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Are They A Laudable Model, Or A Large Mistake?

Monday, Mar. 25, 2002

On March 7, the Justice Department released its final rules for the September 11 Victims Compensation Fund. Ken Feinberg, the Fund's Special Master, had said that he would listen to all the criticisms of the suggested rules that were submitted to his office.

We may now look at the changes that Feinberg made in settling on the final rules, and ask to what extent the plan, as it stands, makes sense. We may also ask a more fundamental question: Can this plan serve as a model for the resolution of future mass torts?

The Act Under Which the Rules Have Been Set: A Carrot-And-Stick System

The federal law which authorized the Fund, the Air Transportation Safety and System Stabilization Act, was not specific in most respects. It simply ordered the Justice Department to establish a no-fault compensation scheme "to provide compensation to any individual (or relatives of a deceased individual) who was physically injured or killed as a result of the terrorist-related aircraft crashes of September 11, 2001."

The Act clearly stated that anyone who accepts money from the Fund has to give up their right to sue the airlines (Congress later amended this to include many other parties as well). The Act also clearly stated that collateral sources of compensation - such as insurance payments - will be deducted from any award offered by the Fund.

Finally, anticipating that some families or victims would choose not to accept the government's money, the Act limits the liability of the airlines (and later, other defendants) to their insurance coverage, in the event that families or victims choose to sue rather than accept compensation determined under the Act.

The Act, therefore, is a tort reform constructed out of a mixture of carrot and stick. The carrot is the promise of a no-fault payment - that is a payment given without the victims or their families having to prove fault. The stick is the threat that if one were to sue, recovery could be barred entirely, if other September 11 plaintiffs had reached the defendant first and used up its insurance coverage.

Both of these elements have been used before, sometimes singly, sometimes together, in various programs designed to create alternatives to the tort system. Workman's compensation, for example, bars litigation except under a narrow set of circumstances. On the other hand, workman's compensation also promises a quick, no-fault alternative to litigation. The same can be said of the federal Black Lung program or the federal childhood vaccine program.

Feinberg's Implementation of the Act, with a Compensation Plan

Feinberg implemented the Act in a way that reflected his deep understanding of state and federal no-fault plans throughout the Twentieth Century.

The Plan envisioned a quick, non-adversarial process by which claimants could submit applications over the Internet. The amount of money an applicant would receive would be based on a chart that roughly estimated the earnings the injured and deceased would have earned, based on their age and last two years of income. Pain and suffering awards would be presumed to be set at $250,000 per victim and $50,000 per dependent, with a cap at three dependents. (Thus, a family of four, one of whom had perished on September 11, would receive $400,000 for pain and suffering).

The Plan preserved three essential features of no-fault. First, it strove to turn the compensation process into as administrative a process as possible, by discouraging applicants from challenging the Special Master's office either personally or through lawyers.

Second, it tried to minimize the sort of variation in damages that occurs during litigation by plotting economic damages on a chart. The chart was meant to ensure fairness among similarly situated victims and families.

Third, it rejected the trend in modern tort law to award deceased persons pain and suffering based on retrospective reconstructions of what a particular victim felt before he or she died-a fact which even the most seasoned lawyer will tell you is a matter of pure conjecture. Rather, for purposes of setting the award amounts, it assumed different victims and families experienced more or less the same pain and suffering.

How the Final Rules Modify the Earlier, Proposed Rules

The final version of the Plan is noteworthy, in my mind, because of how little Feinberg budged from these three principles of no-fault. To be sure, he budged a little on all three, but that is to be expected, given how political the debate over the plan had become.

Feinberg's final rules modify his earlier proposal in three ways. First, he simply threw more money at the no-fault schedules. The presumed economic loss was increased a little, mostly at the top end-now the most a family of three can receive for the economic loss of their loved one is $4.1 million, compared to $3.9 million in the earlier proposal.

The presumed non-economic loss was increased as well: instead of $50,000 per dependent for the emotional loss of their loved one, as in the earlier proposal, according to the final rules, each dependent will receive $100,000 (still capped at 3 dependents). (Thus, a family of four, one of whom had perished on September 11, will now receive not $400,000, but $550,000 for pain and suffering).

Second, he extended the "window" of time by which a person injured at the sites of the attacks on September 11 had to seek medical care in order to claim for their injuries under the Plan. Civilians now have up to 72 hours and rescue workers have no time limit.

Third and finally, Feinberg has relented a bit on the presumptiveness of the schedule. He has allowed that the definition of a "collateral source" will be interpreted broadly, so that pension plans which were paid out of the deceased's own paychecks will not be fully deducted.

Feinberg also seems to have opened the door to more hearings. Anyone can request a hearing to argue why their award should exceed that scheduled amounts, and they will be able to argue for as long as they wish, within "reasonable limits".

