Fordham Law

Parties Campaign Aggressively for Participation in 9/11 Pact

Howard Erichson in New York Law Journal, November 08, 2010

Media Source

An unprecedented effort to persuade some 10,000 plaintiffs who responded to the World Trade Center terror attacks to accept a $712.5 million settlement of their respiratory illness claims is nearing the finish line.

Firefighters, police and cleanup workers who toiled in the pit at Ground Zero face a filing deadline today to opt in to the settlement, and the lead plaintiffs' lawyer said last week that he expects to meet the 95 percent participation level required to make the settlement effective.

"We're getting a lot of releases, we have over 8,500 in hand and I expect by [today] to have a lot more," said Paul Napoli of Worby Groner Edelman & Napoli Bern. "I'm confident that, at the end of the day, we are going to get 99 to 100 percent."

Still, campaigning for the settlement in In re World Trade Center Disaster Site Litigation, 21 MC 100, continued down to the wire as the firm held one-on-one meetings with clients at its own offices and in rented hotel conference rooms and ballrooms. On Wednesday night, lawyers were in Nassau County and on Staten Island on Thursday. Further meetings were scheduled during the weekend in Manhattan, Queens, Brooklyn and the Bronx.

Mr. Napoli's firm, serving as co-liaison plaintiffs' counsel, represents the vast majority of the claimants in the seven-year-old litigation. Nicholas Papain and Andrew J. Carboy of Sullivan Papain Block McGrath & Cannavo, represent some 679 police and firefighters who have, or fear they will have, respiratory and other illnesses from inhaling the toxic dust and ash produced by the collapse of the twin towers on Sept. 11, 2001. About 300 additional plaintiffs are represented by a half dozen other law firms.

One lawyer involved in the litigation, who asked not to be named because of the sensitivity of the last-minute push, said attorneys heard comments from several people about how hard everyone—plaintiffs' and defense attorneys and the court—was pushing the settlement.

"Well, at a certain point, yeah, guilty as charged," the lawyer said. "They negotiated hard for this thing for over two years and, at the end of the day, people should not be surprised they are pushing for it. They think it's in everyone's best interest to do it. They think this is the best settlement [the plaintiffs] are going to get."

It has taken more than two years for the plaintiffs' lawyers to negotiate a settlement with New York City and its contractors and lawyers for the World Trade Center Captive Insurance Co., an entity formed to manage insurance costs associated with the response to the terror attacks and funded by a $1 billion grant from the Federal Emergency Management Agency (FEMA).

The parties thought they had reached a final agreement in early 2010. But on March 19, Southern District Judge Alvin K. Hellerstein stunned Mr. Napoli; James Tyrrell of Patton Boggs, who is the city's lead outside counsel; and the lead lawyer for the WTC Captive, Margaret Warner of McDermott Will & Emery, when he rejected the proposed deal.

Mr. Tyrrell questioned the judge's authority to intervene in a non-class action, mass tort settlement. But the judge, whose dockets have been consumed for almost nine years by a variety of Sept. 11 litigation, said that "9/11 is different."

His rejection sent all sides back to the table, accompanied by an admonition that he would not accept Mr. Napoli's standard 33 percent contingency fee contracts with his clients.

A new deal was forged, with Mr. Napoli agreeing on May 27 to reduce the contingency fee to 25 percent, adding $50 million to the amount for distribution; New York City agreeing to waive certain Workers' Compensation liens for an additional $25 million; and the WTC Captive pitching in another $50 million.

While Mr. Napoli's fees drew the judge's scrutiny, the fees paid out by the WTC Captive in defense of the lawsuit since 2004 were no small matter. According to the most recent filing, the Captive had spent $220.9 million by the end of June on legal fees and another $62.1 million on claims administration and document management.

However, those fees have been partially offset by the $200 million for the city's legal costs recovered in successful litigation with the insurance companies.

On June 10, Judge Hellerstein hailed the reworked settlement, saying, "This is a very good deal. I am very excited about this deal."

From that moment, all the parties involved in the process were working toward a common goal: persuading the plaintiffs that opting into the settlement was the best deal they were going to get.

Selling the Settlement

The effort moved into high gear beginning at a June 23 fairness hearing in Judge Hellerstein's courtoom attended by counsel for the plaintiffs, the WTC Captive and the city, including Corporation Counsel Michael A. Cardozo; Kenneth Feinberg, appointed by the judge to hear appeals from compensation decisions; and a number of plaintiffs.

Judge Hellerstein said he hoped that two plaintiffs who expressed opposition to the deal would "think about it" and realize "it's far from perfect. It's good. It's the best we could do."

Mr. Tyrrell outlined the significant hurdles of scientific proof and defenses the plaintiffs would need to surmount to get to trial. The judge, Mr. Napoli and Mr. Feinberg all warned plaintiffs at the hearing not to opt out of the settlement in the hope that a five-year effort in Congress to reopen the 9/11 Victim Compensation Fund would provide them better compensation.

Mr. Feinberg said to any plaintiffs who might be waiting for the bill, known as the James Zadroga 9/11 Health and Compensation Act, "I believe, personally, you are making a mistake."

Mr. Cardozo summed up the city's difficult position in having to defend the suits, and the reason it was accepting settlement.

"How do we fairly compensate the heroes who went down to the pile who worked tirelessly to put this city back on its feet?" he asked. "It was not the fault of the contractors or New York City, at least, in our view, that these people were injured, but there is no question that some people were injured and they suffered damages."

In subsequent public relations efforts, the plaintiffs' attorneys at Napoli Bern contacted reporters to pitch positive stories about the settlement. The firm also was quick to respond to critical or unfavorable news articles or editorials in defense of the deal.

Meanwhile, Mr. Feinberg promoted the settlement in an opinion piece in The New York Times.

