By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.
Bayer agreed to a $10.9 billion settlement yesterday, which resolves much – but not all – of the litigation risk it assumed when in 2018 it acquired Monsanto, the original manufacturer of the glyposate-based herbicide Roundup, according to the WSJ, Bayer to Pay Up to $10.9 Billion to Settle Lawsuits Over Roundup Weedkiller.
Plaintiffs allege its product causes cancer – a claim the company vehemently denies and insists is not supported by scientific evidence (for background on the litigation, see my previous posts, here, here, here, here, and here.)
The company has lost three multi-million dollar jury verdicts, and faced tens of thousands of pending suits. Investors have become increasingly nervous about just how much litigation risk the company had held until yesterday. Indeed, there was massive shareholder unrest over these liabilities, which spilled over to outright revolt last year.
The settlement leaves open the possibility of future litigation. Per the WSJ:
Wednesday’s deal, which follows months of heated talks between Bayer and plaintiffs’ attorneys, doesn’t change anything in Bayer’s view that glyphosate, the active ingredient in Roundup, is safe and doesn’t cause cancer.
Bayer didn’t admit to any wrongdoing as part of the settlement and continued to defend its decision to purchase Monsanto. The company will continue to sell Roundup.
The agreement, however, leaves open the potential of more lawsuits being filed against the company in the future, an issue investors have been particularly concerned about.
As part of the deal, Bayer said it has set aside between $8.8 billion and $9.6 billion to settle claims brought by lawyers representing some 95,000 plaintiffs, as well as some 30,000 more claims that haven’t yet agreed to the settlement. The company said it would set aside another $1.25 billion to work toward a resolution of future claims, including funding a panel to evaluate whether the product causes cancer. The findings from that panel are geared to help shape the outcome of litigation going forward.
The company seeks in these future potential lawsuits to take the determination away from juries as to whether glyphosate causes cancer. Over to the WSJ:
That Bayer’s Roundup products will continue to be sold, without a cancer warning label, leaves the company exposed to future lawsuits. It creates a unique legal conundrum for the company over how best to guard itself against potential future litigation.
To attempt to resolve the key question of whether glyphosate is a carcinogen, Bayer is seeking court permission to create a class of future plaintiffs and fund a five-member scientific panel that will spend several years evaluating the link between Roundup and cancer.
The panel will report its findings to U.S. District Judge Vince Chhabria in San Francisco. A conclusion that the product doesn’t cause cancer will essentially shut down any future cases. If the panel does find a link between Roundup and cancer, Bayer would have to fight plaintiff-by-plaintiff to prove the individuals’ cancer wasn’t caused by the product, a point that unsettled some investors.
Mr. Baumann said on a conference call Wednesday that while “it’s not 100% certain,” Bayer is confident the panel will back its view that glyphosate isn’t carcinogenic. The company has previously said that hundreds of regulatory agencies, including the Environmental Protection Agency, and scientists have deemed the product safe.
“We need to take the decision about carcinogenicity of the product out of the hands of juries,” said Mr. Baumann. The scientists on the panel, he said, would be selected both by Bayer and plaintiffs’ lawyers, to come to a “fair and solid” conclusion.
The creation of such a court-overseen science panel is rare, said University of Georgia law professor Elizabeth Burch, and raises questions over whether future plaintiffs who may not be sick yet are getting a fair shot at pressing claims that Roundup caused their illnesses.
Bayer’s Woes Not Confined to Use in US
Glyphosate is currently licensed for use throughout the EU, accordimg to Deutsche Welle, What’s driving Europe’s stance on glyphosate. But this use is not uncontested, According to Deutsche Welle:
The controversy surrounding glyphosate came to high drama in November 2017 when EU member states voted to extend the commercial license of the weed killer for a period of five years. The measure passed only narrowly and due to the ‘yes’ vote of German Agriculture Minister Christian Schmidt.
Schmidt’s unilateral decision disregarded split opinions within Chancellor Angela Merkel’s cabinet that originally agreed Germany should abstain in the vote.
Moreover, a European Parliament report issued in January 2019 found that EU regulators based their decision to relicense glyphosate on an assessment that was plagiarized from a coalition of pesticide companies, including Monsanto.
The scandal has caused a number of countries in the bloc to introduce individual legislation banning or restricting the use of the substance.
The state of EU public opinion is such that license is unlikely to be renewed, and many EU states have already banned its use. According to the Deutsche Welle account:
In Europe, the shift in public opinion about glyphosate was illustrated by a 2016 poll in the five largest EU countries showing some 66% percent of respondents favoring a glyphosate ban.
In 2017, over 1.3 million people signed a petition calling for a European ban of glyphosate, and putting pressure on Brussels to restrict or even ban the use of the herbicide.
Two Additional Settlements
At the same time as the gylphosate settment, Bayer agreed to two other settlements, including one relating to claims for another herbicide, dicamba. According to the Wall Street Journal:
Bayer also said it would pay up to $400 million to resolve legal challenges and crop-damage claims to another of its herbicides, dicamba, which the company has marketed to kill weeds that have evolved to resist Roundup. Farmers and agricultural experts have blamed dicamba-based sprays for drifting on winds and damaging millions of acres of soybeans, peaches and other crops.
For further background on this lawsuit, see this recent post and this update by the Midwest Center for Investigative Reporting, In Roundup settlement, Bayer reaches $400 million deal with farmers over dicamba.
The Bottom Line
Within the US, Bayer will continue to try to settle glyphosate legal claims with plantiffs who have yet to sign onto the settlement. Bayer has not admitted Roundup causes cancer – and indeed continues to insist otherwise – and persists in defending its Monsanto acquisition. Roundup will continue to be sold without any cancer warning label.
