The former administrator of Norfolk Southern's $600 million settlement over the derailment in East Palestine, Ohio, said it had been following a federal court's plan of distribution, not defying it, when it paid personal injury claimants based on a starting amount of $25,000 each.

Kroll Settlement Administration said the plaintiffs' lawyers on the case had been the ones pushing for personal injury claims to start at a base payout of $25,000, adjusted upward or downward by "points" based on each claimant's circumstances. So those lawyers could not seek to hold Kroll in contempt for not calculating the value of points based on each claimant's "pro rata" share of the overall settlement, the administrator said in a brief opposing a contempt finding Monday.

"At every turn — in the agreement and the plan's plain language, in written and verbal statements to this court, and at a videotaped meeting with class members — class counsel promised that a formula starting with a $25,000 base case would determine personal injury payments," Kroll's brief said. "They never hinted that any sort of proportional or pro rata comparison of class members would play any role in reducing that base amount. They might wish now that they had put that system into place, but they did not, and they cannot blame KSA."

Kroll is seeking to avoid a finding that it was in contempt of the Ohio federal court's orders for distributing the settlement proceeds, for which the plaintiffs are now asking the former administrator to pay back nearly $10 million in fees.

Norfolk Southern had inked a $600 million settlement with the residents and businesses of East Palestine over the Feb. 3, 2023, derailment, which set off fires and chemical spills in the town along the Ohio-Pennsylvania border.

Under the plan of distribution, claims would be allocated based on "points" that are added or subtracted according to factors such as how close the claimant was to the site of the derailment, how long they were allegedly exposed to chemicals, or how persistent their symptoms were.

Kroll Settlement Administration had been brought in to oversee the claims, but allegations of payment delays and miscalculations led the plaintiffs' lead counsel to get Kroll kicked out and replaced with Epiq Class Action & Claims Services Inc. in June.

Though the court had initially ordered an independent audit before moving ahead with the plaintiffs' bid to hold Kroll in contempt of the court's orders, U.S. District Judge Benita Pearson agreed to allow them to seek a "first step" motion for contempt, then follow up after the audit for any additional damages.

The plaintiffs' counsel claimed in their motion Oct. 23 that Kroll had ended up overshooting the settlement amount allocated for personal injury claims by $17 million, in part because the administrator hadn't calculated all the claimants' points or determined how much of the total settlement each point was worth.

But in its response Monday, Kroll said it had been following the stated plan all along when it started each claimant with a base of $25,000, then added or subtracted value based on the points specific only to that claimant, rather than accounting for the total number of claims.

Kroll said the language of the distribution plan had only mentioned "pro rata" shares for claims of business losses or direct payments to households, which would only be calculated and paid after all the personal injury claims. No such "pro rata" language appeared in the section of the distribution plan dealing with the personal injury claimants, Kroll said.

Kroll claimed the "base value" of personal injury claims had been lower earlier in the settlement process, at $10,000 each, but not enough people had signed up for them.

Norfolk Southern wanted as many eligible claimants as possible to file for personal injuries because those payouts came with a release of all future claims against the railroad; the plaintiffs' counsel wanted more because if they didn't get enough, Norfolk Southern could walk away from the deal — along with the lawyers' $162 million fee award, Kroll said. So the plaintiffs' counsel revised the starting point upward, including one attorney announcing the change at a town hall meeting, and got thousands more claimants to sign up, the brief says.

"No one at the town hall told class members that rather than receive a base of $25,000 per person, claimants would receive only a pro rata or relative share of some limited fund that class counsel set aside. In fact, the partner continued, 'As more people participate and we get firmer data about those numbers, these payment values could potentially rise as well,'" Kroll's brief says. "If claimants were indeed going to receive a pro rata or proportional share of a limited fund, more claimants could never raise the payments."

The result was more than 30,000 people applied for personal injury claims, eventually blowing through the anticipated $130 million set aside for injury settlements, Kroll said.

Instead of waiting for all the claims to roll in and be finalized, the parties had pushed Kroll to start getting payments out right away — further indicating their intention to start with a base payment and revise it for each claimant, rather than splitting the fund up once all the claimants were known, the administrator said.

Other parts of the distribution plan supported that interpretation, Kroll said, including plans for any leftover funds from the personal injury settlements to carry over to the direct payments or business loss settlements. If the personal injury fund were distributed pro rata, there would be nothing left and the language about spillover funds would be extraneous, Kroll argued.

The administrator said it had only been following the court's orders as it had seen them and was not intentionally disobeying them in a manner that would support a finding of contempt.

Errors that the company had made in calculating the value of some claims — for example, giving the point value for a resident of the town of East Palestine to some residents of the wider ZIP code — had been caught and corrected by Kroll, which paid the difference back into the settlement fund, the brief says, and could not be held against the company for purposes of contempt.

Kroll said it should not be made to repay nearly $10 million in fees because some of that had been used to pay the actual expenses of administering the settlement, like paying for notifications and setting up offices where people could file claims. At most, Kroll said, it might be on the hook for about $3.25 million it spent on calculating the value of claims, if Epiq had to completely redo that work.

"If there are additional costs from Epiq getting up to speed and performing recalculations, class counsel should ask KSA for compensation for the fund for those amounts, not disgorgement of every dollar KSA received," the brief says.

Counsel for the parties did not immediately respond to requests for comment Tuesday.

The plaintiffs are represented by Jayne Conroy of Simmons Hanly Conroy LLP, Elizabeth Graham of Grant & Eisenhofer PA and Seth Katz of Burg Simpson Eldredge Hersh & Jardine PC.

Kroll Settlement Administration is represented by Christopher J. Joyce of Flannery Georgalis LLC and Scott M. Ahmad, Stephen V. D'Amore, Scott P. Glauberman and Rachael E. Thompson of Winston & Strawn LLP.

The case is In re: East Palestine Train Derailment, case number 4:23-cv-00242, in the U.S. District Court for the Northern District of Ohio.