Judge rejects settlement between Whirlpool and property owners

An attempt to settle a class action lawsuit against Whirlpool by residents in and around the toxic plume of trichloroethylene (TCE) the company admits leaking into the groundwater from its now-shuttered south Fort Smith facility was denied Wednesday (Dec. 3) by U.S. District Judge (Western District of Arkansas) P.K. Holmes III.

Following were details of the proposed resolution, according to an email at the time of the settlement announcement in July from Whirlpool Senior Manager of Global Public Relations Kristine Vernier.
• The agreement covers current owners of property devalued in 2013 by the County Tax Assessor for tax assessment purposes as a result of groundwater contamination from trichloroethylene (TCE) released at the former Whirlpool manufacturing facility in Fort Smith, as well as some properties near the facility whose tax value assessment did not change;
• Property owners inside the area bounded by Ingersoll Ave, Brazil Ave., Jenny Lind Rd., and Ferguson St. will receive either an amount equal to the devaluation estimated by the County assessor or the devaluation as determined by an independent property appraiser;
• Class members outside this area will receive $5,000, and possibly more in the future, if TCE is detected above threshold levels in groundwater beneath their property;
• Property owners agree to allow access to their property for testing and remediation activities, record a deed restriction prohibiting new wells on their property, and release Whirlpool from property damage claims. 
• Each class member will receive formal notice of the resolution, as well as an opportunity to opt out of the agreement;
• A federal Court will be required to approve the agreement; and
• Whirlpool has agreed to pay court approved fees and costs incurred by the class members.

An objection to the proposed settlement was filed in September by attorney Sam Ledbetter of the Little Rock law firm of McMath Woods, who said the deal was "great" for Whirlpool and leaves plaintiffs as the "losers in the proposal."

"The proposed settlement is a great deal for defendant in that it eliminates its exposure to additional types of damages, including punitive damages, avoids any expense associated with litigation, including having to engage in discovery, and allows it to encumber and access private property as if it were a government actor in a condemnation action, thereby avoiding significant expense associated with cleaning up the mess it has made," Ledbetter wrote.

He added, "In other words, for little or no effort, putative class counsel stands to reap a handsome fee."

In Holmes written opinion denying the settlement, he quoted attorney Kenneth Shemin when asked during hearings on the settlement whether "discovery had commenced."

Shemin: "No, but I know –…"
Judge Holmes: "You haven't done any discovery at all?"
Shemin: "I haven't. I don't need, Judge –…"

As a result, Holmes appeared to agree with Ledbetter's assertion on reaping "a handsome fee."

"To the Court, the clause appears to put the Plaintiffs at odds with the putative subclasses because it offers the Plaintiffs an award for deciding not to even begin pursuing their representative claims on behalf of the putative subclasses. … To some extent, the record in this case even raises a question about whether it is Plaintiffs or Whirlpool driving the class action."

The judge also noted that plaintiff Scott Day began "this lawsuit with an attorney whose goal from the beginning was to compromise for less than the damages he believes are available, even though that attorney also assumed that liability for the TCE plume would not be hotly contested."

He added that the actions call into question whether the plaintiff and his attorney will "vigorously prosecute the interests of a class."

Holmes also noted that plaintiff Glenda Wilson become part of the lawsuit "at Whirlpool's behest, as a result of extensive settlement discussions and because Whirlpool wanted to ensure settlement could reach the putative well-ban subclass."

"That Wilson became a Plaintiff and putative subclass representative at the eleventh hour at Whirlpool's behest does not in and of itself render her inadequate as a subclass representative. It does, however, raise a significant question about the extent to which she would vigorously prosecute the interests of the subclass."

Holmes left open the possibility of seeking certification at a future time, though Attorney Ross Noland of McMath Woods said Thursday (Dec. 4) that the “proposed class and settlement have serious issues with every legal requirement for certification and settlement, including the nature of the class and the lack of discovery to date. It is questionable if Whirlpool and Mr. Shemin can overcome those issues. It will be interesting to see if they try. In re the two cases filed by our firm: We are litigating the cases pursuant to the deadlines set in the Court’s  Oct. 23, 2014, scheduling order."

Ledbetter, Noland and Rick Woods of Taylor Law Partners in Fayetteville are co-counsel in the cases Noland referenced.

Jeff Noel, Whirlpool's vice president of communications and public affairs, said in a note Thursday to The City Wire that the company is "committed to doing the right thing for the residents of Fort Smith."

"Our efforts to achieve resolution through the class action process were intended to avoid protracted litigation and provide affected residents with an opportunity to make a decision on whether to take advantage of a substantial, transparent offer. The proposed class resolution was very generous, and we will continue to work toward a resolution that is fair, timely and enables both the residents and the company to focus on meeting the goals of the ongoing remediation effort.”

Link here for a copy of Holmes decision.