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Michigan Settles Flint Water Litigation for $600 Million (2)

Aug. 20, 2020, 2:20 PM; Updated: Aug. 20, 2020, 5:49 PM

Thousands of Flint, Mich., residents whose drinking water was contaminated with lead will have access to a $600 million victims compensation fund announced Thursday.

Residents of Flint, one of Michigan’s poorest communities, ended up drinking lead-tainted water after city water resources were switched to untreated river water to save money in 2014. The ensuing crisis spurred widespread state and federal efforts to replace lead service lines in the industrial city, and cast light on the ongoing risk from lead pipes across the country.

“What happened in Flint should have never happened, and financial compensation with this settlement is just one of the many ways we can continue to show our support for the city of Flint and its families,” Gov. Gretchen Whitmer (D) said in a statement.

The final fund amount still faced public criticism of being too small for one of the nation’s highest-profile incidents of widespread chemical exposure.

“While I support today’s class-action settlement for the victims of the water crisis, there will never be a number that adequately recognizes the harm done to Flint families,” Rep. Dan Kildee (D-Mich.) said in a statement.

Former Secretary of State and Democratic presidential candidate Hillary Clinton said in a tweet on Thursday that “Nothing can make up for the damage this tragedy inflicted, but this is an important start.”

The plaintiffs’ attorneys pushed for a higher payout but were rebuffed by the state, said Michael Pitt, founding member of Pitt, McGehee, Palmer, Bonanni & Rivers P.C.

“We should never let the perfect be in the way of the good,” he said at a Thursday news conference. “I don’t think we left any real money on the table, honestly.”

Cash for Kids

After attorney fees and expenses, the bulk of the record-breaking Michigan settlement will go to children, who are at a higher risk than adults for development problems from lead exposure.

The outline of the deal would send 79.5% of proceeds to children, with 64.5% going to those ages six and under who were exposed to Flint water. Out of the city’s roughly 100,000 residents, up to 30,000 are children, said Theodore Leopold, partner with Cohen Milstein Sellers & Toll PLLC and a plaintiff attorney involved with the negotiations.

“The vast majority of the money is not going to some amorphous class action; the vast majority is going to children who were the most at risk of neurological damage,” Hunter Shkolnik, senior partner with Napoli Shkolnik PLLC and class negotiating counsel on the case, said in an interview.

The settlement is greater than the combined amount of judgments and settlements the state reached between 2008 and 2018, according to a nonpartisan state report on Michigan litigation.

While the details of the deal are still being ironed out, the large cash hit to the state comes at a time when Whitmer will have to negotiate with the Republican General Assembly on how to attack a $3 billion budget hole.

Cash is expected to start flowing to Flint residents in 2021, though schedules for the payments are still being worked out by the attorneys. Plaintiff awards will vary and may depend on proof of lead exposure, Pitt said.

Sorting Out Attorney Awards

The settlement spells an unknown massive payday for myriad attorneys involved in the litigation.

Shkolnik said contingency fee arrangements in the case mean attorneys could be entitled to roughly one-third of the settlement, or $200 million. However, he said he expects the court to reduce these fees in order to increase payouts for Flint residents.

Michigan officials didn’t immediately respond to requests for comment about the size of the attorneys’ award.

Fee arrangements fueled a spat between plaintiffs’ counsel in March 2018, when some other plaintiffs attorneys tried to boot Shkolnik from a negotiating position, arguing the firm’s fee arrangements were too steep.

Six years of legal work went into the case, and negotiations were made all the harder by Covid-19, Shkolnik said. It will be up to the judge so sort out which lawyers get what, he said.

While the settlement resolves the state’s liability, the plaintiffs’ attorneys promised broader litigation isn’t over. There are still hundreds of suits seeking damages from two engineering firms that gave advice to the state, and claims that the U.S. Environmental Protection Agency mismanaged the public health crisis.

“The settlement is welcome news, but I have said from the very beginning that the demand for justice will not be satisfied until every person who had a hand in poisoning my city be held legally accountable, regardless of political position or power,” state Senate minority leader Jim Ananich (D), who represents Flint and Genesee counties, said in a tweet.

—With assistance from Dean Scott.

(Updates with additional reporting throughout.)

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bloomberglaw.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloombergindustry.com; Anna Yukhananov at ayukhananov@bloombergindustry.com

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