TEXAS LAWYER – Judge Spends 3 Hours Explaining His Decision
TEXAS LAWYER – Judge Spends 3 Hours Explaining His Decision
TEXAS LAWYER – January 17, 2025 – By Adolfo Pesquera
A judge sympathetic to the hundreds of victims of the massive Port Neches refinery explosion was not able to convince the defendant corporation to pay $292
A proposed plea agreement between federal prosecutors and TPC Group that involved negotiations that excluded the crime victims, fell apart after the Texas judge insisted the defendant pay $292 million in restitution.
On Jan. 10, U.S. District Judge Michael Truncale gave the parties a three-hour dissertation in Beaumont to justify his restitution decision.
Hogan Lovells, counsel for defendant TPC, then withdrew its client from the plea agreement. “So it’s all back to square one,” said Brent Coon of Brent Coon & Associates, co-counsel for the intervenors and representative of the largest group of victims. His law firm handles over 1,500 of the 5,000 plaintiffs from the explosion.
After getting a bankruptcy order that amounted to four cents on the dollar on claims totaling $1 billion, the victims of the Port Neches petrochemical facility explosion were led to believe there would be no more compensation.
On Wednesday, Truncale, in a related civil case, filed a181-page consent decree brought by the Environmental Protection Agency that included a $12.1 million civil penalty for violations of the Clean Air Act; the explosion released 11 million pounds of cancer-causing butadiene, a colorless gas that forced an evacuation of all residents within a four-mile radius of the plant.
Coon described the approved method for paying the penalty as adding insult to injury because $4.84 million of the penalty is to be provided by the general unsecured claim trust from the bankruptcy. In essence, TPC reached into the claimants’ “little bitty cookie jar … taking money to pay some of their civil obligations,” he said.
The 2019 Thanksgiving Day Explosion
TPC was facing criminal liability because of the Department of Justice alleged the company knowingly violated requirements to prevent accidental releases of a toxic substance into the air.
However, the DOJ never presented the case to a grand jury, opting instead to seek a plea bargain that amounted to, as described by the victims various legal counsels, a slap on the wrist—$18 million in criminal fines, one year of probation and a detailed compliance order concerning safety practices at its Houston facility; the Port Neches site was not repaired and TPC has no intention of reopening it.
The explosion led to multidistrict litigation in state court, however, that was stayed when TPC filed for Chapter 11bankruptcy.
“Nothing was done for three years because of the bankruptcy stay,” Coon said, adding civil recourse for the victims is no longer available against TPC and the litigation is now in early discovery before Orange County 128th District Court Judge Courtney Arkeen against a lone co-defendant, Nalco Co. LLC.
As a third-party vendor, Nalco was responsible for oversight of the flow of butadiene at the Port Neches plant, Coon said.
Nalco, in a Securities and Exchange Commission financial filing, states, “Over 5,000 plaintiffs … currently have claims against Nalco in over 175 individual lawsuits.”
Coon criticized the federal prosecutors for how they treated the victims, stating that had they not been ordered by the court to give public notice, the victims would never have known about the plea bargain until after the fact.
However, U.S. attorney Joseph Batte responded in a May 21,2024 court filing, three weeks after the criminal case was filed, describing numerous victims outreach efforts by EPA and DOJ officers, including notices in local media publications and government websites.
Once counsel for the victims responded, Judge Truncale ordered a sentencing schedule that included evidentiary hearings and co-lead counsels for the victims, owner-partners Mark Sparks and Jane Leger of Ferguson Law Firm handled much of the trial witness testimony and presentation of evidence, according to the court docket.
Evidentiary hearings took place on four days beginning October 20 and ending November 20. As the case progressed and it became evident that Truncale expected TPC to pay some amount of restitution, the state switched its stance on restitution and prosecutor Robert Wells submitted a brief concluding the bankruptcy would not prevent it.
The following day, November 12, Lily Chin of the San Francisco office of Hogan Wells insisted in a response brief that the bankruptcy plan discharged any liability for restitution.
“For the first time, the United States submit a brief arguing that a corporate bankruptcy plan cannot ever discharge liability … this argument comes too late.”
Chin argued the state forfeited that theory by not raising it earlier and in any case its theory was wrong.
Judge Truncale’s Jan. 10analysis and decision was given orally and under seal, with instructions the release of the transcript is set for April 15.
Coon, who was present, described the events and its consequences as follows:
- TPC argued they had already paid enough restitution and would opt out of the plea agreement if the court insisted on it.
- Truncale said TPC’s claim of having paid restitution was false because past payments of about $100million were done shortly after the explosion and primarily made by their insurance company, and before any criminal charge was brought, and were not even considered “restitution” as a consequence.
- Truncale said the bankruptcy did not discharge restitution claims because the bankruptcy plan discharging debts also took place before the criminal charges.
- Truncale said if the case came back to him, the defendant already knows where he stands and warned the damages, should a trial take place, could be much higher.
- Truncale’s figure of $292 million was limited to economic damages, because in criminal cases pain and suffering and punitive damages cannot be considered.
- With the plea agreement dead, the government must now present evidence to a grand jury and seek a formal indictment, which would take roughly six months, and less than a year to prepare for trial, assuming the parties do not return with a proposed settlement for the court’s approval.
In the aftermath of the explosion, TPC focused its resources on investing in its Houston facility.
“TPC got a pass from the bankruptcy court, rebuilt their assets in Houston, probably making $100 million a year, and leaving all the victims holding the bag,” Coon said.
TPC’s financial health was also brought to the Truncale court’s attention in a letter submitted by co-counsel Leger, who notes in a January 6 filing in advance of the sentencing hearing how TPC CEO Edward Dineen boasted of its finances in 2024: “Balance sheet wise we’re very strong, liquidity is very strong. We are buying back $50 million of debt… Last year we used some of that liquidity to buy out our second largest shareholder.” And, “We are spending a fair amount of capital this year, around $125 million.”
Ryan Gertz, a solo practitioner based in Beaumont, was TPC’s criminal defense counsel. Civil litigation attorneys from Hogan Lovells and Baker Botts assisted in TPC’s defense.
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