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In re September 11 Litigation

July 24, 2008

IN RE SEPTEMBER 11 LITIGATION


The opinion of the court was delivered by: Alvin K. Hellerstein, U.S.D.J.

OPINION AND ORDER REGULATING FEE ALLOWANCES AND DISAPPROVING SETTLEMENTS

Four of the last remaining plaintiffs in the wrongful death actions against the airlines and other aviation defendants of 9/11 seek judicial approval to distribute the proceeds of their settlements. The law firm that represents them, Azrael, Gann & Franz, seeks a higher percentage of the settlement amounts as a contingent fee award than were received by all other law firms in all previous cases (but for three approved-exceptions). As I now have learned from considering the issues relating to the four settlements, the settlement amounts in these four cases are substantially higher than those of similarly situated plaintiffs in previous settlements. The issue that I have to decide is the fairness of the settlements and fee awards of these four cases, in relation to claimants in the remaining cases against these same defendants, and in relation to the lesser awards of previous settlements. For the reasons discussed in this opinion, I decline to approve the fee awards and settlements because they are unfair and unreasonable in material respects, and I will vacate, by separate order, earlier orders approving the settlements.

The Air Transportation Safety and System Stabilization Act ("ATSSSA", or the "Act") was enacted within weeks of the terrorist-related aircraft crashes into Towers One and Two of the World Trade Center, the Pentagon, and a field in Shanksville, Pennsylvania. The Act limits the liability of the airlines and other aviation defendants to their insurance coverages. ATSSSA, Section 408(a)(1), 49 U.S.C. § 49101. This limit, imposed by the ATSSSA, is considerably less than the aggregate of wrongful death, personal injury and property damage claims against these defendants. Reports submitted to the Court indicate that, even after accounting for all of the settlements that have been approved thus far, the claims against the airlines and other aviation defendants exceed permissible recoveries from insurance proceeds by much more than a billion dollars.

The excess of claims over permissible recoveries presented a unique and potentially disabling problem to Court and counsel. Could settlements occur in individual cases and settlement proceeds be distributed, if settling parties had to wait until all cases were resolved to ascertain their aliquot shares of a limited recoverable amount? Could there be a differentiation between wrongful death and personal injury claims, and property-damage claims, if in law they had equal status? Could settlement discussions be encouraged, even among the wrongful death and personal injury claimants, where there were 95 of them, killed and injured from crashes in three different states, represented by 15 different firms, as well as one self-represented plaintiff, with each claimant and each law firm resolved to obtain the highest possible recovery for each plaintiff?*fn1

Several claimants made it known that they wished to settle. For various reasons, they had not filed claims with the Victim Compensation Fund (see ATSSSA, Section 401 et seq., 49 U.S.C. § 40101),*fn2 but preferred to settle their claims rather than undergo the further agonies of a difficult litigation. The interests of justice required that the litigants and court develop procedures to make such settlements possible and, indeed that settlements be encouraged, for the problems of the ongoing litigation of the several categories of post-9/11 claims were daunting, and their number, eventually reaching well over 10,000 cases, threatened to swamp the limited capacities of the judicial system.*fn3

A special protocol was developed to resolve the dilemmas that were presented. Despite the fear that payments of earlier settlers would leave inadequate funds for later verdicts and settlements, the property-damage claimants agreed to defer progress on their claims in order to allow wrongful death and personal injury settlers to settle and be paid, provided that such settlements would be approved by the Court as fair and reasonable. It was also important to assure equality of status to all plaintiffs', and all defendants', counsel, and prevent the timing of settlements to work to the advantage, or disadvantage, of counsel or clients, and these considerations also were incorporated into the protocol. The special protocol, developed over several case management conferences, had the following features:

1. Judicial approval to certify fairness and reasonableness would be required for each settlement. See Nov. 18, 2005 conf. tr., at 10.

