By Joel Rosenblatt
Bayer AG won a reprieve as a federal judge cut a verdict linking its Roundup weedkiller to cancer by $55 million, while the German company continues to fight thousands of lawsuits in the U.S.
The stock rose as much as 2.4% in Frankfurt trading after U.S. District Judge Vince Chhabria ruled Monday that the March verdict intended to punish the company was too high.
Bayer’s future growth is clouded by thousands of legal cases filed by people who argue Roundup is to blame for their cancer, leading shareholders to question its decision to buy U.S. seed and pesticide giant Monsanto for $63 billion last year. The company hired a high-profile mediator to lead settlement talks last month, though it continues to defend the herbicide as safe.
“While Monsanto repeatedly intones that it stands by the safety of its product, the evidence at trial painted the picture of a company focused on attacking or undermining the people who raised concerns, to the exclusion of being an objective arbiter of Roundup’s safety,” Chhabria wrote.
The judge rejected Bayer’s bid to overturn the jury’s finding that Roundup is defective because it’s sold without a cancer warning. But he cut the verdict to $25.3 million from $80.3 million in the California case.
Bayer disagreed with Chhabria’s ruling denying the company a new trial. While the reduction of punitive damages “is a step in the right direction,” the verdict and damages “are not supported by the reliable evidence presented at trial,” the company said in an emailed statement, adding that it plans to appeal.
Of the three cases Bayer has lost so far, Chhabria created by far the most rigorous path for the plaintiffs to get to trial -- and they won. Because it’s the first case of hundreds collected from federal courts across the U.S. to go to trial, many of his rulings will serve as a bellwether for those suits.
Analysts’ estimates for the costs to settle all the lawsuits Bayer faces in the U.S. range from about $2.5 billion to $20 billion. Bloomberg Intelligence analyst Holly Froum reiterated her estimate that a potential settlement could cost Bayer $6 billion to $7 billion. Chief Executive Officer Werner Baumann’s job may hang in the balance as the architect of the Monsanto takeover.
Chhabria ruled that the $75 million portion of the March verdict intended to punish the company was too high based on a legal precedent that punitive damages shouldn’t be more than four times bigger than compensatory damages. He reduced the punitive damages to $20 million -- the maximum allowed under guidance supplied by the U.S. Supreme Court -- while emphasizing that the jury’s decision to award such damages was “reasonable.”
The case was brought by Edwin Hardeman, who used the herbicide on his large plot of land in Sonoma County, about 60 miles (100 kilometers) north of San Francisco. As with many of the other 13,400 consumers suing Bayer, Hardeman alleged that his years of exposure caused his non-Hodgkin’s lymphoma. Bayer is scheduled for a fourth trial this summer in St. Louis, where Monsanto was based.
Jennifer Moore, Hardeman’s lawyer, called Chhabria’s refusal to throw out the verdict a “major victory” for all individuals injured as a result of using Roundup.
“For decades Monsanto has lied about the safety of Roundup and undermined any effort to inform the public that Roundup causes cancer,” Moore said in an emailed statement. “We disagree with any reduction of the jury’s verdict.”
The case is In re: Roundup Products Liability Litigation, MDL 2741, U.S. District Court, Northern District of California (San Francisco).