Bayer Considering “Texas Two-Step” Roundup Bankruptcy to Address Non-Hodgkins Lymphoma Lawsuits: Bloomberg

Analysts say the odds are against a Roundup bankruptcy being approved by a federal judge, but the filing could delay cases set for trial throughout 2024.

As Bayer continues to be hit with massive verdicts in Roundup non-Hodgkins lymphoma lawsuits, and faces a steady stream of additional trials set to begin throughout 2024, reports suggest that the company is planning a controversial bankruptcy scheme known as the “Texas two-step”, to force settlement of current and future claims through the U.S. bankruptcy system.

According to a new report from Bloomberg News, Bayer is now considering a Roundup bankruptcy filing that would attempt to transfer liability the company faces for failing to warn about the risk of non-Hodgkin’s lymphoma from the weed killer to a subsidiary, which would then immediately file for bankruptcy.

The tactic has been unsuccessfully attempted by other manufacturers of dangerous products in recent years, including Johnson & Johnson’s controversial talcum powder bankruptcy filing and a maneuver by 3M Company to force Combat Arms earplug lawsuit through a bankruptcy settlement.

While most analysts do not believe the move is likely to succeed, since Bayer has billions in assets and faces no actual financial distress, the filing is likely to delay the litigation for years and prevent other claims from going before juries this year.

Billions in Roundup Settlements Already Paid

Over the past eight years, Bayer and its Monsanto subsidiary have faced more than 167,000 Roundup lawsuits filed throughout the U.S., each raising similar allegations that users were not adequately warned about the risk of developing non-Hodgkin’s lymphoma from the weed killer, either when using the product in an agricultural setting or around the home.

The litigation emerged in 2015, when the World Health Organization’s International Agency for Research on Cancer (IARC) decided to classify glyphosate in Roundup as a probable cancer-causing agent. However, even after paying more than $10 billion to resolve thousands of cases, Bayer and Monsanto have continued to face a steady stream of jury trials involving plaintiffs who rejected settlement offers, as well as new claims that continue to be filed as former users develop non-Hodgkin’s lymphoma.

Currently, hundreds of claims are centralized in the federal court system before U.S. District Judge Vince Chhabria in the Northern District of California, where several large waves of claims are being prepared for remand to different federal district court for trial. Even more are filed in state courts nationwide, including Missouri, Pennsylvania, New Jersey and California, where a series of non-Hodgkins lymphoma lawsuits are expected to go before juries in the coming months.

According to Bloomberg, people familiar with the company’s internal workings say Bayer executives have reached out to law firms and advisors on how it could file for bankruptcy in a way that brings a halt to active litigation in the Roundup lawsuits and trials scheduled throughout 2024, as part of a plan to settle 50,000 remaining claims.

The decision comes after the Eleventh Circuit Court of Appeals rejected arguments that the claims are preempted by federal law and should proceed. In addition, Bayer has suffered a string of massive losses in state court trials over the past few months, including the largest Roundup lawsuit verdict to date, $2.2 billion, handed down by a Pennsylvania state court jury in January. That verdict was preceded by a $1.5 billion verdict in November 2023, and after a slew of others plaintiff victories last year.

Analysts indicate in the recent report that the chances for success with the Roundup bankruptcy attempt are slim, as a federal bankruptcy judge would likely dismiss the attempt. However, that may not be the ultimate goal, as such a decision would take months, or even years to work through the appeals process. During that time, all active litigation involving Roundup could be stayed, allowing Bayer executives to stop the financial bleeding.

In previous efforts by Johnson & Johnson and 3M, judges ruled multiple times that the companies failed to show that they were in enough financial distress to justify the bankruptcy filings. Bayer is likely to face similar questions.

Given the manufacturers’ failure to consistently defend the safety of their product at trial, combined with the substantial damage awards often provided by juries after considering the evidence, settlements paid to date may only represent a small portion of the total liability the manufacturer faces if it fails to resolve Roundup lawsuits in advance of trial.