The first of three "town hall" meetings was held at a hotel in Times Square, where plaintiffs' lawyers, Special Master Aaron Twerski, and claims allocation neutral Matthew Garretson explained to plaintiffs and the media how the compensation structure worked and how claims would be processed and analyzed. They emphasized what they said was the fairness of the settlement and the transparency of the process. Similar meetings would later be held at a courthouse in Queens and a school on Staten Island.

On July 26, Judge Hellerstein appeared at the Michael J. Petrides School on Staten Island, to assure dozens of rescue workers that the deal was good, although not "perfect." He pointed out that it would be difficult for them to prove that their illnesses were caused by conditions at Ground Zero.

The judge made a second appearance on Aug. 3 at the final town hall meeting in Queens.

In status conferences and court hearings throughout August and September, Judge Hellerstein continued to make the case for opting into the settlement by increasing the compensation for plaintiff responders and shaving what the attorneys would receive.

On Aug. 27, after telling Mr. Napoli, "You're getting too much," Judge Hellerstein rejected the attorney's bid to pass on to plaintiffs $6.1 million in interest costs incurred in financing the massive litigation, even though the arrangement was called for in the firm's contracts with plaintiffs and had been pronounced ethical by a legal ethics expert.

On Sept. 29, the Zadroga bill finally passed the House of Representatives. The bill allocates billions of dollars in compensation and free health care for Ground Zero responders.

Under changes made in the bill, plaintiffs would not have to choose between the settlement or waiting for a reopened compensation fund, thus removing a major incentive to opt out of the settlement.

The measure has not passed the Senate. Moreover, Tuesday's election results, which will give Republicans control of the House, place in doubt the future of the bill if it does not pass this year.

On Oct. 5, Mayor Michael Bloomberg, in a City Hall press conference with Mr. Feinberg by his side, made a public plea to responders and cleanup workers to accept the settlement.

That same day, Mr. Napoli reported to Judge Hellerstein that 75 percent of his 9,700 plaintiffs had elected to opt into the deal. With Mr. Feinberg, who had headed the 9/11 Victim Compensation Fund, estimating that as many as 25 percent of claimants in mass tort cases make up their minds in the closing weeks before an opt-in deadline, Mr. Napoli and his team took further steps to get 100 percent participation, which would take the total outlay from the WTC Captive from the low-end number of $625 million to a high-end number of at least $712 million.

Two weeks ago, Judge Hellerstein set aside his courtroom so plaintiffs could have the terms of the settlement explained to them by Messrs. Twerski and Henderson. The special masters had been appointed to assist the judge in executing a multi-phased plan for organizing the plaintiffs into tiers based on the severity and type of their injuries, prioritize cases for trial and lay the groundwork for settlement. (383 separate diseases were alleged to have been caused by the dust.)

Judge's Involvement

While Mr. Tyrrell and others questioned Judge Hellerstein's authority to reject the settlement, and Mr. Napoli questioned his move to interfere with his contractually secured fee arrangements, there was less opposition to the judge's role in advocating that plaintiffs opt in.

"It's not unusual for some judges to get involved in settlement talks or talk to clients," Mr. Napoli said. "But I think that, in these circumstances, it was because this was such a public case that he got so involved."

Howard M. Erichson, a professor at Fordham University School of Law and an expert on mass tort litigation, noted that Judge Hellerstein is not the first jurist to take an active role in overseeing and approving settlements. He cited Eastern District Judge Jack B. Weinstein in the Zyprexa litigation and Judge Eldon Fallon in the Vioxx litigation in the Eastern District of Louisiana.

But Judge Hellerstein was the first judge to reject a settlement in the non-class action context. And while Mr. Erichson, like Mr. Tyrrell, questions whether the judge had the authority to do so, the situation changed once he was given a settlement that met his approval.

"This is a dynamic that comes up again and again," Mr. Erichson said. "At first, there is an adversary relationship between the plaintiffs' lawyers and the defense, but once a settlement has been negotiated, then it's like they are on the same team.

"After a deal has been struck, the plaintiffs' lawyers, the defense and the judge all want to see that deal through to completion," he said. "That's fine if justice is accomplished, but the question is whether individual claimants have anyone truly representing their interests."

This whole litigation has been affected by the fact that the 9/11 attacks "captured the nation's attention like nothing else," Mr. Erichson said. "It's hard to imagine, to the extent that these claims were against the city, the idea that the city would aggressively defend itself against claims by its first responders. It's just a horrible thought. We don't want to think of this as adversary litigation."

But the city was, indeed, aggressively fighting the cases and its alleged responsibility for the illnesses workers may have contracted, or might contract, in the future, even as Mr. Tyrrell said he did not relish the role of opposing compensation for "9/11 heroes."

Mr. Tyrrell asserted several defenses based on the immunity for people who respond to civil disasters. Ms. Warner joined him in warning that the individual plaintiffs would have a tough time proving causation should they be forced to go to trial.

Today's deadline is actually a mailing deadline, and the lawyers anticipate it will take a few weeks to return opt-in forms that have missing information, verify the plaintiffs and deal with attrition among those who initially sued but have moved or lost interest in the case because their recovery may be small.

Momentum continues to build as several other smaller settlements have been reached with defendants who are not covered by the WTC Captive.

In addition to the potential $712.5 million, a figure that can be reached if participation nears 100 percent, Mr. Napoli reported that roughly $103 million in settlements have been reached with other defendants: a $47.5 million settlement with the Port Authority of New York and New Jersey; a $28.3 million deal with the insurers who covered the barges that shipped debris to Staten Island's Fresh Kills landfill for sifting and disposal; a $24.3 million deal with entities at Fresh Kills; and another $4.15 million with a respirator manufacturer.