In Re: World Trade Center Disaster Site Litigation
SUMMARY ORDER DENYING OBJECTION TO BONUS PAYMENTS, Since, in consideration of fairness and proper contract interpretation, the WTC Captive should make the bonus payments as promised, the Allocation Neutral is hereby instructed to include such payment s in the sums payable to settling plaintiffs. The Court understands that all, or the bulk of, these bonus payments will be payable to Tier IV settling Plaintiffs, those with the most serious injuries.The question remains whether Plaintiffs' coun sel should obtain a percentage of the bonus payments in addition to their fee. The Court has previously observed that Plaintiffs' counsel is entitled to a 25 percent contingency fee, net of expenses. All told, the settlements of these lawsuits h ave accumulated approximately $725,000,000, across the series of settlements with the City of New York, its indemnified contractors, and additional Defendants such as the Port Authority of New York and New Jersey. Plaintiffs' counsel theref ore stand to recover approximately $187,500,000, after expenses are paid by the Plaintiffs. Such fees, taken after Plaintiffs' counsel have had all their expenses paid out of the settlement funds, are more than sufficient to compensate counsel for their representation. Plaintiffs' counsel shall not recoup a fee from the bonus payments now ordered to be paid. (Signed by Judge Alvin K. Hellerstein on 9/8/2011) (pl) Modified on 9/8/2011 (pl).
L'NITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
IN RE WORLD TRADE CENTER DISASTER
SUMMARY ORDER DENYING
OBJECTION TO BONUS PAYMENTS
IN RE LOWER MANHATTAN DISASTER
SITE LITlGA TION
21 MC 100 (AKH)
21 MC 102
21 MC 103
IN RE COMBINED WORLD TRADE CENTER
AND LOWER MANHATTAN DISASTER SITE:
ALVIN K. HELLERSTEIN, U.S.D.J.:
In my Order of December 30, 2010, I noted that more than 98 percent of Plaintiffs
eligible to settle their lawsuits in these Master Calendars had opted to settle under the Settlement
Process Agreement, As Amended ("SPA"), and that under the SPA, bonus payments were
payable. Order Accepting Report of Special Counsel and Providing for Effectiveness of
Settlement, In re World Trade Center Disaster Site Litig., No. 21 MC 100 (Doc. No. 2269)
(S.D.N.Y. Dec. 30,2010). The World Trade Center Captive Insurance Company and the City of
New York objected. I have considered the objeetion, the terms of the SPA, and various features
ofthe litigation concerning fairness, freedom from conflicts, and other relevant aspects of the
relationships between Plaintiffs and the counsel who were parties to the creation of the SPA.
The objection is denied. This Summary Order presents my findings and
conclusions in abbreviated format, but is final and may be relied on by the Allocation Neutral in
issuing settlement amounts to settling Plaintiffs.
1. The SPA was approved by this Court as fair, reasonable, and adequate on June 10,
2010. On July 26, 2010, and August 3, 2010, this Court conducted town-hall
meetings in Queens and in Staten Island to answer questions and address concerns
- _ . _ - _..... _ - - - -
of the Plaintiffs eligible to settle their cases by accepting the SPA's tenns. The
Court also, on a pair of evenings in November 20 I 0, made the Special Masters
available for Plaintiffs to ask questions directly.
2. The effective deadline for opting into the settlement, as provided by the SPA, was
September 30, 2010. See SPA § XXIIA
a. The effective deadline was twice extended, first to October 30, 20 I 0, and then
to November 16, 2010, to give more time for sufficient Plaintiffs to ratify the
SPA by satisfying the needed op-in threshold, which could be achieved if95
percent of Plaintiffs eligible to settle in fact did so. Sce SPA § VI.
b. To satisfy the threshold, on the eve of the November 16,2010, deadline,
Plaintiffs' Liaison Counsel, Defendants' Liaison Counsel, and counsel for the
WTC Captive signed seven successive stipUlations of voluntary dismissal
pursuant to Federal Rule of Civil Procedure 41, to dismiss 185 eligible
Plaintiffs and remove them from the Jist of Plaintiffs eligible to settle, thereby
increasing the percentage of those who had chosen to opt into the settlement.
