Ruckelshaus v. Monsanto Co.

RUCKELSHAUS, ADMINISTRATOR, UNITED STATES ENVIRONMENTAL PROTECTION AGENCY v. MONSANTO CO.

Appeal from the United States District Court for the Eastern District of Missouri.

No. 83-196. Argued February 27, 1984 — Decided June 26, 1984.

564 F. Supp. 552, vacated and remanded.

“Blackmun, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Marshall, Powell, Rehnquist, and Stevens, JJ., joined, and in which O'Connor, J., joined, except for Part IV-B and a statement on p. 1013. O'Connor, J., filed an opinion concurring in part and dissenting in part, post, p. 1021. White, J., took no part in the consideration or decision of the case.”

Deputy Solicitor General Wallace argued the cause for appellant. A. Raymond Randolph, Jr., argued the cause for appellee.

The report occupies pages 986 through 1024 of volume 467 of the United States Reports. The syllabus occupies pages 986 through 989; the opinion of the Court begins at page 990 and ends at page 1020; the separate opinion of Justice O'Connor begins at page 1021 and the report closes at page 1024.

[467 U.S. 986] “The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) authorizes the Environmental Protection Agency (EPA) to use data submitted by an applicant for registration of a covered product (hereinafter pesticide) in evaluating the application of a subsequent applicant, and to disclose publicly some of the submitted data. Under the data-consideration provisions of § 3, as amended in 1978, applicants now are granted a 10-year period of exclusive use for data on new active ingredients contained in pesticides registered after September 30, 1978, while all other data submitted after December 31, 1969, may be cited and considered in support of another application for 15 years after the original submission if the applicant offers to compensate the original submitter. If the parties cannot agree on the amount of compensation, either may initiate a binding arbitration proceeding, and if an original submitter refuses to participate in negotiations or arbitration, he forfeits his claim for compensation. Data that do not qualify for either the 10-year period of exclusive use or the 15-year period of compensation may be considered by EPA without limitation. Section 10, as amended in 1978, authorizes, in general, public disclosure of all health, safety, and environmental data even though it may result in disclosure of trade secrets.”

[467 U.S. 986] “Appellee, a company headquartered in Missouri, is an inventor, producer, and seller of pesticides, and invests substantial sums in developing active ingredients for pesticides and in producing end-use products that combine such ingredients with inert ingredients. Appellee brought suit in Federal District Court for injunctive and declaratory relief, alleging, inter alia, that the data-consideration and data-disclosure provisions of FIFRA effected a ‘taking’ of property without just compensation, in violation of the Fifth Amendment, and that the data-consideration provisions violated the Amendment because they effected a taking of property for a private, rather than a public, purpose. The District Court held that the challenged provisions of FIFRA are unconstitutional, and permanently enjoined EPA from implementing or enforcing those provisions.”

[467 U.S. 987] “Held: 1. To the extent that appellee 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. Despite their intangible nature, trade secrets have many of the characteristics of more traditional forms of property. Moreover, this Court has found other kinds of intangible interests to be property for purposes of the Clause. Pp. 1000-1004.”

[467 U.S. 987] “2. EPA's consideration or disclosure of data submitted by appellee prior to October 22, 1972, or after September 30, 1978, does not effect a taking, but EPA's consideration or disclosure of certain health, safety, and environmental data constituting a trade secret under state law and submitted by appellee between those two dates may constitute a taking under certain conditions. Pp. 1004-1014.”

[467 U.S. 987] “(a) A factor for consideration in determining whether a governmental action short of acquisition or destruction of property has gone beyond proper ‘regulation’ and effects a ‘taking’ is whether the action interferes with reasonable investment-backed expectations. With respect to any health, safety, and environmental data that appellee submitted to EPA after the effective date of the 1978 FIFRA amendments (October 1, 1978), appellee could not have had a reasonable, investment-backed expectation that EPA would keep the data confidential beyond the limits prescribed in the amended statute itself. As long as appellee is aware of the conditions under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data in exchange for the economic advantages of a registration can hardly be called a taking. Pp. 1005-1008.”

[467 U.S. 987] “(b) Prior to its amendment in 1972 (effective October 22, 1972), FIFRA was silent with respect to EPA's authorized use and disclosure of data submitted to it in connection with an application for registration. Although the Trade Secrets Act provides a criminal penalty for a Government employee who discloses, in a manner not authorized by law, any trade-secret information revealed to him during the course of his official duties, it is not a guarantee of confidentiality to submitters of data, and, absent an express promise, appellee had no reasonable, investment-backed expectation that its information submitted to EPA before October 22, 1972, would remain inviolate in the EPA's hands. The possibility was substantial that the Federal Government at some future time would find disclosure to be in the public interest. A fortiori, the Trade Secrets Act, which penalizes only unauthorized disclosure, cannot be construed as any sort of assurance against internal agency [467 U.S. 988] use of submitted data during consideration of the application of a subsequent applicant for registration. Pp. 1008-1010.”

