Hess Corporation will pay a total of $150 million to hundreds of former St. Croix refinery workers and their families who were injured by asbestos exposure, according to a settlement reached Thursday in Texas bankruptcy court. The deal ends decades of litigation that some of the victims never lived to see.
Under the agreement, Hess will pay $105 million into a trust for 910 current asbestos claims within 10 days, and put aside $45 million for any future claims, including $25 million now and an additional $20 million in five years, which could increase up to $37 million, depending on need. Of that amount, $11,562,500 will be reserved for mesothelioma claims, according to the settlement.
Claimants’ payouts will be calculated using a complex “points” system depending on injury classification, impairment rating and exposure history.
The Source sought comment from Young Conway Stargatt and Taylor LLP — the future claims attorneys who earlier this year rejected a $106 million offer by Hess as insufficient — but did not hear back by press time Thursday.
Hess and its subsidiaries ran the oil refinery on St. Croix’s south shore from 1965 to 1998 — when its partially owned subsidiary Hovensa was formed — allegedly exposing a generation of Crucians to unchecked toxins in their workplace.
Hess Oil Virgin Islands Corp. (HOVIC), now called HONX, filed for Chapter 11 protection in Houston in April 2022, claiming in court filings that given the number of plaintiffs in the asbestos case, it would take 40 years to litigate each claim in V.I. District Court.
Litigation of the cases had been moving at a snail’s pace since 1997 and 1998 when the first 400 cases were filed by people claiming illness due to asbestos and/or silica dust exposure from the refinery and St. Croix Alumina. In 2013 and 2014 alone, approximately 120 people sued Hess with claims of asbestos exposure during their employment, according to court documents. Over the years, the plaintiffs have been mostly employees of the Hess refinery, family members or people who lived in the vicinity.
Some of the plaintiffs died before giving depositions and others have not been located because of the passage of time, slowing down the process. That prompted the V.I. Legislature to pass a law in September 2021 to grant seniors and the terminally ill preference in civil actions.
The Official Committee of Unsecured Creditors — seeking last year to have the case dismissed and the asbestos litigation heard outside of bankruptcy court — alleged that HONX is just a hollow shell of a company that was revived to shield Hess Corp’s $37 billion in assets against the suits.
U.S. Bankruptcy Judge Marvin Isgur, who presided over the case in Houston, denied the motion to dismiss last December.
Numerous news reports have painted the U.S. Bankruptcy Court in Houston as a place companies go to get favorable rulings, with the Wall Street Journal characterizing it as “a premier landing spot for corporate reorganizations.”
Companies are known to take advantage of what is known as the “Texas two-step,” where they split into two parts — funneling assets into one and debts into the other, which then files for bankruptcy.
Further clouding the case was the revelation in October that a judge who was a mediator in the lawsuit was in a longtime romantic relationship with an attorney who until last December worked for the law firm representing HONX.
The Wall Street Journal first reported on the relationship, which came to light after a plaintiff in another case sued Judge David Jones of the U.S. Bankruptcy Court in Houston, alleging he had a conflict of interest that tainted his rulings while presiding over the 2020 case of offshore-drilling company McDermott International.
In that case, as in the U.S. Virgin Islands asbestos litigation, the local counsel was Jackson Walker LLP, where Jones’ longtime girlfriend, bankruptcy attorney Elizabeth Freeman, worked until leaving to start her own firm.
Jones approved $71,790 in fees for Freeman in the HONX case and $393,782 to Jackson Walker, according to court records. He resigned in October after an ethics complaint was filed against him by the Fifth Circuit Court of Appeals. Last month the U.S. Trustee’s Office, which oversees the bankruptcy court system, filed multiple motions to strip millions of dollars in fees that Jones awarded the firm in 32 cases, including HONX.
The dangers of asbestos — a fibrous, fire-resistant material that can lead to specific lung cancers — have been known since the 1930s and federally recognized as hazardous since the 1950s. The St. Croix refinery, built in the early 1960s and opened in 1965, is thought to have contained millions of pounds of asbestos. Court filings allege workers were routinely exposed, especially while cleaning up storm damage at the plant. They also may have unknowingly brought the toxic fibers home to their families as it clung to their clothing.