Three of these stipulations, pennitting dismissal of approximately half the 185
Plaintiffs, were docketed before I noticed the purpose and pattern of the
c. I then ordered an in camera hearing to ascertain if Plaintiffs' Liaison Counsel
was sufficiently authorized to stipulate to dismiss cases. See Transcript of
Status Conference, III re World Trade Center Disaster Site Litig., 21 MC 100
(S.D.N.Y. Nov. 18,2010). I found that the Plaintiffs' authorizations to
dismiss were unclear, that the scope of the dismissals was excessive, and that
they were potentially executed against the interests of the dismissing Plaintiffs
and in favor of the settling Plaintiffs, Id, (By separate Order, I now order the
trdllscript of the hearing to become a publicly-filed document.)
d. I permitted those stipulations which had been docketed to be effective, but
held the remaining stipulations tor further inquiry.
e. On November 19, 2010, the Allocation Neutral informed me that more than
95 percent of the eligible Plaintiffs had chosen to accept the SPA. Of 10,563
Plaintiffs eligible to settle, 10,043 had chosen to do so. See Doc, No. 2256,
21 MC 100 (S'o,N.Y. Nov, 19,2010), I accepted the Allocation Neutral's
report Id. Because of my determination of effectiveness, the 95 percent
threshold was achieved and the settlement became effective,
f. Of the 520 eligible Plaintiffs who had not chosen to settle their cases under the
SPA, the vast majority had not made an affirmative decision whether to settle
or to continue litigating their cases. This reflected a reality first learned at the
in camera hearing, that many Plaintiffs had ceased to communicate with their
counsel, Worby Groner Edelman & Napoli Bern, LLP. I appointed a Special
Counsel, Michael Hoenig of Herzfeld & Rubin, P.C., to speak with Plaintiffs
who refused to speak to their counsel, in order to determine if such Plaintiffs
wished, in light of the full facts and after consultation with conflict-free
counsel, to settle, continue to prosecute their cases towards trial, or voluntarily
dismiss their cases. Plaintiffs were to be advised that if they were unwilling to
choose, their cases would be involuntarily dismissed. Order Appointing
Special Counsel, In re World Trade Center Disaster Site Litig., 21 MC 100
(Doc. No. 2257) (S.D.N.Y. Nov. 24,2010).
g. The report of Special Counscl, dated December 21, 20 I 0, is filed with the
records of this case. See Order Acceptinl! Report of Special Counsel and
Providing for Effecti"eness of Settlement. As a result of the Special
Counsel's efforts, 44 more Plaintiffs opted into the settlement; 31 opted to
continue with their cases; and 47 chose to dismiss their cases voluntarily, with
prejudice, to the extent that New York law permits, see Golod v. Hoffman La
Roche, 964 F. Supp. 841 (S.D.N.Y. 1997) (Plaintiffs who dismiss eases retain
the right to bring claims based on new, "second" injuries arising from the
same set offacts or occurrences). In addition, 409 Plaintiffs failed to respond
to the Special Counsel's inquiries, and were dismissed involuntarily by the
Court for failure to prosecute. Order Dismissing Cases for Failure to
Prosecute, In re World Trade Center Disaster Site Litig., 21 MC 100 (Doc.
No. 2268) (S.D.N.Y. Dec. 30, 2010). These dismissals were under identical
terms as those Plaintiffs who dismissed their cases voluntarily. See Order
Dismissing Cases with Prejudice, In re World Trade Center Disaster Site
Litig., 21 MC 100 (Doc. No. 2267) (S.DK Y. Dec. 30, 20 I 0).
3. As a result of the additional opt-ins following the work of the Special Counsel,
10,087 Plaintiffs opted into tbe settlement (tbe numerator of the fraction), the
number of eligible Plaintiffs was reduced to 10,147 (the denominator of the
fraction), and the resulting percentage of settling plaintiffs to all those eligible
was approximately 99 A percent.
