WASHINGTON, June 7, 2017 - Attorneys for Syngenta and Kansas growers maneuvered up to the last minute before trial began this week in the first of several class-action cases involving Syngenta’s commercialization of corn genetically modified with the MIR162 trait.
Attorneys for the plaintiffs objected to exhibits Syngenta was planning to use in its opening statement, causing U.S. District Judge John Lungstrum, who is presiding over the proceedings in Kansas City, Kansas, to observe, in a statement in the online docket: “It is … somewhat remarkable to consider the notion that all of Syngenta’s proposed exhibits could actually be employed with any effect in the 45 minutes allocated to it by the court for opening.”
He then ruled that the parties could use exhibits “which will be offered in evidence as long as they have a good faith belief that they will be admitted in evidence,” but that he would not allow excerpts of deposition testimony to be displayed in opening or closing arguments.
Given the stakes, the jockeying for any advantage is not a surprise.
Syngenta sold Agrisure Viptera to corn growers to use for the 2011 growing season without having received Chinese approval of MIR162, a genetic trait that confers insect resistance. In November 2013 China began rejecting U.S. grain shipments because, it said, it had detected MIR162 in the corn. China eventually approved MIR162 in December 2014, but by then, the plaintiff corn growers contend, the damage had been done – both in terms of lower corn prices and lost sales.
The trial is called a “bellwether” because it is designed to measure the strengths and weaknesses of each side’s arguments as they consider whether they should just settle the matter. Other state classes have been certified in Arkansas, Illinois, Iowa, Missouri, Nebraska, Ohio and South Dakota, with as many as 350,000 growers represented, according to the plaintiffs.
The trial that began with jury selection on Monday involves four Kansas corn growers, who are representing 7,300 growers in the state, none of whom actually planted Agrisure Viptera. They are seeking $200 million in compensation, plus unspecified punitive damages. “Additional damages of billions of dollars are being sought for corn producers in the other states already certified as class actions by the court, or to be certified by the court in the future,” plaintiffs’ attorneys said after Lungstrum narrowed the issues to be considered at trial in an April ruling.
Those issues concern whether Syngenta acted negligently in its commercialization of Agrisure Viptera. Kristine Tidgren of the Iowa State Center for Agricultural Law and Taxation framed the issues: “Did Syngenta owe a duty to the plaintiffs? Did Syngenta breach that duty by unreasonably marketing Viptera prematurely or by failing to implement a reasonable stewardship program? Did any breach of a duty owed by Syngenta to the plaintiffs cause China to reject U.S. corn, thereby causing U.S. corn prices to plummet, and the plaintiffs to receive less money for the corn they grew?
“Any plaintiffs’ verdict would require the jury to find in favor of the plaintiffs as to all of those questions,” Tidgren wrote.
According to the plaintiffs, the Chinese rejection caused corn prices to tumble, resulting in losses to U.S. growers of as much as $5.77 billion.
Syngenta, however, will argue at trial that corn prices were already falling. “According to the USDA, the commodity price of corn declined 32 percent (from $6.79 to $4.63 a bushel) between July and October 2013,” before China began rejecting U.S. corn shipments, the company says on its Viptera China Facts web page.
Another issue that will be argued at trial is the question of whether Syngenta misled farmers on how quickly China would approve the trait. Then-CEO Michael Mack famously said on an earnings call in April 2012 that the company expected to get approval within “a couple of days” before qualifying his statement: “Of course, the regulatory authorities are not something that we can handicap definitively.” Approval did not come until December 2014.
Another issue that will come up is how big an export market China would become. The plaintiffs have said consistently that China was poised to become a large trading partner, citing projections by USDA.
But Mike Jones, an attorney with Kirkland & Ellis serving as outside counsel for Syngenta in the Viptera litigation, predicted that the evidence will show that no one really knew what China was going to do.
“There have regularly been predictions about how much corn China was going to import,” Jones said in an interview with Agri-Pulse. “It was almost never the case that those predictions came true; it was almost always the case that the projections were exaggerated.”
Speaking generally because he was citing documents filed under seal in the case, Jones said, “Some of those same folks who were making allegation that China was a key market – their own documents describe China as a key uncertainty because nobody knew exactly what it was going to do.”
During the 2011-2012 marketing year, which runs from September through August, China imported 5.1 million metric tons of corn, but that amount fell to about 2.4 million MT in 2012/13 before rebounding slightly the next year to 2.7 million MT. In the next two years, the U.S. exported about 747,000 MT and 321,000 MT to the country. Japan sits atop the list of countries importing U.S. corn for the current marketing year, with 8.9 million metric tons, according to U.S. Grains Council statistics. China, with about 32,000 MT imported, is number 36.
“Our position is, China has historically been in and out of the market, and when they disappear from the market for two or three years, nobody has previously argued that … that had some big impact on the prices,” Jones said. “There are a number of other countries that are ready, willing and able to accept U.S. corn, and in fact, exports to other countries went up after China left the market.”
Another issue that will be wrestled with at trial is whether Syngenta followed proper stewardship guidelines when it commercialized Viptera.
“Premature commercialization poses a well-known and significant risk of harm to farmers if bio-engineered commodity products are commercialized before they are approved by major importing nations,” the plaintiffs’ amended class action master complaint says. Syngenta, they allege, commercialized MIR162 “despite clear risk of harm to its stakeholders, including plaintiffs in this action, Syngenta’s knowledge of that risk, and Syngenta’s own professed commitment to responsible management.”
But Jones said that Syngenta did follow proper stewardship guidelines and that China “did not have a functioning regulatory system, as that system is defined, because it can become infused with politics.” He said U.S. Trade Representative assessments of China’s compliance with World Trade Organization treaties “have regularly characterized (the Chinese system) as arbitrary and capricious” China has used its regulatory approval process “to game the system when it’s in their political and economic interest to do so,” Jones said.
After China began refusing U.S. corn shipments in late 2013, Jones said both the National Corn Growers Association and Biotechnology Industry Organization (now the Biotechnology Innovation Organization) “went on record to say that Syngenta commercialized MIR162
in compliance with the BIO policy and other policies and really didn’t do anything wrong in terms of the commercialization.”
Philip Shull, a former minister counselor for agriculture in the U.S. Embassy in Beijing, is expected to testify for Syngenta at the trial about the Chinese regulatory system. In an order that largely rejected objections by both sides to the other side’s expert witnesses, Judge Lungstrum ruled that Shull’s “opinions do not depend on any issue of science such as the validity of science-based reasons given for China’s rejection of applications.
“Rather, his opinion is essentially that China acts for political reasons, which always trump scientific concerns,” the judge said. “Mr. Shull is qualified by his experience with China and its regulatory system to give such opinions concerning the role of politics in that system.”
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