On November 16, the en banc Delaware Supreme Court unanimously affirmed the Delaware Court of Chancery’s decision dismissing Merck & Co., Inc.’s lawsuit that sought to shift massive liability for consumer talc products claims to Bayer AG, cementing a total victory for S&C client Bayer. The decision came shortly after oral argument, which the court held on November 1. The appeal followed the Delaware Court of Chancery’s April 3 ruling, which held as a matter of law that Merck cannot shift to Bayer product claims related to certain foot powder products, including Dr. Scholl’s, and dismissed Merck’s contrary claims with prejudice. The April 3 ruling rests on the legally correct interpretation of agreements that the two companies struck in 2014, when Bayer acquired consumer product lines from Merck for $14.2 billion. The agreements included language that Merck would retain sole liability and responsibility for consumer product claims relating to pre-closing business activities. In January 2021, Merck declared that Bayer would be responsible for all consumer talc product claims starting October 14, 2021 and asserted that Merck’s liability would “sunset” on that date. It cited sunset language in the 2014 agreement that created expiration dates for certain contractual indemnification claims. Merck then sued for breach of contract in September 2021, asking for injunctive relief, specific performance, declaratory judgment, and damages. Vice Chancellor Nathan Cook dismissed with prejudice all of Merck’s claims and ruled in favor of Bayer as a matter of law. “Bayer’s interpretation of the [agreement] is the only reasonable one,” he wrote. “The [agreement] clearly and unambiguously provides that Merck indefinitely retained substantive liability for the product liability claims related to products sold prior to the closing of the transaction.” The ruling provides clarity in more than 80 pending product liability cases across the country—and cases that will be filed in the future—establishing that Merck is solely liable and responsible for all of them. The S&C team was led by Dustin Guzior, who argued the motion in Delaware Chancery Court, and included former associate Carson Zhou. The S&C appellate team was led by Jeff Wall, who argued the appeal in Delaware Supreme Court, and included Judd Littleton and Dan Richardson.
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