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The impact of Sept. 11, 2001 — the devastation of the attack and the horrific loss of life that marked that tragic day — cannot be overstated. America entered a vulnerable new world with consequences that could not have been imagined on Sept. 10. One legal consequence was Congress’ immediate legislative reaction to the attack. The question now arises: Can the compensation system that Congress created for the victims serve as a model for tort reform? Just 11 days after the attack, President Bush signed into law the Air Transportation Safety and System Stabilization Act — Public Law 107-42, Sept. 22, 2001; Public Law 107-134, Jan. 23, 2002 — which created the Victim Compensation fund. In creating the taxpayer-financed fund, Congress established, as an alternative to tort litigation and in an effort to discourage Sept. 11-related litigation, a no-fault administrative system wherein victims of the attack could recover economic and noneconomic damages. In so doing, Congress sought not only to provide quick, definitive financial compensation to Sept. 11 victims, but also to protect the airline industry, among others, from potentially bankrupting civil liability arising from the attack. THE ACT The stated purpose of the act was 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 Sept. 11, 2001.” Significantly, Congress assigned the federal government the financial obligation to pay the compensation awarded to victims participating in the fund. Congress did not require that private companies, like the airlines that would be likely defendants in Sept. 11 civil litigation, pay the victims’ awards. The act specifies that only the following individuals can recover compensation from the fund: (1) an individual or survivor of a decedent who was present at the World Trade Center, the Pentagon or the site of the Pennsylvania crash at the time or in the immediate aftermath of the terrorist-related airline crashes and who suffered physical harm or death as a result of the crash; (2) a survivor of any individual who was on any of the planes that were crashed on Sept. 11, except for the terrorists and their representatives; and (3) in the case of an individual who died as a result of the attack, the administrator/administratrix or executor/executrix of the decedent’s estate. The act delegates a tremendous amount of power and discretion to the fund’s special master, Kenneth Feinberg, Esquire, to administer the fund’s compensation program and to promulgate the regulations necessary for the fund’s administration. The act also vests the special master with the ultimate responsibility for rendering a compensation award in each claimant’s case. The act makes clear that a claimant will not have to prove negligence, or any other theory of liability, to recover economic and noneconomic damages. Consequently, the concept of fault and who was to blame for the attack is simply not a component. The act’s authorization of no-fault recovery, whereby claimants are relieved of the obligation to prove the fault of anyone, is in direct contrast to evidentiary burdens that a claimant would have to satisfy in a lawsuit arising from the attacks. In essence, under the act, the federal government concedes some responsibility for the happening of the attacks and assumes responsibility for compensating the victims to keep them from pursuing lawsuits against the airlines and others. The act provides that by submitting a claim to the fund, the claimant waives the right to file a civil action in any court for damages sustained as a result of the terrorist attack, except for actions against the terrorists and their conspirators. The act forces a victim to make a decision: participate in the fund and be guaranteed a definite compensatory award from the federal government, or opt for a lawsuit, with its attendant risks, expenses and evidentiary burdens, and attempt to prove the civil liability of a private defendant. Clearly, Congress intended to encourage individuals to forego litigation against the airlines and other private interests. In an effort to ensure that victims would participate in the fund and waive their rights to pursue a lawsuit, Congress also limited the scope of lawsuits and damages in the event that victims did choose to sue. Specifically, the act provides that liability for all claims, whether for compensatory or punitive damages, against any air carrier shall not be in an amount greater than the limits of liability coverage maintained by the carrier. Moreover, the act created a federal cause of action as the exclusive remedy for damages arising out of the terrorist attacks, and vested the U.S. District Court for the Southern District of New York with exclusive jurisdiction. By creating a no-fault fund with a promise of guaranteed compensation for eligible claimants and by placing various restrictions on Sept. 11 litigation, it is clear that the president and Congress encouraged victims to forego litigation and instead seek recovery from the fund. Of course, in so doing, Congress and the president sought to protect the airlines and other defendants from possible bankruptcy as a result of lawsuits by thousands of victims. This is not to suggest that Congress’ efforts to provide victims with certain compensation through the fund and to prevent Sept. 11 litigation was either inappropriate or unwise. Rather, it is merely illustrative of the fact that in enacting the legislation, Congress passed significant, even radical, tort reform — and was able to do so with unprecedented swiftness and without having to contend with any opposition. In that regard, the Association of Trial Lawyers of America, both on a national and state level, supported the act and the creation of the fund and called for a moratorium on Sept. 11 lawsuits. PRESENTATION OF CLAIMS In March 2002, the special master promulgated the final regulations, 28 C.F.R. Part 104, governing the administration of the fund’s compensation program. In a statement accompanying the final regulations, the special master recognized that Congress intended that victims forego traditional civil litigation by participating in the fund, as he explained “[t]he fund provides an alternative to the significant risk, expense, and delay inherent in civil litigation by offering victims and their families an opportunity to receive swift, inexpensive, and predictable resolution of claims.” 