June 19th, 2024

Railroad agrees to $600 million settlement for fiery Ohio derailment, residents fear it’s not enough

By Josh Funk, The Associated Press on April 9, 2024.

FILE - Debris from a Norfolk Southern freight train lies scattered and burning along the tracks on Feb. 4, 2023, the day after it derailed in East Palestine, Ohio. (AP Photo/Gene J. Puskar, File)

Norfolk Southern has agreed to pay $600 million in a class-action lawsuit settlement for a fiery train derailment in February 2023 in eastern Ohio, but local residents worry the money won’t go very far because their potential health needs down the road may be tremendous.

“It’s not nowhere near my needs let alone what the health effects are going to be 5 or 10 years down the road,” said Eric Cozza, who had 47 family members living within one-mile of the derailment.

The settlement also represents only a small slice of the $3 billion in revenue Norfolk Southern generated just in the first three months of this year.

More than three dozen cars of the freight train – which had roughly 150 cars and three locomotives – derailed on the outskirts of East Palestine, near the Pennsylvania state line. Several cars spilled a cocktail of hazardous materials that caught fire, and then three days later officials blew open five cars filled with vinyl chloride and burned that toxic chemical because they feared those cars might explode. An evacuation covered 1,500 to 2,000 of the town’s approximately 4,800 to 4,900 residents.

The company said the agreement, if approved by the court, will resolve all class action claims within a 20-mile radius from the derailment and, for those residents who choose to participate, personal injury claims within a 10-mile radius from the derailment.

That, too, has people in East Palestine fearing that the money, when divvyed up, won’t amount to much.

A 20-mile radius around the derailment would include not just East Palestine and the people that had to evacuate but also larger towns like East Liverpool and Columbiana, Ohio.

Norfolk Southern said Tuesday that individuals and businesses will be able to use compensation from the settlement in any manner they see fit to address potential adverse impacts from the derailment, which could include health care needs, property restoration and compensation for any net business loss. Individuals within 10-miles of the derailment may choose to pursue additional compensation.

The company said that the settlement doesn’t include or constitute any admission of liability, wrongdoing, or fault.

The settlement is expected to be submitted for preliminary approval to the U.S. District Court for the Northern District of Ohio this month. Payments could begin to arrive by the end of the year, subject to final court approval.

Norfolk Southern has already spent more than $1.1 billion on its response to the derailment, including more than $104 million in direct aid to East Palestine and its residents. Partly because Norfolk Southern is paying for the cleanup, President Joe Biden has never declared a disaster in East Palestine, which is a sore point for many residents.

The railroad has also promised to create a fund to help pay for the long-term health needs of the community, but that hasn’t been finalized yet.

The plaintiffs’ attorneys said the deal is the result of a year of intense investigation of the derailment, and should provide meaningful relief to residents.

“This resolution comes shortly after the one-year anniversary of the disaster and will provide substantial compensation to all affected residents, property owners, employees and businesses residing, owning or otherwise having a legal interest in property, working, owning or operating a business for damages resulting from the derailment and release of chemicals,” said Seth A. Katz of Burg Simpson Eldredge Hersh & Jardine, P.C., M. Elizabeth Graham of Grant & Eisenhofer P.A., Jayne Conroy of Simmons Hanly Conroy LLC and T. Michael Morgan of Morgan & Morgan, P.A.

The railroad also announced preliminary first-quarter earnings of 23 cents per share Tuesday, which reflects the cost of the $600 million settlement. Without the settlement, the railroad said it would have made $2.39 per share.

Railroad CEO Alan Shaw, who is fighting for his job against an activist investor who wants to overhaul the railroad’s operations, said Norfolk Southern is “becoming a more productive and efficient railroad” but he acknowledged there is more work to do.

Ancora Holdings is trying to persuade investors to support its nominees for Norfolk Southern’s board and its plan to replace Shaw and the rest of the management team at the railroad’s May 9 annual meeting. Ancora says Norfolk Southern’s profits have lagged behind the other major freight railroads for years and the investors question Shaw’s leadership.

Last week federal officials said that the aftermath of the train derailment doesn’t qualify as a public health emergency because widespread health problems and ongoing chemical exposures haven’t been documented.

The Environmental Protection Agency never approved that designation after the February 2023 Norfolk Southern derailment even though the disaster forced the evacuation of half the town of East Palestine and generated many fears about potential long-term health consequences of the chemicals that spilled and burned. The contamination concerns were exacerbated by the decision to blow open five tank cars filled with vinyl chloride and burn that toxic chemical three days after the derailment.

The head of the National Transportation Safety Board said recently that her agency’s investigation showed that the vent and burn of the vinyl chloride was unnecessary because the company that produced that chemical was sure no dangerous chemical reaction occurred inside the tank cars. But the officials who made the decision – Ohio’s governor and the local fire chief leading the response – have said they were never told that.

The NTSB’s full investigation into the cause of the derailment won’t be complete until June, though that agency has said that an overheating wheel bearing on one of the railcars, which wasn’t detected in time by a trackside sensor, likely caused the crash.

The EPA has said the cleanup in East Palestine is expected to be completed this year.

The railroad said Tuesday that even though volume was up 4% during the quarter, its revenue fell by 4% because of lower fuel surcharge revenue and changes in the mix of shipments it handled.

Shares of Norfolk Southern Corp., based in Atlanta, were essentially flat Tuesday but are have jumped 23% over the past year with most of that increase coming after news of Ancora’s campaign to overhaul the railroad broke.

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