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Monday, January 02, 2012

The September 11 Victim Compensation Fund (Redux?)

Thanks to Dan and everyone at Prawfs for having me this month.  I'm new here, so a little background about me before I begin:  I teach and write in the areas of complex civil procedure, torts, mass torts, and administrative law.  After clerking for Judge Jack Weinstein, I served with Kenneth R. Feinberg in the administration of the September 11 Victim Compensation Fund.  The VCF was an unusual, no-fault scheme designed to expeditiously compensate personal injury victims and families who lost loved ones in the 9/11 attacks.  And most of my recent scholarship has tracked the way that large publicly-created funds -- that is, funds created by legislatures, government regulators, criminal prosecutors, and states attorneys general -- compete with class action and mass settlements to provide similar kinds of relief. 

So, today marks two significant anniversaries for what I do.  First, it's the ten year anniversary of my original start at the September 11 Victim Compensation Fund; it would publish its final regulations a few months later in March 2002.  After a somewhat slow start, the Fund was very successful by, at least, one measure: at the end of the VCF's short, two year existence, over 98% of the families chose to file claims with the VCF instead of  pursuing individual litigation.    

Second, today marks exactly one year since President Obama signed the James Zadroga 9/11 Health and Compensation Act, a bill Congress passed in the waning days of 2010 to reopen the VCF.  The bill represented the culmination of efforts by many people -- first responders, the New York Congressional delegation, Senator Kirstin Gillibrand, and perhaps most famously, The Daily Show's Jon Stewart -- to compensate rescue and recovery workers who also suffered from toxic exposure as a result of the attacks, but otherwise did not manifest injuries in time to file before the original deadline in 2004.  Both VCF I and II attempt to serve goals long associated with workers compensation, "no-fault" insurance, and for that matter, class action settlements: to provide more legal access, efficiency and equity than the sometimes idiosyncratic, fact-intensive nature of  individual litigation.  Yet, the VCF II will present some unique challenges to its newest administrator, Sheila Birnbaum, a lawyer who, like Ken Feinberg, brings incredible talent, intelligence, and experience to a very difficult task.  I'm only beginning to study the VCF II, but I thought I'd share three ways that I think VCF II differs from its predecessor.  All three raise problems common to all state-sponsored efforts to provide procedural, corrective and distributive justice to victims of collective harm.  

1. Heterogenous and Fact-Intensive Claims.  A large number of the claims filed in the VCF I, sadly, sought compensation in wrongful death.  The VCF II instead largely involves claims for personal injury.  (As of today, it appears that no wrongful death claims have been filed with the VCF II).  The central questions raised in the original VCF raised extraordinarily difficult personal, philophical, and political issues.  Among other things, was a payment from the fund more like a form of government sponsored social-welfare -- privileging need, efficiency and equality -- or like a private tort claim, which values loss, individualized process and exteremly variable awards?  

The VCF II will have far more trouble making these determinations with an overwhelming number of personal injury claims.  The VCF will have to evaluate cases ten years after the event,  and in some cases, resolve difficult and highly individualized questions of exposure, proof, non-economic damages of pain and suffering, and scientific causation. (One can see this by comparing the "grids" released by each iteration of the VCF.  The VCF I grids allows prospective claimants, as well as the public, to estimate awards based on a few, select variables -- age, marital status, and income.  The VCF II "grids," released just last week, cannot replicate detailed grids for the different kinds of physical injuries suffered at different times by first responders.)  The VCF II can rely on the experience of other government entities to determine that someone is totally disabled, like regional workers compensation and social security determinations.  And parties can retain lawyers with experience from the original VCF.  But for the many volunteers and subcontractors working in ground zero who lacked employment benefits, the VCF II will have to expend more effort to meet common goals of transparency, speed and fairness. 

 2.  The Limited Fund.  The original VCF was unusual in that it represented an unlimited appropriation from Congress.  Unlike most private class action or mass settlements, Special Master Feinberg could spend an unlimited amount of money to compensate an eligible, individual claimant for his or her economic and non-economic losses.  The VCF II, by contrast, contains a double cap.  First, Congress set a cap on the total awards that may be paid by the Fund at $2.7 billion.  (The original VCF distributed over $7 billion for a much larger class of people--to the survivors of 2,880 persons killed and to 2,680 individuals injured in the attacks).  But less discussed is the second cap: the special master can only distribute one third of that amount ($875 million) over the first five years of the Fund's existence.   The remaining two-thirds must be distributed, a second time, in the final sixth year of the Fund.  As a result, initial payments will be pro-rated at perhaps as low as 10% of the total due to a claimant, which may be too little (and too late) to cover pressing medical and financial needs.  Moreover, applicants may never really know their compensation award until 2016-17, several years after the statute requires claimants waive their rights to private litigation. 

To address these concerns, Special Master Birnbaum indicated that she would try to account for claimants who "have suffered or will suffer" greater harms than others.  But she recognizes a Solomonic-truth common to many other kinds of private class action and other kinds of aggregate settlements that involve limited resources.  She is "not in the position to compare the urgency of each claimant's needs and resources." At least, that is, until she reviews a large number of claims filed over the five year life of the VCF II

 3.  Lawyers and Their Fees. The original VCF placed no limit on attorney fees, only a recomendation that lawyers attempt to limit their fees to 5% or less of any award.  Attorneys were largely able to meet this challenge for three reasons.  First, the original VCF benefited from an unprecedented outpouring of pro-bono support, organization and shared resources among attorneys and victim groups.  Second, for paid counsel, the legal costs of submitting many wrongful death claims was comparatively lower than traditional litigation.  No proof of fault was required.  Expert reports, to the extent they were submitted at all, could focus only on damages.  Third, awards to survivors were high; unlike personal injury claims, they averaged over $2 million for each family.  The presence of this adequately financed legal support was critical to the smooth, informed operation of the Fund and to achieving a measure of procedural justice--allowing lawyers to tell family members' stories effectively and meaningfully.

