St Louis, MO, May 10--Monsanto Co. and Pharmacia Corp. should be forced to cover the estimated $1.3 billion cost of benefits for all Solutia Inc. and some Monsanto retirees and dependents if bankrupt Solutia can't do so, a panel for the retirees argues.
Attorneys for the court-appointed retirees' committee over the benefits Friday with U.S. Bankruptcy Judge Prudence Carter Beatty of New York.
In seeking Chapter 11 bankruptcy protection in December, Solutia cited its struggles under heavy financial obligations assigned to it when it was spun off by Monsanto as a separate company in 1997. Since then, Solutia was on the hook for retiree benefits, environmental and litigation costs accrued by Monsanto and Pharmacia over a century of manufacturing.
In 1999, St. Louis-based Monsanto was acquired by Pharmacia & Upjohn to create Pharmacia Corp., which in 2002 completed a spinoff of its biotechnology and agricultural businesses to form the current Monsanto. Pharmacia was acquired by Pfizer Inc. in April 2003.
Solutia had warned that bankruptcy was possible if it failed to shed debt, come up with cash for its pension fund and address legacy liabilities--litigation and settlement costs, environmental remediation, and retiree healthcare obligations--costing the company about $100 million a year.
In its lawsuit, the seven-retiree panel representing about 23,000 former Solutia and Monsanto workers, their current and former spouses, and dependents argue that Monsanto and Pharmacia should pay all retiree benefits if Solutia defaults on those obligations.
The committee also accuses Monsanto of wrongly saddling Solutia with 70 percent of Monsanto's retirement-benefit obligations and one-half of its other debts, though business assets assigned to Solutia accounted for just one-third of Monsanto's revenues.
The retiree health-related benefits in question refer to health, disability and life obligations and do not include pension benefits, said Nicholas Franke, a St. Louis attorney for Kansas City-based law firm representing the retiree group.
"Many of these retirees worked decades for Monsanto and relied on Monsanto's financial strength for uninterrupted life, health and disability benefits when they retired," Daniel Doyle, the lead attorney for the retiree panel, said Thursday.
But, Doyle argued, "Monsanto's deliberate underfunding of Solutia, which was designed to give Monsanto shareholders a tax-free stock dividend, unfairly put retirees at a high risk of losing retirement benefits due to Solutia's eventual insolvency and default."
While calling bankruptcy court an appropriate forum to resolve the liability issues, Monsanto has said it would not take on any obligations that are not its legal responsibility during the process, barring a court order.
Monsanto spokesman Bryan Hurley said in a statement, "This is a premature action since all retirees are currently receiving all their benefits, and Solutia continues to be legally obligated to provide those same benefits unless the bankruptcy court rules otherwise. We plan to vigorously defend against this suit in the bankruptcy court."
Solutia makes nylon products, films for laminated safety glass and aftermarket, water-treatment chemicals, heat-transfer fluids and aviation hydraulic fluid.
Solutia's shares have been delisted on the New York Stock Exchange since the company's bankruptcy filing, when the company's shares traded at $2.54.
