Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Mooney v. E. I. Du Pont De Nemours and Co.

Superior Court of Delaware

November 28, 2017


          Submitted: August 22, 2017

          Upon Defendants' Motion to Dismiss, Granted Matthew B. Mooney, Esq., Pro Se.

          Kathleen F. McDonough, Esq., John A. Sensing, Esq., and Jesse L. Noa, Esq. of POTTER ANDERSON & CORROON, LLP, Wilmington, Delaware; Attorneys for E. I. du Pont de Nemours and Company.


          LeGROW, J.

         In 2015, E. I. DuPont de Nemours and Company ("DuPont") spunoff its performance chemicals division into the Chemours Company ("Chemours"). The spinoff was part of DuPont's ongoing effort to reenvision the company for the market and shareholders. In the months leading up to the spinoff, DuPont's officers made numerous optimistic statements regarding the purpose of the spinoff, its expected effect on DuPont, and Chemours' anticipated financial prospects as a stand-alone entity. The plaintiff in this action purportedly purchased DuPont's stock in reliance on those statements. After selling his stock at a loss, the plaintiff alleges DuPont fraudulently misrepresented the spinoff s potential success in order to induce investor participation in an unsound, intentionally-misleading business strategy.

         The key question in this case is whether the statements on which the plaintiff purportedly relied were statements of fact or forward-looking statements. The statements at issue, all couched in terms of the speaker's expectation or opinion about future events, were forward-looking statements that only can form the basis of a fraud claim when the plaintiff adequately alleges the statements were known to be false when made or were made in bad faith. Here, the only allegations the plaintiff identifies to support that standard are later-occurring events. The lack of any contemporaneous factual allegations suggesting DuPont's officers made false statements knowingly or with lack of good faith dooms the plaintiffs claims.


         Except as otherwise noted, the following facts are drawn from the complaint and the documents it incorporates by reference, drawing all reasonable inferences in plaintiffs favor. DuPont is a Delaware corporation engaged in the chemical and life science industries with businesses including agriculture, biotechnology, chemistry, biology, materials science, and manufacturing. Matthew Mooney, the plaintiff, is an individual investor residing in Greenwich, Connecticut.

         On December 18, 2014, DuPont filed an SEC Form 10, announcing the spinoff of its performance chemicals division into Chemours. DuPont's performance chemicals division consisted of fluoroproducts, titanium technologies, and chemical solutions business. According to DuPont, the spinoff of Chemours was part of "a multi-year transformation of [its] portfolio to focus on the highest potential commercial opportunities where [its] science and engineering capabilities can deliver the greatest value."[1]

         Mooney alleges DuPont portrayed the Chemours spinoff as an exercise to carve out a slower growth business so DuPont could focus on higher-growth assets. Mooney contends, however, DuPont's actual purpose in the Chemours spinoff was to insulate DuPont from litigation and environmental liability, strip Chemours of assets at the eleventh hour via a $4 billion "midnight dividend, " and establish "another corporate layer between [DuPont] and potentially debilitating risk."[2]

         The litigation and environmental risk to which Mooney refers arose from DuPont's production of Perfluorooctanoic acid ("PFOA"). Under the terms of a settlement agreement in a class action lawsuit, [3] DuPont created a C8 panel to conduct studies "in communities exposed to PFOA to evaluate available scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and human disease."[4] The C8 panel found several links between exposure to PFOA and various forms of cancer. In its June 30, 2015 Form 10-Q filing, DuPont noted its PFOA exposure had an accrual balance of $14 million.

         On February 17, 2015, DuPont released a letter to its shareholders in which DuPont CEO Ellen Kullman said "[w]e are successfully transforming DuPont.... This includes the acquisitions of Danisco and Pannar Seed, as well as the sale of our Performance Coatings business and the separation of Chemours, upon completion of which we will have divested non-core, legacy business representing a total of $11 billion in annual sales in the past three years alone."[5]

         In a March 23, 2015 letter to shareholders, Kullman stated "DuPont's Board of Directors and management team have taken bold, decisive action over the past six years to transform the Company and deliver higher growth and higher value for our shareholders. The upcoming separation of Chemours represents our latest and most significant step on this path."[6]

         In a first quarter earnings call on April 21, 2015, Nicholas Fanandakis, DuPont's CFO, stated "Chemours' capital structure at separation is expected to support a quarterly dividend to shareholders, such as the sum of DuPont's and Chemours' aggregate third quarter dividend is equivalent to DuPont's third quarterly dividend immediately prior to separation."[7] In the same call, Fanandakis stated "as we look at the capital structure of Chemours ... I feel very good about the midnight dividend, the debt level that we are going to be able to place on the entity along with the dividend structure we are proposing."[8]

         Mooney alleges he "initiated a long position in DuPont securities" on April 30, 2015, in reliance on "DuPont's representations about its upcoming Chemours Company spin-off and its business prospects thereafter."[9] Mooney extended that position on May 1, 2015. He "terminated [his] existing exposure" on May 8, 2015, but later "reestablished [a] larger DuPont long exposure" based on DuPont's representations. Mooney "closed" his "DuPont exposure" again on May 21, 2015, but reestablished a long position on May 26, 2015.[10]

         On May 27, 2015, Kullman addressed the spinoff at the Bernstein Strategic Decisions Conference.

