Tronox Trust Wins Victory in Case Against Kerr-McGee

In the largest environmental fraudulent transfer case ever tried, U.S. Bankruptcy Judge Allan L. Gropper found in favor of the Tronox Inc. litigation trust on December 12, 2013, and indicated that he will enter a damages award between $5.1 billion and $14.1 billion relating to fraudulent transfers perpetrated by Kerr-McGee (now a wholly-owned subsidiary of Anadarko Petroleum Company) in an effort to shield the company's valuable oil and gas assets from environmental and toxic tort liability claims held by creditors. Judge Gropper found that Defendant Kerr-McGee "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."

John Hueston, the litigation trustee for the prevailing Tronox trust, stated: "Today's ruling exposes Kerr McGee's fraudulent effort to avoid responsibility for massive environmental liabilities that proliferated nationally over the course of decades."

"This ruling will provide federal, state and local governments as well as the Navajo Nation with the means to make significant strides toward the remediation of the environmental hazards Kerr McGee wrongfully attempted to abandon, and to provide a measure of redress to individuals harmed by Kerr McGee's abandoned industrial and chemical waste."

"Kerr McGee's attempted avoidance of its massive environmental liabilities threatened communities across the nation which have waited years for Kerr McGee and Anadarko to be held accountable. Victim communities include the Navajo Nation (uranium contamination), Manville, New Jersey (coal tar creosote pollution), downtown Chicago (thorium and other toxins), west Chicago (radioactive contamination), Cimarron, Oklahoma (uranium contamination), Henderson, Nevada (perchlorate and hexavalent chromium in ground water), Savannah, Georgia (toxins relating to titanium dioxide processing), the residents of Avoca, Pennsylvania (creosote exposure), as well as communities in Massachusetts, Texas, Missouri, Alabama, Mississippi, New York and Louisiana."

John Hueston is the litigation trustee of the Tronox trust, formally known as the Anadarko Litigation Trust. Hueston was appointed as trustee of the Anadarko Litigation Trust in February 2011, with broad responsibilities to prosecute and defend all claims on behalf of the trust's diverse beneficiaries including the United States government, more than a dozen states, the Navajo Nation, and a class of individual tort victims.

The trust's case against Kerr-McGee was tried in federal bankruptcy court in the Southern District of New York from May through September of 2012. At trial, the trust alleged that Kerr-McGee executives fraudulently allocated the company's massive environmental and tort liabilities from legacy businesses such as uranium mining and wood treatment facilities to Tronox, a spin-off entity created to serve as a dumping ground for the liabilities. Kerr-McGee then shuffled its oil and gas assets to a "clean" entity known as New Kerr-McGee which, once freed from the company's historical liabilities, was primed for a lucrative acquisition that would net Kerr-McGee executives tens of millions of dollars in personal bonuses and stock profits. After finalizing the spin-off of Tronox, New Kerr-McGee was quickly acquired by Anadarko for $18 billion in 2006, leaving Kerr-McGee's environmental and tort creditors unable to access the oil and gas assets to aid with remediation and cleanup efforts. Unable to support the mounting costs of the legacy liabilities, Tronox filed for bankruptcy in 2009.

After filing for bankruptcy protection in January 2009, Tronox filed the lawsuit against Anadarko. It implemented a confirmed reorganization plan in February 2011 that created the trust to prosecute the suit.

The lawsuit is Tronox Inc. v. Anadarko Petroleum Corp. (In re Tronox Inc.), 09-1198, U.S. Bankruptcy Court, Southern District New York (Manhattan). The Tronox Trust is represented by the Litigation Trustee John Hueston and by Kirkland & Ellis. The U.S. Department of Justice participated in the trial against Kerr McGee/Anadarko through a parallel action.