Products Liability Law Daily West Virginia water companies to set up $126 M fund to process chemical contamination claims
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Tuesday, November 1, 2016

West Virginia water companies to set up $126 M fund to process chemical contamination claims

By Pamela C. Maloney, J.D.

A proposed settlement agreement pursuant to which three West Virginia water companies will establish a $126 million fund to settle claims relating to a chemical spill that contaminated West Virginia drinking water has been ordered filed by a federal district court in the state in a putative class action in which affected individuals and businesses asserted negligence and strict liability claims against the water company and the manufacturer of the spilled chemical. The chemical manufacturer also reached an agreement in principle, the terms of which were not available at press time. In reaching the agreement, the water companies did not admit any fault or liability for any of the allegations made against them (Good v. West Virginia-American Water Co., October 31, 2016, Copenhaver, J.).

A spill of a coal processing chemical mixture sold and distributed by Eastman Chemical Company into the Elk River caused an interruption in water supply to approximately 300,000 residents, as well as businesses, in the Charleston and surrounding area when the chemical mixture infiltrated 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. The chemical mixture, which consisted of 4-methylcyclohexane methanol along with other chemicals, is commonly referred to as "Crude MCHM."

The residents and affected businesses filed a putative class action against the three companies, 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. Specifically, the residents alleged that the water company defendants could have prevented the incident with better precautions, regulatory compliance, and use of reasonable care. Some putative class members operated businesses that lost revenue due to the interruption; other class members claimed physical injuries, asserting that exposure to Crude MCHM in the environment through human pathways caused bodily injury and necessitated that they be medically monitored. Still others alleged that they had incurred costs for water replacement, travel, and other associated expenses.

Prior rulings. In two previous rulings, the court determined that its exercise of jurisdiction over the out-of-state parent company of the two water companies operating within the state did not violate the parent company’s due process rights [see Products Liability Law Daily’s April 13, 2015 analysis], and the water company had an entirely separate duty in tort not to "invade and contaminate the real and personal property of others" in the process of supplying water to customers, thus raising separate claims for both tort and contract under the gist of the action doctrine [see Products Liability Law Daily’s June 4, 2015 analysis].

Terms of settlement agreement. The $126 million set aside for payment of claims submitted by eligible class members will be split between two separate settlement accounts. The water company defendants agreed to contribute $76 million to a Guarantee Fund from which single uniform payments (in an amount to be negotiated) will be paid to each class member who was a residential or business customer of WVAW as of January 9, 2014. The remaining $50 million will be made available in a Claims Based Payments fund to reimburse those class members who do not wish to accept the standard payment from the Guaranteed Fund. These class members must submit a claims form along with appropriate objective documentation and a determination by the settlement administrator of a demonstrated payment amount under criteria to be negotiated by the parties. Wage earners who were not customers of WVAW served by the KVTO on January 9, 2014, and who asserted that they lost wages as a result of the closure of business customers served by the KVTP may submit a claim for a Claims Based Payment.

According to the terms of the settlement, claims-based payments will be paid from the Guaranteed Fund until that fund is depleted and then will be paid using the Claims Based Payment funds up to the maximum amount of $50 million.

All attorney fees and the administrative costs of settlement will be paid from the Guaranteed Fund and/or the Claims Based Payment fund (and/or the Eastman settlement amount) in a manner to be negotiated.

WVAW also has agreed not to seek rate recovery from the West Virginia Public Service Commission for response costs it incurred in relation to the chemical spill or for the amounts paid pursuant to the final settlement.

The case is Civil Action No. 2:14-01374Terms of Settlement Agreement.

Attorneys: Alexander D. McLaughlin (The Calwell Practice, LC) for Crystal Good. Marc E. Williams (Nelson Mullins Riley & Scarborough, LLP) and Marquel S. Jordan (Blank Rome LLP) for Eastman Chemical Co. Albert F. Sebok (Jackson Kelly PLLC) and Alton Kent Mayo (Baker Botts LLP) 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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