Syngenta Litigation Still Pending Despite China's Viptera Approval

Overview

Syngenta lawyers have been busy. And the legal fallout from China’s rejection of Syngenta’s Agrisure Viptera, a genetically-modified (GM) corn product, does not look to end any time soon. At this point, the only sure prediction is that there will be no true winners in this battle.

Background Facts

Syngenta AG is a Swiss-based agribusiness company that owns several American agricultural technology companies, including Syngenta Seeds, Inc. The conflicts arise from corn seed Syngenta developed with the MIR162 insecticidal trait. Syngenta promoted MIR162 as the first trait stack-labeled for control of “true armyworm.” After U.S. regulators approved Agrisure Viptera in 2010, Syngenta began selling the GM seed for planting in the 2011 crop year.

Most U.S. trading partners—including Canada, Japan, Argentina, and the European Union—also approved the GM trait. China, however, did not grant import approval, despite receiving the initial application from Syngenta in March of 2010.

It was during this same period that the Chinese market for U.S. corn exploded. During the 2010-2011 trade year, China imported 979,000 metric tons of corn from the United States. This was comparable to the 950,000 metric tons Canada imported during the same year. One year later, however, China imported 5.2 million metric tons of corn from the U.S., as compared to Canada’s 870,000. Japan remained the largest importer with annual imports of 14.9 million metric tons of U.S. corn.

Although China has always publicized a zero-tolerance policy regarding imports of unapproved GM corn (reserving the right to reject an entire shipment of corn if it contains traces of unapproved GM seed), it was not until November 2013, that China began actually rejecting U.S. corn shipments containing traces of Agrisure Viptera. Since that time, China has continued to reject shipments of U.S. corn, as well as shipments of dried distillers grain used in the production of animal feed. Although the GM corn at issue comprised only three percent of U.S. corn production, China has rejected any shipments containing trace amounts of the MIR162 trait.

Complicating matters and fueling a contentious climate was the precipitous drop in corn and soybean prices accompanying this same time period. The average price of corn per bushel has dropped by more than half since the summer of 2012. Soybean prices have also declined, although not as dramatically. Although all of the precise reasons for this decline are unknown, it is generally accepted that the record harvest from last year, coupled with the expected record harvest this year, have created a climate where supply has simply outpaced demand. Many have argued that China’s rejection of unapproved GM corn is another important factor. They cite an 85 percent decline in Chinese imports of U.S. corn since November of 2013 as support for their claim.

If the number of litigants making this claim is any indicator, it’s a popular stance. Since September, Syngenta has been hit with a barrage of lawsuits claiming that Syngenta caused significant financial damage to U.S. farmers and exporters due to its release of MIR162 seed into the market before China had approved it for import. In 2011, Syngenta filed a still-pending action of its own. These currently pending lawsuits are summarized below.

Legal Actions

Syngenta v. Bunge North America

Bunge North America is an agricultural product storage and transport company that purchases grain from farmers, stores it in local elevators, and transfers it to purchasers in domestic and foreign markets. Bunge is also a federally-licensed warehouse operator. Bunge enters into purchase agreements with producers under which it retains the authority to refuse to accept agricultural products containing GM seed for which import approval by foreign markets has not been obtained.

In the summer of 2011, Bunge began treating China as a major export market for domestically-grown corn because of the significant increase in the amount of U.S. corn that China was importing. Because of China’s zero-tolerance policy for unapproved genetically modified traits like Viptera, Bunge began to refuse to accept Viptera from its contract producers in July of 2011. Pursuant to this policy, Bunge posted signs at its regional facilities and on its website stating that it was unable to accept delivery of Agrisure Viptera. Because of this position, Bunge contract producers who had planted Viptera were required to sell their crops to another warehouse, buy other corn to meet their obligations with Bunge, or buy their contracts out at a loss.  

In August of 2011, Syngenta filed a complaint against Bunge in the United States District Court for the Northern District of Iowa, alleging that it lost profits and market share because of Bunge’s rejection of Viptera. Specifically, Syngenta alleged that it was a third-party beneficiary of Bunge’s licensing agreement with the federal government and that Bunge had breached both contractual duties and its statutory duty under the United States Warehouse Act (USWA), 7 U.S.C. § 245(a), to treat depositors of agricultural products fairly. Syngenta also alleged that Bunge violated the Lanham Act by engaging in false advertising. The district court dismissed the USWA and third-party beneficiary claims for failure to state a claim and granted summary judgment to Bunge on the Lanham Act claim.

