A recent ruling by a Kansas federal judge cleared the way for farmers, grain handlers and exporters to proceed towards trial in their suits against Syngenta claiming that the company's sale of its Agrisure Viptera and Agrisure Duracade corn seed interrupted trade with China and harmed the market for U.S. corn. The class action lawsuit alleged a total of twenty-one counts, including consumer fraud, tortious interference with business, negligence, nuisance, and trespass to chattels.
Syngenta challenged the case, arguing it had no post-sale control over how third-parties used its products, and that it was the third-party use that may have resulted in contamination of the corn supply chain. However, Federal U.S. District Judge John W. Lungstrum rejected Syngenta's two primary legal defenses in denying Syngenta's motion to dismiss in substantial part.
Judge Lungstrum issued his 116-page ruling on Friday, Sept. 11, after reviewing hundreds of pages of written briefs and oral arguments presented by the plaintiff co-lead counsel team and Syngenta.
The co-lead plaintiff counsel , which includes Don Downing of Gray, Ritter & Graham, allege, among other things, that Syngenta was negligent in the timing, scope, and manner of commercializing Viptera and Duracade genetically modified corn in the U.S. knowing that China had not yet approved the corn. China was a major importer of U.S. corn and stopped accepting virtually all U.S. corn shipments. As a result, prices for U.S. corn were depressed, economically damaging U.S. corn growers and others in the industry, according to the plaintiffs.
Judge Lungstrum rejected Syngenta's argument that the company had no duty to protect the farmers, exporters and others in the industry who had brought suit. In his ruling, the judge said "the law reasonably imposes a duty on a manufacturer to exercise reasonable care not to commercialize and sell its product in a way that creates a risk of widespread harm resulting from the intended use of the product by all of its customers."
Based on the allegations in the complaint, the Court made two other key observations First, the Court said the case “involves a risk of harm to other participants in an inter-connected market, participants whom Syngenta has appeared to embrace as stakeholders, and thus who are especially vulnerable to the wrongful acts alleged by plaintiffs." Second, the Court said Syngenta had actually represented that it would take steps to protect the industry from the very harm which had occurred.
"This is a big win for the American corn farmer," said Downing. "We believe the court's ruling thoroughly addresses and rejects the primary legal defenses asserted by Syngenta, namely, that it had no duty to avoid conduct that it knew was likely to harm corn farmers and others and that the economic loss doctrine barred those claims."
Publicly available estimates of economic damages in early 2014 ranged from $1 billion to $2.9 billion, although Downing explained that actual damages may now be substantially higher given that U.S. corn exports to China have yet to recover.
A. Bryan Endres, University of Illinois associate professor of food & agricultural law, and Lisa Schlessinger, University of Illinois agricultural and consumer economics postdoctoral research associate, noted that the ruling resolves, at least in-part, a long-standing open issue on the effect governmental product approval (i.e., biotech product deregulation) may have on subsequent claims for damages arising out of the use of the product.
“Although one should be cautious in reading too much into this preliminary result, it nonetheless establishes an important benchmark in the developing common law of biotechnology in the U.S,” they said.
While some claims will move forward, a Syngenta representative told Feedstuffs that it is important to note that a number of claims were dismissed by the Court in the ruling. Syngenta prevailed in its effort to dismiss claims regarding failure to warn, trespass to chattels, private nuisance and several other statutory claims.
“We are pleased that the Court dismissed a number of the claims in the Viptera China litigation,” the representative said. “The Court was legally required at this early stage to take the plaintiffs' allegations at face value, and accordingly concluded that certain claims could go forward past the initial pleading phase. The plaintiffs will now have to prove their claims with real evidence, and we look forward to defending ourselves vigorously as the litigation proceeds.”
Syngenta said it believes the lawsuits are without merit, adding that it will “continue to defend the rights of American farmers to have access to safe, effective, U.S.-approved technologies like Agrisure Viptera.”
“We commercialized Viptera in full compliance with regulatory and legal requirements, and USDA statistics make clear that the commodity price of corn declined before China’s rejection of U.S. corn in November 2013,” the representative said.
In sum, Endres and Schlessinger noted that the ruling “was just one more step on what is likely to be a long and, at times, controversial journey.”