(Bloomberg) -- Farmers have to deal with threats to their crops from nature all the time. Thousands of Kansans, though, argue that Syngenta AG posed an even bigger threat by failing to prevent its genetically modified corn seed from contaminating U.S. crops, which led to a devastating rejection of imports by Chinese officials.
More than 7,000 Kansas farmers went to trial Monday seeking to convince a jury that the Swiss agrochemical giant rushed the GMO seed to market in 2010 before getting import approval from China, which later stopped shipments after tagging the corn as contaminated.
That move, coupled with U.S. corn farmers’ inability to regain a foothold in China once other countries filled the void, almost wiped out the U.S. corn market for several years and continues to depress corn prices even today, plaintiffs’ lawyers told a Kansas City, Kansas jury Monday in the first case over the corn flap to be heard by a jury. They’re seeking $200 million in lost sales, plus punitive damages.
Syngenta officials, who deny wrongdoing in launching the Viptera product and contend the GMO seed wasn’t responsible for price drops, almost went to trial over similar claims in April. The Minnesota court was forced to reschedule that case after it failed to seat a jury. Several other trials are pending as lawyers pursue suits on behalf of some 350,000 U.S. corn growers claiming as much as $13 billion in losses.
In a twist, the lawsuit spurred by the Chinese action comes as state-owned China National Chemical Corp. is finalizing its $43 billion acquisition of Basel, Switzerland-based Syngenta. A win for the farmers over Syngenta’s sales of the seeds would circle back to the Chinese government that rejected the grain.
U.S. District Judge John Lungstrum, who is overseeing the Kansas trial and most of the litigation, has certified eight statewide classes so far and had said he’ll set another trial this year. Farmers in 14 additional states are awaiting class certification decisions by the Kansas judge.
Grain exporters Archer-Daniels-Midland Co. and Cargill Inc. have accused Syngenta in separate suits of carelessly allowing its seed to taint U.S. corn, prompting the Chinese rejection. Those suits are pending in state court in Louisiana, with Cargill’s headed for trial next year. Syngenta’s counterclaims against both companies were dismissed in Kansas last year.
Claims by several individual farmers will be featured as representative of the class in the Kansas City trial. Those farmers are hardly huge agribusinesses, according to their complaint. One of the representatives, David Polifka, planted about 1,000 acres of corn in 2013 and again in 2014 in Gove County, in western Kansas. Another, Charles Frickey, planted about 180 acres of corn in 2012 and 140 acres in 2014 in Decatur County, in the northwestern part of the state.
Polifka and Frickey are still dealing with a depressed corn market because of Syngenta’s botched rollout of the Viptera GMO seeds, Scott Powell, a lawyer for the class of farmers, told jurors Monday. “Every bushel of corn grown in this country is worth less today than it would have been had Syngenta” waited for Chinese regulatory approval of the product, the lawyer said in opening statements.
Syngenta’s internal files show scientists warned executives that they risked alienating a “key export market” for U.S. corn by rushing ahead with Viptera’s release, Powell said. He said ex-Syngenta Chief Executive Officer Michael Mack dismissed “as nuts” suggestions the company should have waited for Chinese regulators’ approval.
Syngenta began marketing its Viptera insect-resistant corn in 2011 following U.S. approval the prior year. Farmers argue Syngenta was reckless in allowing the trait to contaminate U.S. crops and selling a second GMO seed that also hadn’t been approved by China. Syngenta misled the industry on the timing of an expected approval from China, the farmers contend, citing internal company documents and public statements.
In 2012, according to the farmers’ complaint, Mack told analysts on a conference call Syngenta expected to have Chinese approval within “a couple of days.” The company says Mack qualified that statement on the call, saying he couldn’t “handicap definitively” when China would act.
China didn’t approve the trait until 2014, and Syngenta knew that approval wasn’t imminent in 2012, the farmers said. Cratering corn prices cost massive losses to farmers and a chance at a growing market, according to the class-action suit. Even after China approved the seed, prices remained depressed because the country made deals with Ukraine and other corn producers, the farmers said.
Syngenta denies misleading farmers about the timeline on Chinese regulatory approval and says a 2013 corn glut, and not the Chinese Viptera rejection, caused corn prices to plummet.“Syngenta acted responsibly when it began selling Viptera in 2010,” Michael Brock, one of the company’s lawyers, said in his opening statement. “It was a product that farmers wanted and needed.”
Syngenta was able to secure foreign regulatory approvals in almost a half-dozen countries by late 2010, but China’s dysfunctional regulatory system held up approval in that country until late 2014, Brock said. Even so, the lag “didn’t harm” the Kansas corn growers, whose crops were subject to regular market forces, the attorney argued.
The trials will probably turn on whether farmers can convince jurors it was the Chinese ban, and not traditional market factors, that caused the corn-price decline, said law professor Anthony Sabino, of St. John’s University in New York. “It’s not enough for these plaintiffs to prove liability,” he said.
“They have to present hard economic facts that prove their market losses,” Sabino said. “More than one plaintiff has done a bang-up job of proving liability only to fall flat on proving damages.’’
The case is In Re: Syngenta AG MIR 162 Corn Litigation, 14-md-02591, U.S. District Court, District of Kansas (Kansas City).