Freedom Industries Inc, the chemical maker whose leaky storage tank polluted the Elk River last week and shut down water service in West Virginia’s biggest city, filed for bankruptcy to cope with the subsequent lawsuits.
Freedom Industries listed assets and debt of US$1 million to US$10 million each in a Chapter 11 petition filed on Friday in US Bankruptcy Court in Charleston, West Virginia. The company said the lawsuits and more stringent payment demands from vendors since the incident compelled it to seek court protection.
“They are woefully underestimating their liabilities,” said Aaron Harrah, a lawyer representing the owner of a Charleston restaurant in a lawsuit against Freedom.
Harrah said in a phone interview that he was hopeful his client would still get a payout from Freedom Industries.
A bankruptcy filing halts most litigation, forcing plaintiffs to vie with other creditors for a share of a company’s assets. More than two dozen lawsuits have been filed since the accident, which led US President Barack Obama to declare a state of emergency for the affected counties. The state attorney general is investigating the spill.
On Jan. 9, West Virginia officials discovered a leak from a 133,000-liter tank of 4-methylcyclohexane methanol, a chemical used in coal processing.
About 28,400 liters escaped from a 2.54cm hole, compromising water for about 300,000 people and sending more than 100 to hospital.
Freedom Industries said the current hypothesis for the accident is that a local water line broke next to its plant, causing the land underneath the tank to freeze “in the extraordinary frigid temperatures in the days immediately preceding the incident,” according to bankruptcy papers.
“The petition and related pleadings speak for themselves,” Mark Freedlander, the company’s bankruptcy lawyer, said in a statement, declining to comment further.
Companies facing legal costs and damages following accidents may use US bankruptcy law to protect assets. In August, Montreal, Maine & Atlantic Railway, the operator of the runaway oil train that exploded and killed 47 people in a Quebec town, said it was forced to file for bankruptcy because of potential liability from the crash.
Freedom Industries and Eastman, the maker of the chemical that fouled the river, were sued on Monday by local businesses and residents for creating a nuisance and concealing cancer-causing compounds, among other allegations.
Another case names the West Virginia-American Water Co alongside Freedom Industries. The utility failed to deal promptly with the emergency and had no procedures in place to prevent chemicals from getting into the water system, according to a complaint filed on Jan. 10 in Kanawha County Circuit Court in Charleston.
Harrah said he and his colleagues were still investigating Freedom and other companies that might have contributed to the spill.