A rash of recent lawsuits against 3M have intensified concerns that it could face massive legal and cleanup costs over a class of chemicals called PFAS.
The Maplewood-based industrial giant has already reached a historic $850 million pollution settlement with Minnesota. It settled a $35 million case with an Alabama water authority in April to treat PFAS chemicals that leaked into the Tennessee River.
More are in the pipeline. New York sued last month, after spring and summer filings by New Jersey, New Hampshire and Vermont. A shoe company that used the chemicals to waterproof its products has sued. So has a dairy farm in New Mexico that says it had to dump 15,000 gallons of cow milk each day since October 2018 because of contamination from a nearby military base that used firefighting foams that contained the chemicals.
3M has set aside an additional $235 million to cover legal claims, but some estimates of the ultimate cost exceed $10 billion.
"You can kind of see at its infancy how this could become a very large problem," said Peter Kelso, the complex analytics principal at environmental consulting firm Roux Associates. "This [PFAS] is somewhat like asbestos in that it's very ubiquitous, which means it's pretty much everywhere."
PFAS chemicals have been found in streams, rivers, military bases and in the drinking water of 1,361 sites across the U.S., according to information compiled from states and the U.S. Department of Defense by the Environmental Working Group advocacy firm.
While the lawsuits weave through the system, governments at municipal, state and federal levels have introduced new restrictions or elevated the pollution status of PFAS. In one Ohio lawsuit, a judge allowed a request for lifelong health monitoring to proceed. Health claims were not allowed into evidence in the lawsuits that led to the Minnesota settlement.
While 3M isn't the only firm that made or used PFAS — DuPont, Chemours, Tyco, Chemguard and others also are named in lawsuits and government actions — the concern is the widespread nature of the chemicals. They are used in things ranging from nonstick coatings on pans and carpets to waterproof boots and jackets and fluorinated firefighting foams.
3M is aggressively fighting many of the increased liability claims — and also more stringent regulations and legislation regarding PFAS. 3M attorneys told Congress this fall that PFAS compounds do not harm humans at the levels found in the environment. Company representatives also said 3M has never hidden any research on PFAS and regularly works with cities, states and the Environmental Protection Agency to remediate PFAS contaminations tied to its own sites.
It also "placed thousands of documents in the public domain, including more than 150 published studies conducted by 3M and other researchers on potential environmental and health effects of PFAS," said spokeswoman Fanna Haile-Selassie. "We want to broaden the global knowledge on PFAS."
The company, Haile-Selassie said, will not speculate on 3M's potential liabilities.
As the court cases and the advocacy for the government to increase regulations intensifies, Wall Street and groups representing shareholders have taken notice.
Of the 19 analysts tracked by Reuters that cover 3M, only three rated the company a "buy" or "outperform." This month both Citigroup and UBS Securities downgraded their 3M stock recommendations, citing PFAS cost concerns.
Citigroup research analyst Andrew Kaplowitz wrote in a report to investors that litigation risks could be a "lingering overhang" on 3M's stock.
"Our discussions with legal experts indicate that the remediation [and] cleanup costs — per severe state — could be [as much as $850 million]," Kaplowitz wrote, citing 10 known states with "severe" problems. But he noted that "3M's ultimate liability remains difficult to qualify [because] the science relative to PFAS' actual impact on human health remains not well understood."
In July, a shareholder lawsuit accused 3M and its officers of hiding the company's PFAS woes in order to artificially inflate the stock price — an assertion 3M strongly disagrees with, Haile-Selassie said.
As concerns have mounted, Gordon Haskett Research Advisors, an independent investment research firm, organized two teleconferences this summer with insurance and risk analytics experts regarding PFAS liability.
John Inch, a senior analyst from Gordon Haskett, said some investors eyeing mounting lawsuits and 3M's $235 million reserve wonder, "Does that seem like enough?" More lawsuits and PFAS pollution sites seemingly materialize each month, along with claims about health ailments, Inch said.
It has been 70 years since 3M made its first nonstick, waterproof and stain-resistant chemical ingredients for Scotchgard, Teflon and eventually fluorinated firefighting foams. Environmentalists call PFAS the "forever chemicals" because they don't break down and instead linger in soil, water and human blood.
