| Litigation and Contingencies | Footnote 18 — Litigation and Contingencies
The Company is involved in legal proceedings in the ordinary course
of its business. These proceedings include claims for damages
arising out of use of the Company’s products, allegations of
infringement of intellectual property, commercial disputes and
employment matters, as well as environmental matters. Some of the
legal proceedings include claims for punitive as well as
compensatory damages, and certain proceedings may purport to be
class actions.
Recall of Harness Buckles on Select Car Seats
In February 2014, Graco, a subsidiary of the Company, announced a
voluntary recall in the U.S. of harness buckles used on
approximately 4 million toddler car seats manufactured between
2006 and 2013. In July 2014, Graco announced that it had agreed to
expand the recall to include certain infant car seats manufactured
between July 2010 and May 2013. In December 2014, the National
Highway Traffic Safety Administration (the “NHTSA”)
announced an investigation into the timeliness of the recall, and
in March 2015, the investigation concluded with Graco entering into
a consent order with NHTSA pursuant to which Graco committed to
spend $7.0 million in total over a five-year period to enhance
child passenger safety and make a $3.0 million payment to
NHTSA. At June 30, 2017, the amount remaining to be paid
associated with the consent order was immaterial to the condensed
consolidated financial statements of the Company.
Jarden Acquisition
Under the Delaware General Corporation Law (“DGCL”),
any Jarden stockholder who did not vote in favor of adoption of the
Merger Agreement, and otherwise complies with the provisions of
Section 262 of the DGCL, is entitled to seek an appraisal of
its shares of Jarden common stock by the Court of Chancery of the
State of Delaware as provided under Section 262 of the DGCL.
As of June 30, 2017, dissenting stockholders collectively
holding approximately 10.6 million shares of Jarden common
stock have delivered (and not withdrawn) to Jarden written demands
for appraisal. Two separate appraisal petitions, styled Dunham
Monthly Distribution Fund v. Jarden Corporation 12454-VCS Merion Capital LP v.
Jarden Corporation 12456-VCS Fir Tree Value Master Fund, LP v. Jarden
Corporation 12546-VCS Veritian Partners Master Fund
LTP v. Jarden Corporation 12650-VCS 12456-VCS,
On July 5, 2017 and July 6, 2017, Jarden and eleven of
the dissenting stockholders, specifically including Merion Capital
ERISA LP, Merion Capital LP, Merion Capital II LP, Dunham Monthly
Distribution Fund, WCM Alternatives: Event-Driven Fund, Westchester
Merger Arbitrage Strategy sleeve of the JNL Multi-Manager
Alternative Fund, JNL/Westchester Capital Event Driven Fund, WCM
Master Trust, The Merger Fund, The Merger Fund VL and SCA JP Morgan
Westchester (collectively, the “Settling Petitioners”),
entered into settlement agreements with respect to approximately
7.7 million former Jarden shares (the “Settlement
Agreements”). Pursuant to the Settlement Agreements in
exchange for withdrawing their respective demands for appraisal of
their shares of Jarden common stock and a full and final release of
all claims, among other things, the Settling Petitioners received
the original merger consideration provided for under the Merger
Agreement, specifically (1) 0.862 of a share of Newell common
stock, and (2) $21.00 in cash, per share of Jarden common stock
(collectively, the “Merger Consideration”), excluding
any and all other benefits, including, without limitation, the
right to accrued interest, dividends, and/or distributions.
Accordingly, pursuant to the terms of the Settlement Agreements,
Newell issued 6.6 million shares of Newell common stock to the
Settling Petitioners (representing the stock component of the
Merger Consideration), and authorized payment to the Settling
Petitioners of approximately $162 million (representing the
cash component of the Merger Consideration). The Court of Chancery
of the State of Delaware has dismissed with prejudice the appraisal
claims for the Settling Petitioners.
Environmental Matters
The Company is involved in various matters concerning federal and
state environmental laws and regulations, including matters in
which the Company has been identified by the U.S. Environmental
Protection Agency (“U.S. EPA”) and certain state
environmental agencies as a potentially responsible party
(“PRP”) at contaminated sites under the Federal
Comprehensive Environmental Response, Compensation and Liability
Act (the “CERCLA”) and equivalent state laws. In
assessing its environmental response costs, the Company has
considered several factors, including the extent of the
Company’s volumetric contribution at each site relative to
that of other PRPs; the kind of waste; the terms of existing cost
sharing and other applicable agreements; the financial ability of
other PRPs to share in the payment of requisite costs; the
Company’s prior experience with similar sites; environmental
studies and cost estimates available to the Company; the effects of
inflation on cost estimates; and the extent to which the
Company’s, and other parties’, status as PRPs is
disputed.
The Company’s estimate of environmental remediation costs
associated with these matters as of June 30, 2017 was
$49.7 million, which is included in other accrued liabilities
and other noncurrent liabilities in the condensed consolidated
balance sheets. No insurance recovery was taken into account in
determining the Company’s cost estimates or reserves, nor do
the Company’s cost estimates or reserves reflect any
discounting for present value purposes, except with respect to
certain long-term operations and maintenance CERCLA matters.
