DuPont, Chemours, Corteva reach $4B PFAS settlement
WILMINGTON – The trio of companies that emerged from the legacy of E. I. du Pont de Nemours and Company – DuPont, Chemours and Corteva – have reached a settlement worth as much as $4 billion that ends years of legal wrangling over who’s responsible for liabilities from the historic use of so-called “forever chemicals.”
The binding memorandum of understanding was announced Friday morning by the three parties, which resolves the disputes that have been active since not long after the 2015 spinoff of Chemours from the former Delaware-headquartered chemical giant. The MOU establishes an immediate cost-sharing arrangement, including an escrow account worth upward of $1 billion to cover potential future legacy PFAS liabilities from before the spinoff.
As liabilities in cases related to the historic DuPont company’s use of per- and polyfluoroalkyl substances, or PFAS, have mounted in recent years, Chemours has turned to the courts to sue its former partner companies over reimbursements. The chemicals, used in firefighting foam, nonstick cookware, water-repellent fabric and more, are sometimes called “forever chemicals” because of their extremely long degradation period in the environment.
PFAS includes a variety of chemicals that are associated with increased risk of cancer, including perfluorooctanoic acid, or PFOA, which was used in the production of DuPont’s longtime star product Teflon, which is now owned and produced by Chemours, until 2013.
As recently as December, the Delaware Supreme Court denied an appeal from Chemours against DuPont that the former parent company that lowballed its spinoff entity on the potential liability cost of its PFAS usage, saying it was required to go to mandatory arbitration under a 2017 settlement.
The new MOU announced Friday replaces that 4-year-old settlement and the trio of companies have agreed to resolve ongoing matters in a multi-district PFOA litigation in Ohio for $83 million, including $27 million each from DuPont and Corteva and $29 million from Chemours. It resolves about 95 pending and some unfiled matters but does not include a case where a testicular cancer patient was recently awarded $50 million in damages arising from DuPont’s use of PFOA. That case is being appealed.
Robert Bilott, of Taft Stettinius & Hollister LLP, one of the co-lead counsel for plaintiffs in the multi-district Ohio litigation, said that his clients were glad to settle before trial.
“We are pleased to be able to resolve these personal injury claims for our clients in a way that provides compensation without the need for additional lengthy and expensive trials,” he said in a Friday statement.
According to the terms of the cost-sharing arrangement, DuPont and Corteva together, on one hand, and Chemours, on the other, agree to a 50-50 split of certain qualified expenses incurred over a term not to exceed 20 years or $4 billion of qualified spend and escrow contributions in the aggregate.
DuPont and Corteva’s 50% will be limited to $2 billion including qualified expenses and escrow contributions. Under an existing 2019 agreement, DuPont and Corteva each bear 50% of the first $300 million and thereafter DuPont bears 71% to Corteva’s 29%. Accordingly, DuPont’s share of the potential $2 billion would be approximately $1.36 billion and Corteva’s approximately $640 million.
Contributions to the $1 billion escrow account for potential future PFAS liabilities will be made over an eight-year period on the same 50-50 cost-sharing split, with each side depositing $500 million. The escrow provides for a one-time replenishment if the account balance has less than $700 million as of Dec. 31, 2028.
The settlement retains Chemours’ indemnification obligations under its separation agreement while the chemical company waives its claims, including the case most recently heard in the Delaware Supreme Court.
In a joint statement, DuPont Chairman and CEO Ed Breen; Corteva CEO Jim Collins and Chemours President and CEO Mark Vergnano said they were pleased to reach an agreement that settles potential legacy PFAS liabilities and resolves the Ohio cases.
“The agreement will provide a measure of security and certainty for each company and our respective shareholders using a transparent process to address and resolve any potential future legacy PFAS matters,” they added.
At the market’s opening Friday after the settlement’s announcement, investors largely sold shares in all three companies, pushing down share values slightly. It remains to be seen whether investors will decide whether greater clarity on the parties outstanding liabilities will lead to increased confidence in future margins.