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6-Regulation: Proposed liability legislation for transgenic crops in some U.S. States

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SOURCE: Agricultural Management Committee Newsletter Vol 10(2)
        American Bar Association, USA, by Drew L. Kershen
DATE:   Feb 2006

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During the legislative sessions that began in January 2005, the
legislatures of several states (e.g., California, Hawaii, Montana, North
Dakota and Vermont) dealt with bills that, if they were enacted into
law, would have imposed liability for transgenic crops upon the
manufacturer of the transgenic crop. While each of these bills had
wording unique to the individual states, the pattern, key definitions
and the substantive provisions of the bills were very similar overall
and, quite often, contained identical specific language. Each of these
bills emerged from the Center for Food Safety (CFS) founded by Andrew
Kimbrell, a long-time opponent of agricultural biotechnology who
previously worked with Jeremy Rifkin at the Foundation for Economic
Trends. Joseph Mendelson, legal director at CFS, was the lead drafter of
the "model" bill. The Center for Food Safety then sought sponsors to
introduce the bill into the legislatures of the several states.

For purposes of this article, the author focuses on California Assembly
Bill (A.B.) 984 (introduced by Member Laird, using the April 25, 2005
version) and Vermont (Senate Bill) S. 18 (introduced by Sen. Campbell,
using the version referred to the Senate Committee on Agriculture in
February 2005) to discuss their provisions and their impact upon agriculture.

Section 2 of both A.B. 984 and S. 18 set forth the legislative findings
that support the adoption of the proposed bills. Without repeating the
precise findings in Section 2, the legislatures declare that
- transgenic crops disperse widely through pollen flow, seed commingling
and inadvertent transfers caused by humans, animals and weather; - as a
consequence of wide-spread dispersal of transgenic crops, farmers and
others in the agricultural marketing chain cannot avoid adventitious
presence of transgenic material in their organic and conventional crops;
- the adventitious presence of transgenic material in organic and
conventional crops creates economic costs for organic and conventional
farmers; and
- the manufacturers of transgenic crops should be liable for these
economic costs.

Adventitious presence of unwanted material in agricultural products is
neither new nor unique to transgenic agriculture. Pollen flow occurs
between all sexually-compatible crops; commingling occurs in farm
equipment, transport and storage; volunteer plants from one year to the
next are common in fields and along roadsides. For example, the seed
industry has dealt with issues of adventitious presence for decades
through tolerance levels, agronomic practices and identity preservation.

Indeed, studies of the European Union , Spain, United Kingdom (UK) and
United States by PG Economics, Ltd. of Dorchester, UK, have shown that
coexistence between transgenic, organic and conventional agriculture can
be easily achieved by adopting standards that utilize the same basic
practices as the seed industry. See, Brookes & Barfoot, Co-existence in
North American agriculture: can GM crops be grown with conventional and
organic crops? (PG Economics, Ltd, Dorchester, UK, June 7, 2004).

Even though adventitious presence is wide-spread, it is not at all clear
that adventitious presence creates significant economic costs (depending
on the definition of economic costs to be discussed later). For example,
92 percent of organic farmers surveyed in 2002-2003 reported that they
had incurred no direct costs related to transgenic agriculture. (For the
questions described in this article, the survey had 938 respondents.)
Four percent of organic farmers indicated direct costs related to
testing seed, inputs or organic farm products for the presence of
National Organic Farmers' Survey: Sustaining Organic Farms in a Changing
Organic Marketplace (May 16, 2003).

With respect to seeds and inputs (e.g., feed for animals), organic
farmers have the obligation under the United States Department of
Agriculture's National Organic Program (USDA-NOP) to insure that their
seeds and inputs meet organic standards which means that costs for
testing seeds and inputs may not be additional costs beyond those
ordinarily incurred.

National Organic Program (NOP), 7 C.F.R. Part 205 (§§ 205.1 through
205.690). As for testing, the OFRF made the following comment in its
highlights of the survey:

"It would be interesting to break this [organic certifiers requesting
testing] down because it is not surprising that seed or inputs would
have to be tested by the organic seed or input seller. If the certifying
agent requires organic crops to be tested without reason to believe GMO
material is present, however, the organic certifier is requiring a
higher standard than does the NOP."

Moreover, it is important to remember that the adventitious presence of
approved transgenic crops generally presents no issues of product/crop
safety, food safety, or environmental harm as long as the approved
transgenic crops have met the regulatory requirements of the USDA, the
Environmental Protection Agency and the Food and Drug Administration. By
contrast, if the transgenic crop were unapproved for food use, as was
the case in StarLink® corn, lack of approval can result in recall of
products under FDA laws against adulterants in food.

