TS - Residents look to settle with Palco over flooding W/UPDATE

Residents look to settle with Palco over flooding 01/18/2008

Attorneys for 60 Elk River and Freshwater Creek residents are asking a U.S. Bankruptcy Court to approve an agreement that would do away with their flood damage claims against the Pacific Lumber Co.

The stipulation would allow them to pursue their claims against the company's insurance providers and the parent company of Palco, Maxxam Inc. But it would do away with an estimated $100 million in potential debt -- which the plaintiffs aren't likely to collect from the bankrupt company.

The complaints were originally filed against Palco, Maxxam, Maxxam CEO Charles Hurwitz and the state in 2002 and 2004 in Humboldt County Superior Court. The proceedings were stayed when Palco filed for bankruptcy a year ago. The suits allege that Palco's logging practices in the watershed caused flooding by choking the stream channels with sediment and by increasing runoff.

”This should help the bankruptcy process,” said the residents' local counsel Bill Bertain. “And it will allow our clients' cases to proceed in Humboldt County Superior Court.”

The bankruptcy court had set a date in March to estimate the amount of the claims. Insurance coverage may exist for the claims, according to the court document filed Thursday.

”As noted above, the proposed stipulation will yield obvious and substantial benefits to the estates,” meaning Palco and subsidiary Scotia Pacific, wrote the unsecured creditors committee attorney John Fiero. “Most notably, tens of millions of dollars in potential claims will simply go away.”

Palco Vice President Frank Bacik said the company has always believed it would win if the cases went to trial, but could spend hundreds of thousands in costs and legal fees for claims estimation in bankruptcy court.

”For that reason alone, it certainly is an intriguing proposal, and we're looking very carefully at it,” Bacik said. “But there's clearly some substantive fine-tuning of language needed before we could signal any final agreement.”

In October 2002, a similar lawsuit filed against Palco five years earlier by 22 Elk River residents was settled out of court. The terms of the settlement were undisclosed.

John Driscoll can be reached at 441-0504 or jdriscoll@times-standard.com.
John Driscoll The Times-Standard
Article Launched: 01/18/2008 01:15:26 AM PST
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