Judge Alvin Hellerstein today approved the settlement of numerous property damage claims from the September 11 attack on the World Trade Center. The defendants were the airlines, security companies and other aviation related companies. The plaintiffs were both subrogated insurers and plaintiffs with direct claims. In doing so, he also refused the request of the parties to keep the information sealed.

After 180 depositions, and millions of pages of documents, the parties settled for $1.2B, an amount that Judge Hellerstein said was “fair and reasonable.” This represented a 72% discount off the $4.4B in property claims that were made.  According to Judge Hellerstein, “The discount was based on factors common to all settling parties, including the risk and expense of a trial, and the ability to resolve the case without any party claiming victory or admitting liability.” This is the Order of the property damage settlement.

The settlement takes into account a liability cap that had been imposed by Congress in the immediate aftermath of the attack (The Air Transportation Safety and System Stabilization Act). Because of that cap, some of the plaintiff’s associated with developer Larry Silverstein, long term lessee of the World Trade Center,  objected to the settlement, as the insurance policies of certain defendants  will be exhausted. This is true, for example, of Huntleigh USA, which was responsible for screening passengers at Logan International Airport in Boston where United Flight 175 originated.

The capping legislation is the same piece of law that formed the September 11 Victim Compensation Fund for those that were killed or injured as a result of the attack. The Fund gave automatic payments to those injured and the families of those killed, but in doing so people had to relinquish their rights to sue. The vast majority took this route.

But not all went with the Fund. Judge Hellerstein notes in his opinion that, with respect to the remaining personal injury cases that were filed in court, all but three have now settled.

This settlement comes fresh on the heals of the massive $712M settlement for 10,000 first responders that brought suit as they did not qualify for the Fund, and which was also before Judge Hellerstein.

Finally, the parties sought to keep this settlement sealed. The New York Times moved to have it unsealed, and this motion was granted in part. See: Order unsealing settlement. The aggregate settlement amount was revealed, but not the amount to individual claimants.

Judge Hellerstein, in deciding the issue of whether to seal the settlement or not, had to balance the common law right to judicial documents, the First Amendment rights to access, and among other things, the extent to which revelation of the settlement may chill the efforts of others to settle the remaining suits. The Aviation defendants were also concerned that, given the massive size of the settlement, others would come to see this as an acknowledgment of liability. He did find, however, that the privacy interests of the plaintiffs weighed heavily in favor of keeping specific settlement amounts confidential.

The massive lawsuit regarding the September 11 World Trade Center attack and the 10,000 claimants has settled for the second time. The first settlement, in March of this year, was rejected by District Court Judge Alvin Hellerstein who demanded that the plaintiffs’ attorneys lower their legal fees from 33%. The new settlement has a minimum value of $625M with 95% participation by the claimants, and as much as $712.5M if other conditions are met. The original settlement was for $575M to $657M.

As I first reported on May 28th, the legal fees are being cut to 25%. In addition, the insurance company is ponying up an additional $50-55M, that matches the drop in legal fees. In addition, Workers’ Compensation liens will be waived, which also increases the amount of money that plaintiffs will receive.

These are the details of the new settlement:

• Plaintiffs’ attorneys cap fees at 25%, reducing fees by over $50 million

• WTC Captive Insurance Company to pay up to an additional $50 to $55 million

• Certain workers’ compensation liens against settlement recovery will be waived, giving benefit to many plaintiffs and ensuring that they will continue to receive future benefits with no reductions

• The most severe asthma claims could receive $800,000 to over $1 million dollars, or more if the individual is found disabled as a result of injury

• Former Special Master for the September 11th Victim Compensation Fund Kenneth Feinberg will serve as Claims Appeal Neutral

• Settlement creates path for other defendants and insurers to follow in settling some claims, facilitating recovery of significant additional compensation

This is a tremendous result for plaintiffs’ counsel – a consortium of firms going by the name of Worby, Groner, Edelman & Napoli. The firm had been infuriated in March when the judge demanded that they lower their fees before he approved the settlement, and the firm in turn demanded to know why they were the only ones to receive that request.

And now it seems that their staunch position that others must contribute  has paid off. The winner in all this legal jockeying is clearly the 10,000 claimants.

Ken Feinberg, who had overseen the September 11 Victim Compensation Fund and who then went on to become the nations executive “pay czar” for bailed out companies, will oversea the claims process.