Farmers and others suffering damages from recall of adulterated products
have persuaded courts to recognize claims for legal damages from their
economic loss. See, In re StarLink Corn Products Liability Litigation,
211 F. Supp. 1060 (N.D. Ill. 2002).

In the same survey of organic farmers referenced in the preceding
paragraph, one percent stated that they had lost organic certification
for products due to the presence of transgenic material. However, these
farmers assuredly confused loss of an organic contract premium as
equivalent to loss of organic certification.

Under USDA-NOP standards, the adventitious presence of transgenic
materials does not affect organic certification for the farm or the farm

NOP Final Rules 2000 at pp. 33-35 (clarification of comments about
genetic drift), nop/NOP/standards/FullText.pdf.
Farmers can agree to a contract that exceeds the USDA's standard (which
is "process" based, not oriented toward testing for low levels of
adventitious presence of biotech crops).

Moreover, the USDA-NOP has confirmed that no organic farmer has lost
organic certification as a result of adventitious presence of transgenic
material. USDA letter to National Association of State Departments of
Agriculture (Dec. 21, 2004). Organic farmers lose their organic
certification only if they intentional use transgenic crops or material
or fail to take reasonable measures to avoid the use of transgenic crops
or materials in their seeds or inputs.

Referring once again to the survey of organic farmers, four percent of
respondents (including the one percent who assuredly confused loss of an
organic contract premium with loss of organic certification) reported
loss of sales due to the perceived or actual risk, or actual presence of
transgenic material. Loss of sales, either through contract rejection or
market access rejection, is almost always classified as pure economic
loss under the common law of the United States. For a discussion of pure
economic loss in the context of transgenic crops, see Drew L. Kershen,
Legal Liability Issues in Agricultural Biotechnology 17- 22, National
Agricultural Law Center Research Article (Nov. 2002),

As pure economic loss, the person experiencing the loss almost always
bears the loss without legal redress against others. In a decision
recently rendered by the Saskatchewan Court of Queen's Bench in a class
action lawsuit against manufacturers of transgenic crops, the court
ruled: "It is my conclusion that the case before me does not present a
situation in which the courts would extend the categories for recovery
of pure economic loss, for all the policy reasons traditionally cited in
support of the exclusion of this recovery are in play in this case."
Hoffman v. Monsanto Canada, Inc., [2005] S.J. No. 304, 2005 SKQB 225 at
# 80. (The Saskatchewan court's discussion of pure economic loss is
found at ## 72-80.) This "pure economic loss" lies at the heart of the
proposed bills for imposing liability upon the manufacturers of
transgenic crops.

Reading the definition of injury in the proposed bills makes the pure
economic loss issue crystal clear. In VT S. 18, the definition of
"injury" reads: "Injury" includes:
(A) loss of any price premium that would have accrued to a farmer by
contract or other marketing arrangement or that would have been
otherwise reasonably available to the farmer through ordinary commercial
(B) any additional transportation, storage, handling, or related charges
or costs incurred by the farmer that would not have been incurred in the
absence of crop contamination;
(C) any judgment, charge, or penalty for which the farmer of
nongenetically engineered products is liable because of breach of
contract, including loss of organic certification for failure to deliver
a crop or shipment free of genetically engineered material or for
delivering a crop or shipment exceeding any contractually agreed
tolerances for the presence of genetically engineered material;
(D) market price reductions incurred by farmers resulting from loss of
crop exports, including foreign and domestic markets; and
(E) a farmer's loss of livelihood or reputation caused by genetically
engineered crops. VT S. 18, § 3 in added section 650(2) Definitions.

CA A.B. 984 contains a definition of "injury" that is substantially the
Vermont definition. CA A.B. 984, § 3 in added section 1714.43(a)(6).

In the next added section of the Vermont bill, the language reads: "The
manufacturer of a genetically engineered seed or plant part is liable to
any person injured by the release into Vermont of a genetically
engineered crop ..." VT S. 18, § 3 in added section 651(a) Liability for
Damages Resulting from Genetically Engineered Crops. CA A.B. 984, § 3 in
added section 1714.43(b)(1) adopts the same liability as the Vermont bill.

Without doubt the language of these two proposed bills creates legal
causes of actions against manufacturers of transgenic crops for the
recovery of pure economic loss. Any person damaged through loss of
contract premiums, loss of contract opportunities, breach of contract
specifications (including zero tolerance specifications), or loss of
market access for perceived or actual risk or actual presence of
transgenic material can impose those losses upon the manufacturer.

Farmer can also recover for loss in reputation because Vermont may no
longer be perceived, using language from the proposed legislative
findings, as a "pure and preserved natural environment" if approved
transgenic crops grow in its soil.

