Good v. American Water Works Company, Inc.
2:14-cv-01374
S.D.W. VaJul 6, 2017Background
- January 9, 2014 chemical spill (Crude MCHM) from Freedom Industries contaminated the Elk River and interrupted tap water for ~224,000 people served by the Kanawha Valley Treatment Plant (KVTP).
- Plaintiffs filed consolidated federal and coordinated state litigation alleging contract and tort claims against WV‑American Water, American Water affiliates, Eastman Chemical, and others; an issues class on fault was previously certified in 2015.
- The parties negotiated a global settlement (submitted April 27, 2017) creating a two‑tier common fund: a $101 million guaranteed fund (Eastman + WV American Guaranteed Fund) and a $50 million contingent WV American Fund to pay claims through a claims-administration process (Simple Claims and Individual Review Claims).
- Settlement defines Residential, Business, Wage Earner, and Medical (including Pregnancy) claims with fixed Simple Claim payments and an Individual Review process for larger/complex claims; attorneys’ fees, administration costs, and incentive awards are carved out of the funds.
- The court conducted a Rule 23(e) preliminary fairness review and identified substantive concerns (business tier inequities, inadequate dispute/appeals process, rigid fixed medical base awards, and delay of payments pending appeals) and also scrutinized the attorneys’ fees request (30% of guaranteed fund + additional percentages on certain Individual Review payouts).
- Outcome at this stage: the court DENIED preliminary approval without prejudice, directed revisions addressing the highlighted fairness/administration issues, and provisionally reduced the proposed fee to 25% (from requested 30%) as the appropriate preliminary benchmark, while conditionally addressing costs and incentive awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the proposed Settlement Class should be certified and the settlement preliminarily approved | Good argued the class is numerous, common issues predominate from a single event, and settlement (with Simple and Individual Review claims) is fair and efficient | Defendants supported global resolution and limited objections to structure; sought finality and closure | Court found Rule 23(a)/(b)(3) requirements met in principle but DENIED preliminary approval pending fixes to settlement terms (no notice sent yet) |
| Fairness of compensation scheme (business tiers and fixed medical base payments) | Plaintiffs: tiered Simple Claim and fixed medical bases provide predictability and allow efficient distribution; Individual Review available for higher losses | Defendants: favored structured, administrable payouts and limits exposure; support two‑tier funding | Court held tiered business payouts and inflexible fixed medical base awards unfair or unreasonable; ordered parties to amend tiers and permit flexible/"up to" medical awards |
| Adequacy of claim dispute resolution and timing of payments (appeals) | Plaintiffs: Settlement Administrator and Claims Oversight Panel suffice to administer and resolve disputes; appeals centralized | Defendants: argued oversight/control reduces litigation risk | Court found the review/appeals process inadequate (too much discretion and no independent final review), and that delaying all payouts pending appeals is unacceptable; directed stronger independent dispute resolution and phased payments/sequestering for appealed issues |
| Attorneys' fees, costs, and incentive awards | Plaintiffs' counsel sought 30% of the $101M guaranteed fund (plus 25% on contingent funds and additional percentages on certain Individual Review payouts), reimbursement of ~$2.38M litigation costs, ~$2.65M administration/notice costs, and incentive awards ($15K ×14; $10K ×10) | Defendants implicitly contested excessive fees and certain fee provisions; no detailed opposition at preliminary stage | Court denied fee request in part: preliminarily approved 25% fee on guaranteed fund and 25% on contingent fund (reduced from requested 30%), required fuller justification/documentation for administrative costs and litigation costs, and asked for declarations supporting incentive awards before preliminary approval |
Key Cases Cited
- Cotton v. Hinton, 559 F.2d 1326 (5th Cir. 1977) (trial judge must approve, modify, or reject class settlement and examine fairness)
- Evans v. Jeff D., 475 U.S. 717 (1986) (district court may condition approval on deletion or modification of settlement provisions)
- Amchem Prod., Inc. v. Windsor, 521 U.S. 591 (1997) (settlement‑only class certification requires careful application of Rule 23 safeguards)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (commonality requires class members suffered the same injury)
- Jiffy Lube Sec. Litig., In re, 927 F.2d 155 (4th Cir. 1991) (protections for absent class members in settlement approval)
- Berry v. Schulman, 807 F.3d 600 (4th Cir. 2015) (settlement approval emphasizes protection of absent class members and clear findings for fee awards)
- Flinn v. FMC Corp., 528 F.2d 1169 (4th Cir. 1975) (approval of settlements reached after protracted negotiation and on eve of trial)
- In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283 (3d Cir. 1998) (scale effect: larger common funds typically justify lower percentage fees)