PFAS Settlements: How Much is Enough?

Decisions loom for water suppliers nationwide after settlements totaling over $11 billion with PFAS manufacturers 3M and DuPont were recently announced. Just days before a bellwether trial was scheduled to begin, the most well-known defendants in the aqueous film-forming foam multidistrict litigation in South Carolina^[1] (the “AFFF MDL”) reached settlements to resolve all water supplier claims against them.^[2] The MDL itself includes over 420 water supplier plaintiffs, but several thousand water suppliers are eligible to share in the settlement funds. Now comes the hard part: determining whether to participate in the settlements, assuming the court approves the proposed deals. This article summarizes publicly available information on the status of the settlements, and considerations relevant to water providers and other claimants in deciding whether to participate or opt out.
 

The settlements were announced earlier this month, with 3M agreeing to pay $10.3 to $12.5 billion, and DuPont de Nemours, Inc., The Chemours Company, and Corteva, Inc. (collectively, “DuPont”)^[3] paying $1.185 billion total.^[4] Both would cover any water supplier serving over 25 people that has detected PFAS at any level or is required to test for PFAS, even if they have not yet done so. DuPont asserts that its settlement would “comprehensively resolve all PFAS-related drinking water claims of a defined class of public water systems that serve the vast majority of the [U.S.] population…[which] includes water systems with a current detection of PFAS at any level and those that are currently required to monitor for the presence of PFAS under EPA monitoring rules or other applicable laws. This includes but is not limited to systems in the . . . AFFF MDL.”^[5] 3M’s settlement, if approved, would similarly seek to achieve “a broad class resolution to support PFAS remediation for public water suppliers…that detect PFAS at any level or may do so in the future.”^[6]

The settlements would not address any other types of claims (e.g., personal injury claims by individuals and natural resource and other damage claims by states).^[7] They would also not affect any water supplier claims against the remaining several dozen defendants that they have also sued in the MDL, or their claims against the United States. The settlements will also be proposed as “class settlements,” which must receive approval by the Honorable Richard M. Gergel, the presiding judge in the MDL.^[8]

News of the settlements comes on the heels of another “first of possibly many” event(s) in the MDL: a large corporate bankruptcy brought on by PFAS liabilities. On May 14, 2023, Kidde-Fenwal became the first defendant in the MDL to file for bankruptcy when it sought Chapter 11 protection in a Delaware court.^[9] Kidde is one of several dozen AFFF manufacturers and suppliers facing thousands of legal claims in the MDL by water suppliers alleging that AFFF contaminated groundwater (often near military bases, firefighting facilities, airports, and other industrial sites where AFFF was used for training or to extinguish liquid fuel fires). Kidde is also one of hundreds of defendants whom individuals claim caused them personal injury, a need for medical monitoring, and other losses.

Developments in the coming weeks will define the timelines and processes for the nation’s water suppliers to decide whether to participate in the DuPont and 3M settlements, and for potential PFAS claimants to file proofs of claim in the Kidde bankruptcy.  The DuPont agreement is expected to be submitted to the Court this Friday, June 30. 3M’s, by July 2, and 3M’s June 22, 2023 8-K filing with the SEC (“3M 8-K Report”) includes the entire proposed settlement agreement as an exhibit (10.1).

The Proposed 3M, DuPont Settlements Represent Billions in Potential Funding Yet Still Fall Short of Cleanup Cost Estimates, Even When Combined With Other Resources

In terms of immediacy and financial impacts, the proposed settlements from DuPont and 3M are of greater import for water suppliers than the bankruptcy filing.^[10] Both DuPont and 3M have long and well-known histories with PFAS, with “3M invent[ing] fluorosurfactants in the 1950s”^[11] in coordination with the Navy. Both companies conducted and withheld internal medical research demonstrating human health problems caused by PFAS for decades.^[12] By most estimates, however, the reported settlement funds from these major parties will not be nearly enough to remediate PFAS in drinking water supplies across the country—even when combined with federal funding recently made available through a variety of initiatives such as the $10 billion allocated to PFAS by the 2021 Infrastructure Investment and Jobs Act.^[13] There are over 155,000 public water suppliers in the United States.^[14] Early estimates of the cost to clean up PFAS in drinking water nationwide exceed $400 billion.^[15] The DuPont and 3M settlement amounts would cover under three percent of that figure. In Orange County, water managers estimated that technology alone to filter PFAS from wells serving over two million people will cost $1 billion.^[16] The City of Stuart, Florida (selected for the “bellwether” MDL trial against 3M)—with a population of under 20,000—has already incurred $120 million in PFAS costs just to replace its wells, and faces ongoing cleanup costs to address groundwater contaminated by PFAS.^[17] And many more public water suppliers than MDL plaintiffs have found PFAS in their water systems from AFFF. For example, 170 water systems in Massachusetts alone have found PFAS above the state limit for concentrations in drinking water, and not all are parties to the MDL.^[18]  