Claimants will receive as much as $1.5M in the case of death to as little as $3,250 for those that have the fear of future injury but have not shown symptoms. They will also will be enrolled in a special insurance policy through MetLife to provide coverage for certain blood and respiratory cancers diagnosed during the coverage period, paying a benefit of up to $100,000.

A neutral third party will oversee the valuation of each claim, assisted by a panel of independent physicians. The Garretson Firm Resolution Group, an experienced claims administration company, will fill this role with Feinberg acting pro bono to handle any appeals.

The insurance company paying the settlement is the WTC Captive,  created with a $1 billion grant from the Federal Emergency Management Agency to insure the City of New York and its debris removal contractors because in the aftermath of 9/11 the City of New York was unable to procure an adequate amount of liability insurance coverage in the commercial insurance market for the World Trade Center site rescue, recovery and debris removal work.

It didn’t take long. And Kevin Russell of Howe & Russell isn’t going to be happy.

Just moments after I updated my prior post on the dispute over the legal fees for plaintiffs’ counsel in the World Trade Center Disaster Site Litigation — where appellate counsel Howe & Russell complained they shouldn’t have their fees cut the same way every other plaintiffs’ attorney is  being cut — Judge Alvin Hellerstein has responded.

Russell lost. Judge Hellerstein made clear that his comments back in March regarding a reduction in contingent fees applies to them the same as with all other plaintiffs’ lawyers. He anticipates a reduction in fees — a reduction from 33% to 25% seems to be what will happen — will “improve the benefits flowing to the plaintiffs by reason of any revised settlement agreement.”

Judge Hellerstein, of course, demands that such reduction only be on the plaintiffs side. The defense lawyers, led by $119,071,113 paid to Patton Boggs, need not make any reduction. The authority for demanding such reductions remains a mystery, given that the court is interceding into legally binding retainer contracts.

OK, here is the order, hot off the presses, and so fresh some of the recipients probably still haven’t see it in their email….

ORDER. This order responds to the letter of Howe & Russell, P.C., dated May 26, 2010, asking if my comment at the hearing of March 19, 2010, concerning contingent fees of plaintiffs’ lawyers applies to them. I intended my comment to apply to all the plaintiffs lawyers who might be sharing in contingency arrangements. I anticipate that reductions in such fees, if proposed to improve the benefits flowing to the plaintiffs by reason of any revised settlement agreement, are proposed on behalf of all lawyers and law firms expecting to share in the fees chargeable to plaintiffs or collected from plaintiffs’ recoveries. If any attorneys decline so to be governed, they will have to apply to the court for appropriate relief. Relates to 21mc100, 21mc102, 21mc103. (Signed by Judge Alvin K. Hellerstein on 5/28/10) (rjm)

I wrote this morning that the conduct of Howe & Russell in trying to distance themselves from their co-counsel was an embarressment to the profession, and that there was no logical reason for the firm to believe they would be treated differently than other plaintiffs’ firms. They took the matter on contingency, and now they live and die with that decision, the same as this end of the profession has done for generations.

Will they “apply to the court for appropriate relief”? They have threatened to do so. In his letter to the judge Russell wrote:

[I]f the Court is contemplating abrogating our contract with co-liaison counsel, we respectfully request notice of that intention so that we may be heard on the matter and take any procedural steps (such as intervention in the case) necessary to preserve our ability to appeal any such order.

We’ll see. If they do this, of course, it puts the judge in the position of having to give a formal ruling on his authority to cut any of the contracted fees.

Updated 6/10/10: Massive September 11 Case Settles (Again) — Additional $125M Added to Settlement

A furious fight over legal fees that erupted from the World Trade Center Disaster Site Litigation returned to public view yesterday. That litigation had resulted in a complex settlement with a range of  $575M to $657M for responders sickened in the aftermath of the September 11 attack. Judge Alvin Hellerstein rejected that agreement in March, however, for some 10,000 responders, claiming that the 33% legal fees that plaintiffs’ counsel was to receive was excessive.

In  an angry  letter yesterday to Judge Hellerstein, Paul Napoli of Worby, Groner, Edelman & Napoli, disclosed that the firm will voluntarily reduce its contracted legal fee from 33% to 25%, despite doing almost all of the heavy lifting on the plaintiffs side of the protracted and expensive litigation. In doing so, they asked why others were not also being asked to cut their fees.

