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View Full Version : 9/11 Lawyers Return to Bargaining Table to Refine Settlement




disorderlyvision
03-25-2010, 12:49 PM
http://www.law.com/jsp/article.jsp?id=1202446762518&src=EMC-Email&et=editorial&bu=Law.com&pt=LAWCOM%20Newswire&cn=NW_20100325&kw=9%2F11%20Lawyers%20Return%20to%20Bargaining%20T able%20to%20Refine%20Settlement


As lawyers in the mammoth 9/11 respiratory litigation returned to the bargaining table Wednesday, they faced the daunting challenge of reaching an agreement that will satisfy Southern District of New York Judge Alvin K. Hellerstein.

Hellerstein stunned all sides in the case Friday when he rejected a proposed $575 million to $657 million settlement for those who responded after the World Trade Center terror attacks and cleaned up the site. The judge complained the settlement paid too little to victims and that its terms were confusing, making it difficult for some 10,000 individual plaintiffs to make a decision on whether to accept or reject payments.

One problem confronting the attorneys as they resume settlement negotiations that already have stretched over almost two years is the judge's concern about plaintiff and defense fees.

Hellerstein said Friday he would insist that plaintiffs' attorneys be paid by the third-party insurance fund established to indemnify New York City and its contractors who responded to the tragedy and cleaned up the site.

In effect, by decreeing that the plaintiffs' recovery not be diminished by attorney fees, the judge was demanding that the World Trade Center Captive Insurance Co. sweeten the pot.

But while he insisted the proposed payout to victims "is not enough," the judge did not specify the amount he would accept before focusing on the fees sought by plaintiffs' liaison counsel Worby Groner Edelman & Napoli, Bern as well as other plaintiffs' lawyers and attorneys who referred cases.

Hellerstein said he planned to reject the contracted contingency fee of 33 percent for the lawyers and assign them a lower share, as he did in the Sept. 11, 2001, wrongful death cases, where he reduced the request to 15 percent of recovery.

The Worby firm has spent more than $90 million up front on the cases, with roughly one third, or $30 million, on case disbursements such as filing fees and medical records, according to a person familiar with the costs. The remaining $60 million has been spent on administrative expenses, including office managers, paralegals, rent and lawyer's salaries, which are not costs charged to clients.

If the settlement number is $657 million, once $30 million in disbursements is subtracted, plaintiffs' counsel would be making a percentage application based on $627 million paid to the victims. Based on a one-third fee, Worby and other lawyers would recover about $209 million.

But if Hellerstein follows through and reduces that percentage, and the settlement amount is not increased, the lawyers' profit would fall dramatically.

For example, if he reduces the percentage to 20 percent, the firm would get $105.4 million, with more than half going to cover administrative expenses. And those amounts would not include tens of millions more that must be spent in the future for case disbursements and administrative costs.

The judge said at last Friday's hearing "just as the captive insurance fund and the private insurers of the city paid the city's expenses and in effect fueled this vigorous and aggressive defense, so they should pay the plaintiffs' fee."

He added, "There are precedents for this. There are settlements that are made with the defendant picking up the expense. This is one of those settlements."

Christine LaSala, president and CEO of the $1.1 billion captive fund, has acknowledged that more than $200 million had been spent defending the city and the contractors since the first cases were filed in 2004.

But Margaret Warner of McDermott Will & Emery, who has been in the lead role for the captive fund, told the court on Friday that the lion's share of the city's legal costs to date have not, in fact, come from the fund, which was seeded by a congressional appropriation, but instead have been recovered from lawsuits the captive fund filed against companies who sold the city insurance in the wake of 9/11.

Liberty Mutual and certain London insurers settled with the city in 2007. And Lloyds of London, after getting an adverse ruling from Hellerstein, settled with the captive fund in November 2009, while the company's appeal was pending before the 2nd U.S. Circuit Court of Appeals. The amounts of the settlements are confidential.

The lawyers who are trying to resurrect the 9/11 settlement -- Warner, plaintiffs' liaison counsel Paul Napoli and lead defense counsel James E. Tyrrell Jr. of Patton Boggs -- must also produce a document that strikes the proper balance between paying out monies to victims now and keeping enough in reserve in the captive fund to handle future claims.

Lawyers involved in the settlement worked to establish the proper balance between present and future costs. But now the calculus has to change given Hellerstein's statement that, "In my judgment, too much has been put aside for the future."

The lawyers will also have to figure out how to achieve the judge's goal of taking "this very complicated settlement and presenting it in a way that people can understand."

Although most of the litigation has been stayed while the two sides weigh their options, which include a possible challenge to Hellerstein's rejection of the settlement at the 2nd Circuit, the judge did allow one part of the case to move forward with an order entered Wednesday.

The settlement calls for four tiers of plaintiffs with the most seriously ill people slotted into the highest, or fourth tier. The judge had expressed concern that tier-four plaintiffs might find it hard to understand the value of a "point" to measure compensation under a system established in the settlement.

The judge Wednesday allowed the parties, who have insisted that the compensation amount for plaintiffs in tiers one, two and three is clear and understandable, to complete assembling a list of eligible plaintiffs for the fourth tier, and thereby add some clarity. The parties have 10 days in which to complete the list.