U.S. Judge says Anadarko may be liable for billions in legal battle

Paint materials company Tronox was stripped it of its most valuable assets and spun off by Kerr-McGee Corp

United States bankruptcy Judge Allan L. Gropper ruled Anadarko Petroleum Corp. could be liable for between $5 billion and over $14 billion in a lawsuit over environmental and legal liabilities related to its 2006 acquisition of Kerr-McGee Corp.

Tronox, a manufacturer of titanium dioxide pigments used to make paints and plastics brighter and more durable, was actually spun off by Kerr-McGee Corp. Anadarko Petroleum Corp. and then purchased Kerr-McGee in 2006.

"Today's ruling exposes Kerr McGee's fraudulent effort to avoid responsibility for massive environmental liabilities that proliferated nationally over the course of decades," John Hueston, a lawyer for the Tronox trust said.

According to Tronox, Kerr-McGee stripped it of its most valuable assets before the spinoff. Tronox filed for Chapter 11 bankruptcy protection in 2009 and emerged two years later. Judge Gropper said Anadarko could have to pay damages of between $5.2 billion and $14.2 billion in his opinion. Meanwhile, energy analysts have said that Anadarko's liability at $3 billion or less.

"Given the significant factual evidence supporting our position, we vehemently disagree with the Judge's Memorandum of Opinion, and we fully expect to pursue every avenue available to us through the appellate process to protect the interests of our stakeholders, once a final judgment including damages has been rendered," Anadarko Chief Executive Al Walker said.

Citi Analyst Robert S. Morris lowered his rating on shares of The Woodlands, Texas-based oil and natural gas exploration and production company to ‘neutral’ from ‘buy’ and dropped his target price to $86 from $108. ‘‘This would create a substantial overhang on Anadarko’s stock price, in our opinion,’’ he said.

These days, investors dislike the uncertainty of unresolved litigation hanging over a company’s stock. It is difficult to gauge the possibility of any settlement, but Morris thinks Anadarko has the ability to make a worst-case payout of $14.2 billion without jeopardizing operations.

In addition, Tronox has accused its former parent of millions of dollars of environmental legacy lawsuits, including the costs of cleaning up contaminated soil near plants that closed years ago under different owners. The company said 88 percent of any judgment it eventually receives will go help remediate polluted sites.


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Contributing Author

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Amanda Ciccatelli

Amanda G. Ciccatelli is a Freelance Journalist for InsideCounsel, where she covers intellectual property, legal technology, patent litigation, cybersecurity, innovation, and more. She earned a B.A....

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