A judge in a Delaware court has ruled that it doesn’t have jurisdiction in a dispute between Chemours and DuPont over environmental liabilities related to per- and polyfluoroalkyl substances because the firms agreed to binding arbitration at the time of Chemours’s 2015 spin-off from DuPont. Chemours says the contract for the spin-off intentionally underestimated the liabilities it would assume by $1 billion–$2 billion.
Chemours asked the court to assign liability to DuPont beyond the estimates given at the time of the spin-off, or that DuPont return a $3.9 billion payout it received from Chemours as part of the separation.
Chemours argued that the separation agreement, including the consent to arbitration, should be void because “no one representing Chemours’s interests ever agreed to the Separation Agreement.” Chemours’s court filing said the deal was approved by a Chemours board consisting only of three DuPont employees, who all then immediately resigned from the board. One of those employees, Nigel Pond, then an attorney in DuPont’s mergers and acquisitions group, was then appointed vice president of Chemours. Pond signed and executed the separation agreement and then left Chemours when the spin-off was complete, according to the complaint. “The use of the word ‘Agreement’ is simply a farce,” Chemours says.
The judge in the case, Sam Glasscock III, did not dispute that telling of the events, saying instead that the maneuver was legal. “Chemours concedes that a duly appointed board of directors approved the Spin-Off and the Separation Agreement,” Glasscock wrote, “and that a duly appointed executive of Chemours, Nigel Pond, Chemours’ then-Vice President, executed the Separation Agreement on behalf of Chemours.”
Chemours sought to argue the dispute in the courts instead of in arbitration because the separation agreement prohibits arbitrators from making significant changes.
Glasscock also dismissed an argument by Chemours that DuPont’s domination of the separation negotiations robs the agreement of mutual consent. “Simply because the parent dictates terms to its wholly-owned subsidiary is not a grounds under Delaware law to infer lack of consent such that the contract would not be enforceable.”
“We are pleased with the Court’s ruling, which dismissed Chemours’s lawsuit in full,” DuPont says in a statement. “Chemours’ indemnification obligations are clear. We will take appropriate steps to enforce our rights under the Separation Agreement.”
Chemours says it will appeal to Delaware’s Supreme Court: “We are confident in the merits, whether in court or in arbitration, and will continue to vigorously defend the rights of Chemours and all its stakeholders.”