HOUSTON - Three large chemical firms and millions of homeowners around the country may be forced to resubmit their proposed $750 million settlement of a class-action suit over leak-prone piping to a new court after a Texas state judge declined to approve the deal. State District Judge Katie Kennedy's unexpected ruling Feb. 20 could scuttle the deal between Shell Oil Co., Hoechst Celanese Corp., DuPont Co. and lawyers for about 6 million owners of homes where the piping is installed.
Kennedy, who did not rule on the fairness of the proposal, concluded that the 164th Judicial District Court in Harris County, Texas, lacks jurisdiction over a national class action.
Under a tentative agreement reached last year, the three companies-which made resins used in the piping-had agreed to pay class members at least $750 million, including $688 million for the cost of installing new pipe. The defendants had also agreed to enter into binding arbitration to determine how much of the settlement each firm would fund.
Late last week, lawyers for both sides said that they believed the court did have jurisdiction. Plaintiffs' counsel and DuPont said they would pursue another angle to get the deal approved, including seeking a new venue for the settlement.
``Our options include filing a motion for trial certification, asking the judge for clarification or appealing her ruling to the Court of Civil Appeals here in Texas. We could also dismiss the case and move it to another jurisdiction-possibly a U.S. District Court or another state. Right now, we don't know,'' said Skip Warren, an attorney with the Houston law firm of Caddell & Conwell, which is representing the class of claimants.
Warren said the parties to the settlement were somewhat perplexed by Kennedy's ruling.
``She simply denied our motion for preliminary settlement, but this is not the first time a national class action settlement has been decided in state court,'' Warren said.
The settlement stems from thousands of negligence, fraud and breach of warranty lawsuits that were filed against Shell, Hoechst Celanese and DuPont over leaky polybutylene pipe and fittings systems. When the accord was announced last year, it was labeled the largest settlement involving consumer-related property damage.
``We think the settlement is fundamentally sound. The groundwork for an agreement is still in place. We may just have to take it to a federal court or another state court or even try limited class actions in specific states,'' said John Kane, an attorney with Wilmington, Del.-based DuPont. ``We're going to go forward with this. We thought we had a solution to a large problem. Although the judge said several times in open court that she thought there might be jurisdictional problems, we believed she could have approved this because there are other state courts that have.''
Shell and Hoechst Celanese would only say that they were disappointed in the decision and are assessing their options.
If and when a settlement agreement is reached between plaintiffs and the three defendant companies, it is unclear to what extent insurance will play a role in backing up each defendant's share of liability.
Meanwhile, Hoechst Celanese and Shell are suing dozens of insurers over coverage for the piping claims.