Bayer’s $650 Million PCB Pollution Settlement Rejected by Judge

A federal judge refused to approve Bayer AG’s $650 million settlement of claims by about 2,500 U.S. cities, counties and ports over pollution from polychlorinated biphenyl, or PCB.

Among other problems with the deal, U.S. District Judge Fernando M. Olguin in Los Angeles pointed to the broad scope of the release of legal liabilities for Bayer in the settlement. The judge said he can’t approve any accord that shields Bayer from claims by people or entities not included in the lawsuit.

The Nov. 25 ruling is a blow to Bayer’s efforts, in a $12 billion proposal it announced in June, to resolve lingering litigation exposure the company inherited when it acquired Monsanto in 2018.

Bayer said in an emailed statement that it will work with the plaintiffs to resolve Olguin’s concerns and is confident it will file a revised agreement before the end of the year.

The ruling is “a surprise setback for Bayer,” Tom Claps, a litigation analyst at Susquehanna Financial Group, said in an email. While Olguin’s concerns are “manageable,” Claps said, Bayer is “still facing other PCB litigation nationwide” including more possible lawsuits from states.

A group of 21 attorneys general, including those from California, New Jersey, Massachusetts and Michigan, had raised concerns with the judge that the settlement might block them from pursuing their own legal actions against Bayer.

“It is not difficult to imagine a third-party suing defendant for conduct relating to the allegations in this case,” the judge wrote, adding that Bayer “is not entitled to have class members indemnify it” for third-party claims.

Cities including Seattle, San Diego, Portland, Oregon, and Oakland, California, sued Monsanto -- the exclusive maker of PCBs used to cool heavy-duty electrical equipment for more than 40 years -- prior to the acquistion by Bayer that left it to deal with the pollution problems tied to the chemicals.

Separately, a federal judge in San Francisco this month lifted a pause on suits alleging that Monsanto’s Roundup herbicide causes cancer. With thousands of cases still unresolved even after Bayer announced a settlement plan in June, U.S. District Judge Vince Chhabria set a Jan. 25 hearing to get trials restarted.

Bayer lost three Roundup trials in 2018 and 2019 with average awards of almost $50 million per plaintiff that sent its stock into a downward spiral. The company lost its appeal of the first case to go to trial -- though it did win a reduction in damages -- and is trying to get verdicts in the other two cases overturned.

The PCB case is City of Long Beach v. Monsanto Co, 16-cv-3493, U.S. District Court, Central District of California (Los Angeles).

©2020 Bloomberg L.P.

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