VT S. 18, § 3, in added section 651(d), sets forth an affirmative
defense to liability. CA A.B. 984, § 3, in added section 1714.43(c ),
has the same affirmative defense but in language stated with greater
clarity. The California language of the affirmative defense reads as follows:

"A manufacturer shall have a defense to liability under this section if
the court finds any of the following:
(1) That all of the following conditions are met:
(A) The producer or his or her agent acted in gross negligence.
(B) The producer received or signed a contract with the manufacturer.
(C) The producer received a training manual from the manufacturer.
(D) The court finds that the injury would not have occurred had the
producer or his or her agent followed the terms of the manufacturer's
contract and training manual.
(2) Any person not included under paragraph (1) acted in a grossly
negligent manner that caused injury from the use of a genetically
engineered plant manufactured by the manufacturer." It is debatable
whether the affirmative defense provides much practical protection from
liability for the manufacturer.

When read in full, these proposed liability bills purposefully allow the
transfer of economic losses:
- voluntarily created through contractual standards and obligations from
the parties who negotiate and agree to them to the manufacturers of
transgenic crops;
- arising from market preferences from those seeking to engage in
specialty markets to the manufacturers of transgenic crops;
- arising from aesthetic preferences about rural Vermont or rural
California to the manufacturers of transgenic crops;
- arising from testing and other agronomic practices exceeding the NOP
standards from the organic farmer to the manufacturers of transgenic crops.

To use the language of the Saskatchewan court, in explaining why pure
economic loss is ordinarily not recognized as legally compensable and
why the Saskatchewan court also rejected liability for pure economic
loss, these proposed liability bills "expose defendants to a liability
in an indeterminate amount for an indeterminate time to an indeterminate
class." Hoffman v. Monsanto Canada, Inc., supra at # 77.

The proposed liability bills also have an implied legal consequence.
These proposed bills lack reciprocity for adventitious presence. The
proposed bills impose liability for adventitious presence of approved
crops only upon transgenic crops. No reciprocal liability exists for the
adventitious presence of approved crops from organic or conventional
agriculture. For organic and conventional agriculture, these proposed
bills leave the presently existing legal liability rules in place that
rarely compensates for pure economic loss. By so doing, these bills
purposefully privilege organic, particularly organic, and conventional
agriculture to the detriment of transgenic agriculture.

These proposed bills have another liability provision related to patent
infringement. As stated in the Vermont bill,

"A farmer who is not in breach of contract for the purchase or use of
genetically engineered seed or plant parts and unknowingly comes into
possession or uses such seeds or plant parts as a result of natural
reproduction, cross-pollination, or other contamination shall not be
liable under this subchapter for any injuries, claims, losses, and
expenses, including attorney's fees, caused by the use of genetically
engineered seed or plant part, including damages for patent
infringement." VT S. 18, § 3, in added section 651(c). See also, CA.
A.B. 984, in added section 1714.43(b)(3).

This provision addresses the "the innocent infringer" issue in patent
law. Two commentators have explored this issue extensively and
determined that the innocent infringer is not liable for patent
infringement under the patent laws. Consequently, this provision of the
proposed bills has only symbolic, rhetorical meaning as contrasted with
a practical impact of changing legal liability. Drew Kershen, Of
Straying Crops and Patent Rights, 43 WASHBURN L. J. 575 (2004); Norman
Siebrasse, A Remedial Benefit-Based Approach to the Innocent User
Problem in the Patenting of Higher Lifer Forms, 20 CANADIAN INTEL. PROP.
REV. 79-134 (2003); Norman Siebrasse, The Innocent Bystander Problem in
the Patenting of Higher Life Forms, 49 MCGILL L .J. 349-392 (2004).

If these proposed bills were to be enacted, the impact upon transgenic
agriculture would be great because it is not clear that manufacturers
would be willing to bear the legal liability risks that these bills
impose. Upon careful reading of these bills, it becomes clear that the
Center for Food Safety sees these bills not necessarily as a mechanism
for obtaining legal redress for pure economic loss. Rather, the Center
for Food Safety sees these bills as having the potential of driving
transgenic agriculture completely from the agricultural sector. The real
issue of these bills is not about liability.

The real issue of these bills is about the future of agricultural
biotechnology and, more broadly, the future of technological innovation
for our society.

Drew Kershen is Earl Sneed Centennial Professor of Law, University of
Oklahoma, College of Law.

(Editor's Note: As this issue went to press, Vermont's House of
Representatives rejected strict liability language and adopted a bill
codifying existing right to farm case law. See, BIO Statement: Vermont
House of Representatives Affirms Protection for Farmers,

European NGO Network on Genetic Engineering

Hartmut MEYER (Mr)
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