Bayer Underestimated Legal Risks of Roundup Litigation, Shareholders Say

Amid a growing number of Roundup lawsuits and massive verdicts awarded to former users of the weedkiller who developed non-Hodgkin’s lymphoma, Bayer shareholders indicate that the company greatly underestimated the impact of the litigation when it acquired Monsanto last year, and suggest that the company’s future may now be tied to the outcome of the claims.

Large shareholders intend to speakout at Bayer’s annual general meeting (AGM) on April 26, raising serious questions about whether the board has lost control of the situation.

Deka Investment, which is Bayer’s 10th largest shareholder, told Reuters that it will be among shareholders to voice concerns at the meeting, and other major shareholders have indicated that they plan to vote against approval of the executive board.

Bayer paid $63 billion to acquire Monsanto last summer, taking on thousands of outstanding product liability lawsuits filed by more than 10,000 individuals nationwide who indicate that Montanto failed to disclose the link between Roundup and non-Hodgkin’s lymphoma.

In each of the first two claims to go to trial, juries have hammered Bayer and Monsanto with massive damage awards after reviewing all of the evidence about how long the manufacturer knew about the potential risks, and actively worked to avoid any warnings or updated safety instructions. In August 2018, a California state trial resulted in a $78 million verdict for a former school groundskeeper, and last month a federal jury awarded $80 million to a consumer who sprayed Roundup around his home.

Following those those two massive court defeats, Bayer’s stock value has dropped sharply, causing the company to lose about $34 billion in value.

A third trial is currently underway in Alameda County Superior Court in California, involving claims brought by a husband and wife who were both diagnosed with non-Hodgkin’s lymphoma as a result of years of Roundup use. The couple was granted an expedited trial date since they are both dying from the cancer.

The litigation has steadily grown since 2015, when the World Health Organization’s International Agency for Research on Cancer (IARC) declared that glyphosate contained in Roundup was a probably human carcinogen. A number of studies since have backed up those findings. However, Monsanto has continuously claimed that the weed killer is safe and does not cause cancer.

The company’s assertions were backed up by safety reviews by U.S. and European regulators, but those assessments are now in doubt after revelations in the “Monsanto Papers”, which include internal memos found during the discovery process for Roundup litigation. Some of those memos suggest that Monsanto had undue influence over U.S. and European officials and, in some cases, even wrote parts of the safety reviews itself.

Those memos are believed to have played a significant role in the last two trials, resulting in massive punitive damages awards in the tens of millions of dollars, and similar evidence will be introduced in thousands of other trials if Bayer does not reach Roundup settlements or otherwise resolve the litigation, which has investors nervous.

Last week, the U.S. District Judge presiding over the federal litigation canceled a bellwether trial that was set to begin next month, and ordered the parties to engage in confidential mediation before the Court starts remanding cases back to different federal district courts for individual trials.

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