The letter became public when it was electronically filed, in response to a letter from Kevin Russell of Howe & Russell, who had been hired as plaintiffs’ appellate counsel on issues related to defendants’ claims of immunity. [Updated: The letters, apparently, were sent to the judge but are not in the public file. They appear here for the first time.]

Howe & Russell, whose practice is geared toward Supreme Court litigation, wants to be paid in full, regardless of what happens to Napoli’s firm.

In March, Judge Hellerstein indicated in conferences that despite the “extraordinary” and “productive” work Worby, Groner,Edelman & Napoli had done in representing over 9,000 clients in this expensive and risky litigation, that the plaintiffs attorneys’ fees were nevertheless unreasonable and likely to be cut by the court. As a result of the judge’s comments in open court, the firm reported in an April 9th letter to the court that the firm was  “savaged in thousands of publications – not just in New York, but indeed throughout the country and around the world.”

Plaintiffs lead counsel, the letter states, spent over $30 million of its own money in moving forward on a case  that had been rejected by many.

Yesterday’s letter goes on to state that the firm would voluntarily cut its fee to help get the matter resolved, at great cost, but that the court wasn’t asking anyone else to do the same:

[Y]et despite this Court’s repeated references to the unique nature of the underlying facts and genesis of the plaintiff’s claims herein, not a single person or entity other than the [Plaintiffs’ Liason Counsel] and “plaintiffs’ counsel” by extension has been “asked” by this Court to cut their fees or forego any part of the compensation they contracted for before undertaking the work done in these matters.

Notwithstanding that, in an effort to have this matter settle, the firm wrote:

For the record, although this Court is likely already aware of the facts, we anticipate voluntarily reducing our attorneys’ fees at the Court’s insistence on a number of matters where we are unquestionably entitled to charge the clients for our time and efforts under New York law. In truth, so should the fees of defense counsel and every other consultant and vendor involved. Thus far, we expect that we will voluntarily forego some $85 million in attorneys’ fees if an amended [settlement agreement] is ultimately consummated. …

At the same time, this Court has neither suggested nor indeed directed that any other entity involved in this massive litigation forego any part of their contracted-for remuneration in favor of the plaintiffs.

The anger in yesterday’s letter results not just from Judge Hellerstein’s decision to cut the firm’s fee, but because no one else was asked to cut their fees, even if substantial.  According to the letter,

The financial reports of the WTC Captive Insurance Co., Inc. reveal that as of the end of September 2009, the Captive had paid out some $165,149,165.00 in defense counsel fees, including $119,071,113 paid to Patton Boggs as lead defense counsel,  $6,168,584.00 to coverage counsel and $39,909,468.00 to “other defense counsel.”

The firm has written that, if they are forced in to a fee reduction, then all others should likewise do so, including Russell, referring attorneys, and others. The firm wrote that they will ask for an order stating that:

“The reduction of said attorneys’ fees shall be borne equally among any law firms who share in said attorneys’ fees (e.g., referral attorneys, co-counsel or any other counsel legally entitled to a share of the said recovery)”.

Russell was ripped by Napoli in the letter for making the issue public, and accused him of doing so in an attempt to get others to likewise dump on Napoli’s firm. Napoli wrote:

[W]e were very dismayed that Mr. Russell felt the need to voice his concerns about the allocation of the plaintiffs’ attorneys’ fees and his individual attorneys’ fee agreement with our firm in so public a fashion rather than writing to this Court and simply copying our office.  Nonetheless, given the public outreach to this Court by Mr. Russell and the result he obviously intended, i.e., that his complaint will be joined by every other plaintiff’s attorney who was copied on his communication to this Court, we are compelled to respond in an equally public manner.

Howe and Russell was formerly Goldstein & Howe, before founding partner Tom Goldstein (founder of SCOTUSblog) moved on to Akin Gump.

Two other points before I weigh in with my opinion: While the letter indicates notice to the many people involved with the litigation via electronic notification, I couldn’t find this letter or the one from Russell on PACER. I obtained this letter from another source. If someone has the Russell letter, please share a copy and I will update this post.

Update: I now have the Kevin Russell letter. Rather than stand by his co-counsel, Russell is trying to throw them under the bus:

We are aware that your honor has expressed dissatisfaction with the contingency fee agreement co-liaison counsel negotiated with the plaintiffs, and is considering abrogating those contracts in order to ensure a greater recovery for the plaintiffs and to preserve adequate funds for future claimants. Those concerns are not implicated by our contract, which requires co- liaison counsel to pay our fees out of whatever funds they may recover….

