Fewer than 10 cases related to the 2006 discovery of trace amounts of GM traits in U.S. rice have been heard in federal and state courts. Thus far, Bayer, the company that owns the offending traits, has lost every case with thousands left to litigate.

And in the state cases, Bayer has lost big. Most recently, in a February/March case that pitted Riceland (the big-player, Stuttgart, Ark.-based rice co-op) against Bayer, damages were for some $140 million. Last May, a case involving a group of farmers suing Bayer in Lonoke County, Arkansas, cost the company nearly $50 million.

Or did it? An act passed by the 2003 Arkansas legislature, which capped lawsuit damages, is the reason for the question. It is expected a coming Arkansas Supreme Court ruling will resolve the issue. And it’s a ruling Bayer is surely waiting for before committing whole-heartedly to either settling or taking the long list of pending Mid-South-based farmer suits to trial.

During a late-March interview, Barry Deacon, Riceland’s Jonesboro, Ark.-based lead attorney throughout the last five years of GM-rice litigation, spoke with Delta Farm Press about the unresolved legal issues surrounding the case, explained why the co-op was advised against telling its side of the story until the recent trial, and how the USDA investigation was hampered. Among Deacon’s comments:

First, could you tell our readers how you came to the case? Were you hired shortly after that August announcement?

“I’ve been involved from the start, basically since the announcement of contamination (on Aug. 18,) 2006. I was hired by Riceland shortly thereafter.

“The USDA was (conducting) an investigation at that time. I helped Riceland through some of that – USDA inquiries regarding the contamination. (Riceland) got a lot of inquiries because, obviously, it was one of their customers who had notified them earlier in the year that they’d found some GM material in a rice shipment to France.”

Case evolution

I’m curious how the case evolved. When you took the case you didn’t know how precipitously markets would fall. Your thoughts at the outset and how they’ve changed in the last couple of years?

“It’s been an evolution for Riceland. Riceland was sued early on, was named as a defendant in one of the very first cases filed. That was the case in Lonoke County … where there was a big punitive award for 10 or 11 farmers against Bayer.  

“That case was probably filed within two weeks after the announcement was made. … The fact that we got involved in litigation prevented Riceland from getting its real story out as to what actions the co-op was taking during the entire time.”

Farmers were especially upset because they said if the news had come earlier they could have planted (untainted) varieties.

“Right. That was part of the allegations. And they were upset because many of them were members of Riceland. Many didn’t understand what Riceland had been doing.

“But because of the litigation against Riceland, it wasn’t like we could come out and make a bunch of public statements as to what all was going on. And my advice to Riceland as an attorney was ‘hey, we need to let this come out through the litigation and trial process, not through public comments and telling everything we know.’

“As it developed, other lawsuits started being filed. Even though Riceland wasn’t sued nearly as much as Bayer, there were a number of suits filed against Riceland with the same types of allegations.

“We had to work through the litigation process and let Riceland’s story about what we were doing during this time period – and why we thought we had no responsibility or fault in the situation – come out through depositions, discovery in litigation and trials. We did it that way even though we kept getting a black eye because people didn’t know what Riceland knew, when it knew it, why it didn’t say anything for about a four-month period before (alerting) Bayer.”

Timeline

On the Riceland timeline…

“Riceland immediately started investigating once it got a complaint from a French customer (in January, 2006). Riceland itself didn’t have the ability to test for GM material. So, it hired an independent lab, GeneScan in Metairie, La., to start testing samples.

“GeneScan was (saying) that they didn’t think the GM material was in the rice. The initial thought was it was contamination from some other crop – ‘external’ contamination versus ‘internal’ contamination within the rice. GeneScan was saying ‘hey, we don’t think it’s in the rice. We’re getting some positive (hits) and are getting as many negatives. We’re not sure if we’re getting false-positives or false-negatives. But we don’t think it’s in the rice.’

“But Riceland kept testing because they wanted to figure it out. And there was an additional complaint from the same French customer saying ‘we need to know what the answer is.’

“Finally, in May 2006, (Riceland) took samples from their whole dryer/elevator area. They took (43) samples from about 25 locations. Interestingly, 17 of the samples were positive (for GM material) and 26 were negative. So, they were still getting mixed results but there were enough positives that … they decided to go to Bayer on June 9, 2006.

“Even at the point, GeneScan was saying ‘we don’t think it’s in the rice.’ In fact, GeneScan began to believe it was from some type of GM cotton. They wanted Riceland to look in drying and ginning facilities to see if rice was coming in contact with cotton somewhere. Riceland did that and couldn’t find” any such contact. “Eventually, (the cotton theory) was ruled out in June through testing.” 

When approaching Bayer in June, 2006, Riceland “said ‘hey, we’re getting positives and negatives. We’re not sure if we’re getting false-positives, or not. Can you help us figure out what this is?’ Then, they sent Bayer various samples.”

Following testing “Bayer called Riceland back on July 31 and said it was (GM trait) ‘LL 601.’”

