After several high-profile jury losses that resulted in large verdicts against it, Bayer is faced with a spiraling legal crisis from sales of the weed killer Roundup. Now, there is strong talk that the German company may be close to putting some of its legal woes that it inherited when it acquired Monsanto behind it by settling the lawsuits.
The media has reported that the settlement number could reach as high as $10 billion. Still, given the harsh punishment that juries have meted out to the company, any type of settlement may be a prudent bet for Bayer as the stock market has punished the stock in the past year since news broke of the jury verdicts against Roundup related to Non-Hodgkins Lymphoma cases.
The Settlement Talks Have Stabilized the Stock
In August 2019, news broke of possible settlement talks between Bayer and the plaintiffs in the litigation. Immediately, Bayer’s share price rallied as much as ten percent on the news that the company was considering settling these cases. The prospect of staggering liability have caused some to question Bayer’s future, and the company has every incentive to settle these cases. At the time, the mediator assigned to the case strongly disputed the report that Bayer had been discussing a number for the settlement.
However, what was clear was that Bayer was at least taking some steps to explore a settlement in these cases. After news broke of the three major jury verdicts against the company, the floodgates opened with regard to new litigation. As of now, it is not clear how many outstanding cases there are against Bayer. There seems to be broad agreement that there are at least 42,000 separate cases. Some figures have placed the number of filed cases as high as 100,000. Regardless, the litigation threatens to swamp Bayer for years to come if the company is unable to settle the cases. At present, the number of cases filed continues to grow weekly and there is no letup in sight.
The Settlement Number Makes Sense for Bayer
The most recent settlement number that has been bandied about is $10 billion. This includes $8 billion to settle the outstanding cases and another $2 billion to settle future cases. This number is still lower than the estimated $20 billion of legal liability that Bayer would face absent a settlement.
According to recent news reports, Bayer is attempting to negotiate a provision with plaintiffs’ attorneys that would bar them from advertising for new clients after the settlement agreement is signed. It is in the company’s interest to limit future cases since the prospect of litigation has hurt its share price. After the initial verdicts, plaintiffs’ attorneys aggressively advertised the case because many potential plaintiffs did not know of these cases. As a result, the number of plaintiffs soared as the advertising was effective.
Current Cases Are on Hold
As it stands right now, several upcoming cases that were due to be heard in state and federal courts have been put on hold while the parties negotiate a possible settlement. There was a case scheduled to be heard in Missouri, which is where Monsanto, the maker of Roundup, is based. Missouri juries have rendered numerous plaintiff-friendly verdicts in recent years including a $4.7 billion verdict against Johnson & Johnson because its talc product allegedly causes cancer. All eyes were on that trial to see how juries outside of California would react to the facts of this case.
In the meantime, the verdicts against the company in California are on appeal. The first verdict against the company in the case of gardener Dwayne Johnson is being appealed. The trial judge cut the verdict from $289 million to $78 million and both sides are appealing it. However, the Ninth Circuit will not be issuing a ruling anytime soon that would be able to give Bayer any leverage in the settlement negotiations. The federal government has stepped into the trial and has filed a brief backing Bayer as the EPA is a staunch defender of Roundup in spite of all of the evidence to the contrary of its safety.
The EPA Continues to Claim that Roundup Is Safe
In addition to the settlement talks, there is other recent news impacting both the lawsuit and Bayer’s ability to continue selling Roundup. The EPA has been at odds with its regulatory counterparts across the world by refusing to admit or acknowledge any danger associated with the use of Roundup. The World Health Organization has said that the active ingredient in Roundup is “probably” a carcinogen. The EPA however, given every possible opportunity to reverse its stance, continues to stick by its belief that Roundup is completely safe in spite of the findings of several courts and mounting scientific evidence that it is not.
This actually would present some difficulty for Bayer should it settle the case and wish to continue selling Roundup. One way that it could sell the product without fear of these lawsuits is if it gave an adequate warning on its label. In this case, the notice would include a warning that Roundup can cause cancer. However, a company may not include information on a warning label that contradicts what the government says about a product. In this case, Roundup could not warn about cancer even if that was course of action that it wanted to take because of the EPA’s view.
There is speculation about whether Bayer will even continue to sell Roundup. The company is currently in the middle of a multi-billion dollar investment to attempt to find an alternative to glyphosate which is the active ingredient that is the possible carcinogen. There have also been reports that Bayer is considering halting the sale of Roundup to private users while continuing to sell the products to farms.