Norfolk Southern to Pay $600 Million to Settle Spill Case (2)

Norfolk Southern Corp. said it would pay $600 million to settle lawsuits over its fiery train derailment in Ohio last year that spilled more than 1 million gallons of toxic chemicals and sickened residents.

The Atlanta-based railroad company said Tuesday its agreed to resolve consolidated legal claims pressed by as many as 500,000 residents, property owners and businesses in the East Palestine area over the disaster. The Feb. 3, 2023, derailment of freight train N32 released dangerous chemicals such as vinyl chloride, considered a carcinogen, and prompted an evacuation of local residents.

The derailment ranks among the most high-profile railroad disasters in years, drawing extensive news coverage, congressional inquiries, calls for new regulation and outrage from the public. More recently, the company has come under scrutiny from activist investor Ancora Holdings Group, which is seeking to replace Norfolk Southern’s leadership in part over its “tone-deaf response” to the East Palestine accident.

“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,” lawyers representing victims of the derailment said in an emailed statement.

In a statement Tuesday, Norfolk Southern said the settlement resolves all class action claims in a 20-mile radius of the derailment and personal injury claims in a 10-mile radius of the disaster. It said the pact wasn’t an admission of liability.

Shares of Norfolk Southern were up about 1% in New York trading.

Separately, Norfolk on Tuesday reported preliminary first-quarter adjusted earnings of $2.49 a share, falling short of the $2.59 average of analyst estimates compiled by Bloomberg. Chief Executive Officer Alan Shaw said in a statement that results were hurt by “macroeconomic challenges” and a heavy reliance on international intermodal traffic. This quarter, the company expects as much as a $100 million impact on revenue due to port disruptions related to the collapse of Baltimore’s Francis Scott Key Bridge.

Shortly after the Ohio train accident, Norfolk Southern launched a controlled burn of the chemicals to mitigate the explosion risk. East Palestine residents blamed the resulting cloud for headaches, rashes and increased risks of liver cancer and leukemia.

The accord doesn’t resolve the US Department of Justice’ suit accusing the rail company of violating the Clean Water Act, including “unlawfully polluting the nation’s waterways,” with the spill. The state of Ohio also has sued Norfolk Southern over what the state described as the “entirely avoidable” derailment. That suit is still pending, as well.

US District Judge Benita Pearson in Youngstown, Ohio, is overseeing the consolidated case and must give final approval to the $600 million deal.

Last month, Pearson rejected Norfolk Southern’s bid to have the case thrown out on the grounds the combined suits were preempted by the Federal Railroad Safety Act, the Hazardous Materials Transportation Act, and other federal laws.

Under the Norfolk Southern accord, residents and business owners in a three-state area are eligible for settlement funds over their claims the shipper was negligent in setting up the train and created a public nuisance with the spill.

The case is In Re East Palestine Train Derailment, 23-cv-00242, US District Court, Northern District of Ohio.

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--With assistance from Richard Clough.

To contact the reporter on this story:
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story:
Misyrlena Egkolfopoulou at megkolfopoul@bloomberg.net

Peter Jeffrey, Anthony Aarons

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