769 F. Supp. 2d 202
S.D.N.Y.2011Background
- Tronox, Inc. alleged false and misleading IPO statements in 2005 and subsequent disclosures leading to securities claims in SDNY.
- In Tronox I, court dismissed some claims and granted leave to replead for claims after the Spin-Off; FAC repleaded these claims.
- Plaintiffs allege Kerr-McGee (KMG) and Anadarko controlled Tronox post-Spin-Off via the Master Separation Agreement (MSA) and related conduct.
- MSA allegedly required Tronox to adopt KMG’s reserve methodologies and to obtain KMG’s consent before material reserve changes, enabling understatements.
- Allegations include ongoing interaction and oversight by KMG/Anadarko in Tronox’s environmental reserve reporting and disclosures.
- Court addresses control liability under Section 20(a), respondeat superior, and successor liability theories as to KMG Officers and Anadarko.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Post-Spin-Off control by KMG | FAC pleads KMG had actual control after March 31, 2006. | KMG lost control after Spin-Off; MSA did not grant control. | Denial of KMG control dismissal denied; facts support control post-Spin-Off. |
| Anadarko's control over Tronox via KMG | Anadarko deeply involved in reserves and MSA; liable as control person. | Anadarko was not party to the MSA; insufficient to plead control. | Respondeat superior and control allegations against Anadarko survive; facts show control/consent dynamics. |
| Respondeat superior liability of Anadarko | Anadarko controlled KMG and thereby Tronox’s reserve reporting. | Arguments rely on KMG control concepts; not directly on Anadarko's agency. | Respondeat superior claims against Anadarko denied only to extent unsupported; allegations support liability. |
| Successor liability for Anadarko | Anadarko successor to KMG assumed legacy liabilities via merger/indemnities. | Fraud/escape theory fails; merger cannot be fraudulent to escape pre-merger liabilities. | Anadarko's motion to dismiss successor liability granted. |
| KMG Officers' control liability after merger | Corbett, Pilcher, Wohleber continued to control Tronox via MSA and pre/post-merger actions. | Post-Merger control claims against Corbett limited and attenuated; insufficient for continued control. | Corbett's post-Merger control claims dismissed; other periods allowed subject to further proceedings. |
Key Cases Cited
- ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (control liability principles and pleading standards in Section 20(a))
- First Jersey Sec., Inc. v. White, 101 F.3d 1450 (2d Cir. 1996) (broad interpretation of control concepts; pleading standards)
- In re Blech Sec. Litig., 961 F. Supp. 569 (S.D.N.Y. 1997) (control as fact-intensive inquiry; not purely undisputed status)
- In re Alstom SA Sec. Litig., 406 F. Supp. 2d 433 (S.D.N.Y. 2005) (limitations on control from CEO status; guidance on apparent vs actual control)
- In re Parmalat Sec. Litig., 414 F. Supp. 2d 429 (S.D.N.Y. 2006) (section 20(a) pleading considerations and control assertions)
- Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 2005 WL 2148919 (S.D.N.Y. 2005) (distinguishes scope of control between parent and subsidiary)