Colaio v. Feinberg

OPINION BY: Alvin K. Hellerstein

More than 3,000 people died on September 11, 2001 from the terrorist-related aircraft crashes into the World Trade Center towers, the Pentagon, and the field in Shanksville, Pennsylvania. Those who died, in the airplanes and at the crash sites, were rich and poor, young and old, citizens and non-citizens, and in varied professions and occupations, united only in the unlucky coincidence of time and place.

Eleven days later, Congress and the President, reflecting the sentiments of a shocked and grieving nation, enacted the September 11th Victim Compensation Fund of 2001 ("the Fund") to provide compensation to the bereaved. Soon after, pursuant to the enacting legislation, a Special Master of the Fund was appointed, regulations were promulgated, and the Fund began to function. Now, a year-and-a-half later, the deadline by which all claims must be filed, December 22, 2003, is fast approaching.

Inevitably, interpretive issues have arisen, and lawsuits have been filed. In the three suits involved in this decision, the plaintiffs, who are eligible to file claims with the Victim Compensation Fund but have not yet done so, allege that the regulations promulgated by the Department of Justice and the interpretive policies of the Special Master, Kenneth R. Feinberg, are arbitrary and capricious, violate the Air Transportation Safety and System Stabilization Act, 49 U.S.C. Sect.s 40101 ("the Act"), and unconstitutionally discriminate against them. Their central allegation is that the Special Master's proposed awards fail to reflect that many who died in the World Trade Center were earning, and would have continued to earn, much more than the Special Master is prepared to recognize.

All parties have agreed to a procedure that has brought these cases on for accelerated hearing and determination on an agreed record. Having heard the parties, I now deny plaintiffs' motions for summary judgment, and grant defendants' motions for judgment on the pleadings.

I. Background

A. The September 11th Victim Compensation Fund of 2001

i. Statutory Authorization

The events of September 11, 2001 caused Congress to take immediate action to address the financial crisis in the airline industry and the losses suffered by the victims and their families. On September 22, 2001, President Bush signed into law the Air Transportation Safety and System Stabilization Act of 2001.

Title IV of the Act, captioned "Victim Compensation," creates the September 11th Victim Compensation Fund of 2001. Section 403 of the Act states that the purpose of Title IV is "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." A Special Master appointed by the Attorney General administers the Fund, and his tasks include promulgating rules and regulations for the Fund, generating application forms for claimants, and being the sole decision-maker with regard to individual compensation awards. The claimant may be represented by counsel, present evidence, and exercise "any other due process rights determined appropriate by the Special Master." The Special Master's compensation determinations are "final and not subject to judicial review," and must be rendered within 120 days of the filing of the claim.

By electing to file a claim with the Fund, a claimant waives all rights to bring a civil action regarding the September 11 crashes, except to recover collateral source obligations or to sue knowing participants in the hijacking conspiracy. If victims pursue the litigation route, the amounts they potentially may recover are limited, by section 408 of the Act, to the insurance coverage of the airlines, aircraft manufacturers, airport sponsors, or persons with a property interest in the World Trade Center. The United States District Court for the Southern District of New York is given exclusive jurisdiction over such lawsuits.

In order to qualify as an "eligible individual" for compensation from the Fund, the claimant must be a victim or the personal representative of a victim who: (i) was present on one of the hijacked planes or at the World Trade Center, the Pentagon, or the site of the aircraft crash at Shanksville, Pennsylvania at the time, or in the immediate aftermath, of the terrorist-related aircraft crashes of September 11, 2001; and (ii) suffered physical harm or death as a result of such an air crash. Section 405(b)(1) provides that the Special Master shall review submitted claims according to three factors: harm to the claimant, the facts of the claim, and the individual circumstances of the claimant. The Special Master shall determine: "(A) whether the claimant is an eligible individual under subsection (c); (B) with respect to a claimant determined to be an eligible individual - (i) the extent of the harm to the claimant, including any economic and noneconomic losses; and (ii) the amount of compensation to which the claimant is entitled based on the harm to the claimant, the facts of the claim, and the individual circumstances of the claimant." The Special Master is to make his award determinations without regard to "negligence or any other theory of liability." His awards are not to include amounts for punitive damages and are to be offset by amounts of collateral source compensation the claimant has received or is entitled to receive as a result of the events of September 11. The Act makes no mention of dollar limitations on the amount of an individual claimant's compensation award.

