Chemours Company (The)

Case Details

Class Period: February 16, 2017 - August 1, 2019
Date Filed: October 08, 2019
Case Number: 1:19cv01911
Jurisdiction: District of Delaware
icon-casetype Case Type: Securities Case

Case Summary

The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against The Chemours Company (“Chemours” or the “Company”), and certain of its senior executives.  The Complaint alleges that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired Chemours common stock during the Class Period.

Chemours is a spin-off of E.I. du Pont de Nemours and Company (“DuPont”) that produces a wide range of industrial and specialty chemical products for various markets.  Chemours, which began trading as a public company in July 2015, was initially DuPont’s Performance Chemicals division.   In the spin-off, Chemours inherited all environmental and other liabilities associated with the Performance Chemicals business including, most significantly, Dupont’s liability exposure concerning perfluoroalkyl and polyfluoroalkyl substances (“PFAS”)—toxic chemicals linked to cancer and  other serious health consequences that have since become the basis for environmental regulatory actions, governmental prosecutions, personal injury lawsuits, extensive remediation and other clean-up efforts.

Specifically, the Complaint alleges that Defendants: (1) have long known about the extent of massive environmental liabilities the Company incurred from decades of producing and releasing PFAS and other chemicals into nationwide water supplies; (2) misled investors by representing that Chemours had appropriately accounted and accrued reserves for its environmental liabilities, that the possibility of costs exceeding accrued amounts was “remote,” and that, in any event, additional costs would not be material; (3) assured investors that its “policies, standards and procedures” were “properly designed to prevent unreasonable risk of harm to people and the environment,” and that its “handling, manufacture, use and disposal of hazardous substances are in accordance with applicable environmental laws and regulations”; and (4) certified maximum liabilities that were deliberately and “radically” understated, and “systematically and spectacularly wrong.”  By 2010, DuPont’s Fayetteville Works plant in North Carolina had been discharging PFAS for 30 years or more into the Cape Fear River, which serves as a source of drinking water for tens of thousands of people—a problem that DuPont internally acknowledged represented a tremendous liability.   DuPont then developed a plan to spin off Chemours and unload the responsibility for the vast majority of its environmental liabilities onto the Company while also securing for DuPont a multi-billion-dollar dividend payment from Chemours.  As  revealed in a series of corrective disclosures beginning on May 6, 2019, and which included a confidential complaint Chemours itself filed in the Delaware Court of Chancery (the “Delaware Complaint”) that was unsealed on June 28, 2019—Chemours’ environmental liabilities and true PFAS exposure was estimated to be between $4 billion to $6 billion, and growing.   In response to the first disclosure from Glenview Capital Management’s Larry Robbins during a presentation at the Sohn Investment Conference, Chemours stock declined from $34.18 per share on May 3, 2019 to close at $31.61 on May 6, 2019—an over 7.5% decline that wiped out over $415 million in shareholder value.    Once the Delaware Complaint was unsealed, investors learned how the Company itself was seeking a declaratory judgment that it was not obligated to indemnify DuPont for the full cost of environmental liabilities, or alternatively for the return of the $3.91 billion dividend DuPont took when Chemours was spun off  on the ground that the Company’s environmental exposures were so large—and its reserves so deficient—that the Company was in fact insolvent at spin-off, and thus could not be spun-off under Delaware law.   In response to the disclosures revealed in the Delaware Complaint, the price of Chemours stock dropped $2.37—or nearly 10%—from $24.90 per share on June 27, 2019 to $22.53 per share on July 1, 2019, wiping out over $382 million in market capitalization.   Then, on August 1, 2019, Chemours issued a press release reporting second quarter results and lowered full-year guidance, including reducing its full-year free cash flow outlook to $100 million—down from the prior guidance of over $550 million.   In the Form 10-Q the Company filed the next day, Chemours disclosed significant increases in the Company’s estimated liabilities, including numerous new legal and regulatory actions related to PFAS.  Following the release of these results, analysts slashed their ratings on the Company’s stock.  Chemours shares fell dramatically, and closed down 19% from $18.16 per share on August 1, 2019 to $14.69 on August 2, 2019, erasing over $560 million in shareholder value.

On January 8, 2020, the Court appointed New York State Teachers’ Retirement System (“New York Teachers”) as Lead Plaintiff and Saxena White P.A. as Lead Counsel.   Lead Plaintiff filed the Consolidated Class Action Complaint on April 3, 2020.  Defendants filed their Motion to Dismiss on August 24, 2020.  The briefing schedule for this motion was completed on December 21, 2020.