Searle Ordered to Pay $8.75 Million : Huge Award in IUD Case May Trigger More Suits
Monsanto Co.’s G. D. Searle subsidiary could face further claims and costly damages following its loss of a court case involving its Copper-7 intrauterine device, securities analysts said Monday.
Monsanto’s shares dropped sharply in heavy trading in reaction to the court decision, which was announced Friday after the market closed. The shares fell $7.125 to close at $78.625 on the New York Stock Exchange.
G. D. Searle was ordered by a federal court in St. Paul, Minn., to pay $8.75 million in damages to a Minnesota woman, Esther Kociemba, who claimed that the contraceptive device caused her sterility. The amount was the largest ever awarded to a plaintiff in 19 cases involving the Copper-7 IUD.
Meanwhile, on Monday, the judge in the case ruled that Monsanto itself may also be sued in liability cases involving the Copper-7 intrauterine device. The decision could dramatically expand the potential for financial damage to Monsanto from the hundreds of lawsuits over the birth control device.
The Minnesota court said the St. Louis chemical company may be held liable in some Copper-7 suits even though it had no part in the design and manufacture of the device and, in fact, pulled the controversial contraceptive off the market within three months of buying Searle in 1985.
Monsanto officials said they were confident that the judge’s ruling would be reversed on appeal, saying any liability in the cases would be borne entirely by Searle, which Monsanto has operated as a separate entity since acquiring it.
Analysts said the large amount of damages awarded, specifically the $7 million in punitive damages, could encourage other women to file suits against Searle and might result in further costs for Monsanto.
“It’s a little like playing the lottery. As the amount of the prize increases, more people step in to buy a ticket,” said James Wilbur of Smith Barney, Harris Upham & Co. Wilbur dropped his rating on Monsanto from buy to neutral Monday.
Plans to Appeal
About 450 to 500 cases are outstanding against Searle and analysts expect that number to rise with the Kociemba decision.
“It certainly could attract more plaintiffs, although I don’t expect it to be as large as the Dalkon Shield cases,” said analyst George Krug of Eberstadt Fleming.
Dalkon Shield is an intrauterine device that was pulled off the market by its producer, A. H. Robins Co., in the early 1970s after users complained that it caused pelvic disease. Searle removed the Copper-7 device, which still has Food and Drug Administration approval, from the market in 1986.
Mark Schannon, Monsanto’s director of public relations, declined to speculate whether the Kociemba decision would attract further cases.
“We continue to have full faith in Searle’s ability to manage the Copper-7 cases from a legal, medical and financial standpoint,” Schannon said.
Analysts said concern that the Kociemba decision could attract more cases would hang over the company. Searle has said it would appeal the ruling, but analysts feel that the damage has been done.
“The market is already risk-averse and this just doesn’t help our stomachs,” Wilbur said.
Over the longer term, however, analysts said Monsanto’s shares should be able to weather the storm.
Analysts said Monsanto recently approved a program to buy back 5 million of its shares and the plan could help support the stock price. “They have the cash to do it, and it makes a lot of sense for them to do it,” Krug said.
Smith Barney’s Wilbur also expects Monsanto to overcome its problems with Copper-7 cases. “New bits of information will come out that will make the stock volatile. While there could be sizable liability accrued by Searle, it it won’t be so bad to upset the whole house of cards,” he said.
