Plaintiffs in a major environmental lawsuit against the former Kerr-McGee Corp. say an Ohio trust fund is taking too long to process new claims seeking compensation for health problems linked to the company’s now-defunct railroad tie manufacturing operations in Avoca.
“The victims should have been paid already,” said Jim Haddock, a former Avoca mayor who pushed for legal action against the former Kerr-McGee Corp., which treated wood at the borough site from 1956 to 1996. “These people were exposed to carcinogens and suffered, and I have grave concerns about how this has been handled.”
Haddock said he isn’t speaking out for himself because he’s among 4,400 plaintiffs who have been or will be compensated as part of a bankruptcy settlement with the former Kerr-McGee and related entities.
His complaint focuses on a more than $30 million pot that was earmarked in the bankruptcy settlement largely to cover “future tort claims” to victims who have not yet received any compensation through prior suits.
Around 1,600 past and present Avoca-area residents had obtained settlements from a previous consolidated suit launched before the action that led to a bankruptcy award for Haddock and others.
Haddock points to an annual audit released in April by the Ohio-based Garretson Resolution Group, which was appointed to oversee the bankruptcy settlement trust.
The audit says the portion of the fund for new claims contained $33 million but was reduced to $31.76 million by the end of 2015 with no claims paid.
The expenses included $1.7 million for trust management and processing fees, $40,973 for legal fees, $49,936 in administrative costs and $6,156 in trust advisory committee fees. Three attorneys sit on the trust advisory committee: former Luzerne County prothonotary Jill Moran, Conyngham; Anthony Merrill, Phoenix, Arizona; and Matthew Slocum, Scranton.
“They already ate up more than $1 million in funds and have not paid any victims,” Haddock said. “It’s a travesty.”
Garretson Resolution said it has received new claims from 15,000 people related to the Avoca facility and other former Kerr-McGee operations across the country, and needs court guidance on how to proceed, according to paperwork recently filed in the New York City bankruptcy court that set up the trust.
According to the June 30 court filing, the bankruptcy reorganization plan and trust documents are “ambiguous” on the definition of new claims and the standard that should be used to evaluate which are accepted and rejected.
One interpretation of the bankruptcy plan would leave it up to the court to decide which claims are allowed, while the other puts the trust in charge without specifying a standard.
Garretson believes it should decide and says it has developed a standard for reviewing claims, but it first wants a court directive.
Without a directive, the trust expects claimants to challenge the legality of the evaluation method selected by the trust, which could drain the funds set aside to pay new claims.
The trust proposes granting claims only for those who were diagnosed with a disease or condition after Aug. 12, 2009.
Garretson argues this standard is “fair and appropriate” because claimants who were aware of their health problems prior to the 2009 date had the opportunity to file a claim preserving their right to receive a settlement as part of the bankruptcy case — a right exercised by the 4,400 other Avoca-area plaintiffs.
Under this standard, a “high percentage” of the claims would be denied because the “vast majority” reported diseases or conditions that appeared or were diagnosed before the 2009 date, the filing said.
Garretson was unable to provide a breakdown of the number of the 15,000 claims tied to the Avoca facility, in part because claimants are not required to specify which plant exposed them to chemicals, said Stephanie Mulcahey, the company’s communications director in Cincinnati.
Haddock, who oversees Luzerne County’s civil and criminal court records, said Garretson should have filed the court action sooner.
“The trust overseer should have been more proactive about resolving these claims,” he said. “The trust has been there three years, and it’s dragging its feet.”
Haddock supports liberal standards for the new claims. He estimates thousands more past and present Avoca-area residents who worked at or lived in the 1.5-mile zone around the railroad tie facility when it was in operation received nothing because they weren’t part of prior suits.
The bankruptcy settlement covered about 32 percent of what the 4,400 Avoca area plaintiffs had claimed in damages, he said.
“There were a lot of people who just didn’t realize or hear about the past suits and missed out,” Haddock said. “There are a lot of people up in arms because they were impacted and wish they had been involved.”
Pittston-area attorney Michael Butera said he has six pending new claims and agrees with Haddock, saying lawyers and their clients have become frustrated with “a lot of the things that are going on” with the processing of their requests.
“Our hands are tied, and it’s just not fair,” Butera said.
Butera said his six claimants, all local residents, are suffering from “very serious health problems” that have been tied to creosote oil used at the Avoca operation.
“They have legitimate claims and should be compensated,” he said.
Those who obtained prior settlements have maintained the Avoca operation was responsible for cancers in both adults and children, respiratory problems, heart conditions and rashes and other skin disorders.
Kingston lawyer Edward Ciarimboli, who also is representing some new claimants through his firm, Fellerman & Ciarimboli, said he welcomes court involvement.
“None of our claims have been accepted yet, so I’m thrilled there’s going to potentially be court guidance on this issue,” Ciarimboli said.
Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.