Issue Date: January 30, 2017
DuPont’s PFOA trials are off to a shaky start
Two weeks ago, the eighth of more than 3,500 personal injury cases pending against DuPont for contaminating drinking water in Ohio and West Virginia went to trial in a Columbus, Ohio, federal court.
The hearing pits plaintiff Larry Moody against DuPont. Moody claims that he developed testicular cancer and high cholesterol from drinking water laced with perfluorooctanoic acid (PFOA), a processing aid DuPont used to make fluoropolymers such as Teflon.
The trials come at a pivotal moment for DuPont, which is about to merge with Dow Chemical and subsequently split into three distinct companies. Some observers question whether the potential liabilities for the PFOA cases—estimates run between $1 billion and $5 billion—could disrupt the merger and split. Others argue that the PFOA cases are unlikely to upset the plans.
The trials also have implications for Chemours, the DuPont spin-off that inherited its parent’s fluoropolymer operations in 2015 and assumed financial responsibility for the PFOA cases. Some argue that Chemours may go bankrupt and be unable to fulfill those obligations, in which case they would fall back on DuPont and its successor companies.
Plaintiffs are also at an important juncture. Last May, the Environmental Protection Agency lowered guidelines for PFOA in drinking water to 70 ppt from 400 ppt, strengthening plaintiffs’ case against the former producer of the persistent pollutant.
Mike Papantonio, a lead attorney for the plaintiffs in the PFOA cases, contends that PFOA is “a train wreck for DuPont.” The “evidence is overwhelming” that the company contaminated drinking water, he says.
PFOA suits will come soon from other sites, such as Dordrecht, the Netherlands, where DuPont also used PFOA, Papantonio predicts. “I just got an inquiry from an Amsterdam prosecutor,” he says.
A DuPont spokesperson tells C&EN that it is in “active litigation” and therefore “it is not appropriate to comment” about the cases and the firm’s handling of them at this time. The spokesperson adds that “the proposed merger with Dow will have no effect on the PFOA litigation or how the PFOA cases are handled.”
DuPont has said that it “denies the allegations in these lawsuits and is defending itself vigorously.”
The seven cases that have come up for trial so far are supposed to have provided the basis for DuPont and plaintiff attorneys to negotiate a settlement. DuPont says talks are ongoing. Papantonio says no serious talks have taken place. “I’m on Mars and they’re in Topeka, Kan.,” he quips.
In August, the judge overseeing the 3,500 cases criticized DuPont for delaying talks. Observers say DuPont is hanging on to the hope that its appeal on jury cases decided so far will give it a stronger hand when talks get serious.
To date, three cases have been settled out of court for what DuPont characterizes as “an immaterial amount.” Three other cases have been tried to a verdict. The awards add up to more than $20 million. The seventh case was postponed because the plaintiff changed his complaint and said his diagnosis is actually high cholesterol and not ulcerative colitis, a much more serious disease.
DuPont produced and used PFOA for years at its Washington Works facility, a 1,200-acre factory located along the Ohio River about 11 km southwest of Parkersburg, W.Va. The plant, today operated by Chemours, still makes fluoropolymers; PFOA use ended in 2015.
By 2001, it had become clear that PFOA from the plant had contaminated drinking water supplies in nearby counties in Ohio and West Virginia. That year local residents sued DuPont over the contamination, and in 2005 the company agreed to a $107 million settlement of the case. It was that agreement that set the stage for the suits filed by Larry Moody and others.
The settlement obligated DuPont to filter residents’ drinking water. More important, it funded a panel of independent epidemiologists picked by DuPont and plaintiffs to determine if there are links between ingestion of PFOA and human disease. Under the settlement, residents who live near the Washington Works and drank water from contaminated sources could sue DuPont, but only for diseases the science panel linked to PFOA.
In 2013, after analyzing the blood and medical histories of 69,000 area residents, the science panel found a probable link between PFOA exposure and six diseases: thyroid disease, high cholesterol, ulcerative colitis, preeclampsia, kidney cancer, and testicular cancer.
Almost immediately, suits began to flood courts in West Virginia and Ohio. They have since been consolidated in federal court in Columbus.
Of the cases filed so far, 16% are for the three most serious diseases: kidney and testicular cancer and ulcerative colitis. Plaintiff attorney Papantonio says more are on the way. The judge overseeing the suits has scheduled these cases first to allow people claiming the most serious diseases their day in court. The remaining 84% of cases filed cover less serious illnesses.
In the most recent case to be tried, Kenneth Vigneron, who has testicular cancer, was awarded $2 million in compensatory damages and $10.5 million in punitive damages.
Patrick McGinley, a lawyer who teaches classes in environmental law at West Virginia University College of Law, says the jury verdict is “significant” because of the large punitive award. The decision, reached earlier this month, awards Vigneron 20 times the punitive damages of the only other punitive damage award, David Freeman, who has testicular cancer.
McGinley, who is not involved in the cases, points out that DuPont argued in the damage phase of the Vigneron trial that it didn’t understand the toxicity of PFOA years ago. “The jury didn’t buy it,” he says.
