The Ninth Circuit Court of Appeals on June 19 ruled that farmers and commercial applicators will have until July 31 to use any remaining stocks of the dicamba herbicides Engenia, FeXapan, and XtendiMax that were in their possession as of June 3, provided their state governments have not issued earlier deadlines.
The court ruling was in response to an emergency motion for contempt filed against the U.S. Environmental Protection Agency (EPA) on June 11 by the original plaintiffs in the case, including the National Family Farm Coalition, Center for Food Safety, Center for Biological Diversity, and Pesticide Action Network (GM June 19, p. 1)
The court on June 3 cancelled the registrations for Bayer’s XtendiMax, BASF’s Engenia, and Corteva’s FeXapan for the 2020 growing season (GM June 5, p. 1). EPA then issued a directive on June 8 allowing growers and commercial applicators until July 31 to use existing stocks of the herbicide that were in their possession on June 3, while ending all new sales and distribution (GM June 12, p. 1).
The plaintiffs, however, argued that EPA’s continued use guidance violated the court’s order to vacate the registrations. In its response to the petition, EPA claimed that approximately four million gallons of dicamba herbicides were still in growers’ possession or in the retail/wholesale distribution chain, and that it had received letters from multiple trade associations – including the Agricultural Retailers Association (ARA) – arguing that the court’s decision to halt sales of the herbicides would cause significant economic damage for farmers.
In another major development, Bayer on June 24 announced that it has reached a number of settlements, potentially totaling $12.1 billion, resolving Roundup product liability litigation, dicamba drift litigation, and PCB water litigation.
The company said it will pay up to $400 million to resolve the multi-district litigation pending in the U.S. District Court for the Eastern District of Missouri involving claims of crop damage from dicamba drift for the 2015-2020 crop years. Claimants will be required to provide proof of damage to crop yields and evidence that it was due to dicamba in order to collect.
Bayer also announced a series of agreements that resolve cases representing most of the company’s exposure to water litigation over PCBs, which Monsanto legally manufactured until 1977. Bayer said it has agreed to pay a total of approximately $650 million to a class that includes all local governments with EPA permits involving water discharges impaired by PCBs.
By far the largest and most significant settlement involves Roundup, however. Bayer said it has agreed to make a payment of $8.8-$9.6 billion to resolve approximately 75 percent of the current Roundup cases involving roughly 125,000 filed and unfiled claims. The settlement includes an allowance expected to cover unresolved claims, and $1.25 billion to support a separate class agreement to address potential future litigation.
Bayer said the three Roundup cases that have already gone to trial will continue through the appeals process and are not covered by the settlement. Bayer said the agreements contain no admission of liability or wrongdoing, and stressed that the company’s customers “who depend on glyphosate-based herbicides for their livelihoods” will see no change in the availability of Roundup products as a result of the agreements.
“First and foremost, the Roundup™ settlement is the right action at the right time for Bayer to bring a long period of uncertainty to an end,” said Werner Baumann, Bayer CEO. “It resolves most current claims and puts in place a clear mechanism to manage risks of potential future litigation. It is financially reasonable when viewed against the significant financial risks of continued, multi-year litigation and the related impacts to our reputation and to our business.”
The settlements were applauded by the National Corn Growers Association. “We respect Bayer’s decision to settle many of these cases in order to move forward as a company while keeping glyphosate available to the farmers who rely on it,” said NCGA President Kevin Ross. “NCGA acknowledges that Bayer has not admitted fault through this decision and continues to reiterate a commitment to the safety of the product. Corn farmers work hard every day to produce safe and affordable food, fuel, and fiber for the country and the world. Responsible use of products like glyphosate is an important part of our ability to do just that in a long-term, sustainable fashion.”
Cash payments related to the settlements are expected to start in 2020, and are not expected to exceed $5 billion in 2020 and again in 2021, with the remaining balance paid in 2022 or thereafter. Bayer said it will make use of existing surplus liquidity, future free cash flows, the proceeds from its Animal Health divestment, and additional bond issuances to finance the settlements. Bayer said it expects to keep investment grade credit ratings and its dividend policy.
Bloomberg said the settlements “should bring investors a clearer pictures of the company’s liabilities and removes a significant risk.” Bloomberg noted that Roundup generates $3-$3.5 billion in sales for Bayer in a given year, with a margin below 10 percent.
In related Roundup news, Judge William Shubb of the U.S. District Court for the Eastern District of California this week blocked California’s effort to require cancer warning labels for glyphosate under the state’s Proposition 65. Shubb’s ruling said that requiring the labels would violate First Amendment protections since EPA and other regulators have backed glyphosate’s safety. The ruling was hailed by Bayer.
As for Bayer’s Xtendimas dicamba herbicide, Bloomberg said reregistration of the product this fall is more important to Bayer that the mass tort agreement to settle dicamba drift litigation. “Dicamba approval underpins the company’s biotech seed trait conferring herbicide resistance, which could generate $300-$420 million of EBIT in 2020,” Bloomberg said.
In its June 24 statement, Bayer said it expects a contribution from BASF toward the $400 million dicamba settlement. BASF said in an emailed statement to Bloomberg that it “will evaluate any proposal” from Bayer, but at this time the company has not yet agreed to contribute.