Atlanta-based Norfolk Southern has reached a $600 million settlement agreement to resolve a consolidated class action lawsuit filed against the railroad after its fiery derailment of a train carrying toxic materials in East Palestine, Ohio, last year.
The company said if the agreement in principle is approved by the court, it will resolve all class action claims within a 20-mile radius of the February 2023 derailment and personal injury claims filed by residents within a 10-mile radius of the wreck.
Norfolk Southern said residents and businesses “will be able to use compensation from the settlement in any manner they see fit to address potential adverse impacts from the derailment,” including health care or medical monitoring, property restoration or compensation for business losses.
Residents within 10 miles of the derailment would be able to get compensation for past, present or future personal injury from the derailment, the railroad said.
The settlement comes after residents in the East Palestine area began filling lawsuits shortly after the derailment. Multiple lawsuits were consolidated into one case under Judge Benita Pearson in U.S. District Court in the Northern District of Ohio.
After the derailment, some residents moved and many remain concerned about the potential for long-term health effects from the fire and the burning of toxic vinyl chloride that sent up a towering plume of smoke above East Palestine.
The head of the National Transportation Safety Board told Congress last month that the decision to burn the vinyl chloride from tank cars in the days following the wreck in East Palestine wasn’t justified, and that first responders and officials making the decision didn’t have all the information they needed.
If the agreement in principle is approved, payments could start going to members of the class by the end of this year, according to the company and plaintiffs’ attorneys.
Actual payments to residents, business owners, property owners and workers in the area will be determined by attorneys for the class, with the highest levels of compensation to the residents closest to the derailment site.
Jayne Conroy, one of the lead plaintiffs’ attorneys, said she believes it is the largest derailment settlement in U.S. history, and called it “a very significant amount of money,” for roughly 100,000 people in a 20-mile radius.
“We are very pleased with this settlement, with where it fits with other historic settlements,” Conroy said. “It actually could get money to people very quickly in the scheme of what litigation usually looks like, which can be many years.”
Conroy noted that the cost of cleanup of contamination from the derailment is also separate and not a part of this settlement.
Norfolk Southern said the settlement of the class action lawsuit “does not include or constitute any admission of liability, wrongdoing or fault.” The company expects this to be its largest settlement related to the East Palestine derailment. It had already tallied more than $1 billion in charges for its response.
The railroad also on Monday issued preliminary financial results for the first quarter of 2024, including the impact of the $600 million settlement, expenses associated with layoffs and departures of managers for job reductions, the cost of recruiting a new chief operating officer and other expenses.
Norfolk Southern said its revenues were down 4%. The company is also working to fight off a takeover proposal from Ohio-based activist investor firm Ancora Holdings Group, which said it believes it can make Norfolk Southern into a “safer, more sustainable railroad that is growing profitably,” according to a statement.
Under activist investor pressure, Norfolk Southern last month announced it would replace its chief operating officer with John Orr, an executive from Canadian Pacific Kansas City. Norfolk Southern agreed to pay $25 million for a waiver of non-compete provisions in an agreement Orr had with CPKC and for other “financial and commercial considerations.”
The railroad said Monday it also expects a $50 million to $100 million business impact from the March 26 Baltimore bridge collapse to its second quarter revenue, depending on the duration of the port outage. It said it has taken steps to mitigate supply chain disruptions from the Baltimore bridge collapse, including new service to flow freight between the Port of New York and New Jersey and the Seagirt Marine Terminal in Baltimore.
With the impact of the derailment class action settlement, Norfolk Southern said its preliminary income from railway operations in the first quarter was $213 million, down from $711 million into the first quarter of 2023. The year-ago results included the impact of $387 million in charges recorded due to the East Palestine derailment, and would otherwise have been more than $1 billion.
Misti Allison, an East Palestine resident, said after the announcement of the class action settlement that she was glad to see progress, but “so much more needs to be accomplished.”
Allison said thousands of people have joined the class action, and she questioned whether the proposed $600M settlement, after legal teams are paid, will “be an impactful amount per family” to cover their health care needs and losses.
She said she is still awaiting the release of the NTSB’s full investigation report into the cause of the derailment and is among those pushing for passage of stricter rail safety regulations. The legislation has stalled in Congress. Earlier this month, the Biden administration issued a rule establishing new requirements for the size of train crews.
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