Federal Judge: Chemours Must Face Shareholder Lawsuit Over Alleged Mistreatment Of Maximum Potential Liability For Hazardous Chemicals
According to reporting from Reuters, a federal judge has ruled that Chemours—the Wilmington, Delaware headquarter American chemical company—must face a lawsuit from shareholders over its alleged misrepresentation of the cost of certain environmental cleanups. However, some of the other claims raised by the shareholders were dismissed. In this article, our Miami shareholder disputes lawyers provide a more detailed overview of the ruling from the federal judge.
Background: Chemours Responsible for “Forever Chemicals” (PFAS)
Chemours is a Delaware-based chemical company that was founded in 2015. The corporation was “spun off” from the multinational chemical giant DuPont. Chemours holds and controls the majority of DuPont’s former “performance chemicals” business. Some notable examples of so-called performance chemicals offered by Chemours include mass market refrigerants and industrial fluoropolymers.
Other specialty chemical businesses that DuPont “spun off” to Chemours includes perfluoroalkyl and polyfluoroalkyl substances (PFAS). PFAS are essentially man-made chemicals that were used across a wide array of consumer products and industrial products—from non-stick cooking supplies to equipment for firefighters. The Environmental Protection Agency (EPA) calls these “forever chemicals” a human health carcinogen and an environmental hazard.
Allegations: Chemours Misrepresented its Maximum Potential Legal Liability for PFAS
In controlling the so-called performance chemical business built by DuPont, Chemours also bears legal responsibility for certain costs. With increased attention on the human health and environmental risks posed by PFAS, Chemours faces significant financial liability. This is well known and the company has disclosed its potential future liability to investors for several years.
However, a lawsuit filed by a group of shareholders contends that Chemours materially understated the extent of its potential financial liability. In 2019, investors were informed that the maximum possible liability for PFAS was somewhere around $780 million. The shareholders in this case argue that corporate leaders at Chemours were aware that the true number was approximately $2 billion.
Federal Court Decision: Shareholder Lawsuit May Proceed, But has been Narrowed
On February 24th, 2022, Judge Colm Connolly of the United States District Court for the District of Delaware ruled that the plaintiffs (shareholders) “plausibly alleged” that the corporate officers and directors of Chemours materially misstated the potential maximum liability risk for its PFAS business by more than $1.2 billion.
At the same time, the federal judge also dismissed certain other claims asserted in the shareholder lawsuit. In other words, the case has been narrowed. Based on the ruling from Judge Connolly, the portion of the shareholder focused on the alleged material misrepresentation of the possible liability risk for the hazardous PFAS chemicals can move forward.
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