4. Under the SPA, if the percentage of settling Plaintiffs is 99.4 percent, the amount
of the settlement is as follows:
A base amount 0[$625,000,000, see SPA § II.A., plus
Potential bonus payments of $55,000,000, because the settling percentage
was in excess of 95 percent and amounts to approximately 99.4 percent,
see SPA § Vl.E; and thus
Total payments payable by Allocation Neutral of $680,000,000, together
"vith contingency payments that may come due under SPA § IV.
5. The SPA provides for a list of Plaintiffs eligible to settle, defined as all those who
provided a notice of claim or filed suit against the City of New York by April 12,
2010, alleged qualifying injuries, and had not previously accepted compensation
in the Victim Compensation Fund. SPA § VLA.
a. Plaintiffs' Liaison Counsel and counsel for the WTC Captive kept the list to
themselves, and did not file the list in Court or give a copy to the Court.
b. Approximately 57 of the Plaintiffs who had filed timely complaints or notices
of claim had taken compensation from the original Victim Compensation
Fund and so released their claims, see Air Transportation Safety and System
Stabilization Act ("ATSSSA") § 405(c)(3), 49 U.S.C. § 40101 et seq., but had
sued nevertheless because of increasing and unexpected severity of the
illnesses they allegedly incurred by reason of their work at the World Trade
Center site. When the WTC Captive objected to allowing any of these
Plaintiffs to settle, Plaintiffs' Liaison Counsel deleted them from the list of
Plaintiffs eligible to settle, even though he also represented them. See Order
Denying Motion to Vacate Order Appointing Counsel, In re World Trade
Center Disaster Site Litig., 21 MC 100 (Doc. No. 2383) (S.D.N.Y. March II,
c. The SPA provided that Plaintiffs who voluntarily dismissed their cases and
gave a release in the fonn attached as Exhibit S to the SPA would be
eliminated from the Eligible Plaintiff List. The WTC Captive and Plaintim'
Liaison Counsel eliminated these Plaintiffs from the list. Pursuant to Court
ruling, these releases were narrov.,'Cr in scope than the text of Exhibit S
provided. See Transcript of Status Conference at 29-30, In re World Trade
Center Disaster Site Litig., 21 MC 100 (S.D.N.Y. Nov. 18,2010).
Specifically. Exhibit S purported to release H[alll claims by Plaintiffs against
all Defendant(s) or against any Defendant arising out of or relating in any way
to World Trade Center-related rescue, discovery, and/or debris removal
operations and/or clean-up at any location on and/or after September II,
200 I." SPA, Ex. S. I ruled, however, and counsel for the WTC Captive and
the City acknowledged, that releases could not bar second-injury claims.
Transcript of Status Conference at 29-30, In re WGrid Trade Center Disaster
Site Litig., 2 I MC 100.
d. The SPA did not provide for involuntary dismissals of cases, or what effect
they should have on the list of eligible plaintiffs. There is no indication in the
SPA or in the records of Court proceedings that eligible Plaintiffs would
refuse to choose between settling their cases or continuing with litigation.
The relevant provision of the SPA provides:
Only Plaintiffs with Debris Removal Claims filed against
the Insureds or any of them, including in any Master
Docket, on or before April 12,2010, or who have instituted
Debris Removal Claims against the Insureds or any of them
through other legal process recognized by New York
law ... on or before April 12, 2010 shall be eligible for
inclusion on the Eligible Plaintiff list; provided, however,
that such Plaintiffs who dismiss with prejudice, and without
exception, their Debris Removal Claims against the
Insureds ... need not be included on the Eligible Plaintiff
List; provided, further, however, that any Primary Plaintiff
who is named in Appendix A to Case Management Order
No. I in Master Docket 21 MC 100 need not be included
on the Eligible Plaintiff List unless he or she has amended
his or her complaint to allege any Qualifying Injury(ies).
