Pending Syngenta Lawsuits Raise Numerous Questions

Overview

If you are an Iowa corn farmer, you most likely have been contacted by an attorney wishing to represent you in a lawsuit against Syngenta. Since last fall, plaintiffs have filed hundreds of lawsuits alleging that Syngenta harmed the U.S. corn market by prematurely commercializing genetically modified (GM) corn seed before it was approved for import by China. This article provides a high level summary of the complex legal actions pending against Syngenta. Readers seeking information regarding their individual legal rights should contact an attorney.

Facts

Syngenta AG is a Swiss-based agribusiness company that owns several American companies, including Syngenta Seeds, Inc. The “Syngenta litigation,” involves GM corn Syngenta developed with the MIR162 insecticidal trait. Syngenta developed the seed to control “true armyworm.” After U.S. regulators approved Agrisure Viptera in 2010, Syngenta began marketing it for the 2011 crop year.

Most U.S. trading partners promptly approved the GM trait. China, however, did not grant import approval for many months.

During this same period, the Chinese market for U.S. corn exploded. During the 2010-11 trade year, China imported 979,000 metric tons of corn from the U.S. One year later, however, that number jumped to 5.2 million metric tons. China became the third largest purchaser of exported U.S. corn, accounting for approximately 13 percent of the U.S. export market, which comprises 20 percent of U.S. corn.

Although China publicized a zero-tolerance policy for unapproved GM corn, it was not until November 2013, that China began rejecting U.S. corn shipments containing traces of Viptera. This rejection also applied to shipments of dried distillers grain used for animal feed. Although China finally approved Viptera for import in December of 2014, U.S. corn sales to China have barely budged since that time.

Key to the Syngenta litigation, the average price of corn per bushel dropped by more than half between the summer of 2012 and the fall of 2014. Soybean prices also declined, although not as dramatically. Several consecutive record harvests contributed to a climate where supply outpaced demand.

Lawsuits, Pending MDL

Plaintiffs, including grain exporters Cargill and Trans Coastal Supply, began filing lawsuits against Syngenta in September of 2014. These lawsuits generally allege that China’s rejection of U.S. corn caused economic harm ranging from $ 1 billion to $2 billion and that Syngenta is directly responsible for this harm. Specifically, they allege that Syngenta “irresponsibly” chose to commercialize Viptera before China approved it for import and that Syngenta was negligent by failing to practice “stewardship” required by industry standards. Syngenta counters that China’s wrongful refusal to approve Viptera caused any such harm.

Trans Coastal Supply sought to represent a class of grain handlers and exporters in its action. ADM Company filed its own lawsuit in November.

In October, farmers across the nation who did not plant Viptera began filing proposed class action lawsuits against Syngenta. They allege that Syngenta misled its constituents and negligently contaminated the U.S. corn supply with Viptera, thus causing the rejection of nearly all U.S. corn by China.

The Syngenta litigation now consists of hundreds of separate lawsuits filed in state and federal courts across the country. Although the actions filed by Cargill and ADM were filed in state court, they have been “removed” to federal court because Syngenta alleges that they involve questions of federal law relating to foreign relations.

In December 2014, most of the Syngenta lawsuits were consolidated into multidistrict litigation in the United States District Court for the District of Kansas. Called “MDL,” this procedure allows a single court to hear and decide pretrial legal matters in similar complex lawsuits together. It also streamlines the discovery process. The plaintiffs work together, and the defendants are relieved from litigating identical questions in hundreds of different courts across the country.

Two “master” class action complaints have been filed in the MDL: One proposes to represent corn farmers who did not plant Viptera and the other seeks to represent corn exporters, handlers, and grain elevators.

Cargill, ADM and several other plaintiffs are asking the court to send their actions back to state court. After deciding this question (scheduled for hearing April 27), the court will make many other preliminary rulings. One important issue will be whether to “certify” the two proposed classes. If this happens, the rights of all similarly situated persons or businesses will be litigated in those actions, unless those parties affirmatively choose to “opt out.”

In other words, the legal rights of most corn farmers who did not plant Viptera would be automatically adjudicated in the producer class action. If the class were to settle its claims with Syngenta, “absent class members” (those not named in the suit but meeting the definition of members) would share in the proceeds. The proceeds would be distributed first to the attorneys, with the remainder divided amongst class members according to a formula determined by the parties and the court.  Absent class members are generally not allowed to participate in pretrial discovery. In successful actions, absent class members are generally entitled to share in damage awards after proving their qualifications. Individual damage awards in class actions, however, are generally very small, even when the judgments against the defendants are very large.

Conclusion

This litigation raises many important questions. For example, should a country such as China wield veto power over the products companies can sell in America? What role did China’s own economic interest play in its choice to reject American corn shipments?

Syngenta stated in a January court filing, “This litigation constitutes an unprecedented effort to hold a company liable for selling a U.S.-approved product in the U.S., simply because the product was not yet approved by a foreign country like China that can increase both their productivity and their profitability.”

It remains to be seen the chilling effect, if any, this litigation will have on the ability of U.S. companies to develop and market new technologies.  We will keep you up to date on what is sure to be a very long process.

CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

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