By Jonathan Stempel

(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 that a product that critics have dubbed "pink slime" was unsafe.

Beef Products Inc sued over ABC reports in March and April about the company and its "lean finely textured beef." In court papers, the company said ABC falsely told viewers that the beef product was not safe, not healthy, and not even meat.

"The lawsuit is without merit," Jeffrey Schneider, senior vice president of ABC News, said in a statement. "We will contest it vigorously." ABC News is a unit of Walt Disney Co.

Beef Products is the largest U.S. producer of lean finely textured beef, a filler made from fatty trimmings. The trimmings are sprayed with ammonia to kill bacteria.

While the filler has long met federal food safety standards, critics have questioned its safety, and companies such as McDonald's Corp, Yum Brands Inc's Taco Bell and supermarket chain Safeway Inc have stopped buying the product.

Beef Products filed its 263-page complaint filed 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.

Several individuals were also sued, including ABC News anchor Diane Sawyer, the reporters Jim Avila and David Kerley, and three others who appeared or were quoted in the reports, including a former Beef Products employee.

The Dakota Dunes, South Dakota-based company also accused ABC of interfering with its business dealings with grocery store chains and ground beef processors.

Beef Products said the media furor forced it shut three of its four plants and eliminate more than 700 jobs, roughly half its workforce, and cost more than $20 million of revenue each month.

It also said weekly sales of the beef filler have fallen to less than 2 million pounds per week from nearly 5 million.

Beef Products is seeking $400 million of compensatory damages, which the company wants tripled, plus punitive damages.

The case is Beef Products Inc et al v. American Broadcasting Cos et al, Circuit Court of South Dakota, Union County.

(Reporting By Jonathan Stempel in New York; Editing by Martha Graybow, Sofina Mirza-Reid and Tim Dobbyn)


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