28 C.F.R. Part 104. Before describing the steps that a claimant must satisfy to recover an award from the fund, it is necessary to highlight a few of the fund’s regulations, particularly those relating to recovery amounts. Specifically, the special master developed a methodology for calculating a claimant’s presumed economic and noneconomic award based on the claimant’s particular circumstances. These include the victim’s age, prior income levels, employment history, marital status, and the number and ages of the victim’s dependents. Pursuant to the act, the special master is required to subtract from any award certain collateral sources received by the personal representative, i.e., life insurance payments, pension payments and other death benefits received by the time the claim is filed. To recover under the fund, a surviving victim of the attacks or the personal representative of a deceased victim must submit eligibility and compensation forms. Those forms essentially require information and supporting documentation regarding the participant’s eligibility, i.e., letters of administration; the victim’s location at the time of the injury or death; the extent of harm sustained by a surviving victim or information confirming a deceased’s victim’s death; the victim’s employment history; financial information concerning the amount of economic and noneconomic damages sustained in the wake of Sept. 11; and the personal representative’s collateral sources of compensation. In completing these forms, a claimant must elect one of two case management tracks on which to place his claim, Track A or Track B. Under Track A, the fund notifies an eligible claimant or counsel of the claimant’s presumed award. After receipt of the presumed award, a claimant may either accept the award and request payment, or appeal and request a hearing. After opting for a hearing, a Track A claimant may file supplemental submissions in an effort to demonstrate that the presumed award was insufficient. The special master then presides at a hearing at which the claimant will present the case, including calling witnesses, and argue why the presumed award is inadequate. The special master will thereafter issue his final determination. The special master will increase the award if he determines that the initial award is inadequate or if the claimant demonstrates extraordinary circumstances proving that the presumed award fails to account for certain economic or noneconomic losses. Track B is essentially the same as Track A, except a Track B claimant does not receive a presumed award and instead proceeds directly to a hearing. Under both tracks, the special master will issue his final determination following a hearing, from which there is no appeal. Congress sought to encourage victims to participate in the fund by ensuring that they would receive the compensatory awards quickly. Therefore, the special master must issue a final determination within 120 days that a claim is deemed “filed,” as defined by the regulations. Typically, the entire process takes only six to nine months, compared to the inevitable years a plaintiff would spend prosecuting a lawsuit in the hope of recovering compensation from a jury. SIMILAR NO-FAULT COMPENSATORY SCHEMES The act is considered fairly radical tort reform because it seeks to supplant civil litigation relating to the terrorist attacks with a no-fault, administrative scheme requiring claimants to waive their rights to pursue civil remedies. Other elements of the act, including the significant limits the act places on the airlines’ potential liability and the act’s creation of a federal cause of action that can only be brought in the Southern District of New York, are examples of more traditional tort reform. While the act’s effort to displace litigation is radical, that approach has been used in the past. Congress enacted the National Childhood Vaccine Injury Act, 42 U.S.C.S. � 300aa-1, et seq., a no-fault, federally operated procedure designed to compensate a child injured by a vaccine. The Vaccine Act does not require an individual who suffered harm from a vaccine to prove that the vaccine was defective or caused the harm. The conduct of the manufacturer is irrelevant to a petitioner’s ability to recover under the Vaccine Act. The Vaccine Act’s administrative process parallels that of the Sept. 11 fund. A Vaccine Act claimant first files a petition for compensation with the Court of Claims, which is assigned to a special master. The Department of Health and Human Services determines whether the claim satisfies the criteria established for compensation, and makes a recommendation to the Department of Justice, which then reports to the special master. The special master conducts a hearing and issues a ruling, which becomes the basis of the Court of Claims’ order, unless the Department of Justice or the claimant succeeds in convincing the Court of Claims that the special master’s ruling is arbitrary, capricious or not in accordance with the law. Unlike the Sept. 11 fund, the Vaccine Act requires