Norfolk Southern agrees to pay $600M in settlement related to train derailment in eastern Ohio

Sulphur Run, right, flows into Leslie Run in East Palestine, Ohio, on Tuesday, Jan. 30, 2024. Daily life largely returned to normal for residents of East Palestine, Ohio, months after a Norfolk Southern train derailed and spilled a cocktail of hazardous chemicals that caught fire a year ago. (AP Photo/Carolyn Kaster, File)

Norfolk Southern has agreed to pay $600 million (all figures U.S.) in a class-action lawsuit settlement related to a fiery train derailment in February 2023 in eastern Ohio.

The company said the agreement, if approved by the court, will resolve all class action claims within a 20-mile radius from the derailment and, for those residents who choose to participate, personal injury claims within a 10-mile radius from the derailment.

About 50 cars of the freight train — which had roughly 150 cars and three locomotives — derailed on the outskirts of East Palestine, near the Pennsylvania state line, with some cars transporting hazardous materials. An evacuation covered 1,500 to 2,000 of the town’s approximately 4,800 to 4,900 residents.

Norfolk Southern said Tuesday that individuals 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, which could include health care needs, property restoration and compensation for any net business loss. Individuals within 10-miles of the derailment may, at their discretion, choose to receive additional compensation for any past, current, or future personal injury from the derailment.

The company said that the settlement doesn’t include or constitute any admission of liability, wrongdoing, or fault.

The settlement is expected to be submitted for preliminary approval to the U.S. District Court for the Northern District of Ohio later in April 2024. Payments to class members under the settlement could begin by the end of the year, subject to final court approval.

Norfolk Southern has already spent more than $1.1 billion on its response to the derailment, including more than $104 million in direct aid to East Palestine and its residents. Partly because Norfolk Southern is paying for the cleanup, President Joe Biden has never declared a disaster in East Palestine, which is a sore point for many residents. The railroad has promised to create a fund to help pay for the long-term health needs of the community, but that hasn’t happened yet.

The plaintiffs’ attorneys said the deal is the result of a year of intense investigation of the derailment, and should provide meaningful relief to residents.

“This resolution comes shortly after the one-year anniversary of the disaster and will provide substantial compensation to all affected residents, property owners, employees and businesses residing, owning or otherwise having a legal interest in property, working, owning or operating a business for damages resulting from the derailment and release of chemicals,” said Seth A. Katz of Burg Simpson Eldredge Hersh & Jardine, P.C., M. Elizabeth Graham of Grant & Eisenhofer P.A., Jayne Conroy of Simmons Hanly Conroy LLC and T. Michael Morgan of Morgan & Morgan, P.A.

The railroad also announced preliminary first-quarter earnings of 23 cents per share Tuesday to reflect the impact of the settlement.

Railroad CEO Alan Shaw, who is fighting for his job against an activist investor who wants to overhaul the railroad’s operations, said Norfolk Southern is “becoming a more productive and efficient railroad. There is still more work to be done to achieve industry-competitive margins.”

The railroad said even though volume was up 4% during the quarter, its revenue fell by 4% because of lower fuel surcharge revenue and changes in the mix of shipments it handled.

Ancora Holdings is trying to persuade investors to support its nominees for Norfolk Southern’s board at the railroad’s May 9 annual meeting.

Last week federal officials said that the aftermath of the train derailment doesn’t qualify as a public health emergency because widespread health problems and ongoing chemical exposures haven’t been documented.

The Environmental Protection Agency never approved that designation after the February 2023 Norfolk Southern derailment even though the disaster forced the evacuation of half the town of East Palestine and generated many fears about potential long-term health consequences of the chemicals that spilled and burned. The contamination concerns were exacerbated by the decision to blow open five tank cars filled with vinyl chloride and burn that toxic chemical three days after the derailment.

The head of the National Transportation Safety Board said recently that her agency’s investigation showed that the vent and burn of the vinyl chloride was unnecessary because the company that produced that chemical was sure no dangerous chemical reaction was happening inside the tank cars. But the officials who made the decision have said they were never told that.

The NTSB’s full investigation into the cause of the derailment won’t be complete until June, though that agency has said that an overheating wheel bearing on one of the railcars that wasn’t detected in time by a trackside sensor likely caused the crash.

The EPA has said the cleanup in East Palestine is expected to be complete sometime later this year.

Shares of Norfolk Southern Corp., based in Atlanta, fell about 1.3% before the opening bell Tuesday.