In May I wrote about a manufacturer of Aqueous Film Forming Foam (AFFF) excused from the PFAS Multi-District Litigation in South Carolina because its PFAS-related liabilities might exceed its assets which is something for a Federal Bankruptcy Court to sort out. At the time I worried that this was only one of many PFAS-related bankruptcies we would be seeing.
As many of you know, the "forever chemicals" known collectively as PFAS have been widely used since World War II in everything from AFFF, used to fight fires, to pizza boxes. They're still used in many products, and released to the environment, today.
About two years ago EPA followed several states in concluding that PFAS in drinking water pose a serious risk at minute concentrations that weren't even detectable only a few years ago. Thousands of plaintiffs had already sued manufacturers of PFAS and products containing them and those cases (other than a case brought by the State of New Hampshire which is a subject for another note) were consolidated in Federal Courts in South Carolina and Ohio. The South Carolina Judge, Richard Gergel, is responsible for the many cases relating to the fact that PFAS that were in fire-fighting foam used for that purpose are now in drinking water.
After a few years of discovery and other pre-trial proceedings involving more lawyers than could fit in any courtroom, this July Judge Gergel was ready to resolve a "bellweather" case against manufacturers of AFFF brought by a city-owned water utility in Florida.
Just before the trial was scheduled to begin against the defendants who hadn't yet filed for bankruptcy, settlements were reached between the designated representatives of all of the plaintiffs suing over the costs of dealing with PFAS in drinking water and the remaining defendants. One of those settlements, with 3M, could have 3M pay $12.5 billion to water suppliers. Many, including perhaps Judge Gergel, thought this was a major milestone along the road to resolving the thousands of cases pending in the South Carolina Multi-District Litigation.
And that brings us to the news that 20 states, including the Commonwealth of Massachusetts, plus the District of Columbia and the Commonwealths of Puerto Rico and the Northern Mariana Islands, are now objecting to the settlement and asking to be carved out of it. Among other things, the objectors are complaining that the settlement includes an indemnification of 3M for future claims covered by the settlement after the $12.5 billion has been spent which could, depending on how huge PFAS liability ends up being, cost the settling plaintiffs more than they are getting. In this respect, I think the objectors have a point.
On the one hand, once every affected drinking water supply is treated for PFAS (which could cost more than the $12.5 billion to be paid by 3M plus the billions to be paid by others plus the $10 billion appropriated by Congress for that purpose) there should be no going forward liability relating to the possibility of PFAS in that drinking water. On the other hand, no water supplier can yet be sure what its legal exposure might be for damage already done. For example, water suppliers are trying to have Congress exempt them from liability relating to their disposal of PFAS containing treatment sludge. But they haven't succeeded in that yet.
On the other hand, 3M, which currently employs over 90,000 people world-wide doing lots of things not related to PFAS, is currently worth about $60 billion. That means it has agreed to pay about twenty percent of what the company is currently worth to resolve only part, albeit likely the most significant part, of its PFAS liability. One has to wonder how much more it could bear to pay before it finds itself in bankruptcy court.
We'll see whether 3M and the objectors can reach an agreement that works for everyone and whether Judge Gergel will bless the settlement if that doesn't happen. A release but not an indemnity would be a good start. No matter what, more litigation and more bankruptcies are a certainty as the storm over PFAS continues to strengthen.
