Chemours Lawsuit Over Liability From DuPont Spinoff Tossed

(Bloomberg) -- Chemours Co. must use arbitration to resolve a dispute with former parent DuPont de Nemours Inc. over environmental liabilities shifted to the spin-off when the chemical makers were separated in 2015, a judge ruled.

Delaware Chancery Court Judge Sam Glasscock III concluded a valid arbitration clause in the separation agreement mandated that all disputes were to be heard outside the regular courts. Chemours argued the arbitration provisions were so onerous they shouldn’t be enforced and DuPont’s estimates of how much its former unit should cover were “spectacularly wrong.”

The decision means Chemours may have to take on more of the financial burden for clean-up demands tied to DuPont products such as PFOA, a cancer-linked chemical formerly used to make Teflon nonstick coatings and other products. Chemours also is being asked to indemnify DuPont for other environmental claims.

DuPont and Chemours face a flood of injury claims tied to PFOA in states including Ohio and West Virginia. The companies in 2017 agreed to split a $671 million settlement related to about 3,550 health claims, but they have disputed who is responsible for others. DuPont contends that under the separation agreement, Chemours must indemnify DuPont for any liability, including the PFOA claims.

David Rosen, a Chemours spokesman, said the company will appeal Glasscock’s decision.

Daniel Turner, a DuPont spokesman, said the ruling removed any doubt about Chemour’s indemnification obligations. “We will take appropriate steps to enforce our rights under the separation agreement,” Turner said in an emailed statement.

Both companies are based in Wilmington, Delaware.

Chemours officials said they never agreed to take on uncapped liabilities from past litigation and argued DuPont violated Delaware law by setting its former unit up to be financially overwhelmed. DuPont’s lawyers countered it was never the company’s plan to drive Chemours into bankruptcy and both sides agreed arbitration was the best option for resolving disputes.

The case is Chemours Co. v. DowDupont Inc., 2019-0531, Delaware Chancery Court (Wilmington).

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