MDL Court Rejects Class Action In Genetically Modified Rice Litigation

The MDL court overseeing the litigation arising from alleged contamination of the U.S. rice supply by genetically modified strains has declined to certify a proposed class. In re Genetically Modified Rice Litigation, MDL No.1811, 2008 WL 3539879 (E.D. Mo. August 14, 2008).

Plaintiffs, U.S. long grain rice producers, alleged that the defendants contaminated the U.S. rice supply with non-approved genetically modified strains of rice, thereby affecting the market price for plaintiffs' crops. Plaintiffs alleged that the U.S. market price for rice dropped dramatically as a result of defendant's alleged contamination of the rice supply. (The United States is one of the leading producers in the world of rice, accounting for approximately 13% of the worldwide rice trade. Nearly half of the U.S. rice supply is exported to other countries.)


Mass Accident
While plaintiffs' primary claim for damages was that the defendants' activities caused a market loss injury to the U.S. rice market, the complaint asserted statutory and common law claims of public nuisance, private nuisance, negligence, products liability, and strict liability for ultra-hazardous activities. Thus, the court observed that, in many respects, the alleged widespread contamination of U.S. rice is akin to a “mass accident” mass tort - the sort of case that the Advisory Notes to Rule 23 say should rarely be afforded class treatment. A mass tort resulting in injuries to numerous persons is ordinarily not appropriate for a class action because of the likelihood that significant questions, not only of damages but of liability and defenses to liability, would be present, affecting the individuals in different ways. In these circumstances an action conducted nominally as a class action would degenerate in practice to multiple lawsuits separately tried. See Pruitt v. Allied Chemical Corp., 85 F.R.D. 100, 111 (E.D.Va.1980) (denying class certification for all plaintiffs who claimed to be injured as a result of defendant's pollution of a river, as the pollution affected various groups of plaintiffs in significantly different ways).


Damages Key on Predominance
MassTortDefense notes how significant the issue of damages was to the certification decision, and in particular the predominance inquiry balancing individual issues and alleged common issues. The court observed that, ordinarily, variation in individual damage amounts is not a bar to class certification. Even wide disparity among class members as to the amount of damages suffered does not necessarily mean that class certification is inappropriate. See Bell Atlantic v. AT & T Corp., 339 F.3d 294, 306 (5th Cir.2003). However, class certification “may not be suitable where the calculation of damages is not susceptible to a mathematical or formulaic calculation, or where the formula by which the parties propose to calculate damages is clearly inadequate.” Bell Atlantic, 339 F.3d at 306 (citing Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 342-343 (4th Cir.1998)).


Here, plaintiffs argued that they could show on a class-wide basis the total amount of economic harm caused by the contamination. Plaintiffs argued they could show the total quantity of long-grain rice affected. Using these two market-based figures, plaintiffs would supposedly calculate damage on a per-hundredweight basis. This figure will be used to calculate each individual plaintiff's damages. Each class member would attest to the quantity of rice sold, and that figure would be multiplied by the per-hundredweight loss.

But the court was not persuaded that the calculation of damages in this case was a common issue. What plaintiffs have proposed was a convenient shorthand calculation that might represent an estimate of some damages for some plaintiffs. It might be a reasonable basis on which to reach a settlement of some claims, mused the court. But plaintiffs' proposed method for calculating damages does not represent an actual adjudication of any one plaintiff's claims. Rather, calculation of actual damage is an individual issue specific to each plaintiff in this case, involving a unique inquiry into the time, place, and manner in which each plaintiff both priced and sold the rice.


For example, some rice producers entered pools or cooperatives to sell their rice. Others sold rice through booking contracts, where a quantity of rice to be delivered or a price to be paid might be set far in advance. Rice producers using basis contracts or hedge-to-arrive contracts employed yet more complicated methods for pricing and selling their rice. An accurate, true assessment of any plaintiff's damages would require an extensive inquiry involving the circumstances of that particular plaintiff. This case was therefore more like those cases where class certification was denied because individual damages issues predominated over common elements. This individual inquiry on damages predominated over the common issues allegedly raised in the class action complaint.


Superiority Lacking
The class method was not superior either. The claims process would devolve into an endless series of “mini-trials” that would fail to meet the goals of class certification. Also, hundreds of plaintiffs had shown significant interest in prosecuting their own claims. While plaintiffs argued that to deny class certification in this case would result in hundreds of full-scale individual trials across five states, all dealing with the same issues, the court noted that there are many options available to resolve the hundreds of cases in this MDL. The parties can propose a collection of “test cases” to be tried to verdict before deciding how other cases should be handled. The MDL court also has the option of going to trial on the claims of the plaintiffs named in the master consolidated complaint that was filed in its home district.

The opinion is thus also instructive on the willingness to look at real world trial plans and alternate methods of moving an MDL forward, beyond class action treatment.
 

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