Why Critics Are Still Complaining: The Bargain of No-Fault

Feinberg's modifications hardly satisfied the Plan's fiercest critics, and for good reason. There is an unbridgeable gulf between what many of the families of victims of 9/11 want, and what the Plan can give them.

Many families want to be able to sue the airlines and others in tort, and to collect damages commensurate with what they would received in a typical airline disaster case. The Plan must, unfortunately, disappoint them on both these demands - and for good reason.

First, the goal of the Plan is to substitute administration for litigation. To the extent that some families will reject the Plan and sue anyway, they face the risk that there will be no money to collect even if they win. But the families who accept the Plan will have to accept that they will never be able to demand an answer to the question that arises out of their greatest fear-that their loved ones died as a result of preventable negligence. Could a particular death have been prevented? The Plan families may never know.

The price of opting into a no-fault scheme is the loss of the opportunity to demand an answer to that question in a court of law. In no-fault auto insurance, for instance, the victim of an accident cannot normally drag the driver who hit her into a deposition and before a jury.

Tort law is a very powerful device that empowers average citizens to pursue the truth, a la Erin Brockovich. No-fault is a bargain- in exchange for money today, no truth tomorrow. It may be a bargain with the Devil, but it is a bargain that may be worthwhile in many cases.

Why Claimants Necessarily Receive Less Than They Might Have By Winning a Tort Suit

Second, the goal of the Plan is to minimize the expected cost of compensation. The only reason why defendants accept the concept of no-fault-which, after all, simply means strict liability-is to save money in the long run. The Plan saves money (in theory) not only by reducing administrative costs, but also by giving each claimant less than they would have received had they sued in tort and won. (Huge lawyers' fees, however, are also saved.)

Without this simple assumption, there would be no incentive to give money to the applicants without first having a trial about not only whether anyone other than the terrorists were negligent, but also over questions relating to the actual damages suffered by each applicant. No-fault is a bargain here as well: each applicant gets a guaranteed payout, but much less than they could have expected to receive had they sued and won.

The Plan Will Survive, But May Not Be A True Success

I suspect that, notwithstanding the promised legal challenges to Feinberg's plan, it will survive and many of the thousands of families and individuals eligible will take advantage of it. Does that mean that it is a success? And that it can be used again in the future to resolve other mass torts, such as the current asbestos crisis?

I am not sure whether we should call the Plan a success. The Plan will do what it set out to do-compensate a large number of people who would have otherwise been tempted to bring lawsuits against the airlines. But I am not sure that is the only way to evaluate the Plan's "success." The Plan will work because of an additional factor that is rarely present in most no-fault plans.

The Plan is being paid for by the U.S. taxpayer, not the companies it is designed to help. That makes it quite different from almost all no-fault plans in this nation's history - except for the federal Black Lung plan between 1968 and 1974 and the programs designed to compensate individuals injured by the Swine Flu vaccine and certain childhood vaccines. The airlines are, of course, more than happy to let Congress impose strict liability for what they did on September 11 if Congress picks up the tab.

Even when Congress has placed itself in the shoes of the industry upon which it is imposing the no-fault plan, it has tried to keep the level of compensation low. Ironically, in his zeal to encourage the families to accept the Plan, Feinberg seems to have decided to offer a relatively high no-fault payout.

Under the Plan's final, revised schedule, the average award per claimant will be $1.85 million. The total cost is expected to be between $5 and 6 billion. The Plan is much more expensive that any no-fault Plan ever seen in this nation's history. If the airlines and the other industries protected by the Plan had been asked to accept a plan based on these numbers - with them, and not the government, picking up the tab - I am pretty sure they would have rejected it and taken their chances at trial.

The reason why the Plan will work is because it is a very good deal for the families, if one views the Plan just as a no-fault system. The reason why the airlines are happy with the Plan is because it gets them off the hook and it costs them nothing.

A more interesting question is why Congress, the Justice Department, and finally, Ken Feinberg, have proposed such an unusual, lop-sided no-fault plan. One explanation is that they wanted to insure the Plan's success and decided to err on the side of generosity to draw as many applicants as possible.

Another explanation, related to the first, is that they wanted to heal the nation's wounds from 9/11 as quickly as possible. Thus, the Plan is not only designed to be a bargain between plaintiffs and defendants, but a symbol of national healing and an expression of support for the heroes of 9/11.

A final reason, which is but the dark converse of the previous explanation, is that the U.S. Government feels that it bears some responsibility for 9/11, and that the Plan is not really a good deal for the airlines, but an act of atonement by Washington. It may be the closest thing to an apology from our government that these families will ever see.

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 and several previous columns on the new Airline Stabilization Act in particular. All can be found in the archive of his column on this site.

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