Coase, legal liability, and pesticide drift

Lynne Kiesling

A ruling last week from Minnesota’s Court of Appeals provides an interesting case study in using common law and legal liability (a la Coase) in an environmental case. As summarized in the St. Cloud Times, the issue at hand is pesticide drift — when pesticide spray on one field is carried over to another field by wind. In the case of an organic farm, such pesticide drift has a significant economic cost, because the organic farmer cannot sell the affected produce, and may even have to take affected acreage out of rotation for several years to clear the pesticide and retain the foundation of the organic attribution (usually defined by law).

Here’s a bit more about the fact pattern:

The Johnsons turned their farm into an organic one in the 1990s to take advantage of the higher prices organic crops and seeds bring at market. They posted signs noting that the farm was organic, created a buffer between their property and neighboring farms and asked the co-op to take precautions to avoid overspraying, according to the Court of Appeals opinion.

But the co-op violated state law four times from 1998-2008 by spraying chemicals that landed on the Johnson’s organic farm, the opinion said. The opinion said that the co-op was cited four times by the Minnesota Department of Agriculture for violating pesticide laws that make it illegal to “apply a pesticide resulting in damage to adjacent property.”

A 2002 overspray led to the Johnsons selling their crops at lower, nonorganic prices and taking the tainted field out of production for three years. In 2005, 2007 and 2008, the overspray led the Johnsons to destroy alfalfa and soybeans and plow under and take out of production for three years parts of their fields, according to the Court of Appeals opinion.

What’s interesting to me about this case is the Johnsons’ use of the common law — they filed a lawsuit claiming nuisance and trespass. The district court found against them, but this appeals ruling negates that and sends it back to the district court:

The Court of Appeals opinion Monday decided that what the co-op did could be considered a trespass because it met the two elements necessary — that the Johnsons had rightful possession of their fields and that the cooperative’s unlawful spraying of the pesticide, causing it to drift onto the Johnsons’ otherwise chemical-free fields, constitutes an unlawful entry.

Looks to me like an application of Coase to the pesticide drift question — clarifying who has legal liability for the consequences of actions when those actions affect others, use of the common law concept of nuisance — with the result that the pesticide sprayer is liable for the costs of the consequences.

In a case like this, with two adjoining plots of land, the identification of the actors and the actions is pretty straightforward, so it’s a textbook low transaction cost case. But what happens if, say, the organic farm is adjacent to three other farms, and the issue is not pesticide drift, but is rather GMO propagation drift? If all four farms plant corn, but three of them plant the same strain of drought-resistant GMO corn, some seed propagation across property boundaries is likely. How do you assign liability with multiple potential actors? Is there a way to avoid such a cost, and if so, who is likely to be the least-cost avoider? Or more interestingly, since the GMO corn is drought resistant, how do you net out the beneficial effects of the need for less irrigation against the cost of the corn not being able to be sold as GMO-free any more?

I think I may have just identified a new case study for my fall environmental class …

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10 thoughts on “Coase, legal liability, and pesticide drift

  1. Even more interesting, or at least touching the area of political correctness, would be if the “organic” (I am a natural scientist, hence the inverted commas so that I don’t choke) farm is infested by some vermin, that the normal pesticide spraying level on the neighbouring field would stop dead in its track, but that the head start of eating half the crop in the “organic” fields, gives the power to destroy the normal (rationally cultivated) fields as well.

  2. What role does the state law that prohibits applying pesticides in a way the damages neighboring property play in this dispute? If common law principles of nuisance and trespass apply, the state law hardly matters, right?

    Or are the common law claims bolstered in some sense by the evidence of related state law violations? I’m just wondering about how private enforcement of property rights asserted through the courts ties into state regulation of property rights.

    I’m also curious, given the history of trespasses as presented in the summary, why didn’t the organic farm sued for damages sooner? I.e., why not the first time they had to destroy a crop or sell at lower non-organic prices or lost an organic designation for their crops?

    (I also agree that this case makes good fodder for class discussions. I’m looking for ways to strengthen my discussion of Coasian property rights insights as part of a section on externalities as justifications for public policy intervention.)

  3. Google Scholar turns up the recent decision, which provides a bit more detail. See: Johnson v. PAYNESVILLE FARMERS UNION COOPERATIVE OIL COMPANY, Minn: Court of Appeals 2011.

    The fuller discussion answers some of my questions. For example, why didn’t Johnson act sooner? According to claims summarized in the decision, “Oluf Johnson complained to the cooperative after the 1998 incident, and it apologized, promising to “make it right.” But when the Johnsons gave the cooperative an invoice documenting their losses from the overspray, the cooperative refused to pay.”

    So Johnson first tried working things out less formally, neighbor to neighbor, and only long after it was clear that less forceful methods were not working did Johnson turn to courts to enforce his property rights.

  4. The decision also includes an interesting discussion distinguishing the trespass claim asserted here from a previously decided Minnesota case dismissing a trespass claim linked to a foul odor (but permitting a nuisance claim). A bad smell is a nuisance, not a trespass, because the transient odor interferes with enjoyment of a property but not its possession. The pesticide, on the other hand, is by design not transient. When it settles on plant or ground it is designed to stick in place and affect the thing it sticks to. This distinction is enough for the pesticide, but not the foul odor, to potentially result in a trespass.

