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Bayer Facing A Billion Dollars in Lawsuits After Polluting Thousands of Rice Fields with Genetically Engineered Rice 10-16-08
NOTE: This article includes information we hadn't seen elsewhere about
the settlement of the earlier Starlink GM contamination fiasco, that not just
growers but also consumers received compensation.
It seems, "People who ate the tainted food, some of whom said they became
nauseated, received $9 million worth of coupons for corn products, according to
their lawyer, Krislov."
The rest of the $119 million settlement went to growers. In this case, rice
farmers are looking for considerably more by way of compensation for their
losses.
EXTRACTS: Don Downing, a St. Louis-based lawyer for the growers, said in a court
filing last year that damages might exceed $1 billion. The figure will be lower
because class-action status was denied, he said this month, declining to
estimate the total.
The $1 billion would be equivalent to 16 percent of Bayer's 2007 net income...
------
Bayer AG's defeat of a bid by U.S. rice farmers to sue the company as a group
doesn't end the matter. The German producer of genetically altered seeds still
faces 1,200 individual claims of crop contamination.
Farmers in five states sued after trace amounts of types of modified rice being
grown experimentally by Bayer in Louisiana were found in rice raised for
consumption. U.S. District Judge Catherine Perry in St. Louis in August refused
to allow the claims to be combined in class-action suits, one per state. She may
set a date tomorrow for the first individual trial.
While the farmers lost group leverage for forcing settlements because of the
ruling, they may regain it should Bayer lose early trials, said Carl Tobias,a
University of Richmond law professor. If the facts are "very similar,"early
verdicts "might be applied to other cases" by the court, leaving only the amount
of damages for juries to decide, he said.
"That ups the ante for the first few trials," said Tobias, who teaches tort and
product-liability law and is an expert on federal courts and civil procedure.
"It might push the pressure to settle."
Don Downing, a St. Louis-based lawyer for the growers, said in a court filing
last year that damages might exceed $1 billion. The figure will be lower because
class-action status was denied, he said this month, declining to estimate the
total.
"We wouldn't feel comfortable until our experts are finished with their
analysis," Downing, of the law firm Gray, Ritter & Graham, said in an interview.
2007 Profit
The $1 billion would be equivalent to 16 percent of Bayer's 2007 net income of
4.7 billion euros ($6.4 billion) and 13 percent of CropScience's sales of 5.8
billion euros. Bayer lawyer Mark Ferguson in Chicago said it's impossible to
know whether jury findings in one trial would be applied in another. The outcome
"would depend on the specific case or issue involved and the precise facts and
circumstances," he said.
Bayer shares have fallen 28 percent from a year ago. The German Stock Index fell
39 percent in the same period as the global credit crisis pushed down shares.
The company shares today fell 3.44 euros, or 7.6 percent, to 41.86 euros in
Frankfurt, and the index fell 6.5 percent.
Bayer's LibertyLink brand of genetically altered rice was being studied at
Louisiana State University in an effort to create a crop that could be safely
sprayed with a weed-killer, the U.S. Agriculture Department said. Two strains of
LibertyLink were found amid commercially grown long-grain rice in Louisiana,
Mississippi, Texas, Arkansas and Missouri, the agency said.
Export Bans
The farmers blame Bayer, based in Leverkusen, Germany, and its CropScience unit
for damages caused by temporary bans on two kinds of high-yield seeds, export
restrictions and a plunge in prices that followed discovery of the
contamination. Because LibertyLink rice wasn't approved for human consumption,
the European Union, Japan and Russia restricted its sale, according to the
complaint. Within four days of the 2006 announcement, a decline in rice futures
had cost U.S. growers about $150 million, according to the farmers' complaint in
federal court in St. Louis. News of the contamination caused futures prices to
fall approximately 14 percent, and American rice exports also fell, the growers
said.
Restrictions were eased after Bayer's rice was declared safe by the Agriculture
Department in November 2006. There are no claims in the rice litigation that
LibertyLink harmed or risked human health.
Tiny Amounts
Only "minute'' amounts of LibertyLink were found in U.S. crops, Bayer attorney
Ferguson said. "It's our view most of these plaintiffs didn't suffer market
losses in selling their rice,'' said Ferguson, of Bartlit Beck Herman Palenchar
& Scott in Chicago. "There was a short time when rice futures prices dropped,
but that doesn't necessarily translate to losses to farmers.'' Prices later rose
to "record heights,'' he said.
Bayer, where the aspirin was invented in 1897 according to the company, is the
world's seventh-largest seed maker as well as Germany's largest drugmaker. The
17,800-employee CropScience unit's sales of 5.83 billion euros were about 19
percent of Bayer's total of 32.39 billion euros, according to the company.
Analysts Andrew Benson of Citigroup Inc. in London, Richard Logan of Goldman
Sachs Group Inc. and Karl-Heinz Scheunemann of Landesbank Baden-Württembergin
Stuttgart, who follow Bayer, said they haven't studied the cases and declined to
comment. Jeffrey LaFrance, a University of California agricultural economist in
Berkeley, said rice prices rebounded rapidly after the taint was disclosed.
Still, at least some of the 1,200 farmers suffered during the import-ban period,
he said.
Corn Lawsuits
LaFrance played a role in U.S. litigation that ended six years ago as an expert
for Aventis CropScience, a French company later bought by Bayer. Aventis was
sued over crop contamination by genetically modified corn. Separate cases by
growers and consumers were settled out of court for $119 million.
People who ate the tainted food, some of whom said they became nauseated,
received $9 million worth of coupons for corn products, according to their
lawyer, Krislov. The rest went to growers and their attorneys.
In deciding against rice class actions, the St. Louis judge ruled there were too
many ways for the farmers to sell their crops, and to have lost money, to treat
them as cohesive groups.
Defendants generally oppose class certification, Krislov said.
"The hope is that the plaintiffs give up, which is a strategy that certainly
works plenty,'' he said. ``But when you have a significant numberof people with
sizable claims, maybe that backfires.''
The case is In Re Genetically Modified Rice Litigation, 06- md-1811,
U.S.District Court, Eastern District of Missouri (St. Louis).