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Chemours Board Sued Over PFAS Liabilities Assumed in DuPont Spin

Sept. 16, 2020, 9:02 PM

Chemours Co.'s board and senior management were sued by a pension fund in Delaware Chancery Court on Wednesday over billions in potential environmental liabilities related to PFAS, a class of “forever chemicals,” that the company took on when it spun off from DuPont.

The derivative lawsuit accuses the company’s leaders of breaching their duties to investors in connection with the 2015 spinoff, which allegedly put Chemours on the hook for litigation and environmental cleanup costs, potentially exceeding $2.5 billion, related to the cancer-linked group of chemicals once used in firefighting foam and nonstick cookware.

DuPont and Chemours agreed in 2017 to split a $671 million settlement related to about 3,550 health claims, but they’re still at odds over many others.

The full extent of Chemours’ potential obligations didn’t emerge until mid-2019, when it sued DuPont over them. That case—which was sent to arbitration in a ruling later appealed to Delaware’s top court—now appears close to settling.

Chemours called the shareholder suit baseless in a statement Wednesday, saying it “misreads and misinterprets” the dispute between Chemours and DuPont.

That suit seeks an order “limiting DuPont’s indemnification rights against Chemours” to the “high-end maximum realistic” liability estimates it offered as part of the spinoff, or the return of a "$4 billion dividend it extracted from Chemours premised upon these maximums,” the statement said.

The new shareholder suit, filed under seal, appears broadly similar to a pair of derivative cases brought in Delaware federal court by individual investors in late July. Those suits accuse Chemours’ board and leadership of concealing the extent of its PFAS liabilities while two top executives sold stock at prices inflated by the scheme.

Chemours was “insolvent from the start,” and the company has admitted under oath that management and the board were “fully aware” its public liability estimates were “baseless concoctions,” the earlier suits say.

The derivative cases also echo a proposed securities class action consolidated in the U.S. District Court for the District of Delaware.

The new suit was filed by the City of Hialeah Employees Retirement System, a Florida municipal pension fund that holds Chemours stock. Under Chancery Court rules, the complaint is due to be unsealed on or around Sept. 21.

Cause of Action: Breach of fiduciary duty.

Counsel: The pension fund is represented by Bernstein Litowitz Berger & Grossmann LLP.

The case is City of Hialeah Emp. Ret. Sys. v. Vergnano, Del. Ch., No. 2020-0786, complaint filed 9/16/20.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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