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The final rules for the Sept. 11th Victim Compensation Fund were released on March 7 by Kenneth Feinberg, the fund’s special master. Despite some controversy, the basic principles set out in interim rules late last year remain unchanged. There are sure to be court challenges, but the plan will probably survive unscathed. We may now turn to the future and ask whether the system can serve as a model of alternate dispute resolution for other mass torts. The federal law that authorizes the plan, the Air Transportation Safety and System Stabilization Act, orders 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 also states that people who accept money from the fund must surrender their right to sue the airlines. (Congress later amended this to include many other parties.) The act clearly states that collateral sources will be deducted from any award offered by the fund. Anticipating that some families or victims will choose not to accept the government’s money, the act limits the liability of the airlines and other defendants to their insurance coverage. For those who use the fund as an alternative, Congress set no maximum for payouts. The act, therefore, is an alternative to the tort system that is constructed out of a mixture of carrot and stick. The carrot is the promise of presumably generous no-fault payments. The stick is the threat that if one were to sue, recovery could be barred if others had reached the defendant first and used up its insurance coverage. Both of these elements have been used before, sometimes singly, sometimes together. Workers’ compensation, for example, generally bars litigation. On the other hand, workers’ 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. But the Sept. 11 fund combines these characteristics in a novel and untested form. UNCLE SAM, PAYING Perhaps most significant is the fact that the benefits it offers are paid for by the U.S. taxpayer, not the airlines or the other businesses protected by the liability cap. This is not how workers’ compensation operates, but it is how many recent federal programs designed to replace tort law operate. For example, the federal government substituted itself for the manufacturers of the swine flu vaccine in 1976 (although it could sue for indemnification if it chose). So, if someone sues under the National Childhood Vaccine Injury Compensation Act (NCVIA), it is the government, and not the vaccine manufacturer, that pays. And until 1974, it was the federal government, and not the mining companies, that paid under the federal black lung program. Who pays for a no-fault program makes a huge difference in whether the program will be adopted and the scale of its benefit structure. The airline industry went to Congress looking only for a limitation on its liability. When it became clear that the Democrats would block legislative action unless the law included a compensation scheme for those injured in the Sept. 11 attacks, the airlines did not object — as long as Congress paid the bill. Corporations are indifferent about no-fault plans when the government pays. It is widely accepted that the coal industry did not become an active critic of Congress’ 1969 black lung program until it began to pay for the program in 1974. Obviously, the party that pays will want to control the scale of the payments. Interestingly, although Congress is paying for the fund, it said little or nothing about how the compensation levels were to be established and adjudicated. It is unclear how much in its collective memory Congress recalled of the debacle of the swine flu vaccination program. In 1976, in order to encourage rapid production, Congress took over the potential liability of the manufacturers of the vaccine by requiring anyone injured by a vaccine to sue under the Federal Tort Claims Act, with the right to a jury, using the applicable jurisdiction’s tort law. Congress quickly discovered how expensive the tort system can be — associated legal costs ate up almost the entire budget of the program. The memorable lesson is that if one establishes a no-fault scheme, one cannot permit the typical rules of adversarial adjudication to determine damages. MONEY HELPS Feinberg also knew that lesson. In the interim rules, Feinberg revealed two features that immediately defined the fund’s differences from the tort system. First, although not required by Congress, he developed a schedule for the initial calculation of compensation for lost earnings and pain and suffering. Second, he indicated that he did not envision that many of the applicants would require hearings. The Web site for the fund suggested that submission of materials via the Internet might often suffice. Under the NCVIA, the estate of a child killed by one of the covered vaccines receives a death benefit of $250,000 and up to $250,000 in pain and suffering (if injured, the child receives compensation based on the average earning power of a typical American worker). Plaintiffs can enter the tort system. But the manufacturers who are sued may use as a defense compliance with Food and Drug Administration regulations, and recovery is limited to compensatory damages. The question of how much a no-fault program should pay