Pistachio Bushy Top Syndrome – Down The Legal Rabbit Hole In Search Of A Remedy

May 6, 2015

Pistachio Bushy Top Syndrome (“PBTS”) appears to potentially threaten several thousand acres of pistachio trees planted with UCB-1 rootstock that are said to have been purchased from a single nursery in the last few years.  While research is ongoing, it appears the source of the problem is a pathogen called Rhodoccocus Fascians, although there have been suggestions of a mutation.

Dr. Jennifer Randall of New Mexico State University, UC ANR, and the Pistachio Research Board are investigating how the pathogen may have infected the rootstock, how the infection can be detected, what growers should do with the infected and potentially infected trees, whether the pathogen can be transmitted from infected trees to healthy trees, and how to replant without risk of reinfection, among other issues.  Dr. Randall and others are working hard to learn more about the cause and risks associated with this problem. 

This article leaves the science to the scientists, and focuses on what growers should understand about their rights should they decide to pursue claims regarding replacement of their infected trees.  This is not an assessment, evaluation or determination of any nursery’s liability, but rather a discussion of legal principles that may have application.

Express Warranty Limitation

One of the first issues to consider is what kind of warranty the nursery provided for the rootstock.  The place to begin is to review the Sales & Growing Agreement the nursery had growers sign when they purchased rootstock.  Often warranties in agricultural nursery contracts are limited, and this is true in one example of an agreement with a pistachio grower that we will review in this article.  In this case what is promised is that:

Nursery products are guaranteed from production defects for two months as follows:

(1)  If you have any losses in your planting due to product quality, we will replace up to 2% of your total delivery at no charge.

On its face this warranty is limited to production defects that appear only in the first two months after delivery, and is limited to 2% of the total delivery.  Consequently, if PBTS appears in trees more than two months after delivery, this warranty does not extend to those trees.

Even if the defects become apparent within the first two months, the restriction on the warranty only promises replacement of 2% of the delivery.  For example, if 100 trees are delivered, and 30 trees display PBTS within the first two months after delivery, the nursery’s express warranty is limited to replacing 2 of the 30 defective trees.

Implied Warranty and Damage Limitations

In addition to any written express warranties, the law may also imply certain warranties, including the implied warranties of merchantability and fitness for a particular purpose, which are broader and more comprehensive in terms of scope of relief than express warranties. However, implied warranties can also be disclaimed.  In our example the Sales & Growing Agreement provides that: 

Nursery makes no warranty of merchantability or fitness for a particular purpose with respect to goods sold under this contract.

This particular contract further limits recoverable damages, at best, to the purchase price of the trees falling within the express warranty, as follows:

Nursery is not and shall not be liable for prospective profits or special, direct, indirect, or consequential damages which buyer may claim as a result of this contract or breach of this contract.

Nor may an action in law or equity result in a recovery against nursery in an amount greater than the total purchase price of the goods, as indicated on the reverse hereof.

These are fairly common provisions in purchase and sale contracts. 

What Does This Mean For A Grower Who Purchased The Rootstock?

Although the law permits warranty disclaimers and damage limitations, there are limits on these disclaimers.  The above provisions are generally enforceable unless a grower can prove that their situation falls within one of three exceptions – unconscionability, failure of essential purpose or fraud.   

Unconscionability.  The first exception generally applies to situations where a party cannot meaningfully avoid a contract term that is “unreasonably favorable to the other party.”  Thus, unconscionability has both procedural (no opportunity to avoid the contract term) and substantive (overly harsh term) elements, both of which might apply to these purchases.  A court might apply the doctrine of unconscionability to afford growers relief from these warranty limitation provisions. 

Referring to the above example of contract language, it would seem reasonable to argue that a warranty that expires in two months, before any symptoms of a defect are likely to appear, and provides for a very limited remedy is overly harsh, and therefore substantively unconscionable.

Failure of essential purpose.  The second exception focuses first on determining the essential purpose of the contractual remedy – replacement of up to 2% of the defective trees within two months of delivery and disclaimer of all other damages – and second, on determining whether the remedy as applied fails of that essential purpose.  The remedy in this particular contract arguably does not address the problem since PBTS usually appears later than the first two months after planting, often much later, and may occur in many more than 2% of the trees purchased. 

Fraud.  The third exception – fraud – may apply if the trees were sold with knowledge of the defect or if the defect should have reasonably been known.   Growers should inquire as to when the nursery first knew or should have known of the potential for PBTS in the pistachio rootstock it was selling.  If the problem surfaced a number of years in the past, there may be a point where the problem was known or should been known.  If that is true and sales of the rootstock continued after that, then a grower might be able to state a case for fraud. 

It should be understood that the application of any of these exceptions to the warranty language depends heavily on the facts of each sale, and advice of an attorney should be obtained before filing a lawsuit. 

How Long Do You Have to File a Lawsuit? 

Any time you contemplate litigation, you need to be aware of the time limits for filing the lawsuit, otherwise known as statutes of limitations.  While normally a grower might have up to 4 years to file, the time period can be shortened by agreement.  In this example the contract states that

Any action for breach of this contract must be commenced within two years after the cause of action accrues.

This time limit raises the question of when the “cause of action accrues.”  The nursery may argue that the two years begins to run upon delivery to the grower.  But growers may not discover for several months or longer that their trees have PBTS, and it may even be longer before they determine that the nursery they bought the trees from may be responsible.  Growers may be able to argue that the two years begins to run when they discovered the problem, but this will introduce an element of uncertainty as to when the grower knew or should have known of the problem. 

When dealing with limitations periods that could derail your lawsuit, it is better to be safe than sorry.  It might be safest for growers to assume that the two year period began on the date of the delivery of the trees.  Growers who want to file a lawsuit should consider filing within two years after delivery or obtain a tolling agreement from the nursery.  This is an important consideration.  Growers who are considering filing a lawsuit should consult with a lawyer about this timing issue – a tolling agreement is a written agreement, in this case between the nursery and the grower, that specifically extends the period of time within which to file a lawsuit. 

Collectability

A question in suing a business for money is always whether the business can pay a judgment. That may depend on many things, including the number and extent of the lawsuits brought against that business and its assets, and the amount and extent of those assets including any insurance policies. 

For example, it has been suggested that 20,000 plus acres may be impacted by PBTS.  If that is the case, total potential damages from PBTS may exceed assets available to pay the damages, including insurance coverage.  Depending on the number of claimants, the courts will sometimes fashion an overall solution to compensate growers on a fair and equitable basis.  Impacted growers may want to consider finding a way to act collectively.

Other Considerations

If a grower believes it has suffered damages from PBTS, it should consult with a plant pathologist to confirm the diagnosis and develop a plan for treatment.  It is important to preserve evidence, particularly if trees are being removed, which means confirmation testing for each tree suspected of being infected, retaining samples, and creating a photographic record.  Growers also should consult with an attorney on these issues.