|Here is the section titled "Legal Proceedings" from GLW's 2011 Annual Report.|
The key points are contained in the last two sentences.
Environmental Litigation. Corning has been named by the Environmental Protection Agency (the Agency) under the Superfund Act
or by state governments under similar state laws, as a potentially responsible party for 18 hazardous waste sites. Under the Superfund
Act, all parties who may have contributed any waste to a hazardous waste site, identified by the Agency, are jointly and severally
liable for the cost of cleanup unless the Agency agrees otherwise. It is Corning’s policy to accrue for its estimated liability related to
Superfund sites and other environmental liabilities related to property owned by Corning based on expert analysis and continual
monitoring by both internal and external consultants. At December 31, 2011 and 2010, Corning had accrued approximately $25
million (undiscounted) and $30 million (undiscounted), respectively, for the estimated liability for environmental cleanup and related
litigation. Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the
Company’s liability and that the risk of an additional loss in an amount materially higher than that accrued is remote.
Dow Corning Corporation. Corning and The Dow Chemical Company (Dow Chemical) each own 50% of the common stock of
Dow Corning. In May 1995, Dow Corning filed for bankruptcy protection to address pending and claimed liabilities arising from
many thousands of breast implant product lawsuits. On June 1, 2004, Dow Corning emerged from Chapter 11 with a Plan of
Reorganization (the Plan) which provided for the settlement or other resolution of implant claims. The Plan also includes releases for
Corning and Dow Chemical as shareholders in exchange for contributions to the Plan.
Under the terms of the Plan, Dow Corning has established and is funding a Settlement Trust and a Litigation Facility to provide a
means for tort claimants to settle or litigate their claims. Inclusive of insurance, Dow Corning has paid approximately $1.7 billion to
the Settlement Trust. As of December 31, 2011, Dow Corning had recorded a reserve for breast implant litigation of $1.6 billion. As a
separate matter arising from the bankruptcy proceedings, Dow Corning is defending claims asserted by a number of commercial
creditors who claim additional interest at default rates and enforcement costs, during the period from May 1995 through June 2004.
As of December 31, 2011, Dow Corning has estimated the liability to commercial creditors to be within the range of $86 million to
$280 million. As Dow Corning management believes no single amount within the range appears to be a better estimate than any other
amount within the range, Dow Corning has recorded the minimum liability within the range. Should Dow Corning not prevail in this
matter, Corning’s equity earnings would be reduced by its 50% share of the amount in excess of $86 million, net of applicable tax
benefits. In addition, the London Market Insurers (the LMI Claimants) claimed a reimbursement right with respect to a portion of
insurance proceeds previously paid by the LMI Claimants to Dow Corning. This claim was based on a theory that the LMI Claimants
overestimated Dow Corning’s liability for the resolution of implant claims pursuant to the Plan. Based on settlement negotiations,
Dow Corning had estimated that the most likely outcome would result in payment to the LMI Claimants in a range of $10 million to
$20 million. During the third quarter, Dow Corning and the LMI Claimants settled the claim for an amount within that range. There
are a number of other claims in the bankruptcy proceedings against Dow Corning awaiting resolution by the U.S. District Court, and it
is reasonably possible that Dow Corning may record bankruptcy-related charges in the future. The remaining tort claims against
Corning are expected to be channeled by the Plan into facilities established by the Plan or otherwise defended by the Litigation
Hemlock Semiconductor Group, of which Dow Corning owns 63%, brought an action against one of its customers to enforce
multiyear supply agreements requiring the customer to purchase or pay for quantities of polycrystalline silicon used in the solar power
industry. Hemlock Semiconductor Group and the customer resolved the dispute during the fourth quarter. The settlement resulted in
Dow Corning recognizing pre-tax income of approximately $420 million for the year ended December 31, 2011, including previously
deferred revenue. After income taxes and amounts attributable to non-controlling interests, net income attributable to Dow Corning
for the year ended December 31, 2011, increased by approximately $177 million from this settlement.
