* Beef Products Inc lawsuit seeks $1.2 billion
* Diane Sawyer, other individuals also sued
* Lawsuit says ABC disparaged safety of a beef filler
* ABC, other defendants say lawsuit without merit
By Jonathan Stempel
Sept 13 (Reuters) - ABC News was hit with a $1.2 billion defamation lawsuit on Thursday by a South Dakota meat processor that accused it of misleading viewers into believing a product that critics have dubbed "pink slime" was unsafe.
Beef Products Inc sued over ABC reports aired in March and April about the nation's largest producer of "lean finely textured beef."
In court papers, the company said ABC falsely told viewers that its beef product was not safe, not healthy and not even meat, resulting in the 31-year-old company's loss of hundreds of millions of dollars in profit and roughly half its employees.
"The lawsuit is without merit," Jeffrey Schneider, senior vice president of ABC News, a unit of Walt Disney Co, said in a statement. "We will contest it vigorously."
Six individuals were also sued, including ABC News anchor Diane Sawyer and the reporters Jim Avila and David Kerley.
ABC conducted a "sustained and vicious disinformation campaign," Beef Products' lawyer Dan Webb, chairman of Winston & Strawn and a former U.S. attorney in Chicago, said at a press briefing.
"To call a food product slime is the most pejorative term that could be imagined. ABC's constant repetition of it, night after night after night, had a huge impact on the consuming public."
The other defendants are Gerald Zirnstein, a former U.S. Department of Agriculture microbiologist credited with coining the term "pink slime;" former USDA employee Carl Custer and former Beef Products employee Kit Foshee. All appeared or were quoted in ABC's reports.
William Marler, a lawyer for Zirnstein and Custer, said: "The complaint is completely bogus and frivolous, and we will defend these public employees vigorously."
Foshee could not be immediately reached for comment.
Beef Products accused ABC News of acting with actual malice in producing its reports, a high legal standard to meet.
"These kinds of cases are hard to win because courts have given media many protections in reporting on matters of public concern," said Bruce Rosen, a partner and media law specialist at McCusker, Anselmi, Rosen & Carvelli in Florham Park, New Jersey.
"Constitutionally, the plaintiff has to show ABC knew what it was broadcasting was false, or had very strong reasons to know, and ignored them," he said. "It's a very hard standard to overcome. Dan Webb will have his hands full."
Lean finely textured beef is a filler made from fatty trimmings that are sprayed with ammonia to kill bacteria.
The Department of Agriculture approved use of the product in ground beef in 1993 and affirmed its safety in March.
But that has failed to quiet critics, which have included food safety activists, as well as animal rights organizations.
Large customers have also taken note, with companies such as McDonald's Corp, Yum Brands Inc's Taco Bell and supermarket chain Safeway Inc halting purchases of the product.
Other courts have addressed similar claims in the past.
In 2000, a federal appeals court rejected defamation claims by Texas cattle ranchers against talk show host Oprah Winfrey over a "dangerous food" episode of her eponymous show, where she was accused of falsely depicting U.S. beef as unsafe in the wake of a British panic over "mad cow" disease.
Beef Products filed its 263-page complaint in Union County Circuit Court in South Dakota. It said ABC included nearly 200 false, defamatory and disparaging statements in on-air and online reports, and in social media postings.
Based in Dakota Dunes, just west of Sioux City, Beef Products also accused ABC of interfering with its business dealings with grocery store chains and ground beef processors.
It said ABC's "campaign" against it actually began in April 2011, when the network broadcast a show featuring British chef Jamie Oliver that included false statements about the type of beef trimmings it used.
Beef Products said the media furor forced it shut three of its four plants and eliminate more than 700 jobs, and has cost more than $20 million of revenue each month.
It said weekly sales of the beef filler have fallen to less than 2 million pounds from nearly 5 million.
Beef Products said it is seeking $400 million of compensatory damages representing lost profit, which could be tripled under South Dakota's Agricultural Food Products Disparagement Act, plus punitive damages.
Zirnstein used the term "pink slime" in a 2002 email to coworkers after touring a Beef Products plant. His email was later released to The New York Times.
Walt Disney shares closed up 90 cents at $52.60 on the New York Stock Exchange.
The case is Beef Products Inc et al v. American Broadcasting Cos et al, Circuit Court of South Dakota, Union County, No. 12-292.