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Class-action suit against FEMA trailer manufacturers settled for $42.6 million

David Friedman / NBC News

File photo shows a FEMA trailer park near Highway 90 in Bay St. Louis, Miss., in 2007.

More than six years after Gulf Coast victims of Hurricane Katrina began experiencing adverse health effects while living in travel trailers provided by the federal government for temporary housing, a federal judge in New Orleans has given his final approval to a $42.6 million settlement of a class-action lawsuit alleging that the units emitted hazardous levels of the toxic chemical formaldehyde.

U.S. District Judge Kurt Engelhardt approved the deal Thursday after hearing from attorneys who brokered the agreement between the plaintiffs and more than two dozen manufacturers of mobile homes provided by the Federal Emergency Management Agency in the wake of Hurricanes Katrina and Rita.

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Roughly 55,000 residents of Louisiana, Mississippi, Alabama and Texas will be eligible for shares of $37.5 million paid by more than two dozen manufacturers, the Associated Press reported. They also can get shares of a separate $5.1 million settlement with FEMA contractors that installed and maintained the units.

Dan Balhoff, a court-appointed special master, will determine the plaintiffs' awards, the AP said. Up to 48 percent of the total settlement money – or approximately $20,5 million -- will be deducted for attorneys' fees and costs, it said. Assuming the remainder is divided equally among 55,000 plaintiffs, the plaintiffs would receive about $4,020 apiece.

Payments are expected to go out late this year or early next year, the AP said.

Engelhardt presided over three trials for claims against FEMA trailer manufacturers and installers after he was picked in 2007 to oversee hundreds of consolidated lawsuits. The juries in all three trials sided with the companies and didn't award any damages.

As msnbc.com (now NBCNews.com) first reported in July 2006, residents of the trailers began complaining of headaches, nosebleeds and breathing difficulty shortly after moving into the trailers, which were trucked to the Gulf Coast by the tens of thousands after Katrina and Rita devastated the area in rapid succession in 2005.

Air quality tests of 44 FEMA trailers in early 2006 conducted by the Sierra Club found formaldehyde concentrations as high as 0.34 parts per million – a level nearly equal to what a professional embalmer would be exposed to on the job, according to one study of the chemical’s workplace effects.

And government tests on hundreds of trailers in Louisiana and Mississippi announced in 2008 found formaldehyde levels that were, on average, about five times what people are exposed to in most modern homes. 

FEMA, which isn't a party to the settlements, had long downplayed the health risks from formaldehyde exposure before those test results were announced.

It eventually began auctioning off the units as “scrap” — meaning they should not be used for human habitation — in October 2008, but some unscrupulous buyers apparently were able to dodge regulations and return them to the housing pool. 

Formaldehyde gas -- the airborne form of a chemical used in a wide variety of products, including composite wood and plywood panels in the travel trailers that FEMA purchased to house hurricane victims -- is considered a human carcinogen, or cancer-causing substance, by the International Agency for Research on Cancer and a probable human carcinogen by the EPA.

Gerald Meunier, a lead plaintiffs' attorney, told the AP that the deal provides residents with "somewhat modest" compensation but allows both sides to avoid the expense and risks of protracted litigation.

"Dollar amounts alone do not determine whether a settlement is fair and reasonable," he said.

Jim Percy, a lawyer for the trailer makers, said Engelhardt would have had to try cases individually or transfer suits to other jurisdictions if the settlement wasn't reached.

"It was not going to end quickly, and it was going to be even more monumental for all the parties concerned," he said.

But that doesn't mean the deal isn't a disappointment for many residents who blame their illnesses on the cramped trailers they occupied for months on end.

"We were told not to look for much," said Anthony Dixon, a New Orleans resident who says he developed asthma while living in a FEMA trailer for two years.

Dixon, 58, attended the hearing with his wife and mother to learn more about the deal.

"We're glad to get it over with," he added.

Engelhardt noted he received a letter from a woman whose 66-year-old mother, Agnes Mauldin, of Mississippi, died of leukemia in 2008 after living in a FEMA trailer. Mauldin's daughter, Lydia Greenlees, said the settlement offers "very little" for what her family considers to be a wrongful death case.

"I am saddened about the settlement in that I feel like it makes a mockery of my mother's life," Greenlees wrote. "I don't want anyone to think for one second that I view this settlement as a fair trade for my mother's life. I do not."

A group of companies that includes Gulf Stream Coach Inc., Forest River Inc., Vanguard LLC and Monaco Coach Corp. will pay $20 million of the $37.5 million settlement with the trailer makers.

Shaw Environmental Inc., Bechtel Corp., Fluor Enterprises Inc. and CH2M Hill Constructors Inc. are among the FEMA contractors that agreed to pay shares of the separate $5.1 million settlement.

Only a handful of formaldehyde-related claims are still pending, including some against FEMA by a group of Texas residents.

Mike Brunker is the projects editor for NBCNews.com; the Associated Press contributed to this article.

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