Wow, its must be litigation house cleaning for Bayer this week. They’ve settled with the states and cities for PCB contamination suits as well:
Ironically, $60 million will go into WA’s general fund, which has been devastated by the COVID crisis. Most of the remainder will go to the WA attorney’s office and litigation pracitioners. Very little for actual damages or cleanups. I bet you the stock has soared, just like in Michael Clayton.
Yes, that’s the second of the two additional settlements I mentioned above. Haven’t written about the issue before, unlike dicamba, so in the interest of saving space, I didn’t include details. Thanks for raising them here.
$10.9 billion for potentially wrecking all of agriculture seems like a bargain.
I still can’t understand why Bayer bought Monsanto before these cases were settled or completed. According to the article, there is a definite possibility for more lawsuits to come. The whole thing smells fishy to me.
Obviously they knew the cost included these lawsuits. Must be a lot of value in Monsanto.
Perhaps they worried that if the lawsuits took the value of the company too low, someone else might be able to pick up the pieces?
I’m sure they hoped the settlements would be less once they bought the company and could push off a lot of the blame on their predecessors, but, you are right, it still makes no sense to include that as part of the price.
I live in Germany and have been following this for quite some time. Here is my best appraisal of why Bayer made a suicidal investment in Monsanto. German executives generally hold a PhD often in a science and engineering field. Germans are used to a legal system that is far different than the one in the US. For example, loser pays so taking on a 1 in a million case is not going to happen. Lawyers here do not take contingency cases. No plaintiff is going to spend their own money on a meretricious case no matter how sympathetic a plaintiff they may be.
Decisions are generally made by Gutachters who are specialists in the field who have licenses and who can lose them if they veer from fair and accurate appraisal of a situation be it medical malpractice, a car wreck, or neck and back pain after a slip and fall. So my best guess is that Baumann, the CEO, obtained careful evaluation by specialists who reviewed the scientific literature just as the EPA did and they concluded that there was no where close to enough evidence to establish that a cancer was “more likely than not…51% or more likely)” caused by a plant poison in a mammal. Roundup was not a new product and has been in use for decades. Baumann and the board made a calculation based on science and the way German law is done. Because they were not US trained they had little appreciation for how cowboy American law works. That is why we now see essentially no medical advances pioneered in the US and we see many from Germany. For example cardiac stents and the cardiac valves that are placed with catheters in the heart without opening the chest and I am sure multiple other areas. Developing anything complex in the US is opening up a developer to a crapshoot. Some readers may say they are sure Roundup causes cancer because they read something but there is more than enough evidence to show that if there were any relationship it is less than probable. So those who are convinced might not be wrong but might is not enough to win a case if rational law is followed. But American juries are chosen to be not sophisticated. We know that plaintiff lawyers do not want educated people on the panels. And when it comes to law I always remember a comment an experienced DA once made to me regarding an insurance fraud case he did not want to prosecute…..”The average juror here thinks insurance fraud is fine so I doubt we have a chance at conviction.” And our Covid response and failure in wearing of masks and appropriate precautions points to just how uninformed and incurious Americans can be and suggests that the disaster verdict was a foregone conclusion for Bayer. You hurt and your lawyer found someone to say you hurt from the accident or the Roundup or whatever and a jury says let State Farm pay….let Bayer pay…. Tort reform with loser pays would be a great idea in the US….probably as good an idea as cutting the defense budget in half or by 2/3’s, or raising taxes on the 1%, or campaign finance reform. I don”t see it happening in this millenium….if we survive it. And one of the pillars of the democratic party is big law and we are watching the dissolution of the two party system although we really have had one party for a long time…the party of money. So the short answer is the German executives thought the US had a rule of law that was predictable and rational. Bad Guess. The US has rich attorneys and in Germany they earn far less.
American “cowboy” plaintiffs’ lawyer here. I’ve spent 35 years representing victims of toxic substances. I can assure you it is very, very difficult to win these cases these days and has been for a long time. Republican judges are programmed to dismiss toxic tort cases unless the epidemiologic and other proof is nearly overwhelming. Essentially the only cases that can confidently be predicted to succeed these days are those involving “signature” relationships such as that between asbestos and mesothelioma. One of the reasons the Roundup cases have proven to be an exception is the substantial amount of incriminating internal evidence–Monsanto questioning the safety of its own products.
I would much prefer to live in the German system, in which health care costs are socialized, including the costs of diseases caused by products like Roundup. But that’s not what we have here–we have a much more individualistic system of assigning responsibility for harms and costs. That’s what juries do. It’s odd that the German geniuses who bought Monsanto wouldn’t have known that.
‘ Because they were not US trained they had little appreciation for how cowboy American law works.’ About five minutes Googling would alert any open minded intelligent person who could read English to the risks involved in taking over Monsanto. Just type in ‘ Monsanto sucks ‘ for starters . Oh sorry, I forgot, these executives all had PhDs and, no doubt consultants a plenty and lawyers by the bucket load and not one of them piped up and suggested they could smell the rotting carcus of a rat as soon as you crossed Monsanto’s threshold. If only those executives had spent a term in the university of hard knocks before they went down their PhD rabbit holes.
@Felix_47: hear here!
It’s disheartening to see US courts/juries deciding what is scientifically true.
As opposed to the government? Juries decide all kinds of things every day, from who had the green light to guilt and innocence in capital murder cases. They generally reach the right outcomes in most cases over time. Worst system ever invented except for all the others, etc.
What was the name of that German physician who created a makeshift ventilator out of a garden hose and a lamp timer?