Managing and Mitigating the U.S. PCB Litigation Risk

There are two categories of PCB-related litigation: environmental impairment cases on the one hand and injury and building cases on the other. The Company has strong legal defenses for all cases and will only consider settlements when it can do so on reasonable terms.

In most cases, the products containing PCBs that are alleged to be the source of PCB impairments to the environment, or exposures in buildings or to people, were manufactured and/or disposed of by third party companies, not by Monsanto.

Importantly, Monsanto has broad indemnification agreements with many former PCB customers under which these companies agreed to indemnify Monsanto for litigation-related costs as a condition of continuing to receive PCBs in the 1970s. As communicated, Monsanto is actively seeking to enforce these contracts and recover these costs in a lawsuit it filed in the Circuit Court for St. Louis County in Missouri. In July 2024, Monsanto announced that it has retained leading plaintiff lawyer Mark Lanier to represent the Company in its PCB indemnity litigation.

In June 2020, Bayer announced a $650 million settlement agreement involving a class of approximately 2,500 municipal entities that allege PCB impairments of their water bodies. The necessary court approval was granted on November 19th, 2022. This settlement resolves most of the Company’s exposure to municipal government PCB water litigation.

The vast majority of the local governments that opted out of this nationwide class action settlement are included in 9 pending municipal opt-out cases. These pending cases are largely grouped around a limited number of waterways and have unique factual and legal circumstances. Monsanto remains committed to defending cases at trial and will only consider settlements when it is in the Company’s interest to do so. In July 2024, Monsanto reached a settlement agreement with the City of Seattle.

Additionally, the Company entered into separate agreements with the Attorneys General of New Hampshire, New Mexico, Ohio, Oregon, Pennsylvania, Virginia, Washington, and also Washington D.C. to resolve similar PCB cases brought by these governments. There are also pending cases that have been filed by the Attorneys General of Illinois, Maine, Maryland, New Jersey, and Vermont and the Company will litigate these cases aggressively and only settle them if they can be resolved on reasonable terms. A case brought by the state of Delaware was dismissed by a court in 2022, but the Delaware Supreme Court reversed this dismissal in part on June 22, 2023. The state of Vermont also claims PCB contamination of school buildings.

Based on data reported to EPA about impairments of waterways by PCBs and the fact that PCBs in the environment are generally declining more than 40 years after production ceased, the Company believes that the scope of potential future state litigation is limited. While additional lawsuits are possible, this is far from a nationwide risk.

The Company faces a number of personal injury cases in which plaintiffs claim that exposure to PCBs caused their health problems. Most of these cases arise from one school, the Sky Valley Education Center (SVEC), in the Seattle area, where approximately 200 plaintiffs have brought suit. There are several personal injury lawsuits pending in Vermont related to Burlington High School and to the Twin Valley elementary school. There is also a proposed class action seeking medical monitoring claims. These cases are at the early stages. The Burlington School District (BSD) has also filed a lawsuit alleging that Monsanto should pay for a new high school after the old one was shut down for a number of reasons, including PCB concerns. Other school districts in Vermont filed a lawsuit alleging PCB impairments to certain schools.

The Company has strong defenses in these cases including that the relevant products at issue, like fluorescent lighting fixtures and caulk, were manufactured by other companies, not Monsanto, and were decades beyond their useful lives. The evidence also is not sufficient in these cases to support a causation and liability finding against the Company as air samples taken in the SVEC cases, for example, found no PCBs in most classrooms and trace concentrations below EPA safe evaluation levels in others. Similarly, the available blood samples for plaintiffs in the SVEC litigation showed background PCB levels, the same as the typical American.

The Company also believes that school districts themselves could be held responsible for the alleged injuries and building problems as the U.S. Environmental Protection Agency has provided more than 30 notices that date back decades advising owners and managers of pre-1980 buildings, including school districts and their maintenance personnel, about best management practices to address PCB-containing products that are beyond their useful lives.

The trial court in Washington State has ruled against the Company on these and other significant legal defenses in several trials to date. However, in the first of these cases, Erickson, the Court of Appeals Division I in the State of Washington ruled in Monsanto’s favor, reversed the initial verdict in its entirety and remanded the case back to trial court for further proceedings. In October 2024 the Washington Supreme Court accepted the review of the Erickson case.

In Massachusetts complaints were filed in August 2023 claiming personal injury due to PCB exposure, though Monsanto did not manufacture or dispose of PCBs in the greater Pittsfield area. The company had no responsibility for or control over the electrical equipment plant in Pittsfield operated by another defendant in this case.

The Company’s lawsuit seeking to enforce its indemnification agreements with its former customers is a major element of its strategy to mitigate the financial risk of the PCB litigation and recover its costs. The indemnity agreements were executed in 1972, following Monsanto’s announcement of its plan to phase out non-electrical uses of PCBs in response to concerns about their environmental persistence. For electrical uses, however, there were no alternative safety fluids. Thus, consistent with the conclusions of the federal Interagency Task Force, Monsanto agreed to continue to manufacture and sell PCBs for use in closed electrical applications until alternatives became available, but only if these customers agreed to defend, indemnify, and hold Monsanto harmless for all legal costs and claims arising from these sales. Six former Monsanto customers, accounting for approximately 93% of PCB sales, entered into these indemnity agreements. Given the increasing costs of defending current cases, settlements and potential judgments, Monsanto filed suit in August 2022 in the Circuit Court of St. Louis County in Missouri to enforce these contracts and recover costs from its former customers. This suit is at an early phase, but the Company believes it is a strong position to recover substantial litigation-related costs from this action.