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Monday, Dec. 03, 2001

Since the terror attacks of September 11, Congress and the White House have invoked federal tort reform three times in the name of patriotism and homeland defense. The first reform, introduced within days after the tragedy, was contained in the Airline Stabilization Act. The Act changed the tort system relating to September 11-related claims against airlines, but did so in a way that benefited both victims and the airline industry. Accordingly, that legislation was framed with the minimum of partisanship.

But now, two-and-a-half months later, as the fires at the WTC are beginning to subside, things are very different. The White House has decided to begin fanning the flames of lawyer-bashing, with two more terrorism-related legislative tort reforms, both of which are partisan Republican efforts to aid corporate defendants.

The first of these reforms, which is still restricted to September 11-related claims and may only be quashing meritless lawsuits, seems relatively harmless. But it is crucial that the second, and most recent reform - which would change the tort system relating to all torts arising out of terrorist acts, to victims' severe detriment - should not be enacted.

The Airline Stabilization Act: Bipartisan Legislation

The Airline Stabilization Act - which I also discussed in an earlier column - is a very unusual kind of tort reform. It affected only torts arising from the events of September 11. But where those torts were concerned, it gave the Republicans and their allies in industry a few things they had wanted to implement for years, with respect to much broader categories of torts. Specifically, it forced all civil litigation into a single federal district court and capped the airlines' liability at the amount for which they had insurance coverage.

The reforms came at a price, however. In order to get the bill passed quickly in the days following September 11, the Republicans agreed to have the federal government offer something like full compensation to any plaintiff with personal injuries who chose not to sue the airlines. As tort reform goes, this was super-sugarcoated tort reform. In theory, it limited defendants' liability without necessarily limiting plaintiffs' recovery.

Thus, depending on your point of view, one can understand the Airline Stabilization Act in one of two ways. One the one hand, if one believes that the airlines could be found legally liable for the events of September 11, then the Airline Stabilization Act is a government welfare program for corporate America, under the guise of tort reform - a bailout for the airline industry, which might otherwise have been bankrupted by tort claims.

On the other hand, if one believes that the airlines could not ultimately be found liable in court, then the Airline Stabilization Act is a government welfare program for the victims of September 11, under the guise (you guessed it) of tort reform. On this view, the government is choosing to compensate plaintiffs who otherwise would have lost in court. If like me, one believes that in all likelihood these victims have no legal claim against anyone but the hijackers themselves, the alternative compensation scheme is just a nice, if ad hoc, form of welfare.

Regardless of which of these two views one takes, the Act, whatever its merits, was never really about tort reform. Real tort reform is a zero-sum game, where one side (usually plaintiffs) loses, and the other side (usually defendants) gets what the other side loses. Traditionally Democrats favor the plaintiffs' side, and Republicans the defendants' side. This time, though, both sides won, in a sense, since taxpayers end up footing the bill to compensate the plaintiffs, and the airline industry remains viable.

Extending Tort Reform to Airplane Makers, Airport and Property Owners, and NYC

The Government's second attempt to use tort reform in the context of September 11 came in the form of a little-noticed amendment to the Aviation and Transportation Security Act, which was signed by the President a few weeks ago.

The Act itself received significant publicity, for its main purpose is to "federalizes" airport security. But it also contained a provision that did not receive much publicity. That provision amended the Airline Stabilization Act. It states that the earlier Act covers not just airlines, but also airplane manufacturers, the owners of Logan and Newark airports, anyone with a property interest in the World Trade Center, and New York City. It also specifically states that the benefits of federal tort reform will not be extended to the private security agencies who were checking bags on September 11 - and who failed to find the boxcutters with which the hijacking apparently were accomplished.

One could argue that the amendment was needed to correct an oversight in the original bill. Suppose one sees the prior Act as a way to give the airline industry special protections based on the unique evil of September 11. If American Airlines is protected, then why should Boeing, which is in some way part of the same troubled industry, still be vulnerable to lawsuits?

Or suppose one takes the opposite view, believing that the original bill was really just a way to get federal money to a special group of disaster-stricken citizens. Why not further incentivize them to take the money by making it clear that litigation against anyone (except the airport security firms) is going to be far tougher than normal?

But there was something weird about the amendment that neither of these two views could quite explain.

Why Airplane Makers Are In A Different Position From Airlines Regarding September 11

Given the information available to Congress in the months following September 11, the amendment extending the Airline Stabilization Act to airplane manufacturers and others reads like a bad exam answer from a first year torts student.

What exactly were the lawsuits against which this amendment was being specially enacted? Had anyone yet articulated a theory as to why Boeing could be sued for what happened on September 11? I have heard some suggestions concerning cockpit doors, but no suggestion that Boeing or another manufacturer's doors were substandard for the industry, or that the industry standard should have been higher, though, of course, such an argument could be made.