[467 U.S. 988] “(c) However, under the statutory scheme in effect between October 22, 1972, and September 30, 1978, a submitter was given an opportunity to protect its trade secrets from disclosure by designating them as trade secrets at the time of submission. The explicit governmental guarantee to registration applicants of confidentiality and exclusive use with respect to trade secrets during this period formed the basis of a reasonable investment-backed expectation. If EPA, consistent with current provisions of FIFRA, were now to disclose such trade-secret data or consider those data in evaluating the application of a subsequent applicant in a manner not authorized by the version of FIFRA in effect between 1972 and 1978, its actions would frustrate appellee's reasonable investment-backed expectation. If, however, arbitration pursuant to FIFRA were to yield just compensation for the loss in the market value of appellee's trade-secret data suffered because of EPA's consideration of the data in connection with another application (no arbitration having yet occurred), then appellee would have no claim against the Government for a taking. Pp. 1010-1014.”

[467 U.S. 988] “3. Any taking of private property that may occur in connection with EPA's use of data submitted to it by appellee between October 22, 1972, and September 30, 1978, is a taking for a ‘public use,’ rather than for a ‘private use,’ even though subsequent applicants may be the most direct beneficiaries. So long as a taking has a conceivable public character, the means by which it will be attained is for Congress to determine. Congress believed that the data-consideration provisions would eliminate costly duplication of research and streamline the registration process, making new end-use products available to consumers more quickly. Such a procompetitive purpose is within Congress' police power. With regard to FIFRA's data-disclosure provisions, the optimum amount of disclosure to assure the public that a product is safe and effective is to be determined by Congress, not the courts. Pp. 1014-1016.”

[467 U.S. 988] “4. A Tucker Act remedy is available to provide appellee with just compensation for any taking of property that may occur as a result of FIFRA's data-consideration and data-disclosure provisions, and thus the District Court erred in enjoining EPA from acting under those provisions. Neither FIFRA nor its legislative history discusses the interaction between FIFRA and the Tucker Act, and inferring a withdrawal of Tucker Act jurisdiction would amount to a disfavored partial repeal by implication of the Tucker Act. FIFRA's provision that an original submitter of data forfeits his right to compensation from a later submitter for the use of the original submitter's data if he fails to participate in, or comply with the terms of, a negotiated or arbitrated [467 U.S. 989] compensation settlement merely requires a claimant to first seek satisfaction through FIFRA's procedure before asserting a Tucker Act claim. Pp. 1016-1019.”

[467 U.S. 989] “5. Because the Tucker Act is available as a remedy for any uncompensated taking appellee may suffer as a result of the operation of the challenged provisions of FIFRA, appellee's challenges to the constitutionality of the arbitration and compensation scheme of FIFRA are not ripe for resolution. Pp. 1019-1020.”

[467 U.S. 1002] “Trade secrets have many of the characteristics of more tangible forms of property. A trade secret is assignable. . . . A trade secret can form the res of a trust, . . . and it passes to a trustee in bankruptcy.”

[467 U.S. 1003] “Although this Court never has squarely addressed the question whether a person can have a property interest in a trade secret, which is admittedly intangible, the Court has found other kinds of intangible interests to be property for purposes of the Fifth Amendment's Taking Clause.”

[467 U.S. 1004] “[T]hat property right is protected by the Taking Clause of the Fifth Amendment.”

[467 U.S. 1005] “The Court, however, has identified several factors that should be taken into account when determining whether a governmental action has gone beyond ‘regulation’ and effects a ‘taking.’ Among those factors are: ‘the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.’”

[467 U.S. 1006] “We find that with respect to any health, safety, and environmental data that Monsanto submitted to EPA after the effective date of the 1978 FIFRA amendments — that is, on or after October 1, 1978 — Monsanto could not have had a reasonable, investment-backed expectation that EPA would keep the data confidential beyond the limits prescribed in the amended statute itself. Monsanto was on notice of the manner in which EPA was authorized to use and disclose any data turned over to it by an applicant for registration.”

[467 U.S. 1007] “Thus, as long as Monsanto is aware of the conditions under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data by an applicant in exchange for the economic advantages of a registration can hardly be called a taking.”

