Payout (In Lockheed Settlement) May Set Model in Future Cases
August 6, 1996
BY CHIP JACOBS
Daily News Staff Writer
Lockheed Martin Corp.’s $60 million out-of-court settlement with 1,300 Burbank residents is a precedent-shattering deal that could have impacts on aerospace companies throughout Southern California in the post-Cold War era, environmental and business experts said Monday.
None … could recall a settlement with so many recipients getting so much money in a case that never saw the inside of a courtroom.
“It’s a precedent that other large defense contractors may look at as a model,” added Mike Paparian, the Sierra Club’s West Coast representative. “I don’t think Lockheed would have paid out $60 million unless they figured they might have to pay a lot more under the court system. A lot of these companies were pretty messy in how they handled waste.”
Under the settlement, residents who claimed that their health was affected or their homes lost value as a result of the contamination stemming from the plant got payments ranging from $10,000 to $300,000. In exchange, Lockheed did not admit liability and agreed to establish an independent medical monitoring program.
While out-of-court settlements are nothing unusual today, the number of homeowners involved and the $60 million plus payout which was made is usually the stuff of class-action lawsuits, according to environmental activists.
But faced with the prospect of a drawn-out court fight, an unpredictable jury decision and a sullied corporate image, Lockheed apparently opted for closure.
Lockheed “wanted an alternative to full-scale legal war,” said Joel Reynolds, senior staff attorney for the Natural Resources Defense Counsel, a leading environmental group.
“The fact they didn’t admit liability is less significant than the fact they paid out the money,” he said. “It clearly shows some calculation of risk.”
Lockheed spokeswoman Maureen Curow said the company would have no further comment on the deal. She repeated the firm’s contention that the B-1 plant never posed a health risk to the community. Shuttered about six years ago, the facility was used to manufacture warplanes and commercial aircraft.
Jack Kyser, chief economist for the county’s Economic Development Corp., said companies such as Northrop, McDonnell Douglas, TRW and Rockwell International must be watching, especially if they want to sell shuttered defense sites or convert them into commercial uses.
“Lockheed was using these types of chemicals when they were legal, and now the scientists have founds it’s dangerous stuff and coming back to haunt them,” Kyser said.
The Daily News reported the terms of the hush-hush deal Sunday, including the provision that any claimants who publicly divulged details of the settlement would lose half of their payments.
Even U.S. Environmental Protection Agency officials who are overseeing Lockheed’s $300 million cleanup of the San Fernando Valley groundwater under Superfund laws said they didn’t know of the deal.
“Companies typically litigate to have their day in court,” Reynolds said. “The fact Lockheed moved pre-emptively before it got to intense litigation that becomes widely known indicates damage control.”
Richard Drury, a staff attorney for the nonprofit Communities For A Better Environment, said most big companies saddled with wide-scale contamination problems usually force plaintiffs to go to court, at least initially, to probe their seriousness.
Because of that, Drury reasoned that Lockheed assumed the residents were determined to get compensation. In doing so, they could bog the company down and prompt residents near other Lockheed sites around the country to follow suit.
“They bought peace with 1,300 residents,” Drury said. “It may seem trivial, but to a large corporation, the public relations value of having a black mark against your name is worth potentiallyL millions of lost dollars.”
Thomas Girardi, the lead attorney for the residents in the Lockheed case, termed the settlement “absolutely precedent-setting.”
The deal not only avoided the court system, it was resolved in a short period of time – about a year – and at a fraction of the legal costs typically generated in court battles involving toxics, said Girardi, a Los Angeles attorney.
“In the past, litigation like this was never resolved and after the dust settled the plaintiffs would receive relatively little, the cost of the litigation would be enormous, and the other side would pay millions to lawyers,” Girardi said.
“The precedent setting of this case is that the plaintiffs are getting something now instead of six or seven years from now, and I believe Lockheed saved millions in legal fees,” Girardi added.
In some ways, the case resembles the $330 million settlement last month of a suit brought against utility Pacific Gas & Electric by 600 people in Hinkley, Calif., a town located just outside Barstow, said Girardi, who represented the residents there.
That case – like the Lockheed settlement – was driven in part by historic air emissions of the carcinogen hexavalent chromium, Girardi said.
Attorneys for PG&E could not be reached for comment Monday.
Girardi said his firm did a study of Burbank residents around the Lockheed site “that was supportive of the fact that the contamination played a role” in the cancers, but that it “certainly was not conclusive by any stretch of the imagination.”
Federal EPA officials said they were surprised by the settlement, but they said they were focusing on the groundwater cleanup they’re supervising.
Ben Shaw, senior manager for the air toxics program at the South Coast Air Quality Management District, said he was “very surprised” by what has happened.
The AQMD identified the northern Burbank area where the B-1 plant is located as the San Fernando Valley’s hottest toxic spot. A health risk assessment on the residential areas around the plant while it was operating concluded that hexavalent chromium, a known carcinogen, was present at high levels.
But regulatory officials said it has been historically hard for complainants to prove that their health has been damaged by nearby plant emissions because chronic health effects often take decades to materialize.
“I’m rather surprised (Lockheed settled) because it’s awful hard to determine what historical pollutions actually were,” Shaw said “There has to be something more.”
Like others, Shaw speculated that Lockheed may have settled to expedite the sale of the land where the waste emanated from to companies interested in possibly building an entertainment center.