Memo regarding City liability and 9/11 litigation, 2001

NYC 9/11 Public Portal Document

Attorney General, through a Special Master, is charged with administering the compensation program, with no budget limitations. In filing a claim the individual/family does not have to establish fault and waives the right to file a civil action. Individuals who do file a claim are capped in the possible judgment. This fund is quite broad and would allow all injured individuals, not just those in the airplanes, to apply for compensation and to obtain it in a timely manner.

Federal Indemnification Since the number of lawsuits that will be filed is unknown, as is the actual liability amount the City will incur, the City could request indemnification by the Federal government for all liability claims arising from the events of 9/11/01. This form of relief could also assist the City in the long-term as well by including toxic tort cases that might arise in the next few decades. This proposal would require the City to devote resources to defending these claims and then seek Federal indemnification. This alternative would, therefore, still require the City to devote a tremendous amount of time and resources to these cases.

Background The airlines succeeded in getting the bailout legislation by convincing Congress that they would "go under" within a matter of days without it. They claimed that the insurance companies would not continue to cover them, and that they would not be able to access the capital market without immediate protection. The Trial Lawyers Association cooperated in creating the fund for payments to victims who waive their rights to sue.

Silverstein and the Port Authority are lobbying for bailout legislation now. Silverstein is arguing that if Congress will bail him out, he will use his insurance money to rebuild. These efforts are meeting resistance.

According to Schumer's office, they are working on technical corrections to the airline bailout bill that will clarify that persons who opt to receive payment from the federal fund must waive all claims including claims against the City (but only the claims that arose on September 11). Apparently, this was the original intent of the bill and Senator Schumer made a statement on the record to this effect. (However, it will be difficult to amend the bai lout law. Many members of Congress who voted for it are now having "buyers remorse.")

We have been advised that the City will need to convince Congress that it has a "compelling need" to be bailed out, something in the order of a likelihood of bankruptcy without federal protection. By advocating this we may be inviting litigation.

The City's potential liabilities are less immediate and much harder to quantify than the dangers articulated by the airlines, and may not persuade Congress of the need to provide us protection now. Of the various liability concerns, perhaps the one most worth pursuing in Washington is the demand of the contractors that the City indemnify them above the amounts that will be covered by insurance that we can purchase.

NYC-WTC 000138297