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"Special Dispensation"--A Commentary by Prof. Peter Schuck

(This essay originally appeared in the June 2004 issue of the American Lawyer.)

Special Dispensation

It is doubtful that a future administrative program for victims of a large-scale catastrophe would be as flexible, personalized, and antibureaucratic as the 9/11 fund has been.

By Peter H. Schuck, Simeon E. Baldwin Professor of Law

Just before last Christmas, the window for filing applications to the 9/11 Victims Compensation Fund closed. After vigorous, eleventh-hour efforts by fund administrators to persuade the remaining eligibles to enter the program, approximately 97 percent of the death claimants and more than 4,000 personal injury claimants did so. Of the nonfilers, some 48 took the tort option and are suing the airlines and others whom they think are responsible for their losses; some of these plaintiffs will probably drop their suits and file claims against the fund. Some others filed with the fund but then withdrew their claims; some of these may then have sued in tort. At the filing deadline, the fund believed that some 30 had not pressed their claims in either forum, perhaps out of grief or fear of the daunting application form.

The fund must complete its processing of the claims before it goes out of business on June 15, 2004. Although a final verdict on its effectiveness will have to wait until then, it is not too early to begin assessing the fund as a unique policy tool, as a model of a distinctive technique for compensating personal injury and death victims. This preliminary assessment can also shed light on how well the fund has performed the specific duties that Congress mandated in the Airline Transportation Safety and System Stabilization Act, a statute enacted with great haste and little deliberation less than two weeks after 9/11.

The law's chief aim was to keep the airlines aloft in an unprecedented crisis consisting of new terrorist threats, severely reduced traffic, potentially ruinous liability exposure, and skittish insurance markets. Several provisions addressed liability and insurance threats. First, the law limited airlines' tort exposure to the amount of liability insurance already in force on 9/11 [$6 billion]. Second, the law provided a remedial alternative to the tort system for victims of physical harm or death caused by the crashes. Creating the fund in the U.S. Department of Justice, it authorized administrators to compensate victims under a number of rules, including a requirement that they waive their tort claims in order to be eligible for compensation. Some rules are statutory, others have been adopted by regulation, and the act vests the fund's special master, Kenneth Feinberg, with enormous discretion in the interpretation of the statute and the framing of regulations.

Some of these rules are consistent with the tort system, and the statute uses many terms taken from tort law. Other rules might be considered "tort-plus." For example, the law defines economic loss very broadly to include not only the usual out-of-pocket costs but "loss of business or employment opportunities" [presumably meaning future income or profit] if allowed under state law. It also compensates "nonpecuniary losses of any kind or nature," apparently even where state law does not allow it. Still other fund rules depart from tort system principles. Thus, awards are reduced by "all" collateral sources, even including life insurance [but not including private charity]. The fund must make awards within 120 days after the claim application is substantially complete. No judicial review is permitted. In death cases, a $250,000 minimum award for pain-and-suffering applies.

Finally, some of the fund's features deviate sharply from tort law. Unlike tort [but like some social insurance schemes], the act decouples the goals of compensation and deterrence. Many lawyers are representing claimants without fee. The fund's administrator and staff view themselves as victims' advocates; they have vigorously encouraged claims, revised their rules in response to victims' criticisms, and sought to humanize an irreducibly bureaucratic process. By almost all accounts, the fund has succeeded admirably in the difficult, morbid task that Congress assigned it.

From its inception, the fund raised a host of important questions about our society's most fundamental notions of corrective and distributive justice, questions that are worth revisiting now that the claims period has ended. Perhaps the most basic is the question of what policy analysts call horizontal equity, constitutional theorists call equal protection, and common lawyers call analogical reasoning: whether the system treats like cases alike. On this important criterion, I would give Congress a failing grade. It is not simply that the fund compensates the victims of one set of terrorist attacks [9/11] but not victims of other terrorist attacks on American and foreign soil [Oklahoma City, Khobar Towers, and others]. It is also that the fund compensates the 9/11 victims while most other innocent victims of crime, intentional wrongdoing, or negligence must suffer without remedy unless they are "lucky" enough to have been injured by someone who can be held liable under the tort system's peculiar, often arbitrary rules and who is also sufficiently insured or secure financially to pay the judgment. And as already noted, the fund's awards are far more generous and quickly and easily obtained than a tort remedy in most cases. This is particularly true where, as in the 9/11 litigation against the airlines and the World Trade Center, any fault-based liability is highly doubtful and would in any event take many years to establish, and where a third of any recovery would probably go to the lawyers.

As a political matter, of course, Congress's vastly superior treatment of the 9/11 victims is perfectly intelligible. After all, Congress wanted to protect the airlines against potentially massive liability. It also saw the 9/11 victims as a symbol of a unique trauma inflicted on the nation's collective psyche, trauma that had to be repaired as swiftly as possible. But as a matter of fair and equal treatment of other equally innocent victims of misfortune, the fund's scheme seems morally obtuse and impossible to justify. Special master Feinberg is keenly aware of this dilemma. He wonders how he should be expected to reply to the family whose equally innocent loved one died in any accident other than 9/11, including a terrorist incident, and who were to ask, "Why not us?"

