Products Liability Law Daily $151M settlement agreement for 2014 West Virginia chemical spill preliminarily approved
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Monday, September 25, 2017

$151M settlement agreement for 2014 West Virginia chemical spill preliminarily approved

By John W. Scanlan, J.D.

Two water companies and a chemical company will establish a $151 million fund to compensate individuals and businesses affected by a January 2014 chemical spill that contaminated drinking water in portions of nine counties in West Virginia, under an amended proposed settlement agreement given preliminary approval by the federal court in West Virginia administering the litigation. An earlier proposal was rejected by the court in July (Good v. West Virginia-American Water Co., September 21, 2017, Copenhaver, J.).

On January 9, 2014, Crude MCHM, which consists of 4-methylcyclohexane methanol and other chemicals, leaked from a Freedom Industries tank near Charleston into the Elk River and infiltrated into the Kanawha Valley Treatment Plant (KVTP) in Charleston owned and operated by American Water Works Service Company, Inc. and West Virginia-American Water Company (WVAW), both of which are subsidiaries of American Water Works Company. This resulted in an interruption in water supply for more than 224,000 residents and 7,300 businesses in portions of Boone, Cabell (Salt Rock/Culloden area), Clay, Jackson, Kanawha, Lincoln, Logan, Putnam and Roane Counties. The Crude MCHM had been purchased from Eastman Chemical Co.

Affected residents and businesses brought a putative class action against West Virginia-American Water, American Water Works, and Eastman Chemical, alleging a number of counts including: strict products liability in tort, negligence, gross negligence, breach of warranties, negligent infliction of emotional distress, public and private nuisance, trespass, breach of contract, and medical monitoring. Although the parties jointly moved for preliminary approval of a proposed class settlement to settle the litigation, the court denied this request in July 2017, finding four aspects of the initial proposal to be inadequate: (1) the tiered compensation structure for certain businesses; (2) the review and "appeals" process when disputes over claims arise; (3) the fixed base payments to certain medical claimants; and (4) the delay of payments pending appellate review. The parties then proposed an Amended Class Settlement Agreement, dated August 25, 2017.

Eligibility. The settlement class includes all natural persons, including unborn children, residing in apartments, condos, and houses that received tap water from Kanawha Valley Water Treatment Plant on the date of the spill. Also included are affected businesses, non-profits, and government entities, along with hourly wage earners for affected businesses.

Residential households filing a Simple Claim Form will be entitled to receive an estimated $550, plus $180 for each person after the first, with pregnant women receiving an estimated $1,500. Alternately, residents may seek reimbursement through an Individual Review Option for documented specific property damage, discarded food, and extra expenses. Residents who obtained medical treatment may recover for their personal injuries and medical expenses, and area workers in businesses ordered to shut down during the incident may be reimbursed for lost wages. Businesses, nonprofits, and government entities can file Simple Claim Forms to receive $1,875; businesses ordered to shut down can receive up to $41,875, based on the business’s revenue; and lodging businesses can receive up to $64,000. As with residents, businesses may choose instead to seek recovery for documented specific property damages, lost profits, lost inventory, and extra expenses.

Attorney fees. Class attorneys may receive 25 percent of the $101 million in guaranteed payment funds distributed from the $76 million to be contributed by West Virginia-American Water and $25 million from Eastman. Attorney fees of up to 25 percent paid from the contingent fund will be considered presumptively fair. Attorneys representing claimants seeking individual review may receive a contingent fee provided that the net payment to the claimant exceeds the simple claim amount.

Deadlines. Notification to class members will begin on October 11, 2017, and will end on November 8. The deadline for objections and opting out will be December 8, 2017, and the settlement administrator must identify opt-outs by December 18. Based on the number of opt-outs, the defendants may elect to exercise their right to terminate the settlement no later than January 2, 2018. Claim applications must be filed by February 21, 2018. A final fairness/approval hearing has been scheduled for January 9, 2018.

The civil action is No. 14-1374, consolidated with Case Nos. 2:14-11011, 2:14-13164, and 2:14-13454.

Attorneys: Benjamin L. Bailey (Bailey Glasser LLP) for Crystal Good. Deborah Greenspan (Blank Rome LLP) and Marc E. Williams (Nelson Mullins Riley & Scarborough LLP) for Eastman Chemical Co. Albert F. Sebok (Jackson Kelly PLLC) and Alton Kent Mayo (Baker Botts) for West Virginia-American Water Co. d/b/a West Virginia American Water.

Companies: Eastman Chemical Co.; West Virginia-American Water Co. d/b/a West Virginia American Water

MainStory: TopStory SettlementAgreementsNews ChemicalNews WestVirginiaNews

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