By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.Water
The state of Michigan announced Thursday its settlement of class action claims arising from the contamination of drinking water in the city of Flint with toxic lead.
The headline payout amount is $600 million, but the exact amount to be divided up among those harmed will only be known when legal feesand other costs have been deducted. For the purposes of this post, let’s assume that the contingent payment for the lawyers on the side of the plaintiffs will be the standard 1/3 (which I will discuss more fully below). There are also other legal costs; yet since I have no idea what those are, I will ignore them and only mention them here as they mean there may be less than $400 million to divvy up. As I’m only doing a rough calculation here, let’s move on and divide up $400 million:
The settlement amount has been heavily rriticized for being too small, according to Bloomberg’s report, Michigan Settles Flint Water Litigation for $600 Million (2):
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.
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.”
Now, according to the Detroit News, Here’s how Flint families will get paid in water crisis settlement:
So far, 33,459 people have filed a claim or intend to bring a claim, according to Attorney General Dana Nessel’s office. But the number is expected to grow as people discern whether they qualify under the settlement terms.
If the $600 million settlement were divided equally among Flint’s roughly 100,000 residents, each would receive $6,000. But that is not the way the agreed-upon settlement will work.
Note that the Detroit News account does not consider attorneys’ fees- which as we shall see below, will be substantial.
If the $400 million were equally allocated among the 33,000 victims who have filed so far, that would allow for a payment of roughly 12,000 each. The actual Flint payout formula is heavily weighted toward younger victims and as to them, the amount they can expect to receive is more generous — exactly how much more per victim depends on the number of the youngest victims. Of the 100,000 Flint residents at the time of the water crisis, roughly 30,3000 were minors.
According to the Detroit Free Press, Flint water crisis legal settlement totals $600M, creates victim compensation fund:
About 65% of the money would go to Flint residents who were 6 and under when first exposed to lead in Flint water, with 10% going to those who were between the ages of 7 and 11 and 5% to those who were 12 to 17. About 15% would go to adults, 3% for property damage, and 0.5% to cover business losses.
And the settlement also includes amounts for those who may later file claims, per the same source:
About $35 million would be placed in trust for “forgotten children” who do not file claims within the required time frame, so they are able to file claims once they become adults.
Plaintiffs’ counsel says, according to Bloomberg:
“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.
As I noted, exactly how much depends on the number of young victims, not only those who have filed lawsuits but also those who have yet to come forward. The settlement pool seems to be 90% of $400 million (ignoring costs, but allowing for the standard 1/3 contingent attorney payout), or $360 million. The portion for minors is 80%, or $320 million, and of which there are roughly 30,000 at the time of the water crisis. I have not been able to determine how many of these fall into that youngest category, and thus qualify for 65% of the settlement to receive the biggest payout.
But what amount of compensation is adequate to compensate for permanent brain damage, which will stay with some victims for the rest of their lives?
Just to place this amount in perspective, let’s compare it to the $333 million, 2008 Hinkley settlement with PG &E, which you may already be familiar with whether you know it or not, as this is the event upon which the movie Erin Brockovich was based. In that case, I understand the contingency fee to the lawyers was 40% of the total payout> There is great dissatisfaction over that settlement as well, especially the lawyers’ share, according to this Guardian account, Poisoned town condemns its movie-heroine lawyer. But the bottom line is that each victim, sepecially the most severely affected, seems to have received much more than will be paid out in Flint.
According to The Guardian:
Under their agreement with with Ed Masry (who is played in the film by Albert Finney) and two other law firms, the lawyers received 40 per cent of the settlement, or $133m. That should have left $196m for the victims, or roughly $300,000 each.
But many have received $100,000 or less, and neither PG&E nor the lawyers will release records of their accounting. Carol Smith’s husband, who had 17 tumours removed from his throat, received only $80,000. An elderly resident in the town was awarded $25,000.
Ron Gonzales, who grew up next to the plant and suffers skin problems, says that he initially received only $100,000, a sum that was doubled after he complained to Masry. His sister, who had most of her cancerous lower intestine removed, received about $2m. Gonzales charges that Masry and Brockovich advised residents not to appeal against their pay-outs.
The Hinkley harm was over a longer period, although I don’t know what we can say about whether it was more or less severe. Lead is lead and seriously damages developing brains, and is very bit as debilitating as cancer caused by groundwater contamination.
