Legal Proceedings
In December 2003, the Mulberry and Bartow Phosphate Production facilities in
Florida were inspected by the United States Environmental Protection Agency
(USEPA). Since the inspection, USEPA has requested additional information, under
RCRA Section 3007, regarding the hazardous waste handling practices at each
facility. Both facilities have provided detailed answers to those requests.
Additionally, USEPA has provided an inspection report identifying certain
potential violations at the Mulberry facility. USEPA has not provided an
inspection report for the Bartow facility at this time. An official with the
Florida Department of Environmental Protection has informally advised the
Cargill Fertilizer Businesses that it was likely that USEPA would initiate a
regulatory enforcement action against the Cargill Fertilizer Businesses for
certain aspects of the facilities' hazardous waste handling practices.
Typically, these types of actions can result in a required modification of the
Cargill Fertilizer Businesses' waste handling procedures, the imposition of
monetary penalties, or both.
During Hurricane Frances, Mosaic's Riverview facility experienced a sudden
release of approximately 65 million gallons of partially treated process water
from its phosphogypsum stack. This
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release, which was caused in part by heavy rain and winds, ultimately flowed
into Hillsborough Bay. The Florida Department of Environmental Protection,
referred to as FDEP, has stated that it intends to impose fines through civil
enforcement actions for the release. Mosaic intends to assert any defenses that
it may have to civil enforcement and to claims for restoration of resources and
does not expect these costs to have a material effect on the business, assets,
operations, or financial condition of Mosaic.
During Hurricane Jeanne, the Bartow and Mulberry facilities experienced process
water releases. Similarly, excessive rain and loss of electric power to pumps
during Hurricane Jeanne allowed water in the toe ditch at the base of the south
phosphogypsum stack at the Mulberry facility to flow onto the adjacent road and
to an adjacent low-lying area. An unknown amount of contaminated storm water
runoff flowed toward Skin Sapling Creek but did not enter the creek. FDEP may
also seek civil penalties for these releases at Bartow and/or Mulberry. Mosaic
intends to assert all available defenses against such enforcement does not
currently expect these penalties to have a material effect on the business,
assets, operations, or financial condition of Mosaic.
On September 23, 2004, a Class Action Complaint and Demand for Jury Trial,
referred to as the Complaint, was filed against Cargill in the Circuit Court of
the Thirteenth Judicial Circuit for Hillsborough County, Florida. The Complaint,
which arises out of the release of process water from the Riverview facility,
contains four counts: Chapter 376.313 (i.e., statutory strict liability); common
law strict liability; common law public nuisance; and negligence. The strict
liability counts relate to the discharge of pollutants or hazardous substances.
Plaintiffs seek class certification and an award of damages, attorneys' fees and
costs on behalf of a class of unknown size comprising "all fishermen and those
persons engaged in the commercial catch and sale of fish, bait, and related
products in the Tampa Bay area who lost income and suffered damages because of
the pollution, contamination and discharge of hazardous substances by the
defendant Cargill." On October 18, 2004, Cargill responded to the Complaint by
filing a Motion for Summary Judgment or, in the alternative, to Dismiss on the
basis that plaintiffs had improperly named Cargill which neither owned nor
operated the subject facility, as a defendant. On the same day, Cargill was
served with an Amended Class Complaint and Demand for Jury Trial, referred to as
the Amended Complaint, by plaintiffs' counsel. Mosaic has not currently been
named in the lawsuit even though it owns and operates the Riverview facility. It
is possible that plaintiffs may eventually name Mosaic in the action or that
some neighbors, property owners or civic groups may pursue litigation against
Mosaic if material damage from the Riverview release is found to have occurred
to the environment. Mosaic believes that it would have substantial defenses to
any such claims and intends to vigorously defend against any actions that might
be filed.
The Cubatao Public Prosecution Office (Brazil), jointly with OIKOS - UNIO DOS
DEFENSORES DA TERRA (Defenders of the Earth Union), filed a suit on January 15,
1986 against several companies, including a facility operated by the Cargill
Fertilizer Businesses in the Cubatao valley in Brazil. The plaintiffs sought
redress for the companies' alleged continuous discharge of pollutants into the
atmosphere, which they assert would have caused, among other damage, degradation
and the perishing of a considerable part of the vegetation cover in the slopes
of the Serra do Mar mountain range. Review of this matter by a court-appointed
expert panel is pending with no set deadline.
