Roundup, dicamba, PCB settlements to cost Bayer up to €11bn

Bayer last week confirmed agreements to settle outstanding Roundup lawsuits in the US and to address future litigation, while denying any wrongdoing.
Roundup, dicamba, PCB settlements to cost Bayer up to €11bn
Bayer, famed as the inventor in 1899 of Aspirin, has opted to spend billions of euro on settlements and related costs, rather than risk damage from further litigation to do with Roundup and other products of Monsanto, which Bayer purchased for €55.7bn in 2018.
Bayer, famed as the inventor in 1899 of Aspirin, has opted to spend billions of euro on settlements and related costs, rather than risk damage from further litigation to do with Roundup and other products of Monsanto, which Bayer purchased for €55.7bn in 2018.

Bayer last week confirmed agreements to settle outstanding Roundup lawsuits in the US and to address future litigation, while denying any wrongdoing.

It is part of an $11.3bn-$121bn (€10.3bn to €11bn) series of agreements designed to substantially resolve major outstanding Monsanto litigation involving Roundup, dicamba, and PCB products.

Bayer purchased Monsanto for $63bn (€55.7bn) in 2018.

Bayer will now pay $8.8bn to $9.6bn to resolve current Roundup litigation, including an allowance expected to cover unresolved claims.

Bayer says this will bring closure to approximately 75% of the current Roundup litigation involving approximately 125,000 filed and unfiled claims in the US.

The claims are from plaintiffs alleging Roundup causes illness such as cancer.

Bayer will pay $1.25bn to support a separate class agreement to address potential future litigation.

The Roundup class agreement will be subject to approval by Judge Vince Chhabria of the US District Court for the Northern District of California.

The agreements contain no admission of liability or wrongdoing.

Three US cases that have gone to trial will continue through the appeals process, and are not covered by the settlement.

Bayer said it is important for the company to continue these cases as the appeals will provide legal guidance going forward.

Potential future cases will be governed by the class agreement which is subject to court approval.

The agreement includes establishment of a class of potential future plaintiffs and creation of an independent class science panel which will determine if Roundup can cause non-Hodgkin’s lymphoma (NHL), and if so, at what minimum exposure levels.

If the class science panel determines that a causal connection between Roundup and NHL is not established, class members will be barred from claiming otherwise in any future litigation against Bayer.

The class science panel’s determination is expected to take several years.

Class members will not be permitted to proceed with Roundup claims prior to the class science panel’s determination, and cannot seek punitive damages.

The agreed funding is capped at $1.25bn, and will support research into treatment of NHL, NHL diagnostic programmes, and assistance payments to class members who develop NHL.

Bayer chief executive officer Werner Baumann said science indicates that Roundup does not cause cancer.

There will be no change in the availability of Roundup products, under the agreements announced.

Also last week, a federal judge in California found that the weight of scientific evidence does not support the state’s Proposition 65 cancer warning label requirement for glyphosate-based herbicides.

Resolution of dicamba litigation

Bayer also announced a mass tort agreement to settle dicamba herbicide spray drift litigation alleging damage to crops.

The company will pay up to $400m to resolve pending litigation in Missouri and claims for the 2015-2020 crop years.

Claimants will be required to prove damage to crop yields due to dicamba.

Bayer expects a contribution from its co-defendant, BASF, towards this settlement.

The only dicamba drift case to go to trial (Bader Farms) is not included in this resolution.

Instead, Bayer will continue to pursue post-trial motions and an appeal, if necessary.

Resolution of PCB litigation

Bayer also announced agreements that resolve cases representing most of the company’s exposure to PCB water litigation.

Polychlorinated biphenyls (PCBs) were used in a variety of products for about 50 years until they were banned in the US in 1979, having been demonstrated to cause cancer and other illnesses in animals.

Studies in humans support evidence for potential carcinogenic and non-carcinogenic effects of PCBs.

PCBs were legally manufactured by Monsanto until their production ceased in 1977.

One agreement establishes a class that includes all local governments with EPA permits involving water discharges impaired by PCBs. Bayer will pay about $650m to the class, which will be subject to court approval.

Bayer has entered into separate agreements with the attorneys-general of New Mexico, Washington, and the District of Columbia to resolve similar PCB claims.

For these agreements, Bayer will pay about $170m.

Bayer assumes the potential cash outflow for the settlements announced last week will not exceed $5bn in 2020 and $5bn in 2021; the remainder would be paid in 2022 or thereafter.

To finance the payments, Bayer can make use of existing surplus liquidity, future free cash flows, proceeds from their animal health divestment, and additional bond issuances.

Bayer expects to maintain its investment grade credit ratings and dividend policy.

“The Roundup agreements are designed as a constructive and reasonable resolution to a unique litigation,” said Kenneth R Feinberg, court-appointed mediator for the settlement talks.

The multi-step Roundup resolution applies to the vast majority of the current litigation in US federal and state courts, including both plaintiffs with filed cases and parties who have retained counsel but not yet filed their claims in court.

Those participating in the settlement will be required to dismiss their cases or agree not to file.

The range of $8.8bn to $9.6bn covers both the agreements already signed and those that are still under negotiation.

It also reflects the fact that the number of claimants who are eligible to receive compensation under these agreements won’t be known until the claims process is well underway.

The claims still subject to negotiation largely consist of cases generated by TV advertising and for which plaintiffs’ law firms have provided little or no information on the medical condition of their clients, and/or cases held by law firms with small inventories.

Bayer said that before deciding to settle, it considered the alternative course of continuing to litigate Roundup cases.

In the company’s risk assessment, potential negative outcomes of further litigation, including more advertising and growing numbers of plaintiffs, upwards of 20 trials per year, and uncertain jury outcomes, and associated reputational and business impacts, likely would substantially exceed the settlement and related costs.

“Taking account of various options, I am convinced this plan provides a comprehensive, reasonable solution to the complex, contested issues presented by this litigation,” said attorney John Beisner, a consultant to Bayer’s supervisory board and a mass tort expert who leads Skadden, Arps, Slate, Meagher & Flom LLP’s Mass Torts, Insurance and Consumer Litigation Practice Group.

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