WILMINGTON (LN) — U.S. District Judge Richard G. Andrews on Friday granted motions to dismiss in the Chemours securities litigation, concluding that the plaintiffs' allegations regarding Free Cash Flow manipulation and internal control deficiencies did not state a claim under the Securities Exchange Act.
The suit, filed in 2024, alleged that Chemours executives made misleading statements between February 2023 and February 2024 concerning the company's financial performance. The plaintiffs claimed that defendants improperly delayed payments to vendors and accelerated collections from customers to meet publicly communicated Free Cash Flow targets, which tied into executive incentive compensation.
Chemours disclosed in February 2024 that it had placed three executives on administrative leave pending an internal review of its financial reporting processes. The company later stated that combined accelerated collections and delayed payables totaled $215 million in 2022 and $360 million in 2023.
Despite these disclosures, Judge Andrews ruled that the plaintiffs failed to plead that the company's statements about the timing of payments and collections were materially misleading. The judge noted that Chemours had already disclosed that discretionary timing was a "substantial factor" influencing accounts payable and receivable figures.
"I think Plaintiffs have failed to make a good argument as to why Defendants' disclosure regarding the effects of the variable timing of payments and collections would have required a concomitant disclosure that the variable timing was caused by intentional shifting," Judge Andrews wrote in his memorandum opinion.
The judge further rejected claims regarding Sarbanes-Oxley certifications and violations of the company's Code of Ethics, reasoning that without a successfully pleaded underlying fraud, attestations about internal controls could not be deemed false or misleading.
Plaintiffs had sought to certify a class of investors who purchased Chemours stock or options between February 10, 2023, and February 28, 2024. The stock price dropped approximately 12% following the February 2024 announcement about the internal review and fell an additional 31% after the company disclosed the specific accounting irregularities.
Judge Andrews granted the plaintiffs leave to file a second amended complaint, setting a deadline of June 5, 2026, for the motion to amend. He warned that if the deficiencies were not cured by that date, the case would be dismissed without further opportunity.