Source: Charleston Daily Mail (WV), March 4, 2015
Posted on: http://envfpn.advisen.com, March 4, 2015
Attorneys are looking at ways to bring the Freedom Industries bankruptcy case to conclusion, first and foremost by dealing with obligations under a West Virginia Department of Environmental Protection remediation program and selling the Etowah River property. Tuesday’s hearing in federal bankruptcy court was packed with attorneys representing companies and individuals involved in the case. Attorneys gave an update to U.S. Bankruptcy Judge Ronald Pearson about the case and discussed how the limited cash remaining should be used, mentioning Freedom’s participation in a remediation program and divvying up insurance proceeds among creditors and spill claimants.
Mark Freedlander, an attorney representing Freedom in the bankruptcy case, said there are several parts to address in this case. Pearson said it’s the toughest Chapter 11 case he’s been involved in, noting there is a “lack of trust and understanding” since hundreds of thousands of people were affected by the chemical spill.
“The scrutiny has been unparalleled as it should be,” he said.
Pearson also mentioned the number of legal professionals in this case, talking about getting fee applications from 60 legal professionals.
“I’ve never seen a case so staffed completely,” he said.
Freedlander said the number of legal professionals in the case is “unfortunate.”
“It’s a relatively small case in assets but … it has big case complexity,” he said.
The biggest thing Freedom must address, attorneys said, is environmental compliance. Last Friday, the DEP approved Freedom’s application, accepting it into its Division of Land Restoration Voluntary Remediation Program.
“This does not mean that Freedom’s remediation undertakings are complete,” a Feb. 27 status report stated. “Instead, acceptance into the (program) means that Freedom and the WVDEP will negotiate a definitive agreement that outlines the requirements for Freedom to obtain a certificate of completion from WVDEP. Receipt of this certificate of completion is the ultimate goal of Freedom — obtaining what amounts to a clean bill of environmental health from WVDEP.”
In the 30 day window starting from when it was accepted in the program, Freedom has to get an agreement drafted. In that time, the company’s chief restructuring officer Mark Welch will try to find someone to purchase the Etowah River terminal, the last physical asset in the estate.
Money from the sale could be paid into the bankruptcy estate or used to pay obligations under the program that Freedom would have used from the proposed environmental escrow account, which would deal with expenses associated with the program.
According to the status report, the company has discussed the sale of the property with several entities and has no fewer than three possible buyers. The status report said none of the possible purchasers have a connection to Freedom or its executives.
According to the status report, since Freedom filed for Chapter 11 bankruptcy a little more than a year ago, it has spent no less than $10.5 million on environmental compliance, testing and remediation. Welch estimated in the report that in order to complete its environmental obligations, the maximum amount it will need to spend is $450,000. This work will include capping the MCHM portion of the facility, monitoring the property and ongoing water collection and testing, the report said.
Pearson also told attorneys to speed up negotiations with spill claimants, or those who filed claims in bankruptcy court claiming out-of-pocket damages from the chemical leak.
Spill claimants fall into three main categories — people who filed claims for disturbance or out-of-pocket costs, businesses claiming lost profits and a hybrid of the two.
According to court documents, Freedom’s estate has $1.5 million in cash and $3.2 million in post-petition payables for legal and environmental services. There are 3,800 of these spill claims totaling $200 million.
In an earlier order, Pearson noted 1,213 of the claims are less than $600, 344 are for $5,000 or less, 1,058 are for $10,000, 72 for $15,000 and the remaining 516 claims are for $20,000 or more. There is one claim for $100 million.
Pearson asked attorneys if they have discussed with spill claimants whether they could come up with “more realistic amounts.” Ronald Gold, who represents the Official Committee of Unsecured Creditors, said he has talked with attorneys and spill claimants about the total funds available for distribution in the case. He said a vast majority of business interruption claims have all their documentation.
Right now, there is no approved settlement with the company’s insurance provider. In the most recent proposed agreement, attorneys asked the judge to approve a deal for AIG to pay $3.2 million into Freedom’s bankruptcy estate.
Former Company President Gary Southern’s attorney filed an objection to the proposed settlement, seeking to have his defense costs paid from the insurance policy.
Several attorneys representing people claiming injury from the spill in civil lawsuits also spoke in Tuesday’s hearing, seeking to get the bankruptcy case resolved so they can move forward with the lawsuits.
Attorneys explained the cases against West Virginia American Water Company are stayed as well because the water company removed cases from Kanawha County Circuit Court to federal court, where the judge put cases on hold pending resolution from the bankruptcy case.
“Our clients are damaged every week this case is before the court. They are in limbo,” said Marvin Masters, who represents some of the people claiming injury from the chemical spill.
Pearson also took up and denied a motion by Freedom’s former environmental consultant. Civil & Environmental Consultants initially oversaw the cleanup of Freedom Industries and alleged the bankruptcy judge treated it unfairly in its request for fees, especially compared to the payout to Freedom’s newer environmental consultant.
Last July, Freedom asked the bankruptcy judge to approve the hiring of Arcadis US Inc as its new environmental consultant following two overflow incidents.
The company sought an injunction preventing Freedom from releasing funds until the court completely reviewed and ruled on fee applications. Pearson said there were problems with its applications which drew objections, and encouraged the company to negotiate with Freedom.