It's time to get to the bottom of how DuPont Co.'s spinoff of part of its holdings and its nearly completed merger with Dow Chemical Co. affect the liabilities related to water contamination with and human illnesses potentially caused by the manufacturing giant's C8 chemical, a federal judge said this week.
U.S. District Judge Edmund Sargus Jr. told DuPont lawyers they needed to provide the information - which lawyers for thousands of Mid-Ohio Valley residents who drank C8-contaminated water have been demanding for months - and said he would order a DuPont official to testify about the matter at a closed-door hearing next week if he wasn't convinced DuPont was finally providing financial documents that should address the issue.
During a telephone call with lawyers for both sides, Sargus expressed concern that the continuing dispute between DuPont and the plaintiffs' lawyers might mean there was reason to be concerned about how DuPont's recent transactions were structured.
"... The longer this takes and the more difficult it becomes to get this information, truthfully, the more I'm determined that there is something that needs to be ferreted out here," the judge said, according to a court transcript of the Wednesday phone call.
"I hope it turns out to be the big nothing," Sargus continued. "But I can tell you from experience in this job, the more things aren't disclosed, the more suspicious everybody becomes, and I think that's the situation we're in right now."
Attorneys in more than 3,500 lawsuits pending against DuPont in U.S. District Court in Columbus have been trying to get answers about how the DuPont transactions affect which corporate entity is responsible for damages sought by residents who drank water contaminated by DuPont's decades-long manufacture of C8 at its Washington Works plant south of Parkersburg.
C8 is another name for perfluorooctanoate acid, or PFOA. In West Virginia, DuPont has used C8 since the 1950s as a processing agent to make Teflon and other nonstick products, oil-resistant paper packaging and stain-resistant textiles. DuPont and other companies have reduced their emissions and agreed on a voluntary phase-out of the chemical, but researchers are still concerned about a growing list of possible health effects and about the chemical's presence in consumer products, as well as continued pollution from waste disposal practices.
After ignoring concerns about high levels of C8 in some West Virginia communities for years, the U.S. Environmental Protection Agency this spring issued a new drinking water advisory for the chemical, following the highly publicized discovery of contamination in communities near Hoosick Falls, New York.
The federal court lawsuits filed against DuPont come after a three-person panel of scientists finished a six-year study of C8 and concluded there were probable links between exposure to the chemical and certain human illnesses. Their work was funded by a class-action lawsuit settlement with DuPont and based, in part, on C8 testing and other health data from roughly 70,000 current and former residents - one of the most extensive examinations ever of how a toxic chemical affects humans.
So far, juries awarded verdicts against DuPont for a total of $7.2 million in two of the C8 cases that have gone to trial. Three other cases have settled for undisclosed amounts. Another case is set for trial in November and the judge has indicated that 40 more cases alleging C8 caused cancer will go to trial in 2017.
A year ago, DuPont finalized its spinoff into a new company - called Chemours - more than three dozen production facilities in a dozen countries. Since that transaction, an activist group, Keep Your Promises DuPont, has been waging a public campaign raising concerns that Chemours inherited massive liabilities for C8 lawsuits and toxic cleanups of contaminated sites around the country.
After the second verdict against DuPont in a C8 case, Chemours said that while DuPont is the named defendant in all of the pending cases, and is "directly liable" for any judgment, DuPont "claims that it is entitled to have Chemours repay it for any such judgments. Chemours said it "retains its defense" to any such claims by DuPont.
Futher complicating matters, DuPont is in the final stages of completing a merger with another chemical giant, Dow. And, Dow and DuPont have indicated that they plan to split their combined holdings into three separate other companies.
Lawyers for residents who are suing DuPont have been trying for many months to get documents about the Chemours transaction and the Dow merger so they can clarify which corporate entity has which sorts of C8 liabilities.
"What we do not have is, we do not have the schedules from the Chemours-DuPont spinoff that we have been asking for and what we believe the court ordered," David Butler, one of the residents' lawyers, said during Wednesday's conference call with the judge. "We also do not have any of the underlying Dow-DuPont merger documents that have been properly authenticated by a DuPont person."
John Burlingame, a lawyer for DuPont, responded that in the case of the Dow merger, it's not yet been decided where the C8 liabilities will end up once the three separate companies are formed following the merger.
"There will be advisory boards constituted for each of those that will be making recommendations to the board of Dow-DuPont with respect to allegations of allocation of assets and liabilities," Burlingame said. "There has been no determination whatsoever in terms of where the liabilities that currently are held by DuPont will go if they ultimately go into any of the three contemplated spin-off transactions."
Sargas indicated that he wasn't sure he believed documents were available that would answer the plaintiffs' questions.
"I can't believe that there aren't schedules, documents, indicating there was due diligence performed, all this occurred, and there had to be something in writing to document it, and I don't hear any of this being disclosed," the judge said. "DuPont and Dow didn't just blindly merger or attempt to merger."
Burlingame said that DuPont wanted to speak with a financial expert hired by the plaintiffs, to be sure the company understands exactly what documents the plaintiffs want.
Sargas gave the two sides until July 28 to resolve the issue, and said that if it wasn't resolved by then, he would hold a closed-door hearing at which a "very high-level person" from DuPont would be forced to testify about the issue. The judge said that the DuPont official will have to be someone with "great knowledge" about the liabilities and that person must "bring documents that would support whatever the testimony is."
He said that if the material is confidential - not part of the public financial filings with the U.S. Securities and Exchange Commission - he would seal all of the documents and order the lawyers to not speak publicly about the information.
At the end of the hearing, another lawyer for the residents, Rob Bilott, said he wanted to make it clear that "this is really another delay by DuPont."
"We have already conveyed to DuPont what information we need," Bilott said. "They already know what we need. They're just refusing to turn it over at this point."
Reach Ken Ward Jr. at kward@wvgazettemail.com, 304-348-1702 or follow @kenwardjr on Twitter.