Well, the interesting thing is I think there was always a belief in the shareholder community and even within the company that the Performance Chemicals, high performing, low-cost, number one or number two position in each one of their franchises, generates a lot of cash throughout the cycle, returns the cost of capital even at the depths of the cycle, was, although it was commodity and cyclical, it was a very strong performer and it generated a lot of cash that enabled us to do a lot of things over the years. But so there was-I think there was a perception that it was an integral part of our company, our make-up, how we generate the cash to create those returns to shareholders and to do that.
And the volatility of that segment just got very large. And so the magnitude of the change just created great dislocation. And the model became very different than the science and innovation model that the core DuPont company had. And when you have two sides of a company that are so different like that, how they create value is very different, the amount of leverage you can do is very different. Then it just seemed natural to us to have it separated and create its own company.
Well, I took a look in some of the chemical industry venues that, when I became CEO, there was like Dow and DuPont, and there was [sic] a lot of small companies, right? A lot of them had been created and were succeeding and doing quite well and they were -they had the capital they needed, they were making investments, they were creating shareholder value. And so the structures of the chemical industry had changed a lot in the last couple decades. And, I think Chemours is a strong franchise, and they're going to compete very effectively, and I think it's the right decision moving forward.[11]

         In a June 2015 investor presentation, before the spinoff, Chemours stated it was "#1 in Fluoroproducts globally" and "its Day 1 Capitalization levels were: $200 million of cash and cash equivalents; a $1.5 billion term loan; and $2, 503 billion in senior notes. Funded debt was $4, 003 billion and net debt was $3, 803 billion."[12] Chemours also stated it would return cash to shareholders, highlighting its $100 million dividend payable in September 2015. On June 18, 2015, Mooney extended his exposure in DuPont securities.

         On July 8, 2015, DuPont filed a SEC Form 8-K, reporting it completed the Chemours spinoff on July 1, 2015. Under the basic terms of the spinoff, "DuPont common stockholders on the record date received one share of common stock of Chemours for every five shares of DuPont common stock they held on the record date."[13] On July 9, 2015, Mooney extended his exposure in DuPont and Chemours stocks.

         Seven days after the Chemours spinoff completion, DuPont filed the Separation Agreement between DuPont and Chemours ("Separation Agreement"). The Separation Agreement detailed the spinoff s allocation of environmental litigation risk between DuPont and Chemours. Mooney contends the effect of the allocation is to insulate DuPont from liability associated with the PFOA litigation. The Separation Agreement provided:

With respect to existing matters ... or new matters, in each case, ... the DuPont Group shall, in its reasonable determination determine whether such Environmental Liabilities are Primarily associated with the Chemours business, the Chemours Group or Chemours Discontinued Operations. . . . The burden of proof to rebut such determination shall be borne by the Chemours Group.[14]

         On July 8, 2015, Bloomberg reported U.S. District Judge Edmund Sargus eliminated the plaintiffs' burden of proving individual exposure to PFOA during the PFOA litigation, thereby eliminating a significant litigation barrier for PFOA plaintiffs.

         Meanwhile, DuPont noted in its June 30, 2015, Form 10-Q that it received a dividend from Chemours in May 2015 (the "midnight dividend") of $3, 923 billion, consisting of $3, 416 billion in a cash distribution and $507 million in a distribution in-kind (ten-year notes maturing in 2025 at a 7% fixed interest rate).[15] Chemours financed the dividend by issuing $4 billion of debt; $1.5 billion under a seven-year senior secured loan facility, $1.35 billion in senior unsecured notes due 2023, $750 million in senior notes due 2025, and $360 million in EUR[16] senior unsecured notes due 2023.

         According to the complaint, Chemours initially stated in its June 2015 investor presentation that it would return capital to its shareholders through dividends. The complaint alleges that although Chemours paid an initial quarterly dividend, later dividends were reduced by 95% from $0.55 per share to $0.03 per share.[17] The complaint also alleges Chemours rewrote the "terms of its adjusted EBITDA to avoid violating its creditors' debt covenants."[18]

         Possibly due to a combination of the abovementioned events, DuPont's stock began to decline towards the end of July 2015. Mooney terminated his exposure to DuPont and Chemours "at a significant loss" on July 20, 2015, shortly after the publication of the Separation Agreement, Judge Sargus's ruling, and the disclosure of the midnight dividend.[19] Mooney argues he was induced by false statements made by DuPont officers to invest in DuPont securities. This inducement, Mooney argues, resulted in increased exposure to DuPont which caused significant loss to him when he sold his DuPont securities after the stock dropped in price.

         The alleged false statements by DuPont officers identified in the complaint concerned the benefits DuPont expected to receive from the Chemours spinoff as well as the expected financial prospects of Chemours. I note that each statement was couched in cautionary language and identified as a forward-looking statement.[20] DuPont moved to dismiss the complaint for failure to state a claim.

         THE ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.