[467 U.S. 1011] “Thus, with respect to trade secrets submitted under the statutory regime in force between the time of the adoption of the 1972 amendments and the adoption of the 1978 amendments, the Federal Government had explicitly guaranteed to Monsanto and other registration applicants an extensive measure of confidentiality and exclusive use. This explicit governmental guarantee formed the basis of a reasonable investment-backed expectation. If EPA, consistent with the authority granted it by the 1978 FIFRA amendments, were now to disclose trade-secret data or consider those data in evaluating the application of a subsequent applicant in a manner not authorized by the version of FIFRA in effect between 1972 and 1978, EPA's actions would frustrate Monsanto's reasonable investment-backed expectation with respect to its control over the use and dissemination of the data it had submitted.”

[467 U.S. 1011] “The right to exclude others is generally ‘one of the most essential sticks in the bundle of rights that are commonly characterized as property.’ . . . With respect to a trade secret, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data.”

[467 U.S. 1014] “We must next consider whether any taking of private property that may occur by operation of the data-disclosure and data-consideration provisions of FIFRA is a taking for a ‘public use.’ We have recently stated that the scope of the ‘public use’ requirement of the Taking Clause is ‘coterminous with the scope of a sovereign's police powers.’ . . . The role of the courts in second-guessing the legislature's judgment of what constitutes a public use is extremely narrow.”

[467 U.S. 1014] “So long as the taking has a conceivable public character, ‘the means by which it will be attained is . . . for Congress to determine.’ Here, the public [467 U.S. 1015] . . . Congress believed that the provisions would eliminate costly duplication of research and streamline the registration process, making new end-use products available to consumers more quickly. . . . Such a procompetitive purpose is well within the police power of Congress.”

[467 U.S. 1016] “We therefore hold that any taking of private property that may occur in connection with EPA's use or disclosure of data submitted to it by Monsanto between October 22, 1972, and September 30, 1978, is a taking for a public use.”

[467 U.S. 1016] “Equitable relief is not available to enjoin an alleged taking of private property for a public use, duly authorized by law, when a suit for compensation can be brought against the sovereign subsequent to the taking. . . . The Fifth Amendment does not require that compensation precede the taking. . . . Generally, an individual claiming that the United States has taken his property can seek just compensation under the Tucker Act, 28 U. S. C. § 1491.”

[467 U.S. 1019] “Therefore, where the operation of the data-consideration and data-disclosure provisions of FIFRA effect a taking of property belonging to Monsanto, an adequate remedy for the taking exists under the Tucker Act. The District Court erred in enjoining the taking.”

[467 U.S. 1019] “Because we hold that the Tucker Act is available as a remedy for any uncompensated taking Monsanto may suffer as a result of the operation of the challenged provisions of FIFRA, we conclude that Monsanto's challenges to the constitutionality of the arbitration and compensation scheme are not ripe for our resolution.”

[467 U.S. 1020] “We find no constitutional infirmity in the challenged provisions of FIFRA. Operation of the provisions may effect a taking with respect to certain health, safety, and environmental data constituting trade secrets under state law and designated by Monsanto as trade secrets upon submission to EPA between October 22, 1972, and September 30, 1978. But whatever taking may occur is one for a public use, and a Tucker Act remedy is available to provide Monsanto with just compensation. Once a taking has occurred, the proper forum for Monsanto's claim is the Claims Court. Monsanto's challenges to the constitutionality of the arbitration procedure are not yet ripe for review. The judgment of the District Court is therefore vacated, and the case is remanded for further proceedings consistent with this opinion. It is so ordered.”

[467 U.S. 1020] “Justice White took no part in the consideration or decision of this case.”

Editorial note. Justice O'Connor joined all of the Court's opinion except Part IV-B and the Court's conclusion, at page 1013, that EPA's consideration or disclosure of data submitted before October 22, 1972, does not effect a taking. In her view public disclosure of pre-1972 data would effect a taking, because such disclosure was neither permitted by law, nor customary agency practice, nor expected by applicants for pesticide registrations before 1972.

Editorial note. She distinguished public disclosure of trade secrets from internal use of those secrets within the agency, observing that internal use leaves a submitter's position in foreign markets undisturbed, and would have remanded to the District Court for further factual findings on Monsanto's expectations regarding interagency uses of trade-secret information before 1972.

Editorial note. This record is a research edition, not a substitute for the official reporter. It reproduces the Reporter of Decisions apparatus in full and reproduces the Court's own text in extended verbatim passages arranged under the Court's own divisions, each bracketed with the official United States Reports page on which the passage appears. Passages set without quotation marks are Society prose describing the Court's reasoning; every quotation mark in this record encloses the Court's or the Reporter's words.

