UPDATE: State Supreme Court Affirms Rice Verdict, Declares Part of 'Tort Reform' Unconstitutional

by Jan Cottingham  on Thursday, Dec. 8, 2011 3:28 pm  

In a unanimous decision, the Arkansas Supreme Court on Thursday upheld a $48 million verdict for farmers who said they lost millions of dollars after their rice was tainted by genetically modified rice seeds produced by Bayer CropScience.

In April 2010, a Lonoke County jury had awarded $5.9 million in actual damages and $42 million in punitive damages to the farmers.

The Supreme Court affirmed a ruling by Lonoke County Circuit Judge Phillip Whiteaker that declared unconstitutional Arkansas' law capping punitive damages at $1 million — a ruling that could have far-reaching effects, including on an even bigger jury award to Riceland Foods of Stuttgart in a related case.

The Supreme Court ruling has as much significance for "tort reform" as it does for Arkansas farmers. It quickly generated both criticism and praise and exposed fissures between business and agricultural interests.

State Sen. Gilbert Baker, R-Conway, issued a news release in which he said, "I'm shocked and dismayed at how the courts have undermined the process by which Arkansas citizens govern themselves.

"The Legislature enacted tort reform in 2003 by overwhelming margins in both chambers, and since then the trial lawyers and the courts have been steadily chipping away at its major provisions," he said.

"Thursday's ruling by the Supreme Court severely limits the Legislature's authority to carry out the wishes of the majority of Arkansans who understand the wisdom of tort reform. The democratic process is the major casualty in this legal ruling," he said.

Randy Zook, president and CEO of the Arkansas State Chamber/Associated Industries of Arkansas, said: "This ruling marks a setback in efforts to create an environment that is encouraging to job-creating entrepreneurs and business leaders. The uncertainty presented by the potential for unlimited damage assessments will discourage growth and expansion of Arkansas businesses. The cost of this ruling will be significant."

At the heart of the dismay is the issue of punitive damages.

Bayer had argued that the $1 million cap on punitive damages enacted as part of Civil Justice Reform Act of 2003 was, in fact, constitutional. The Supreme Court, however, said that the punitive damages limit was unconstitutional because "it limits the amount of recovery outside the employment relationship."

The decision was written by Associate Justice Courtney Hudson Goodson.

"I'm very pleased with the ruling, obviously," said Scott Powell, an attorney with Hare Wynn Newell & Newton LLP in Birmingham, Ala., and the lead counsel for the plaintiffs in the Lonoke case. "It's a great victory for the rice farmers, and I think it's a victory for all consumers all over the state.

"These farmers have struggled mightily over the last five years after their crops were contaminated and the market crashed. They still struggle."

"The jury found Bayer's conduct in this whole rice fiasco to be egregious," Powell said. "And the trial court agreed and the Supreme Court agreed 7-0 as well."

Barry Deacon of Jonesboro, a lawyer for Riceland Foods Inc. of Stuttgart, echoed Powell's sentiments about the verdict, saying, "We are very pleased with the Arkansas Supreme Court decision today."

Riceland, a rice growers' cooperative, and Deacon have reason to be pleased.

In March, a Stuttgart jury in a separate case awarded Riceland $136.8 million in its lawsuit against Bayer CropScience over genetically modified rice.

The award was believed to be the largest in Arkansas history. The circuit court jury said Bayer CropScience owed Riceland $11.8 million in compensatory damages and $125 million in punitive damages.

At the time, Bayer CropScience expressed its disappointment with the verdict but noted that Arkansas law limits punitive damages to $1 million. In addition, the judge in that case ruled that the punitive damages cap was constitutional and that's how the judgment was entered.

Riceland, however, appealed the punitive damages cap and the high court's ruling certainly appears to support the farmers' cooperative.

"It's very good for us," Deacon said of the Supreme Court's ruling, though he noted other issues were on appeal.
 Asked, however, about Baker's comments, Deacon declined to comment.

The farmers' complaint against Bayer stems from the company's development of a genetically modified rice called LibertyLink. The rice, which hadn't been approved for human consumption, was found mixed in with regular rice seed on farms in Arkansas and Missouri.

Major global markets, particularly the European Union and Japan, refused to buy rice from Arkansas and other farmers in the U.S. after the tainted rice was discovered. The EU relented after tests were implemented to detect contamination by genetically modified organisms, or GMOs.

Arkansas grows about half the nation's rice, and farmers in the state, along with rice growers in California, Louisiana, Mississippi, Missouri and Texas, sued Bayer. The farmers alleged they'd sustained tremendous economic losses. In yet another case, U.S. rice farmers, including a number in Arkansas, and Bayer AG in July reached a $750 million settlement agreement over contamination of the U.S. rice supply by Bayer's genetically modified rice. Thursday's Supreme Court ruling has no bearing on that case.

The Arkansas General Assembly approved the Civil Justice Reform Act of 2003 after a Mena jury awarded $78 million — $63 million of that in punitive damages — to the family of a nursing home patient.



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