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Commitments and Contingencies
6 Months Ended
Jun. 30, 2021
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

14. Commitments and Contingencies

We are subject to laws and regulations relating to the protection of the environment. We provide for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change and are generally not discounted. We have been designated as a potentially responsible party or have received claims in four active federal and state Superfund and other multiparty remediation sites. In addition to these sites, we may also have the obligation to remediate six other previously and currently owned facilities. At the Superfund sites, the Comprehensive Environmental Response, Compensation and Liability Act provides that our liability could be joint and several, meaning that we could be required to pay an amount in excess of our proportionate share of the remediation costs.

Our understanding of the financial strength of other potentially responsible parties at the multiparty sites and of other liable parties at the previously owned facilities has been considered, where appropriate, in the determination of our estimated liability. We believe that our recorded accruals, recorded in Accrued liabilities and other and Other noncurrent liabilities, are adequate to cover our share of the potential costs of remediation at each of the multiparty sites and the previously and currently owned facilities. It is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future. However, in our opinion, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material effect on our consolidated results of operations, financial position or cash flows.

In April 2019, we received a subpoena from the SEC related to previous business dealings with the Brazilian Ministry of Education. The SEC and Department of Justice (“DOJ”) are investigating the matter, and we are cooperating as they conduct their investigations.

In addition, the Brazil authorities are also investigating the matter and in June 2021 the Company learned that Brazil's Comptroller General of the Union ("CGU") issued an administrative enforcement notice with charges related to previous business dealings between an administrative body of the Brazilian Ministry of Education and the Company's former Brazilian subsidiary, RR Donnelley Editora e Gráfica (“RRD-Brazil”).  The administrative enforcement notice forms the basis of an administrative proceeding against the former Brazilian subsidiary (which filed for bankruptcy liquidation in March 2019) and its immediate parent, RR Donnelley Holdings B.V.  The Company also is named as a party in this proceeding.  The administrative enforcement notice alleges that former employees of RRD-Brazil engaged in anticompetitive and other business misconduct in connection with services provided to the Ministry of Education.  We are pursuing our defenses in this matter and analyzing potential courses of action with local legal counsel.

From time to time, our clients file voluntary petitions for reorganization under United States bankruptcy laws. In such cases, certain pre-petition payments received by us from these parties could be considered preference items and subject to return.

We also regularly investigate matters reported to our whistleblower hotline and are currently investigating matters in certain foreign locations. In addition, we may be party to litigation arising in the ordinary course of business.

We believe that the final resolution of these preference items, investigations, and litigation will not have a material effect on our consolidated results of operations, financial position or cash flows.

Contingencies related to LSC Communication, Inc. and Subsidiaries (“LSC”) and Donnelley Financial Solutions, Inc. (“Donnelley Financial”)

Subsequent to the spinoff of LSC Communications, Inc. and Subsidiaries (“LSC”) and Donnelley Financial Solutions, Inc. (“Donnelley Financial”) on October 1, 2016, we may be contingently liable for obligations under various operating leases for office, warehouse and manufacturing locations of LSC and Donnelley Financial. In the event that LSC or Donnelley Financial, or any successor lessee, fail to make lease payments or fail to pay other obligations under these lease agreements, we may be required to satisfy those obligations to the lessor. Our exposure to these potential contingent liabilities decreases over time as LSC and Donnelley Financial pay monthly lease obligations and as the leases expire. As of June 30, 2021 these potential contingent obligations were $41.2 million and $1.8 million for LSC and Donnelley Financial, respectively.

On April 13, 2020, LSC announced that it, along with most of its U.S. subsidiaries, voluntarily filed for business reorganization under Chapter 11 of the U.S. Bankruptcy Code. In September 2020, a third-party (the “Buyer”) offered to buy the assets and assume certain obligations of LSC. Although the buyer assumed the majority of LSC’s existing leases, we continue to be contingently liable for these leases until their termination or renewal.

In May and June 2020 we became aware that LSC failed to make required monthly contributions to certain of their multiemployer pension plans (“MEPP”). In accordance with laws and regulations governing multiemployer pension plans, we believe that we and Donnelley Financial, as former members of the control group, are contingently liable on a joint and several liability basis for LSC’s MEPP obligations. We believe that the total undiscounted MEPP obligations for which LSC was responsible was approximately $100 million and was payable over an average 13-year period. The amount of our ultimate liability related to LSC's MEPP obligations is contingent upon the outcome of our negotiations with Donnelley Financial concerning how the obligations would be apportioned between us and Donnelley Financial. These negotiations commenced during the third quarter of 2020, when the parties agreed to enter into mediation, and then arbitration, after an agreement was not reached though the mediation process. During the first quarter of 2021, Donnelley Financial filed notice to commence the arbitration process, although no arbitration date has been set. In 2020, we recorded a contingent liability of approximately $37.1 million representing our estimate of the aggregate payments we believe we will be required to make with respect to LSC’s MEPP liabilities. This amount however could be adjusted in the future based on the final allocation as a result of the arbitration process. Payments to settle this liability are scheduled to be completed by 2034.

During the six months ended June 30, 2021, we and Donnelley Financial commenced negotiations with each of the three MEPPs to settle the MEPP liabilities and, we successfully negotiated a settlement with two of the three plans. As a result of these settlements, in the same period, we recorded a $2.2 million gain in restructuring, impairment and other expense on the Condensed Consolidated Statement of Operations reflecting our estimated share of the reduced liability. Cash payments made by us during the second quarter of 2021 were approximately $18.4 million and primarily related to the settlement of the two MEPP plans. As of June 30, 2021, we have $13.4 million accrued representing our estimate for our share of the remaining liability.