Editorial note. The Court-authored sections of this record are SELECTED EXCERPTS, not complete opinions. Each such section is headed accordingly, and no section of this record represents a judicial opinion as reproduced in full. Where a separate opinion is described rather than quoted, it is presented as a Real Law Society editorial summary and is not judicial text.

Editorial note. Three limitations are declared. First, the numbered footnotes of the opinion of the Court and of the separate opinion are not reproduced, and the detailed recitation of the statutory history in Parts I and II is summarised rather than quoted. Second, the separate opinion of Justice O'Connor is summarised rather than quoted at length. Third, obvious typographic and scanning defects in the digitised bound volume have been silently corrected against the surrounding text; no substantive word has been altered, modernised, or paraphrased inside a quotation.

Editorial note. This edition also corrects an oversimplification in the Society's earlier record of this decision, which stated the holding without distinguishing the three statutory periods. The Court's disposition of the takings question turns entirely on when the data were submitted, and the three periods are now stated separately. For any purpose requiring the complete official text, consult the bound volume through the canonical source recorded with this authority.

Editorial note. FIFRA conditions the registration of a pesticide on the submission of extensive health, safety, and environmental research data. Monsanto had generated such data at very substantial expense and treated it as trade secret. Under the statute as amended, the Environmental Protection Agency was authorised to consider data submitted by one registrant in support of a later applicant's registration, subject to a duty of compensation determined by negotiation and binding arbitration, and to disclose health and safety data to the public. Monsanto sued the Administrator, contending that the use and disclosure provisions took its property without just compensation.

Editorial note. The District Court for the Eastern District of Missouri held the data-consideration and data-disclosure provisions unconstitutional and enjoined the Administrator from carrying them out, 564 F. Supp. 552. On direct appeal the Supreme Court vacated the judgment and remanded.

Editorial note. The Court held, first, that a trade secret recognised as property by state law is property within the meaning of the Takings Clause. Second, whether the statute took that property depends on the regime in force when the data were submitted: data submitted before October 22, 1972 carried no statutory assurance of confidentiality and no taking results; data submitted between October 22, 1972 and September 30, 1978 were protected by an explicit statutory guarantee of confidentiality and exclusive use, and consideration or disclosure of that data may frustrate a reasonable investment-backed expectation and so effect a taking; data submitted on or after October 1, 1978 were submitted in the face of express statutory authority to use and disclose, so no reasonable expectation of confidentiality could arise. Third, any such taking is for a public use. Fourth, because the Tucker Act affords a remedy in damages, no injunction lies and the District Court erred in granting one. Fifth, the challenges to the arbitration scheme and to the scope of judicial review of an award were not ripe.

Editorial note. Justice Blackmun reasoned from the attributes of the interest: a trade secret is assignable, can form the res of a trust, and passes to a trustee in bankruptcy, and Congress itself had spoken of such data in proprietary terms. The interest is therefore property, but its content is fixed by state law and by the conditions on which it is held.

Editorial note. The taking analysis then turned on expectation rather than on the fact of governmental use. A submission made with knowledge of statutory conditions rationally related to a legitimate governmental interest is a voluntary exchange for the benefit of registration, and cannot be called a taking. Conversely, where the Government had expressly guaranteed confidentiality and exclusive use and later withdrew that guarantee, it took away what it had promised; the right to exclude is among the most essential sticks in the bundle of property rights.

Editorial note. On remedy, the Court applied the settled principle that equity will not enjoin an authorised taking for public use where compensation may be recovered from the sovereign afterwards. The Tucker Act was available and had not been withdrawn by FIFRA's compensation scheme, so the constitutional injury, if any, was the absence of compensation and not the agency's action.

Editorial note. Monsanto is the treatise's principal authority for the proposition that the subject matter of property is not confined to land and tangible things, and that intangible interests created by state law may be taken. It is equally important for two structural points: reasonable investment-backed expectations are measured against the legal regime under which the interest was acquired, so that a regulatory condition known at acquisition ordinarily defeats the expectation; and the availability of a damages remedy determines the form of relief in a takings case. The three-period analysis is a model of the discipline that the taking question must be asked of a particular interest acquired at a particular time.

Editorial note. Followed and applied. The expectation analysis was carried forward in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), and in Palazzolo v. Rhode Island, 533 U.S. 606 (2001). Horne v. Department of Agriculture, 576 U.S. 350 (2015), relied on Monsanto in treating a reserve requirement on personal property as a per se taking while distinguishing the voluntary-exchange reasoning. The remedial holding was substantially reworked by Knick v. Township of Scott, 588 U.S. 180 (2019), which addressed state-court ripeness rather than the Tucker Act rule stated here.

Editorial note. Read with U.S. Const. amend. V (Takings Clause).