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Why Bayer settled Roundup and dicamba litigation
To do so, it’s costing Bayer between $11 and $12 billion to settle the dicamba and Roundup lawsuits that accompanied its 2018 $63 billion acquisition of Monsanto. This amount also includes a settlement for PCB water litigation.
The settlement contains no admission of blame for the products and their use. “That is pretty routine for these kinds of settlements,” says Brett Beggeman, Bayer chief operating officer, crop science. “We still believe that the product used according to the label is a product that can be managed in the marketplace.”
Closure of lawsuits was a requirement with Bayer for the settlements, says Bill Dodero, Bayer global head of litigation. In the case of Roundup, Bayer officials say the main feature will bring closure to approximately 75% of current Roundup litigation involving approximately 125,000 filed and unfiled claims overall. Bayer officials say Bayer will pay $8.8 billion to $9.6 billion to resolve the current Roundup litigation, including an allowance expected to cover unresolved claims, and $1.25 billion to support a separate class agreement to address potential future litigation.
This agreement leaves over 30,000 claims remaining. Dodero expects the rest of the cases to be eventually settled.
“It’s not at all unusual to accomplish this kind of a settlement in stages,” says Dodero. “In addition, 95% of all cases set for trial are settled. All of the leadership from California, the federal litigation, and the like are similarly settled. We expect to close the rest in due course, and our allowance in the settlement allows for that. We have reviewed and looked at the remaining lawyers’ inventories and have communicated offers of settlements. We’re still under negotiation with some firms who generated their inventories by television, and with a small number of firms who’ve provided a little information.”
Brett Nicole Taylor, a Los Angeles-based attorney with the Cozen O’Connor law firm, notes in large state coordinated actions and federal multidistrict litigation, it is not unusual for there to be stages of settlement due to the complexity of the matter and the sheer volume of plaintiffs.
“When parties are negotiating settlement in such cases, they often group together plaintiffs based on certain criteria, whether it be similar injuries, type of claims being made, or other criteria,” she wrote in an email. “This allows the parties to come to an agreement on settlement with certain plaintiffs that may not be acceptable for others. For example, a plaintiff claiming permanent brain damage is not likely to be agreeable to the same settlement as a plaintiff who claims minor injuries with no permanent damage.
“In this case, it appears 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, or cases held by law firms with small inventories,” she wrote. “It is difficult to predict a timeline for settlement of these claims, but it is likely that more information on the medical condition of these plaintiffs will need to be provided for settlement discussions to be fruitful.”
Class Science Panel
An independent entity called the Class Science Panel will govern potential future Roundup liability cases. This is subject to court approval. It will consist of scientists not associated with the existing litigation to date, Bayer officials say. Dodero says the panel will have access to all scientific studies. Dodero says this bodes well for Bayer, as he says that the science panel will be made up of experts who will weigh all scientific evidence besides the March 2015 International Agency for Research on Cancer (IARC) report that classified glyphosate as “probably carcinogenic to humans.”
“They will review the totality of the science and consider all of those pieces of information just as the regulatory authorities to date have, who importantly have found that IARC (the March 2015 report) is an outlier and that that opinion by IARC is not credible,” says Dodero.
Bayer does not expect any changes to the labels of Bayer glyphosate products farmers use, says Liam Condon, president of Bayer Crop Science.
“We’re paying an awful lot of money to take the discussion about the safety of glyphosate out of the courtroom, and actually put it back into the scientific and regulatory arena because that’s where it belongs,” he says. “All regulators so far have been very unanimous in our opinion. That’s why we don’t foresee any changes to labeling based on this.”
The settlement also will pay up to $400 million regarding dicamba drift litigation. Bayer officials say this will resolve the multidistrict litigation (MDL) pending in the U.S. District Court for the Eastern District of Missouri and claims for the 2015-2020 crop years. It does not cover potential future off-target dicamba cases.
It also does not include the only dicamba drift case to go to trial – Bader Farms v. Monsanto. Last February, a Missouri jury awarded Bader Farms, a Missouri peach farm, $265 million in damages in February. Bayer and BASF, codefendants in the case, are appealing the verdict.
“What we’ve seen over the years is that we had a big spike in inquiries in off-target movement when we launched XtendiMax (Bayer’s dicamba formulation for dicamba-tolerant soybeans and cotton) in 2017,” says Condon. “This fairly rapidly declined as farmers got more training and got used to the conditions under which it needs to be applied effectively. With that, we think that now the situation is very much under control and while we can never fully preclude future litigation, we think this would be very manageable going forward.”
