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Not Just A Bailout, But Also A Huge Tort Reform Plan

Monday, Sep. 24, 2001

The horrible events of September 11 are testing our nation in many ways. Our political, diplomatic, and military resources are not the only parts of American society that must be performing for the good of all. America's legal community must play a role too.

Already in FindLaw's Writ, my colleagues have discussed the role of international and criminal law in America's future response to terrorism. But we lawyers do not need to look to the future to take stock of our role in today's crisis. Tort law has already been asked to respond.

On Saturday, September 22, Congress and the White House agreed on an Act called the "Air Transportation Safety and System Stabilization Act." The media describes it as a $15 billion "rescue plan" for the airline industry.

To some extent, that description is correct; the government has promised $15 billion in direct subsidies in order to keep the corporations that operate the airlines solvent. However, the Act is also one of the largest tort reforms ever imposed by the federal government on the states -- and it is worth focusing on that aspect of the Act, and not just the money grant it contains.

A Liability Limit and A Quick Settlement Process

The Act does two things. First, and most importantly, it limits the total liability of the airline industry for claims resulting from the crash of the four airliners hijacked on September 11 to the airline's insurance coverage.

Second, it provides an alternative, non-litigation process by which victims who suffered personal injuries or death (or their estates) may get some kind of compensation quickly--but only if they give up their right to sue the airlines.

The act is extremely vague on how this alternative compensation scheme will work. It says only that a Special Master will be appointed who will design a system that will allow victims and their estates to submit claims, but leaves the details of the system to the Special Master. (The term "special master," familiar to lawyers, generally applies when a court appoints an outside person to perform a task, usually a complex and time-consuming one, to implement a court order or aid in a court's decision; here, however, the appointment is being made by Congress).

The Act requires the Special Master to ask for information about three issues. First, the application for compensation must establish that the victim was injured or killed as a result of the events on September 11. Second, it must set out the harms suffered by the victim, including lost earnings capacity and pain and suffering, and the amount of compensation these harms entitle the victim. Third, and finally, the application must reveal any collateral sources of compensation to which the victim is entitled (for example, life insurance payments).

A Radical Form of Tort Reform

The Act is a radical form of tort reform in that it simply caps the amount of money that victims could collect from the airlines at their insurance coverage. This is radical in several respects. Most simply, it is radical because it means that the airlines, even if they were partially liable for the events of September 11, will not required to pay a single dollar in damages. That is a result deeply contrary to our tort system, which makes punitive damages uninsurable to avoid precisely this kind of outcome, of liability entirely covered by insurance.

It is also radical because the victims' recovery, if they have a valid claim, is limited to whatever insurance the airlines happened to be carrying on the day of the tragedy. Granted, some states have capped punitive damages in the past. But the "insurance limit" is different. Unlike any "cap" passed by state tort reformers in the past twenty years, it is not related in any way to the severity or nature of the victim's injury.

A Radical Form of Compensation

On the other hand, the Act offers victims a radical form of government compensation in exchange for the rights to sue that the Act takes away. The only previous time the government has ever offered to assume the liability for injuries caused by a private corporation was in the National Childhood Vaccine Injury Act of 1986.

The vaccine Act was passed at the urging of the pharmaceutical industry. The industry's members were finding themselves being held liable in what is called strict liability -- that is, liability that is imposed regardless of negligence, and that is applicable even if all due care was taken -- for the unavoidable aftereffects of certain vaccines. Accordingly, they sought relief from Congress.

The vaccine Act, like the airline Act, offered victims of adverse reactions a streamlined process by which they could receive compensation for injuries. In exchange, the government took away the right to sue manufacturers of childhood vaccines in its entirety.

The Vaccine Act Versus the Airline Act

First, unlike in the case of the child vaccine Act, no one has to accept the government's alternative compensation scheme offered in the airline Act. But, as I explained above, in the airline Act, there is an arbitrary cap on the victim's right to sue the airlines: Once the last insurance dollar is paid out, the right to sue is worthless. So if someone wants to go outside the government scheme, they had better do it quickly, or they may not recover anything at all, if others have sued and received insurance money before them.