On Riceland’s response and due diligence…

“Our position all along has been (that Riceland) was doing due diligence and was trying to figure out what (the problem was). They didn’t want to come out and cry ‘wolf.’ They knew if they gave a false report – that the problem wasn’t in the rice – it could have just as bad of an impact on the markets as a true report. They wanted to make sure what they had before saying anything…

“As for farmers saying ‘if I’d known by March,’ -- no one knew. Once they figured out there was GM in the rice, they then had to figure out what seed it was in. That wasn’t an easy process.

“Riceland helped Bayer and the USDA determine it was in Cheniere. That’s because even after Riceland went to Bayer, they continued to test … seed they’d gotten from seed dealers. In July 2006, they determined the only seed variety that tested positive was Cheniere. No one would have determined what seed varieties (GM material was in) during the 2006 planting season.

“And the USDA didn’t confirm it was in Cheniere until LSU announced that around September 1. Once the USDA announcement came out about the contamination, all the universities began testing their seed. LSU announced out of all the seed varieties and samples from their foundation seed, the 2003 Cheniere foundation seed was positive for 601. That’s when it was really confirmed in Cheniere. It was much later that LL604 was found in Clearfield 131.”

APHIS

The foot-dragging claims weren’t leveled just against Riceland and Bayer but also USDA -- APHIS (Animal and Plant Health Inspection Service) especially. Any comment?

“Everybody was disappointed that it took such a long time for USDA and APHIS to do their investigation. … Some may question whether the government is the best vehicle to do an investigation like this, whether they have enough resources to actually do the thorough type of investigation needed.

“From the litigation process that has been going on for four years, we’ve discovered much, much more about Bayer than came out through the USDA investigation. There were probably 50 to 75 depositions of Bayer employees, the production of around three million to four million documents from Bayer.

“Not to cast any aspersions on the USDA, but they don’t have the manpower, resources or time to get into all of that. I think that’s why you’ve seen the USDA take no enforcement action against Bayer. They did note in the USDA report that there were records that weren’t available to the USDA, that there were records that hadn’t been kept by the main parties. There were maps that weren’t ever recorded or kept that would show exactly where some of the field trials were located, especially in relation to where foundation seed development (was done). USDA noted the limitations in their investigation. In fact, they issued a second report that said lessons were learned from their investigation where they realized their limitations and maybe things needed to be changed, new rules implemented.

“Bottom line: the litigation has ended up uncovering a lot of things that never were addressed in the USDA report. That’s why you’re now seeing every trial result is against Bayer.”

Only the cases heard in federal court haven’t had punitive damages?

“Right.”

What about the lead-up to the trial? Did y’all have settlement talks with Bayer? Was anything ever on the table?

“We did. But it didn’t go anywhere and wasn’t ever a viable option. Bayer took the position they’ve taken in almost of these (cases): ‘we’re going to try these cases and make you prove us wrong in court.’ That’s been their attitude.

“The only problem with that attitude is they’ve lost every case.”

The trial

Have you talked to any of the jury members since the trial?

“I have not. I intend to do that. But it was a lengthy trial and I’m trying to give them a cool-down period.

“They worked hard. As with all juries, you could probably tell from their verdict that there was disagreement among them and ultimately they came to a compromise on various aspects of the case.

“But I think they reached a fair result even though Riceland is disappointed in some of the result. We’re excited about some and disappointed in some.”

More background on the Riceland/Bayer suit…

“The suit was initiated as a farmer case … against both Bayer and Riceland. Then Riceland filed a cross-claim against Bayer seeking its own damages.

“What happened is pretty interesting. The weekend before the trial, Bayer – and they’d actually started trying to negotiate with the farmers long before that – settled with the four farming entities that initiated the suit. It’s public record … that they settled for approximately $4 million.

“Bayer also cross-claimed against Riceland. They said Riceland was at fault and should be paying farmers’ damages.

“One of the issues presented to the jury was: is Riceland responsible for damages to farmers due to the loss of the European market. If so, they were going to ask” that Riceland be responsible for recompensing Bayer “for the settlement money Bayer paid to the farmers. That was the last part of the verdict.”

On the verdict…

The jury was asked to determine was “’Riceland negligent which caused the loss of the European market which caused the farmer damages?’ The jury answered that ‘no.’

“Also ‘using 100 percent apportion, what responsibility is there between Riceland and Bayer?’ The jury answered ‘100 percent’ for Bayer and zero for Riceland.

“That’s something we’re excited about because we’ve been sued by a number of farmers. Bayer cross-claimed against us saying ‘yeah, you are responsible for farmer damages.’ But a jury has found ‘no, Riceland’s negligence didn’t cause farmer damages and Bayer is 100 percent responsible.’

Premiums and tactics

On settlement “premiums”…

“Bayer actually said in trial that the settlements made to farmers were paid at a premium. The reason they wanted to say that is because they know there are thousands of farmer suits sitting out there. They don’t want those farmers thinking that’s the amount they’ll get, or are entitled to.

