Bayer’s Monsanto Headaches Continue

Chief Executive Officer

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Bayer AG inherited a festering mass-tort problem when it agreed to pay $66 billion for Monsanto in 2016. Monsanto’s ubiquitous Roundup herbicide—active ingredient: glyphosate—was considered safe by virtually every national regulator, including the U.S. Environmental Protection Agency. But, in 2015, an agency associated with the World Health Organization added Roundup to its list of likely carcinogens that includes everything from cellphones to coffee.

American lawyers swung into action and, by the time the Monsanto deal closed, Bayer faced thousands of lawsuits claiming Roundup had caused non-Hodgkin’s lymphoma (NHL), a common cancer that physicians say has no known cause 75 percent of the time. The lawyers soon had three courtroom victories under their belts, including a $2 billion jury verdict.

So far, so typical in the American system of tort law. Instead of relying on government experts, jurors decide whether Substance A caused Disease B in a specific plaintiff. It results in haphazard verdicts, but it’s how our courts do business, and companies have learned to adapt. Once courtroom vulnerability is clear, settlement talks usually begin. Plaintiff lawyers who spent millions of dollars on advertising and expert witnesses are only too eager to earn a return on their investment. Legal advertising consultants X Ante estimate plaintiff lawyers spent more than $100 million on television ads to recruit some 100,000 clients, or $1,000 per plaintiff, for the Roundup litigation.

Bayer entered negotiations last year under ace mediator Kenneth Feinberg and announced a $10 billion agreement to settle most of the 100,000 outstanding Roundup lawsuits this year. It would deliver around $60,000 per plaintiff and some $3 billion to their lawyers.

Here’s where the story takes a twist.

Because nearly everyone except plaintiff experts and the WHO considers Roundup safe, Bayer has no plans to take it off the market. Farmers around the world depend on glyphosate to keep weeds down and crop yields up, and long-term epidemiological studies of agricultural workers find no correlation between glyphosate and NHL. The EPA even prohibits Bayer from putting a cancer warning on the label because that would be misleading.

Bayer’s solution was innovative. With the help of a prominent class-action law firm, it would form a special class of everyone who had been exposed to Roundup but hadn’t yet sued. They’d get $1 billion up front, including payments to people diagnosed with NHL, in exchange for dropping their right to sue while a “science panel” composed of experts from both sides reviewed the literature and decided once and for all whether glyphosate is dangerous. If the panel ruled for Bayer, the litigation would go away. If it ruled for the plaintiffs, they could still sue but without the right to seek punitive damages or medical monitoring, two of the most potent claims in the plaintiff lawyers’ arsenal. Anyone who didn’t like the terms could opt out up front.

It seemed like a brilliant solution—but then the U.S. Constitution got in the way. The asbestos industry faced a similar problem in the 1990s and tried to solve it with a global settlement that would bind present and future claimants into one massive agreement. But the U.S. Supreme Court’s landmark 1997 decision in Amchem v. Windsor said lawyers for present-day claimants couldn’t negotiate away the rights of future claimants so easily. Soon, rival lawyers were crying “Amchem,” the judge overseeing federal Roundup litigation expressed his skepticism, and the futures class was off the table. That leaves Bayer stuck halfway through the door, with an agreement to end most of the present litigation against it but no apparent solution, other than slugging it out in court, to put to rest the question of whether the most popular herbicide on earth actually causes cancer.

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