$750 Million Settlement in Class Action Alleging Contamination of Rice Supply

Despite the trial court’s denial of class certification, the threat of a successful appeal and a string of victories by individual plaintiffs have resulted in a comprehensive $750 million settlement in the massive In re Genetically Modified Rice Litigation, No. 06-md-1811 (E.D. Mo., consolidated Dec. 19, 2006).  The plaintiffs principally alleged that Bayer Cropscience (a subsidiary of the aspirin maker) contaminated regular rice crops with genetically modified rice.  The settlement amount excludes potentially substantial administrative costs.

The multidistrict litigation comprised nearly 300 cases filed by rice farmers and arose from the discovery in 2006 of genetically modified rice strains (indisputably linked to Bayer Cropscience) within non-modified rice supplies in Arkansas, Louisiana, Mississippi, Missouri, and Texas.  The contaminated rice supplies were destined for distribution throughout the country and world.  Discovery of the contamination led to a dramatic drop in U.S. rice prices, as the European Union stopped buying U.S. rice altogether.  Even now, rice prices remain substantially below their pre-contamination discovery level.  The plaintiffs sought to recover as damages the market losses and expenses that they experienced as a result of the contamination.

The cases were consolidated by the Judicial Panel on Multidistrict Litigation in December of 2006, but the presiding court denied the plaintiffs’ class certification motion in January of 2009.  However, despite there being no certified class, the court moved forward with what it referred to as “bellwether trials.”  Though formally individual trials, verdicts favorable to plaintiffs from Missouri, Arkansas, Mississippi, and Louisiana seemingly induced the $750 million settlement—one of the largest in the past year—which still must receive judicial approval.

The settlement covers all U.S. long-grain rice producers (essentially the class as to which certification was denied) and includes a complex allocation formula.  Settlement funds will be divided among three settlement “pots” keyed to total rice acreage and the year in which rice was planted to determine market loss damages.  Additionally, the settlement agreement includes a provision requiring that 85% of the settling rice farmers expressly approve of the settlement agreement; otherwise, it will be automatically voided.