Lower Passaic River Matter
U.S. EPA has issued General Notice Letters (“GNLs”) to
over 100 entities, including the Company and Berol Corporation, a
subsidiary of the Company (“Berol”), alleging that they
are PRPs at the Diamond Alkali Superfund Site, which includes a
17-mile Seventy-two
U.S. EPA issued its final Record of Decision for the lower 8.3
miles of the Lower Passaic River (the “ROD”) in March
2016, which, in the language of the document, finalizes as the
selected remedy the preferred alternative set forth in the FFS,
which U.S. EPA estimates will cost $1.4 billion. Subsequent to
the release of the ROD in March 2016, U.S. EPA issued GNLs for the
lower 8.3 miles of the Lower Passaic River (the “2016
GNL”) to numerous entities, apparently including all previous
recipients of the initial GNL as well as several additional
entities. As with the initial GNL, the Company and Berol were among
the recipients of the 2016 GNL. The 2016 GNL states that U.S. EPA
would like to determine whether one entity, Occidental Chemical
Corporation (“OCC”), will voluntarily perform the
remedial design for the selected remedy for the lower 8.3 miles,
and that following execution of an agreement for the remedial
design, U.S. EPA plans to begin negotiation of a remedial action
consent decree “under which OCC and the other major PRPs will
implement and/or pay for U.S. EPA’s selected remedy for the
lower 8.3 miles of the Lower Passaic River and reimburse U.S.
EPA’s costs incurred for the Lower Passaic River.” The
letter “encourage[s] the major PRPs to meet and discuss a
workable approach to sharing responsibility for implementation and
funding of the remedy” without indicating who may be the
“major PRPs.” Finally, U.S. EPA states that it
“believes that some of the parties that have been identified
as PRPs under CERCLA, and some parties not yet named as PRPs, may
be eligible for a cash out settlement with U.S. EPA for the lower
8.3 miles of the Lower Passaic River.” In September 2016, OCC
and EPA entered into an Administrative Order on Consent for
performance of the remedial design. On March 30, 2017, U.S.
EPA sent a letter offering a cash settlement in the amount of
$280,600 to twenty PRPs, not including the Company Parties, for
CERCLA Liability (with reservations, such as for Natural Resource
Damages) in the lower 8.3 miles of the Lower Passaic River. U.S.
EPA further indicated in related correspondence that a cash out
settlement might be appropriate for additional parties that are
“not associated with the release of dioxins, furans, or PCBs
to the Lower Passaic River.” At this time, it is unclear how
the cost of any cleanup would be allocated among any of the
parties, including the Company Parties or any other entities. The
site is also subject to a Natural Resource Damage Assessment.
OCC has asserted that it is entitled to indemnification by Maxus
Energy Corporation (“Maxus”) for its liability in
connection with the Diamond Alkali Superfund Site. OCC has
also asserted that Maxus’s parent company, YPF, S.A., and
certain other affiliates (the “YPF Entities”) similarly
must indemnify OCC, including on an “alter ego” theory.
On June 17, 2016, Maxus and certain of its affiliates
commenced a chapter 11 bankruptcy case in the U.S. Bankruptcy Court
for the District of Delaware. In connection with that
proceeding, the YPF Entities are attempting to resolve any
liability they may have to Maxus and the other Maxus entities
undergoing the chapter 11 bankruptcy. An amended Chapter 11 plan of
liquidation became effective in July 2017. In conjunction with that
plan, Maxus and certain other parties, including the Company
parties, entered into a mutual contribution release agreement
pertaining to certain costs, but not costs associated with ultimate
remedy.
Given the uncertainties pertaining to this matter, including that
U.S. EPA is still reviewing the draft RI and FS, that no framework
for or agreement on allocation for the investigation and ultimate
remediation has been developed, and that there exists the potential
for further litigation regarding costs and cost sharing, the extent
to which the Company Parties may be held liable or responsible is
not yet known. Accordingly, it is not possible at this time for the
Company to estimate its ultimate liability related to this
matter.
Based on currently known facts and circumstances, the Company does
not believe that this matter is reasonably likely to have a
material impact on the Company’s results of operations,
including, among other factors, because the Company Parties’
facilities are not even alleged to have discharged the contaminants
which are of the greatest concern in the river sediments, and
because there are numerous other parties who will likely share in
any costs of remediation and/or damages. However, in the event of
one or more adverse determinations related to this matter, it is
possible that the ultimate liability resulting from this matter and
the impact on the Company’s results of operations could be
material.
Because of the uncertainties associated with environmental
investigations and response activities, the possibility that the
Company could be identified as a PRP at sites identified in the
future that require the incurrence of environmental response costs
and the possibility that sites acquired in business combinations
may require environmental response costs, actual costs to be
incurred by the Company may vary from the Company’s
estimates.
Clean Air Act Labeling Matter
In April 2015, the Company became aware that two beverage container
products, one product of its recently acquired bubba brands
business and one product of its recently acquired Ignite business,
contained closed cell rigid polyurethane foam insulation that was
blown with HCFC-141b, which is listed as a Class II
ozone-depleting
Other Matters
Although management of the Company cannot predict the ultimate
outcome of these proceedings with certainty, it believes that the
ultimate resolution of the Company’s proceedings, including
any amounts it may be required to pay in excess of amounts
reserved, will not have a material effect on the Company’s
Consolidated Financial Statements, except as otherwise described
above.
In the normal course of business and as part of its acquisition and
divestiture strategy, the Company may provide certain
representations and indemnifications related to legal,
environmental, product liability, tax or other types of issues.
Based on the nature of these representations and indemnifications,
it is not possible to predict the maximum potential payments under
all of these agreements due to the conditional nature of the
Company’s obligations and the unique facts and circumstances
involved in each particular agreement. Historically, payments made
by the Company under these agreements did not have a material
effect on the Company’s business, financial condition or
results of operations.
As of June 30, 2017, the Company had approximately
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