We had not understood your honor to be contemplating abrogating the fee agreements among plaintiffs’ counsel. For example, we have had no reason to believe that the Court was considering altering the division of fees among the lawyers and law firms comprising WORBY, GRONER, EDELMAN & NAPOLI BERN, or abrogating the hourly fee agreements co-liaison counsel may have entered into with other outside lawyers to provide discrete advice or services to them.

However, we have recently been advised that our understanding may be mistaken. If that is so, and if the Court is contemplating abrogating our contract with co-liaison counsel, we respectfully request notice of that intention so that we may be heard on the matter and take any procedural steps (such as intervention in the case) necessary to preserve our ability to appeal any such order.

So there you have it. The court seeks to abrogate the contracts that Worby, Groner, Edelman & Napoli have with their clients — on what legal basis remains a mystery — but Russell thinks it shouldn’t apply to his firm.

Second, an order by Judge Hellerstein yesterday seems to indicate that a settlement may be near, as “intensive negotiations” continue, and he extended a deadline for motion practice. A copy of that order is here: Hellerstein-5/27/10-Order

My opinion: I think the court’s idea of cutting the firm’s contracted legal fee is a disgrace when no such pressure is put on others. This firm took the risk of untold thousands of hours of work with thousands of claimants and tens of millions of dollars of their own money, none of which would be recovered if the case was dismissed or they lost at trial.  They took a case that few were willing to undertake.

They don’t deserve to be cut off at the knees by the court, and in the process set a miserable precedent for future cases. It isn’t up to the court to legislate its own version of tort “reform” to discourage others from taking difficult or expensive cases in the future with the fear that their fees will suddenly be cut at the end.

If the courts decide to legislate away the contingency fee by eviscerating it, those with meritorious cases that also happen to be complex will  be unable to find counsel. We’ve seen that here in New York when the medical malpractice legal fees were slashed in the mid-80s, leading many people unable to find representation.

With respect to Howe & Russell, they should be embarrassed by their conduct. The people that hired them have unexpectedly had a gun placed to their head by a court that is dumping the contracted retainer agreements. Their fee should move in lockstep with any fee cut that the court is forcing down the throats of lead counsel.

Howe & Russell could easily see backlash from its conduct, as others become reticent to hire them. And that is the way it should be. There is no shortage, after all, of talented lawyers willing to argue cases to the Supreme Court.

If the court wants to enlarge the pot of money available to the injured claimants beyond that which the lawyers were able to recover, let it also ask the defense lawyers to cut their fees. Ask Patton Boggs and others to give back $85 million of their (guaranteed) fees. Then ask the court stenographers, special masters, mediators,  consultants, adjusters and everyone else, to give back a portion of their fees as well.

It is unreasonable, and outrageous, to ask the one firm that shouldered the risk and expense of the litigation — and miss countless family functions because the court wanted to hold the lawyers’ feet to the fire to move the case forward — to bear the brunt of lowering costs to increase the pool of money available for the claimants.

Update: The Russell letter that I now have indicates that his firm’s agreement was to get 1/2 of one percent of the legal fee. If the 1/3 fee still applied, that would result in an approximately $200M plaintiffs’ fee (leaving aside the expense issue) and a $1M fee for Howe & Russell. That works out, at $750/hr, to 1,333 hours of work to argue the immunity-related motions and appeal.

I suspect that they didn’t put in those kinds of hours, of course, but they won and are therefore entitled to be paid well. The nature of the contingency fee is that without the hope for payment, no rational attorney would undertake the risk. The lawyer lives and dies with that risk.

But there is no logical reason, if they are joined at the hip with Worby, Groner, Edelman & Napoli, that Russell should think his firm will escape taking a hit on the fee if the others are forced to do.

The Russell letter, wherein he throws his co-counsel under the bus, is truly an embarrassment to the profession.

Update #2: Just moments after I edited this piece with the letter from Russell, Judge Hellerstein has rendered an opinion, which I’ve put in a new post since this one is getting lengthy: Judge in World Trade Center Litigation Says Howe & Russell Fees To Be Cut

Update #3, 6/10/10: Massive September 11 Case Settles (Again) — Additional $125M Added to Settlement