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Commitments and Contingencies | 9 Months Ended
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Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Environmental Matters The Company accrues for potential environmental liabilities when it is probable a liability has been incurred and the amount of the liability is reasonably estimable. As of June 30, 2018, reserves for environmental liabilities totaled $43 million, of which $14 million was recorded within other current liabilities and $29 million was recorded within other noncurrent liabilities in the consolidated statements of financial position. Reserves for environmental liabilities totaled $51 million at September 30, 2017, of which $10 million was recorded within other current liabilities and $41 million was recorded within other noncurrent liabilities in the consolidated statements of financial position. Such potential liabilities accrued by the Company do not take into consideration possible recoveries of future insurance proceeds. They do, however, take into account the likely share other parties will bear at remediation sites. It is difficult to estimate the Company’s ultimate level of liability at many remediation sites due to the large number of other parties that may be involved, the complexity of determining the relative liability among those parties, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur. Nevertheless, the Company does not currently believe that any claims, penalties or costs in connection with known environmental matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. In addition, the Company has identified asset retirement obligations for environmental matters that are expected to be addressed at the retirement, disposal, removal or abandonment of existing owned facilities. At June 30, 2018 and September 30, 2017, the Company recorded conditional asset retirement obligations of $48 million and $61 million, respectively. Asbestos Matters The Company and certain of its subsidiaries, along with numerous other third parties, are named as defendants in personal injury lawsuits based on alleged exposure to asbestos containing materials. These cases have typically involved product liability claims based primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were used with asbestos containing components. As of June 30, 2018, the Company's estimated asbestos related net liability recorded on a discounted basis within the Company's consolidated statements of financial position was $180 million. The net liability within the consolidated statements of financial position was comprised of a liability for pending and future claims and related defense costs of $557 million, of which $54 million was recorded in other current liabilities and $503 million was recorded in other noncurrent liabilities. The Company also maintained separate cash, investments and receivables related to insurance recoveries within the consolidated statements of financial position of $377 million, of which $41 million was recorded in other current assets, and $336 million was recorded in other noncurrent assets. Assets included $10 million of cash and $274 million of investments, which have all been designated as restricted. In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable; the amount of such recoveries recorded at June 30, 2018 was $93 million. As of September 30, 2017, the Company's estimated asbestos related net liability recorded on a discounted basis within the Company's consolidated statements of financial position was $181 million. The net liability within the consolidated statements of financial position was comprised of a liability for pending and future claims and related defense costs of $573 million, of which $48 million was recorded in other current liabilities and $525 million was recorded in other noncurrent liabilities. The Company also maintained separate cash, investments and receivables related to insurance recoveries within the consolidated statements of financial position of $392 million, of which $53 million was recorded in other current assets, and $339 million was recorded in other noncurrent assets. Assets included $22 million of cash and $269 million of investments, which have all been designated as restricted. In connection with the recognition of liabilities for asbestos-related matters, the Company records asbestos-related insurance recoveries that are probable; the amount of such recoveries recorded at September 30, 2017 was $101 million. The Company's estimate of the liability and corresponding insurance recovery for pending and future claims and defense costs is based on the Company's historical claim experience, and estimates of the number and resolution cost of potential future claims that may be filed and is discounted to present value from 2068 (which is the Company's reasonable best estimate of the actuarially determined time period through which asbestos-related claims will be filed against Company affiliates). Asbestos related defense costs are included in the asbestos liability. The Company's legal strategy for resolving claims also impacts these estimates. The Company considers various trends and developments in evaluating the period of time (the look-back period) over which historical claim and settlement experience is used to estimate and value claims reasonably projected to be made through 2068. At least annually, the Company assesses the sufficiency of its estimated liability for pending and future claims and defense costs by evaluating actual experience regarding claims filed, settled and dismissed, and amounts paid in settlements. In addition to claims and settlement experience, the Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment, and the Company's defense strategy. The Company also evaluates the recoverability of its insurance receivable on an annual basis. The Company evaluates all of these factors and determines whether a change in the estimate of its liability for pending and future claims and defense costs or insurance receivable is warranted. The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on the Company's strategies for resolving its