What happened

Shares of Chemours (NYSE:CC) traded up 13% on Tuesday after former parent DuPont (NYSE:DD) said it is likely to renegotiate the companies' separation agreement. Chemours has sued DuPont over the environmental liabilities it retained in the original agreement, but the company's initial court efforts have not been promising.

So what

Chemours, a major supplier of titanium dioxide, was spun out of DuPont in 2015 and held on to a lot of legacy environmental liabilities as part of the separation agreement. Chemours has argued that DuPont's estimates of how much its former subsidiary would be on the hook for were off base and were not prepared in good faith.

A pile of white pigment.

Image source: Getty Images.

Chemours had gone to court to try to get DuPont to foot more of the bill, but the company on March 31 was dealt a setback when the litigation was dismissed on technical grounds. Sam Glasscock 3d of the Delaware Court of Chancery granted DuPont's dismissal request, ruling that he had no jurisdiction to hear the case because the separation agreement between the companies states that all disputes arising from the spinoff are subject to binding arbitration. Chemours has appealed that ruling.

DuPont CEO Edward Breen, during his company's post-earnings call, said he was pleased with the push to go to arbitration "because it's a quicker process than going through the court system." He also predicted the two sides would be able to come to an agreement.

"My opinion is, there probably will be a settlement with Chemours that will occur here at some point in time, where we will renegotiate the agreement we have between the companies," Breen said.

Now what

Chemours shares crashed after the late March court decision because what investors fear most is the company having to go it alone in cases involving PFOA, a chemical once used in nonstick coatings and other products.

There is still a lot of risk with these suits, but it appears from Breen's comments that Chemours' former parent is not just trying to walk away from the claims. That's reason enough to send the shares flying heading into Chemours' earnings report Tuesday evening.