Chemours Shareholder Suit Over DuPont Spinoff Liabilities Dismissed
(Bloomberg) -- A Delaware judge dismissed a suit by Chemours Co. shareholders alleging directors misled them about the company’s financial health and legal liabilities when it was spun off from a predecessor of DuPont de Nemours Inc.
Chemours shareholders can’t show misleading statements by directors left them facing “a substantial likelihood of liability,” a Delaware Chancery Court judge concluded on Monday. The company was created in large part to wall off the rest of DuPont from lawsuits over environmental harm and health risks from a class of chemicals known as PFAS.
“I find that the facts pled” in the investors’ suits don’t lay out evidence of “willful or negligent misconduct,” Judge Sam Glasscock III said in his 63-page ruling. Greg Varallo, a lawyer for some of Chemours investors, declined to comment on Glasscock’s ruling.
Following the ruling, Chemour shares were up nearly 4% to $29.10 at mid-day on Monday.
Chemours was sued by investors after agreeing earlier this year to a $4 billion settlement with DuPont and Corteva Inc. to cover liabilities tied to PFAS, a chemical used in making DuPont products such as Teflon. Under the agreement, DuPont and Corteva will split “certain qualified expenses” 50-50 with Chemours, the companies said. They specified expenses incurred over 20 years or totaling $4 billion at most.
Series of Verdicts
PFAS are widespread in the environment and human blood after decades of use to make things slippery, nonstick or waterproof. Their bonds are so stable they’re known as “forever chemicals.” Employed to make items such as carpets and firefighting foams, they’ve been found at high levels around airports and U.S. Air Force bases, prompting drinking-water concerns. Researchers have linked them to cancer, liver and kidney problems.
DuPont has been hit with a series of verdicts in PFAS suits. An Ohio jury in 2020 ordered the company to pay $50 million to a couple who blamed their cancers on PFAS-tainted drinking water. DuPont and Chemours agreed to a $670 million settlement in 2017 to resolve PFAS suits filed by 3,500 people in Ohio.
In the suit dismissed on Monday, disgruntled Chemours investors had alleged DuPont’s decision to saddle the spin off with more than $2.5 billion in environmental liabilities crippled it from the start. They also claimed Chemours directors covered up the chemical company’s impaired financial health through stock buybacks and dividends.
Glasscock said the directors followed Delaware law in setting up a stock-buyback program and objecting investors also benefited from dividends they targeted in the suit. “I find that the complaint does not allege with particularity the stock repurchases and dividend payments” ran afoul of Delaware corporate statutes, the judge noted.
Investors also didn’t produce enough evidence to show Chemours was insolvent at any time and directors’ assessment the chemical company had a sufficient surplus to warrant dividends and stock repurchases was flawed, Glasscock wrote.
The case is In RE The Chemours Company Derivative Litigation, No. 2020-0786, Delaware Chancery Court (Georgetown)
©2021 Bloomberg L.P.