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Chemours investors lose bid to sue over post-spinoff transactions

2 minute read

Sussex County Court of Chancery in Georgetown, Delaware. REUTERS/Andrew Kelly

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  • Investors said board approved transactions
  • Judge says directors were "fully protected" from liability for suit's claims
  • Opinion uses new demand futility test

A Delaware judge has dismissed Chemours Co shareholders’ lawsuit accusing the chemical maker’s board of negligently approving roughly $1.74 billion in stock buy-backs and dividends after its 2015 spinoff from E.I. du Pont de Nemours and Co.

Vice Chancellor Sam Glasscock III said on Monday that Chemours shareholders City of Hialeah Employees’ Retirement System and Robert Pinto did not adequately allege that the directors could be held liable for violating the law by approving the transactions.

Chemours spokesperson Cassie Olszewski said in a statement that the company was pleased with Glasscock's decision.

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Attorneys representing the shareholders, including those from Bernstein Litowitz Berger & Grossmann and Pomerantz, did not respond to requests for comment on Monday. Neither did the Wachtell, Lipton, Rosen & Katz attorneys advising the Chemours board members.

The Chemours shareholders sued the company’s board in September 2020 and February 2021 for approving the transactions despite the company carrying $2.56 billion in environmental pollution liabilities that it received through its spinoff from DuPont in 2015.

The investors had cited Chemours’ 2019 suit against Dupont over the liabilities to support claims that Chemours was insolvent at the time of the share repurchase and dividends distribution.

In a motion to dismiss, the Chemours board countered that the company did not allege that it was currently insolvent or insolvent after the spin-off.

In Monday's decision, Glasscock used the three-part test for demand futility. The judge said that since the directors were “fully protected” from liability for the suit’s claims, the shareholders should have first asked the board to pursue litigation.

The case is In re The Chemours Company Derivative Litigation, Delaware Court of Chancery, No. 2020-0786.

For City of Hialeah Employees’ Retirement System: Mark Lebovitch of Bernstein Litowitz Berger & Grossmann; and Robert Klausner and Stuart Kaufman of Klausner, Kaufman, Jensen & Levinson

For Robert Pinto: Gustavo Bruckner of Pomerantz; and Kip Shuman, Rusty Glenn and Brett Stecker of Shuman, Glenn & Stecker

For Chemours board: Jonathan Moses and Ryan McLeod of Wachtell, Lipton, Rosen & Katz

(Update: This story has been updated with a comment from a Chemours representative.)

Read more:

Chemours shareholder sues board over buybacks, dividends

DuPont, Chemours, Corteva agree on $4 bln settlement for 'forever chemical'

Dela. Supreme Court tightens test for demand futility in derivative lawsuits

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Sierra Jackson reports on legal matters in major mergers and acquisitions, including deal work, litigation and regulatory changes. Reach her at sierra.jackson@thomsonreuters.com

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