a claimant to adjudicate a vaccine-injury claim under the administrative scheme and reject the award before the claimant may file a lawsuit. The public policies on which the Vaccine Act is based are similar to the policies on which the Sept. 11 Act is premised. The Vaccine Act was designed to afford a definite remedy for a plaintiff who would otherwise be forced to engage in lengthy and expensive litigation — and who would face a difficult burden of proof in prosecuting a tort claim. Prior to the Vaccine Act, plaintiffs generally experienced great difficulty in proving their claims, though they occasionally did obtain large verdicts. Vaccine manufacturers were fearful of those unpredictable high verdicts, and the Vaccine Act shielded them from financially crippling civil liability — liability that could have led to a shortage of vaccines and a public health hazard. By analogy, under the Sept. 11 Act, Congress sought to shield airlines from financially crippling civil liability that could have significantly disrupted interstate commerce and further damaged the national economy. Thus, the Vaccine Act and the Sept. 11 Act are similar because they both establish no-fault administrative systems, as an alternative to litigation, and provide compensation to individuals who would otherwise face significant evidentiary challenges recovering in tort. Like the Vaccine Act, New Jersey’s workers’ compensation system, N.J.S.A. 34:15-1 to -128, like many other state workers’ compensation laws, is analogous to the Sept. 11 Act. Under both workers’ compensation and the fund, injured or deceased claimants are automatically entitled to certain benefits under a no-fault procedure. Prior to the inception of the workers’ compensation system, injured employees encountered great difficulty recovering from defendants because co-workers were hesitant to testify against their employers and because employers were able to rely upon several very effective defenses. These inadequacies led the New Jersey Legislature and other state legislatures to enact workers’ compensation systems. Those systems involved an historic trade-off: employees relinquished their right to pursue uncertain common-law remedies in exchange for a no-fault system whereby they received relatively quick and certain compensation. New Jersey’s workers’ compensation system is similar to the Sept. 11 Act in that it provides a no-fault compensation system for claimants who otherwise run the great risk of not recovering in tort. The workers’ compensation design saves injured employees from that risk and ensures that they receive reasonable compensation for their injuries. Similarly, the Sept. 11 Act guarantees that victims who choose to participate in the fund will receive compensation in an expeditious manner in exchange for waiving their common-law rights. Thus, workers’ compensation and the Sept. 11 Act both divert employees and victims from the litigation system with its attendants risks and costs to a compensation system that guarantees them some compensation, albeit less than they might receive from a favorable jury. (That is not to say that the Sept. 11 fund awards are paltry. In one personal injury case, the fund award was $6.7 million. Several death cases have resolved in the $3-$4 million range.) A significant difference between workers’ compensation and the Sept. 11 Act, however, is that employers are responsible for paying the compensation awards in the workers’ compensation system, whereas the federal government has assumed the financial obligation of paying the fund awards. Consequently, although somewhat unique, and even radical, the act’s substitution of the tort system for a no-fault administrative scheme parallels previous no-fault legislative reform in other contexts. MODEL FOR FUTURE TORT REFORM? Given the act’s somewhat revolutionary tort law status, can it serve as a model for future tort reform? If so, what torts or other claims would be suitable for such reform? Unquestionably, one area of the law that has been in dire need of reform for some time is asbestos litigation. The U.S. Supreme Court has thrice called upon Congress in the last decade to enact legislative reform of asbestos litigation because of the staggering costs that the litigation imposes on the parties and the economy at large. See “Asbestos Litigation Is a Crisis Spiraling Out of Control,” New Jersey Law Journal, 171 N.J.L.J. 236, Jan. 27, 2003. Recently, the U.S. Senate has taken the lead in an effort to enact tort reform — reform that is similar to the reform embodied in the Sept. 11 Act — by considering S.1125, the Fairness in Asbestos Injury Resolution Act of 2003. In the bill’s Findings section, the Senate acknowledges that “[a]sbestos litigation has had a significant detrimental effect on the country’s economy, driving companies into bankruptcy, diverting resources from those who are truly sick, and endangering jobs and pensions.” To remedy that problem, the Senate has proposed the creation of a privately-financed, publicly administered fund from which asbestos claimants may recover compensation. The explicit purposes of S.1125, which would entirely remove asbestos litigation from the tort system, are: (1) to establish a fair and efficient system to resolve asbestos injury claims; (2) to ensure that those injured by exposure to asbestos will receive fair compensation; and (3) to increase economic stability by resolving the asbestos litigation crisis that has bankrupted numerous companies. Under the bill, to recover compensation, an asbestos claimant must timely file a claim and prove that he suffers from an eligible disease or condition. Like the Sept. 11 fund, an asbestos claimant would not have to prove the negligence or fault of