3M PFAS settlement gains final court approval

Background: PFAS

• Per- and polyfluoroalkyl substances are a large group of synthetic organic chemicals used in many different industrial, commercial, and consumer applications since the 1940s. There are a wide variety of definitions for PFAS and consistent debate on which definition is most applicable. The EPA, for example, has used a structural definition, with a PFAS being any chemical that contains at least one of the following three structures: (1) R-(CF₂)-CF(R’)R’’, where both the CF₂ and CF moieties are saturated carbons; (2) R-CF₂OCF₂-R’, where R and R’ can either be F, O, or saturated carbons; and (3) CF₃C(CF₃)R’R’’, where R’ and R’’ can either be F or saturated carbons [ Read an AgencyIQ explainer on the EPA’s definition of PFAS].
• The classic hallmark of a PFAS is a chain of fully fluorinated carbon atoms. This means that at least one carbon atom has all hydrogen bonds replaced with fluorine bonds, creating an extremely strong molecule. Carbon-fluorine bonds are some of the strongest in nature, meaning that PFAS can persist in the environment and resist a wide variety of environmental stressors.
• The historical ubiquity of PFAS in consumer products means it is frequently released into the environment as well. PFAS have been used in a wide variety of consumer products, often for their ability to repel both water and oil. This has led to PFAS applications in textiles, high-performances coatings, cleaning products, semiconductors, and firefighting foams (AFFFs). PFAS contamination has been found in many different areas around the U.S., with the U.S. Geological Survey estimating in 2023 that at least 45% of the country’s tap water is contaminated with PFAS. PFAS contamination can stem from industrial facilities where PFAS are used and subsequently released into the environment (or created via processes or as impurities or byproducts) as well as at military bases, airports, and other areas that use AFFFs for testing, training, or extinguishing fires.

Background: the PFAS MDL and litigation history

• In 2018, the South Carolina District court consolidated many cases covering PFAS contamination of local and municipal drinking water supplies into a single multi-district litigation (MDL). This MDL, composed of cases from across the United States, is targeted at a wide range of PFAS manufacturers and processors, including Chemours, DuPont, Corteva, 3M, Tyco, and more. The defendants are sued jointly but separate defendants are able to resolve their liabilities for the water systems section of the MDL through settlement agreements that do not necessarily include all defendants. In an MDL, the plaintiff and defense sides will reach an agreement on several “bellwether” cases to try as a representative sample of the cases in the MDL.
• On June 2, 2023, DuPont, Chemours, and Corteva announced a joint settlement with a nationwide group of municipal water utilities that will resolve all PFAS-related drinking water claims for those companies alone. The settlement covers water systems with current PFAS detections at any levels and those that are currently required to monitor for the presence of PFAS under Environmental Protection Agency (EPA) monitoring rules. This includes, but is not limited to, cities in the AFFF MDL in South Carolina. The settlement specifically excludes water systems owned and operated by a state or federal government, small systems that have not detected the presence of PFAS and are not required to test under EPA monitoring rules, and water systems in the lower Cape Fear River Basin in North Carolina, though these may opt in.

3M’s proposed settlement

• 3M and the plaintiffs in the South Carolina MDL reached a tentative settlement on June 22, 2023. The agreement includes payments of up to $10.3 billion over the course of 13 years and would fund public water supplies that have detected PFAS (“Phase One class members”) or that may detect PFAS in the future (“Phase Two class members”). The wide-reaching settlement would cover a vast array of public water supplies.
• On July 26, 2023, 22 states and territories filed a motion to intervene in the case and block the proposed 3M settlement. State attorneys general from Arizona, California, Colorado, Connecticut, Hawaii, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Pennsylvania, Puerto Rico, Rhode Island, Tennessee, Texas, Vermont, Wisconsin, as well as the District of Columbia and the Commonwealth of the Northern Mariana Islands explained that the filing was to protect sovereign interests in separate ongoing or intended lawsuits against 3M to address PFAS contamination.

Backlash and changes to the settlement

• On August 29, 2023, a group of state attorneys general, led by California Attorney General Rob Bonta, announced that the states had dropped their opposition, while continuing to raise issues with two separate pieces of the proposed settlement. Bonta argued that 3M had declined to pay more than the initial $10 to $12 billion in the proposed settlement, and that the amount was “far short” of the actual cost to remediate PFAS contamination caused by 3M in the country’s drinking water supply. In addition, Bonta noted that 3M declined to pay out the settlement more quickly, with the firm instead insisting it be paid out in installments over the course of a decade “even while 3M’s own attorneys share concerns about bankruptcy in light of its many PFAS and other liabilities.”
• These concerns were laid out more broadly in an amicus curiae letter to the District of South Carolina and the judge overseeing the case. In the letter, the states argued that the settlement forces the class members to bear the risk of 3M’s insolvency over the course of the next decade. The states cite that 75% of the funds for Phase Two class members and 31.5% of the funds for Phase One class members for operation and maintenance under the settlement will not be paid out until the 2030s. The states also cite 3M’s assertions in previous filings, where the company noted its pile of other liabilities. However, with the preliminary settlement in its Combat Arms earplugs litigation fresh off the presses, there may be less uncertainty about future liabilities.
• On August 29, 2023, Judge RICHARD GERGEL gave his preliminary approval to the settlement. The revised settlement modifies several different areas. Importantly, the revised settlement is planned to allow the state attorneys generals’ claims against 3M and other manufacturers to continue without anti-suit injunctions. In addition, the states will remain free to file additional PFAS-related claims against 3M.
• The revised settlement agreement removed a proposed indemnification clause that could have shifted some future burden and liability from 3M to the public water systems included in the agreement. The settlement also provides water systems with an estimated amount of payment that the water system would receive before making the decision to opt in or out.
• During the decision period, cities and municipalities began dropping out of the settlement, with a few others explaining their reasoning for staying involved. La Crosse, Wisconsin, for instance, opted out and decided to continue its actions against all manufacturers, rather than just the ones covered by the DuPont and 3M settlements. Fort Worth, Texas, also dropped out of the settlement, finding that it was in the interest of the city to do so. Other cities opted in even when they were not sure how much they would receive, with a representative from Casselberry, Florida, explaining that the city did not currently have issues with PFAS and did not have any violations under the proposed settlement [ Read AgencyIQ’s review of city and municipality reasoning for accepting or opting out of the settlement].

