Judge to OK $6.3M deal in contaminated neighborhood case

A federal judge signaled Thursday that he will bless a $6.3 million settlement between developers of homes at Hunters Point shipyard, a potentially toxic neighborhood in San Francisco, and homeowners who claim they were lied to about the full extent of the area's contamination due to fraudulent radiological remediation.

U.S. District Judge James Donato said he is "leaning toward approval" of the deal over the objection of Tetra Tech, a radiological cleanup company that is one of the defendants in the lawsuit. It argued that the developers knew more about the fraud than they are representing.

The settlement, if approved, would resolve the liability of developers Lennar Corp. and Five Point Holdings in a class action among a series of federal lawsuits over radiological contamination at the former Superfund site.

The class action brought by homeowners in 2018 over claims that Tetra Tech falsified soil sample tests, leading officials to believe the area is no longer contaminated, involves a multibillion dollar housing development on city property that has led to nearly a dozen lawsuits and countersuits. The class action stated that Tetra Tech, Lennar and Five Point severely diminished the value of homes at Hunters Point by misleading homeowners that the area was successfully remediated.

Tetra Tech, which is not a part of the settlement and has denied all accusations, has opposed the deal. It argued that the developers knew about the alleged fraud by the time over half the 347 properties at issue in this case were sold.

Tetra Tech attorney Christopher Rheinheimer of Hanson Bridgett LLP pointed to a report the company sent to developers in 2016 about its self-investigation into claims that some of its employees falsified soil samples.

But Donato disagreed on the timeline in which the developers discovered that the area might be unsafe to live in because of the fraudulent remediation. The report did not disclose that the investigation was a result of allegations of a massive fraud scheme directed by Tetra Tech management, which was only revealed to Lennar and Five Point in 2018 when the plea agreements of two former Tetra Tech employees were unsealed, Donato found.

Stephen Rolfe and Justin Hubbard, former radiation control technician supervisors for Tetra Tech, pleaded guilty to accusations of switching clean soil samples with soil they were supposed to be testing. They were sentenced to eight months in prison

Donato also appeared to reject arguments that the $6.3 million settlement is too low.

Attorneys representing the homeowners emphasized that the deal is fair because Tetra Tech is mostly responsible for their clients' injuries. The settlement figure is 12% of their maximum recovery, estimated at $48 million, if they prevailed on each of their claims at trial.

"Twelve percent would look great compared to a lot of consumer settlements I get that I have to wrestle with," Donato said.

Rheinheimer countered that the developers are the primary wrongdoers because the homeowners do not seek damages for alleged exposure to toxins at Hunters Point but rather for the decreased value of their properties. He argued the developers should bear all of the liability because they had a duty to disclose.

The majority of the class is expected to receive five-figure payments. Pennington v. Tetra Tech, CV18-05330 (N.D. Cal., filed Aug. 29, 2018).

Plaintiffs' attorney Anne M. Murphy, a partner at Cotchett, Pitre & McCarthy LLP, emphasized that the settlement "moves this case along very quickly" and that there have been no opt-outs or objections.

The Justice Department has intervened in whistleblower lawsuits against Tetra Tech. United States ex rel. Jahr v. Tetra Tech EC Inc., CV13-03835 (N.D. Cal., filed Aug. 19, 2013).

The company also faces lawsuits from residents alleging health problems, Lennar for allegedly botching its development plans, and current and former officers of the San Francisco Police Department who were stationed at Hunters Point, among others.

The Environmental Protection Agency and the Navy, which is responsible for the remediation of the area, concluded that up to 97% of Tetra Tech's work was potentially fraudulent and needed to be redone.