  5. Good find! I should get in the habit of using Google Scholar this way. Should make for a good class discussion.

  6. Michael, how would one qualify “bugs” coming from the organic side, bugs that would not be there if they had applied pesticides? Nuisance or trespass? Insects are largely natural to the environment, but it is only the fact that agriculture must use monocultures (only one or two plants in each field) that means that their numbers can explode.

    Similarly, if I refuse to shoot off the wild boars on my land and they then destroy the neighbours corn fields.

    In my native Sweden they shoot (and eat, and sell) about 120 000 elk (what in NA English is called Moose) per year. That is about 1/3 of the population. The numbers have to be kept down by law by all land owners, otherwise the population would explode and they would destroy the young pine trees. (The wolves have been almost rooted out.)

  7. Interesting wrap up discussing GMO’s and externalities. Note, for discussion purposes, there may also be positive externalities associated with some biotech products:

    Communal Benefits of Transgenic Corn. Bruce E. Tabashnik  Science 8 October 2010:Vol. 330. no. 6001, pp. 189 – 190DOI: 10.1126/science.1196864 
     
     “Bt corn planted near non-Bt corn can provide the unmodified plants with indirect protection from pests”
     
    Areawide Suppression of European Corn Borer with Bt Maize Reaps Savings to Non-Bt Maize Growers. Science 8 October 2010:Vol. 330. no. 6001, pp. 222 – 225 DOI: 10.1126/science.1190242W. D. Hutchison,1,* E. C. Burkness,1 P. D. Mitchell,2 R. D. Moon,1 T. W. Leslie,3 S. J. Fleischer,4 M. Abrahamson,5 K. L. Hamilton,6 K. L. Steffey,7, M. E. Gray,7 R. L. Hellmich,8 L. V. Kaster,9 T. E. Hunt,10 R. J. Wright,11 K. Pecinovsky,12 T. L. Rabaey,13 B. R. Flood,14 E. S. Raun15,
     
    “Cumulative benefits over 14 years are an estimated $3.2 billion for maize growers in Illinois, Minnesota, and Wisconsin, with more than $2.4 billion of this total accruing to non-Bt maize growers.”
     
    In terms of a low cost solution for negative biotech externalities, I wonder what happened to the idea of terminator gene technology, which would prevent genetic contamination? Was it abandoned soley for PR reasons or were there other technological barriers to its use? It seems like a technology that would both protect IPR & mitigate contamination issues.

  8. Erik, I’d guess that a farmer’s neighboring property owners are not obligated to kill or control naturally occurring bugs on their own properties just because they are a hazard to the farmer’s crops. If the organic farmer intentionally introduced some bugs (intending to help control other bugs), and the introduced bugs were a hazard to the farmer’s crop, then maybe a problem.

    Similarly, if one farmer’s GMO crops help protect a neighbor’s crop (for example, if the are unsuitable habitat for bugs and therefor reduce bugs crossing over to a neighbor’s crop), the protected farmer wouldn’t owe the first farmer for the service. However, if the effect is strong I can imagine that an organic farm may want to be surrounded by pest-resistent GMO crops in order to obtain this buffering effect without compromising the organic certification of their crop. Perhaps even the organic farmer would pay his neighbors for the service?

  9. Erik, I’d guess that a farmer’s neighboring property owners are not obligated to kill or control naturally occurring bugs on their own properties just because they are a hazard to the farmer’s crops. If the organic farmer intentionally introduced some bugs (intending to help control other bugs), and the introduced bugs were a hazard to the farmer’s crop, then maybe a problem.

    Similarly, if one farmer’s GMO crops help protect a neighbor’s crop (for example, if the are unsuitable habitat for bugs and therefor reduce bugs crossing over to a neighbor’s crop), the protected farmer wouldn’t owe the first farmer for the service. However, if the effect is strong I can imagine that an organic farm may want to be surrounded by pest-resistent GMO crops in order to obtain this buffering effect without compromising the organic certification of their crop. Perhaps even the organic farmer would pay his neighbors for the service?

  10. The word “natural” is a very misused word and I wonder what the legal system makes of it. If we by natural mean “occurring without man’s intervention”, then 100 hectars of land would contain hundreds of species of plants (in Northern Sweden where I was born), or thousands of species in more temperate regions.

    “Organic” farming is the fruit of ten thousand years of selective breeding. As Matt Ridley relates, since the 1950s, this has been done by putting seeds in nuclear reactors or treating them with carcinogenic substances to cause massive genetic damage (i.e. mutations) to get new kinds. Many of the most popular “organic” varieties were developed that way.

    Then planting 10 or 100 hectars with the same “organic” species is an open invitation to insect X or fungus Y to explode in numbers like locusts in a Malthusian way. In the “unfarmed”, “natural” environment with thousands of different plants, vermin can only sometimes do this.

    Sweden does not have common law, but in many areas the US must have similar provisions. In 2005, Sweden was struck by the storm “Gudrun” that felled many years’ production of timber. All forest owners are by law required to clear up storm damage to prevent beetles that feed on pine and spruce to multiply.

    The beetles, and the forests for that matter, might be as natural as one likes, but heavy fines are meted out if you do not comply and clear up.

    Many emergency storage areas were created, among them Europe’s largest one at Byholm with a million cubic meters of timber:

    I seem to remember that Coase discusses rabbits and the damage they do in his book. And rabbits then have the further complication that they both are vermin, but that they also can be eaten.

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