States like Illinois, though, didn’t see a decrease in 2019. Instead, off-target complaints in 2019 set a record. The 728 complaints in Illinois more than doubled the 2018 total of 330, says Jean Payne, executive director of the Illinois Fertilizer and Chemical Association.
“When you look across data, you’re going to find pockets (of off-target damage),” says Beggeman. “I don’t blame the state for looking at what goes on in their state.
“The key in all this is totality, in looking across the U.S.,” Beggeman continues. “We went from a few million acres in the early years to this year, when we’re expecting somewhere around 60 million acres of (dicamba-tolerant) soybeans and cotton. We look at it holistically. We look at our own data, we look at the state data that comes in, we look at all of the information that we get, and our overall (off-target dicamba) calls continue to go down.”
Farmers Need to Be Proactive
Farmers who have been impacted by off-target dicamba applications need to be proactive, says Paul Lesko, an attorney for Peiffer Wolf Carr & Kane, a national law firm that has represented farmers in dicamba-damage lawsuits.
“There is a process that is set up,” he says. "It is not a case where farmers can sit back and the check will come in the mail.”
Peiffer Wolf Carr & Kane attorneys say the claims process will begin later this year after the 2020 harvest. Details and timing issues are still being worked out, but can be checked out at this link, say law firm officials. Bayer officials say the firm expects a contribution from its codefendant, BASF, toward the settlement. However, BASF – maker of the dicamba herbicide Engenia – said in a June 24 statement it has not yet committed toward participation.
"BASF understands that Bayer announced today (June 24) a series of agreements that will substantially resolve outstanding legacy Monsanto litigation, including primarily litigation related to Monsanto’s Roundup products. As Bayer has indicated, the settlements also include litigation concerning dicamba drift litigation, where Bayer has agreed to fund a settlement of those claims.
Although Bayer’s settlement of dicamba litigation resolves those claims on behalf of BASF, at this time BASF has not agreed to a contribution toward today’s announced settlement and will evaluate any proposal from Bayer."
Cash payments related to the settlements are expected to start in 2020, say Bayer officials. A litigation provision will cover the amount in 2020 on the balance sheet, says Condon.
“This would be a special item, so it will not affect our core earnings per share,” he says.
“From a cash flow point of view, the agreement is structured in such a way that approximately $5 billion would be paid in 2020, approximately $5 billion (paid) in 2021, and then the remainder from 2022 onward,” adds Condon. To make the payments, Bayer officials say the firm will make use of:
- Existing surplus liquidity
- Future free cash flows
- The proceeds from the Bayer Animal Health $7.6 billon sale to Elanco announced in 2019.
- Additional bond issuances that Bayer officials say will provide flexibility in managing the settlement payments as well as upcoming debt maturities.
Re-registration of dicamba
“This settlement and re-registration of dicamba (later in 2020) are completely different things,” says Condon.
On June 3, the Ninth Circuit of the U.S. Court of Appeals vacated the registrations of XtendiMax, Engenia, and FeXapan. The registration was set to expire December 20,2020.
On June 8, the Environmental Protection Agency (EPA) issued a cancellation order for these three herbicides but ruled that farmers and applicators could use existing stocks that were in their possession as of June 3, 2020.
Use needs to be consistent with the products’ previously approved labels, and may not continue after July 31, 2020. Some states have earlier cutoff dates. For example, Minnesota farmers may not apply dicamba after June 20.
“This, I think, is an indication of the EPA’s confidence in the system,” says Condon.
Condon expects re-registration for the 2021 growing season and beyond to occur later this fall based on the latest data that wasn’t present in 2018’s conditional EPA registration.
Agricultural companies have had several jury verdicts lead to settlements in recent years. In March 2018, Syngenta settled for $1.51 billion in a nationwide class-action lawsuit filed in Kansas federal court over Syngenta’s Viptera corn that was detected in shipments from the U.S. to China in 2013. The genetic trait at the time was not approved in China at the time.
“Tort litigation just isn’t in agriculture,” says Beggeman. “It’s in other industries, too. We talked to a lot of experts in getting to the conclusion and making the tough call that we made to basically move this out of the courtroom and back to regulators and scientists to address this going forward. It lets us get back to focusing on all the fantastic things that agriculture is doing in increasing productivity, doing it in a more sustainable way.”