On October 20, 2014, the Eighth Circuit Court of Appeals affirmed the dismissal of the USWA and third-party beneficiary claims, but vacated the summary judgment on the Lanham Act claim and remanded for further proceedings. Syngenta Seeds, Inc. v. Bunge North America, Inc., No. 13-1391 (8th Cir. Oct. 20, 2014). At the time the district court issued its ruling, the United States Supreme Court had not yet issued its opinion in Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014), which settled a split in the circuits regarding the requirements for standing to bring a Lanham Act claim.  Before Lexmark, the Eighth Circuit had required that a false statement be made by a competitor to be actionable under the Lanham Act. Following this precedent, the district court had ruled that because Bunge was not Syngenta’s competitor, its statements were not actionable under the Lanham Act, and Syngenta lacked standing to bring its claim. In Lexmark, however, the U.S. Supreme Court eliminated the competitor requirement and established the “zone-of-interest test” and “proximate causality requirement” as the proper analysis for Lanham Act standing. Because of this new precedent, the Eight Circuit remanded Syngenta’s Lanham Act claim for the district court to determine whether Syngenta had standing pursuant to the Supreme Court’s new directives. The Eighth Circuit declined to rule on whether the Bunge statements at issue constituted commercial speech.

Cargill v. Syngenta

On September 12, 2014, Cargill, Inc., the top U.S. exporter of grain, filed an action against Syngenta in Louisiana State Court. In its complaint, Cargill alleges that it lost more than $90 million because Syngenta began selling Viptera before it had secured import approval from China. Specifically, Cargill relies on standard tort causes of action, such as negligence and reckless or willful misconduct, to establish its claims, and attempts to tie its loss of earnings to China’s rejection of U.S. corn shipments due to MIR162-laced seed.  Cargill also alleges that Syngenta has not practiced responsible “stewardship.”

The same day that Cargill filed its case, Trans Coastal Supply Company, another U.S. corn exporter, filed a putative class action against Syngenta alleging that Syngenta’s “premature release” of Viptera has caused Trans Coastal to lose around $41 million. Trans Coastal, which filed its complaint in the United States District Court for the Central District of Illinois, sets forth a number of claims in its complaint, including violations of the Lanham Act, public nuisance, trespass to chattels, negligence, strict liability, negligent interference with prospective economic relations, and fraudulent misrepresentation.

Class Actions by Corn Farmers

Since October 3, 2014, U.S. farmers in 11 states have filed putative class actions against Syngenta setting forth claims nearly identical to those of Trans Coastal. These actions are filed on behalf of farmers who did not plant Syngenta’s Viptera but who were allegedly damaged by the collapsing corn market caused in no small part—according to the complaint—by Syngenta’s premature release of Viptera into the market. The complaints, which are largely orchestrated by the same law firm, allege that the Syngenta “destroyed the export of U.S. corn to China and caused depressed prices for all domestic corn.” The complaints also assert that Syngenta misled the public as to the approval status of the GM seed and the impact a lack of approval by China would have on the market. The complaints allege that China’s rejection of U.S. corn has led to a projected loss of 11 cents per bushel or $1.14 billion during a nine-month marketing period. The plaintiffs seek damages for their class members and ask the courts to enjoin Syngenta from selling, marketing, distributing, or otherwise disseminating any corn with the MIR162 train (including Viptera and Duracade, which is Syngenta’s “second generation” seed with the MIR162 trait) until such time as China approves the seed for import.

Conclusion

These legal actions raise a number of important questions, with many implicating U.S. sovereignty. For example, should a country such as China wield regulatory power over the products companies can sell in America? Is compliance with U.S. law sufficient or can foreign countries dictate production requirements? What if these production requirements are rooted in pure economic interest (as is likely the case with China)? Who should bear the risks inherent in a global marketplace?

Another interesting twist to these lawsuits is that the plaintiffs are not generally opposed to GMO technology. In fact, many have and will continue to profit from its development.  Nonetheless, it is difficult to see how these lawsuits will not have a chilling effect on GMO development. The allegations in the complaints are similar to concerns often voiced by GMO opponents. For example, the complaints allege that Syngenta’s development of Viptera constituted an “ultra-hazardous or abnormally dangerous activity” for which it should be held strictly liable. They also assert interesting “trespass to chattels” claims, alleging that MIR162 has led to a “market-wide” contamination and “public nuisance” claims arguing that the public was deprived of its freedom to “choose to purchase and consume” “non-contaminated” corn. Even within its negligence claims, the plaintiffs assert the “near certainty of cross-pollination” and “commingling” as risks that Syngenta should have foreseen.

Syngenta will file its answers to these complaints shortly. Syngenta has said publically that the complaints are “without merit” and that it “strongly upholds the right of growers to have access to improved new technologies that can increase both their productivity and their profitability.” Syngenta has also stated that it “commercialized the trait in full compliance with regulatory and legal requirements” and has been “fully transparent” in its dealings.  

It remains to be seen how these legal battles will unfold. Important legal principles may be established to guide the development and dissemination of emerging food technology. In the short term, however, it seems unlikely that any clear winners will emerge.