asbestos claims, currently available information, and a number of estimates and assumptions. Key variables and assumptions include the number and type of new claims that are filed each year, the average cost of resolution of claims, the identity of defendants, the resolution of coverage issues with insurance carriers, amount of insurance, and the solvency risk with respect to the Company's insurance carriers. Many of these factors are closely linked, such that a change in one variable or assumption will impact one or more of the others, and no single variable or assumption predominately influences the determination of the Company's asbestos-related liabilities and insurance-related assets. Furthermore, predictions with respect to these variables are subject to greater uncertainty in the later portion of the projection period. Other factors that may affect the Company's liability and cash payments for asbestos-related matters include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms of state or federal tort legislation and the applicability of insurance policies among subsidiaries. As a result, actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company's calculations vary significantly from actual results. Insurable Liabilities The Company records liabilities for its workers' compensation, product, general, property and auto liabilities. The determination of these liabilities and related expenses is dependent on claims experience. For most of these liabilities, claims incurred but not yet reported are estimated by utilizing actuarial valuations based upon historical claims experience. At June 30, 2018 and September 30, 2017, the insurable liabilities totaled $444 million and $445 million, respectively, of which $80 million and $122 million was recorded within other current liabilities, $25 million and $22 million was recorded within accrued compensation and benefits, and $339 million and $301 million was recorded within other noncurrent liabilities in the consolidated statements of financial position, respectively. The Company records receivables from third party insurers when recovery has been determined to be probable. The amount of such receivables recorded at June 30, 2018 was $21 million, of which $6 million was recorded within other current assets and $15 million was recorded within other noncurrent assets. The amount of such receivables recorded at September 30, 2017 was $46 million, of which $31 million was recorded within other current assets and $15 million was recorded within other noncurrent assets. The Company maintains captive insurance companies to manage certain of its insurable liabilities. Arbitration Award In September 2017, the Company was subject to an unfavorable arbitration award of approximately $50 million relating to a contractual dispute with a subcontractor used by the Company at an airport construction project in Doha, Qatar. In connection with the unfavorable arbitration award, the Company recorded a charge of $50 million within selling, general and administrative expenses in the consolidated statements of income in the fourth quarter of fiscal 2017. The airport project is being managed by a steering committee. The Company and the subcontractor were working jointly to document claims for increased costs against the steering committee when the subcontractor initiated the arbitration proceeding against the Company. Pursuant to its arbitration proceeding against the Company, the subcontractor sought to recover costs it alleges it incurred due to project delays, additional work and related financing costs. The Company has filed annulment proceedings with respect to the arbitration award in the local court in Qatar. While the award remains outstanding, a portion of the balance will accrue interest at a statutory rate of 9.56%. In a related action, the Company has initiated an arbitration claim against the steering committee related to costs it incurred in connection with delays of the airport construction project, including costs related to the above award. The arbitrator is expected to issue a decision on the Company’s claims against the steering committee by the end of fiscal 2018. Aqueous Film-Forming Foam ("AFFF") Litigation Two of our subsidiaries, Chemguard, Inc. ("Chemguard") and Tyco Fire Products L.P. ("Tyco Fire Products"), have been named, along with other defendant manufacturers, in a number of class action lawsuits relating to the use of fire-fighting foam products by the U.S. Department of Defense (the "DOD") and others for fire suppression purposes and related training exercises. Plaintiffs generally allege that the firefighting foam products manufactured by defendants contain or break down into the chemicals perfluorooctane sulfonate ("PFOS") and perfluorooctanoic acid ("PFOA") and that the use of these products by others at various airbases and airports resulted in the release of these chemicals into the environment and ultimately into communities’ drinking water supplies neighboring those airports and airbases. PFOA and PFOS are being studied by the United States Environmental Protection Agency (EPA) and other environmental and health agencies and researchers. The EPA has not issued regulatory limits, however; while those studies continue, the EPA has issued a health advisory level for PFOA and PFOS in drinking water. Both PFOA and PFOS are types of synthetic chemical compounds that have been present in firefighting foam. However, both are also present in many existing consumer products. According to EPA, PFOA and PFOS have been used to make carpets, clothing, fabrics for furniture, paper packaging for food and other materials (e.g., cookware) that are resistant to water, grease or stains. Plaintiffs generally seek compensatory damages, including damages for alleged personal injuries, medical monitoring, and alleged diminution in property values, and also seek punitive damages and injunctive relief to address remediation of the alleged contamination. As of August 2, 2018, the Company is named in 16 putative class actions in federal courts in six states as set forth below: Colorado
• | District of Colorado - Bell et al. v. The 3M Company et al., filed September 18, 2016.
