Tronox, Inc. v. Kerr-McGee Corp.

A federal bankruptcy court held that a petroleum company and its subsidiaries may be held liable for at least $5 billion—and perhaps up to $14 billion—in environmental response costs and tort liabilities. In 2005, a now-bankrupt manufacturing company that makes titanium dioxide pigments was transferred and spun off by an oil and gas company that was then purchased by the petroleum company in 2006. The manufacturing company charged that the deal left it with 70 years and billions of dollars of legacy environmental and tort liabilities, while the oil and gas company kept valuable oil and gas assets. Those assets were acquired by the petroleum company for $18 billion only a few months after they were spun off. The court agreed that the defendants acted with intent to "hinder and delay" the debtors' creditors when they transferred out and then spun off the oil and gas assets and that the transaction, which left the debtors insolvent and undercapitalized, was not made for reasonably equivalent value. But the court did not make a final determination on damages. Rather, it gave the defendants 30 days to file a proof of claim under §502(h) of the Bankruptcy Code, which governs the allowance or disallowance of claims against a debtor, and to brief the dilutive effect of the damages assessed against them.