Note: Late Friday afternoon, Delta Farm Press received the following press release. More coverage of the potential end to the long-running legal case will follow.

For more, see GM rice.

A $750-million-dollar legal settlement has been reached between Germany-based Bayer AG and its affiliates and U.S. rice farmers. This settlement relates to legal actions filed beginning in 2006 in response to contamination of the U.S. rice supply by Bayer’s experimental and unapproved genetically modified Liberty Link rice.

Bayer has agreed to pay up to $750 million in damages to U.S. rice farmers, plus all administrative costs. This settlement is in addition to previous settlements in which Bayer has already agreed to pay to some plaintiffs in the litigation, which include farmers, rice exporters, rice importers, rice mills and rice seed dealers.

Background

In August 2006, the USDA announced that Bayer’s genetically modified LibertyLink rice was found in the U.S. long-grain rice supply, including two of the most popular rice seed varieties, Cheniere and Clearfield 131. Discovery of the contamination led to a dramatic drop in U.S. rice prices, as the European Union stopped purchasing U.S. rice. Even today, the European Union’s purchases of U.S. rice are only a small fraction of what they were before the 2006 GM discovery.

The first lawsuit on behalf of U.S. rice farmers was filed in September 2006. As more federal lawsuits were filed, they eventually were combined and sent by the Judicial Panel on Multidistrict Litigation to the Honorable Catherine D. Perry, United States District Judge for the Eastern District of Missouri. Judge Perry, since December 2006, has presided over the litigation, which has grown to now include thousands of rice producers and dozens of other types of businesses that have sued Bayer.

Six trials involving farmers have gone to verdict. In all six trials, the juries returned a verdict in favor of the farmers and against Bayer. Millions of dollars have been awarded by the juries in compensatory damages, and two juries also awarded punitive damages.

Settlement Terms

Attorney Don Downing of the St. Louis law firm Gray, Ritter & Graham, and Adam Levitt of the Wolf Haldenstein Adler Freeman & Herz law firm in Chicago, are the court-appointed co-lead Plaintiff’s counsel in the multi-district litigation in U.S. federal court. Downing also was the lead trial lawyer in the three bellwether trials conducted in federal court, and led the negotiations with Bayer on behalf of the farmers. Downing and Levitt announced the global settlement terms today.

“We are happy that Bayer has agreed to provide substantial compensation to the thousands of U.S. families that make their livelihood from rice farming,” Downing said. “In the farming community, most people live by the principle that if you harm a neighbor, you make it right. After almost five years of litigation, Bayer has finally made an effort to make it right.”

“From the outset of this litigation we made it clear to Bayer that it needed to step up and take responsibility for damaging American rice farmers with its unapproved rice seeds; this settlement goes a long way toward achieving that goal,” Levitt said.

The settlement covers all U.S. long-grain rice producers (farmers and crop share landlords) who planted rice between 2006 and 2010, not just those who have already filed a lawsuit against Bayer. The settlement calls for payment to farmers from one or more of three different funds, or pots.

Pot 1 Compensation

Pot 1 compensates for market losses – the lower price of U.S. rice crops - suffered by farmers. It will pay each farmer up to a total of $310 per acre for each acre of long-grain rice planted over five years. The per-acre compensation begins at $120 per acre planted in 2006 and ends at $10 per acre planted in 2010. The breakout is as follows:

To be eligible for payment from this fund, farmers will be required to submit Farm Service Agency documents verifying long-grain rice acres planted in each year.  

Pot 2 Compensation

U.S. rice farmers who planted either of the contaminated varieties, Cheniere or Clearfield 131, are also eligible to receive compensation from another fund to cover financial damages other than market loss. Damages compensated by this fund include financial losses suffered by farmers who had to plant lower valued crops such as soybeans in previously contaminated rice fields or leave those fields fallow, and the cost of cleaning equipment to remove contaminated rice.

To be eligible for payment from this fund, a rice farmer must have documented evidence of planting in 2006  one of two of the contaminated varieties – Cheniere and Clearfield 131.

For every acre planted in either variety in 2006, farmers will receive an additional $100 per acre from this fund, subject to a total cap of $70 million for all such claims.

Pot 3 Compensation

A third fund also covers financial damages farmers suffered beyond market loss but requires more extensive documentation to receive compensation. The fund has been established to compensate farmers who either did not plant Cheniere or Clearfield 131 variety rice in 2006 or did plant those varieties but incurred more than $100 per acre in other losses and are willing to take the time and effort to prove it.

Farmers may seek compensation from either Pots 2 or 3, but not both. Claims made for compensation from Pot 3, unless agreed to by Bayer, will go to binding arbitration. An arbitrator will hear each claim and rule how much compensation, if any, farmers will receive. Pot 3 has a total cap of $100 million in compensation for all claims.

Settlement Cap

The $750 million in total compensation agreed to by Bayer is a cap. If all filed claims exceed $750 million, the compensation in Pot 1 will be reduced to no lower than $300 per acre to farmers. If after that reduction the claims still exceed the $750 million cap, then the Pot 3 compensation will be reduced to meet the cap.

Filing Deadline

“It can be a complicated process for farmers to document and file their claims,” Downing said. “To make sure farmers receive all of what they are due, I strongly recommend that they seek legal counsel to obtain and complete all necessary documents required by the settlement agreement.” 

In addition to Downing and Levitt, other counsel who were substantially involved in the settlement negotiations include: Richard Arsenault of the Neblett, Beard & Arsenault law firm, William Chaney of the Looper, Reed & McGraw law firm, Scott Powell of the Hare, Wynn, Newell & Newton law firm, and Grant Davis of the Davis, Bethune & Jones law firm.

Acreage threshold

There is an acreage threshold in order for the settlement to take effect. According to the settlement terms, farmers who planted at least 85 percent of the average number of planted rice acres in the United States from 2006 to 2009 must agree to participate in the settlement.

If the 85 percent participation threshold is not met, Bayer has the right to walk away from the settlement or adjust its terms. The average total number of long-grain rice acres planted in each year of this four-year period was approximately 2.2 million acres.