08 December 2003 00:00 [Source: ICB Americas]Solutia Inc. is wrangling with Pharmacia Corp. and Monsanto Company over payments in two asbestos settlements that could set the stage to reduce its legacy liabilities. Solutia is refusing to pay $3 million to satisfy asbestos litigation settlements in two cases it settled on behalf of Pharmacia.
The settlement agreements in question are Brignac, et al. v. Pharmacia Corp., settled in April 2003, and Campbell et al. v. Pharmacia Corp., settled last August-both in Texas.
In its latest 10-Q filing on November 11, Solutia said it is defending around 570 asbestos actions involving 3,500 to 4,500 plaintiffs brought against Pharmacia. In its spinoff from Monsanto in 1997, Solutia agreed to take responsibility for all environmental and retiree costs related to the former Monsanto chemicals business. Monsanto then sold its pharmaceutical division to Pharmacia, which later merged with Pfizer Inc.
"In the spinoff, Monsanto cherry-picked what it wanted and threw in all kinds of cats and dogs as a going away present, including $1 billion in debt and environmental and litigation costs," says a Solutia official.
Solutia points to its latest 10-Q filing where it said it "must take action to reduce its current level of legacy liabilities," which currently cost the company around $100 million per year. The company is in negotiations with bondholders to restructure its heavy debt load.
"We're making a strategic decision not to pay for Monsanto or Pharmacia's liabilities. Why should we use our resources when we're not even named as a defendant," says a Solutia official. "We're not going to do it."
The official also notes that in the spinoff, Solutia was assigned 85 percent of Monsanto's retirees. "Today, we have to take care of 20,000 Monsanto and Pharmacia retirees where we only have 4,000," he says.
Solutia says it has not advised Monsanto and Pharmacia that it will not honor any remaining legacy liabilities, but says it will be selective.
Monsanto says Solutia's failure to honor the settlements would be a breach of its spinoff agreement. "Under the distribution agreement, Solutia assumed these liabilities and does not have the right to selectively determine which obligations it honors," Monsanto says in a statement.
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