SAN FRANCISCO (Legal Newsline) – Bayer convinced a federal judge to throw out part of a lawsuit brought by its shareholders who claim they were gypped when the company acquired Monsanto.
U.S. District Judge Richard Seeborg, of the Northern District of California, on May 18 ruled on Bayer’s motion to dismiss a class action that was spawned by the thousands of lawsuits against Bayer and Monsanto that said weedkiller Roundup’s active ingredient glyphosate causes non-Hodgkin’s lymphoma.
The decision takes away claims Bayer misled shareholders with its claims regarding its science-based arguments that it made when fighting personal injury lawsuits.
Seeborg’s earlier ruling that denied a first motion to dismiss relied on a 2002 internal Monsanto email in which its head of product safety strategy stated “Glyphosate is OK but the formulated product *and thus the surfactant) does the damage.”
“Although this email demonstrated that Monsanto employees were aware that Roundup and Monsanto were not one and the same in terms of their safety risks,” Seeborg wrote in the May 18 ruling, “Plaintiffs have presented scant support for their arguments that statements Bayer executives made in 2018 and later were made with ‘either intentionally or with deliberate recklessness.’
“Even if it was possible that Bayer executives had access to the relevant emails, possible access is not enough under Ninth Circuit’s case law concerning scienter, as Plaintiffs needed to allege facts to explain why the relevant executives would have had actual access or exposure to the information in the emails.”
Grand Rapids, Mich., retirement systems and the pension funds for the Sheet Metal Workers and the Teamsters filed lawsuits accusing Bayer of hiding the true magnitude of its Roundup liability, which includes a $10 billion settlement of some 95,000 claims.
Seeborg had already allowed the shareholders’ claims to move forward, ruling last year that they had adequately alleged their claims. At issue is a 38% drop in the value of Bayer shares between July and October 2020.
Bayer agreed to buy Monsanto in 2016 and closed the deal in 2018. Soon after completing the acquisition, juries returned more than $150 million in damages in two Roundup trials in California, which stimulated lawyers to file thousands of similar cases. Bayer offered to settle the litigation for $10.9 billion in June 2020. Its shares fell the following month, after U.S. District Judge Vince Chhabria said it was unlikely he would approve the deal.
The plaintiffs immediately sued, claiming Bayer misled investors about lapses in its due diligence, failing to disclose the cancer risk of glyphosate and failing to properly account for its legal liability.
Bayer moved to dismiss under Rule 12(b)6 for failure to state a claim. It argued, among other things, that glyphosate is safe and that the plaintiffs were accusing it of fraud in hindsight. The company said the claims boiled down to failing to anticipate lawyers would file meritless claims that Roundup causes cancer, and juries would believe them.
Seeborg rejected the motion to dismiss, but the plaintiffs amended their complaint when he wrote they had failed to adequately plead claims concerning Bayer’s statements concerning the safety of glyphosate and litigation risks.
The new complaint removed allegations regarding legal risks and reframed the plaintiffs’ theory of liability as to the safety of glyphosate. The plaintiffs say Bayer made misrepresentations concerning the evidentiary basis for Monsanto’s science-based trial defenses.
Bayer responded with the most recent motion to dismiss. The case will proceed with claims OK’d by Seeborg in his first ruling on the first motion to dismiss.