Bayer agrees to pay $750m to end lawsuits over gene-modified rice

A Bayer AG unit agreed to a $750m 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 $150m, according to a complaint filed by the farmers. News of the contamination caused futures prices to fall about 14%.

"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 $54m 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).

(Published by Bloomberg - July 2, 2011)