Plaintiffs who dismiss all of their Debris Removal Claims
against the Insureds with prejudice by filing the StipUlation
of Dismissal with Prejudice ... at any time before the Final
Settlement Agreement Effective Date shall not be counted
for purposes of determining compliance with the Opt-in
Threshold. In addition, Primary Plaintiffs identified on
Exhibit I may be excluded from the Eligible Plaintiff List,
or shall be excluded from the Opt-In Threshold calculations
in this Section VI of this Agreement even if listed on the
Eligible Plaintiff List, only if they dismiss with prejudice
all of the claims relating to Qualif)ing Injuries such that the
Primary Plaintiff's only remaining Debris Removal Claims
against the Insureds are orthopedic in nature. For those
Plaintiffs who do not opt into the Final Settlement
Agreement, the identification of alleged Primary
Qualifying Injury required by Section VIA. of this
Agreement shall be deemed an answer to an interrogatory
and pursuant to Federal Rule of Civil Procedure 35(c) may
be used to the extent allowed by the Federal Rules of
SPA § VLA As the City and the Captive concede, "[aJlthough the
negotiating parties were well aware that some number of the over 10,000
individual Plaintiffs would ultimately drop out during the settlement process,
the parties made no provision in their contract for altering the participation
percentage for individuals who would ultimately be involuntarily dismissed."
Dcrs Brief at *6. Under the proeeedings that I had ordered, the "drop out" of
Plaintiffs resulting from involuntary dismissals of Plaintiffs refusing to choose
whether to settle or not, and refusing to communicate with their lawyers, was
the equivalent, in consequence and intent, to voluntary dismissals.
e. Where the language of SPA § VLA has spoken to the question whether
Plaintiffs are eligible to settle, this Court has enforced it according to its plain
meaning. See Order Denying Motion to Enlarge Settlement Eligibility Date,
In re World Trade Center Disaster Site Litig., 21 MC 100 (Doc. No. 2192)
(S.D.N.Y. Sept. 27,2010).
f. There is no legal distinction, in consequence or intent, between a voluntary
and an involuntary dismissal, particularly in the circumstances recited above.
Both are subject to the same terms, as permitted by New York law. As I
previously described them,
[Plaintiffs'] dismissal is vvith prejudice for all claims that
could have been brought in relation to plaintiffs' existing
pleadings, but without prejudice in relation to a second
injury to the extent permitted by New York State law, see,
~, Golod v. Hoffman La Roche, 964 F. Supp. 841
(S.D.N.Y. 1997) ("Under [New York's] two-injury rule,
'diseases that share a common cause may nonetheless be
held separate and distinct where their biological
manifestations are different and where the presence of one
is not necessarily a predicate for the other's development.'"
(internal quotation marks omitted», and as may be defined
by any court having jurisdiction over any such later-filed
Order, Dunne v. World TradeCeu.!er l'rops, LLC, In re World Trade Center
Disaster Cite Litig., 05 Civ. 1578 (21 MC 101), Doc. No.9) (S.D.N.Y. Feb. 22,
6. Nothing in the language of the SPA supports the argument of the WTC Captive
and the City that they are not obligated to remove involuntarily dismissed
Plaintiffs from the list of Plaintiffs eligible to settle. As they concede in their
briefing, the parties' agreement shows that they contemplated only that Plaintiffs
would choose to settle their cases or continue litigating. The situation presented
differs from those in which the language of the SPA has spoken to the issue. The
absence of choice was an unforeseen contingency, which requires judicial
7. The objection of the WTC Captive and the City to bonus payments has no
principled basis, and breaches a material obligation on their part to be performed
under the SPA. Requiring the WTC Captive to make bonus payments accords
with the objective intention of the parties, as expressed in the SPA and as
communicated to, and objectively understood by, the settling Plaintiffs, that the
WTC Captive and the City are to pay settlement funds commensurate with the
number of eligible Plaintiffs who chose to settle their cases.
