Monsanto’s Roundup litigation has begun to present a near-existential issue for its corporate parent Bayer. When the German company purchased the American chemical manufacturer, it inherited all of its past, present and future liabilities. One of these liabilities concerns the pesticide Roundup, which is alleged to cause non-Hodgkin’s lymphoma after extended exposure.
Monsanto has lost several high-profile lawsuits recently, and the jury awards have been eye-popping. One married couple was awarded $2 billion by a jury for their cases of cancer. Even after a judge reduced the verdict, the company was still assessed a damages award of nearly $90 million. There have been several other verdicts that, even after appeals, have remained in the tens of millions of dollars. Much of the damage amount consists of punitive damages assessed by the juries.
Monsanto now faces over 18,000 lawsuits relating to this product. The company’s predicament has only been worsening as there have been over 5,000 lawsuits alone that have been filed between July and the first half of August. Roundup lawsuits continue to make headlines and the publicity has encouraged more plaintiffs to lawsuits for compensation.
What has become apparent after several trials are that juries have reacted viscerally to corporate misconduct. There is extensive evidence of possible corporate malfeasance as the company has known about the possible dangers for decades. Instead of taking action to address the hazards or warn consumers, Monsanto has attempted to exert influence on the scientific debate to convey the impression that the product is completely safe. This has resulted in the high punitive damages that have dwarfed the compensatory damages.
The litigation has exerted downward pressure on the company’s share price as investors have been frightened by the scope of the possible damages in Roundup lawsuits. One only need to do some elementary calculations to multiply the damage awards described above by the thousands of coming lawsuits to realize the corporate peril that Monsanto is facing. The share price has been cut by almost one third since the verdict against the company was handed down by a California jury last August. Until there is a Roundup settlement, there will be a continued overhang depressing the price of Bayer’s shares. In fact, the entire Bayer company has at times been worth less than what the company paid for Monsanto alone.
There has been talk among shareholders and the Wall Street analyst community of Bayer’s need to settle the lawsuits to alleviate the downward pressure on its stock price. Now, there is talk that there are settlement negotiations underway in the multi-district litigation that the company is facing. There were previous reports that Bayer’s CEO stated that the company would settle the litigation on “reasonable terms.” The CEO had also said that the company was constructively engaging with a federal court mediator.
Recently, there was a report by Bloomberg that numbers have been discussed between the two sides. The report stated that the company had offered between $6-8 billion to the plaintiffs in a settlement offer. Bloomberg reported that the plaintiffs were asking for amounts in excess of $10 billion. While the overall amount seems shocking, the settlement amount on a per claim basis is less than a half a million. This is far less than the amounts that juries have been awarding plaintiffs.
The news of the possible Roundup settlement was encouraging to the company’s investors. The share price surged over seven percent on the news after rising by as much as 11 percent during the course of the trading day. For the company, removing the threat of these lawsuits would lift some of the cloud hanging over the company. While Bayer is a massive corporation and Monsanto is a subsidiary, the amount of potential liability in all of these lawsuits could engulf the entire corporation.
The mediator has dismissed the report of the amount of Bayer’s settlement offer and denied that it offer to pay that much in the litigation. The mediator said that the Bloomberg report was “pure fiction.” The mediator in the case is Ken Feinberg, who oversaw the September 11th Victims Compensation Fund. Following Feinberg’s denial, the stock gave back some of what it gained after the initial reports. Although the mediator has thrown cold water on the overall amount of the settlement, what is clear is that the two sides are at least talking and that Monsanto recognizes some of its legal peril. However, there is still some ways to go before plaintiffs receive fair compensation for their cancer.
Even should Bayer settle the federal litigation, this will still only reduce some of its litigation risk, and the problem will not completely go away for the company. While many of the lawsuits are in federal court, the majority of litigation is in state court. Many of the state court juries can be unpredictable and can have a gut reaction to what they feel is egregious corporate conduct. The three cases so far that have resulted in the extremely large jury verdicts have all been heard in state courts in California.
In the meantime, Monsanto is appealing the state court verdicts even after they were reduced in state court. Verdicts in the appeals are expected by the end of 2019. The company seems to have found sympathy from the EPA, who is actively prohibiting a warning label for Roundup alerting customers to the possible connection between Roundup and cancer. Nonetheless, the company continues to receive negative publicity as word of the Roundup trials is spread through the media.
Updated: August 15, 2019