Implementing the 9/11 victim compensation fund: two steps forward, one step back: while the statute establishing the fund seeks full compensation for victims, the regulations are subject to challenge for failing that mandate in some respects.

• Author: Campbell, Richard P.

ON September 22, 2001, just 11 days after the deadly and devastating attacks on the World Trade Center and the Pentagon, the President of the United States signed into law H.R. 2926, the Air Transportation Safety and System Stabilization Act (ATSSSA). (1) In Title IV of ATSSSA, which created the September 11th Victim Compensation Fund of 2001, the federal government chose a curious tort model to assist the individual victims and their families. It could have selected other paths, such low interest or no-interest loans or transitional assistance programs parroting some state based unemployment compensation or workers' compensation programs.

But it did not. Instead, Congress chose a model that provides full, fair and reasonable compensation, without regard to fault, for the entire loss suffered by each victim and each family in this horrific tragedy. Without doubt, the fund is the single largest and most comprehensive no-fault statute in the history of the United States.

In typical fashion, Congress painted the canvas of the fund in broad strokes, setting policies and standards and the appropriating funds to pay the claims. Responsibility for implementing the details was delegated to the U.S. Attorney General and a "special master." Kenneth R. Feinberg was appointed special master in November 2001. On December 21, 2001, in accordance with the time frames set by ATSSSA, the Department of Justice issued an interim final rule establishing regulations to govern administration of the fund. (2) After receiving and considering numerous comments from interested parties, lawyers, academics and others, the final rule was issued on March 13, 2002. (3)

With the regulations that will govern the administration of the fund now firmly set, it is appropriate to evaluate the legal issues that arise.

ISSUES RAISED

1. Constitutional Issues

   * Did Congress have the power to create a no-fault compensation scheme that benefits a narrow class of tort or crime victims and that is financed by federal tax dollars?

   * Did Congress have the power to grant full or partial immunity from tort-based judgments (1) to specific private parties rather than classes of individuals (2) ex post facto (3) without full, unrestricted compensation and (4) triggered by exhaustion of available casualty insurance proceeds?

   * Did Congress have the power to mandate waiver of civil lawsuits against putative tortfeasors by individuals who file claims against the fund and who are later determined to be ineligible for fund benefits?

   * Did Congress have the power to create federal causes of action for damages arising from a connected series of tortious/ criminal acts and tie liability to the tort law of the state where the incident occurred?

   * Did Congress have the power to assign all lawsuits of this type to one federal district court regardless of the site of the incident, the location and convenience of witnesses, or the domicile or residence of the plaintiffs or defendants?

   * Who has standing to challenge Title IV, the regulations promulgated under it, or the decisions, actions or inactions of the special master?

   * What are the proper procedures to follow in raising challenges to the act, the regulations, or the actions of the special master?

2. Fundamental Issues

   * Did the Department of Justice materially and wrongfully deviate from Congress's delegation of authority by (1) assuming powers beyond the express grant of authority, (2) excluding some victims from the fund, (3) minimizing the authorized scope of recovery for victims, and (4) abandoning individualized fact finding?

   * Is explicitly unequal treatment of rescue workers from other victims proper and sustainable?

   * Can the special master control distribution of fund proceeds in frank disregard of state probate law?

   * What are the proper procedures to follow in challenging the regulations?

   In order to put these and related legal issues into a context, it is helpful to review again the essential features of the statute and the final regulations designed to implement them.

   A LOOK AT TITLE IV

1. General

   Title IV of ATSSSA is relatively simple and straightforward. Its stated purpose, according to Section 403, is "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 September 11, 2001." The act does not explain who may be considered a "relative." Participation in the fund is limited to physical injury and wrongful death claims only. Section 404 provides that the U.S. Attorney General, acting through a special master appointed by the Attorney General shall "administer the compensation program" through "hearing officers and other administrative personnel."

   The special master's statutory duty is clear and unequivocal under Section 405. He "shall" determine (1) a claimant's eligibility, (2) the extent of harm, including any economic and non-economic losses, and (3) the amount of compensation not later than 120 days after the date on which a claim is filed. The statute mandates action; it does not grant the special master discretion to act as and when he sees fit.

   Congress set a broad scope of recovery. Indeed, as a cursory review of the language shows, the scope of recovery is greater under this pure no-fault scheme than virtually any state tort law system. The statute requires the special master to award economic and non-economic damages. Economic damages, according to Section 402(5), are to be assessed "to the extent recovery for such loss is allowed under applicable state law." The statute does not create a ceiling on recovery of damages generally or in any single category of damages.

2. Definitions

   The statute (Section 402(5) defines economic loss as:

   any pecuniary loss resulting from harm (including loss of earnings or other benefits related to employment, medical expense loss, replacement services loss, loss due to death, burial costs, and loss of business opportunities) ... Non-economic damages are defined (Section 402(7) as:

   losses for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), hedonic damages, injury to reputation, and all other non-pecuniary losses of any kind or nature. Statutory recognition of hedonic damages is unique but generally welcome. Identification of it as something different from the loss of enjoyment of life is puzzling. (4)

3. Deductions from Award

   Under Section 405(6), the special master must reduce' the award by any "collateral source compensation" the claimant has or is entitled to receive as a result of the events of September 11, and "collateral source" is defined by Section 402(4) as:

   all collateral sources, including life insurance, pension funds, death benefit programs, and payments by federal, state, or local governments related to the terrorist-related aircraft crashes of September 11, 2001. Collateral source compensation is described in the aggregate; it is defined neither as the net collateral source benefit actually received by the claimant nor the present value of any future stream of income. So, for example, the statute on its face requires any award under the fund to be reduced by the full amount of the collateral source compensation without regard to any payments made to obtain the benefit, such as premiums for life insurance, or to any contingency applicable to future receipt of the payments, such as death on a future income stream.

   While no explicit mention is made in the statute of charitable gifts made by the numerous special funds set up to assist victims and their families, the special master determined that amounts received from privately funded charitable entities would not be considered collateral source benefits. He stated in the final regulations that the definition of "collateral source" had been clarified by

   expressly stating that certain government benefits, such as tax relief, contingent Social Security benefits, and contingent workers' compensation benefits (or comparable contingent benefits for government employees), need not be treated as collateral source income. Also, because we do not believe that Congress intended to treat a victim's savings accounts or similar investments as collateral source compensation, the collateral source offsets will not include moneys or other investment in victims' 401 (k) accounts. (5) Claim awards are not subject to federal income or estate taxes under the Victims of Terrorism Tax Relief Act of 2001. (6)

4. Claimants' Rights

   Claimants--that is, victims or a victim's "personal representative"--have a statutory right under the act to present evidence through witnesses and documents and to such other "due process" as determined by the special master. The right to an evidentiary hearing, therefore, is protected. The statute also assures the claimant the right to be represented by an attorney throughout the process. (7) There is no statutory provision for government representation by the Justice Department (or otherwise) or for an adversary process of any stage in the proceedings.

5. Procedure

   Claimants must submit a claim form developed by the special master. It requires (1) information detailing the physical harm suffered or information confirming a decedent's death, (2) disclosure of any possible economic and non-economic losses and (3) information about collateral source compensation. While fraud prevention and detection are not explicitly covered, claimants who make factual misrepresentations on the special master's designated claim form are subject to criminal penalties under the False Statements Act. (8)

   1. Eligibility and Restrictions

      Individuals eligible to file claims are persons who were "present" at the crash sites at the time or in the "immediate aftermath" of the terrorist-related aircraft crashes of...