$2.6M Deal to Settle Hurricane Katrina FEMA Mobile Home Claims

Companies that manufactured mobile homes for the Federal Emergency Management Agency after Hurricane Katrina have agreed to pay $2.6 million to resolve thousands of claims that the shelters exposed Gulf Coast storm victims to potentially dangerous fumes, according to a proposed class-action settlement filed Jan. 21.

Attorneys for plaintiffs and roughly two dozen mobile home makers and their subsidiaries are asking a federal judge to approve the deal, which would be the second mass settlement of claims over formaldehyde exposure in the government-issued housing units FEMA ordered after the 2005 storms.

One of the plaintiffs’ lead lawyers said the settlement came after a key ruling by the judge severely hurt his side’s position.

The settlement could benefit several thousand families in Louisiana, Mississippi, Texas and Alabama who claim they were exposed to dangerous levels of formaldehyde while living in FEMA mobile homes. The chemical, commonly found in building materials, can cause breathing problems and is classified as a carcinogen.

The settlement doesn’t involve claims for residents who lived in FEMA travel trailers, which housed the majority of storm victims. Travel trailers are smaller and less sturdy than mobile homes and are more prone to elevated levels of formaldehyde.

The mobile home companies involved in the proposed settlement include Cavalier Home Builders, Patriot Homes Inc., CMH Manufacturing and Champion Home Builders. A lawyer for the companies said he couldn’t immediately comment on the deal.

In May 2009, U.S. District Judge Kurt Engelhardt dismissed some of the state law claims filed against mobile home makers, ruling they were barred under federal law. Engelhardt said Congress never intended to allow states to set higher safety standards for mobile homes than those imposed by the Department of Housing and Urban Development.

Gerald Meunier, a lead plaintiffs’ lawyer, said Engelhardt’s ruling dealt a serious blow to mobile home residents’ claims against the companies.

“The only way you win is to show they broke HUD’s rules,” Meunier said. “If they complied with HUD’s rules, you’re out of luck.”

The companies agreed to pay a total of $2,625,000 into the settlement fund, but they continue to deny any wrongdoing and believe the claims are without merit, the agreement says.

A court-appointed special master will present Engelhardt with a plan for distributing the money before a “fairness hearing” is held on the proposal. Attorneys’ fees and other expenses will be deducted from the $2.6 million and are capped at 48 percent of the fund.

Meunier said he expects his clients to understand that they weren’t in a position to reap a big windfall from the deal.

“I think they’re going to be accepting of it once they understand the impact of (Engelhardt’s) ruling,” he said.

Meunier added that the judge’s ruling didn’t affect claims against travel trailer makers.

“Travel trailers are vehicles. They have VIN numbers. They’re not HUD regulated,” he said.

Becky Gillette, the Sierra Club’s formaldehyde campaign director, said it appears the settlement will pay each family well under $1,000 apiece if several thousand qualify for awards.

“I don’t see it benefits them that much,” she said. “Now they might have enough money to go to McDonald’s, but it wouldn’t pay for even one child’s visit to the emergency room because they’re having difficulty breathing.”

Three cases against companies that manufactured and installed FEMA travel trailers have been tried before Engelhardt, who is presiding over a batch of hundreds of consolidated lawsuits. The juries in all three trials sided with the companies and didn’t award any damages.

Fleetwood Enterprises Inc., which supplied FEMA with travel trailers before it filed for bankruptcy in 2009, agreed last year to a settlement resolving about 7,500 to 8,000 claims. Terms of that deal weren’t disclosed.

FEMA downplayed residents’ formaldehyde concerns before government tests on hundreds of trailers in Louisiana and Mississippi found formaldehyde levels that were, on average, about five times what people are exposed to in most modern homes.