(Jan 15): Bayer AG’s Monsanto unit stopped making toxic PCBs a half century ago, but the legal fallout lingers even as many of the building materials made with the chemicals are no longer used in US homes, schools and factories.

On Tuesday Bayer was hit with a US$100 million (RM450.12 million) verdict in the most recent case blaming it for students and faculty at a Seattle-area public school being sickened by exposure to polychlorinated biphenyls, or PCBs, contained in ageing fluorescent-light fixtures.

The company faces billions of dollars in exposure from a growing number of lawsuits over PCB products filed by state and local governments, school districts and individuals.

Bayer, which acquired Monsanto in 2018 for US$63 billion, already has agreed to pay almost US$2 billion in settlements in PCB cases brought by states, cities and counties. Separate litigation over Monsanto’s Roundup weedkiller has created a drag on the German conglomerate’s shares, which have lost about 80% of their value since the acquisition. The company has reserved US$16 billion for US lawsuits over Roundup and faces a wave of trials.

Analysts are casting a wary eye on Bayer’s burgeoning PCB problem. Bloomberg Intelligence analyst Holly Froum projected in November that it may cost Monsanto and two other companies embroiled in the litigation, Eastman Chemical’s Solutia and Pfizer’s Pharmacia, as much as US$3.9 billion to settle the remaining cases, up from her previous estimate of US$2.5 billion.

“This is an unfortunate setback for Bayer,” said Sebastian Bray, an analyst at Berenberg. He and others pointed to another case under review by Washington state’s supreme court as more of a bellwether. The stock was little changed in Frankfurt trading on Wednesday.

US regulators banned PCB production in 1979 after research linked the chemical compound to cancer, liver damage and other ailments.

“PCBs are not a problem of the past” for Bayer and Monsanto, said Ellen Griffith Spears, a University of Alabama professor who has studied the effect of the pollution on towns and cities. “They are very much a problem of the present.”

Bayer acknowledges that its PCB caseload has grown in recent years, but says it’s confident the litigation won’t mushroom into the kind of existential threat Roundup has posed.

“The manufacture of PCB-based products was concentrated in certain regions of the country, so we expect any potential future litigation to be limited as PCBs is not a 50-state issue,” the company said in a statement.

This week’s verdict in Washington state court marked the 10th time that students and faculty at Sky Valley Educational Center have taken Bayer to trial over claims they suffered brain damage and other injuries. The case featured 15 alleged victims, the largest group yet.

Monsanto said it was pleased that the jury awarded damages to only four of the plaintiffs but also said it will challenge the verdict, which included US$75 million in punitive damages. A lawyer for the plaintiff said he wasn’t disappointed with the outcome, adding that “every case is different”.

In earlier Sky Valley cases, about 20 of the 65 plaintiffs were awarded no damages, but Bayer was hit with a total of more than US$1 billion in damages in those trials.

PCBs — used in electrical transformers, paints and sealants as well as building materials — were once prized for their fire-resistant properties. The lawsuits against Monsanto allege that it knew PCBs were toxic to humans and wildlife and could cause contamination far into the future, but hid the risk and continued to make the product.

Bayer is pursuing a strategy to recoup some of its litigation costs from other companies such as General Electric and Westinghouse Electric, now Paramount Global, that were large users of Monsanto PCB products. Bayer has hired a prominent personal injury lawyer, Mark Lanier, to try to enforce 52-year-old contracts that the company says require its corporate customers to indemnify Monsanto for payouts tied to PCB pollution.

Among the settlements Bayer has reached, it agreed in 2020 to pay about US$650 million to resolve waterway pollution claims by about 2,500 municipalities. Cities and towns argued Bayer’s PCBs poisoned their streams and rivers. It has also struck separate accords with Oregon for US$698 million and with six other states and Washington, DC for a total of US$456 million.

The company still faces dozens of PCB lawsuits by school districts, states and cities over health exposure and environmental contamination in buildings, landfills and waterways, according to Bayer’s 2023 annual report.

Bayer said in the report it could face “considerable financial disadvantages” if it loses those cases, which may force the company to take on more debt or divest assets to cover the costs.

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