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Connecticut and several other states on Monday formally objected to Carrier Global Corp.'s proposed $540 million deal that seeks to release the company from litigation liability linked to "forever chemicals" through its ownership of the bankrupt firefighting foam manufacturer Kidde-Fenwal Inc. The states cited a recent U.S. Supreme Court ruling that rejected a similar bankruptcy plan involving drugmaker Purdue Pharma LP.

The states argue in their objection that the deal, first disclosed in an October filing with the U.S. Securities and Exchange Commission, unlawfully attempts to shield Carrier Global — as the parent company of Kidde-Fenwal, now renamed KFI Wind-Down Corp. — from billions of dollars in claims related to chemical contamination caused by aqueous film-forming foam (AFFF), which is widely used to extinguish fires.

Connecticut, along with California, Colorado, Delaware, New York, and the District of Columbia, asked the Delaware federal bankruptcy court to reject KFI’s disclosure statement. They say it misleads creditors about the scope and value of the company’s liquidation plan and fails to disclose that the plan intends to release Carrier from extensive firefighting foam liabilities.

“The debtor intends to accomplish its objective by unlawful means: the proposed plan will compel nonconsensual third-party releases disguised as a settlement of claims that are property of the estate,” the states stated. “It does not matter that the Plan calls them estate releases instead of third-party releases; what it does is take away creditors' claims for their own injuries.”

The states pointed to the U.S. Supreme Court’s decision last year in Harrington v. Purdue Pharma LP, which “forecloses Carrier's grift.” The court struck down the validity of nonconsensual third-party releases, which extinguish a creditor's claim against a person or entity other than the debtor without that creditor’s consent.

In the Purdue Pharma case, the Sackler family — owners of the company — agreed to contribute up to $6 billion to the estate in exchange for a release from liability tied to the opioid crisis. The U.S. Trustee’s office opposed the releases, arguing they amounted to an inappropriate discharge of liability for nondebtors without subjecting them to bankruptcy court authority.

Kidde-Fenwal filed for bankruptcy in May 2023 amid thousands of lawsuits from firefighters, water suppliers, government entities, and others alleging the company’s firefighting foam contains per- and polyfluoroalkyl substances (PFAS), which pose significant risks to public health and the environment. At the time of bankruptcy, Kidde-Fenwal faced more than $1 billion in claims.

Carrier’s October SEC filing revealed it plans to enter into three settlement agreements: one with KFI, a second with the official committee of unsecured creditors in the bankruptcy case, and a third with co-leads of the plaintiffs’ executive committee in multidistrict litigation over firefighting foam in South Carolina federal court.

In their objection, the states contend that the Supreme Court’s Purdue decision prohibits the plan’s proposed releases for Carrier and other nondebtor affiliates. They accuse Carrier of trying to “use another’s bankruptcy to buy a release for less than it would have to pay on its own.”

Though Carrier initially said it had set aside at least $615 million, the states note the plan proposes paying creditors $540 million over five years. Any insurance recoveries after litigation would be split between Carrier and creditors, up to $3.5 billion, with any excess going to creditors. In return, KFI would grant Carrier a release from all firefighting foam-related claims.

The states urge the bankruptcy court to delay approval of the disclosure statement until Carrier and KFI submit a plan that complies with bankruptcy law.

“Whether you are a family of billionaires or a multinational corporation worth billions of dollars, you cannot hide from liability behind someone else’s bankruptcy,” Connecticut Attorney General William Tong said. “We fought this in the Purdue bankruptcy and this question went all the way up to the Supreme Court. This is settled law.”

“PFAS chemicals are a toxic menace to human health and our environment, and the cost to remediate this public health and environmental catastrophe will be massive,” Tong added. “We will not allow Carrier to abuse the bankruptcy process to evade liability.”

Counsel for the committee of unsecured creditors declined to comment, and attorneys for Carrier and KFI did not immediately respond to requests for comment Monday evening.

The states are represented by their respective attorneys general. Carrier is represented by Paul M. Basta, Kenneth S. Ziman, and Robert A. Britton of Paul Weiss Rifkind Wharton & Garrison LLP. The official committee of unsecured creditors is represented by David J. Molton, Cathrine M. Castaldi, and Eric R. Goodman of Brown Rudnick LLP, and Sander L. Esserman of Stutzman Bromberg Esserman & Plifka PC. KFI is represented by Andy Dietderich, Brian D. Glueckstein, Justin J. DeCamp, and Benjamin S. Beller of Sullivan & Cromwell LLP, and Derek C. Abbott and Andrew R. Remming of Morris Nichols Arsht & Tunnell LLP.

The case is In re: KFI Wind-Down Corp., case number 1:23-bk-10638, in the U.S. Bankruptcy Court for the District of Delaware.