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Bayer to Pay Rice Farmers for Gene Contamination

By IAN BERRY
JULY 1, 2011, 6:39 P.M. ET

CHICAGO—Bayer AG agreed on Friday to a $750 million settlement with U.S. rice farmers who had sued the company after two of the German chemicals firm's genetically modified traits contaminated their crops.

The settlement concludes a four-year-old case that followed the revelation that traces of two strains of genetically modified rice, which had not been approved by federal regulators, had entered the U.S. supply. The disclosure prompted several export customers to ban U.S. rice or impose strict testing requirements before allowing it into the country, which sent U.S. prices tumbling.

The contamination occurred between 1998 and 2001, during experiments with the rice strain on U.S. test sites. At the time, the strains were owned by chemicals company Aventis and were designed to make the rice resistant to its own weed killer. Bayer bought parts of Aventis, including the rice strains, in October 2001, and made them part of its Bayer CropScience subsidiary.

Bayer is responsible for the contamination and for waiting at least a couple months after learning of it to notify the U.S. Department of Agriculture, which announced the problem in August 2006, farmers' attorneys alleged.

Those farmers continue to feel the impact, said Chicago-based Adam Levitt, lead attorneys for the plaintiffs. He said the industry is still "struggling to regain its primacy" in the world market, and that the lawsuit aimed to make Bayer take responsibility for the damage to farmers.

"This excellent settlement goes a long way toward achieving that goal," Mr. Levitt said.

About 11,000 farmers in five states, Arkansas, Louisiana, Mississippi, Missouri and Texas, will split the settlement. Farmers who planted rice in each of the five years from 2006 to 2010 will be eligible to receive $310 per acre, plaintiff attorneys said. Those who planted a specific strain of rice that was contaminated in 2006 will be eligible for another $100 per acre.

The U.S. has been a leading adopter of genetically modified crops since they were introduced in the 1990s, but many of its export customers have been more reluctant to accept them.

Following the contamination, countries such as Japan and Russia banned U.S. exports while the European Union and Mexico, a key U.S. customer, imposed strict testing requirements.

The settlement follows several jury trials in related state and federal cases which awarded millions of dollars to farmers in the South. Bayer had lost all of the cases, including one brought by Riceland, a farmers' cooperative and the world's largest rice miller, which an Arkansas jury awarded $125 million in punitive damages. That award could be reduced, however, as that state's Supreme Court considers whether an existing $1 million cap on awards is constitutional.

Write to Ian Berry at [e-mail]

Copyright ©2011 Dow Jones & Company, Inc.

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Bayer Agrees to Pay $750 Million to End Lawsuits Over Gene-Modified Rice

By Andrew Harris and David Beasley - Jul 1, 2011 11:01 PM CT

A Bayer AG (BAYN) unit agreed to a $750 million settlement resolving claims with about 11,000 U.S. farmers who said a strain of the company’s genetically modified rice tainted crops and ruined their export value.

The settlement, announced yesterday, ends scores of lawsuits filed against the Bayer CropScience unit of the Leverkusen, Germany-based company by farmers in Texas, Louisiana, Missouri, Arkansas and Mississippi.

The U.S. Agriculture Department said in August 2006 that trace amounts of the company’s experimental LibertyLink strain were found in U.S. long-grain rice. Within four days, declining rice futures cost U.S. growers about $150 million, according to a complaint filed by the farmers. News of the contamination caused futures prices to fall about 14 percent.

“From the outset of this litigation, we made it clear to Bayer that the company needed to step up and take responsibility for damaging American rice farmers with its unapproved rice seeds,” Adam Levitt, a plaintiffs’ lawyer, said yesterday in a statement. “This excellent settlement goes a long way toward achieving that goal.”

Bayer confirmed the settlement in its own press statement minutes later.

“Although Bayer CropScience believes it acted responsibly in the handling of its biotech rice, the company considers it important to resolve the litigation so that it can move forward focused on its fundamental mission of providing innovative solutions to modern agriculture,” Greg Coffey, a spokesman for the company, said in the statement.

Herbicide-Resistant

The accord is contingent upon the participation of growers representing at least 85 percent of the U.S. long-grain rice acreage planted between 2006 and 2009, the company and plaintiffs’ lawyers said separately.

Bayer and Louisiana State University had tested the rice, bred to be resistant to Bayer’s Liberty-brand herbicide, at a school-run facility in Crowley, Louisiana.

The genetically modified variety cross-bred with and “contaminated” more than 30 percent of U.S. ricelands, Don Downing, a lawyer for the plaintiffs, said at the start of the first farmers’ trial in November 2009.

Exports fell as the European Union, Japan, Russia and other overseas buying ceased or was slowed for testing of U.S.-grown long grain rice, the growers said.

“Our clients and other rice farmers were devastated by the loss of markets around the world,” said a third plaintiffs’ lawyer, Scott Powell of Hare, Wynn, Newell & Newton.

Trace Amounts

The company denied the testing program was negligently managed and claimed sale prices rebounded after the initial drop. It said the trace amounts of the LibertyLink rice posed no threat to people.

Juries in the first six cases to be tried awarded farmers about $54 million in total compensatory and punitive damages before the company settled a seventh case three days into an October 2010 trial at the U.S. courthouse in St. Louis.

It paid the Texas growers $290,000, Downing said then.

Under yesterday’s accord, farmers who sustained market losses will be compensated for each acre of rice they grew on an annual declining scale encompassing the years 2006 through 2010.

A grower who participated in all five seasons would receive $120 per acre for 2006, $80 per acre for 2007, $60 per acre for 2008, $40 for 2009 and $10 for 2010 for a maximum of $310 per acre.

Compensation Pools

Two other compensation pools have been created under the pact: one for farmers who planted two contaminated varieties and another for growers who didn’t plaint tainted strains yet suffered damages beyond market loss. Those latter claims, if disputed by Bayer, would be subject to binding arbitration.

“In the farming community, most people live by the principle that if you harm a neighbor, you make it right,” Downing said in his press statement yesterday. “After almost five years of litigation,” Bayer has finally made an effort to make it right.”

The federal case is In re Genetically Modified Rice Litigation, 06-md-01811, U.S. District Court, Eastern District of Missouri (St. Louis).

To contact the reporters on this story: Andrew Harris in Chicago at [e-mail]; David Beasley in Atlanta t ; [e-mail].
To contact the editor responsible for this story: Michael Hytha at [e-mail].

©2011 BLOOMBERG L.P.

http://www.bloomberg.com/news/2011-07-01/bayer-to-pay-750-million-to-end-lawsuits-over-genetically-modified-rice.html


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