• | District of Colorado - Bell et al. v. The 3M Company et al., filed September 18, 2016.
• | District of Colorado - Davis et al. v. The 3M Company et al., filed September 22, 2016.
The above cases have been consolidated in the U.S. District Court for the District of Colorado, and a hearing on the plaintiffs’ motion for class certification is expected in 2018 with a trial date schedule for April 2019. Delaware
• | District of Delaware - Anderson v. The 3M Company et al., filed June 12, 2018 in the United States District Court District of Delaware.
Massachusetts
• | District of Massachusetts - Civitarese et al. v. The 3M Company et al., filed April 18, 2018 in the United States District Court of Massachusetts.
Washington
• | Eastern District of Washington - Ackerman et al. v. The 3M Company et al., filed April 5, 2018 in the United States District Court, Eastern District of Washington.
New York
• | Eastern District of New York - Green et al. v. The 3M Company et al., filed March 27, 2017 in Supreme Court of the State of New York, Suffolk County, prior to removal to federal court.
• | Southern District of New York - Adamo et al. v. The Port Authority of NY and NJ et al., filed August 11, 2017 in Supreme Court of the State of New York, Orange County, prior to removal to federal court.
• | Southern District of New York - Fogarty et al. v. The Port Authority of NY and NJ et al., filed August 11, 2017 in Supreme Court of the State of New York, Orange County, prior to removal to federal court.
• | Southern District of New York - Miller et al. v. The Port Authority of NY and NJ et al., filed August 11, 2017 in Supreme Court of the State of New York, Orange County, prior to removal to federal court.
• | Supreme Court of the State of New York, Suffolk County - Singer et al. v. The 3M Company et al., filed October 10, 2017.
• | Supreme Court of the State of New York, Suffolk County - Shipman et al. v. The 3M Company et al., filed March 21, 2018.
Pennsylvania
• | Eastern District of Pennsylvania - Bates et al. v. The 3M Company et al., filed September 15, 2016.
• | Eastern District of Pennsylvania - Grande et al. v. The 3M Company et al., filed October 13, 2016.
• | Eastern District of Pennsylvania - Yockey et al. v. The 3M Company et al., filed October 24, 2016.
• | Eastern District of Pennsylvania - Fearnley et al. v. The 3M Company et al., filed December 9, 2016.
