Court of Appeals rejects settlement in alleged water contamination suit due to conflict of interest

LAWRENCE COUNTY,  Ala. — A settlement in a class action suit alleging chemically tainted Tennessee River water was thrown out Monday by the Eleventh Circuit Court of Appeals. The settlement was drawn up between the West Morgan-East Lawrence Water and Sewer Authority and their customers on one side and Daikin America, Inc. on the other.

The settlement terms required Daikin to pay $5 million, $4,450,000 of which would go to the Water Authority and $550,000 would go to the attorneys. The customers would receive no money directly from the settlement, according to Gathing’s Law Firm, which appealed the settlement. Under the settlement, instead of customers receiving funds for damages suffered, the Water Authority would apply a $450,000 credit to the water bills amounting to about $50 in credits for each of the 300 customers.

The Water Authority used $4 million of the settlement to cover the cost of a temporary GAC or granulated activated carbon filtration system in 2016. Customers have seen a recent surcharge on their bills to help pay for maintenance on the system.

Customers of the Water Authority claim that cancerous conditions are linked to the use of the PFC family of chemicals used by manufacturer Daikin, along with 3M Company and Dyneon, LLC.

The court found that since the two plaintiffs, the residents and Water Authority, are represented by the same legal counsel, there was a conflict of interest. While both parties were looking for injunctive relief — to prevent more contaminated water from being sold and consumed —  residents were also seeking monetary damages for individual issues like mental anguish, which includes anxiety, fear and inconvenience.

The court found that the individual claims were not shared by the Water Authority so their shared attorneys could not advocate for one party without opposing the interests of the other.

“This was a clear-cut example of a conflict of interest. I have represented clients in these types of cases for more than 40 years and have never seen a situation where the attorney for one plaintiff, who was not a member of the class, was able to give up the rights of class members, in this case, thousands of other plaintiffs,” said Lloyd Gathings of Gathings Law, who objected to the settlement on behalf of the customers.

Initially, the district court had determined there was no conflict because both parties “share a common interest in pursuing injunctive relief against the defendant.”

The case is now headed back to the U.S. District Court of Northern Alabama for more negotiations.