Bayer weighs ‘Texas Two-Step’ bankruptcy filing over Roundup

Bayer AG is considering whether to use a controversial legal maneuver known as the “Texas TwoStep” bankruptcy to try to resolve tens of thousands of U.S. lawsuits claiming its Roundup weedkiller causes cancer, according to people familiar with its thinking.

Faced with a recent string of costly jury verdicts over the herbicide, Bayer executives are consulting with law firms about how to prompt a bankruptcy judge to halt further trials. The object is to wrangle a settlement of more than 50,000 cases, said the people, who declined to be identified discussing a confidential matter.

The bankruptcy maneuver gets its name from the use of a Texas state law that lets companies split their assets and liabilities into separate units, then place the unit loaded with liabilities into bankruptcy to drive a global settlement. Courts have rejected the tactic by 3M Co. over suits targeting faulty hearingprotection devices for U.S. soldiers and by Johnson & Johnson in litigation tied to its talc-based baby powder.

Bayer is looking for breathing room after it was hammered over the last four months with Roundup jury verdicts totaling about $4 billion. While the company has won more recent trials than it has lost, its latest courtroom defeat was its biggest yet, with a Pennsylvania jury awarding $2.25 billion to a man who blamed his cancer on longterm exposure to Roundup. Bayer maintains the product is safe.

“Given the recent rulings on Texas Two-Step bankruptcies, I’m pretty sure Bayer knows this is a longshot bid for a settlement,” said Bruce Markell, a former federal bankruptcy judge who teaches law at Northwestern University. “But they may feel like they don’t have any other choice.”

Bayer declined to comment on any plans for a bankruptcy filing over the Roundup litigation. But Bill Anderson, the company’s new chief executive officer, has said he is prepared to “explore every reasonable option to protect the company and protect our mission from the litigation industry.”

The company’s stock has lost about 70% of its value since Bayer’s 2018 acquisition of Monsanto, from which it inherited Roundup, for $63 billion. Bayer officials acknowledged this month that profits are falling partly because of the ongoing litigation.

The German conglomerate is taking steps that might be in preparation for a unit’s bankruptcy filing. Last month, it proposed to add activist investor Jeff Ubben to its supervisory board. Ubben called for Bayer to consider a Texas Two-Step filing to deal with the Roundup litigation more than a year ago.

Bayer is also proposing to bring on former McKesson Corp. General Counsel Lori

Schecter as a director. Before joining McKesson — a drug distributor that paid $6 billion to settle litigation over its alleged mishandling of opioid painkillers — in 2012, she was a partner at the Morrison & Foerster law firm, where she handled complex litigation and corporate investigations.

Part of Bayer’s problem is that the company is facing tens of thousands of lawsuits in state courts across the country. When it tried to consolidate the litigation through a class-settlement program in 2021, a federal judge rejected its efforts.

The company has spent about $10 billion of the $16 billion that it set aside to resolve more than 110,000 Roundup cases so far. The remainder is intended for resolutions of newly filed cases, existing suits that bowed out of previous settlement efforts and future claims.