Tentative settlement reached in water crisis case

By Kyla Asbury | Jul 22, 2014

CHARLESTON - A tentative settlement has been reached in 24 lawsuits involving Freedom Industries regarding the January chemical leak that affected nine counties.

The more than $2.9 million, which will be held in a trust by Freedom pending Bankruptcy Court approval of Freedom's plan of liquidation, could cover health studies, water testing and other projects to benefit those who were affected by the chemical leak, according to court documents filed July 18 in the U.S. District Court for the Southern District of West Virginia.

The settlement would not include any direct payments to individuals, but would instead be used to benefit the proposed class of all 300,000 people whose water supply was disrupted.

Lawsuits against West Virginia American Water, whose water system was contaminated, and Eastman Chemical, who is the manufacturer of the chemical that was leaked into the water system, will go forward in federal court, as well as lawsuits against individual Freedom employees.

"This settlement only releases Freedom," said Anthony Majestro, an attorney for the plaintiffs. "All claims against West Virginia American Water and the others are still valid claims."

One condition to the settlement is that Freedom’s remaining environmental remediation payments, excluding costs for legal help and consultants from the firm Arcadis, do not exceed $850,000, according to the settlement documents.

The final settlement document also includes a provision allowing potential class members to "opt-out" of the deal if they wish to do so, according to the term sheet. It also requires public notices to be filed that explain the settlement and informs the public of deadlines for opting out.

The terms sheet states that attorneys for the residents and businesses agree "neither to ask for nor receive payment of fees from settlement proceeds paid by Freedom for the class," according to the settlement documents.

"We realized Freedom's assets weren't going to be sufficient to adequately compensate those who were affected by the spill," Majestro said. "The $2.9 million can be used in ways to help all involved - it can help us answer questions about what the chemical is and what it does."

Majestro said he spoke to his clients and others who were impacted by the spill to find out what they wanted in terms of a settlement.

"It became clear to me that no one wanted a $7.60 check from Freedom - they wanted answers," Majestro said.

Majestro said the $2.9 million can be used to find out the affects of MCHM on the water supply, can fund studies and medical monitoring.

"We feel very strongly that this is the right thing to do," Majestro said. "So much so that we were willing to reach this settlement and agree not to accept any compensation or attorneys fees. We live here and work here and we want answers to these questions ourselves."

However, Majestro said, no one is being forced to agree to the settlement.

"Anyone who feels that this is not the right thing to do can opt out of the settlement to receive their portion of Freedom's assets.

Majestro said the settlement will also save money because, if it is approved, the parties involved will not have to resolve individual claims of the class in Bankruptcy Court, which would "eat at Freedom's assets."

On Jan. 9, government officials discovered a licorice smell originating from Freedom's facility, according to complaints filed in January soon after the spill in the U.S. District Court for the Southern District of West Virginia.

Freedom did not self-report the leak of MCHM, although it had an obligation to do so immediately, according to the suits.

The plaintiffs claim airborne release of MCHM from the facility caused chemical air pollution, resulting in ambient concentrations well above the odor threshold for the chemical over an area of several square miles and over a period of several days after the Jan. 9 release.

West Virginia American Water reported that only 2,000 to 5,000 gallons of MCHM leaked into the Elk River. However, that number is as yet unknown, with recent estimates of 7,500, according to the suits.

Eastman is the exclusive U.S. manufacturer of MCHM and Eastman had a duty to make full disclosure on Material Safety Data Sheets for MCHM under the Emergency Planning Community Right to Know Act and to reflect accurately the state of knowledge of the medical and scientific communities about the toxicity of MCHM.

Eastman placed MCHM into interstate commerce and issued MSDS sheets and other warning data that were inadequate and not protective, the plaintiffs claim.

The plaintiffs claimed Gary Southern, Freedom's president, knew or should have known about the conditions at the facility and his acts and omissions in ignoring obvious threats to the environment and failure to take appropriate steps to mitigate them directly contributed to the plaintiff's damages.

The chemical spill tainted more than 300,000 WVAWC customers' water in parts of nine counties across the state.

The Center for Disease Control advised pregnant women to not drink tap water until the chemical was completely gone from the water.

Freedom filed for bankruptcy protection in January. On Jan. 29, Freedom's suggestion of bankruptcy was filed in the U.S. District Court for the Southern District of West Virginia at Charleston.

Southern signed a bankruptcy petition, estimating Freedom's debts at $10 million or less, but the cost of the water contamination disaster is likely to run much higher.

The cases have been assigned to District Judge John T. Copenhaver Jr.

U.S. District Court for the Southern District of West Virginia case numbers: 2:14-cv-14845, 2:14-cv-03433, 2:14-cv-14846, 2:14-cv-14846, 2:14-cv-14847, 2:14-cv-14848, 2:14-cv-14849, 2:14-cv-14850, 2:14-cv-14851 , 2:14-cv-14852, 2:14-cv-14853, 2:14-cv-14854, 2:14-cv-14855, 2:14-cv-14856, 2:14-cv-14857, 2:14-cv-14858, 2:14-cv-14859, 2:14-cv-14860, 2:14-cv-14861, 2:14-cv-14862, 2:14-cv-14863, 2:14-cv-14864, 2:14-cv-14865, 2:14-cv-14883, 2:14-cv-14901, 2:14-cv-11009

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