP’s independent judgment and expertise to determine whether the applicant developed the product independent of Monsanto’s data and did not rely upon the parties’ presentations to sharpen the issues.

According to the consent decree, if a majority of the SAP determined that the registration application contained only information that the applicant had developed independently of the improperly disclosed information, then EPA would “formally accept” the registration application and the normal registration process would proceed. Id. If the SAP found that any of the information in the registration application had not been developed independently, EPA would refuse to accept the registration application unless EPA determined that the SAP did not have sufficient information before it to support its conclusion. Id.

On August 22, 1983, EPA notified Monsanto that it had received a pesticide registration application for a product containing an active ingredient similar to that in Roundup and that, pursuant to the terms of the consent decree, it had referred the application to the SAP. Monsanto then requested EPA to disclose the identity of the applicant and the active ingredient to aid it in the development of its presentation to the SAP. Both EPA and the SAP refused this request, asserting that nondisclosure was necessary to maintain the confidentiality of the applicant under the consent decree and FIFRA. Monsanto then obtained a temporary restraining order (TRO) that prevented further consideration of the registration application by the SAP until EPA provided Monsanto with a “more appropriate and complete submission.”³

Because the TRO did not specifically require EPA to disclose the identity of the applicant and the active ingredient and because the applicant asserted the confidentiality of such information, EPA determined that it would be premature to disclose the information. The district court then made the temporary order permanent, finding that EPA’s refusal to disclose the requested information denied Monsanto due process. Monsanto Co. v. Ruckel-shaus, No. 79-0366-C(l), slip op. at 6 (E.D.Mo. Nov. 2, 1983) (injunction). Although the district court’s order did not specifically require EPA to disclose the applicant’s identity and the active ingredient, the parties agree that in order to comply with the injunction EPA would have to disclose the registration application and supporting submission in a substantially unedited form.

Modification of the Consent Decree

The district court has inherent equitable powers to modify a consent decree, whether the parties entered into the decree after negotiation or litigation, upon a showing of changed circumstances which cause such extreme and unexpected hardship that the decree is oppressive. United States v. Swift & Co., 286 U.S. 106,114, 52 S.Ct. 460, 462, 76 L.Ed. 999 (1932) (Swift); Humble Oil & Refining Co. v. American Oil Co., 405 F.2d 803, 813 (8th Cir.), cert. denied, 395 U.S. 905, 89 S.Ct. 1745, 23 L.Ed.2d 218 (1969). A court may modify the parties’ rights and obligations under a consent decree if it finds that the judgment has become “void” or that it is “no longer equitable.” Fed.R.Civ.P. 60(b)(4), (5). See also United States v. Atlantic Refining Co., 360 U.S. 19, 23, 79 S.Ct. 944, 946, 3 L.Ed.2d 1054 (1959) (modification of consent decree); EEOC v. Safeway Stores, Inc., 611 F.2d 795, 798-99 (10th Cir.1979), cert. denied, 446 U.S. 952, 100 S.Ct. 2918, 64 L.Ed.2d 809 (1980). Modification of a consent decree involves the granting of extraordinary relief. See, e.g., Philadelphia Welfare Rights Organization v. Shapp, 602 F.2d 1114, 1120-21 (3d Cir.1979). In addition to the power to modify the consent decree, a court has the power to interpret vague or confusing language to implement the purposes of the decree. See Pasadena City Board of Education v. Spangler, 427 U.S. 424, 438, 96 S.Ct. 2697, 2705, 49 L.Ed.2d 599 (1976); Brown v. Neeb, 644 F.2d 551, 559-60 (6th Cir.1981).

The consent decree between Monsanto and EPA neither required EPA to disclose the identity of the applicant and the active ingredient to Monsanto nor prohibited such a disclosure. The consent decree does allow Monsanto to make a presentation to the SAP, but it does not allow Monsanto access to the applicant’s data or formula information. Moreover, Monsanto and EPA agreed that the SAP would conduct its review in executive session. The district court’s injunction gives Monsanto access to the identity of the applicant and the active ingredient, which the consent decree neither required nor prohibited.