A few of the key terms are defined in section 402. "Economic loss" is "any pecuniary loss resulting from harm (including the loss of earnings or other benefits related to employment, medical expense loss, replacement services loss, loss due to death, burial costs, and loss of business or employment opportunities) to the extent recovery for such loss is allowed under applicable State law." Section 402(9) defines "noneconomic losses" as "losses for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), hedonic damages, injury to reputation, and all other nonpecuniary losses of any kind or nature." "Collateral source" is defined in section 402(6) as "all collateral sources, including life insurance, pension funds, death benefit programs, and payments by Federal, State, or local governments related to the terrorist-related aircraft crashes of September 11, 2001." The "claimant" is the "individual filing a claim for compensation under section 405(a)(1)."

Not all of the key terms contained in the Act are defined. The Act provides that claimants are entitled to compensation awards based on "the facts of the claim, and the individual circumstances of the claimant," as well as on the "extent of harm," a term which includes "any economic and noneconomic losses." However, the Act does not define these two additional criteria - "the facts of the claim" or "the individual circumstances of the claimant."

ii. Promulgation of Rules, Regulations and Methodologies

On November 5, 2001, the Department of Justice, through the Attorney General, published a Notice of Inquiry and Advance Notice of Rulemaking, pursuant to section 407 of the Act. This Notice of Inquiry initiated the process of rule-making under the Act. Attorney General John Ashcroft appointed defendant Kenneth R. Feinberg to administer the Fund as the Special Master on November 26, 2001, a selection supported by congressional leaders of the two major political parties.

Pursuant to the regulations and in some respects expanding on them, the Special Master provided a methodology for determining awards. As mandated by 28 C.F.R. § 104.43, the Special Master published schedules, tables, and charts to permit prospective claimants to estimate economic loss determinations for annual incomes up to but not beyond the 98th percentile of individual income in the United States for the year 2000; the tables do not project awards for incomes above the 98th percentile, or $ 231,000. The award amounts listed in the tables, or "presumed awards," are "based upon individual circumstances of the deceased victim, including: the age of the decedent as of September 11, 2001; the number of dependents who survive the decedent; whether the decedent is survived by a spouse; and the amount and nature of the decedent's income for recent years." In order to determine a decedent's income, an average of the "decedent's salary/income in 1998-2000" is used, with discretion in the Special Master to take other years into account and make evaluations "in a manner that the Special Master deems appropriate." [As to non-economic losses, the] presumed non-economic loss for decedents is $ 250,000, plus an additional $ 100,000 for a spouse and each dependent of the deceased victim. With respect to the "individual circumstances of the claimant," a criterion provided by the Act for compensation awards, the Special Master was authorized to take into consideration "the financial needs or financial resources of the claimant or the victim's dependents and beneficiaries."

Claimants may choose between two tracks in pursuing awards. Under Track A, the claims evaluator notifies the claimant within 45 days of his or her eligibility and of the amount of the presumed award. The claimant may then either accept the presumed award as the final determination or seek a hearing under 28 C.F.R. § 104.33. Under Track B, the claims evaluator notifies the claimant about eligibility within 45 days, and the claimant then proceeds to a hearing. The Special Master or his designee may adhere to the presumptive award methodology, or modify the award if the claimant presents "extraordinary circumstances not adequately addressed by the presumptive award methodology."

The Special Master has adopted additional procedures, not set out in the regulations, but which are contained in a number of documents available to the public. The main document that reflects these procedures, "Explanation of Process for Computing Presumed Economic Loss," includes the presumed award charts, outlines the use of post-tax income for determining lost earnings, and sets consumption rates for decedents according to marital status and the number of dependent children.