“So, they say they’ve paid a premium because they wanted the case to be solely between Bayer and Riceland. The only way to do that was to settle out with the farmers and pay them.

“That’s an interesting position for Bayer to take. Because even as they’re trying to settle all these other cases pending in the United States, they won’t be telling them they’ll pay that kind of money.

“So, they settled on the weekend before the trial started with the farmers. Then it was a straight-up case between Bayer and Riceland. Part of Bayer’s strategy was they believed they’d really be behind the 8-ball if they had both individual farmers in the suit along with Riceland – a kind of a double-team effort. They decided to eliminate the double-team.

On trial tactics…

“From a witness standpoint, Bayer has done the same thing in every case. They don’t bring any of their witnesses in to testify live. That required us to show video depositions of Bayer employees we had to go all around the world to take. They’re people are scattered all over the world. We’ve been to Singapore, London, Amsterdam, Germany, Belgium and all kinds of places. They have over 50 different people involved in the LibertyLink rice project.

“But Bayer would never bring (those employees) to a trial. They don’t want to put them in front of a jury. They don’t want to subject them to cross-examination at a trial in Arkansas.

“Other than the experts they pay to testify, the only Bayer witness that testified live in this case was their rice breeder in the United States.

“During Riceland’s part of the case, we ended up showing the testimony of the Bayer witnesses. That’s because most of it is favorable to us, showing the deficiencies they had in the LL rice program, what they were doing in field trials and their actions in dealing with GM rice.

“The witnesses for us were mainly Riceland people. They don’t really know about the liability aspects of the case because no one at Riceland knew what was going on at Bayer. Basically, we used the Bayer video depositions to be witnesses against themselves.”

Verdict and cap

On the verdict amount…

“The verdict was $16.9 million on compensatory damages for Riceland – basically on a lost profits claim – what was lost on milled rice.

“That amount was reduced because the jury found 30 percent negligence on Riceland. I’m really not sure what the jury thought that was attributable to. But Bayer’s argument was that Riceland continued to sell into the European market during the time period between (early) 2006 up until August, when (the USDA) announced (GM traits had been found in rice). They argued that … Riceland knew there was problem and shouldn’t have continued selling.

“In my mind, that’s why the jury put that 30 percent on us. So, the $16.9 million is reduced by 30 percent – down to around $11.8 million.

“Then, the jury found against Bayer for punitive damages of $125 million. The punitive legal standard in Arkansas – and the instruction the jury got – is that Bayer knew, or should have known, their conduct would result in damage and they continued that conduct in reckless disregard of the consequences. The evidence was replete that they knew if this got out – if there was an escape of a regulated material – it would shut off the foreign markets to U.S. rice. That’s exactly what happened.

“As long as these (GM rice) cases aren’t settled and the longer this thing goes on, the EU is still almost shut down today. And we’re almost five years from the USDA announcement. Before that, the EU market was a premium market for U.S. rice, for Riceland and Producers Rice Mill. Both sold a lot of parboiled rice to the EU market.”

Is it true this verdict is the largest for punitive damages in the state’s history?

“I think it is.”

How long before you collect?

“In Arkansas, there is a cap on punitive damages. The legislature passed the Civil Justice Reform Act in 2003. In that legislation, the legislature put a cap on punitive damages of $1 million.

“The jury doesn’t know that when they go back to decide.

“So, right now, Bayer will say ‘we don’t owe $125 million. We owe you $1 million.’

“Riceland will appeal the cap. In fact, the cap is already being appealed. The Lonoke County verdict – I think it was (around) $40 million – was a year ago and it’s on appeal, right now. The cap issue is also a factor in that case.

“The issue is whether, when the legislature passed that cap eight years ago, it was constitutional. That will be decided by the Arkansas Supreme Court. And it’ll probably be decided in the Lonoke County case before the Riceland case ever gets to the Supreme Court.

“But, yes, there will an appeal. Riceland will actually appeal on the cap limitation. If the Supreme Court says the cap is constitutional, Riceland will never get that money.

“The Lonoke County case is up, right now. Bayer has already submitted its briefs to the Supreme Court. I just talked to the lawyers for the plaintiffs and their briefs are due in the next 30 days. As soon as the briefing is done, it will go to the Supreme Court, there will likely be oral arguments and it’ll be decided sometime this year.

“My guess is it may be late summer when that is decided.”

Has anyone suggested during this Arkansas legislative session that the cap be rescinded?

“Not in this session. But it’s likely to come up again.

“It was very controversial legislation. It didn’t just involve caps on punitive damages. The nickname for it was ‘tort reform.’ A number of states have passed tort reform. Most of the impetus was due to medical malpractice cases and doctors saying they couldn’t get insurance…

“But one of the things that got thrown into the act was the limitation on punitive damages. Generally, that’s viewed as ‘pro-business’ legislation. But Riceland certainly believes that in business cases there can be egregious conduct, even in significant business disputes like Riceland against Bayer. … There ought to be a remedy where a jury isn’t limited on the amount of a punitive award.”