Meat processor cuts deal with ABC in 'pink slime' defamation case

June 28 (Reuters) - Beef Products Inc has settled a closely watched defamation lawsuit against American Broadcasting Co and its reporter Jim Avila, the meat processor said on Wednesday.

BPI had claimed ABC, a unit of Walt Disney Co, and Avila defamed the company by calling its ground-beef product "pink slime" and making errors and omissions in a 2012 report.

The terms of the settlement were not disclosed.

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BPI's signature product, commonly mixed into ground beef, is made from beef chunks, including trimmings, and exposed to bursts of ammonium hydroxide to kill E. coli and other contaminants.

"While this has not been an easy road to travel, it was necessary to begin rectifying the harm we suffered as a result of what we believed to be biased and baseless reporting in 2012," South Dakota-based BPI said in a statement.

"Through this process, we have again established what we all know to be true about Lean Finely Textured Beef: it is beef, and is safe, wholesome, and nutritious."

ABC stood by its reporting, which it has said deserved protection under the U.S. Constitution's First Amendment which guarantees freedom of religion, speech and the press.

"Throughout this case, we have maintained that our reports accurately presented the facts and views of knowledgeable people about this product," ABC said in a statement confirming the settlement.

"Although we have concluded that continued litigation of this case is not in the company's interests, we remain committed to the vigorous pursuit of truth and the consumer's right to know about the products they purchase."

The trial began earlier this month in the tiny town of Elk Point, South Dakota, and had been expected to last eight weeks.

BPI had claimed up to $1.9 billion in damages, which could have been tripled to $5.7 billion under South Dakota's Agricultural Food Products Disparagement Act.

During its reports, ABC used the term "pink slime" more than 350 times across six different media platforms including TV and online, Dan Webb, an attorney for BPI, said during opening statements on June 5.

In the aftermath of ABC's broadcasts, BPI closed three of its four processing plants and said its revenue dropped 80 percent to $130 million.

Attorneys for ABC countered that the term was commonly used before ABC's reports and said that BPI's business was already suffering. (Reporting by Timothy Mclaughlin in Chicago; Editing by Noeleen Walder and Phil Berlowitz)