Bankruptcy Court Rules that Spinoff Was a Fraudulent Transfer
December 20, 2013
On December 12, 2013, in a 166-page opinion, Bankruptcy Judge Allan L. Gropper of the U.S. Bankruptcy Court for the Southern District of New York held that Kerr-McGee Corporation was liable for between $5.1 and $14.5 billion in damages as a result of various fraudulent transfers occurring several years before Tronox Inc. and certain of its affiliates filed for bankruptcy. See Tronox Inc. v. Kerr-McGee Corp. (In re Tronox Inc.), Adv. Proc. No. 09-1198 (ALG), 2013 WL 6596696 (Bankr. S.D.N.Y. Dec. 12, 2013). The fraudulent transfer claims, which were prosecuted by a litigation trust, related to the spinoff and separation of Kerr-McGee’s chemical business from its oil and gas exploration and production business. Significantly, the opinion addresses issues of first impression relating to environmental and tort liability in the context of a fraudulent transfer, provides guidance on the unique role that § 502(h) of the Bankruptcy Code can play in fraudulent transfer litigation, and adds to a growing list of cases that address the safe harbors under § 546(e) of the Bankruptcy Code.