“A planned $5 million settlement between Daikin and the West Morgan-East Lawrence Water Authority was derailed Monday by a federal appellate court in a ruling that an official said is likely to result in increased rates for the authority’s customers.

The authority had borrowed $4 million for a carbon filtration system that has removed toxic industrial chemicals from its drinking water, but general manager Don Sims said the plan had been to use the settlement with Daikin America Inc. to pay off the bond…

Sims said the authority had no choice but to build the carbon filtration system in order to reduce levels of perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA). The authority’s water intake on the Tennessee River is 16 miles downstream of the main sources of contamination on the river. The authority and its customers alleged in their complaint against Daikin, 3M Co. and its subsidiary Dyneon that the ongoing contamination of the river comes from materials dumped or discharged by the Decatur plants in the past…

Sims said the authority is testing a reverse osmosis system which he sees as a better permanent solution. Replacement of the granulated carbon in the temporary system is expensive, with a price tag of $300,000 over the last 18 months. Funding for the permanent system depends on a successful resolution of the lawsuit, he said…

The appellate court reversed a lower court’s approval of the Daikin settlement. The lower court abused its discretion, according to Monday’s ruling, because the same lawyers represented both the authority and its customers despite their conflicting interests. The settlement also was inappropriate because it released individual damage claims of customers who were class members, the court ruled…

Attorney Lloyd Gathings of Birmingham represented about 300 people who objected to the settlement. He said if rates have to be increased to pay off the bond, the amount of the increase should be minimal…

He said West Morgan-East Lawrence would have received a far better recovery than its customers in the proposed settlement, which he said was a result of the lawyers being more focused on their primary client than on the members of the class who also were plaintiffs…

Judge Charles Wilson in his dissent argued the practicality of the settlement outweighed the concerns of a conflict of interest raised in the majority’s opinion. Rejection of the Daikin settlement ‘will result in significantly more interest on the bond for the granular activated carbon filtration system, which will lack the settlement proceeds to pay for it.’ ”

Read the full article by Eric Fleischauer