The methodology established by the Special Master, pursuant to the regulations and his further implementing policies and explanations, are intended to provide a speedy and efficient alternative to normal tort litigation. Through the tables of presumptive awards, those who suffered irreparable loss from the terrorist-related aircraft crashes of September 11, 2001 are enabled to predict the awards for which they are eligible, and which they will be entitled to [receive within a 120-day period.] They then can decide among three options: 1) to enter the process and accept the presumed award; 2) to obtain a hearing before the Special Master and seek to prove entitlement to a higher amount, also within a relatively short period; or 3) to pursue the normal tort litigation process, with all its risks of contested liability, discovery, lengthy pre-trial and trial proceedings, appellate review, and substantial litigation expense, but with the potential for larger economic recovery.

B. The Instant Lawsuits

Three lawsuits have been filed against defendants Kenneth R. Feinberg, John Ashcroft, and the Department of Justice. All involve plaintiffs who are legal representatives of people who died in the World Trade Center on September 11, 2001. None of the plaintiffs has submitted a formal claim to the Fund, but several, and perhaps all, have met with the Special Master for the purpose of evaluating what a possible award might be.

Shortly after the Colaio complaint was filed, I held a conference on February 6, 2003. The parties agreed that no factual issues were in dispute and that the lawsuits could be decided by motion. In order to facilitate appellate review before the looming deadlines for filing lawsuits and claims with the Fund, I ordered, with the consent of the parties, the compilation and submission of factual without the customary discovery process, and issued an expedited briefing schedule. I denied the Colaio plaintiffs' request to depose the Special Master because of the absence of factual dispute as to any material issue, and because the proceeding was not to be a review of any specific award determination.

II. Discussion

Senator McCain commented:

"No amount of money can begin to compensate the victims for their suffering. Nothing will make them and their families 'whole.' It is not the intent of the federal fund to do this. Nor is it the intent of the fund to duplicate the arbitrary, wildly divergent awards that sometimes come from our deeply flawed tort system-awards from which up to one third or more of the victims' award is often taken by attorneys.

The intent of the fund is to ensure that the victims of this unprecedented, unforeseeable, and horrific event, and their families do not suffer financial hardship in addition to the terrible hardships they already have been forced to endure. "


The Special Master appropriately considered Congress' conception of the Fund as addressing the needs and hardships of the victims of September 11 when formulating a definition of "individual circumstances" that includes financial needs and resources.

Congress believed that the Fund would provide compensation as an alternative to the tort system, and to individuals who might not be able to recover anything through litigation, notwithstanding years of effort, expense, and emotional toil. As Senator John McCain said, the "victims could also receive no compensation from the courts if they determine that corporate entities, including airlines, were not responsible for the devastating damage arising from the terrorist attacks." He explained that the Fund would "ensure that the victims and families of victims who were physically injured or killed on September 11th are compensated even if courts determine that the airlines and any other potential corporate defendants are not liable for the harm; if insurance monies are exhausted; or are consumed by massive punitive damage awards or attorneys' fees." The Fund was not intended to replicate tort damage awards in wrongful death actions.

III. Conclusion

The extraordinary events of September 11, 2001 changed all of our lives, but none more than the lives of everyone who was a child, spouse, parent, or close friend of those who died. To those who loved or depended on the victims of the terrorist attacks, no monetary remedy can be adequate; only an aching void remains to be filled.

In enacting the Victim Compensation Fund, Congress and the President sought to provide some measure of recompense for the irreparable loss of the thousands who died and were injured. They granted to the Department of Justice and the Special Master the authority to promulgate regulations, exercise wise discretion in justly and efficiently administering the Fund, and the ability to craft and implement policies and instructions with respect to that administration. After thorough review, I have found that the regulations, duly promulgated as required by law, reasonably and properly implement the provisions of the Act. Similarly, the interpretive methodologies and policies of the Special Master are reasonable and proper implementations of the Act and regulations. The duty of a judge is to give deference to the Department of Justice's regulations and respect to the Special Master's policies to the extent that they are rooted in law. I hold that the regulations and policies are lawful and valid.

For the reasons stated, I grant defendants' motions for judgment dismissing the complaints and I deny plaintiffs' motions for summary judgment.

SO ORDERED.