Bloomberg News

Tronox Judge to Decide on Anadarko Cap in $15.5 Billion Suit

November 29, 2011

(Updates with judge’s comment in third paragraph.)

Nov. 29 (Bloomberg) -- Anadarko Petroleum Corp.’s request to limit damages claimed in a $15.5 billion pollution lawsuit brought by the U.S. and creditors of formerly bankrupt Tronox Inc. will be decided soon, a judge said.

U.S. Bankruptcy Judge Allan Gropper in Manhattan said he will issue a written ruling on whether The Woodlands, Texas- based Anadarko and its Kerr-McGee unit can cap the claims against them, after hearing more than two hours of arguments today. His ruling will determine whether Tronox creditors and the U.S. government can argue for billions to clean up thousands of polluted sites around the U.S. and pay people who claim they were harmed by Kerr-McGee’s toxins.

“It’s important to get the decision out quickly,” Gropper said. “I will give you a decision as soon as possible.”

Tronox sued Anadarko and Kerr-McGee in 2009 during its bankruptcy to recover what it said were billions of dollars in environmental liabilities that Anadarko dumped on it through a 2006 spinoff. U.S. government agencies also sued, and a trust created when Tronox exited bankruptcy Feb. 14 is now pursuing the lawsuit. The U.S. will get 88 percent of whatever is won in the lawsuit and tort claimants will get the remainder, according to court papers.

The case is set to go to trial May 15. Gropper said today that the parties should mediate the dispute.

‘Windfall’ Objection

Anadarko said in court papers that the plaintiffs shouldn’t be able to profit from a recovery, and redacted their pleadings to hide their estimates as to how much the trust had allegedly over-stated its claim.

“They admit to you they’re seeking over $15.5 billion. That’s a windfall,’ Lydia Protopapas, a lawyer for Anadarko, told Gropper today.

Kerr-McGee transferred about 2,800 polluted sites and liability for 70 years’ worth of pollution to Oklahoma City- based Tronox after moving its most valuable oil and gas assets to a new company that Anadarko acquired in 2006 for $18 billion, Tronox said in its 2009 lawsuit. Tronox has called the transactions a two-step fraud.

David Zott, a lawyer for the trust, said the estate and all its creditors, including environmental and tort claims, are entitled to recover money that was fraudulently transferred out of the estate.

Lawsuit Proceeds

“We’re entitled to avoid in entirety the fraudulently transferred oil and gas assets,” Zott told Gropper.

Proceeds from the lawsuit will go to the litigation trust which has taken on the case. Proceeds from the trust will go to the U.S. Environmental Protection Agency and other agencies. Lawyers for the U.S. have said the federal government and several states are involuntary creditors now dealing with pollution strewn across the country.

In a separate, related lawsuit, Tronox shareholders sued Anadarko in July 2009, seeking unspecified damages over the same two transactions. They claim they were misled by company disclosures about the size of Kerr-McGee’s potential environmental liabilities.

The bankruptcy case is Tronox Inc., 09-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: Stephen Farr, Michael Hytha

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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