3M stopped making two key PFAS compounds — PFOA and PFOS — back in 2002 and switched to shorter chain compounds, which it claims are safe. The company also has spent years cleaning up its PFOA and PFOS factories and dump sites in Minnesota, Alabama and Illinois. At question now is the groundwater and soil contamination outside 3M factory sites and whether the PFAS levels are high enough to do lasting damage.
The growing problem worries environmentalists, cities and plaintiffs who point to the results of a published study that monitored the health of 16,000 West Virginians exposed to PFAS-contaminated water between 2005 and 2013. The C8 Science Panel, as the researchers were called, found probable links between certain PFAS compounds and testicular and kidney cancers, thyroid, cholesterol, autoimmune and high blood pressure problems in animals and humans.
While states march to court — and some like New Hampshire pass more stringent legislation — critics complain the U.S. government has yet to do more than study growing contamination claims. The EPA set a PFAS "health advisory level" of 70 parts per trillion in water. That advisory is a guideline that is not enforceable.
More than 40 bills have been introduced in Congress that would raise the PFAS class, thus adding some enforcement teeth. The latest of those was just pushed out by a bipartisan conference committee trying to reconcile the House and Senate defense spending bills. The House version had suggested elevating certain PFAS to the Superfund level.
Even so, product liability experts note that most PFAS lawsuits just mention health risks but largely complain about sizable environmental damage. That's because it's easier to prove chemicals are in city drinking water than to prove that PFAS — and only PFAS — caused a person's specific disease, attorneys note.
Until "more is definitively known about the scientific health effects of PFAS," litigants will probably opt for environmental and product liability litigation, said Alexandra Klass, a University of Minnesota environmental law professor. "In the case of Minnesota, the state said [your PFAS] is harmful to our natural resources. We are incurring millions in costs because of your actions pushing these harmful products.' "
Inch at Gordon Haskett said the fallout from PFAS lawsuits or any Superfund designations could span decades. If so, that "silver lining" of time would help 3M manage what is expected to be an expensive problem.
Bank of America Merrill Lynch equity analyst Andrew Obin estimated that if the strongest of congressional PFAS bills passed, PFAS contaminations could cost 3M $7.8 billion to $102 billion pretax. Exactly where it lands depends on whether Congress raises PFAS chemicals to Superfund status or requires manufacturers to pay more cleanup costs.
"While 3M is at risk for a large PFAS liability, we think it is manageable over time," Obin wrote.
The latest attempt to elevate PFAS to Superfund status did not make it through a bipartisan conference committee finalizing the defense spending bill that was passed last week.
Rhon Jones, the toxic tort attorney who sued 3M's Alabama chemical factory and 30 of its Georgia carpet-making customers on behalf of two Alabama river cities in 2016, said 3M's product liability exposure risk is high. "There are [3M] issues in Michigan, New York, Georgia, Alabama, Ohio and New Jersey. When you start to look at all those issues in totality, you could be in the $10 billion range. That's a big number," Jones said.
Many litigants are now preparing for trials that start in 2020 or 2021.
Fire foams are the fastest growing environmental lawsuits against 3M, DuPont and others. More than 132 fire foam pollution lawsuits nationwide have funneled into multidistrict litigation in South Carolina. In September, a federal judge refused 3M's request to dismiss a 2018 lawsuit by Ohio firefighter Kevin Hardwick. Hardwick wants 3M, DuPont, Chemours, Dyneon and Daikin to pay for long-term medical monitoring of him and others exposed to PFAS fire foam chemicals for decades.
Another judge will decide next month if he'll allow a similar PFAS medical monitoring lawsuit by thousands in Hoosick Falls, N.Y., where 3M and DuPont supplied PFAS chemicals to a lamination company.
With so many issues erupting, potential "damages can ramp up quickly," said Kelso at Roux Associates. "I think the litigation will continue to grow," he said. "If I were looking at a football field, even though this litigation has been going on for quite some time, we might only be close to the 50-yard line."
