More On The Issues Raised by the Recent Proposal to Reopen the 9/11 Victims Compensation Fund:
Part Two in a Two-Part Series of Columns

In my last column, I explained why the City of New York is facing at least eight thousand lawsuits brought by first responders and construction workers who allege that their health has suffered as a result of work they performed after the attacks of September 11 on the World Trade Center. The City tried to have the federal judge before whom all the cases must be brought dismiss them all, on the basis of federal and state immunity to such damages claims. However, the judge refused, arguing that the City would have to argue for its immunity on a case-by-case basis.

Mayor Bloomberg has asked Congress to expand the 9/11 Victims Compensation Fund (VCF) to include these new cases. He has been joined in this request by many of New York's most prominent Democratic Senators and Representatives.

It's possible that they are motivated by a desire to honor the men and women who were injured in the search for survivors and clean-up of the site - certainly a worthy goal. However, I suspect that in addition to this reason, there is another, more practical reason that many are seeking to reopen the VCF to cover these plaintiffs--fear of liability. As I will explain, that would be a realistic fear.

Could New York Be Liable for An Amount Greater than the Statutory Limit?

In theory, Mayor Bloomberg should not be worried. When Congress created the 9/11 VCF, it also limited the liability of virtually anyone who could be sued as a result of the attacks of 9/11. (The only parties as to whom liability was not capped were the terrorists and those who aided them.)

Under the Air Transportation Safety and System Stabilization Act (ATSSSA), the airlines could not be required to pay a total of more than the insurance coverage they had on the planes, regardless of how many people and companies sued them. Similarly, New York City could not be held liable for a total greater than its insurance coverage, or $350 million, whichever was higher. Thus, in theory, even if all 8000 of the respiratory lawsuits were tried, and the plaintiffs won every single one, after New York paid out $350 million or the maximum under its insurance coverage, it would need to pay nothing more; the next victorious plaintiff would be out of luck, unable to recover a cent from the City.

But there's a catch here: This analysis assumes that the limitation on liability passed by Congress on behalf of New York is legal. What if it is not?

The original limitation on liability passed by Congress, regarding direct victims of the attacks, was part of a quid-pro-quo: The statute gave victims and their families the chance to recover money from the VCF. But it took away their right to recover damages beyond the cap the statute placed on the airlines' liability.

With respect to New York City, the statute took away something from respiratory plaintiffs - the right to recover damages beyond the cap. But it did not give anything in return, since it did not offer VCF participation, as the U.S. Court of Appeals for the Second Circuit stated in McNally v. Port Auth. (In re WTC Disaster Site).

Is this unconstitutional - in that it violates the Due Process Clause, or the Takings Clause- or otherwise illegal?

Can Congress Take Away Rights Without Offering Anything in Return?

The Second Circuit did not really reflect deeply on the quid-pro-quo point in McNally, nor did it go on to reach any constitutional questions. Rather, it concentrated on statutory interpretation alone. (The issue the court directly confronted was was whether Congress gave exclusive jurisdiction to the Southern District of New York for all suits arising from 9/11.) Had the court consider the constitutional issues raised, however, it might well have concluded that while the statute, by its terms, imposed a liability cap while giving nothing in exchange, it violated the U.S. Constitution in doing so.

Under the Constitution, it is very hard for Congress to completely impair the right to sue of any private citizen without providing an alternative form of compensation (such as the VCF). Yet the VCF, as noted above, does not currently cover the respiratory plaintiffs.

Moreover, the risk that the respiratory plaintiffs' damages awards could significantly exceed New York's insurance coverage is a very real one. There are many commercial litigants currently suing the City of New York (among other defendants) for loss of property and business interruption claims. These claims, too, will tend to exhaust the City's insurance coverage, creating a real possibility that some or all of the respiratory plaintiffs might face zero recovery.

In sum, the liability cap, as applied to the respiratory plaintiffs, may well be unconstitutional, as long as the VCF continues to be left out of the equation. Mayor Bloomberg doubtless realizes this, which is why he does not want to test the liability caps in court.

Can Congress Simply Avoid the Quid-Pro-Quo Issue by Reasserting Sovereign Immunity?

One might argue that the constitutional argument would work with respect to a liability cap for, say, the airlines, but not the City. Why? Because governmental entities, unlike private corporations, once enjoyed sovereign immunity from any and all awards of damages. After World War II, Congress waived some of that immunity via the Federal Tort Claims Act (FTCA). One might think that Congress could reverse the waiver any time it wanted, making any allowance of governmental liability in federal statutes a matter of grace, not a matter of right.

