By ERIK LARSON
Freedom Industries, the chemical maker whose leaky storage
tank polluted the Elk River in early January and shut down
water service in West Virginias biggest city, filed for
bankruptcy to cope with the subsequent lawsuits.
Freedom Industries listed assets and debt of $1 million to
$10 million each in a Chapter 11 petition filed in US
Bankruptcy Court in Charleston, West Virginia. The company
said the lawsuits and more stringent payment demands from
vendors since the incident compelled it to seek court
They are woefully underestimating their
liabilities, said Aaron Harrah, a lawyer representing
the owner of a Charleston bar and restaurant in a lawsuit
against Freedom. Harrah said in a phone interview that
hes hopeful his client will still get a payout from
A bankruptcy filing halts most litigation, forcing plaintiffs
to vie with other creditors for a share of a companys
assets. More than two dozen lawsuits have been filed since
the accident, which led President Barack Obama to declare a
state of emergency for the affected counties. The state
attorney general is investigating the spill.
On Jan. 9, West Virginia officials discovered a leak from a
35,000-gallon (133,000-liter) tank of 4-methylcyclohexane
methanol, a chemical used in coal processing. About 7,500
gallons escaped from a one-inch hole, compromising water for
about 300,000 people and sending more than 100 to the
Freedom Industries said the current hypothesis for the
accident is that a local water line broke next to its plant,
causing the land underneath the tank to freeze in the
extraordinary frigid temperatures in the days immediately
preceding the incident, according to bankruptcy papers.
A woman who answered the phone at Freedom Industries
headquarters and declined to give her name said no one at the
company was commenting to the media.
The petition and related pleadings speak for
themselves, Mark Freedlander, the companys
bankruptcy lawyer, said in a statement, declining to comment
Companies facing legal costs and damages following accidents
may use U.S. bankruptcy law to protect assets. In August,
Montreal, Maine & Atlantic Railway Ltd., the operator of
the runaway oil train that exploded and killed 47 people in a
Quebec town, said it was forced to file for bankruptcy
because of potential liability from the crash.
Charleston-based Freedom Industries was formed in 1986 and
supplies specialty chemicals to the steel, cement and coal-
mining industries. The closely held company completed a
four-way merger nine days before the leak was discovered.
The four companies had total revenue of about $25.7 million
in fiscal 2012 and $30.7 million in 2013, according to court
filings. Freedom Industries equity is 100% owned by
Chemstream Holdings, according to court filings.
Freedom Industries is seeking permission to borrow as much as
$5 million to continue operations during the bankruptcy. It
said that without the extra liquidity, it will have no
choice but to liquidate.
Among its 20 biggest unsecured creditors are Archer Daniels
Midland, owed about $429,000, and Eastman Chemical, owed more
than $127,000, according to court papers.
Freedom Industries and Eastman, the maker of the chemical
that fouled the river, were sued Jan. 13 by local businesses
and residents for creating a nuisance and concealing
cancer-causing compounds, among other allegations.
Another case names the West Virginia-American Water Co.
alongside Freedom Industries. The utility failed to deal
promptly with the emergency and had no procedures in place to
prevent chemicals from getting into the water system,
according to a complaint filed Jan. 10 in Kanawha County
Circuit Court in Charleston.
Harrah said he and his colleagues are still investigating
Freedom and other companies that may have contributed to the
The meter continues to run, he said. Even
though there are businesses with their water back, there are
other businesses serving bottled water, trucking in ice. You
can imagine people are pretty skittish about drinking this