Bayer AG, the German conglomerate is reportedly considering the use of a contentious legal technique, the “Texas Two-Step” bankruptcy to handle upwards of tens of thousands of US lawsuits. These lawsuits claim that Bayer’s Roundup weedkiller product is a carcinogen, according to individuals acquainted with the internal deliberations of the conglomerate. Bloomberg Law reports.
Legal professionals in the corporate sector will note the name “Texas Two-Step” bankruptcy originates from the ability of Texas state law to allow corporations to divide their assets and liabilities into separate entities. Consequently, the entity laden with liabilities can be filed for bankruptcy in aim of an encompassing settlement. However, legal precedent shows that courts have previously rejected this tactic by 3M Co. and Johnson & Johnson in disputes related to flawed hearing protective devices for American soldiers and their talc-based baby powder, respectively.
Increasing financial pressure has been felt by Bayer since it became liable for a total of about $4 billion in Roundup jury verdicts over a span of four months. In the most recent trial, the company suffered its most significant defeat yet, with the jury directing Bayer to pay an Indiana-based man $2.25 billion. He had attributed his cancer to prolonged exposure to Roundup. Despite the recurring lawsuits and losses, the company persists in its assertion that the Roundup product is safe.
Throughout the ongoing litigation, Bayer’s value has plummeted by approximately 70% since its $63 billion procurement of Monsanto in 2018, which coincided with the acquisition of the Roundup product. This downfall has significantly influenced the company’s falling profits. Amid these challenges, Bayer has been putting into place measures that indicate the possibility of a bankruptcy filing for a unit of the company. It is noted that this approach has been met with disapproval from some legal experts as it allows solvent companies to use bankruptcy court to impose settlements on claimants.
In light of the recent setbacks surrounding the use of Texas Two-Step bankruptcies, legal professionals may note that the pursuit of this strategy by Bayer implies a greater interest in delaying existing litigation than addressing the legal rights of cancer patients or pursuing a comprehensive settlement at a fair price.”