Groups Drop Class Action Insurance Settlement in West Virginia Spill

March 26, 2015

Lawyers for businesses and people affected by a massive chemical spill last year say a settlement to fund community projects is no longer being considered.

In June 2014, lawyers for the groups affected by the Freedom Industries spill proposed the money go toward projects benefiting the public, like health monitoring or more water testing.

The money would have come from $3.2 million worth of insurance from Freedom. The Charleston Gazette reports that U.S. Bankruptcy Judge Ronald Pearson approved the insurance settlement last week without tagging the money for public projects. His order directs Freedom to use the money for liabilities stemming from the spill.

The January 2014 spill contaminated drinking water for 300,000 people for days. Businesses and workers lost money amid a ban on using the tap water, though public concern about the water lingered long afterward. Many of them sued the company, and their cases are being addressed as bankruptcy claims.

In court documents from Freedom’s bankruptcy case last week, the lawyers wrote that the plan has been abandoned because “the necessary parties were not able to come to a final agreement.”

Former Freedom executives opposed it, saying the insurance should cover their legal costs.

Pearson wrote that the insurance money could become subject to Freedom’s large legal fees. Those fees have done little to help Freedom’s creditors, Pearson wrote.

“… some considerable portion of the work done appears to have been to limit the civil and criminal exposure of shareholders, for which reason the court has still under consideration those fee requests,” Pearson wrote.

Former Freedom President Gary Southern, five other former Freedom officials and the company itself face federal pollution charges in the spill. Southern also faces fraud charges in the company’s bankruptcy case.

Freedom chief restructuring officer Mark Welch says he hopes to use some of the money to pay creditors other than spill victims.

He said other money could be available, including from a possible sale of Freedom’s Charleston tank farm headquarters along the Elk River.

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