McGinley doesn’t expect DuPont will seriously undertake global settlement talks until appeals in the three cases with verdicts have “run their course.” Then, he says, the firm will weigh the costs of continued litigation and potential jury awards against the cost of a global settlement.
The first appeal now wending its way through appeals court in Cincinnati is on the first case, involving Carla Bartlett. In its legal filing, DuPont argues that the court should overturn Bartlett’s $1.6 million award for kidney cancer because a pretrial ruling barred the company from revealing evidence that she had received “a relatively low dose” of PFOA that “did not materially increase her risk of cancer.”
In their rebuttal, plaintiff attorneys say DuPont agreed to avoid argument over PFOA dose levels in the 2005 class action settlement setting up the science panel. Bartlett “was not required to prove that her dose or exposure was capable of causing her kidney cancer—that link has been established pursuant to the parties’ agreement,” the plaintiff attorneys argue.
DuPont acknowledges that it did agree not to dispute the science panel’s finding that PFOA was capable of causing a linked disease. However, the firm asserts that its agreement with plaintiffs preserved its right to argue that there was little or no proof that PFOA caused the disease in a specific case.
Joseph Princiotta, vice president of credit rating agency Moody’s, says the Bartlett appeal “could be very important” because a decision would set the tone for rulings in other appeals and trials to come.
Princiotta, who has closely followed other chemical industry injury suits, notes that the punitive damage award in the Vigneron case “is not good news” for DuPont and Chemours. Dow Corning saw similar large damage awards in cases that went to court before it ultimately settled—for $3.2 billion—the thousands of personal injury suits from women who had silicone-filled breast implants. The suits kept Dow Corning in bankruptcy reorganization for nine years.
As Princiotta sees it, settling the PFOA cases, like the breast implant cases in the 1990s, will take years. Not only are appeals ongoing, but 38 more trials have already been scheduled in Ohio starting in May. If a settlement is eventually worked out, then court approvals will be needed and a mechanism will have to be set up to review claims and make awards, he points out.
The long process has already frustrated plaintiffs who have been waiting since 2005 for closure. “DuPont’s pattern over a decade has been to do everything they can to delay,” says Jeffrey Dugas, a spokesperson for Keep Your Promises DuPont, a group formed by Ohio Valley residents to advocate for people exposed to PFOA.
“When will 70-year-old victims get compensated?” Dugas asks. “Who knows if they will be alive when settlements come through.”
Papantonio says he is concerned about who would compensate the people exposed to PFOA, given Chemours’ weak financial condition. “Once Chemours goes under, which they will, DuPont will argue they can’t make payment on claims that belong to Chemours,” he contends.
Credit analyst Princiotta isn’t so sure Chemours is headed to financial ruin. The firm’s titanium dioxide business is on the mend, and its fluorochemical refrigerant business is going strong. The firm has reduced its costs, sold or restructured certain businesses, and reduced debt. “If their balance sheet further improves, I don’t put a high probability on default,” he says.
Last year, Citron Research, a firm betting that Chemours’ stock price would fall, issued a report predicting that the company’s PFOA liabilities will zoom beyond $5 billion. However, Princiotta estimates costs for settling the suits will be less than $1 billion.
“I’m not predicting bankruptcy, but if Chemours were to be in Chapter 11, then PFOA is a DuPont problem,” Princiotta says.
If that happens, DuPont won’t be able to shake liabilities for PFOA, say people familiar with the law. “Before Chemours existed, DuPont conducted business and acquired liabilities,” says Lawrence Hamermesh, a professor who specializes in corporate and business law at Widener University Law School.
“Anyone, such as Chemours, can agree to be responsible for those liabilities,” Hamermesh says. But from the claimants’ perspective, DuPont is obligated to pay.
Should DuPont merge with Dow and then split into three firms, one of them in a strong financial position could take on the claims, Hamermesh says. Any other scenario would involve fraudulent transfer statutes, and in such a case the PFOA claimants could go after the other surviving companies.
Historically, avoiding personal injury and environmental liabilities has been nearly impossible for companies, Princiotta notes. In 2014, courts forced Sealed Air Corp. to pay more than $1 billion into a trust fund for the asbestos claimants of the bankrupt W.R. Grace. The courts had determined Grace’s sale of its Cryovac business to Sealed Air in 1998 was a fraudulent transfer of assets.
Similarly, in 2014, courts forced Kerr-McGee to pay $4.5 billion to satisfy environmental cleanup costs passed on to titanium dioxide maker Tronox. Kerr-McGee spun off Tronox in 2006, and Tronox later filed for bankruptcy reorganization because of those claims.
Papantonio, the plaintiff attorney, says that no matter what, he expects that he and his clients will get paid. “We’re counting on DuPont’s appeals playing out and no money paying out for another three years,” he says.
In the meantime, Papantonio says he has nearly a dozen other injury cases at various stages to finance his operations. They include actions against the artificial hip maker Stryker, producers of the hormone testosterone, and Monsanto for its Roundup herbicide.
As far as the PFOA cases are concerned, Papantonio says, “We can go 10 years if we have to.”
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