In a less-than-everyday occurrence, a spinoff is suing its former parent company over environment liabilities. Nevertheless, many market watchers believe this one was inevitable.

In a lawsuit filed in May, which now has been unsealed, chemical producer Chemours, spun off from DuPont in 2015, is suing the company newly re-emerged from DowDuPont to recover or avoid paying thousands of dollars in compensation for spills of perfluorinated compounds (C8) from US production sites.

According to Chemours, the only reason for the spinoff was for DuPont to avoid paying for a cleanup. Claiming that DuPont underestimated the liabilities, the spinoff is attempting to nullify a clause in the separation agreement requiring it to indemnify DuPont from any future environmental liability going forward.

The 64-page filing states that DuPont’s board made the determination required by Delaware law, namely that the spinoff was appropriate and that Chemours was solvent and capable of bearing the expected maximum cost of remediation, under false pretenses. Rather than being solvent enough to absorb all the liabilities, it says DuPont’s estimates of the potential payout sums were “systematically and spectacularly wrong”.

At the time of the spinoff, the Chemours lawsuit says, DuPont estimated a liability of $128 million from a multi-district litigation in federal court brought by 3,500 plaintiffs over C8 contamination. On settlement of the litigation in 2017, the payout was $671 million.

The filing says also that DuPont estimated its liabilities over the Cape Fear River discharges from its Fayetteville, North Carolina, site at $2.09 million, while the end sum topped $200 million.

The former DuPont division points out that many private lawsuits relating to DuPont’s activities in the same region remain outstanding, including a large class action that a North Carolina federal court recently denied DuPont and Chemours’ motion to dismiss.

In March of this year, the state of New Jersey mandated that Chemours and DuPont reimburse the damage caused by discharges around the state. Chemours‘ lawsuit says the remediation costs would be “staggeringly expensive” and far higher than the maximums certified by DuPont.

For its part, DuPont has asked the court to dismiss the complaint and send the dispute to arbitration, where it expects to” fully rebut” the substance of Chemours’ allegations about legal responsibilities it previously agreed to.

“We find it regrettable that our former colleagues at Chemours have taken this action in an attempt to limit responsibility for their litigation and environmental liabilities under the Separation Agreement, which the parties amended and otherwise reaffirmed in 2017,” the  statement reads.

“Based on Chemours’ public statements, DuPont says it believes Chemours has been a successful company since its spinoff in July 2015, adding: “We have no reason to believe Chemours is insolvent or otherwise unable to manage liabilities allocated to it in the separation agreement – either today or at any point since it became an independent company.“

Indeed, the statement continues, “Chemours has similarly demonstrated confidence in its financial position by returning more than $1 billion to its shareholders in the form of dividends and stock buybacks.”