On Friday July 1, 2011 Bayer Crop Science settled existing lawsuits with several U.S. rice farmers, exporters, importers, mills, and seed dealers for an agreed $750 million after Bayer contaminated the U.S. rice supply with LibertyLink genetically modified rice in 2006. In 2006 the USDA announced that LibertyLink rice was discovered in the U.S. long grain rice supply, which the USDA had yet to approve because the genetically manufactured rice had yet to undergo proper FDA testing. According to an article posted on DeltaFarmPress.com, the 2006 announcement lead to a drastic drop in U.S. rice prices, as the European Union stopped purchasing U.S. rice. Additionally, even though the announcement was almost five years ago these farmers have yet to recover, as European purchases of U.S. rice are mere shadows of the percentages that they were before 2006.

Cutting Losses Smart Choice For Bayer

Previous attempts at litigating this issue proved unsuccessful for Bayer as they had lost all six trials that had reached a final verdict and lost millions of dollars in compensatory damages to rice farmers before agreeing to settle for $750 million last Friday. What is more is that Bayer had been ordered to pay punitive damages in 2 of the trials.  Keeping this in mind, Bayer still had thousands of lawsuits pending against them in trial court. Thus, the writing was on the wall for Bayer. Bayer had to settle and they had to settle quickly.

Settlement The Right Decision For Farmers?

I realize the general consensus is that settlement is more efficient and expeditious than litigation, which is why most cases settle before coming to a final judgment. However, in certain cases, such as this one, settlement may be far less advantageous to a plaintiff or group of plaintiffs. This is evidenced by a recent case in which a single plaintiff, Riceland, won a $140 million dollar judgment against Bayer.

Here, it seems to me that Bayer got off easy because by agreeing to settle for $750 million they are able to pay far less than the actual damages that they caused U.S. rice farmers. In addition, by settling Bayer avoided the possibility of having to pay the farmers a potentially crippling punitive damage award. However, after diminished sales since Bayer’s contamination of the U.S. rice supply in 2006 it was evident that the farmers needed some form of compensation as soon as possible. The probable threat of lengthier litigation and an even longer appeals process were probably enough to cause the farmers to decide to settle. This is especially plausible considering the nations economic state today.

Settlement: Saves Time and Money

Generally, parties to a lawsuit try to avoid trial because they feel that by agreeing to settle they will minimize the costs posed by a back-logged court system including unnecessary court fees and large sums of attorney’s fees. In fact, according to an article posted on BizJournals.com, 97% of cases are settled or dismissed without a trial.