Second, in another contrast to the child vaccine Act, in the airline Act there is no clear governmental or judicial oversight of the damages awarded by the Special Master. This may be remedied soon, but, as far as I can tell, so far there is nothing in the airline Act that tells the Special Master how much to pay out in damages.

By contrast, the vaccine Act limits pain and suffering awards to $250,000 and wrongful death awards to $250,000. (Obviously, the issue of lost earnings does not arise in this context, since there is no way to calculate what children's earnings might have been.)

Third, in the child vaccine Act context, a victim who does not like the Special Master's damage award may drop out and sue the manufacturer of the vaccine (though very few do). In the airline Act, once one submits the application on the Internet, or mails it to the Special Master, one has permanently and apparently irrevocably waived the right to sue.

Finally, the most important difference between the two Acts is that the pharmaceutical companies had a very strong and credible fear of litigation that could bankrupt them when they asked Congress for help, because they knew strict liability would apply -- meaning they essentially had no defense.

Should the airline industry now have the same fear? Perhaps not. Very few states still hold the operator of an airplane strictly liable for damage on the ground, and New York is not one of them. Accordingly, unlike the pharmaceutical companies, the airline industry would likely be able to assert the defense that they were not negligent.

The prospect of crushing liability that motivates the airline Act seems realistic. But the precise extent of that liability is very difficult to predict.

For example, would a court hold that the airlines had a duty to the persons on the ground to take reasonable steps to prevent their planes from being intentionally crashed in kamikaze attacks? If such a duty existed, would a jury find it was breached by the airlines? And would a jury find that the breach was the proximate cause not just of the fires in the buildings in which people died, but also of their collapse?

Why the Airline Act Is Wise

Just reading the serious of difficult questions in the paragraph above tells us why the airline Act, for all its uncertainties, was a wise and perhaps necessary step. What the Act did, uncontrovertibly, was to moot all this legal wrangling once and for all.

The Act, at its core, says that we do not want to treat the events of September 11 as a problem of legal fault. I think this impulse is a healthy one.

In everyday life, litigation can be a very good way for citizens to understand (through discovery, including the use of experts) how they ended up injured. It can also be a very good way for them to determine whether their injury was the result of fate or the wrongful actions of a fellow citizen. In the context of the World Trade Center tragedy, however, these are not the right questions to ask.

Accordingly, the new Act replaces the everyday litigation process with a very different inquiry. It simply asks the survivors of this tragedy to tell the government three things: Who was there? What was lost? What is left behind?

Acknowledging the Limits of Tort Law

The Act, which was clearly put together by lawyers, is an explicit recognition of the limits of tort law.

I suspect that none of us would be very happy with a result saying either that the airlines were not at fault, so the victims get nothing, or that the airlines are at fault, so the government should do nothing. Fortunately, the Act steered clear of either approach.

Rather, this Act says that, whatever the question of fault, the debt owed to the victims should fall on all our shoulders. The usual tools of tort litigation--adversarial discovery, confrontational cross-examination, partisan claims about damages--have their place when tragedies come in two and threes. But not when they come as a national wound.

He or she will be faced with the huge problem of setting up a fair system to judge pain and suffering. As I have noted in an earlier column, pain and suffering damages are awarded in the United States in almost random fashion -- which is understandable, since they are, in fact, incalculable. Nonetheless, if the alternative compensation system provided by the airline Act is to be a legitimate alternative to the tort system, and not just a hasty retreat from a difficult liability problem, the Special Master will have to solve the problem of calculating pain and suffering.

In regular litigation, it is acceptable to all that a plaintiff in a given accident may receive ten times the damages received by another plaintiff with almost identical claims. That is because the tort system's other virtues outweigh its randomness.

But that cannot be acceptable under the Airline Act; the Special Master must do far better in ensuring equal and fair treatment of victims' claims. Congress suspended the tort system for victims of this tragedy because it felt that the nation must shoulder the responsibility of making sense of and paying for what happened. Equality is a touchstone of our national character, and I think it should be a part of the alternative scheme established by Congress in the wake of the tragedy on September 11.

Anthony J. Sebok, a FindLaw columnist, is a Professor of Law at Brooklyn Law School, where he teaches Torts, among other subjects. Professor Sebok has written several columns on mass tort litigation for FindLaw; they can be located in the archive of his columns on the site.

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