was therefore addressed by Feinberg through the exercise of his discretion in implementing the plan. The final rules suggest that each family claiming on behalf of a deceased individual will receive between $300,000 and $4.7 million. These numbers assume $250,000 for the pain and suffering of the deceased herself (regardless of whether she was a passenger on a hijacked plane or in a building struck by a hijacked plane), $100,000 for each dependent (capped at $300,000), and up to $4.1 million for lost earnings. Significantly, these sums are much larger than those offered in any other federal no-fault plan. In an important sense, the plan keeps the structure of no-fault, but adopts the compensation philosophy of negligence law. One key element of Feinberg’s system is that it avoids the potential debacle of jury trials. This is the part of the plan that most resembles other forms of ADR. But Feinberg seems to have bought this advantage not only by offering a lot of money, but also by imitating the jury’s task in evaluating the degree of loss of income and (very roughly) pain and suffering. The second pillar of Feinberg’s no-fault structure — one familiar to participants in certain types of ADR — is its rejection of the adversarial process. Like the NCVIA and the black lung program (and unlike swine flu), administrative costs are to be minimized through the use of administrative fact finding. It seems that the Sept. 11 attacks would be well-suited for such treatment, since — unlike in most other no-fault plans — there seems little likelihood for disagreement over whether a plaintiff’s injuries were caused by the acts covered by the law. The open questions relate to the calculation of damages, something that is handled reasonably well by the use of schedules. RISKS REMAINING It is still not clear whether the plan will be able to escape the expensive morass of individualized hearings. Feinberg’s office has retreated considerably from its earlier presumption against individual hearings. Although the decisions of the special master will not be appealable, it now seems that families who believe that they should receive more than the presumptive amounts relating to either pain and suffering or future earnings can make their case to the special master at full hearings where they may appear with counsel and present a variety of forms of evidence. It is not clear how Feinberg expects to run the hearings without some form of adversarial presentation. And if these hearings begin to generate sums that diverge too much from the schedules, the schedules may become irrelevant. If a significant number of families do not use the tort system to try to obtain compensation, we must not jump to the conclusion that the plan “worked” and should be emulated in other mass torts. After all, plaintiffs might have opted out of court because the case against the airlines is weak for most of the Sept. 11 victims. Future plaintiffs in other mass torts might stand on firmer legal ground, and therefore decide to use the tort system. And, to the extent that the plan avoided the prolonged litigation of the tort system, look at the cost of doing so. The plan is estimated to produce 3,000 or more awards at an average cost of $1.85 million per claimant. It is estimated that the U.S. government may expend up to $5 billion to fund the plan. Is this a good deal for society? The point of no-fault was to offer an alternative to tort litigation, not a system that simply reproduced its most expensive features. If the Victim Compensation Plan teaches us that no-fault is acceptable only if it pays out hundreds of thousands of dollars for pain and suffering, and millions for lost earnings, what’s the advantage over litigation? The plan does help us see what are some of the essential features of a no-fault alternative to the tort system. Funding from the government helps, as does scheduled damages and streamlined, nonadversarial procedures. But we must confront the uncomfortable truth that it is the size of the awards that is the true innovation, and that is most likely to generally satisfy most of the claimants. NOT A MODEL It may be that Feinberg, in his zeal to win approval of his plan, has set a new floor for all future no-fault plans, from asbestos to genetically engineered drugs. But I doubt it. I suspect that the plan, for all its virtues, is irreproducible. Rather, it is the product of a unique political situation. The generous levels of compensation adopted by the government probably can be attributed to the nation’s swell of patriotism. It is doubtful that those amounts reflect some considered judgment that no-fault compensation levels should be higher in airplane disasters than in cases of vaccine injuries. Equally important, the plan was possible because the government, and not the airlines and other defendants, paid for it. It is hard to imagine a future mass tort arising out of a purely domestic context that will ever receive the same solicitude from the government. Anthony Sebok is a professor at Brooklyn Law School, where he teaches tort law and other topics. He is the author of “Legal Positivism and American Jurisprudence” (Cambridge University Press, 1998).

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