Certain systems, however, would be excluded from the 3M settlement, including: public water systems associated with 3M PFAS-manufacturing facilities Cordova, Cottage Grove and Decatur; systems owned by a state or the federal government; and systems that have settled their claims with 3M already.^[21]

The agreement filed with the SEC (which has not yet been filed with the MDL court) identifies eligible water suppliers by phases and defines the payment schedule accordingly. It also provides for objections to the settlement and, among other things, a process to divide amounts between qualifying class members. Should the court approve the settlement, all actions necessary to take part in, or opt out of, the settlement would run from the date that eligible claimants receive a court-approved notice.^[20]
 

The remaining uncertainty around PFAS recovery is compounded by an evolving regulatory landscape which continues to increase water filtration costs.^[21] Water suppliers are particularly concerned about EPA’s proposed national drinking water standards for six PFAS expected to be finalized by year end.^[22] EPA has estimated annual costs of compliance with its new proposed standards for utilities nationwide at between $772 million and $1.2 billion.^[23]  The Association of Metropolitan Water Agencies and other water providers and associations consider that estimate far too low, noting that costs already incurred to address PFAS likely exceed that estimate.^[24] On the American Water Works Association’s request, a private consulting firm developed a national cost estimate for water systems to reduce just two types of PFAS to EPA’s recently proposed primary drinking water regulatory levels.^[25] It estimated compliance costs to reduce PFOA and PFOS only to under four parts per trillion at over $3.8 billion annually, with a life cycle cost of $40 billion.^[26]

Rising remediation costs and complicated routes for recovering costs already incurred leave water supplier claimants with difficult decisions to make, in complex circumstances and with incomplete information. The first bellwether trial was scheduled to begin on June 5, 2023. Judge Gergel stayed it to accommodate settlement negotiations.^[27]  On Friday, June 23, the City of Stuart approved a resolution finalizing a confidential settlement with 3M, which the City announced will allow it “to continue providing clean drinking water to its residents.”^[28] A bellwether trial may occur at some point absent an immense global settlement preceding it. But bellwethers test the strength of representative cases and provide guidance on how similar cases would fare, so the delay has left uncertainty regarding the strength of water supplier claims and manufacturer and supplier defenses.

Still, motions practice in the MDL has provided some insights into the strength of some claims and defenses, the judge’s view on important factual and legal issues, and the parties’ ability to present certain evidence at trial. For example, the Court denied the AFFF manufacturers’ motion for summary judgment on the government contractor immunity defense, a theory which could have immunized them from liability altogether.^[29] Judge Gergel also denied several motions in limine filed by 3M for the bellwether trial which, had they been granted, would have withheld evidence from the jury of EPA efforts to regulate PFAS in drinking water, PFAS contamination beyond the bellwether plaintiff’s jurisdiction, an alleged link between PFAS exposure and COVID-19 severity, and defendants’ PFAS-related lobbying efforts.^[30]

Even without a bellwether result to guide decision-making, water suppliers will likely have to make decisions relatively soon that will impact their costs and operations for years to come. Those may include, for example, whether and when to invest in cleanup and infrastructure improvement; whether and how to compete for limited state and federal grants with thousands of other providers; whether to participate in the 3M and DuPont settlements, even if their allotment may be insufficient for testing, capital costs, remediation, and ensuring ongoing adequate clean water supplies; whether to attempt to obtain higher damages from 3M and DuPont by opting out of the settlement; whether to pursue claims in the Kidde bankruptcy (and others to come); and whether to pursue, or continue to pursue, additional defendants in the AFFF MDL and, potentially, their home courts.

Many Defendants Additional to 3M, DuPont, and Kidde Remain in the AFFF MDL

Looking beyond 3M and DuPont, over 80 manufacturer and supplier defendants (including families of companies) named by water provider plaintiffs remain in the AFFF MDL (with hundreds more remaining that thousands of individuals have sued). Those include, among others: Dynax Corp.; Arkema, Inc.; Raytheon Technologies Corp.; Honeywell International; Buckeye Fire Equipment Co.; AGC Inc.; Clariant Corp.; Archroma US Inc.; BASF Corporation; and subsidiaries. These and dozens of additional companies of varying sizes and industries played a variety of roles, differing in duration and degree of involvement, in PFAS manufacture, distribution, and other levels of PFAS/AFFF supply chains over the years. In addition to the insurance of defendant companies, many have long been, and remain, independently viable financially. BASF, for example, an international chemical company dating back to 1865 that reported over $95 billion USD in global sales last year—is and has been for several years running the largest chemical company in the world by sales.^[31] Raytheon, one of the largest aerospace and defense manufacturers in the world, anticipates $73 billion in sales this year.^[32] Honeywell, another multinational conglomerate, operates in aerospace, performance materials and other sectors and forecasts $36-37 billion in 2023 sales.^[33]  AGC Inc., a 115-year old Japanese corporation, yields most of its billions in profits from chemicals.^[34]  Arkema, a global chemicals company whose specialty materials (including surfactants) accounted for the majority of its sales last year, anticipates $11-12 billion USD in 2024 sales.^[35]  Dynax, founded in 1991, bills itself as “[a] major global supplier of C6 telomer-based fluorosurfactants and fluorochemical foam stabilizers to firefighting foam manufacturers[.]”^[36]  Smaller companies—such as Buckeye, which manufactured a variety of AFFF types for nearly 30 years and reports annual sales of $114 million^[37]—also remain defendants in the AFFF MDL.