In any case, even if a suit against the manufacturer were to be brought, why aren't our state court judges and juries capable of handling it? If the suit is nonsense, it should be dismissed, limited by the traditional doctrines of proximate cause, or disposed of by a jury. If not, why shouldn't Boeing pay out of its own funds?

The Amendment extending protection to airplane manufacturers was not really about helping the victims of September 11, since the original act already established the alternative compensation scheme. Accordingly, the Amendment to the Airline Stabilization Act seems like a strange bit of Republican grandstanding on behalf of corporate America - protecting even companies who do not seem to deserve, or to desperately need, a bailout.

In short, the Amendment to the Aviation and Transportation Security Act seems to have been relatively harmless political theater - protecting companies that may not have needed protection, from lawsuits that probably would have failed anyway, at little or no cost to September 11 victims.

Amending the Terrorism Risk Protection Act

In contrast, the latest bit of terrorism-related tort reform to come from the Republicans is a bit more serious, and should, in my opinion, be stopped dead in its tracks.

Last week, the House of Representatives voted on party lines to amend the Terrorism Risk Protection Act. This bill, which has just been sent to the Senate for reconciliation, does not deal with September 11, but, like the Aviation and Transportation Security Act, it deals with the future.

The bill itself is designed to insure that American insurers and reinsurers will continue to write policies covering terrorism. By promising to cover up 90% of claims exceeding $25 billion in the event of an "act of terrorism" (as determined by the Secretary of the Treasury), the Congress had hoped to reassure a jittery domestic insurance market.

The bill, on its face, is about subsidizing an industry in order to benefit consumers. I have no opinion about that policy decision. But I was a little baffled to see that, at the behest of the White House, Representative Dick Armey added an amendment that would impose tort reforms that exceed those adopted by the Airline Stabilization Act in the event of an "act of terrorism."

Importantly, if Armey has his way, the bill, as amended, will cover any tort suit "arising out of, relating to" the act of terrorism. All such cases would be removed to federal court, regardless of their size or the residency of the parties. Moreover, the bill would bar punitive damages, eliminate joint and several liability for non-economic damages (under which a plaintiff can go after any or all defendants for compensation), require that all damage awards be off-set by collateral sources such as insurance or gifts, and limit lawyers' fees to 20% of the award.

The amended bill, in other words, would allow the Secretary of the Treasury to create a special zone in American law in which many of the fundamental assumptions of federalism and common law tort are suspended. Worse, under the amended bill, the Secretary of the Treasury's determination that an "act of terrorism" has occurred would not be appealable to any court - even, presumably, the Supreme Court.

This amended bill would differ from the Airline Stabilization Act, under which, in some sense, plaintiffs and defendants both win. In contrast, the amended bill would create a zero-sum scenario, in which plaintiffs' interests would lose so defendants' interests could benefit.

Put another way, the House's version of the Terrorism Risk Protection Act is good old-fashioned tort reform: it takes from victims and gives to defendants. Personally, I am convinced that American tort law could benefit from a bracing set of good old-fashioned tort reform-if well designed. But sneaking tort reform through the back door-especially a back door built from the carnage of September 11-is unprincipled. It might also backfire politically, tainting any future attempt to limit plaintiffs' recovery with the stain of an attempt to limit terrorism victims' recovery in particular.

The amended bill is also extremely overbroad. As it now stands, it seems that a landlord who failed to provide an adequate means of evacuation in the case of a fire would be treated differently depending on whether the fire that killed and injured innocent occupants of his building was set by an arsonist or a terrorist. This makes no sense to me.

Perhaps the White House is counting on federal judges to use their common sense when interpreting this law. Nevertheless, it contains so many loopholes of which creative corporate defense lawyers are likely to take advantage, that I cannot see how it can be interpreted in a way that would not offend the average citizen without requiring the judge to act in an unprincipled way herself.

Fortunately, the Senate's version of the Terrorism Risk Protection Act does not contain these tort reform provisions - so let us hope that version is one that is enacted. I hope that the Senate can prevail on the House to stop trying to use the current national crisis to build tort reform up in a piecemeal fashion.

When it comes to an issue as politically and morally divisive as tort reform, half a loaf is worse than no loaf. If the Republicans cannot make their case for tort reform on its own merits, rather than taking advantage of September 11 to sneak reform past a scared public, then there should be no tort reform until the argument can be made more persuasively.

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 three previous columns on the new Airline Stabilization Act in particular. One is an overview of the Act; another is an explanation of victims' rights under the Act; and the third is a discussion of the choice of, and role of, the Special Master administering the compensation scheme. All of these can be located in the archive of his columns on the site.

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