AGs and Water Utilities Oppose 3M Settlement, Criticize DuPont’s as Too Small

Objections to 3M Settlement

Nearly two dozen states and territories (the “Sovereigns”)—along with a number of municipalities, water districts, the California State Water Board, and the California Department of Corrections and Rehabilitation—have lodged objections to a proposed nationwide class settlement between PFAS manufacturer 3M Company and drinking water providers (“3M Settlement”). The objections, filed in the Aqueous Film-Forming Foam Multi-District Litigation (“AFFF MDL”) pending in the U.S. District Court for the District of South Carolina, raise issues with the terms of the agreement and adequacy of a settlement that thousands of water utilities nationwide may be asked to sign on to in the next few months—and with which many are unfamiliar.

The idea of a nationwide class settlement between 3M and American water providers impacted by AFFF was central to the proposed 3M Settlement reached on June 22, 2023.^[1] In return for an aggregate payment over time of between $10.5 and $12.5 billion, 3M is asking over 12,000 water providers to forever release their PFAS-related water supply claims against 3M, and to indemnify 3M for any future related claims against it.^[2] Presumed members of the proposed settlement class encompass water providers in two “phases”: Phase One comprises those providers that have already detected PFAS in their drinking water supplies; Phase Two comprises those that lack known PFAS detections but either must test for PFAS under EPA regulations by the end of 2025 or serve over 3,300 people.^[3]

A motion to begin the settlement approval process was filed on July 3, requesting that the district court overseeing the MDL preliminarily approve the 3M Settlement, notify the water utilities in the proposed class, and require from them a decision to participate, object, or opt out within 60 days of the mailing of notice.^[4]

In late July, however, 23 Sovereigns sought to intervene in the case for the purpose of objecting to the terms of the 3M Settlement.^[5] They argued that:

• The indemnity provision in the 3M Settlement would impose unlimited obligations on water providers to indemnify 3M for amounts that cannot be quantified and that could exceed the settlement amount they are eligible to receive;
• Water providers could be required to indemnify 3M for, among other things, suits the states and territories have brought against 3M to protect those very water providers, and any suits brought by water providers’ customers;
• Water providers could additionally be forced to indemnify 3M for regulatory liability, citizen suits, and personal injury claims arising from exposure to PFAS;
• The foregoing provisions would be prohibited by many states’ laws: Municipalities cannot indemnify 3M as a matter of law because an indemnity by a local government of a private company is illegal and void under state constitutional and statutory provisions restricting local governments from assuming debt;
• The proposed release could be read to encompass even the claims of the Sovereigns and other entities over which water providers have no authority;
• The proposed 60-day period after the mailing of notice for water utilities to object or opt out would not provide sufficient time to: evaluate the 3M Settlement terms or PFAS treatment costs; calculate a potential settlement award with a reasonable degree of accuracy; gain approval from relevant municipal authorities; or otherwise weigh the myriad factors relevant to the decision of whether to participate in a settlement that would release and indemnify the company that “began manufacturing PFAS in 1940s“ and, before “withdrawing from the market [2002, was] . . . the predominant global manufacturer of PFAS” for nearly 50 years.^[6]
• Water providers and other governmental entities in several states—California, Colorado, New Mexico, New York, Pennsylvania, and Washington—have likewise voiced their concerns about the 3M Settlement to the court, supporting intervention by the Sovereigns and joining in their opposition to its approval. They include the City of Philadelphia (PA), the California State Water Board and Department of Corrections and Rehabilitation, the City of Airway Heights (WA), the City of DuPont (WA), the City of Moses Lake (WA), the City of Newburgh (NY), Lakewood Water District (WA), Roosevelt County Water Coop, Inc. (NM), Security Water District (CO), and the Town of New Windsor (NY).^[7]
• Four of the Sovereigns (California, the District of Columbia, Pennsylvania, and Puerto Rico) filed a separate opposition to inform the Court of their additional objections to the 3M Settlement: namely, that the settlement, by apparently forcing certain state-owned water providers to be part of the settlement class, violates sovereign immunity; that the settlement amount is inadequate; and that the protracted payment schedule over the course of over a decade shifts bankruptcy risk from 3M to class members.^[8] The States of Maine and Vermont filed a supplemental brief in opposition to preliminary approval because of the possibility that an anti-suit injunction the Court was considering would inappropriately delay lawsuits against 3M brought by those states’ attorneys general.^[9]

3M and proposed class counsel have obtained additional time, until August 28, to work out a compromise with the Sovereigns regarding the language of the deal. If none is reached, 3M and proposed class counsel will presumably respond to the objections.^[10]

DuPont Settlement Also Criticized for Amount of Consideration and Specific Terms

3M is not alone in seeking to resolve its massive and mounting PFAS liabilities. DuPont (and several companies related to DuPont by prior corporate transactions, including The Chemours Company, Corteva, Inc., and EIDP, Inc.)^[11] have also reached a proposed settlement agreement in the MDL (“DuPont Settlement”).^[12] There has been less commotion as to the terms of this agreement compared to the 3M Settlement (DuPont’s does not, for example, contain the indemnity provision present in 3M’s), but criticism abounds on the adequacy of its consideration. The States of Arizona, California, Pennsylvania, Wisconsin, and the District of Columbia (“Subset of Sovereigns”) recently informed the Court that they would not oppose preliminary approval of the DuPont Settlement. They took this step after DuPont negotiated certain terms with them after the motion for preliminary approval was filed, which led to changes to the DuPont Agreement.^[13] The Subset of Sovereigns argued the DuPont Settlement as originally proposed would have:

