Flint attorneys are getting millions in fees; now they want interest from $626.25M fund

LANSING ‒ Lawyers handling the massive civil lawsuit arising from the Flint drinking water crisis now want a share of the interest earned on the $626.25 million settlement fund, but the state Attorney General's Office is urging a federal judge to tell them no.

Officials say the fund is earning interest in low-risk investments such as Treasury bills but have not said how much it has earned since its creation in November 2021. U.S. District Judge Judith Levy and lawyer Deborah Greenspan, the "special master" assisting the judge with the Flint case, did not provide that information in response to questions emailed Thursday.

The amount could be substantial, as rates have steadily risen in the last two years. Invested for two years at an average interest rate of 2.5%, compounded annually, the fund could earn more than $30 million.

Attorneys for Flint residents who were poisoned by lead in their drinking water did not specifically address the issue of interest earned on the fund when they asked Levy to approve fees that could approach $200 million, back in the spring of 2021. But in a July court filing and another filing Tuesday, they said they should get the interest earned on their shares of the fund.

Although Flint claimants have yet to receive a dime from the settlement, Levy ordered in May that the lawyers be paid $39.6 million in "common benefit" fees and $7.1 million in expenses as partial payment while the claims approval process continues.

In a Tuesday filing, signed by Stephen Morrissey, of Seattle, Michael Pitt, of Royal Oak, and 11 others, plaintiffs' attorneys said they should receive whatever interest has been earned on the $39.6 million and the $7.1 million, respectively, plus whatever interest is earned on all future pieces of the settlement fund they receive.

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Flint residents have been told they might start receiving payments around the end of this year.

Assistant Attorney General Margaret Bettenhausen said in a court filing that the settlement agreement between the state, other defendants and Flint residents says interest earned on the fund can be used to pay expenses related to implementing the settlement — not to pay lawyers on top of the significant fees they have already been awarded.

"Plaintiffs' counsel are not being paid to implement the settlement," though several contractors are, Bettenhausen wrote.

"If any interest remains after implementation of the settlement is complete, then those funds should ... benefit ... the claimants."

Lawyers for the Flint residents suggested in Tuesday's filing that it's the Attorney General's Office that is violating the settlement agreement, not them. The AG promised not to weigh in on requests for attorney fees and expenses, unless specifically requested to do so by the judge, the lawyers said.

Just because the settlement agreement says earned interest may be used to pay expenses arising from implementation of the settlement, that doesn't mean earned interest must only be used in that way, the lawyers argued.

"Under plaintiffs' proposal, every expected beneficiary of the settlement receives the same share of the settlement as was contemplated when the court granted final approval," the lawyers said.

The state's proposed prohibition on plaintiffs' attorneys getting their proportional share of the interest "fundamentally shifts the allocation of the settlement funds, effectively punishing plaintiffs' counsel for certain objectors' decisions to pursue meritless appeals that delayed settlement distribution."

The lawyers say it's common for attorneys to share in earned interest in complex class-action and mass tort cases and cited several past cases where that has happened, including at least one OK'd by the Michigan Attorney General's Office.

So far, $10.5 million has been paid from the fund to cover costs arising from the claims administration process, which continue to be invoiced.

Those costs include just under $2 million paid to the Washington, D.C. law firm that employs Greenspan; nearly $4.7 million paid to Houston-based Archer Systems LLC, the firm initially appointed to manage the claims process; nearly $2.4 million paid to Ohio-based Wolf Garretson, one of two firms hired to assist and largely replace Archer, and about $643,000 paid to Alvarez and Marsal Disputes and Investigations, a Washington, D.C. firm hired after problems were identified with Archer's approach, which is also assisting Greenspan and Wolf Garretson.

Flint's water crisis began in April 2014, when a state-appointed emergency manager switched the city's drinking water supply from Lake Huron water treated in Detroit to Flint River water treated at the Flint Water Treatment Plant. It was a temporary, cost-saving measure, but turned out to be a disastrous mistake. The Michigan Department of Environmental Quality has acknowledged it failed to require needed corrosion-control chemicals as part of the water treatment process.

After Flint River water began flowing, corrosive water caused lead to leach from joints, pipes and fixtures, causing a spike in toxic lead levels in the blood of Flint children and other residents.

Flint switched back to Detroit water in October 2015, but some risk remained because of damage to the city's water distribution infrastructure. Since then, nearly all lead service lines in Flint have been replaced.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.

This article originally appeared on Detroit Free Press: Flint attorneys want share of interest earned on $626.25M settlement