 I suspect that securing legal representation for the VCF II will be more difficult, particularly in light of Points 1 and 2, above.  The VCF II covers a larger number of complicated claims (Point 1) than the original and involves, on average, lower and more uncertain awards (Point 2).   However, Congress capped attorney fees at 10% of any award, and it is unlikely that attorneys will be able to match the unprecedented level of pro-bono service and coordination that followed immediate aftermath of September 11.  Special Master Birnbaum has stated that she is committed to making the VCF II work without lawyers -- the original VCF expressed a similar goal, too.  Some have compared this kind model of compensation to "inquisitorial justice," relying on adjudicators and administrators, as opposed to lawyer-advocates, to assist people who petition the government for relief.  However, the VCF I and II illustrate the importance of lawyers in particularly complex claims, with limited resources, that pressure administrators to make difficult distributive questions between deserving parties.  In these cases, lawyers may actually reduce administrative costs, enhance access, and improve the chances like cases will be treated in a like manner.   

 

Posted by Adam Zimmerman on January 2, 2012 at 09:23 PM in Civil Procedure, Torts | Permalink

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A single, childfree rocket scientist, I am disgusted over the discrimination practiced against persons of my ilk. If I'd been killed or injured on 9/11, few of my loved ones would have been properly compensated for their loss of my life and influence. Let it be known that, as a result, I actively contribute my talents to the destruction of such a discriminatory system of compensation.

To the degree that my brilliance, education and efforts are derogated in deference to the married and the breeders, I must apply my talents to bring justice.

The Pied Piper of Hamlin is my hero.

Posted by: Jimbino | Jan 2, 2012 9:48:40 PM

One thing I did not understand is why existing forms of workers' compensation do not adequately compensate the rescue workers for their injuries as a result of responding to 9/11. After all, presumably all workers were covered by existing workers' compensation schemes. And workers' compensation is also no-fault and seems to be able to compensate workers for medical bills and losses, though perhaps not at the rate of private tort law.

All the VCF II seems to do is shift the cost of 9/11 response injuries from private and public insurers to the government.

Posted by: Sean M. | Jan 4, 2012 8:48:24 PM

Thanks for the question, Sean. To take your last comment first, neither version of the VCF is meant to shift the cost of insurance or state workers' compensation to the federal government. By statute, the VCF deducts all "collateral sources" of income, like insurance, disability, pension or other benefits paid to those injured at the site (subject to some caveats). Moreover, the federal government reserves an ultimate right of subrogation; so if another public or private insurer only pays up years later, the federal government may collect those funds, too. In this way, both versions of the VCF were meant to be "payors of last resort."

This "collateral source" provision in the first version of the VCF turned out to be very controversial, by the way. Victims' families complained that the Fund effectively punished people prudent enough to have the forsight to buy insurance or government workers who negotiated for additional disability benefits as part of a collective bargaining agreement instead of a higher salary. Neverthess, the chief reason for this collateral source rule was, as you suggest, to avoid any "insurance-shift" to save taxpayer money, while allocating resources where it was most needed. Many similar funds here and abroad generally function as payors of last resort for that reason.

As to your primary question about the sufficiency of workers' compensation, there are three answers. First, many recovery and rescue workers actually did not qualify for workers' compensation because they were volunteers or independent contractors. Second, as you note, for those who technically qualified for workers' compensation (or some other form of "line of duty" benefit), economic losses extend only up to a statutorily defined percentage of the workers' average weekly wage (if I remember, about 66% in New York) and workers' compensation does not cover non-economic losses at all. Third, many of those working on ground zero complained that workers' compensation carriers took too long--in some cases several years--to determine that their illnesses were connected to the aftermath of September 11. (Those complex causation problems, as I note above, will remain. But, in another part of the same Act, Congress created a default list of covered injuries and charged an independent medical panel -- the same one already charged with registering and monitoring complaints of 9/11 related diseases -- to continue to make new determinations about covered illnesses. So, those determinations may be faster here than in workers compensation.).

But you do raise two deeper, fundamental questions about the September 11 Victim Compensation Fund. First, is the fund supposed to be a substitute for tort or social insurance? After all, why should a no-fault fund pay tort-like compensation? Why should a taxpayer supported fund treat the waiter at Windows on the World differently than the financial analyst just a few floors below? One reason may be because the Fund's payments needed to be high enough to encourage parties to choose it over tort-based litigation. But then again, after a portion of rescue workers settled with New York City following years of private litigation, that reason may not be so compelling. (Note, however, that a significant portion of those workers did not participate in that lawsuit).

Second, where should the federal government draw the line with these kinds of funds? Why not Oklahoma City? Or the bombings of a US embassy? (Some members of Congress attempted, but ultimately failed, to include both in the Fund). The answer to that question is one that I constantly dodge because I have no good answer. As a political matter, I think the increasing reliance on focused, ad-hoc funds, as opposed to more comprehensive reforms to permanent compensation schemes, like changes to workers compensation, reflects the extraordinary political clout and capital needed to accomplish those broader social reforms. Only when (1) the class is narrow, (2) the claims asserted are discrete, and (3) the the population seeking compensation from Congress is considered “more deserving” do these legislative funds stand a chance.

Posted by: Adam Zimmerman | Jan 4, 2012 10:24:37 PM

Adam,

Thanks very much for your thoughtful and detailed answer. It helped clear up some misconceptions I had about the facts on the ground and the Fund and raises some more interesting issues about its design and goals.

Posted by: Sean M. | Jan 7, 2012 10:38:07 AM

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