Syngenta Settlement: What Producers Need To Know

Disclaimer:  This blog post offers only a summary of the detailed information included in the Proposed Settlement and Class Notice.  Producers should review the official documents, which are linked below, for full details.

The federal court handling lawsuits filed by farmers against Syngenta over genetically modified corn seed has granted preliminary approval to a proposed settlement agreement.  [View Order here.]  This means that corn farmers meeting the requirements to be considered class members will soon receive notice in their mailbox and instructions on how to proceed.

Background

In 2010, Syngenta released these seed varieties, which were approved in the United States, but not in China.  In 2013, US corn shipments arrived in China and were rejected due to the presence of the MIR-162 trait found in Viptera and Duracade.  Shortly thereafter, US corn prices fell.  Farmers who did not plant the seeds have filed suit against Syngenta claiming that Syngenta’s false assurances about imminent approval by the Chinese government constituted fraud and the rejection of corn by the Chinese caused the drop in the market, causing monetary damages to the farmers.  [For more background information, read this fact sheet and view this webinar.]

Tens of thousands of lawsuits were filed across the United States, and the vast majority were consolidated in “Multi-District Litigation” in the District of Kansas federal court.  In that MDL litigation, the plaintiffs sought to certify 21 classes of farmer plaintiffs, divided by state.  The following states were included in the list of proposed classes:  AL, AR, CO, IL, IN, IA, KS, KY, LA, MI, MN, MS, MO, NE, ND, OH, OK, SD, TN,  TX,  and WI.  The specific legal claims made differ for each class.  All classes assert a negligence claim and certain states may have additional statutory claims based upon the law in that jurisdiction.  Initially, the court heard class certification motions and certified 8 state classes:  AR, IL, IA, KS, MO, NE, OH, and SD.  The remaining proposed classes had not yet been considered for certification by the court.

The first class action trial, that of a class of Kansas farmers, resulted in a $217 million verdict in June 2017.  In September 2017, the parties announced they had reached a tentative settlement.  A motion for preliminary settlement approval was filed by the parties earlier this year.

The Proposed Settlement

The proposed settlement will require Syngenta to make a $1.51 billion settlement to the Class.  The number of Class Members is said to be over 600,000 based on the Class Definition explained below.  [View Proposed Settlement here].

Class Definition

The Class Definition lays out exactly who is included as a class member.  This is important because class members are those people who will receive settlement proceeds and they will also be barred from pursuing additional claims or litigation against Syngenta in this matter.

The Proposed Settlement states that the class consists of any Person (including natural persons, corporations, LLCs, and other legal entities) in the US during the Class Period (9/15/13 – 4/10/18) who owned any interest in Corn in the US priced for sale during the Class Period and who falls into one of the following four sub-classes:

  • Subclass 1:  Any Producer (defined as any owner, operator, landlord, waterlord, tenant, or sharecropper who shares in the risk of producing corn) in the US that during the Class Period owned any interest in corn in the US priced for sale during the Class Period, excluding producers that any time prior to the end of the Class Period purchased Agrisure Viptera and/or Agrisure Duracade Corn Seed and produced corn grown from those seeds.
  • Subclass 2:  Any Producer in the US that during the Class Period owned any interest in corn in the US priced for sale during the Class Period who did, at any time prior to the end of the Class Period, purchase Agrisure Viptera and/or Agrisure Duracade Corn Seed and produced corn grown from those seeds.
  • Subclass 3:  Any Grain Handling Facility in the US that owned any interest in corn in the US priced for sale during the Class Period.
  • Subclass 4:  Any Ethanol Production Facility in the US that owned any interest in corn in the US priced for sale during the Class Period.

There are a number of entities excluded from this Class Definition, including the Court and its officers, employees, and relatives, Syngenta and its affiliates, subsidiaries, officers, directors, employees, contractors, etc., plaintiffs’ counsel, government entities, a list of “excluded exporters,” and anyone who elects to opt out of the class.

Proposed Settlement Fund Allocation

The $1.51 billion settlement shall be allocated as follows.  First, all costs of settlement administration approved by the Court shall be deducted from the Settlement Fund.  The remainder of the fund shall be distributed by class as follows:

  • Subclass 1: All funds not allocated to the other groups will be allocated to members of Subclass 1.
  • Subclass 2: The total amount of Settlement Funds available to Subclass 2 is capped at $22.6 million and the average per-bushel recovery for Subclass 2 members shall not exceed the average per-bushel recover for Subclass 1 members.
  • Subclass 3:  The total amount of Settlement Funds available to Subclass 3 is capped at $29.9 million.
  • Subclass 4:  The total amount of Settlement Funds available to Subclass 3 is capped at $19.5 million.

