Court Approves $50 Million Settlement of Claims Against Bankrupt Diacetyl Defendant

A New York bankruptcy court will reportedly allow Chemtura Corp. to resolve 90 percent of the respiratory disease claims pending against it for $50 million, or one-third of the $150 million sought by factory workers allegedly exposed to the popcorn-flavoring ingredient diacetyl. In re: Chemtura Corp., No. 09-11233 (S.D.N.Y., settlement approved August 23, 2010). Responding to claims by co-defendants that the settlement may not meet “good faith” requirements, the court reportedly indicated that it was “within the range of reasonableness.”

The settlement will apparently resolve 15 lawsuits and 347 proofs of claim filed by individuals alleging personal injury from diacetyl exposure. The company has indicated that eight additional individual and five corporate diacetyl claims remain pending. According to a news source, the company has also reached an agreement with its insurers to cover half the cost of the settlement and provide up to a maximum of $10 million to indemnify any other diacetyl claim settled or litigated in the future.

The company apparently filed for bankruptcy in 2009, facing debts exceeding $10 billion, most of which involve government environmental claims. The U.S. Department of Justice reportedly announced on August 24, 2010, that the company has agreed to pay $26 million to clean up 17 contaminated sites in 14 states. The company is planning to emerge from bankruptcy by the end of September, after receiving permission from the court to incur about $1 billion in new debt as part of its Chapter 11 plan. See Bloomberg, August 9, 2010; Product Liability Law 360, August 23 and 26, 2010; Reuters, August 24, 2010.