  (1) required class members to make opt-out decisions with no information about the amount of money they might receive from the Settlement Agreement; (2) asked the court to enjoin other PFAS lawsuits against DuPont—including those prosecuted by Sovereigns—even before final approval of the Settlement Agreement; (3) required agreement to a convoluted and conflicting claims-over provision that appeared to act as an indemnity; and (4) hamstrung Sovereigns’ ability to recover PFAS remediation costs from DuPont.^[14]

In a Motion on Consent, proposed class counsel, the DuPont entities, and the Sovereigns sought court approval of amendments to the DuPont Settlement addressing these concerns.^[15] At the behest of the Sovereigns, the timeframe between “commencement of dissemination of the Notice” of the DuPont Settlement and the deadline to opt out would now be 90 rather than 60 days.^[16] The parties also agreed to revise the definition of a “Releasing Person,” amend the claim-over provisions, and amend the requested stay order and injunction, primarily through changes that limited the agreement’s applicability to states.^[17] Finally, the Sovereigns confirmed with proposed class counsel that class members would be able to derive a good faith estimate of their potential recovery under the DuPont settlement through a forthcoming website.^[18] The motion to amend the settlement agreement was granted by the Court on August 9, 2023.^[19]

Nevertheless, the Subset of Sovereigns wrote separately in a letter response filed with the Court to voice their remaining concern that the total amount of the DuPont Settlement—$1.185 billion—“falls far short of what is needed to address the harm DuPont’s products have caused public water systems” and “should not serve as a point of reference for future PFAS resolutions.”^[20]   They supported this criticism with two main points: the DuPont Settlement releases claims related to all PFAS in all products, not just in the AFFF products at issue in the MDL; and current estimates for PFAS regulatory compliance costs for water systems are orders of magnitude higher than the settlement amount, given the high cost of compliance and the ubiquity of contamination. Given these concerns, the Subset of Sovereigns questioned whether the consideration in the DuPont Settlement justifies the value of the scope of release provided. While they did not oppose approval of the DuPont Settlement, they cautioned that it should not provide a template for future PFAS-related settlements in light of this deficiency.^[21]

What’s Coming This Week
 

By Monday, August 28, 2023, the public will know whether 3M, the parties’ lead counsel, and the Sovereigns are able to resolve the Sovereigns’ concerns.^[22] If they do not, then replies to the Sovereign’s oppositions will be filed for the Court’s consideration in weighing whether to preliminarily approve the 3M Settlement. If they do, then it remains to be seen whether the resolution will address the concerns of the municipalities, water districts, and state agencies that joined in the Sovereigns’ opposition and identified additional ways in which the problematic terms would affect their own rights.^[23]

Deadlines Will Hit Quickly If the Court Approves the Settlements

If the Court finds that it “will likely be able to . . . approve the proposal [and] certify the class” and grants the motions for preliminary approval, it “must direct notice” to all class members who would be bound by the proposed settlements. Fed. R. Civ. P. 23(e)(1). Accordingly, the Court must now determine whether the proposed settlements could likely be finally approved—or, colloquially, whether to grant “preliminary approval” to the settlements. Such orders regarding notice and preliminary approval are not subject to interlocutory appeal.^[24] While courts of appeal “may permit an appeal from an order granting or denying class-action certification under [Rule 23(f)],” they may “not from an order under Rule 23(e)(1),” which governs preliminary approvals. Fed. R. Civ. P. 23(f). Accordingly, parties that take issue with an order granting preliminary approval will have to wait until the formal objection stage to object to the substance of the agreement, and they will not be permitted to object unless they take part in the settlement (as opposed to affirmatively opting out).^[25]

Notice would go out within 14 days of the Court’s preliminary approval to class members.^[26] Once mailed, class members would have 60 days (for the 3M Settlement) or 90 (for DuPont’s) to either participate, participate and object, or opt out.^[27] The Court must then hold a fairness hearing to review objections and decide whether to grant final approval.^[28] If the Court finally approves either settlement agreement, the deadlines to file claims will begin 60 days after the time to seek appellate review of the Court’s order granting final approval expires.^[29] The timeline below depicts timeframes for these future events in the event either settlement is approved (the starting date of which will shift depending on the date of the Court’s decision on the pending motions), as well as the dates of the actions that led to them:

Absent further changes to the agreements, should the Court approve the DuPont and/or 3M Settlements, water providers nationwide would be required to make weighty decisions with significant consequences to their ratepayers in very short order.

For more information, contact Jess Ferrell, Jeff Kray, Victor Xu, or Isabel Carey.*

*Marten Law represents multiple water systems in the MDL litigation. See Jessica Ferrell, Jeff Kray, and Jack Ross, PFAS Settlements: How Much is Enough?, Marten Law (June 28, 2023), https://www.martenlaw.com/news....