Monsanto Legal Risks Linger With Suit as Wheat Futures Rebound

10:28AM Jun 05, 2013
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June 5 (Bloomberg) -- Monsanto Co., the world’s largest seed company, may face more complaints from farmers even as tests so far haven’t shown unapproved gene-altered wheat anywhere beyond an Oregon farm where it was found.

The company was sued in federal court in Wichita by a Kansas farmer who accused it of negligently releasing genetically altered wheat seed in the U.S. and damaging the market for his crop. The lawsuit filed June 3 by Ernest Barnes of Morton County, Kansas, may be the first of many against St. Louis-based Monsanto alleging contamination, his lawyers said in a statement.

"Monsanto has failed our nation’s wheat farmers," Stephen Sussman, a lawyer for Barnes with Houston-based Sussman Godfrey LLP, said in the statement. "Monsanto knew of the risks its genetically altered wheat posed and failed to protect farmers and their crops from those risks."

The discovery of the altered wheat in Oregon, nine years after Monsanto ended an effort to have the wheat approved for commercial sale, prompted Japan to halt imports of western-white and feed wheat. South Korean millers have suspended purchases of U.S. white wheat, and the Taiwan Flour Mills Association said it wants the U.S. to label cargoes by state of origin.

The European Union, which competes with the U.S. for exports, said Monsanto provided a method to detect the rogue strain of genetically modified wheat. The company also has provided the test to regulators in Japan, South Korea and Taiwan.


Tests Negative

Tests of U.S. wheat imported by Japan, South Korea and the European Union have found no evidence of the unapproved gene- altered strain discovered in Oregon in April, Agriculture Secretary Tom Vilsack said yesterday. Wheat futures, which entered a bear market in January because of rising global supplies, have risen since the May 29 announcement of the Oregon contamination, closing at $7.09 a bushel yesterday in Chicago.

Information about the Oregon case appears to point toward an isolated situation, according to Val Giddings, a senior fellow at the Information Technology and Innovation Foundation in Washington. Still, if the wheat is found in more than one or two other locations, it could lead to significant trade disruptions, Giddings said in an e-mail. "If it is not, the present disruptions will wane fairly quickly. We are all waiting on more data."

Any estimate of any possible liability Monsanto may face is highly speculative, said Mark Gulley, a New-York based analyst at BGC Partners LP who recommends buying Monsanto shares.


Scratching Head

"Based on the facts in front of us today, it would seem the issue is difficult to quantify," he said in a phone interview. "You really start to scratch your head as to how that GMO wheat grew on that farm."

Past instances of genetic contamination have cost U.S. companies and farmers. The 2000 release of Aventis SA’s StarLink corn cost as much as $288 million in lost revenue and a yearlong drop in the grain’s price, according to a 2008 report by the Government Accountability Office. The 2006 release of Bayer AG’s Liberty Link rice cost as much as $1.29 billion in lost exports, food recalls and other expenses, the GAO said, citing an environmental advocacy group.

Bayer in 2011 agreed to pay $750 million to about 11,000 U.S. rice farmers who sued the company.

Barnes, who accused Monsanto in his lawsuit of negligence, gross negligence and creating a nuisance, is seeking at least $100,000.


Exclusive Control

The genetically engineered grain "has always been in the exclusive control, or should have been in the exclusive control, of Monsanto and its agents," according to the complaint.

While some of that wheat was tested in Kansas, the company never disclosed that information to the state’s wheat farmers, Barnes said in his complaint.

Genetically-modified wheat seed can’t be completely removed from farming equipment and facilities, according to Barnes’ complaint, which asserts his damages aren’t limited to loss of market revenue.

"Plaintiffs are taking a wild swing that’s unlikely to connect," Monsanto said yesterday in an e-mailed statement responding to Barnes’ allegations.

"Tractor-chasing lawyers have prematurely filed suit without any evidence of fault and in advance of the crop’s harvest," David Snively, Monsanto’s general counsel, said in that statement. The program for "closing out" the wheat development plan was "rigorous, well-documented and audited," according to the statement. The company said it will fight the farmer’s claims.


Field Test

The USDA, in a May 29 statement, said Monsanto had been authorized to field-test the genetically modified seed, altered to resist the company’s Roundup herbicide, in 16 states from 1998 to 2005.

The U.S. Food and Drug Administration, in a 2004 "voluntary consultation," determined the engineered wheat was as safe as unmodified varieties on the market, the USDA said in last week’s statement. Still, it hasn’t approved any genetically altered wheat for commercial production or sale in the U.S. or elsewhere. The FDA, along with the Environmental Protection Agency, also participate in approving genetically modified plants.

The case is Barnes v. Monsanto Co., 13-cv-01218, U.S. District Court, District of Kansas (Wichita).


--With assistance from Jack Kaskey in Houston and Alix Steel in New York. Editors: Michael Hytha, Glenn Holdcraft


To contact the reporters on this story: Alan Bjerga in Washington at [email protected]; Andrew Harris in the Chicago federal courthouse at [email protected]


To contact the editors responsible for this story: Michael Hytha at [email protected]; Jon Morgan at [email protected]