United States: Genetically Modified Corn – A Litigation Commodity

Foods have been modified naturally and through breeding techniques for thousands of years. Advances in natural or conventional breeding techniques flourished in the 20th century and, among other things, increased yield, addressed pest issues and created specific nutrient attributes. Advances in science led to the development of recombinant deoxyribonucleic acid (DNA) technology and what is known as "Genetically Modified" food. GM food contains genetic material that has been modified through in vitro recombinant (DNA) techniques, which allow for modifications that could not otherwise be obtained using conventional breeding methods.

GM food is regulated through a "coordinated framework" of federal agencies that includes the Food and Drug Administration (FDA), Environmental Protection Agency (EPA), and the United States Department of Agriculture (USDA). The FDA issued its Statement of Policy in 1992 concerning foods derived from new varieties (57 FR 22984) and issued guidance in 1997. In Alliance for Bio-Integrity v. Shalala, 116 F.Supp.2d 166 (D.D.C. 2000), the court observed that the FDA considers most GM food to be generally recognized as safe (GRAS). The court further observed that FDA does not require approval before marketing, but does recommend consultation with FDA. This lack of federal (and international) requirements for approval and labeling has left states and (foreign countries) to set their own standards.

The lack of uniform international standards creates problems when GM and non-GM foods are commingled in the supply chain. As a result, litigation related to GM seed commingling is becoming more prevalent. For example, In re: Monsanto Co. Genetically-Engineered Wheat Litig., 978 F. Supp. 2d 1373 (J.P.M.L. 2013) involved wheat farmers' claims for economic injuries due to lower wheat prices, import restrictions, and increased production costs when Monsanto's field study GM "Roundup Ready" wheat—which was not commercially available due to widespread industry opposition—was later discovered on US farms, resulting in settlements in excess of $2M. In In re: Genetically Modified Rice Litig., 543 F. Supp. 2d 1375 (J.P.M.L. 2008) rice farmers claimed monetary losses when Bayer CropScience's GM rice—at the time only approved for small-scale testing—was later found in all streams of US commercial rice production and the export rice market plummeted, resulting in settlements in excess of $750M. In In re: Starlink Corn Prods. Liab. Litig., 152 F. Supp. 2d 1378 (J.P.M.L. 2001) involved global claims for economic damages due to product recalls, import rejections, and heightened compliance requirements when corn which was not approved for human consumption was found in hundreds of corn-based food products, resulting in settlements reported to be in excess of $100M.

In 2014, lawsuits were filed  against Syngenta claiming the biotech giant contaminated the US corn supply with "Viptera Corn"—a GM corn seed that contains the patented GM trait MIR162. The crux of these allegations focus on the fact that Syngenta marketed and sold its Viptera Corn to US farmers before it was approved by China—at the time the third largest and fastest growing market for the export of US corn. Plaintiffs allege that Syngenta encouraged farmers to plant Viptera Corn commercially as early as 2011, assuring them that approval by China was forthcoming. Farmers began planting Viptera Corn shortly thereafter, but China did not approve it. When the unapproved GM trait showed up in boatloads of American corn in November 2013, China began rejecting the shipments, and US exports of corn to China practically ceased.

Corn is predominantly commodity based, so when the world's most populous country withdraws from the export market, prices across the US are significantly affected. Corn went from trading at almost $8 per bushel in 2012 to close to $3 per bushel in 2013. Some of the plaintiffs involved in the Syngenta litigation, who claim damages related to the global drop of corn prices and to China's reduced demand for US corn, attribute a quantifiable percentage of that drop to China's refusal to accept US corn that tested positive for traces of MIR162. A recent study by an economist for the National Grain and Feed Association concluded that damages to US corn farmers from Viptera Corn exceeded $1 billion, and could be as high as $2.9 billion.

Thousands of farmers across the US produce corn; and it is grown, stored, commingled, and shipped via local and regional grain elevators and transportation networks. Thus, even corn from growers who did not plant or otherwise knowingly commingle their product with Viptera Corn was rejected. The plaintiffs represent the entire spectrum of parties involved in the manufacture and distribution of US corn—farmers, grain elevators and silos, brokers, resellers, and other processors and distributors.

China finally approved Viptera Corn on December 22, 2014, but not before the Judicial Panel on Multidistrict Litigation (JPML) issued a Transfer Order on December 11, 2014, transferring nine lawsuits to MDL 2591 for consolidated pretrial proceedings in front of Judge John Lungstrum in the District of Kansas. See In re: Syngenta AG MIR 162 Corn Litigation, 2014 US Dist. LEXIS 171958 (J.P.M.L. 2014). The consolidation was unopposed, but selection of a transferee court was contested, with almost all plaintiffs requesting transfer to another district. Over 258 lawsuits, some of which propose class actions, have now been transferred to the Syngenta MDL.

Consumer awareness campaigns have led to proposed legislation regulating the production and labeling of GM seed. The consumer advocacy group Center for Food Safety, lists State Labeling Initiatives summarizing proposed legislation for Colorado, Illinois, Massachusetts, New Jersey, Oregon, Pennsylvania, and Rhode Island and describes Connecticut and Maine's legislation. In April 2014, Congress introduced H. 4432, 113th Cong. (2013-2014), proposing federal legislation establishing terms and premarket notification requirements for certain bioengineered organisms and preempting state or local requirements. Any legislation will have a significant effect on both GM and non-GM seed companies as well as their manufacturing, processing, and distributing partners.

As state and federal legislators wrestle with how to regulate the labeling and the introduction of GM products into commerce, the current absence of regulation creates fertile ground for litigation. Among the notable issues to be resolved in the Syngenta litigation is whether Syngenta had a legal duty to avoid commingling its product with product that it knew would inevitably end up in China. Nonetheless, even under the proposed legislation, when fungible commodities are commingled, until and unless they are truly interchangeable to the entire market, both domestic and abroad, litigation will ensue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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