Judge's Rejection of 9/11 Settlement Raises Questions About His Asserted 'Power of Review'Howard Erichson in The New York Law Journal, March 23, 2010
Judge Alvin K. Hellerstein's rejection of a settlement between New York City and some 10,000 plaintiffs who claimed to have suffered respiratory ailments during the World Trade Center response and cleanup has left the lawyers for the plaintiffs, the city and its contractors who had spent almost two years negotiating the settlement wondering what to do next.
The judge, addressing a courtroom packed with attorneys and plaintiffs last Friday, called the $575 million to $657 million settlement inadequate and potentially confusing to plaintiffs.
He acknowledged that "most settlements are private" and "the judge has no part."
"This is different," Judge Hellerstein said. "This is 9/11. This is a case that has dominated my docket, and because of that, I have the power of review."
The legal teams are now considering their options. They can go back to the bargaining table; proceed at full speed to trial on 12 "bellwether" cases selected by the parties and the judge; or possibly file a petition for a writ of mandamus with the U.S. Court of Appeals for the Second Circuit, hoping a panel will order Judge Hellerstein to accept the settlement.
The last option is problematic, as it could tie up the already marathon litigation even longer. Moreover, legal analysts yesterday said there is no precedent on point for appellate review of a judge's refusal to accept what he believes to be an inadequate settlement in mass tort litigation.
Howard Erichson, who teaches complex litigation at Fordham University School of Law, said only certain types of settlements require judicial approval, such as class actions, settlements involving minors and consent judgments where there is ongoing judicial supervision.
"Outside of those special situations where you need a judge's power to make it happen, I simply don't understand what gives the judge the authority here," Mr. Erichson said.
Geoffrey P. Miller of New York University School of Law compares the World Trade Center cases to the Vioxx product liability litigation in New Orleans and the Zyprexa litigation before Eastern District Judge Jack B. Weinstein, which some observers have called "quasi-class actions."
"The judge's authority to exercise this kind of review of the settlement to protect the plaintiffs that you would see in a class action, it's very controversial," Mr. Miller said. "I'm sure the judge was acting out of the very best of intentions and protecting the very vulnerable people who can't protect themselves. However, the legal basis for the judge exercising that kind of powerful equitable authority is questionable."
Judge Hellerstein acknowledged Friday that he cannot force the city and its contractors to settle.
"That's a matter of private conviction," he said. "All I can do is schedule trials and rule according to the merits."
However, the judge made it clear last week he was going to take a much more aggressive role in overseeing the settlement talks.
The first indication came March 15, four days before Friday's hearing, when he issued an order saying the agreement "does not provide for judicial supervision or appointment of the allocation neutral (who will make the decision on what category individual plaintiffs belong to for purposes of compensation) and the firm and panel of physicians that will assist it."
The judge instructed the parties not to engage, or continue to engage, people or firms for those positions without his approval.
Then, at Friday's hearing, Judge Hellerstein said he wanted "judicial control over the process, because that's what's fair."
"If I'm the judge, I can be reversed," he said. "If the parties appoint someone, he's the dictator. We don't have dictators."
The judge also said Friday he intended to cap plaintiffs' attorney's fees below the 33 percent called for in contingency contracts and said the fees "will" be paid out of the $1.1 billion World Trade Center captive insurance fund, the same fund that will be paying the settlement.
There is little dispute that judges have broader authority in the realm of attorney's fees in mass tort cases.
Judge Eldon Fallon of the Eastern District of Louisiana capped fees in the $4.85 billion Vioxx settlement at 32 percent, and Judge Weinstein capped most fees at 35 percent in the $700 million Zyprexa settlement in Brooklyn.
Mr. Erichson said both Judges Weinstein and Fallon "reviewed" the settlements even though they were not class actions.
"I wondered how they could approve the settlements if they didn't have the power to approve them, but I guess, if they are approving them, it didn't seem to be a problem," he said. "Getting the judge's blessing gave the lawyers some comfort they weren't doing anything wrong."
While it is unclear whether Judge Hellerstein has the authority to reject the settlement, absent an appeal he still wields the gavel and influence over a settlement with many moving parts, including a short, 90-day window for plaintiffs to decide whether they want to be included.
There is also the requirement that 95 percent of plaintiffs approve the settlement in In re World Trade Center Disaster Site Litigation, 21 MC 100, and the judge now has before him a series of defense motions to dismiss many of the cases based on the immunity granted to those acting in response to civic disasters.
Lead lawyers Paul Napoli, of Worby Groner & Napoli, Bern for the plaintiffs, and James Tyrrell, Jr., of Patton Boggs for the city, declined comment yesterday.
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