After a federal judge in New York ruled in December that Kerr-McGee Corporation’s spin-off of Tronox Inc. was a fraudulent transfer intended to shield it from billions in environmental liabilities, Kerr-McGee parent Anadarko Petroleum Company claimed in January it should pay no more than $850 million in damages. But this week, Kirkland & Ellis’s David Zott told the judge that the ruling is worth a staggering $21 billion.
Anadarko derived the $850 million number based on the gap between Tronox’s assets and its liabilities when the company was first deemed insolvent in 2005. On Wednesday, however, Kirkland filed a 34-page objection on behalf of one of two litigation trusts that filed the suit, arguing that Anadarko was improperly trying to apply Kerr-McGee’s equity interest in Tronox before Tronox went bankrupt in order to vastly reduce the damages it should have to pay. Zott, the plaintiffs’ lead lawyer, argued that under the bankruptcy code, Anadarko’s equity claim should either be disallowed completely, or should offset the judgment by no more than 2.8 percent. The defendants have until early March to respond; the judge is expected to make a decision before mid-year.
