LIBYA, LOCKERBIE, AND THE LAWYERS:
What Precedent Will Be Set By A Possible Pan Am Flight 103 Settlement That Also Involves Lifting Sanctions?

Last month, it was revealed that the Libyan government has been negotiating with lawyers representing a large proportion of the families who are suing Libya for the deaths of their loved ones on Pan Am Flight 103, which exploded over Lockerbie, Scotland in 1988. This is far more interesting than a typical settlement, however - for it is really a three-corner deal.

The Flight 103 Suit and Its History

In 1994, attorneys attempted for the first time to sue Libya for its alleged fault in connection with Pan Am Flight 103. However, the suit was dismissed. At the time, the Foreign Sovereign Immunities Act (FSIA) protected a foreign government from suit in the United States except under very limited circumstances. These limited circumstances - which were restricted to certain commercial contexts, or instances in which the foreign government had consented to be sued - were held not to apply.

Then, in 1996, Congress amended the FSIA to allow tort suits in American courts against nations whom the government had determined were "state sponsors of terrorism." That included Libya. So that same year, Lee Kreindler, one of America's preeminent aviation disaster personal injury lawyers, filed a suit on behalf of 117 families of the 270 bombing victims, against defendants including Libya, its "External Security Organization" as well as a number of individuals.

The suit sought $20 million per victim's estate for wrongful death, $1 million per victim for pain and suffering, and $2 billion per defendant in punitive damages. Libya made a few attempts to have the suit dismissed, challenging the constitutionality of the '96 amendment to the FSIA, but they were turned back by the United States Court of Appeals for the Second Circuit, which held that Kreindler's suit could go forward.

Then, in 2001, the suit got another boost. A Scottish court sitting in the Netherlands convicted Abdelbaset Alo Mohmed Al Megrahi, an employee of the Libyan secret service, for the terrorist attack. (It had taken ten years of sanctions and pressure from the U.S. and the United Nations to get the Libyan government to agree to allow Megrahi, as well as another secret service agent who was found innocent, to be tried by a foreign court.)

If Libya Loses, a Huge Damages Judgment is Likely

It is not surprising that Libya, having lost FSIA immunity, wants to settle the suit. Even if the plaintiffs could not show the Libyan government ordered the bombing, there is a good chance that it still could be held liable. Liability could be imposed under the doctrine of respondeat superior, under which employers can be held liable for even those intentional torts of their employees that they did not command.

And if Libya were indeed held liable, the plaintiffs might well receive the very damages they have asked for - especially in the context of the current global "War on Terrorism." By comparison, in 1995 a New York court awarded $19 million in a suit against Pan Am for the death of a 33 year old man who died on Flight 103. And Pan Am was not accused of murder-just reckless indifference. Meanwhile, this year a Washington, D.C. jury ordered Iran to pay $321 million for its role in the death of an American marine during a hijacking in Beirut in 1985.

On the other hand, money may not be the main motivation behind Libya's recent willingness to talk. First of all, the '96 amendment to the FSIA has not worked exactly as it had been hoped by its sponsors. Although suits have been brought and won against states that sponsor terrorism, it has turned out to be very difficult for a victorious plaintiff to collect any of his or her award. This is not because, as one might first think, it is difficult to find assets to attach. That might be true, too, but the biggest barrier to collecting the judgement is the United States State Department.

The United States State Department has opposed many (if not all) attempts to enforce such judgments.

For example, the Flatow family, for whom the '96 amendment to the FSIA was named, tried to collect their $200 million judgement against Iran by attaching Iranian consular property in the U.S., and were blocked by the State Department. The State Department argued in court that allowing the property to be attached would interfere with the conduct of American foreign policy.

The State Department similarly intervened when the families of three men who had been killed by the Cuban Air Force during an attempt to aid defectors tried to collect on a judgment of $188 million against Cuba. It has been adamant that allowing private tort suits to turn into something with real bite-the seizure of assets-would put American consular property at risk around the world, as foreign nations employed a "tit-for-tat" strategy, attaching American consular property to compensate for their own losses of consular property in America.

Congress has now addressed this problem - but only with respect to suits against Iran and Cuba. In such a suit, a victorious plaintiff who agrees to drop efforts to collect against the foreign government can, in exchange, receive the equivalent of their compensatory damage award from the United States government.

What about a suit against Libya? Congress might expand the offer to grant compensatory damages, so that it encompassed Libya too, and the U.S. government, not Libya, would be the one to pay. And even if Congress did not act, Libya might be able to rely on the State Department intervening in its favor.

In short, it is unclear whether the plaintiffs could collect their damages, either in full from Libya or in part from the U.S. Government.

Why Libya May Want to Settle Despite Doubts About the Judgment's Enforceability

So why is Libya offering to settle? Let's look at the terms of the settlement for an answer. It may be that Libya is truly terrified of the American tort system and the threat of punitive damages. But for the reasons described above, I doubt it. My feeling is that, although Libya is talking to Kreindler's clients, what Libya's real audience is the U.S. State Department. The terms of the settlement prove the point well.

According to published reports, Libya has offered to pay $10 million per victim. In exchange, Libya wants three things. First, all the families must drop their suits. Second, the United Nations must drop its sanctions against Libya. Third, the U.S. must drop its sanctions against Libya, and remove Libya from the list of nations that sponsor terrorism.

How does the settlement contrast with the current, conditional sanctions? Quite dramatically, it turns out. Currently, the U.N. and U.S. sanctions are supposed to be dropped only when Libya pays compensation to the victims of Flight 103, admits responsibility for their deaths, and renounces terrorism. Libya, it seems, wants to satisfy only the first item, and forget about the latter two.

Settlement Without Admission of Fault Is Typical - But Not In International Affairs

Oddly Libya's behavior reflects typical settlement practice in the United States. A standard feature of every settlement is that the defendant does not concede fault. Indeed, the right to disclaim fault is why one agrees to a settlement-that, as well as avoiding the uncertainty of a trial verdict, is why defendants pay good money to settle.

Thus, settlements in even the most controversial, heated tort suits contain language saying the defendant does not admit fault. For instance, such language can be found at the end of the Master Settlement Agreement between the states and the tobacco companies. It can also be found in the settlements arranged by Catholic dioceses in countless lawsuits alleging negligent supervision of pedophile priests. Libya could point out, in its defense, that it only seeks the same type of language.

Understandably, however, many of the Lockerbie families have said that unless Libya accepts responsibility for the murder of their loved ones, they do not want the money. This puts the families and the U.S. State Department on the same side of the sanctions question. All the U.S. and the U.N. wanted from the beginning was for Libya to accept responsibility. That is all many of the families want, too - or at least, for them it is a necessity.

It may be that Libya thought that it could buy itself a new pressure group with the settlement. It might have hoped that the promise of $10 million dollar per family would turn the families and their attorneys into lobbyists who would help convince the U.S. and the U.N. to retreat from their demand that Libya accept responsibility for Lockerbie.

If so, Libya so far has been sadly disappointed - as it should be. Even more so than in the cases of the tobacco companies and the Church, Libya should not be able to shrug off responsibility for its actions - which amounted to sponsoring terrorism. So if, in the end, Mr. Kreindler can get $10 million per family from Libya as well as an admission of responsibility, then he will have done both his clients and the world a service. But anything short of that should be rejected.