We could view the district court’s injunction as a reasonable interpretation of Monsanto’s right set forth in the consent decree to make a presentation to the SAP⁴ or as a modification of the consent decree necessary to afford Monsanto due process. In either case, whether we characterize the order as an interpretation of ambiguous language or as a modification, the district court held that due process required EPA to disclose the identity of the applicant and the active ingredient to Monsanto. Therefore, we proceed to the due process issue.

Due Process

The due process clause requires that notice be reasonably calculated to inform parties of proceedings which may directly and adversely affect their legally protected interests. In the administrative context, due process requires that interested parties be given a reasonable opportunity to know the claims of adverse parties and an opportunity to meet them.

North Alabama Express, Inc. v. United States, 585 F.2d 783, 786 (5th Cir.1978) (citations omitted); see Morgan v. United States, 304 U.S. 1, 58 S.Ct. 773, 82 L.Ed. 1129 (1938) (Morgan)-, United States Lines, Inc. v. Federal Maritime Comm’n, 189 U.S.App.D.C. 361, 584 F.2d 519 (1978). Here, the district court found that due process requires “a reasonable opportunity to know the claims of the opposing parties and to meet them.” Monsanto Co. v. Ruckelshaus, No. 79-0366-0(1), slip op. at 5 (order of Nov. 2, 1983), citing Morgan, 304 U.S. at 18, 58 S.Ct. at 776. Although the identity of the opposing parties and the nature of their claims is an essential element of due process in an adversarial administrative proceeding,⁵ we believe that the district court misconceived the nature of the consent decree and frustrated its purpose by imposing such a requirement in this case.

Parties may waive rights afforded them under the due process clause. D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 185, 92 S.Ct. 775, 782, 31 L.Ed.2d 124 (1972); National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-16, 84 S.Ct. 411, 414-15, 11 L.Ed.2d 354 (1964). Parties to a consent decree may waive their right to litigate the particular issues raised. United States v. Armour & Co., 402 U.S. 673, 91 S.Ct. 1752, 29 L.Ed.2d 256 (1971). While there is a presumption against waiver of due process, Brookhart v. Janis, 384 U.S. 1, 86 S.Ct. 1245, 16 L.Ed.2d 314 (1966), courts look to the nature and purpose of a consent judgment when determining what procedures are necessary to effectuate their purpose and to comport with due process.

In this case, the parties did not design the SAP review to be an adversarial proceeding. The consent decree did not provide that Monsanto could contest before the SAP the independent development of an applicant’s product or that, the registration applicants would “defend” charges that the registration application was not the product of independent development. Rather, the SAP review was designed as an independent and specialized administrative inquiry. Monsanto and EPA agreed to rely upon the SAP’s expertise to determine whether the registration applicant had developed its registration application and supporting data independently of Monsanto’s Roundup data.

In addition, the SAP review does not impair Monsanto’s property interest in the data required to be submitted to EPA under FIFRA. See Ruckelshaus v. Monsanto Co., 104 S.Ct. at 2875-80. Under the consent decree, SAP review determines whether the registration applicant developed the registration application and supporting data independently of Monsanto’s Roundup data for purposes of EPA’s acceptance of the registration application for the new product. If the SAP review determines that the registration applicant did not develop the registration application and data independently, then EPA will not accept the registration application and, therefore, the SAP prevents the registration applicant from profiting from the EPA’s improper disclosure of Monsanto’s confidential information about Roundup. If, however, the SAP finds that the registration application was independently developed, then Monsanto’s confidential Roundup data are not involved and EPA can then accept the registration application. The SAP review is not designed as a judicial or adversarial administrative proceeding to determine whether the registration applicant misappropriated Monsanto’s trade secrets. The SAP review, therefore, does not impair Monsanto’s property interest; rather, it is a screening mechanism designed to prevent a competitive harm to Monsanto. Importantly, the registration applicant whose registration application has been referred to the SAP review is not an opposing or adverse party to Monsanto in the context of the SAP review. The applicant has submitted a registration application for a product that contains an active ingredient similar to the active ingredient in Roundup. The SAP review determines only whether the registration application and data were developed independently of Monsanto’s confidential Roundup data for purposes of registration under FIFRA.

