July 1st, 2010

More September 11 Cases Settle – $1.2B for Property Damage – Judge Denies Request to Seal Record

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.


June 10th, 2010

Massive September 11 Case Settles (Again) — Additional $125M Added to Settlement

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.


May 28th, 2010

Judge in World Trade Center Litigation Says Howe & Russell Fees To Be Cut

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


May 28th, 2010

Attorney Fee Fight Gets Ugly in World Trade Center Litigation (Plaintiffs’ Legal Fees Being Slashed; Howe & Russell Objects) — Updated x3

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


April 30th, 2008

Port Authority Liability Upheld in 1993 World Trade Center Bombing

A jury’s finding of liability has been upheld by a New York appellate court against the Port Authority of New York and New Jersey regarding the 1993 terrorist attack. The attack killed six and injured about 1,000 others. The jury found the PA to be 68% liable in the attack for its negligence in failing to provide security in the face of a clear danger that the trade center was a terrorist target. Since the finding of liability exceeded 50%, under New York law they are liable to pay all of the non-economic damages.

The decision by the Appellate Division First Department in Nash v. Port Authority followed long established premises liability law as it pertains to the reasonable security measures that landlords must undertake to make their premises safe. In essence, if one follows the opinion, the case was little different then that of a crime being committed in an apartment house after a broken lock went unfixed for months on end.

The court’s analysis started with some very fundamental issues regarding the well known risk that the trade center was a terrorist target, recounting the Port Authority’s own security report that found it was “obvious that the potential for a terrorist attack upon the World Trade Center is a real possibility and [that] the results could be catastrophic,” and specifically noted that “[t]he parking lots are accessible to the public and are highly susceptible to car bombings.” Another report, according to the court,

found that “it was not merely possible, but “probable,” that there would be an attempt to bomb the World Trade Center and pointedly noted, “the WTC is highly vulnerable through the parking lot . . . With little effort terrorists could create havoc without being seriously deterred by the current security measures.”

And yet another report found that “Parking for 2,000 vehicles in the underground areas presents an enormous opportunity, at present, for terrorists to park an explosive filled vehicle that could affect vulnerable areas.” The report became still more specific in describing the feared scenario:

“A time bomb-laden vehicle could be driven into the WTC and parked in the public parking area. The driver could then exit via elevator into the WTC and proceed with his business unnoticed. At a predetermined time, the bomb could be exploded in the basement. The amount of explosives used will determine the severity of damage to that area.”

With respect to the duty that the Port Authority, as landlord, owed to the tenants and visitors of the trade center, the court rejected the absurd defense claim that, because no such attack had taken place previously, they had no duty to prevent against one. The court noted that:

it is fair to say that no reasonably prudent landlord, aware as defendant was of the value of his or her structure as a terrorist target and of a specifically identified condition upon the property rendering it vulnerable to terrorist penetration, would await a terrorist attack, particularly one directed at basic structural elements, before undertaking, to the extent reasonably possible, to minimize the risk.

Thus, the reports (and these are just a few that I quoted from the court’s opinion) clearly gave notice to the Port Authority of the danger, and it had a duty to act on that danger. In premises liability law well known to New York’s personal injury attorneys — familiar from other breach of security cases such as those that take place with broken locks in apartment buildings and subsequent crimes — the court wrote (citations omitted) of the duty of landlords, that they must

“act as a reasonable [person] in maintaining his [or her] property in reasonably safe condition in view of all the circumstances, including the likelihood of injury to others, the seriousness of the injury, and the burden of avoiding the risk. This ultimate standard is as applicable in premises security cases as it is in other contexts where liability is sought as against a landowner for injuries allegedly attributable to premises hazards or defects. Indeed, it has been observed that the duty of a landlord to take reasonable measures to minimize foreseeable danger on his or her premises from third-party criminal activity is but a natural corollary to the landowner’s common-law duty to make the public areas of his property reasonably safe for those who might enter.

It is true, of course, that a landlord is not an insurer of the safety of those upon his or her property and that the actual precautions sufficient to meet the reasonable care standard in premises security actions have often been described as “minimal.” This is, in the vast majority of cases, a perfectly accurate description of the property owner’s obligation; ordinarily, a landlord has discharged his or her duty if the basic perimeter and public area security systems, such as locks, buzzers, intercoms and lighting, are properly installed and maintained. The legally binding standard of care, as distinguished from the particular precautions required for its satisfaction in a given case, however, remains reasonable care to render the premises reasonably safe, and there are circumstances in which the nature and likelihood of a foreseeable security breach and its consequences will require heightened precautions…”

So what did the PA do in response to this danger? Apparently nothing. And the court was pretty clear that the jury was fully justified in making a 68% finding of liability against it after listening to the evidence, even though the PA was the negligent tortfeasor (as opposed to the intentional tortfeasor whose attack was predicted):

This was not a case in which ordinary negligence was transformed into a precipitant of tragedy by an otherwise unrelated, merely coincidental intentional act, but one in which the intentional act was foreseeably responsive to and exploitative of the negligence and, causally, did little more than bring the incipient catastrophic potential of the negligence to terrible fruition.

In seeking to avoid this entirely justifiable construction of the evidence, defendant sought to portray the bombers as exceedingly determined and clever malefactors, whose success was attributable, not in the main to its negligence, but to their own “finely tuned” plan. It would, however, have been very difficult to convince any jury that a “finely tuned” plan was necessary to do what the bombers did. There was evidence before the jury that explosives in “envisioned quantities” were readily available and that, once the explosives had been obtained and loaded onto the rented van, all that remained between the bombers and their nefarious objective were tasks rendered horrifyingly and embarrassingly simple by defendant’s negligence: driving the van into the complex’s subgrade parking facility, parking on the access ramp, setting a fuse and leaving the scene – all with evident ease. Only the most rudimentary plan was needed to take advantage of the “enormous opportunity” that defendant had through its negligence provided.

The court was clear that the law here is not about “comparative reprehensibility” — for there is no doubt that the terrorists’ conduct would warrant vacatur of the award if that was the standard — but rather, about the conduct that contributed to the harm.

Did the court absolve the terrorists with this decision? Of course not. And what’s more, they fully anticipate such criticism:

The verdict we now uphold is neither properly nor intelligently understood as absolving the terrorists. The issue before the jury in this civil action was not whether the terrorists had committed the bombing — obviously they had — or whether they should be severely penalized — most of them were — but whether their heinous conduct was foreseeable and avoidable by defendant in the discharge of its proprietary responsibilities.

In sum:

  • There was as duty of care by the Port Authority due to the forseeable risk of a terror attack;
  • The Port Authority breached that duty of care;
  • That breach was as a substantial factor in causing injury;
  • The jury apportioned fault based upon the conduct of the people involved, as opposed to apportioning based on moral turpitude.

And a last word from the court on whether the Port Authority should be immune from suit:

[T]he evidence overwhelmingly supported the view that the conscientious performance of defendant’s duty reasonably to secure its premises would have prevented the harm. This civil jury had no power to decide whether the terrorists should in any meaningful sense be “absolved” of their murderous acts. What it could and did decide was rather that the acts of these terrorists, even while obviously odious in the extreme, were not a cause for the easy absolution of this defendant from its civil obligations.

For anyone trying a failed security that allows a criminal on the premises to commit a crime, this case is a must-read.

See also:

  • From the defense side, see Ted Frank at Overlawyered who thinks the Port Authority should get a free pass for its negligence)