DuPont de Nemours Inc. never intended to saddle its spinoff Chemours Co. with “unlimited exposure” to its liabilities, DuPont’s former chief executive officer said, sending Chemours stock up sharply.
Ellen Kullman, who resigned as DuPont’s CEO and chairman in 2015 after clashing with an activist investor seeking to break up the company, said DuPont’s board wasn’t out to burden Chemours with crushing amounts of liability for environmental cleanups and other litigation.
“The position of DuPont’s current management that Chemours faces unlimited exposure for historical DuPont liabilities is not consistent with my intent or the intent of DuPont’s board in approving the terms of the spin-off,” Kullman said in a court filing Oct. 18.
The filing could bolster Chemours’s position in a legal fight with DuPont over what responsibilities each holds as part of the 2015 spinoff.
Shares of Chemours rose as high as 9.2% on Wednesday before closing up 4.5% at $16.79 in New York.
“Ms. Kullman’s assertions are entirely inconsistent with the facts as reflected in documents from the time and do not accurately reflect the process in which she directly participated in her role as Chair of the Board and CEO,” DuPont said in a statement. “The facts in this matter are clear — at the board meeting to approve the transaction, it was unequivocally stated that the parties’ indemnification obligations were uncapped.”
DuPont said it would “vigorously defend against the claims in the complaint and our rights under the Separation Agreement.”
Both companies are based in Wilmington, Delaware.
Chemours sued DuPont in Delaware Chancery Court in May, accusing executives of its former parent of misleading it about the extent of liabilities the spinoff would take on. For example, Chemours officials take issue with the amount of liability the spinoff was being asked to assume 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.
DuPont and Chemours face a wave of suits tied to the PFOA chemical in states such as Ohio and West Virginia. The companies in 2017 agreed to split a $671 million settlement related to about 3,550 health claims but have disputed who is responsible for others. Under the separation agreement, DuPont argues, Chemours is supposed to indemnify it for any liability.
The accord came after at least three juries found DuPont liable for injuries, including cancers, blamed on PFOA. The company was facing almost 40 more trials over the chemical when it signed the deal.
Last year, U.S. regulators asked Chemours to test public and private drinking water supplies in West Virginia and Ohio for GenX, a successor to PFOA. The U.S. Environmental Protection Agency said in a letter it was concerned about GenX discharges into public waterways.
DuPont argues that the spinoff agreement makes clear that Chemours must accept liability for the PFOA cases and that all disagreements over the pact must be resolved by an arbitrator. In her statement, Kullman, the former DuPont CEO, said DuPont “unilaterally determined the terms of the separation agreement” and that those terms didn’t include an arbitration clause covering fights over the pact’s language.
Maximums Way Off
Before the spinoff, Chemours officials said DuPont provided maximums of how much liability the new company would be accepting. When the bills started coming in, however, those maximums were way off, lawyers for Chemours argue.
“DuPont’s certified liability maximums have proved to be systematically and spectacularly wrong,” they said in their Oct. 18 response to DuPont’s request to have the case thrown out or sent to arbitration. “The liabilities DuPont plowed into Chemours are far greater than DuPont’s maximums suggested possible.”
Kullman, the last Delaware native to run DuPont, butted heads with activist investor Nelson Peltz and his Trian Fund Management, who pushed to break up the chemical maker. Kullman won a 2015 proxy fight with Peltz but retired later that year when board members backed the breakup.
DuPont ultimately agreed to combine with Dow Chemical Co. in a $150 billion merger that created the world’s biggest chemical maker, DowDuPont Inc. DowDuPont later decided to split into three companies.
The case is Chemours Co. v. DowDupont Inc., 2019-0351, Delaware Chancery Court (Wilmington).
Was this article valuable?
Here are more articles you may enjoy.