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A federal judge in New York has thrown out three lawsuits that claimed the Sept. 11 Victim Compensation Fund improperly limited awards to the families of high-income victims of the World Trade Center terrorist attacks. Southern District Judge Alvin K. Hellerstein ruled that the fund as administered by Special Master Kenneth R. Feinberg “reasonably and properly” implemented the congressional act that created it. The judge also said Feinberg could properly consider “financial need and financial resources” in determining awards to the families of victims who earned annual incomes above the 98th percentile in the country, or $231,000. The plaintiffs were “unhappy with the special master’s discretion beyond the 98th percentile level to determine awards according to the claimant’s needs, resources and other individual circumstances,” Hellerstein wrote in his 43-page decision in Colaio v. Feinberg, 03-0558; Smith v. Ashcroft, 03-1040; and Schneider v. Feinberg, 03-1129. “That, however, is discretion that Congress wanted the special master to have,” the judge concluded. Congress created the fund after the Sept. 11, 2001, terrorist attacks to provide an alternative to litigation for the families of the more than 3,000 victims. Feinberg was appointed by Attorney General John Ashcroft, also named as a defendant, to oversee the fund and determine awards. Claimants receiving payment from the fund agree not to sue other parties for wrongful death. The plaintiffs, all of whom are family members of victims who were in the World Trade Center, claimed that Feinberg had violated the authorizing statute by imposing a de facto cap on the awards to the families of those victims whose incomes exceeded $231,000. Lawyers for the plaintiffs had argued that the existence of such a cap was evidenced by statements made by Feinberg in meetings that he would not approve awards over $6 million. The fund had also established presumptive awards for victims whose income fell below $231,000 a year. Claimants of higher-income victims, on the other hand, were required to justify payouts above the 98th percentile by making a showing of their “individual circumstances,” including need and resources. But the judge held that “plaintiffs had adduced no reliable evidence that the special master has imposed a cap.” He noted that the more than 300 awards already determined ranged from $250,000 to more than $6 million. “There is no basis to believe that $6 million will be the maximum award if the facts and circumstances merit a higher award,” Judge Hellerstein wrote. The judge also rejected the contention that the consideration of claimants’ financial need and resources imposed the equivalent of a cap and injected “unpredictability” into the process. Such considerations, he held, conformed with congressional intent to ensure that even the neediest families were compensated, while allowing all victims’ families a chance to avoid the drawn-out, divergent outcomes likely in the traditional tort system. STATE TORT LAW Hellerstein again raised the distinction between the fund and the tort system in rejecting plaintiffs’ argument that New York tort law should govern calculations of claimants’ economic losses. New York law allows a more expansive definition of economic loss and requires compensation to be calculated on pre-tax rather than post-tax income. “Plaintiff’s argument proposes that the special master’s determination of compensation should replicate a jury’s potential calculation of damages under New York’s wrongful death law,” the judge wrote. “Congress did not instruct the special master to engage in the intricate calculations mandated by state tort law in crafting awards.” John Cambria of Salans, the lawyer for the Colaio plaintiffs, all of whom are family members of employees of trading firm Cantor Fitzgerald, said he and his clients were conferring on future action, including the possibility of an appeal. “The judge basically decided the statute supports a level of discretion we disagree with,” said Cambria. “We don’t believe the statute provides for unfettered discretion.” Marc S. Moller of Kriendler & Kreindler, and Jonathan C. Reiter of Aaron J. Broder & Jonathan C. Reiter represented the other plaintiffs. Defendants were represented by Justice Department lawyer Robert D. McCallum. Feinberg expressed satisfaction at the court’s opinion. “I hope this would encourage eligible families that are on the fence to come into the program as the best alternative,” he said.

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