any entity. Thus, both the Sept. 11 fund and the asbestos fund relieve a claimant of having to meet evidentiary burdens associated with lawsuits. Unlike the Sept. 11 fund, however, the asbestos fund would be funded by contributions from private companies that have been defendants in asbestos litigation, as well as the insurance industry. Despite the Judiciary Committee’s approval, S.1125′s prospects for passage appear dim, as senators from both parties have already raised concerns about the bill. Moreover, the AFL-CIO and the trial bar have criticized the bill and lobbied against its passage because they believe the proposed asbestos fund awards are insufficient. Additionally, the insurance industry has opposed S.1125 because of the financial obligations that the bill imposes on it. As a result, it appears unlikely that the full Senate will pass S.1125 this year. Can the Sept. 11 fund be considered a model for tort reform? At this time, the answer is — perhaps. It depends on the success of the Sept. 11 fund. Victims have until Dec. 22, 2003, to submit their claims to the fund, so it may be too soon to evaluate whether the fund has been successful and whether it should be replicated. Some victims have already complained that the fund compensation is inadequate while others have been gratified by their awards. While victim response has been mixed, the other primary beneficiaries of the act, the airlines and others whose civil liability has been abrogated, consider the act a success. It is important to consider the polices upon which the fund was premised in determining whether it should be replicated in parallel contexts. Those policies are to provide definite compensation to injured individuals who would face difficulty prevailing in a lawsuit and to protect key industries from damaging civil liability. One context in which the fund could serve as a model for tort reform is the mass disaster context, i.e., where numerous individuals experience significant economic and noneconomic loss due to a single occurrence — an airplane crash, whether or not terrorist-related, or a pipeline explosion, like the one that occurred in Edison several years ago. Under such circumstances, the policies of providing definite and expeditious compensation to individuals on a no-fault basis in exchange for waiving civil litigation could be implemented. Another area of the law for which the fund could serve as a template for reform is mass tort, whereby numerous individuals are allegedly injured by a particular substance, drug or product. The U.S. Senate is currently attempting to implement reform similar to the fund to supplant the asbestos litigation system, which is probably the longest-running and most costly American mass tort in history. Other mass torts for which the fund could serve as a template include diet drug litigation, PPA litigation, Ephedra litigation, or whatever the next mass tort “du jour” may be. If the Sept. 11 fund is successful in providing fair and definite compensation to victims, support may grow for applying its no-fault compensation scheme in these other areas where litigation is indisputably expensive, time consuming and unpredictable for all parties. Even assuming the fund proves successful, there still will be obstacles to overcome to implement reform in other contexts. One such problem is that the trial bar will not support widespread reform to eradicate civil litigation. As noted previously, the fund was created without any substantive opposition from anyone, including ATLA. While ATLA supported the Sept. 11 fund, it is actively opposing asbestos and medical malpractice reform and has made clear that its support for the fund should not be interpreted as support for other tort reform initiatives. Another problem likely to be encountered in transporting fund concepts into other areas is the source of funding. The federal government cannot be expected to assume the Sept. 11-type financial responsibility in every context. Instead, such reform would likely require private entities to provide the financial resources. That is exactly what S.1125 attempts to do, and the companies that would be assigned financial obligations are complaining loudly that the proposed system would be unfair to them. As a result, the opposition of both the trial bar and industry is stalling the progress of S.1125 and will likely help defeat the legislation. While private companies would surely embrace reform that would supplant civil litigation and eliminate their financial responsibility for paying awards as the Sept. 11 fund did, it is unlikely that there would be many other contexts, aside from another terrorist attack on the nation, in which such reform could be envisioned. Nonetheless, if the Sept. 11 fund proves to be a rousing success, there may be a groundswell of support for broader application of the fund’s principles in other areas. However, until the ultimate success of the Sept. 11 fund can be gauged, we are left to ponder whether the fund will serve as groundbreaking, precedential tort reform or a unique program inextricably linked to the horrific circumstances that led to its creation. DePhillips is a principal and member of the product liability and mass tort group, and governmental affairs practice at Porzio, Bromberg & Newman (www.pbnlaw.com) of Morristown, N.J. He represents numerous families impacted by the terror attacks on the World Trade Center and is prosecuting claims on their behalf before the special master of the U.S. Justice Department’s Victim Compensation fund. Sharkey is an associate of the firm. If you are interested in submitting an article to law.com, please click here for our submission guidelines.

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