Federal appeals court rejects $5M Daikin settlement

Federal appeals court rejects $5M Daikin settlement
Updated: Jun. 4, 2018 at 11:56 PM CDT
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(Source: WAFF)
(Source: WAFF)

DECATUR, AL (WAFF) - The 11th Circuit Court of Appeals has thrown out a settlement between Daikin America Inc. and the West Morgan-East Lawrence Water Authority.

The West Morgan-East Lawrence Water Authority alleges that Daikin allowed dangerous chemicals to get into local drinking water. Daikin had agreed to pay $5 million to cover the costs of an advanced water filtration system designed to make sure the perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS) used by Daikin, 3M and Dyneon LLC in Decatur did not get into the authority's drinking water.

The pollution resulted in the water authority telling customers to not drink the water for a period of time in 2016.

The federal appeals court reversed a lower court's approval of the settlement because the same lawyers represented the water authority and its customers despite a conflict of interest.

Daikin entered into a settlement agreement with both the water authority and the water authority's customers in 2016 over the claims regarding PFOA and PFOS. Lloyd Gathings and Will Lattimore with Gathings Law objected to the settlement on behalf of more than 300 of those customers and challenged its approval.

Under the terms of the settlement agreement, Daikin would have paid $5 million. Of that agreement, $4,450,000 would have gone to the water authority and $550,000 would have gone to the attorneys. The customers would receive no direct compensation. Instead, the water authority would apply $450,000 as credits to their water bills. On average, that would result in less than $50 in credits per customer, according to Gathings Law.


Gathings and Lattimore appealed the approval to the 11th Circuit Court and argued their case before a panel of federal circuit judges in March. They argued that attorneys for the water authority improperly represented both the water authority and the class of water customers. They also made the case to the judges that the settlement unfairly prevented people from opting out of the settlement to seek a recovery that is more in their favor.

The majority of the judges agreed and concluded that the "district court abused its discretion because plaintiffs' counsel was conflicted and because the settlement impermissibly released absent class members' individualized claims for monetary damages." The judges reversed the approval of the settlement and sent it back to the lower court.

In a news release, Gathings said he is pleased with the 11th Circuit Court's decision.

"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," he said.

The appellate court sent the case back to the lower court where Gathings said he hopes a more favorable settlement can be negotiated on behalf of all of the water authority's clients.

Gathings Law represents more than 300 of the water authority's customers in a lawsuit in the Circuit Court of Lawrence County. Attorneys said they hope to force 3M and the other defendants to immediately stop letting PFOA, PFOS and other chemicals into the Tennessee River. The lawsuit also asks that the companies "fairly compensate the residents for damages caused by the pollution," the new release states.

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