SAN FRANCISCO (Legal Newsline) - Securities class action lawyers have added a new litigation front for Bayer AG to fight in America, filing a complaint accusing the German chemicals giant of misleading investors when it said lawsuits over Roundup herbicide were baseless.
Bayer, which received bad news on Tuesday when a California appeals court upheld a jury ruling on liability, still says the scientific evidence shows Roundup’s active ingredient glyphosate is safe – a position echoed by the U.S. Environmental Protection Agency and nearly every other national regulatory agency. But lawyers at Bernstein Litowitz Berger & Grossman, in a lawsuit filed July 15, say the non-scientist jurors who have awarded billions of dollars in damages against Bayer following its purchase of Roundup-maker Monsanto revealed the truth about the widely used product.
"We are confident that we have always acted in accordance with our obligations under the applicable securities laws," Bayer said in a statement to Legal Newsline.
"Bayer conducted appropriate due diligence regarding all aspects of the Monsanto acquisition, including having outside counsel conduct diligence of litigation and regulatory issues throughout the process that ended with Bayer becoming sole owner of Monsanto on June 7, 2018. Thus, the acquisition of Monsanto was carefully planned and executed and the members of the Board of Management and of the Supervisory Board have acted in accordance with their duties.
"Reports by independent experts have explicitly confirmed this."
Bayer agreed to buy Monsanto in 2016 for $63 billion, saying the combination would create the world’s leading life sciences company. Instead the takeover turned tricky, as lawyers spent more than $100 million recruiting plaintiffs who accuse Roundup of causing non-Hodgkins lymphoma, a common cancer that doctors say has no known cause three-quarters of the time.
It is pursuing appeals of the three jury verdicts against it, including on the basis of federal preemption, or the argument it shouldn’t be subjected to a jury trial that effectively challenges the federal regulations over the product. One of those verdicts was just upheld, though a California appeals court reduced the damages from $78 million to $21 million.
Bayer Chairman Werner Baumann repeatedly told investors the Roundup litigation risk was low because the product was safe. It turns out he underestimated the lottery-like characteristics of the American legal system, in which plaintiff lawyers can win huge verdicts despite the weight of scientific evidence going against them.
In the telling of lawyers at Bernstein Litowitz, “the truth began to emerge on August 10, 2018, when a jury in the Johnson case found unanimously that Monsanto’s glyphosate-based Roundup weed killer was a `substantial factor’ in causing the plaintiff to develop non-Hodgkin’s lymphoma.
“Monsanto knew, or should have known, the risks associated with exposure to the chemical and failed to warn of this severe health hazard,” say the lawyers, who filed the suit in the name of several Grand Rapids, Mich., pension systems.
Bayer has agreed to pay as much as $10 billion to settle some 100,000 individual lawsuits over Roundup, once again telling investors it believes the settlement will contain the litigation. The company’s attempt to settle all future litigation hit a snag, however, when the judge overseeing federal multidistrict litigation indicated he wouldn’t approve a $1 billion class settlement that would have employed a “science panel” of experts to decide whether glyphosate causes cancer.
Bayer and negotiating plaintiffs firm Lieff Cabraser withdrew the proposal, with the company saying it would continue to work out concerns from the judge and other plaintiffs firms with Roundup cases.
In a related filing in the federal MDL, the lawyers for Grand Rapids said they want to fold their case into the federal litigation because the lawsuits “will involve substantially similar witnesses and will involve overlapping discovery.” They cited similar cases including the Volkswagen “clean diesel” litigation in which securities and other tort claims were combined.
The proposed class action would cover investors who purchased Bayer shares between May 23, 2016, when Bayer first announced its takeover offer for Monsanto, and March 19, 2019, when a jury in the first federal bellwether trial delivered a verdict against Bayer. The company’s stock plunged 9% on the news. The shares have yet to recover.
After the first jury verdict in 2018, Baumann told investors a “verdict by one jury in one case does not change the scientific facts and the conclusions of regulators that glyphosate does not cause cancer.” The company still says glyphosate is safe and it continues to sell Roundup, one of the most widely used chemicals on earth.
A federal judge recently ruled that California cannot order a cancer warning on Roundup because it would be false and mislead consumers.