This settlement does not close out all ongoing Flint-related litigation. According to the Detroit Free Press,
Litigation would continue against the U.S. Environmental Protection Agency and private firms that were involved in the tragic switch of Flint’s drinking water source from Lake Huron to the Flint River. Those firms include environmental consultant Veolia North America, which advised the city of Flint on water quality issues, and engineering firm Lockwood, Andrews & Newman, involved in preparing the Flint Water Treatment Plant to treat water from the Flint River.
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.
Fees for Plaintiffs’ Attorneys
Now, some of the news accounts have emphasised the large amount of the settlement that will go to fees for plaintiffs’ attorneys. Take the account in the Detroit Free Press as representative,
Attorney fees and costs would be deducted from the $600 million, leaving a lesser amount for distribution. Attorneys expect to be fairly compensated, but it is too soon to say what those fees and costs will be, Pitt said. Attorney contingency fees vary, depending on the case, but it is not unusual for them to amount to one-third of a settlement amount.
Let’s consider The Detroit News account, which provides more detail:
The cut of the settlement that will go to the 20 to 30 lawyers involved in the lawsuits for the past five years will be determined by Federal Judge Judith Levy, but Leopold said the portion will be “significant and substantial.”
Note that Judge Levy has yet to sign off on the settlement. Per the Detroit News:
Levy will review all the issues, “gripes” and details of the settlement plan and decide whether the deal is “fair and reasonable” and “in the best interest of the Flint community” in the next 45 days, Pitt said.
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.
Let’s do a rough calculation, and assume the attorneys’ pot will be $200 million, or the regular 1/3 share. And that it will be divided equally 30 ways- although I appreciate this is a ridiculous assumption, as these things don’t work that way. But this is only a back of the envelope calculation. So 30 attorneys into $200 million comes out as roughly $7 million each. Which certainly seems a generous payday. Even for many if not most lawyers and for 5-6 years of work.
But I don’t think it’s necessarily excessively so, particularly for an attorney at an advanced stage of his or her career. (We should mention as an aside that there are also costs involved and they come off the top or out of the lawyers’ share and might therefore reduce that $200 million amount; I just can’t hazard a viable estimate of what that amount might be.)
Now, some things for us also to consider.These news accounts don’t highlight what it means when attorneys take a case on contingency. Meaning they do not get paid unless they win a trial or secure a settlement. Not all lawsuits are winners. Far from it, even when plaintiffs have a strong legal claim. Lawyers for the plaintiffs must also front all litigation costs – whether they win or not. And the amount they get for successful outcomes must subsidize all the other cases they take on that don’t result in any payouts.
I don’t deny that these lawyers seem to have made out well here – assuming the judge approves a 1/3 or similarly generous contingency share. Yet what I’m also saying is that for every eye-popping contingency award you see, there are plenty of lawyers who swing for the fences with class action litigation – and end up whiffing. They get no contingent payout for that or even any case.
Is it a great system? No. It stinks actually. But it’s what we have. I’d prefer a system that adequately funded the Environmental Protection Agency, and state environmental protection bureaus. Not only for litigation, because that’s a terrible, post hoc way of cleaning up messes, and only determines who pays for environmental depredations after the fact. I’d prefer there to be large numbers of scientists, testers, agency officials who make sure that lead doesn’t get into the water of Flint or dangerous chemicals out into the environment in the first place.
That includes paid teams of attorneys a decent, regular wage, to help regulate what goes into our environment, rather than relying on those who prosper from the crapshoot of an occasional settlement or winning jury verdict (that stands up on appeal).
And while I’m dreaming, how about an environmental law regime that embodies the precautionary principle – meaning you couldn’t use something unless you could prove it didn’t cause damage. Rather than the system we have where for the most part it’s up to the plaintiff to prove that it did. Not to mention that the vagaries of environmental legal decision-making depend on the people who oversee and staff the EPA. The current EPA falls short of what it could be, and although Trump’s minions have plumbed some new lows, both parties share the blame for environmental policy.
I also point out that these news accounts never, ever tell you what white collar defense lawyers receive for their work. They get paid whether they win or not. In so many of these class action cases, we never hear how much the defense team made, which was distributed in regular payouts. We instead focus our outrage on the payout to plaintiffs’ laywers for the compensation they receive for being on the right side of a winning case.