WILMINGTON, Del. (Legal Newsline) - Merck is stuck with mounting costs from lawsuits over Dr. Scholl’s foot powder, which plaintiff lawyers claim can cause cancer, even though it sold the division containing that business to Bayer for $14 billion nearly a decade ago, a Delaware judge ruled.
The sale contract specified that product-liability claims stemming from products sold before Bayer bought the business in 2014 remain with Merck indefinitely, Vice Chancellor Nathan Cook ruled.
Merck sued Bayer to take over the potentially billion-dollar liabilities in 2021, citing a clause in the contract that said “all liability” would revert to Bayer after seven years. But another clause in the contract says Merck remained responsible for “retained liabilities,” which were defined in another clause as any product liability claims arising from before the sale.
Judge Cook held a hearing in December and issued a decision dismissing Merck’s lawsuit against Bayer on April 3.
“The interpretation offered by Bayer is the only reasonable one, and, therefore, Merck’s complaint must be dismissed,” the judge wrote.
Merck argued the contract would have used words like “perpetual” or “forever” if it was meant to retain the retained liabilities indefinitely. But the judge said the time limit was on claims arising from the contract between the two companies, not lawsuits brought by third parties. And the words “absolute” and “irrevocable,” which are in the contract, “encompass the idea of unreserved commitment,” the judge wrote, citing Black’s Law Library as an authority.
The alternative would be absurd, the court said, since it would mean Bayer had agreed to cover the costs of third-party lawsuits after seven years without any mechanism in the contract for transferring them from Merck. Neither company has the power to extinguish tort claims brought by people who weren’t party to the contract, the judge said.
Merck’s interpretation “would be commercially unreasonable because it would allow Merck to dump all pending but untendered cases involving product claims onto Bayer on October 1, 2021,” the judge wrote. That would mean Merck and its lawyers could make all strategic decisions in litigating those claims, including whether to settle them or to fight it out in court, “without input from Bayer.” That would give Merck an incentive to stall for time until Bayer took over liability, the judge said.
Plaintiff lawyers developed a theory of liability for talcum powder in cooperating with experts who specialized in asbestos litigation. Those experts claim they can find asbestos fibers in talc, and that people who use the product can inhale enough of the fibers to develop cancer. Johnson & Johnson and other talc manufacturers dispute the science and maintain there is no asbestos in their products, but J&J has proposed spending at least $8.9 billion to end its liability, after losing more than $2 billion in jury verdicts.
Among the products Bayer bought in 2014, lawyers have sued over Dr. Scholl’s and Lotrimin foot powder.