Monsanto asserts that if it knew the identity of the registrant and the active ingredient in the new product, it could search the public record to determine whether the applicant had been conducting research and product development in the particular area of that new product. While Monsanto might be disadvantaged to an extent, nevertheless EPA and Monsanto designated the SAP to conduct an inquiry which presumably would include the same inquiry about the product as Monsanto might make. Monsanto is not limited in the suggestions it may make to SAP on methodology to ascertain whether or not the applicant’s product has been derived from independent research, rather than from acquisition of confidential material indirectly obtained through Monsanto.

While Monsanto’s presentation to the SAP may be limited, nevertheless it has agreed to rely on the integrity of SAP to assure that the applicant has proceeded independently in developing the new processes. Under these special circumstances, Monsanto’s objection based on due process considerations must be rejected. Monsanto makes no showing that in exercising its expertise SAP will not make an appropriate investigation, an investigation that will protect Monsanto’s interests. Moreover, as indicated, supra, we are dealing only with a screening mechanism designed to prevent competitive harm to Monsanto; Monsanto may still challenge the propriety of the registration in administrative proceedings, if the SAP review decides that registration may proceed.

Confidentiality

EPA also argues that it is prohibited under FIFRA from prematurely disclosing the identity of the registration applicant and the active ingredient when disclosure would result in unforeseen competitive harm to the registration applicant. 7 U.S.C. § 136h(b).⁶ Monsanto argues that the information is not confidential and, therefore, in fact, not protected from disclosure by the EPA, and that FIFRA requires EPA to disclose the identity of the registration applicant and the active ingredient.

FIFRA requires EPA to publish in the Federal Register upon receipt of the registration application the name of the registration applicant and the identity of the pesticide when the pesticide contains a new active ingredient or if it requires a changed use pattern. 7 U.S.C. § 136a(c)(4). EPA acknowledges that in the present case the registration applicant’s pesticide contains a new active ingredient and that, if EPA had “formally accepted” the registration application, the statute would require publication in the Federal Register of the registration applicant’s identity and active ingredient. EPA contends, however, that a registration application which has been referred to the SAP review process pursuant to the terms of the consent decree will not be “formally accepted” until the SAP determines that the registration application and supporting data were developed independently of Monsanto’s improperly disclosed data.

The SAP review process was designed to prevent the acceptance of a registration application for a pesticide developed with improperly disclosed data. EPA, therefore, agreed not to “formally accept” a registration application for a pesticide containing similar active ingredients to Roundup until the SAP determined that the registration application in question was developed independently of the improperly disclosed data. Monsanto v. Gorsuch, No. 79-0366-0(1), slip op. at 2 (E.D.Mo. Aug. 31, 1982) (consent decree). In other words, EPA agreed to subject a potentially innocent class of new pesticide registration applications to the additional procedural step of a SAP review to prevent any competitive harm to Monsanto from EPA’s improper disclosure. Monsanto agreed that EPA would not “formally accept” registration applications which had been referred to the SAP until the SAP determined that the registration application was developed independently of the Roundup data. EPA is under no statutory duty to publish the identity of the registration applicant and the active ingredient in the Federal Register until the registration application is cleared by the SAP review and thus accepted for registration. Premature disclosure of the identity of the registration applicant and the active ingredient may expose the registration applicant to substantial and unanticipated risk of competitive harm. Moreover, the consent decree contemplated that the SAP would hold its review in executive session in order to protect Monsanto’s and the registration applicant’s trade secrets.

Accordingly, the order of the district court is reversed.

1 . Ruckelshaus v. Monsanto Co., — U.S. —, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984).

2 . FIFRA is a chemical licensing, labelling, and regulatory statute. It prohibits any person from selling or distributing a pesticide that is not registered with EPA. 7 U.S.C. § 136a(a) (1982). The statute requires the applicant to submit test data supporting the environmental safety of the pesticide. In 1972, Congress authorized EPA to use one applicant’s registration data to support another applicant’s application. EPA could not, however, disclose the confidential trade secrets of one applicant to another applicant.

