By Tina Bellon
NEW YORK (Reuters) - Bayer AG (DE:BAYGN) had hoped a new trial strategy focusing jurors on scientific evidence could stem a burgeoning tide of U.S. lawsuits over its glyphosate-based weed killer Roundup, but a second jury finding on Tuesday that the product caused cancer has narrowed the company's options, some legal experts said.
Bayer shares tumbled more than 12 percent on Wednesday after a unanimous jury in San Francisco federal court found Roundup to be a "substantial factor" in causing California resident Edwin Hardeman's non-Hodgkin's lymphoma.
The jury decision was a blow to Bayer after the judge in the Hardeman case, at the company's request, had split the trial, severely limiting evidence plaintiffs could present in the first phase. Tuesday's defeat on terms considered advantageous to Bayer sets up the second phase to be even tougher and limits the grounds on which the company could appeal any final verdict, the experts said.
"The fact that Bayer lost this trial despite it being set up in the most favorable way for them is a huge setback," said Thomas Rohback, a Connecticut-based defense lawyer.
Bayer in a statement on Tuesday said it stood behind the safety of Roundup and was confident the evidence in the second trial phase would show that Monsanto's conduct was appropriate and the company not liable for Hardeman's cancer.
The company, which bought Monsanto (NYSE:MON) last year, on Wednesday declined to comment beyond that statement.
Tuesday's finding did not address liability, which will be determined following the second trial phase that began on Wednesday.
Bayer denies glyphosate or Roundup cause cancer. The German company faces more than 11,200 lawsuits over the popular weed killer. Last August, following the first Roundup trial, a California state court jury issued a $289 million verdict against the company.
Two weeks after that verdict, which was later reduced to $78 million and is being appealed, Bayer Chief Executive Werner Baumann reassured analysts that the company had a new legal strategy based on focusing jurors on the scientific evidence.
"Bayer and the joint litigation team are working to ensure that, going forward, this overwhelming science will get the full consideration it deserves," Baumann said in an Aug. 23 conference call.
A LOT AT STAKE
There is a lot at stake for Bayer, which acquired Roundup maker Monsanto last year for $63 billion. Though Bayer does not break out sales figures for Roundup, glyphosate is the world's most widely used weed killer, and Roundup is the leading brand.
Bayer's new strategy was focused on keeping out plaintiffs' allegations that the company improperly influenced scientists, regulators and the public about the safety of Roundup. Bayer has denied it acted inappropriately and said in public statements following the August verdict that it thought the jury was inflamed by the claims of corporate misconduct.
Vince Chhabria, the San Francisco federal judge overseeing the Hardeman case, agreed with the company's argument that such evidence was a "distraction" from the scientific question of whether glyphosate causes cancer. He agreed to split the trial in a January order.
Had Bayer had won the first phase, there would have been no second phase looking at company liability. Now that it has lost, almost all of the previously excluded evidence can be presented to the jury.
Plaintiffs' lawyers hit Bayer with those allegations in their opening statements for the second phase on Wednesday. Aimee Wagstaff, one of Hardeman's lawyers, said Monsanto influenced the science around Roundup through its "cozy" relationship with regulators.
Bayer could convince the jury in the second phase that, despite their finding that Roundup played a substantial role in Hardeman's cancer, the company was not liable. Experts said that was unlikely.
"They could present evidence of how careful they were in developing Roundup, but that's an uphill battle given that the scientific evidence was their strongest argument," said Alexandra Lahav, a law professor at the University of Connecticut.
A lawyer for Bayer on Wednesday argued that Bayer could not be held liable because the U.S. Environmental Protection Agency, as well as other regulators worldwide, approved Roundup without a cancer warning.
If the Hardeman trial had not been split and a final verdict went against Bayer, the company might have been able to appeal any damages award to the U.S. 9th Circuit Court of Appeals by claiming the jury had been improperly swayed by inflammatory evidence, said Lori Jarvis, a Virginia-based mass tort defense lawyer. That argument will now be difficult to make.
"It would not be surprising at all for the 9th Circuit to uphold what the jury did in this case, particularly given the great effort Chhabria put into creating a level playing field for Monsanto," Jarvis said.
Some lawyers said Bayer could still argue on appeal that plaintiffs' experts and their scientific evidence were insufficient and statistically invalid and should not have been admitted at trial. But they noted the 9th Circuit, which oversees the San Francisco federal court, has generally been permissive in allowing expert testimony.
However, experts said it was probably too soon to write off Bayer's legal strategy, noting future Roundup cases could result in different outcomes.
"It's a relatively early phase in this litigation as a whole and we just need to see more trials to understand Bayer's liability," said Adam Zimmerman, a law professor at Los Angeles-based Loyola Law School.