Pittsburgh Corning Corporation. Corning and PPG Industries, Inc. (PPG) each own 50% of the capital stock of Pittsburgh Corning
Corporation (PCC). Over a period of more than two decades, PCC and several other defendants have been named in numerous
lawsuits involving claims alleging personal injury from exposure to asbestos. On April 16, 2000, PCC filed for Chapter 11
reorganization in the U.S. Bankruptcy Court for the Western District of Pennsylvania. At the time PCC filed for bankruptcy
protection, there were approximately 11,800 claims pending against Corning in state court lawsuits alleging various theories of
liability based on exposure to PCC’s asbestos products and typically requesting monetary damages in excess of one million dollars per
claim. Corning has defended those claims on the basis of the separate corporate status of PCC and the absence of any facts supporting
claims of direct liability arising from PCC’s asbestos products. Corning is also currently involved in approximately 9,900 other cases
(approximately 38,300 claims) alleging injuries from asbestos and similar amounts of monetary damages per case. Those cases have
been covered by insurance without material impact to Corning to date. As described below, several of Corning’s insurance carriers
have filed a legal proceeding concerning the extent of any insurance coverage for these claims. Asbestos litigation is inherently
difficult, and past trends in resolving these claims may not be indicators of future outcomes.
Corning, with other relevant parties, has been involved in ongoing efforts to develop a Plan of Reorganization that would resolve the
concerns and objections of the relevant courts and parties. In 2003, a plan was agreed to by various parties (the 2003 Plan), but, on
December 21, 2006, the Bankruptcy Court issued an order denying the confirmation of that 2003 Plan. On January 29, 2009, an
amended plan of reorganization (the Amended PCC Plan) - which addressed the issues raised by the Court when it denied
confirmation of the 2003 Plan - was filed with the Bankruptcy Court.
The proposed resolution of PCC asbestos claims under the Amended PCC Plan would have required Corning to contribute its equity
interests in PCC and Pittsburgh Corning Europe N.V. (PCE), a Belgian corporation, and to contribute a fixed series of payments,
recorded at present value. Corning would have had the option to use its shares rather than cash to make these payments, but the
liability would have been fixed by dollar value and not the number of shares. The Amended PCC Plan would, originally, have
required Corning to make (1) one payment of $100 million one year from the date the Amended PCC Plan becomes effective and
certain conditions are met and (2) five additional payments of $50 million, on each of the five subsequent anniversaries of the first
payment, the final payment of which is subject to reduction based on the application of credits under certain circumstances.
Documents were filed with the Bankruptcy Court further modifying the Amended PCC Plan by reducing Corning’s initial payment by
$30 million and reducing its second and fourth payments by $15 million each. In return, Corning would relinquish its claim for
reimbursement of its payments and contributions under the Amended PCC Plan from the insurance carriers involved in the bankruptcy
proceeding with certain exceptions.
On June 16, 2011, the Court entered an Order denying confirmation of the Amended PCC Plan. The Court’s memorandum opinion
accompanying the order rejected some objections to the Amended PCC Plan and made suggestions regarding modifications to the
Amended PCC Plan that would allow the Plan to be confirmed. Corning and other parties have filed a motion for reconsideration,
objecting to certain points of this Order. Certain parties to the proceeding filed specific plan modifications in response to the Court’s
opinion and Corning supported these filings. Corning and other parties also filed a motion for reconsideration objecting to certain
points in the Court’s opinion and Order. Proposed plan modifications will be discussed during the hearing scheduled for February 17,
The Amended PCC Plan does not include certain non-PCC asbestos claims that may be or have been raised against Corning. Corning
has recorded an additional $150 million for such claims in its estimated asbestos litigation liability. The liability for non-PCC claims
was estimated based upon industry data for asbestos claims since Corning does not have recent claim history due to the injunction
issued by the Bankruptcy Court. The estimated liability represents the undiscounted projection of claims and related legal fees over
the next 20 years. The amount may need to be adjusted in future periods as more data becomes available.
The Amended PCC Plan with the modifications addressing issues raised by the Court’s June 16 opinion remains subject to a number
of contingencies. Payment of the amounts required to fund the Amended PCC Plan from insurance and other sources are subject to a
number of conditions that may not be achieved. The approval of the (further modified) Amended PCC Plan by the Bankruptcy Court
is not certain and faces objections by some parties. If the modified Amended PCC Plan is approved by the Bankruptcy Court, that
approval will be subject to appeal. For these and other reasons, Corning’s liability for these asbestos matters may be subject to
changes in subsequent quarters. The estimate of the cost of resolving the non-PCC asbestos claims may also be subject to change as
developments occur. Management continues to believe that the likelihood of the uncertainties surrounding these proceedings causing
a material adverse impact to Corning’s financial statements is remote.
Several of Corning’s insurers have commenced litigation in state courts for a declaration of the rights and obligations of the parties
under insurance policies, including rights that may be affected by the potential resolutions described above. Corning is vigorously
contesting these cases. Management is unable to predict the outcome of this insurance litigation and therefore cannot estimate the
range of any possible loss.