Microplastics and Manufacturers in the spotlight

Microplastics and Manufacturers in the spotlight

The large-scale production and widespread use of plastics in manufacturing exploded in the 1950s. Since then, a staggering 8.3 billion metric tons of virgin plastics have been produced. Once considered a useful product, about 70% of this plastic is now waste. 

When larger plastic items break down, either through wear of products or breakdown in a landfill, “microplastics” are formed. Microplastics can also be directly released into the environment by manufacturing processes. They can enter the environment at every state of their lifecycle, from airborne discharge during manufacturing, shedding during product use, mismanagement of waste and stormwater/wastewater discharges.

Scientific studies have established that we all are exposed to microplastics in the air we breathe, the food we eat, and the water we drink. But the extent of harm to human health and the environment is still being determined. While the scientific community is working to evaluate those effects, the state of California is already leading the way in developing regulations that may impact producers and users of plastics.

In 2020, the California State Water Resources Control Board became the first regulatory body to define microplastics in drinking water. Its definition is based on particle size and sets the bounds of the size of microplastics to between 1 nanometer and 5,000 micrometers.

The next step in California’s path to understanding microplastics is the development of a comprehensive way to analyze microplastics at a laboratory. There are numerous polymers, additives, colors, sizes, and shapes that make up the universe of microplastics. Collecting these samples, preparing them and analyzing them at a lab is both complex and unlikely to ever have a one-size-fits-all approach. However, once these testing methods are developed, adopted, and accredited in mid-2022, the sampling for (and likely detection of) microplastics will begin. As we have seen with other emerging contaminants, once microplastics can be reliably detected in water, air and soil, liability will likely follow.

Not everyone is waiting for the development of microplastics regulations, as some plaintiffs have already taken matters into their own hands and are suing plastics producers and users under existing legal theories. These cases have already had a huge impact on those industries that produce and use plastics.

In recent years, environmental organizations have been using citizen-suit provisions to target plastic producers such as the Citizen Suit Against Formosa Plastics where the plaintiff argued that the defendant, Formosa Corp., a global manufacturer of resins and petrochemicals, was violating its U.S. Clean Water Act (CWA) discharge permit by discharging plastic pellets and PVC powder into a surface water body. The terms of the permit prohibited the “discharge of floating solids or visible foam in other than trace amounts.” The court was subsequently presented with photographic, video, and water sample evidence to demonstrate that Formosa was in violation of the terms of its permit.

Despite Formosa’s counter argument that it was not in violation of its permit as the provision did not specify a weight or concentration for the referenced discharge, the court found that Formosa discharged plastics on 736 different days in violation of its permit and called Formosa a “serial offender.” To add insult to injury, the court also held that Formosa failed to report its noncompliance, as it was required to do under the permit.

The two parties entered into a consent decree to settle the case after the court handed down its decision and as a result Formosa was required to pay $50 million to fund environmental projects to offset the harm it caused to the environment, as well as over $3 million in plaintiffs’ legal fees. Formosa was also forced to commit to a number of facility upgrades and monitoring requirements, as well as a zero-plastics discharge commitment by 2024.

Microplastics floating in the ocean

Citizen suits are not the only recourse available to dissatisfied members of the public as plaintiffs have also used the federal Resource Conservation and Recovery Act, which regulates solid and hazardous waste, as a mechanism to sue plastics producers. In Charleston Riverkeeper et al. v. Frontier Logistics, for example, plaintiffs sued Frontier Logistics, a plastics transporter, alleging that Frontier had discharged plastic pellets which subsequently remained in and around a number of surface water bodies. The plaintiffs further argued that Frontier violated the Clean Water Act, claiming that by discharging this solid waste, Frontier created an “imminent and substantial endangerment” to human health and the environment, a cause of action provided for under RCRA.

Unlike the Formosa Plastics case, Frontier settled the suit long before trial, agreeing to pay $1 million to fund environmental projects to clean up the waterways as well as paying $225,000 to cover plaintiffs’ legal fees. In addition to these financial restitutions, Frontier further agreed to an independent audit of its facility and to implement the auditor’s recommendations with regard to environmental safeguards.