The above cases have been consolidated in the U.S. District Court for the Eastern District of Pennsylvania. The defendants' motion to dismiss the complaint in the consolidated proceeding was denied without prejudice and the cases are currently stayed pending the appeal of an action in which the Company is not a party. In June 2018, the State of New York filed a lawsuit in New York state court (State of New York v. 3M Co., No. 904029-18 (N.Y. Sup. Ct., Albany County) against a number of manufacturers, including affiliates of the Company, with respect to alleged PFOS and PFOA contamination purportedly resulting from firefighting foams used at locations across New York, including Stewart Air National Guard Base in Newburgh and Gabreski Air National Guard Base in Southampton, Plattsburgh Air Force Base in Plattsburgh, Griffiss Air Force Base in Rome, and unspecified “other” sites throughout the State. The lawsuit seeks to recover costs and natural resource damages associated with contamination at these sites. In addition, as of August 2, 2018, there were a total of 51 individual or “mass” actions filed in state court in Colorado (41 cases), New York (1 case) and Pennsylvania (9 cases) against Chemguard and Tyco Fire Products and other defendants in which the plaintiffs generally seek compensatory damages, including damages for alleged personal injuries, medical monitoring, and alleged diminution in property values. The cases involve approximately 7,000 plaintiffs in Colorado, 26 plaintiffs in New York and 13 plaintiffs in Pennsylvania. The Company is also on notice of approximately 622 other possible individual product liability claims and 3 possible municipal claims by filings made in Pennsylvania state court, but complaints have not been filed in those matters, and, under Pennsylvania’s procedural rules, they may or may not result in lawsuits. Chemguard and Tyco Fire Products are also defendants in three municipal cases pending in the U.S. District Court for the District of Massachusetts: Town of Barnstable v. the 3M. Co., et al, (filed Nov. 21, 2016), County of Barnstable v. the 3M. Co., et al, (filed January 9, 2017) and City of Westfield v. the 3M Co., et al., (filed on February 24, 2018), as well as two municipal cases pending in the Eastern District of New York: Suffolk County Water Auth. v. 3M Co. (filed November 30, 2017) and Hampton Bays Water Dist. v. 3M Co. (filed Feb. 21, 2018), and one municipal case pending in the Northern District of Florida: Emerald Coast Utilities Auth. v. 3M Co. (filed June 22, 2018). These municipal plaintiffs generally allege that the use of the defendants’ fire-fighting foam products at fire training academies, municipal airports, Air National Guard bases, or Navy bases released PFOS and PFOA into public water supply wells, allegedly requiring remediation of public property. The defendants have filed motions to dismiss in County of Barnstable and City of Westfield. In May 2018, the Company was also notified by the Widefield Water and Sanitation District in Colorado Springs, Colorado that it may assert claims regarding its remediation costs in connection with PFOS and PFOA contamination allegedly resulting from the use of those products at the Peterson Air Force Base. In addition, three water districts in Pennsylvania, Horsham Water and Sewer Authority, Warminster Municipal Authority, and Warrington Township have filed praecipes for summons against Chemguard and Tyco Fire Products and other AFFF manufacturers relating to alleged PFOS and PFOA contamination. These praecipes are not active suits, but have the effect of tolling the statute of limitations. Other AFFF Matters Tyco Fire Products, in coordination with the Wisconsin Department of Natural Resources (WDNR) and the Wisconsin Department of Health Services (DHS), has been conducting an environmental assessment of its Fire Technology Center (FTC) located in Marinette, Wisconsin and surrounding areas in the City of Marinette and Town of Peshtigo, Wisconsin. In connection with the assessment, PFOS and PFOA have been detected at the FTC and in groundwater and surface water outside of the boundaries of the FTC. Tyco Fire Products continues to investigate the extent of potential migration of these compounds and is working closely with WDNR and DHS to develop interim measures to remove these compounds from certain areas where they have been detected. The Company is vigorously defending these cases and believes that it has meritorious defenses to class certification and the claims asserted. However, there are numerous factual and legal issues to be resolved in connection with these claims, and it is extremely difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, but there can be no assurance that any such exposure will not be material. The Company is also pursuing insurance coverage for these matters. The Company is involved in various lawsuits, claims and proceedings incident to the operation of its businesses, including those pertaining to product liability, environmental, safety and health, intellectual property, employment, commercial and contractual matters, and various other casualty matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, it is management’s opinion that none of these will have a material adverse effect on the Company’s financial position, results of operations or cash flows. Costs related to such matters were not material to the periods presented.

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