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In Re: September 11 Property Damage Litigation

April 8, 2011

IN RE: SEPTEMBER 11 PROPERTY DAMAGE LITIGATION
WORLD TRADE CENTER PROPERTIES LLC; 1 WORLD TRADE CENTER LLC; WORLD TRADE CENTER LLC; 3 WORLD TRADE CENTER LLC; 4 WORLD TRADE CENTER LLC; 7 WORLD TRADE COMPANY, L.P., INTERVENORS-APPELLANTS,
v.
CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON COMPRISING SYNDICATES NO. 30 33, 1003, 2003, 1208, 1243, 0376; GREAT LAKES REINSURANCE (UK), PLC; UNDERWRITER AT LLOYD'S, SYNDICATE NO. 1225; MUNICH-AMERICAN RISK PARTNERS 7244 GMBH; GREATER NEW YORK MUTUAL INSURANCE COMPANY; INSURANCE COMPANY OF GREATER NEW YORK; MUNICH REINSURANCE COM- PANY UK GENERAL BRANCH; MUENCHENER RUECKVERSICHERUNES- GESELLSCHAFT; WOBURN INSURANCE, LTD.; GREAT LAKES REINSURANCE U.K. PLC; AMERICAN ALTERNATIVE INSURANCE CORPORATION; THE PRINCETON EXCESS & SURPLUS LINES INSURANCE COMPANY; MUNICH REINSURANCE AMERICA, INC., FORMERLY KNOWN AS AMERICAN RE-INSURANCE COMPANY; COLISEE RE, FORMERLY KNOWN AS AXA RE AND SUCCESSOR TO THE INTERESTS AND LIABILITIES OF SPS REASSURANCE; COLISEE RE CANADIAN BRANCH, FORMERLY KNOWN AS AXA RE CANADIAN BRANCH AND FORMERLY KNOWN AS AXA CORPORATE SOLUTIONS REASSURANCE CANADIAN BRANCH; COLISEE RE MADEIRA BRANCH, FORMERLY KNOWN AS AXA RE MADEIRA BRANCH; PORTMAN INSURANCE LIMITED, FORMERLY KNOWN AS AXA GLOBAL RISKS (UK) LTD. AND SUCCESSOR TO THE INTERESTS AND LIABILITIES OF AXA REINSURANCE UK PLC; AXA CORPORATE SOLUTIONS ASSURANCE UK BRANCH; AXA INSURANCE COMPANY, FORMERLY AXA CS INSURANCE CO.; COLISEUM REINSURANCE COMPANY, FORMERLY AXA CS REINSURANCE CO. US; AXA VERSICHERUNG AG; AXA CESSIONS; AXA CORPORATE SOLUTIONS SERVICES UK LTD. AND AXA CORPORATE SOLUTIONS ASSURANCE, FOR ITSELF AND SUCCESSOR TO THE INTERESTS AND LIABILITIES OF AXA CORPORATE SOLUTIONS ASSURANCE CANADIAN BRANCH; AXA ART INSURANCE CORPORATION; PARIS RE ASIA PACIFIC PTE. LTD., FORMERLY KNOWN AS AXA RE ASIA PACIFIC PTE. LTD.; PARIS RE, SUCCESSOR TO THE INTERESTS AND LIABILITIES OF COMPAGNIE GENERALE DE REASSURANCE DE MONTE CARLO; INDUSTRIAL RISK INSURERS AND ITS MEMBERS; AEGIS INSURANCE SERVICES, INC.; LIBERTY INSURANCE UNDERWRIT- ERS, INC.; NATIONAL UNION INSURANCE COMPANY OF PITTSBURGH; NUCLEAR ELECTRIC INSURANCE LIMITED; CERTAIN UNDERWRITERS AT LLOYD'S COMPRIS- ING SYNDICATES NO. 1225 AND 1511; CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.; QBE INTERNATIONAL INSURANCE LTD.; CERTAIN UNDERWRITERS AT LLOYD'S LONDON, AS MEMBERS OF SYNDICATES NUMBERED 1212, 1241, 79, 506, AND 2791; ASSURANCES GENERALES DE FRANCE IART; ASSURANCES GENERALES DE FRANCE; ALLIANZ GLOBAL RISKS US INSURANCE COMPANY F/K/A ALLIANZ INSURANCE COMPANY; ALLIANZ INSURANCE COMPANY OF CANADA; ALLIANZ SUISSE VERSICHERUNGS-GESELLSCHAFT; ALLIANZ VERSICHERUNGS- AKTIENGESELLSCHAFT; FIREMAN'S FUND INSURANCE COMPANY; MAYORE ESTATES, LLC; 80 LAFAYETTE ASSOCIATES, LLC; BARCLEY DWYER CO., INC.; KAROON CAPITAL MANAGEMENT, INC.; N.S. WINDOWS LLC; TOWER COMPUTER SERVICES, INC.; WALL STREET REALTY CAPITAL, INC.; WORLD TRADE FARMERS MARKET, INC.; ADEM ARICI; OMER IPEK; MVN ASSOCIATES, INC.; MARSHA VAN NAME; DANIEL D'AQUILA; FLOYD VAN NAME, PLAINTIFFS-APPELLEES, AMERICAN AIRLINES, INC.; AMR CORPORATION; UNITED AIR LINES, INC.; UAL CORPORATION; US AIRWAYS, INC.; US AIRWAYS GROUP, INC.; COLGAN AIR, INC.; GLOBE AVIATION SERVICES CORPORATION; GLOBE AIRPORT SECURITY SERVICES, INC.; HUNTLEIGH USA CORPORATION; ICTS INTERNATIONAL N.V.; THE BOEING COMPANY; MASSACHUSETTS PORT AUTHORITY; BURNS INTERNATIONAL SECURITY SERVICES COMPANY, LLC, FORMERLY KNOWN AS BURNS INTERNATIONAL SECURITY SERVICES CORPORATION; BURNS INTERNATIONAL SERVICES COMPANY, LLC, FORMERLY KNOWN AS BURNS INTERNATIONAL SERVICES CORPORATION; PINKERTON'S LLC, FORMERLY KNOWN AS PINKERTON'S INC.; SECURITAS AB, DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Debra Ann Livingston, Circuit Judge:

