DuPont used Chemours, Dow merger to shield itself from PFAS claims - suit

Author: Al Greenwood

2020/10/15

HOUSTON (ICIS)--DuPont used a series of mergers, spinoffs and divestments to shield itself from claims accusing it of polluting North Carolina with chemicals used to make Teflon, according to a lawsuit filed by the state.

The deals include DuPont's merger with Dow, which was not named in the suit.

The allegations are among several that the state made against DuPont, which produced the Teflon chemicals at the Fayetteville Works complex in North Carolina. The complex is now part of Chemours, which is also being sued.

The Teflon chemicals made at the Fayetteville Works site were per- and polyfluoroalkyl substances (PFAS). One of these PFAS is perfluorooctanoic acid (PFOA), also known as C8. DuPont later developed a substitute, perfluoro-2-propoxypropanoic acid, or GenX, which also contaminated the state.

North Carolina alleged that DuPont knew all along that its PFAS were toxic, it emitted large amounts of the chemicals, and it could be on the hook for billions in liabilities.

By 2013, DuPont started putting together a plan that would re-arrange its corporate structure to avoid paying for those liabilities, the lawsuit alleged.

The first step was to transfer its PFAS liabilities and spin them off into a separate company, the lawsuit alleged. That company would be Chemours, spun off in 2015 and including DuPont's Teflon business. Chemours would also assume the PFAS liabilities and indemnify DuPont against any related claims.

Many of the allegations in North Carolina's lawsuit resemble those that Chemours made against DuPont in a lawsuit that it filed in Delaware Chancery Court.

A judge ruled that the two companies need to settle their differences in arbitration, in accordance with the separation agreement.

The Chemours spinoff alone would not be enough to protect DuPont from any future PFAS claims, North Carolina alleged. DuPont could still be directly liable for its conduct.

The second step would involve the merger between DuPont and Dow, which was announced later in 2015 and completed in 2017.

DuPont transferred its businesses and product lines to the merged company, called DowDuPont. These businesses then were re-arranged into three divisions.

The agriculture division would be spun off as Corteva. Because Corteva assumed some of the direct financial liabilities of the old pre-merger DuPont, the state sued the company.

The materials-science division would be spun off as Dow. North Carolina made no mention of Dow assuming any of DuPont's pre-merger liabilities. Dow did not immediately respond to a request for comment.

What remained was the specialty-products division. The specialty-products division kept the DuPont name, but it was in effect a new company.

North Carolina alleges that DuPont transferred its business to these new companies so they would be out of reach from the state and others seeking claims against it. North Carolina wants the court to void these transfers.

It also alleges that the new post-merger DuPont assumed some of the liabilities of the pre-merger company.

If the new DuPont or Corteva sells any other businesses, North Carolina wants the proceeds to go into a constructive trust.

This could affect several deals. DuPont has deemed several of its businesses as noncore, and it is seeking buyers for them.

It is in the midst of merging its nutrition and biosciences business with International Flavors & Fragrances (IFF).

Corteva did not immediately respond to a request for comment.

Dow did not immediately respond to a request for comment.

Earlier, a spokesman for DuPont said that the company had yet to hear from Stein.

"That said, such action would be disappointing and without merit," the spokesman said. "We look forward to vigorously defending our position in this matter."

Chemours said it is still reviewing the lawsuit. The company noted the work it has done to the Fayetteville Works complex since it became an independent company in 2015.

It has worked with the state to address concerns about PFAS and agreed to a consent order and a subsequent addendum that are related to another lawsuit filed in North Carolina, Chemours said.

The company has invested in technology that has decreased emissions of GenX by 99%, Chemours said. The site's thermal oxidiser destroys PFAS with an efficiency that exceeds 99%.

Chemours is also working on ways to prevent PFAS from entering the nearby Cape Fear River, the company said. On 30 September, it started operations at a capture-and-treatment system that targets one PFAS pathway into the river. It will address other pathways, as called for under the addendum to the consent order.

Additional reporting by Tom Brown

Thumbnail image shows tape made with Teflon. Source: Shutterstock