Bayer Faces 1,200 Rice-Damage Suits After Blocking Class Action

Bayer Faces 1,200 Rice-Damage Suits After Blocking Class Action


Oct. 15 (Bloomberg) -- 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 Bayer after the U.S. government in 2006 said trace amounts of modified rice being grown experimentally by the company 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 who teaches tort and product-liability law and is an expert on federal courts and civil procedure.

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, Tobias said. ``That ups the ante for the first few trials. 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 yesterday closed at 45.3 euros, down 22 percent from a year earlier. The German Stock Index has fallen 35 percent in the same period as the global credit crisis pushed down shares.

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.

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.

Not Approved

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.

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.

Record Prices

``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.

AnalystsAndrew Benson of Citigroup Inc. in London, Richard Logan of Goldman Sachs Group Inc. and Karl-Heinz Scheunemann of Landesbank Baden-Württemberg in 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.

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.

The case is In Re Genetically Modified Rice Litigation, 06- md-1811, U.S. District Court, Eastern District of Missouri (St. Louis).

BLOOMBERG