Norfolk Southern has agreed to pay $600 million in a class-action lawsuit settlement related to a fiery train derailment in February 2023 in eastern Ohio. The settlement will resolve all class action claims within a 20-mile radius from the derailment and personal injury claims within a 10-mile radius. About 50 cars of the freight train derailed on the outskirts of East Palestine, prompting an evacuation of 1,500 to 2,000 residents. Individuals and businesses affected by the derailment will be able to use compensation from the settlement for various purposes such as healthcare needs, property restoration, and compensation for business losses.
The settlement does not admit any liability on the part of Norfolk Southern, which has already spent over $1.1 billion on its response to the derailment. However, despite the significant financial commitment, President Joe Biden has not declared a disaster in East Palestine, causing frustration among residents. The company has promised to create a fund to address the long-term health needs of the community, but has yet to establish it. Payments to class members under the settlement could begin by the end of the year, pending final court approval.
Plaintiffs’ attorneys have praised the settlement as providing meaningful relief to residents affected by the derailment, following a year of intense investigation. The deal will offer substantial compensation to individuals, property owners, employees, and businesses impacted by the disaster. Norfolk Southern’s CEO Alan Shaw highlighted the company’s continued efforts to improve efficiency and productivity, despite facing pressure from an activist investor seeking operational changes. The railroad reported preliminary first-quarter earnings reflecting the impact of the settlement, with volume increasing by 4% while revenue fell by 4%.
Federal officials have stated that the aftermath of the train derailment in East Palestine does not qualify as a public health emergency, as widespread health problems and ongoing chemical exposures have not been documented. The EPA did not approve the designation of a public health emergency following the derailment, which raised concerns about potential long-term health consequences. The NTSB’s investigation into the derailment is still ongoing, with the agency attributing the crash to an overheating wheel bearing on a railcar not detected in time by a sensor. The cleanup in East Palestine is expected to be completed later this year, according to the EPA.
Shares of Norfolk Southern Corp. fell about 1.3% before the opening bell on the day the settlement was announced. Ancora Holdings, an investor, is seeking support for its nominees for Norfolk Southern’s board at the upcoming annual meeting. While the company continues to work towards industry-competitive margins, the settlement highlights the financial impact of the derailment on its operations. The resolution of the lawsuit marks a significant step towards providing compensation and relief to those affected by the tragic events in East Palestine in February 2023.