Calculation of Producers Compensable Recovery Quantity

For class members who are Producers (defined as any owner, operator, landlord, waterlord, tenant, or sharecropper who shares in the risk of producing corn), the number of bushels for which the Producer is entitled to recovery will be calculated by determining the number of corn acres planted from the USDA Form FSA 578 during the Class Period.  Acres reported as failed or chopped for silage will be excluded.  The FSA 578 corn acres will be multiplied by the Producer’s share in those acres as reported on the Form 578.  The number of acres will then be multiplied by the USDA NASS county average yield for corn and deducting any bushels reported as “fed on farm” on the Producers Claim Form.  Then, the resulting number of bushels will be multiplied by a weighted average for each marketing year to obtain the total number of bushels.  If a producer does not have an FSA 578, RMA Data may be used.  If neither Form FSA 578 nor RMA data is available, a Producer may provide additional information on the Claim Form. Similar formulas are set forth in the Settlement Agreement for Grain Handling Facilities and Ethanol Production Facilities.

Preliminary Approval

The Court’s Order finds that, upon preliminary review, the settlement agreement between the parties “appears to be sufficiently fair and reasonably and well within the range of possible approval so as to warrant preliminary approval and dissemination of notice to the Class.”  This is not the end of the judicial review as a final fairness hearing and final approval will be required before the settlement can be entered and payments made to the class members.

Additionally, in the preliminary approval Order, the court provisionally certified the classes as defined by the proposed settlement above for settlement purposes.  This step was necessary because these were not the class definitions included in the underlying litigation, and there were classes from certain states (including Texas), that had not yet been certified in the litigation process.

Class Notice

Class Notice is a document mailed to all potential class members to inform them of the pending litigation, preliminary approved settlement, and explaining their rights and options at this point.  Under the current schedule, the first mailing of Class Notice will be May 11, 2018, so be on the lookout for this in your mailbox.  [View a copy of Class Notice here].  Producers meeting the Class Definition essentially have four options at this point:

Submit a Claims Form (and remain in the class)

Class members are required to submit a claims form in order to receive any portion of the settlement fund.  Claims forms will be available to be submitted online or by mail if requested.  The deadline for filing claims is October 12, 2018. The Claims Forms essentially authorize the Claim Administrator to pull a Producers FSA 578 or, if that is not available, RMA data in order to calculate the Producers Compensable Recovery Quantity. It also seeks information related to leases to determine if the landlord will qualify as a producer based on the structure of the lease agreement.  Finally, if a Producer did not report corn acreage to FSA, he or she can include the information on the form to allow calculations to be made.  Again, there are similar forms for Grain Handling Facilities and Ethanol Production Facilities.

Opt out of the Class

Upon receipt of the notice, Class Members will have the right to opt out of the class by submitting written requests for exclusion within 90 days of the first Class Notice mailing, meaning the deadline is August 10, 2018.  Any member who does not submit a timely exclusion request will be included in the class and deemed to have waived their right to opt out.  Persons who opt out will not receive any of the settlement funds, but will retain their right to file suit against Syngenta individually.  Importantly, even if a class member previously opted out of the case when class notice was sent, they will be required to opt out again if they do not desire to be part of this settlement class.

Object to the Settlement

Any party who does not opt out of the class has the right to object to the Settlement terms by filing a written objection with the Court.  Objections must be filed within 90 days of the first mailing of the Class Notice, making the deadline August 10, 2018.

Do nothing

Producers who do nothing will be included as a Class Member since they did not effectively opt out, which means they will lose their right to sue Syngenta separately for these claims.  However, they will not receive any portion of the Class Settlement unless a Claims Form is filed.

 

Final Approval Hearing

The Final Approval Hearing will be held on November 15, 2018.  At that time, the Court will determine whether the settlement shall be approved as “fair, reasonable and adequate,” enter a final judgment in the case, and consider any applications for attorneys’ fees.  Any Class Member filing the required notice of objection will be heard at this time.

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