2. The desire of all plaintiffs to maintain confidentiality of their separate recoveries would be respected. See March 3, 2006 conf. tr., at 13, 21. Thus, the approval process would be split. The participants to the initial approval process would be limited to counsel for the paying aviation defendants and counsel for the settling plaintiff. Following approval, up to five settlements would be grouped, and the fairness and reasonableness of the grouped settlements would be reviewed by all other affected defendants' counsel for acquiescence or objection. Stipulation and Order Regarding Settlements, dated April 10, 2006.

3. Contingent fees would be limited to 15 percent of net recoveries. See March 3, 2006 conf. trans., at 31-32.

4. There would be no advantage to being late, or early, in the settlement process. Early settlers would not be permitted to leverage recoveries against later settlers, and later settlers would not be permitted to leverage recoveries against earlier settlers. March 3, 2006 conf. tr., at 7; see also Sept. 8, 2005 conf. tr., at 5 ("I cannot preside over this case contemplating that one plaintiff's lawyer will do better in a similar case than another plaintiff's lawyer. That is not going to happen.").

5. A period of time would be allotted to the wrongful death and personal injury claimants to negotiate settlements. The property damage claimants agreed to a slowed discovery schedule until counsel for the wrongful death and personal injury claimants had reasonable opportunities to negotiate settlements. They agreed also to limit their involvement in certain depositions in an effort to accommodate the government's desire to limit as much as possible the number of counsel who would have access to discovery material that had to be filtered through the United States Transportation Security Administration ("TSA") and cleared of any Sensitive Security Information ("SSI")*fn4 . May 12, 2006 conf. tr., at 16.

6. I offered a Board of Mediators to help counsel negotiate, comprised of former Judge Abraham D. Sofaer, George P. Shultz Senior Fellow in Foreign Policy and National Security Affairs at the Hoover Institution on War, Revolution and Peace at Stanford University; Patricia Hynes, former partner at Milberg Weiss and current senior counsel at Allen & Overy; and Jay Lefkovitz, former Chief of Domestic Policy Planning under President Bush and current partner at Kirkland & Ellis. Instead, counsel for the aviation defendants and for the wrongful death and personal injury claimants made their own choice of mediator, Sheila Birnbaum, Esq. of Skadden, Arps, Slate, Meagher & Flom LLP. Jan. 27, 2006 conf. tr., at 12-14. Ms. Birnbaum took an active role as mediator, ultimately assisting the parties in consummating more than 85 settlements.

The protocol enabled approximately 30 cases to settle within three months. But a significant number remained, and settlement negotiations seemed to slow. And for the cases that remained, the discovery issues were formidable. The procedure by which discovery had to be filtered through the TSA for SSI was slow and cumbersome; there were continuing controversies how depositions potentially involving SSI would be conducted, and how many, and which, lawyers could attend and what should be their roles. See Memorandum and Order Regulating Deposition Protocol and Supplementing Orders of March 31 and May 5, 2006, 431 F. Supp. 2d 405 (S.D.N.Y. May 16, 2006). Disputes, if SSI issues could not be resolved by negotiation, were to be litigated by appeals to the United States Courts of Appeals. Id. Witnesses that various counsel wished to depose-for example, FBI agents said to have knowledge of risks from terrorists before September 11, 2001-could not easily be deposed without elaborate court proceedings and uncertain results. Id. Many years of discovery proceedings lay ahead before any of the cases could be tried.

At Case Management Conferences held on March 22, June 14 and June 25, 2007, I offered an alternative: trials only of plaintiffs' damages in a selected few cases, selected for their representative quality in relation to remaining cases. The experience, I commented, should facilitate settlements of many more cases, for the values awarded by juries would help plaintiffs and defendants negotiate possibly different numbers, whether higher or lower than the numbers they had discussed in their previous negotiations. Furthermore, the difficult and time-consuming discovery issues involved with the TSA and SSI might become unnecessary, and depositions and ...


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