Second Circuit Court of Appeals Affirms Discretion of 9/11 Special Master

In a decision appearing in yesterday’s NEW YORK LAW JOURNAL, the U.S. Court of Appeals affirmed that Kenneth Feinberg, Special Master for Victim’s Compensation pursuant to The Air Transportation Safety and System Stabilization Act (“ATSASSA”),[1] had not set de facto caps on recovery and had not abused his discretion in the manner in which he applied state law to determine compensation levels.  The Court did rule, however, that the Special Master must fully consider economic loss before making any adjustments based upon the needs of the individual claimants.  (For a summary of the district court decision on appeal, see our 8th Newsletter, at http://www.alony.com/Archives/legislativeU8.htm)

Appellants/plaintiffs agreed that the Special Master had not established an actual, or de jure, cap on damages.  Rather, they argued that by discontinuing presumed loss tables at the top 98th percentile of income and having stated that awards in excess of US$6 Million were unlikely, Feinberg had created a de facto cap.  The Court found plausible the Special Master’s explanation that incomes in the higher percentiles were less susceptible to presumptions because of the variables and complexities associated with income levels in the top 2%.  The Court also noted that awards in excess of US$6 Million had already been issued, belying any argument that a US$6 Million cap had been set.  The Court displayed some unveiled dissatisfaction and frustration regarding comments made by the Special Master with respect to “extraordinary” awards to the wealthy:
Such comments fuel the impression that the Special Master has closed his mind to awards that exceed his idea of what is appropriate in the most general sense of the word.

It appears that Congress has confided each award to a sealed box of a Special Master’s mind, has refrained from meaningful prescriptions and has placed the result beyond the reach of review. . . . So while we agree with plaintiffs that the Special Master’s comments are hard to square with the text of the Act, we decline to declare what we cannot enforce.
Plaintiffs/Appellants also argued that the Attorney General’s office had promulgated regulations contrary to the Act.  Specifically, plaintiffs argued that 28 C.F.R. §104.41 improperly allows the Special Master to consider the individual needs of the victim’s families and that 28 C.F.R. §104.42 fails to equate “compensation” with all elements of tort compensation.
The Court ruled that “compensation” as used in the Victims Compensation Act was not intended as a specific reference to compensation levels in the state tort system.  Rather, compensation was consistently used as a synonym for “payment.”


Plaintiffs argued that “economic loss” had to be calculated in the same manner as in state tort law because the Act’s allowed for such damages “to the extent recovery for such loss is permissible under applicable state law”  ATSASSA §405 (emphasis added).  Plaintiffs argued that ATSASSA required the Special Master to affirmatively award damages in all categories permitted by state tort law.  The regulations, interpreted the statute as a prohibiting awards of damages not recoverable under state tort law, but not as a requiring that all state tort elements of damages be calculated and applied.  Because the Act was ambiguous and subject to more than one interpretation, the court gave “deference” to the interpretation of the Special Master and upheld the regulations and interpretation.  Part-and-parcel to this broad ruling, the Court agreed that it was appropriate for the Special Master to depart from state tort law’s approach and calculate economic loss based upon post-tax earnings.


The Court of Appeals also ruled that the regulation allowing for the consideration of the individual needs and circumstances as including “the financial needs and financial resources of the claimant and the victims dependents and beneficiaries” was permissible.  Although the Act could be subject to differing interpretations, the Special Master’s [and the regulation’s] consideration of the needs and resources of the individual’s seeking compensation was entitled to deference.  However, the Court also ruled that the calculation of economic loss must precede the analysis of the needs of the plaintiffs.

 
“[The Special Master] should take into full account a claimant’s economic loss, as specifically required by the statute, before evaluating need-based circumstances.  This slight shift in approach has the virtue of more closely reflecting Congress’ aim as well as appearing to be more fair to claimants.
Lastly, the Court rejected plaintiff’s challenge to “excessive” consumption rates applied to single decedents with no children.  The Court of Appeals ruled, in essence, that such rates were subject to the broad discretion of the Special Master and essentially beyond the scope of judicial review.

Latest Victim’s Compensation Statistics (Updated 13 October 2003)
The following are the latest “presumed awards” ranges for “substantially completed” wrongful death claims under the Victims Compensation Fund:
 
Income Level    Range    Number of
Claims in Range    Net Change from
Prior Newsletter
Up to $20,000    $250,000-$5.75 Million    24    +12
$20,001 to $40,000    $250,000-$1.88 Million    77    +33
$40,001 to $60,000    $250,000-$2.66 Million     127    +70
$60,001 to $80,000    $250,000-$3.15 Million    110    +55
$80,001 to $100,000    $250,000-$4.10 Million    70    +32
$100,001 to $120,000    $250,000-$4.50 Million    60    +21
$120,001 to $140,000    $250,000-$3.63 Million    41    +19
 $140,001 to $160,000    $250,000-$4.08 Million    31    +16
$160,001 to $180,000    $602,329-$4.85 Million    20    +12
$180,001 to $200,000    $482,524-$4.38 Million    24    +15
$200,001 to $220,000    $496,013-$5.09 Million    20    +12
Over $220,001    $250,000-$6.66 Million    86    +54
Totals         690    +351


Of the awards for which more detailed information is provided on a separate “Claim Summaries” page, the highest award broken down is $3.48 Million for a “married project manager with one dependent and a base salary of $231,000…after $939,680 in collateral offsets.”

[1] ATSASSA, also referred to as the Act, is the “enabling” U.S. statute or legislation under which ATSASSA’s regulations were enacted or “promulgated” by the Attorney General.  As a matter of law, regulations and interpretations cannot exceed the authority, or run contrary to, the enabling legislation.  Generally, legislation provides broader guidelines and restrictions; regulations add detail and interpret these guidelines and restrictions.  Plaintiffs above generally argued that various regulations and interpretations were contrary to the Act.