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Tronox, Inc. v. Anadarko Petroleum Co.

ELR Citation: 44 ELR 20245
Nos. 14-cv-5495, (S.D.N.Y., 11/10/2014) (Forrest, J.)

A district court approved a $5.15 billion settlement agreement—the largest such recovery in American history—resolving two lawsuits in which a spin-off company and the U.S. government asserted fraudulent transfer and other claims against an energy company and its parent. In 2006, the energy company created the spinoff company, burdening it with massive environmental and tort liabilities the energy company had accumulated over the course of decades of operating in the chemical, mining, and oil and gas industries throughout the nation, but without sufficient assets with which to address these liabilities. The spinoff company filed for bankruptcy, and then filed this lawsuit on behalf of creditors who hold environmental and tort claims against it, alleging that the transactions that resulted in the spinoff amounted to an actual and constructive fraudulent conveyance. The government then intervened on behalf of the spinoff company. The bankruptcy court found the energy company liable, but before it could award damages, the parties agreed to settle. Under the agreement, the energy company's parent will pay $5.15 billion into a litigation trust, with $4.4 billion being paid toward the trust's environmental beneficiaries, and $605 million toward tort beneficiaries. Of the environmental recovery in this settlement, nearly $2 billion will be paid for cleanup work associated with numerous EPA-lead sites, resulting in the largest bankruptcy-related award that EPA has ever received for environmental claims and liabilities. Two parties objected to the agreement, arguing that the settlement was too low, but the court ultimately ruled that the agreement was fair, reasonable, and consistent with federal environmental law.