Argued: March 10, 2011

Before: B.D. PARKER, LIVINGSTON, and LYNCH, Circuit Judges.

Intervenors-Appellants World Trade Center Properties LLC, 1 World Trade Center LLC, 2 World Trade Center LLC, 3 World Trade Center LLC, 4 World Trade Center LLC, and 7 World Trade Company, L.P. (collectively "WTCP Plaintiffs") appeal from a final Order of the United States District Court for the Southern District of New York (Alvin K. Hellerstein, District Judge) granting Plaintiffs-Appellees' (collectively "Settling Plaintiffs") and Defendants-Appellees' (collectively "Aviation Defendants") joint motion for orders approving their Settlement Agreement and Mutual Release of Claims. We hold that the Air Transportation Safety and System Stabilization Act of 2001 ("ATSSSA"), Pub. L. No. 107-42, 115 Stat. 230 (2001) (codified as amended at 49 U.S.C. § 40101, note), does not preempt New York State's "first-come, first-served" settlement rule, and that the proposed settlement payments reduce each contributing Aviation Defendants' remaining liability pursuant to the liability limits defined in ATSSSA. We also conclude that the district court did not abuse its discretion in finding that the Settling Plaintiffs and Aviation Defendants entered into their settlement agreement in good faith. Accordingly, we affirm the district court's approval of the settlement.

AFFIRMED.

Intervenors-Appellants World Trade Center Properties LLC, 1 World Trade Center LLC, 2 World Trade Center LLC, 3 World Trade Center LLC, 4 World Trade Center LLC, and 7 World Trade Company, L.P. (collectively "WTCP Plaintiffs") appeal from a final Order of the United States District Court for the Southern District of New York (Alvin K. Hellerstein, District Judge) granting Plaintiffs-Appellees' (collectively "Settling Plaintiffs") and Defendants-Appellees' (collectively "Aviation Defendants") joint motion for orders approving their Settlement Agreement and Mutual Release of Claims, dated February 23, 2010.

The district court also ordered all amounts paid pursuant to the settlement agreement to be credited to the contributing Aviation Defendants' respective liability ceilings under § 408(a)(1) of the Air Transportation Safety and System Stabilization Act of 2001 ("ATSSSA"), Pub. L. No. 107-42, 115 Stat. 230 (2001) (codified as amended at 49 U.S.C. § 40101, note). It further found that Defendant-Appellee Huntleigh USA Corp.'s ("Huntleigh") insurers will exhaust the limits of Huntleigh's liability insurance coverage by making payments pursuant to the settlement agreement.