Settlement Amounts to Eligible Beneficiaries

The 3M settlement structure is set forth as an exhibit to its report filed with the SEC on June 22. As “forward-looking statements’ within the meaning of the federal securities laws,” the filing may not be entirely accurate and depends on future events. Those could include, among others: “achievement, terms and conditions of a final settlement; the outcome of any pending or future litigation related to PFAS or PFOA, including personal injury claims and natural resource damages claims; the extent and cost of ongoing remediation obligations and potential future remediation obligations; changes in laws and regulations applicable to PFAS chemicals; the level of opt-out exclusions from the settlement.”^[38] If the Court approves the settlement and 3M does not terminate it, “3M will pay $10.5 billion to $12.5 billion in total to resolve the claims released . . .in payments annually from 2024 through 2036. The actual amounts that 3M will pay will be determined in part by which, if any, class members that do not have a positive test result for the presence of PFAS in their drinking water (as defined by the Settlement) as of the date of the Settlement receive such a test result by the end of 2025.”^[39] In exchange, class members would:

release 3M from any claim arising out of, relating to, or involving (i) PFAS that has entered or may enter drinking water or the class member’s water system; (ii) the development, manufacture, formulation, distribution, sale, transportation, storage, loading, mixing, application, or use of PFAS or any product (including … AFFF) manufactured with or containing PFAS; (iii) the transport, disposal, or arrangement for disposal of PFAS-containing waste or PFAS-containing wastewater, or a class member’s use of PFAS-containing water for irrigation or manufacturing; or (iv) representations about PFAS or any product (including AFFF) manufactured with or containing PFAS. The Settlement would also require class members to release punitive- or exemplary-damages claims that arise out of conduct occurring at least in part before the Settlement’s effective date and that relate to PFAS or any product (including AFFF) manufactured with or containing PFAS.

3M’s option to terminate is governed by a series of required participation thresholds based on number of people served by member, and payments would be made in phases to different types of class members as defined by the agreement.

DuPont’s would also reportedly include water suppliers serving over 25 people with a current detection of PFAS at any level (not just those with PFAS above a State Action Level, State Maximum Contaminant Level, or EPA lifetime Health Advisory Level, for example), as well as those that are required to monitor for the presence of PFAS by EPA and/or State regulations.^[39] As in other MDL settlements, the process and timeline for allocating funds—if the settlements are approved—may be long and contentious.

Potential Claimants Can Assert Their Rights in the Kidde Bankruptcy

The amount Kidde claims it has available to its creditors (~$318 million)^[40] is an order of magnitude less than the reported settlements with 3M and DuPont. Still, it will have financial implications for potential claimants, and additional bankruptcies could follow by other companies for the same reasons.

According to court documents Kidde filed, it “has continuously owned and operated numerous lines of business related to industrial fire detection and suppression.”^[41] Several Kidde-affiliated companies and subsidiaries are named as defendants in the MDL as well, with Kidde’s involved corporate history explicated in bankruptcy filings. Notable among these affiliates was National Foam, which began producing AFFF and distributing related products in the early 1970s. Kidde owned and operated National Foam from 2007 to 2013.^[42]

All claims in the AFFF MDL against Kidde and an entity called “New National Foam” were automatically stayed by the bankruptcy filing.^[43]  The bankruptcy court has not yet set a proof of claim deadline, but will likely do so soon. Any individual or entity impacted by PFAS contamination from a Kidde, National Foam, or related entity’s product (including but not limited to water suppliers) may wish to file a proof of claim in the bankruptcy proceedings. For potential claimants, it is important to gather relevant evidence to perfect their claim. Evidence may include documentation that an implicated product was purchased and/or used (e.g., purchase orders, service records), as well as data showing contamination, harm, or damages (e.g., PFAS testing results).^[44]

Conclusion and Next Steps

Major PFAS manufacturer defendants in the AFFF MDL are taking action to resolve or at least reduce their liabilities. Additional defendants may also soon settle or file for bankruptcy. The financial implications at the current juncture are enormous. PFAS-impacted entities, especially water suppliers, must make difficult decisions—and soon—to ensure they are best positioned to continue providing safe drinking water to their constituents.

Marten Law attorneys represent multiple water suppliers and other claimants across the country in litigation against PFAS manufacturers. For more information, please contact PFAS Practice Group co-leads Jessica Ferrell and Jeff Kray, or Jack Ross.

*The views expressed in this article are purely for informational purposes and do not constitute legal advice. All facts discussed herein are based on publicly available information. No confidential information—including any relating to the ongoing litigation in the AFFF MDL or any parties thereto—is included in this article.