8. Apart from the terms of the SPA, the City and the WTC Captive are not free to
offer and agree to a bonus payment aecording to the percentage of settling
Plaintiffs to the whole, and then to renege on the obligation.
a. Since, from the perspective of the City and the WTC Captive, the legal
consequence and effect of involuntary dismissals is the same as voluntary
dismissals, the WTC Captive would obtain a windfall if it were freed of its
obligation to pay bonus payments.
b. The settling Plaintiffs' acceptances were in response to communications that
the settlement would include bonus payments according to percentages of
acceptances in excess of 95 percent.
c. The Court approved the settlement on the basis that bonus payments would be
payable upon a rate of acceptance exceeding 95 percent, and helped the
parties obtain such ratification by extending Court sessions to Staten Island
and Queens, to spread understanding and acceptance of a settlement that it
determined to be fair and equitable.
9. Because the settlement was made in the aggregate and not in respect of individual
cases, it is the equivalent of a class settlement and not an aggregate of individual
settlements. The Court has jurisdiction and responsibility to review the terms of
the settlement and to determine its faimess and reasonableness. Congress vested
this Court with the power to manage and supervise these cases when it
consolidated all litigation in the United States District Court for the Southern
District of New York, which has exclusive jurisdiction over all cases arising from
the terrorist-related aircraft crashes of September II, 200 I. See ATSSSA
§ 408(b)(I), (3), Congress, in consolidating this entire litigation in this Court,
contemplated that it should exercise such control, and should manage these cases
to achieve a just and satisfactory resolution, just for Defendants as well as for
10. Further, because of the number of conflicts and potential conflicts among the
group of Plaintiffs, and between the Plaintiffs and their counsel, the Court must
assume jurisdiction and responsibility to assure fairness with respect to all
proceedings, including settlement proceedings.
a. The City and the WTC Captive were aware of these conflicts. The bonus and
incentive arrangements exacerbated such conflicts by creating an incentive to
Plaintiffs' counsel to advocate the settlement to all clients, even those who
might prefer to continue ',ith their cases, and to minimize the intensity of
proceedings of continuing cases. See SPA § IV (describing additional
contingency payments that turn on how much litigation activity occurs in
these cases in the future). The City and the WTC Captive also required the
stipulation of dismissal, Exhibit S to the SPA, to be too broad on its faee to be
legitimate. The Court has jurisdiction and responsibility to assure that the
potential for eo-option resulting from these features does not compromise
b. The conflicts and potential conflicts among the Plaintiffs, and between the
Plaintiffs and their counsel, led to distrust between client and attorney and
refusal by many to respond to their lawyer, or to instruct the lav,'Yer regarding
the material aspects of the case. This feature, also, justifies judicial
involvement to assure fairness-for example, the appointment of a Special
Counsel to locate and consult with Plaintiffs who no longer trusted their
lav,'Yer but could not practically displace him with another lawyer.
Since, in consideration offairness and proper contract interpretation, the \lvTC
Captive should make the bonus payments as promised, the Allocation Neutral is hereby
instructed to include such payments in the sums payable to settling plaintiffs. The Court
understands that all, or the bulk of, these bonus payments will be payable to Tier IV settling
Plaintiffs, those with the most serious injuries.
The question remains whether Plaintiffs' counsel should obtain a percentage of
the bonus payments in addition to their fee. The Court has previously observed that Plaintiffs'
counsel is entitled to a 25 percent contingency fee, net of expenses. All told, the settlements of
these lawsuits have accumulated approximately $725,000,000, across the series of settlements
with the City of New York, its indemnified contractors, and additional Defendants such as the
Port Authority of New York and New Jersey. Plaintiffs' counsel therefore stand to recover
approximately $187,500,000, after expenses are paid by the Plaintiffs. Such fees, taken after
Plaintiffs' counsel have had all their expenses paid out of the settlement funds, are more than
sufficient to compensate counsel for their representation. Plaintiffs' counsel shall not recoup a
fee from the bonus payments now ordered to be paid.