But wait a minute. Congress has the power to waive and reinstate federal sovereign immunity. Here, we're talking about New York's sovereign immunity, not the federal government's. Moreover, under our constitutional federalism, it seems that only Albany - not Congress - ought to have the right to say whether New York City or New York State may be sued. And thus far, Albany has not sought to cut off the respiratory plaintiffs' right to sue via a New York statute. Nor is it likely to - or should it -- do so; these plaintiffs are among the heroes of 9/11, responsible in part for the City's recovery.

Will - and Should -- the Respiratory Plaintiffs Get the Same Amounts from the VCF as 9/11 Victims' Families?

That means, in short, that liability cannot be capped for the respiratory plaintiffs unless an alternative compensation system is in place. Should it be the VCF, all over again?

Here we tread on very delicate ground, and touch on a hot-button issue: Should the respiratory plaintiffs benefit from the generous VCF compensation scheme? There is an inequality either way: Either respiratory plaintiffs will receive quite a bit more than other workers in New York City with similarly serious injuries, or they will receive quite a bit less than the 9/11 families.

Before the VCF, federal programs that were alternatives to litigation were often much less generous. Moreover, state workman's compensation programs, which really serve much the same function, are notoriously less generous than the tort system, and the VCF offered sums that resembled tort awards, not more modest workman's compensation awards.

The reason that the VCF was so generous was twofold: First, Congress probably wanted to persuade as many families as possible to enter the fund, so as to cut short the possibility of potentially politically-divisive litigation against the airlines and others. (Nevertheless, some families and many corporations are still suing the airlines and others.)

Second, as former Special Master Ken Feinberg notes in his book, written after the Fund was wound up, Congress and the nation felt that the victims of 9/11 who died at the WTC, the Pentagon, and on the airplanes were heroes, and that therefore, they should treated differently, and better, than society usually treats applicants for workman's compensation or other types of social insurance.

How do these concerns play out in the context of the respiratory plaintiffs? First of all, the sheer number of plaintiffs may make it financially impossible to offer compensation like that provided by the VCF. Eight thousand plaintiffs is the current number; the number is expected to grow. Many of the plaintiffs may turn out to be permanently disabled, and if they are young, the tort-like damages they could expect would compensate them (in theory) for decades of lost wages and pain and suffering.

Second, suppose the courts do uphold the liability cap for New York -- which is either $350 million or $1 billion, depending whether one thinks New York is "insured" -- in the face of constitutional challenge (an outcome I think is unlikely). In that case, the plaintiffs will be faced with a difficult choice: If they do not accept the compensation offered by Congress--even if it is much lower than that offered, via the VCF, to the 9/11 families of victims who died on the day of the attack--then they could find themselves unable to collect anything from the City, given how many of them are suing the City (along with other property damages plaintiffs).

But even if the respiratory plaintiffs do end up in this difficult position, should Congress take advantage of the situation? Or should it dig deep into its pockets and give these first responders and workers the same level of compensation it offered the people who died and were injured on 9/11, because they are heroes, too?

There is no doubt that the men and women who rushed to Ground Zero in the hours, days, and weeks after the attack acted out of patriotic motives. There is also no doubt that, if their allegations are true, they were not treated well by the City or the federal government. If their allegations are true, they were not told the truth about the risks of working at Ground Zero, nor were they provided with the minimum protection that the Environmental Protection Agency recommended they should have when they were working.

But the question is, are they like the people who were killed and injured in the attack itself? Put another way, at what point does the terrorist attack cease being an attack, and turn into a workplace accident?

A Parallel: The World War II Shipyard Workers and Asbestos

The terrible treatment alleged by the first responders and workers at Ground Zero reminds me of how the U.S. Government treated shipyard workers in World War II. Our government genuinely felt that it had to build thousands of ships as soon as possible after Pearl Harbor. There is every reason to believe that the Navy knew that the shipyards with whom it had contracted were not protecting workers from the risks of asbestos - risks that were already well-known to public health officials by the 1940's. As a result, tens of thousands of shipyard workers were exposed to asbestos. Could they have been protected? Maybe--but the war effort might have been retarded. What could surely have been done, however, was to offer compensation. Yet because of sovereign immunity, many received nothing at all.

Looking back on it now, we rarely think of the shipyard workers who built the ships that won WWII as being like the soldiers who stormed the beaches of Normandy. But perhaps they were. And perhaps, more generally, everyone whose life is put at risk as a result of an attack on the United States should be viewed on the same moral plane as others who are in the same situation. This is, I think, the theory implicit in the calls to expand the VCF to include those injured in the days, week, and months after the attack of 9/11.

This theory may be the right one. It cannot be denied, however, that the import of this theory is to expand the meaning of word "hero" to include a much larger group than before. If this were to happen, is hard to imagine that the generous level of compensation awarded under the VCF could be maintained for this new, broader set of heroes.