The first U.S. trial over a herbicide called dicamba has landed Bayer AG and its German rival BASF SE with another potentially multi-billion-dollar problem.
Jurors in federal court in Cape Girardeau awarded $265 million Saturday to a Missouri farmer who blamed the herbicide for destroying his peach orchards. The companies now face more than 140 lawsuits over allegations that dicamba wreaked havoc across the Midwestern U.S. when it drifted onto crops that weren’t engineered to resist it.
While two German industrial giants are involved, the focus is set to fall on Bayer, already seeking to settle thousands of lawsuits claiming exposure to its Roundup weedkiller causes cancer. Both dicamba and Roundup are produced by Monsanto, which Bayer acquired in 2018.
The loss heaps more pressure on Bayer Chief Executive Officer Werner Baumann, who staked his career on the $63 billion takeover of Monsanto. Last April, after a couple of Roundup trial losses, Baumann became the first CEO of a major German company in decades to lose a shareholder confidence vote.
Activist investor Elliott Management later announced the purchase a stake in the company, raising the prospect of holders pushing to split up the pharma and agro-chemicals conglomerate. Baumann, a defender of that setup, faces another shareholder vote in April.
Act Fast
Since dicamba is another legacy Monsanto product, the latest verdict threatens to undo Bayer’s recent momentum. Since June, the stock has recouped about half of the value it lost following the Roundup trial losses.
Bayer shares fell as much as 3.3% in Frankfurt trading, the sharpest drop in more than four months. The ruling is “a negative for sure,” though dicamba will probably not grow into a headache as big as Roundup, according to Dennis Berzhanin, an analyst at Pareto Securities in Frankfurt.
The company vowed to appeal, saying “there was no competent evidence presented which showed that Monsanto’s products were present” on the Missouri farm and were responsible for the farmer’s losses.
BASF said it was surprised by the jury’s decision and would use “all legal remedies available.” The stock dropped less than 1% in Germany.
Carl Tobias, a University of Richmond law professor who teaches about mass torts, said Bayer needs to get on top of this latest situation fast.
“The sooner you put the fire out on this, the better,” Tobias said Sunday in an interview. “If every one of these dicamba cases is worth more than $250 million, that’s going to create another multi-billion-dollar headache for Bayer and investors won’t like that one bit.”
Bayer has thus far managed to avoid going back to trial over Roundup and talks have heated up with plaintiff attorneys toward a possible resolution of that litigation. Its shares would probably surge if Bayer can close the Roundup headache for as little as $10 billion, analysts have said.
The Roundup and dicamba litigation aren’t Bayer’s only legal woes. It’s set to go to trial in March in the first of thousands of lawsuits claiming it hid safety risks of its Essure birth-control device.
Other Cases
The company is also battling lawsuits by numerous cities alleging that Monsanto contaminated waterways with toxic PCBs, a chemical compound widely used in industrial applications before it was banned in 1979 over environmental concerns. Bayer has denied wrongdoing over both weedkillers as well as Essure and PCBs. It also has appealed the Roundup verdicts.
Saturday’s decision to impose $250 million in punishment damages on top of $15 million to compensate farmer Bill Bader may encourage other commercial growers from Arkansas to Illinois to pursue trials rather than settle their claims over ruined crops. It’s unclear how the award will be split between Bayer and BASF.
Monsanto has been fighting lawsuits since 2015 over its dicamba product, now called XtendiMax. BASF makes its own dicamba-based herbicide for use on its genetically modified seeds.
The companies say the crop damages stem from farmers applying the chemical incorrectly, and that dicamba’s current formulations won’t drift if proper procedures are followed.
Peach Yields
In the Missouri trial, Bader said neighbors planted dicamba-resistant cotton engineered by Monsanto and sprayed it with the older, easy-drift version of the weedkiller made by BASF. The herbicide enveloped his orchards, curling leaves and killing trees.
The companies’ lawyers presented statistical evidence showing that Bader’s peach yields had begun to fall prior to 2015. They cited weather events, such as hail storms and late freezes, as the cause for declining production.
Bev Randles, one of Bader’s lawyers, said the verdict sends a message to all U.S. corporations.
“There is no giant too big,” she said. “Everyone has to follow the law.”
The case is Bader Farms v. Monsanto Co., 16-cv-00299, U.S. District Court, Eastern District of Missouri (Cape Girardeau).