LITTLE ROCK, Ark. (Legal Newsline) - The Arkansas Supreme Court affirmed Thursday a lower court's judgment awarding nearly $48 million in a case that challenged the state's cap on punitive damages.
The amount was awarded to a group of farmers who alleged that genetically engineered rice made by chemical company Bayer hurt market prices.
In the 1990s, the company and its corporate predecessors developed LibertyLink Rice, a genetically engineered rice that is resistant to Bayer's Liberty herbicide, a weed killer known for controlling red rice. Red rice, also known as weedy rice, will diminish yield and reduce the price of a rice crop.
In August 2006, the U.S. Department of Agriculture announced that trace amounts of the genetically engineered rice had been detected in the U.S. long-grain rice supply.
At the time, the USDA hadn't granted regulatory approval for the rice. Also, no foreign government had approved the commercial use of such rice for human consumption.
As a result, between 2005 and 2008, exports of American rice decreased by more than 600,000 metric tons.
Soon after the USDA's announcement, a group of rice farmers filed suit against Bayer in Lonoke County Circuit Court.
Among their allegations, they said the company knew the majority of American grown rice was exported and that other countries did not import genetically modified rice.
The farmers also accused Bayer of knowing that any contamination of the U.S. rice supply with such genetically altered rice would depress the export market and adversely affect the price of American rice.
In the United States, rice is mostly grown in Arkansas, California, Louisiana, Mississippi, Missouri and Texas. Of those states, Arkansas is the leading producer of long-grain rice.
Because of Bayer's negligence, the farmers claimed they were entitled to punitive damages because the company knew, or should have known, that their actions would result in damages to them.
The farmers also filed a pretrial motion asking the court to declare unconstitutional a limitation on punitive damages. They argued that the statutory cap on punitive damages offends the separation of powers doctrine found in the state constitution.
They also argued that the statute violates an article of the state constitution prohibiting the General Assembly from limiting the amount to be recovered for injuries resulting in death or for injuries to persons or property.
Bayer, in response, argued that the statute's cap on punitive damages did not invade the powers of the judiciary because the law is substantive and not procedural in nature, and that the section of the state constitution applies only to compensatory damages.
In 2010, the circuit court declared the statutory cap on punitive damages unconstitutional and found Bayer negligent.
The court awarded $5,975,605 in compensatory damages and $42 million in punitive damages to the farmers.
Bayer appealed, calling the award "grossly excessive."
The state's high court upheld the lower court's ruling, also deeming the statutory cap unconstitutional "as it limits the amount of recovery outside the employment relationship."
The state constitution, the Court said, only allows limits on compensation paid by employers to employees.
"The fact that Bayer employed some measures to prevent the release of LLRice, standing alone and without regard to other facts and attending circumstances, does not absolve it of liability for punitive damages," Justice Courtney Hudson Goodson wrote.
"Rather, the critical inquiry is whether a party likely knew or ought to have known, in light of the surrounding circumstances, that his conduct would naturally or probably result in injury, and that he continued such conduct in reckless disregard of the consequences from which malice could be inferred."
As to whether the jury's award of $42 million is "grossly excessive," the Court said it could not determine.
"In this case, Bayer did not state in the notice of appeal that it was appealing the denial of the post-trial motion for new trial and remittitur. Therefore, the question of the excessiveness of the jury's award is not properly before us," it wrote.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.