The WTCP Plaintiffs argue that the district court's application of New York state settlement rules was contrary to, and thus preempted by, ATSSSA. They also contend that the court failed to make a proper evaluation of the fairness of the settlement agreement, and that the court erred in crediting the proposed settlement payments to the contributing Aviation Defendants' respective liability limits under ATSSSA. We hold that ATSSSA does not preempt New York State's "first-come, first-served" settlement rule, and that the proposed settlement payments pursuant to the settlement agreement properly reduce the contributing Aviation Defendants' remaining liability under ATSSSA's liability limits. We further conclude that the district court did not abuse its discretion in finding that the Settling Plaintiffs and Aviation Defendants entered into their settlement in good faith.

BACKGROUND

This case concerns the multitude of property damage claims that arose from the terrorist attacks of September 11, 2001, when American Airlines Flight 11 and United Air Lines Flight 175 struck Towers One and Two of the World Trade Center. Defendant-Appellee Globe Airport Security Services, Inc. ("Globe") provided security services for Defendant-Appellee American Airlines, Inc. ("American") and screened the passengers aboard Flight 11. Huntleigh provided similar services for Defendant-Appellee United Air Lines, Inc. ("United"), and screened the passengers aboard Flight 175.

Among the several groups of plaintiffs that filed suit against the Aviation Defendants, the Settling Plaintiffs alleged subrogated and uninsured property damage and business interruption claims. The WTCP Plaintiffs similarly asserted claims, alleging, inter alia, that, but for the negligence of the Aviation Defendants, the terrorists would not have boarded Flights 11 and 175, and the WTCP Plaintiffs' property would not have been destroyed. After a lengthy period of discovery, the Settling Plaintiffs and Aviation Defendants entered into a mediation process in which retired U.S. District Judge John S. Martin, Jr., served as mediator. The WTCP Plaintiffs, however, did not participate after Judge Martin concluded that their position was so far apart from that of the Aviation Defendants that mediation efforts would be unproductive.

Towards the end of the mediation proceedings between the Settling Plaintiffs and the Aviation Defendants, which lasted two full weeks, Judge Martin concluded that the two sides remained far apart. He proposed a "mediator's number" of $1.2 billion to settle all claims. The proposed amount, which Judge Martin believed to represent a reasonable settlement of all of the Settling Plaintiffs' claims, reflected a 72 percent discount from the Settling Plaintiffs' total claimed damages of $4.4 billion, and was higher than the last settlement offer by the Aviation Defendants. Both sides accepted Judge Martin's number and, on February 23, 2010, entered into their Settlement Agreement and Mutual Release of Claims.

The settlement resolves 18 of the 21 property damage actions comprising the master calendar for September 11 property damage claims, 21 MC 101.*fn1 Under the terms of the agreement, four of the Aviation Defendants are to pay the entire settlement amount of $1.2 billion. American and Globe will pay 60 percent of the settlement, for damages attributed to Flight 11, while United and Huntleigh will pay the remaining 40 percent, for damages attributed to Flight 175. Because Huntleigh had a small amount of insurance relative to the other contributing Aviation Defendants, the agreement further provides that Huntleigh will contribute, and thereby exhaust, its available insurance coverage. In exchange, each Settling Plaintiff is to execute and deliver releases discharging and releasing all Aviation Defendants, as well as the contributing Aviation Defendants' insurers, from all claims relating to or arising out of the September 11 attacks. The agreement is expressly conditioned, in relevant part, upon the district court's: 1) approving both the settlement and the allocation of payments between the contributing Aviation Defendants as consistent with ATSSSA; 2) concluding that all amounts paid pursuant to the settlement agreement are to be credited against the contributing Aviation Defendants' respective ATSSSA liability limits; and 3) finding that Huntleigh exhausted its liability limits under ATSSSA.

In an Opinion and Order dated July 1, 2010, the district court approved the settlement agreement and ordered all amounts paid pursuant to the settlement agreement to be credited against the liability ceilings of the contributing Aviation Defendants. The court also concluded that payment by Huntleigh's insurers exhausted the limits of Huntleigh's liability insurance coverage. On July 23, 2010, the district court issued an order clarifying that its Opinion and Order was final and appealable in each of the settled actions and in the collective 21 MC 101 action. It also granted intervenor status in each of the settled actions to the WTCP Plaintiffs. The court directed entry of final judgment pursuant to Fed. R. Civ. P. 54(b). Judgment was entered in the collective 21 MC 101 action ...


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