International Paper 2012 Annual Report Download - page 94

transferred from the District Court for the Eastern
District of Wisconsin to the District Court for the
Western District of Michigan. The case has been split
into a liability phase and a potential subsequent
allocation/damages phase. The Company is now
involved in the liability phase of the case and
believes it is premature to predict the outcome or to
estimate the amount or range of loss, if any, which
may be incurred.
International Paper and McGinnis Industrial Main-
tenance Corporation, a subsidiary of Waste
Management, Inc., are potentially responsible parties
at the San Jacinto River Superfund Site in Harris
County, Texas, and have been actively participating
in investigation and remediation activities at this
Superfund Site. In December 2011, Harris County,
Texas filed a suit against the Company in Harris
County District Court seeking civil penalties with
regard to the alleged discharge of dioxin into the San
Jacinto River since 1965 from the San Jacinto River
Superfund Site. Also named as defendants in this
action are McGinnis Industrial Maintenance Corpo-
ration, Waste Management, Inc. and Waste
Management of Texas, Inc. Harris County is seeking
civil penalties pursuant to the Texas Water Code,
which provides for the imposition of civil penalties
between $50 and $25,000 per day. The case is in its
preliminary stages and it is therefore premature to
predict the outcome or to estimate a loss or range of
loss, if any, which may be incurred.
In October 2012, a civil lawsuit was filed against the
same defendants, including the Company, in the
District Court of Harris County by what are now 363
plaintiffs seeking medical monitoring and damages
with regard to the alleged discharge of dioxin into
the San Jacinto River since 1965 from waste
impoundments that are a part of the San Jacinto
Superfund Site. This case is in its early stages and it
is therefore premature to predict the outcome or to
estimate a loss or range of loss, if any, which may be
incurred. In December 2012, residents of an up-river
neighborhood filed a civil action against the same
defendants, including the Company, in the District
Court of Harris County alleging property damage and
personal injury from the alleged discharge of dioxin
into the San Jacinto River from the San Jacinto
Superfund Site. This case is in the discovery phase
and it is therefore premature to predict the outcome
or to estimate a loss or range of loss, if any, which
may be incurred.
In August 2011, Temple-Inland’s Bogalusa, Louisiana
paper mill received predictive test results indicating
that Biochemical Oxygen Demand (BOD) limits for
permitted discharge from the wastewater treatment
pond into the Pearl River were exceeded after an
upset condition at the mill and subsequently con-
firmed reports of a fish kill on the Pearl River (the
Bogalusa Incident). Temple-Inland initiated a full mill
shut down, notified the Louisiana Department of
Environmental Quality (LDEQ) of the situation and
took corrective actions to restore the water quality of
the river. On September 2, 2011, Bogalusa mill oper-
ations were restarted upon receiving approval from
the LDEQ. The LDEQ, the Mississippi DEQ, and other
regulatory agencies in those states have each given
notice of intent to levy penalties and recover restitu-
tion damages resulting from the Bogalusa Incident.
Temple-Inland settled for a total of approximately $1
million the known claims of various Mississippi
regulatory agencies and the Louisiana Department of
Wildlife and Fisheries (LDWF). In September 2012,
the settlement with the LDWF for restitution dam-
ages related to the Bogalusa Incident was vacated by
a state district court. However, on January 15, 2013,
the state Court of Appeals reversed the trial court’s
decision, upheld the validity of the LDWF settlement
and dismissed the underlying lawsuit. On Febru-
ary 14, 2013, the plaintiff appealed the Court of
Appeals’ decision to the Louisiana Supreme Court.
The Company continue’s to believe the settlement is
valid and will vigorously defend our position. The
LDEQ has not yet levied a civil enforcement penalty.
Such a penalty is expected, however, and is likely to
exceed $1 million, but is not expected to be material.
A plea agreement has been reached with the U.S.
Attorney’s Office in New Orleans as a result of a
federal criminal investigation into the Bogalusa
Incident. Pursuant to the plea agreement, on Febru-
ary 6, 2013, Temple-Inland subsidiary, TIN Inc.,
pleaded guilty in U.S. District Court to a mis-
demeanor violation of the Clean Water Act and a
misdemeanor violation of the National Wildlife Ref-
uge statute. The plea agreement, which remains
subject to court approval, provides for a financial
penalty, which is not material, and a two-year corpo-
rate probation period for TIN Inc.
Temple-Inland (or its affiliates) is a defendant in 23
civil lawsuits in Louisiana and Mississippi related to
the Bogalusa Incident. Fifteen of these civil cases
were filed in Louisiana state court shortly after the
incident and have been removed and consolidated in
an action pending in the U.S. District Court for the
Eastern District of Louisiana along with a civil case
originally filed in that court. During August 2012, an
additional 13 causes of action were filed in federal or
state court in Mississippi and Louisiana. In October
2012, International Paper and the Plaintiffs’ Steering
Committee, the group of attorneys appointed by the
Louisiana federal court to organize and coordinate
the efforts of all the plaintiffs in this litigation,
reached a tentative understanding on key structural
terms and an amount for resolution of the litigation.
Preliminary approval for the proposed class action
settlement was granted in December 2012. In the
interim, all civil litigation arising out of the August
2011 discharge has been stayed. We do not believe
that a material loss is probable in this litigation.
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