Environmental Liability

As I have previously noted on this blog, one recurring source of securities class action litigation exposure for publicly traded companies is the companies’ underlying environmental liabilities. In the latest example of this type of litigation, a plaintiff shareholder has now filed a securities suit against The Chemours Company, a chemical company that spun out of E.I. du Pont de Nemours and Company (“DuPont”) in July 2015. One of the extraordinary things about the new securities suit is that it draws heavily on allegations Chemours itself raised in a 2019 Delaware Chancery Court lawsuit it filed against DuPont, in which, among other things, Chemours alleges that when DuPont spun out the company, its environmental liabilities reserves were “spectacularly” inadequate. A copy of the on October 8, 2019 securities class action complaint filed in the District of Delaware against Chemours, its CEO, and its CFO can be found here.
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At a time when litigation involving corporate disclosures regarding cybersecurity, privacy, and human resource practices and other hot topics dominate the discussion, potential corporate exposure arising from environmental liabilities and disclosures does not always receive the attention it deserves. However, as I have previously noted on this blog,  environmental disclosures can and frequently are the subject of D&O litigation, both in the form of securities class action litigation and shareholder derivative litigation. A new securities suit recently filed against 3M is the latest example of corporate and securities litigation arising from environmental disclosure-related issues. As discussed further below, the 3M complaint is also the latest example of event-driven securities litigation as well.
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In the wake of President Donald Trump’s June 1, 2017 announcement that the United States will withdraw from the Paris Climate Accord, one of the things I predicted was that the administration’s action likely would trigger a host of reactions on the state, national and international stage. Among other things, I conjectured that activists facing setbacks on the political stage might try to use judicial processes to advance their agenda. Though it lacks a direct connection to the U.S.’s actions on the Paris Climate Accords, a recent Australian lawsuit confirms my suggestion that activists are increasingly likely to try to use the courts as a way to promote their objectives.
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earthOn June 1, 2017, President Donald Trump announced the withdrawal of the United States from the Paris Climate Accord.  Under the terms of the Paris pact, withdrawal could take up to four years, but the President’s recent action signals his administration’s intent to step away from the agreements and commitments detailed in agreement. The President’s action has already set in motion a host of political reactions, including a variety of pronouncements at the state and local level in the U.S. in response to the President’s move.

Amidst these actions on the political stage, a host of other actors, including shareholders, activists, and non-governmental organizations (NGOs) have continued to press climate change-related disclosure issues. These developments ensure that notwithstanding the President’s actions on the Paris accord, climate change will remain a high profile issue for many corporate boards, and potentially could be a source of future corporate claim activity.
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A new Ontario statutory provision affecting the liability of directors and officers of dissolved corporations for environmental remediation costs recently caught my attention. As discussed in a December 5, 2016 memo from the Dentons law firm (here), apparently Ontario corporations have been in the past voluntarily dissolving in order to try to avoid environmental clean-up. Under provisions of the Forfeited Corporate Property Act 2015, which comes into force on December 10, 2016, along with related amendments to the Ontario Business Corporations Act, corporate dissolution will no longer protect former directors and officers from environmental liabilities. This statutory change, which is consistent initiatives in a number of jurisdictions to try to impose liability on corporate and officers without regard to culpability, raises a number of concerns and also highlights a number of larger issues.
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exxonThe question whether concerns about climate change-related disclosures might lead to regulatory enforcement actions or even liability claims has been around for some time, but though the concerns have remained, the regulatory actions and liability claims have not really materialized.  However, in the past week, the service of a subpoena on Exxon Mobil Corp. by New York Attorney General Eric T. Schneiderman has raised the possibility that an enforcement action against the energy giant relating to its climate change-related disclosures may be in the works. The Attorney General’s action also raises the question whether other companies and industries could also be targeted. These possibilities highlight possible corporate climate change-related enforcement and liability exposures.
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floridaAt a time when cyber liability and other hot topics dominate the discussion, potential corporate liability arising from environmental disclosures often does not receive the attention it should. However, as I have previously noted on this blog, environmental issues have been and remain an area on which plaintiffs’ lawyer have been focused. A recently

caliIn recent months, there have been a number of securities class action lawsuits filed based on alleged misrepresentations of the defendant company’s environmental compliance. On August 7, 2014, the securities suit filed against Exide Technologies and certain of its directors and officers based on the defendants’ allegedly misleading statements about the company’s compliance with environmental

In a case that has important implications for the potential liabilities of individual directors and officers, on October 28, 2013 twelve former directors and officers of bankrupt Northstar Aerospace agreed to pay a total of $CAN 4.75 million to the Ontario environmental regulator for costs to remediate environmental contamination at the company’s manufacturing site. The case