An Alabama jury on Friday ruled against Monsanto Co. and Solutia Inc. in a case seeking to repay property damages resulting from production of dangerous chemicals several decades ago, according to the Circuit Court in Gadsden, Alabama.
Investors on Friday were spooked by the news. Shares of Solutia, which would bear the brunt of the liability in the case, closed down $2.95, or about 34 percent, to $5.80 in New York Stock Exchange trade.
Monsanto, which spun-off its Solutia chemicals business in 1997, produced polychlorinated biphenyls (PCBs) in Anniston, Alabama between 1935 and 1971. The suit decided on Friday is one of several which seeks to find the companies liable for damages from these PCBs ranging from emotional distress to personal injury.
The jury has not yet determined the dollar amount of the liability, and is set to reconvene on Monday afternoon. Any decision could be appealed.
The PCBs are believed to be responsible for causing multiple types of skin ailments, reproductive disorders, liver disease, cancers, cerebral palsy and other diseases.
Attorney Jere Beasley, who claims the PCBs were transmitted through the states waterways, said today’s verdict gives more credibility to his lawsuit, which involves 15,000 citizens in Alabama, including children with cerebral palsy and cancer. He said one of the findings against Solutia was especially rare in Alabama, called a “tort of outrage.”
“This is reserved for conduct that is so reprehensible that it shocks any civilized person,” Beasley said. He said that it is the hardest claim to prove, and demonstrates a high level of liability on Solutia that is likely to result in a large damage claim.
In a statement, the St. Louis, Missouri-based Solutia said it was disappointed in the verdict but said the decision was “an interim step in a long process.” The company said it was committed to investigating the impacts of PCB production and had already investigated 8,000 acres of land.
Solutia spokeswoman Beth Rusert said that the company had already spent $40 million on cleanup efforts and has been fully cooperating with the Environmental Protection Agency. She also said that there are contradictory studies on the health impacts of PCBs.
“There is no evidence of long-term health effects from PCBs.” Rusert said.
In March of 2000, what remained of Monsanto after the Solutia spin-off merged with drugmaker Pharmacia Corp.. Later that year, Monsanto was spun-off as a biotechnology and agriculture firm and has distanced itself from the lawsuit in Alabama.
“The new Monsanto is not a party to that case,” said Gary Barton, a spokesman for Monsanto.
Deutsche Banc, Alex Brown analyst John Moten said that investors were overreacting to the lawsuits, which have eroded Solutia’s market value by over $500 million, or more than half, since the beginning of the year.
“It’s just a very nervous market right now, and investors are worried about any hint of undisclosed liability,” Moten said.
Moten said that the erosion in market value is far higher than any damages the company will likely have to pay.
“At some point, rationality takes over,” he said. “At what point this is, I don’t know.”
Moten said Solutia has been completely open about is liabilities. The company announced in mid-December it would take fourth-quarter charges totaling $90 million to $100 million after taxes, including about $30 million to cover environmental work and increase its self-insurance reserves.