Monday, September 12, 2011

September 11th, Ten Years Later, Where Are We In The Handling Of Mass Claims Within The Legal System?

On September 8, 2011, I had the honor of moderating a live webinar entitled September 11th, Ten Years Later, Where Are We In The Handling Of Mass Claims Within The Legal System? Participating in this fascinating panel discussion were the Honorable Alvin K. Hellerstein, Senior Judge, Southern District of New York, Kenneth Feinberg, and Shelia Birnbaum. I am pleased to provide you with some of the highlights below.

The 2001 Victim’s Compensation Fund, established by Congress within two weeks after September 11, 2001, was an unlimited fund, which distributed over $7.049 billion to survivors of 2,880 persons killed on that day and to over 2,680 persons injured in the attacks or rescue efforts thereafter. Ninety seven percent of the families of deceased victims received compensation from the Fund. The average award for families of deceased victims exceeded $2 million. The average award for injured victims was nearly $400, 000. According to Kenneth Feinberg, the Special Master who administered the Fund, the Fund and its success remains unprecedented, and is unlikely to ever be replicated again. It was the nation’s response to a horrific tragedy of our nation, like the tragedy of Pearl Harbor and the assassination of President Kennedy. The overwhelming success of the Fund would never have been possible without the cooperation of the private bar, who assisted applicants through the claims process. For victims who needed a hearing to relieve their pain and present their evidence for compensation, those hearing were held both before Ken Feinberg and before Judge Hellerstein, who handled the over 10,000 cases filed in his courtroom in the aftermath of September 11, 2001.

The success, in terms of the 97% participation rate, was due in large part also to the fact that Judge Hellerstein suspended his docket for two years, to enable the Fund, for its 33 month time limit, to process its claims. A litigant would need to dismiss their lawsuit to participate in the Fund. Since collateral source payments were deducted from fund compensation, litigants with large life insurance policies opted for the litigation route which did not include deductions for collateral source payments. Special Master Sheila Birnbaum was appointed by Judge Hellerstein to mediate 92 cases in his courtroom, which she did successfully. Judge Hellerstein organized the cases by grouping them into master dockets, 4 of them, organized by subject matter. Legal challenges to jurisdiction and other issues like governmental immunity and dealing with the thicket of security issues made the litigation quite challenging. Special Masters were appointed, who created an electronic database to track each and every plaintiff as well as each and every defendant. Bellwethers were selected from the large mass of cases and discovery commenced on this select group of cases. According to Judge Hellerstein, it was only after the terrorist cases of Zahawari proceeded to trial in Northern Virginia and some of the sensitive security information became public, that the litigants before Judge Hellerstein had access to that SSI information. The cases were bifurcated and Judge Hellerstein set a trial date for a damages only trial. After discovery and before trial, the parties entered into a mass settlement for $712.5 million. Ultimately most of the onsite lawsuits have settled, even after an initial settlement was rejected because some lawyers were for demanding too much money in attorneys’ fees. Judge Hellerstein was committed to making sure that the persons settling early in the litigation did not receive less money than those who settled on the eve of trial. He worked very hard to ensure that the early and late settlers received approximately the same amounts and no one was disadvantaged by the timing of settlement. As of today, one death case remains, the Bavis lawsuit, and only 65 other case from the onsite group remain from the initial over 10,000 cases. A November trial date is set for the Bavis case. The offsite cases remain. Judge Hellerstein expects those cases will be impacted by the Zadroga Act. He does expect his caseload to diminish once the Zadroga act is up and running and litigants choose to dismiss their cases and file claims under the Act.

Neither Feinberg nor Hellerstein thought the Zadroga Act would passed and were initially opposed to it. But, it did pass and no one better could have been appointed to administer it, according to both, than Sheila Birnbaum. The Act is divided into two parts: Part I(medical) and Part II (compensation). Unlike the original Fund, the $2.8 billion reconstituted Fund is limited with administrative expenses deducted from the Fund. Hence, administration will be a challenge. The Fund encompasses a broader geographic area than the original Fund, so potentially more people will be claimants. Dismissal of pending litigation, like the original Fund, is a requirement for participation. Collateral source payments, like the original Fund, will be deducted from the final award. Like the original Fund, the methodology for calculating awards will be published so that a claimant will be able to gauge their expected payment. But, unlike the original Fund, payments will be made not all at once, because the Zadroga Act permits distribution of only $875 million in the first five years, leaving the remaining amount to be paid in the program’s sixth year. The awards will be pro-rated and received in two parts over a period of six years.

The panel discussion could have continued with these well respected panelists who enjoy their work and enjoyed working together to resolve the legal aftermath of this horrific tragedy in our nations history. Judge Hellerstein explained his thoughts about whether he will allow the request for “terror damages” in the Bavis lawsuit headed toward trial this November. He has not made up his mind about whether to permit such damages, but appears to be leaning in that direction, sharing his though process with us. Sheila Birnbaum discussed her thoughts about whether cancer will ever be compensated under the Zadroga Act, and if so, when. Judge Hellerstein lamented that cancer claims did not receive enough compensation in his courtroom, some did, but the emphasis was on respiratory illnesses due to the latency factor. Sheila Birnbaum also discussed the treatment of PTSD and physiological injuries under Part I of the new Fund, although compensation for those injuries is not allowed under Part II of the Fund. Ken Feinberg discussed the challenges he currently faces in administering the BP Fund, which has many many more claimants from all 50 states. As of August 23, 2011, over $5 billion has been distributed to 204,434 claimants, with approved payments by the GCCF of 359,441 claims. While there are no bodily injury or death claims, to all the families facing economic displacement and loss, it was a personal disaster.

Feinberg would let the politicians decide if and when circumstances are suitable to enact another Fund for handling mass torts. Although he is exceptionally experienced in administering these funds, having administered some of the largest funds in our legal history, he is not a proponent of the establishment of funds for the handling of mass disasters, nor of a separate court for handling mass disasters, which Judge Weinstein once espoused. Feinberg will not go out and seek creation of a fund to solve a national tragedy, he would rather let the politicians/Congress decide whether or not to create a fund in response to a national tragedy. He does think the Fund established in response to September 11th was right thing to do. He applauded judges like Judge Hellerstein in administering cases and accepting the challenges of handling 10, 000 cases within the traditional litigation system and making our system work. He stated that there are other judges, state and federal, doing the same in our complex litigation courts across the country. Ironically, Judge Hellerstein appeared a proponent of the fund approach, stating that funds do have its place in our legal system, using the original Fund’s success as an example. Sheila Birnbaum will face challenges in administering the new limited fund which is capped and includes more people, but no one finer is up to the task than Ms. Birnbaum, according to both panelists and this author who moderated this panel.

Should you wish to learn more about the claims and litigation filed as a result of September 11, 2001, the recent live broadcast of September 11th, Ten Years Later: Where Are We In the Handling of Mass Claims Within the Legal System? is now available on demand at West LegalEdcenter. If you missed any of the ten programs in the September “Disaster Preparedness and Response” series, each program is now available on demand. West LegalEdcenter, part of Thomson Reuters, has dedicated a landing page specific to this ABA-TIPS series. Click here to view all available programs and have the opportunity to register for this impactful and timely series through a promotional bundle and applicable discounts for TIPS members.

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