Manufacturers have also been subject to shareholder derivative suits for plastics-related claims with a shareholder of Danimer Scientific, Inc. filing a derivative suit in the fall of 2021 which alleged that the company’s overstated sustainability claims led to millions of dollars in market capitalization losses. Danimer is a large-scale manufacturer of polymers, resins, and plastic alternatives which are used in a number of plastic products. Prior to the trial, the company claimed that its products were biodegradable and that they could reduce plastic use and pollution. For one product in particular, “Nodax,” Danimer proudly boasted that it was fully degradable within just 12 to 18 weeks of being discarded. A Danimer press release on Nodax claimed that it is a “100% biodegradable, renewable, and sustainable plastic . . . certified as marine-degradable, the highest standard of biodegradability, which verifies the material will fully degrade in ocean water without leaving behind harmful microplastics.” The company made similar representations about Nodax in an SEC Form S-1 registration statement.

Unfortunately for Danuimer, the Wall Street Journal published a detailed article refuting Danimer’s biodegradation claims shortly after the aforementioned statements were published. Various experts cited ion the article were highly skeptical of Danimer’s claims about their products, casting doubt on whether they really would degrade as quickly as advertised under real-world conditions. The article noted that things like ocean temperature, microorganism variation and plastic shape and size will all impact biodegradability and may result in significantly longer timelines for degradation. The next trading day after the publication of the Wall Street Journal article saw Danimer’s stock price drop by almost 13%, and as of the time of writing the stock was below $10 a share, down from $50 a share in May.

The plaintiff, a Danimer stockholder, filed the derivative suit against the company’s CEO and Chairman of the Board, CFO, and a number of the company’s directors, claiming that these officers and directors breached their fiduciary duties to the company by intentionally or recklessly allowing these false statements to be published, resulting in significant losses. The plaintiff also sued the officers and directors for unjust enrichment, waste of corporate assets, and breaches of the Exchange Act.

Lastly, plastics users are now also being targeted in court for their alleged contribution to world-wide plastics pollution. An example of this is Earth Island Institute, a non-profit environmental group based in Berkeley, California, which is suing companies including Coca-Cola, Crystal Geyser Water, Clorox, Colgate-Palmolive and others, alleging violations of consumer protection laws as they produce and use plastic products that contaminate the environment, and that these products are not as recyclable as the companies claim. The lawsuit alleges common law theories of liability such as negligence, nuisance, breach of warranty, as well as violations of consumer protection laws, and calls for these companies to stop polluting. In addition, the plaintiff also seeks recovery of resources it is required to expend to combat plastics pollution.

Today we are taking merely the first steps on what is likely to be a long road towards microplastics regulation. We must bear in mind that as scientific knowledge and sampling efforts develop, regulatory bodies will always look for ways to stop microplastics from being released into the environment, as well as to clean up those that are already there, as will potential plaintiffs.

As can be noted in the cases cited above as well as with other emerging contaminants, such as PFAS, these efforts often involve not just the direct product producer, but also many companies that may have used the regulated product (and also many that never used it at all).

Given that microplastics are an almost inescapable feature in the environment, regulatory agencies and plaintiffs alike may cast a wide net when identifying potentially responsible parties. Even without robust microplastics regulations, plaintiffs are already using existing laws to try and find ways to target plastics in the environment, from citizen suits to challenging claims regarding sustainability and recycling as they relate to plastics. 

So what can plastics producers and users do now? Manufacturers may want to survey their operations and supply chains to determine how plastics are being used—and potentially released into the environment. Manufacturers may also want to evaluate their permits, licenses, approvals, and regulations that apply to their operations to determine if there are ways that an administrative agency, or a plaintiff, may use those mechanisms to address plastics releases.

And smart manufacturers will also want to keep an eye on what happens in California as it moves through the regulatory process for microplastics, as its efforts are likely to be a model for other jurisdictions. These regulations have the potential to directly or indirectly impact plastics producers and users as agencies and plaintiffs look for ways to address microplastics pollution and curtail future releases of the contaminant.