Chemours files lawsuit against DuPont
Alleges company underestimated environmental liabilities
PARKERSBURG — DuPont created Chemours to dump its environmental liability upon the spinoff company, according to an unsealed lawsuit filed by Chemours in Delaware.
Chemours is claiming DuPont underestimated the liabilities, including from perfluorinated compounds, and is attempting to nullify a clause in the spinoff agreement to indemnify DuPont from any future environmental liability. C8, once used to make Teflon at the Washington Works, is a perfluorinated chemical.
The 64-page lawsuit was filed and sealed on May 13 while a public redacted version was to have been filed on May 16. Chemours attorneys failed to file a redacted version within the timeframe and the Associated Press asked the court to unseal the lawsuit. A judge ruled continued secrecy violated court rules and ordered it unsealed on Friday.
The lawsuit said DuPont in 2015 “orchestrated a spinoff of its Performance Chemicals unit into a new company it named Chemours as part of a plan to try to off-load its historical environmental liabilities.” The DuPont board made the determination, required by Delaware statutory and common law, that the spinoff was appropriate and that Chemours was solvent and viable at the time, the suit said.
“DuPont’s board made that determination on the basis of ‘high end (maximum) realistic exposure numbers’ DuPont certified for each of the host of contingent liabilities it was dumping on Chemours,'” the suit said.
“It has since become clear that DuPont’s supposedly ‘maximum’ numbers were systematically and spectacularly wrong,” the suit said. “Yet DuPont and the other defendants now claim a right to unlimited indemnification from Chemours for DuPont’s massive historical liabilities, without regard for the ‘maximum’ numbers DuPont certified for those liabilities and upon which the spinoff was predicated.”
The lawsuit names DowDuPont Inc., Corteva Inc. and E.I. DuPont De Nemours and Co. as defendants. Dow Chemicals and DuPont merged after the Chemours spinoff. Corteva, previously the Agriculture Division of DowDuPont, became an independent public company on June 1.
The defendants have asked the court to dismiss the complaint and go to arbitration where DuPont and Corteva “expect to fully rebut the substance of Chemours’ allegations through the private arbitration process to which Chemours previously agreed,” a statement from the companies said.
At time of the spinoff, DuPont, involved in the multi-district litigation in federal court in Columbus from 3,500 plaintiffs over C8 contamination, estimated the liability at $128 million, but the settlement of the litigation in 2017 was $671 million, the Chemours lawsuit said. Chemours also claimed DuPont estimated its liabilities over the Cape Fear River discharges from the Fayetteville, N.C., Works at $2.09 million; however, it is more than $200 million, the lawsuit said.
“Beyond that, many private lawsuits relating to DuPont’s activities in the region remain outstanding, including a large class action as to which the North Carolina federal court recently denied DuPont and Chemours’ motion to dismiss,” the suit said. “DuPont has demanded indemnification for, and disclaimed any obligation to all these liabilities without regard to the $2.09 million ‘maximum’ it certified.”
In March, the state of New Jersey directed Chemours and DuPont to recover the costs of DuPont discharges around the state. The remediation costs would be “staggering expensive” and “well into the millions of dollars,” far higher than the maximums certified by DuPont, the lawsuit said.
DuPont managers in 2013 began to consider restructuring the company and casting off substantial environmental liabilities including clean up and other remediation obligations in an initiative called Project Beta, the lawsuit said.
Project Beta was focused on the Performance Chemicals Unit that made and sold industrial and specialty chemicals, including fluorochemicals and fluoroproducts for refrigerants, lubricants, propellants, solvents, fire extinguishants and electronic gases, the lawsuit said.
“Because these businesses had created chemical byproducts as part of their chemical processs, the (Performances Chemicals Unit) had given rise to many of DuPont’s environmental liabilities, including costly remediation of prior emissions and the need for substantial investment in pollution abatement technology,” the lawsuit said.
“DuPont concluded that no rational buyer would accept the associated liabilities without limit, at least absent a price discount so substantial that the sale would not be financially beneficial to DuPont,” the lawsuit said. “So DuPont’s management team instead decided to pursue a divestment in which DuPont could control the transaction structure and economics. So began the spin off what would become Chemours.”
Chemours asked that the indemnification clause be declared unenforceable and not apply in excess of the $2.09 million maximum liability for the Fayetteville Works. The company also seeks reimbursement from DuPont for payments Chemours has made above the $2.09 million, as well as further limits on Chemours’ liability in New Jersey or the return or a portion of the $3.91 billion dividend it paid to DuPont.
“We find it regrettable that our former colleagues at Chemours have taken this action in an attempt to limit responsibility for their litigation and environmental liabilities under the Separation Agreement, which the parties amended and otherwise reaffirmed in 2017,” the DuPont and Corteva statement said. “We believe the claims made by Chemours are without merit.”
Standard spinoff practices were used in allocating liabilities to Chemours, the companies said.
“Based on Chemours’ public statements, we believe Chemours has been a successful company since its spin off in July 2015. We have no reason to believe Chemours is insolvent or otherwise unable to manage the liabilities allocated to it in the Separation Agreement – either today or at any point since it became an independent company,” the companies said. “Indeed, Chemours has similarly demonstrated confidence in its financial position by returning more than $1 billion to its shareholders in the form of dividends and stock buybacks.”