$4 Billion PFAS Settlement: Why Downstream Commerce Companies Should Be Wary
On January 22, 2021, a $4 billion PFAS settlement was reached between DuPont de Nemours Inc., Chemours Co., and Corteva, Inc. for environmental liabilities stemming from PFAS pollution. In addition, an $83 million settlement was reached by the same companies with numerous plaintiffs in an Ohio Multi District Litigation (MDL) established to litigate PFAS personal injury claims. At first glance, the numbers seem staggering; however, a closer look reveals that the settlements may in fact be more important as a harbinger of potential litigation against companies completely unrelated to PFAS manufacturing.
What Are PFAS and Why Are They a Concern?
Per- and poly-fluoroalkyl substances (“PFAS”) are a class of over 7,000 manmade compounds. Chemists at 3M and Dupont developed the initial PFAS chemicals by accident in the 1930s when researching carbon-based chemical reactions. During one such experiment, an unusual coating remained in the testing chamber, which upon further testing was completely resistant to any methods designed to break apart the atoms within the chemical. The material also had the incredible ability to repel oil and water. Dupont later called this substance PFOA (perfluorooctanoic acid), the first PFAS ever invented. After World War II, Dupont commercialized PFOA into the revolutionary product that the company branded “Teflon.”
Only a short while later, 3M invented its own PFAS chemical – perfluorooctane sulfonate (PFOS), which they also commercialized and branded “Scotchgard.” Within a short period of time, various PFAS chemicals were used in hundreds of products – today, it numbers in the thousands.
The same physical characteristics that make PFAS useful in a plethora of commercial applications, though, also make them highly persistent and mobile in the environment and the human body – hence the nickname, “forever chemicals.” While the science is still developing regarding the extent of possible effects on human health, initial research has shown that PFOA and PFOS are capable of causing certain types of cancer, liver and kidney issues, immunological problems, and reproductive and developmental harm.
A Deeper Dive Into the $4 Billion PFAS Settlement
The staggering settlement amount was not agreed to in order to resolve present environmental pollution claims – no municipality, state, plaintiff, or other entity will actually receive anything for the time being from this settlement. Rather, the settlement merely resolves disputes among three companies that share some aspects of corporate history and sets aside $4 billion for future PFAS litigation.
In 2015, E.I. DuPont & Co. spun off Chemours, which agreed to take with it environmental liabilities from DuPont’s business. In 2017, DuPont’s parent company joined with Dow Chemical Co. in a $130 billion merger, which resulted in the creation of DowDuPont Inc. Finally, in 2019, DowDuPont split into three companies – Dow, Corteva and DuPont de Nemours. Prior to the 2015 spinoff, though, PFAS litigation was a concern for E.I. DuPont, which estimated that it would cost between $300 million and $950 million for PFAS cleanup in environmental remediation claims. This estimate proved to be woefully under-estimated, which led Chemours to sue DowDuPont in 2019 for misrepresenting the liabilities at the time of spinoff. Several other claims were brought among the corporations, each alleging that the other was responsible for various levels of the PFAS liabilities that were to come.
The $4 billion settlement put to rest the allegations between the three companies, with each picking up a percentage of the agreed upon sum. While complex in its own right, in essence, the agreement has DuPont and Corteva splitting certain types of “qualified expenses” related to PFAS remediation litigation that may arise in the next 20 years, up to a maximum of $2 billion. Chemours agreed to shoulder the responsibility for the other $2 billion of the agreement, as long as the liability results from conduct prior to 2015.
The Impact of the PFAS Settlement On Non-Chemical Businesses
At first glance, it would be easy to read the news of the PFAS settlement with a raised eyebrow and simply set the information aside as an agreement that only impacts three chemical giants. However, the settlement is likely to have downstream commerce impacts in both the short term and long term that extend well beyond just the chemical companies that manufactured PFAS.
First, states, municipalities, and water treatment districts will pay particularly close attention to the announcement of $4 billion in available money to pay for the cost of PFAS remediation in years to come. Over the past two years, there has been a steadily increasing number of lawsuits brought by states, municipalities, and water treatment districts for PFAS cleanup costs. The majority of the lawsuits have been brought against 3M and DuPont; however, a $1 billion lawsuit in California in December 2020 introduced a roofing products manufacturer into the lawsuit, as well. This shows that, in an effort to reach as many monetary resources as possible for PFAS remediation costs, manufacturers may find themselves increasingly at risk for entanglement in PFAS lawsuits with claims of environmental pollution due to PFAS use in manufacturing processes. The $4 billion PFAS settlement will likely increase the number of PFAS remediation lawsuits at an exponentially higher rate than previously seen, which could likewise lead to an ever-growing number of diversified companies brought into the lawsuits.
In addition, the $83 million settlement for hundreds of personal injury claims due to PFAS exposure in the Ohio Multi District Litigation cannot be ignored. The settlement adds to increasing numbers of lawsuits settled with plaintiffs that allege that PFAS caused a personal injury. It is reported that for PFAS personal injury claims alone (not including environmental remediation settlements), DuPont and Chemours have settled over 3,500 lawsuits for over $753 million. While the personal injury lawsuits with DuPont, 3M, Chemours, and the like will continue unabated, plaintiffs’ counsel will only look to diversify the pockets that they can reach to obtain settlements for PFAS-related injuries for their clients. These efforts will lead to an ever-broadening array of companies being brought into personal injury lawsuits stemming from PFAS exposure.
Companies that manufacture products and that utilize PFAS in some aspect of the manufacturing process or the end product must heed the news of the AFF settlement and properly plan now to avoid significant and costly PFAS product liability lawsuits that we predict will come. Full compliance audits are a crucial first step in the process, with consideration for finding non-PFAS substitutes as an option. Even companies without direct use or knowledge of PFAS use in products should consider a review of supplier materials, as those materials may have PFAS as a component, which could some day subject the company to legal liability issues.