One possible reply to at least some of them-the family of a soldier killed in Iraq, for example-is that compensation for such a loss is already available under social insurance programs such as workers' compensation or Social Security [or its military equivalent]. These programs, like the fund, pay victims on a no-fault basis and usually with little delay. Again, however, such programs are far less generous than the tortlike awards that the fund provides to the families of 9/11 victims.

This difference between tort and the fund in turn highlights one of the most important questions concerning the approach of American society to misfortune. Under what conditions should society [1] provide victims with an individually tailored, full compensation remedy, [2] provide them with one that treats them more as members of broad victim categories receiving awards addressed only to their basic needs, or [3] leave them to private charity, self-insurance, or other forms of self-protection?

This is not the place to answer such immensely difficult and controversial questions; here are just a few of the complications. First, the concept of "misfortune" is highly contested in courtrooms, legislatures, and private discourse among citizens. Are smokers who die of lung cancer victims of misfortune? What about unbelted drivers or passengers who suffer injuries that would have been prevented? Or people whose genetic endowment makes them more vulnerable to certain illnesses? A second and related point is that we disagree sharply about the roles that government and private entities or individuals should play in bearing risks, even of those losses widely viewed as misfortunes. Examples include health care costs, sudden declines in property values, and inadequate public schools. Third, there is little consensus on the nature, extent, and merits of tort law as a background, rights-oriented, fault-based system for compensating certain types of injuries.

Small wonder, then, that American society has deployed such a messy, ostensibly incoherent, if not unprincipled, mixture of institutions and approaches--tort, social insurance, private insurance, contract, charity, private savings, categorical programs--for remedying misfortunes of one kind or another. The 9/11 fund well reflects this characteristically American eclecticism and the extraordinary circumstances of its sudden birth. As I discussed earlier, the fund creates a remedy that combines many features of tort law with some elements that are more characteristic of social insurance and, at least in the collateral source deduction rule, private insurance. The result is what Stanford Law School 's Robert Rabin aptly calls a "hybrid" system in which claimants seek individualized, case-by-case determinations leading to compensation at tort [or tort-plus] levels, while also having the benefits-and some constraints-of collective, more categorical compensation at lower levels through a relatively inexpensive and riskless administrative process. It is doubtful, however, whether a future administrative program for victims of a large-scale catastrophe would be as flexible, personalized, and antibureaucratic as the 9/11 fund has been.

This is hardly the first time that American society has confronted the question of how the government should approach private misfortune. Conventional wisdom dates this confrontation to the New Deal era, when the federal government responded to the economic and psychological crisis caused by the Great Depression with a congeries of programs that put all levels of government into the business of bearing and spreading risks of misfortune previously borne by individual citizens and families. Harvard sociologist Theda Skocpol takes this story back further in time to the Civil War veterans' pensions at the federal level and an array of social welfare programs at the state level in the early decades of the twentieth century.

An intriguing footnote to the decision to create the 9/11 fund is the research of Michele Landis Dauber, a lawyer-sociologist at Stanford Law School. Dauber has already unearthed a surprising number of relevant federal laws going back to the early days of the Republic, laws that, mutatis mutandis, grew out of analogous social misfortunes and in some ways prefigured the 9/11 fund. In her telling, both the nature of the crisis and the political-legal response that led to the fund [and the kinds of criticisms the fund has aroused] have historical antecedents. Although many of the early compensation laws were private bills to relieve a relatively small number of individuals, compensation was also sometimes provided on a more categorical basis through administrative mechanisms that she contends foreshadowed the modern welfare state. The triggering events were often fires, floods, storms, earthquakes, and similar disasters, but some of them involved foreign raids on American communities, the early nineteenth-century equivalent of the terrorist attacks of 9/11.

A particularly arresting example was a law enacted by Congress in 1816 to compensate citizens for property lost, captured, or destroyed by the British troops and their Indian allies during the unpopular War of 1812 in a category of cases defined, albeit ambiguously, in the law. As Dauber shows, the public justifications advanced for this compensation program were similar to those advanced for compensating the 9/11 victims. Even more interesting from today's vantage point, the administrator ["commissionere"] of the 1816 law, Richard Bland Lee, had to make numerous eligibility decisions of a kind all too familiar to Ken Feinberg. Lee's decisions, moreover, generated a furious backlash in Congress strikingly reminiscent of the contemporary politics of welfare entitlement programs. In 1817 Lee's authority under the increasingly unpopular law was severely curtailed.

Feinberg's political and administrative skills evidently exceed Lee's. Although Feinberg has been criticized and was sued by some high-income families angry at both the life insurance offsets and the fund's informal cap on high-end compensation, he and the fund have benefited from the strong bipartisan political and judicial support for the program. The prospect for similar programs in a future where terrorist attacks may become all too common is unclear. Perhaps 9/11 will continue to be seen as sui generis, limiting the power of the next victims' "Why not us?" lament to obtain a similar remedy. We must pray that there will be few of them.

Peter H. Schuck is the Simeon E. Baldwin professor at Yale Law School, and author of Diversity in America [Harvard University Press, 2003].