The State of Paran Public Prosecution Service has prepared penal charges against
Fospar and former directors and employees of Fospar on April 10, 2003, alleging
that they caused pollution by allowing rainwater to discharge solid residues of
phosphatic rock from an outdoor storage area through a rainwater drainpipe into
a mangrove area, thus causing contamination to an environmentally protected
area. The alleged acts occurred in January 1999, prior to the Cargill Fertilizer
Businesses' acquisition of its interest in Fospar through the Fertiza
acquisition which occurred in October 2000. Although it has been named in the
charges, Fospar has not received a citation to date and is therefore not yet an
official party to the proceeding. The Cargill Fertilizer Businesses are
continuing to evaluate the matter.
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On January 30, 2004, a lawsuit was filed in the Court of Chancery for New Castle
County in Wilmington, Delaware by a common stockholder of IMC on behalf of a
purported class of all stockholders of IMC. Named as defendants in the complaint
are IMC, all members of IMC's board of directors and Cargill. The plaintiff
alleges, among other things, that the individual defendants breached their
fiduciary duties of care and loyalty to IMC's common stockholders by, among
other things, failing to conduct an auction or otherwise checking the market
value of IMC before voting to approve the merger and contribution agreement, and
that the merger consideration to be received by the IMC common stockholders is
inadequate because, among other things, it is less than the "intrinsic value" of
the IMC common stock and it does not offer a premium to the IMC common
stockholders. The lawsuit seeks, among other things, to enjoin or rescind the
Cargill transactions or, alternatively, to recover unspecified damages and
costs. The defendants have secured an extension of the time to answer or
otherwise plead to the complaint.
On February 24, 2004, a second lawsuit, similar to the lawsuit described above,
was filed in the Court of Chancery for New Castle County in Wilmington,
Delaware. On March 17, 2004, the Court of Chancery consolidated these two
lawsuits and named the complaint in the lawsuit described in the previous
paragraph as the operative complaint for the consolidated lawsuit.
On August 20, 2004, the parties reached an agreement in principle to settle the
class action litigation and subsequently executed definitive settlement
documents which have been filed with, and are subject to the approval of, the
Delaware Court of Chancery.
An action was brought against Fospar, S.A. and the Brazilian Institute for the
Environment and Renewable Natural Resources ("IBAMA") by the Parana Public
Prosecution Service in August 1999 seeking to cause Fospar to suspend any work
or activities that might result in full or partial elimination of a mangrove
swamp in the area of a proposed maritime terminal and bulk pier. The action also
sought to void the existing environmental licenses and authorizations and sought
redress of environmental damage. The court initially granted injunctive relief;
however, the injunction was later cancelled. A second action was subsequently
brought by the Parana Public Prosecution Service in October 1999 against Fospar
and IBAMA seeking to enjoin Fospar from carrying out any work or activities
relating to dredging or intervention in the marine ecosystem that could cause an
adverse environmental impact on the estuary, and to void all environmental
licenses and authorizations issued for the company in relation to the setup of
the proposed maritime terminal and bulk pier. It also sought redress of
environmental damage. No injunctive relief was granted because of the status of
the first case filed in August.
Shortly after the cases were filed in 1999, a federal judge ordered an expert
environmental investigation relating to both cases. The results of the
investigation were issued in October 2003 and were favorable to Fospar. Fospar,
therefore, expected a favorable result in both cases because, in addition to the
favorable results of the expert investigation, the injunctive relief had been
cancelled and the maritime terminal and bulk pier had been constructed in
compliance with applicable laws, licenses, and authorizations and had commenced
operations in February 2001.
In July 2004, the federal court issued a consolidated ruling unfavorable to the
defendants, including Fospar, finding that the request for canceling the
licenses and authorizations was partially valid. Fospar and IBAMA were ordered
to jointly pay R$22,800 (approximately US$7,600) plus monetary correction of
Brazilian currency and 6% interest from the date of the alleged violation.
Additionally, Fospar was ordered to pay two percent of its annual revenues for
the five year period of 2000-2004. If upheld, Fospar estimates the liability
could range from approximately US$742,000 to US$1,091,000. Fospar is appealing
the monetary aspects of the ruling and the Public Prosecution Service has filed
an appeal requesting that the maritime terminal and bulk pier built within the
mangrove area be torn down and that the licenses and authorizations previously
issued be cancelled.
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