In 1978, Congress expanded the availability of submitted environmental safety data to support other applications. FIFRA no longer prohibited the use or disclosure of trade secrets, but made the data available on the basis of "age.” Applicants who have submitted data after- September 30, 1978, on a new active ingredient are afforded exclusive use for 10 years. Id. § 136a(c)(l)(D)(i). A new applicant or EPA may use data submitted after December 31, 1969, for 15 years if the applicant offers to compensate the original submitter of the data. Id. § 136a(c)(l)(D)(ii). Finally, data that does not qualify for either the 10 or 15 year period is available to EPA to consider without limitation.

Monsanto alleged that these provisions constituted an unconstitutional taking of property without paying just compensation. In addition, Monsanto urged that the data-consideration provisions violated the fifth amendment because EPA was taking the information for a private rather than public purpose. Finally, Monsanto contended that the statute violated its due process rights and constituted an unconstitutional delegation of judicial power.

The Supreme Court disagreed with Monsanto and upheld the constitutionality of the FIFRA data-consideration scheme. Ruckelshaus v. Monsanto Co., —U.S.—, 104 S.Ct. 2862, 81 S.Ct. 815 (1984). The Court held that "to the extent that Monsanto has an interest in its health, safety, and environmental data cognizable as a trade-secret property right under Missouri law, that property right is protected by the Taking Clause of the Fifth Amendment.” Id., 104 S.Ct. at 2874. The statute, however, merely conditioned registration upon the future use of the data in consideration of other applications. Therefore, the statute did not undermine a "reasonable investment-backed expectation.” Id. at 2875-79. The Court found an expressed and reasonable public purpose behind the data-consideration provisions. Id. at 2879-80. Congress believed these provisions would eliminate costly, duplicative research and thereby ease the entry into the pesticide market and stimulate competition. Id.

3 . The district court stated that "Monsanto is at a distinct disadvantage in the proceeding because it does not know the identity of the applicant Further, Monsanto does not know what data has been submitted in support of the applicant’s registration application.” Monsanto Co. v. Ruckelshaus, Civ. No. 79-0366-C(l), slip op. at 3-4 (E.D.Mo. Oct. 14, 1983) (temporary restraining order).

4 . See Sarabia v. Toledo Police Patrolman’s Ass’n, 601 F.2d 914 (6th Cir.1979). Despite the absence of any express authority, the court in Sarabia concluded that "it was within the power of the district court to suspend a civil service rule whose application prevented achievement of the stated goal of the consent decree.” Id. at 918. In the present case, if the district court found that the EPA’s refusal to disclose the identity of the applicant and the active ingredient frustrated the purpose of the consent decree, it could modify the original decree to effectuate its purpose.

5 . The cases that the district court relied upon and that Monsanto cites to this court were all adversarial proceedings. See, e.g., Morgan v. United States, 304 U.S. 1, 58 S.Ct. 773, 82 L.Ed. 1129 (1938) (order of Secretary of Agriculture fixing maximum rates of commission at stockyards); North Ala. Exp., Inc. v. United States, 585 F.2d 783 (5th Cir.1978) (ICC increased operating authority to motor common carrier).

6 . Section 10(b) of the 1972 amendments, 7 U.S.C. § 136h(b), prohibits EPA from publicly disclosing information which EPA believes contains or is related to "trade secrets or commercial or financial information.” As noted in Ruckelshaus v. Monsanto Co., 104 S.Ct. at 2869, the 1978 amendments revised FIFRA’s data-consideration and data-disclosure provisions.

Congress added a new subsection, § 10(d), 7 U.S.C. § 136h(d), that provides for disclosure of all health, safety, and environmental data to qualified requesters, notwithstanding the prohibition against disclosure of trade secrets contained in § 10(b) [, 7 U.S.C. § 136h(b) ]. The provision, however, does not authorize disclosure of information that would reveal "manufacturing or quality control processes” or certain details about deliberately added inert ingredients unless "the Administrator has first determined that the disclosure is necessary to protect against an unreasonable risk of injury to health or the environment.” §§ 10(d)(1)(A) to (C).

Id. at 2869-70 (footnote omitted).