Settlement finalization and payments

• On April 1, 2024, 3M announced that its settlement agreement had received final approval from the court. The order, filed on March 29, 2024, laid out the reasoning for the final approval of the amended settlement agreement. The order details an abridged explanation of the litigation history of the case, including information on settlement discussions culminating in the global settlement agreement.
• The finalized settlement will include $12.5 billion in payments (the present value of the payments is $10.3 billion, with the actual maximum amount to be paid is $12.5 billion). In the agreement, the parties allocated 55% of funds to Phase One class members (those with measurable PFAS concentrations prior to June 22, 2023) and the remaining 45% to Phase Two class members. The finalized settlement agreement also excludes some specific potential members from the final class, including any public water system associated with a specific PFAS manufacturing facility owned by 3M, or some public water systems owned by state or federal governments. The plaintiffs’ counsel has moved for attorney’s fees of 8% of the settlement amount. No party objected to this fee amount, and the settlement agreement does not provide for set attorney’s fees, instead leaving it up to the court to make a final decision.
• The final order also hosted a deep discussion on the fairness of the settlement agreement, with Gergel determining that the settlement resolves the litigation fairly, and that the class of public water systems meet class certification requirements. Gergel also spends significant time assessing whether current Fourth Circuit jurisprudence allows the settlement agreement, focusing on the protection of class members whose rights may not have been given adequate consideration during settlement negotiations.
• About 8 percent of class members opted out of the settlement. According to the court, approximately 897 of the about 12,000 class members decided to leave the settlement (and only 7 filed objections, which the court quickly disposed of). This relatively low opt-out number means that most municipalities determined that the settlement is the best way to ensure payment from 3M for PFAS-related remediation, rather than gambling for years on the outcome of a high-stakes trial. Enforceable regulations on PFAS in drinking water are expected soon [see this AgencyIQ analysis for more information]; municipalities are likely looking to have a settlement in hand now, rather than waiting for an uncertain future payout, to ensure that they can fund the means to provide safe drinking water around the country.
• According to 3M’s press release, the payments will be made until 2036, with the expectations that payments will begin in the third quarter of 2024. 2024 is the highest payout year, with 3M expending $2.9 billion pre-tax, followed by a gradual reduction in payments (excluding 2027, which will include $2.6 billion in payments).

The impact of the settlement and the future of PFAS litigation

• Despite concerns about municipalities rejecting the settlement, the vast majority decided to take the settlement deal, giving them a predictable sum to allocate for future PFAS remediation. Combined with the upcoming finalization of drinking water regulation for certain PFAS, this will give municipalities a clearer picture of what shortfalls might need to be made up to pay for necessary upgrades.
• The remaining plaintiffs may choose to target 3M in high stakes trials, but these trials, and any subsequent appeals, will likely take years to finish. Though their reasons for opting out may vary, these plaintiffs are likely to be significantly more sophisticated than most municipal water systems; they may also have the resources to both initially meet PFAS water standards and maintain a legal campaign against 3M. This may lead to sporadic verdicts in cases over the next few years in favor of 3M or a plaintiff water system. Although some verdicts in favor of water systems may far outstrip individual payments under the settlement agreement, the protracted timeline of litigation likely made most municipalities take the settlement instead.
• Now that there are a set number of municipalities that will receive a mostly set amount of money from 3M, there will also likely be a rush towards new or cheaper methods to remediate PFAS in drinking water. The PFAS remediation sector is expanding, and both private industry and the federal government are spending considerable sums of money on research to destroy and remediate PFAS more cheaply and at scale. Some municipalities may turn to newer, cheaper technologies, even as wide-scale testing of these new approaches may not yet be feasible.

To contact the author of this analysis, please email Walker Livingston ( [email protected]).
To contact the editor of this analysis, please email Kari Oakes ( [email protected])

Key Documents and Dates

• 3M Settlement with Public Water Suppliers to Address PFAS in Drinking Water Receives Final Court Approval (Press Release) (April 1, 2024)
• Amended settlement agreement