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Lawyers say suits may benefit clients

They are enormously complicated questions: Who is liable for the Sept. 11 terrorist attacks and what is the fairest way to compensate victims?

Congress thought it had the best answer. As part of an airline industry financial bailout, it established a taxpayer-funded Sept. 11 Victim Compensation Fund that would bypass the usual legal skirmishing over liability and speed payments to victims and their families.

The fund was also meant to protect American Airlines and United Airlines, which lost two planes each in the attacks, from thousands of potentially bankrupting lawsuits alleging security lapses and negligence. This goal has only grown more urgent after Monday's American Airlines Flight 587 crash in Queens, N.Y.

But the plaintiffs' lawyers have different ideas.

"Our firm has three clients whose family members were on the airplanes. It may not be in their best interest to go through the compensation act that's been enacted," said Chicago lawyer Tom Demetrio, an airplane crash specialist.

And so, Congress' relatively simple plan for compensating victims may turn into something much more complicated.

The direction the trial lawyers ultimately take _ to advise clients to file claims with the fund or file lawsuits outside it _ will have important consequences for taxpayers, observers say.

If the lawyers mostly advise clients to seek compensation from the government fund, taxpayer liability can be limited. That's because the Justice Department will write the rules for dispensing the money, giving the government some power to limit aggregate payments to some very large but presumably manageable amount.

Victims and family seeking compensation from the government fund are not allowed to pursue outside litigation.

But if lawyers advise clients to sue, there will be no road map for a future that could hold $100-billion or more in liability claims against businesses and government agencies, said Sherman Joyce, president of the American Tort Reform Association, a business-backed group that argues for limits on corporate liability.

"It's perfectly conceivable that somebody right now could file a lawsuit asking for tens of millions of dollars from the Port Authority (of New York and New Jersey, owner of the World Trade Center), the airlines, the security companies, you name it," Joyce said.

The government fund has at least one advantage over the courts for the dependents of those who died in New York and Washington: Compensation could come with merciful speed. The fund is required to open its doors on Dec. 21 and to deliver settlements within 120 days of claims being filed. A court case, by contrast, could take many years, with no certain outcome.

And it is on this point, some say, that the interests of the lawyers and the interests of the survivors of Sept. 11 may diverge.

On Sept. 22, President Bush signed into law the Air Transportation and Stabilization Act, which provided $5-billion in cash and $10-billion in loan guarantees for the crippled airline industry.

That law also established the Sept. 11 Victim Compensation Fund and limited the airlines' total liability in the crashes to the amount of their insurance for the hijacked airplanes. For the two planes that struck the World Trade Center, the airlines carried a combined $3.2-billion in insurance.

That amount is not likely to cover potentially thousands of multimillion-dollar judgments against the airlines. The universe of possible plaintiffs includes relatives of the estimated 4,500 people who perished and countless others injured in the attacks and their immediate aftermath.

One scenario is that the airlines, unable to pay billions in court judgments against them, eventually return to Congress for another huge government bailout.

Taxpayers would again be on the hook _ but for potentially a lot more than if most victims file claims through the more predictable process of the government's compensation fund.

"We support the victims compensation fund. We see it as a very good way for those who suffered injury to get compensation in a relatively easy manner," said Chris Brathwaite, a United Airlines spokesman.

Trial lawyers say they will know better how to advise potential clients once the Justice Department finishes writing the rules that will govern the making of awards from the fund.

Attorney General John Ashcroft is considering releasing a draft of the rules as soon as he selects a judge, or special master, to guide the fund, a spokesman said. That announcement could come as early as next week.

"The only thing we've got now as guideline is (an order) to provide compensation to eligible individuals," Justice Department spokesman Charles Miller said. "Congress gave us a blueprint. We have to fill in the details."

The department is considering using a formula for making awards. The idea is to plug information about a victim's age, earnings potential, number of dependents, amount of "collateral income" such as life insurance, and other factors into a grid that is then used to compute a fair award.

For taxpayers, this method has merit. It would set some limit on the ultimate amount of government liability and make the process more predictable. And for claimants, it would help the government abide by the statutory 120-day deadline for deciding upon an award.

"It's kind of a no-fault system designed to do away with certain legal requirements," Joyce said. "The speed with which the money would be received would increase its value."

Otherwise, he said, claimants could be tied up for a decade or more in the courts fighting over liability. Victims of the 1993 World Trade Center bombing, for example, are still in the courts trying to establish liability for that terrorist attack.

Still, many lawyers oppose using a formula.

"I'm against it," Demetrio said. The right to jury trial "is more precious to the American way of life than setting up a grid."

Miami attorney Larry Stewart said: "It's contrary to the law, because the victim is entitled to a hearing and to present evidence and witnesses. Put them in a grid and that eviscerates that right.

"I think it would be seen by the victims as being arbitrary and completely unfair."

Stewart heads Trial Lawyers Care, a nonprofit organization set up by the Association of Trial Lawyers of America to offer free legal services to Sept. 11 victims who file claims with the government fund.

Critics say the plaintiffs' lawyers oppose a formula because it could set a precedent for awards in future mass-injury cases that would end up reducing their income. Lawyers typically take a percentage of any monetary judgments they win for their clients, an arrangement called a contingency fee.

The airline bill also sets no cap on fees earned by lawyers representing Sept. 11 clients in lawsuits outside the fund. In negotiations on the bill, House Republicans tried to cap those fees at 25 percent, but Senate Democrats prevailed in insisting there be no limit.

The result is that lawyers have an incentive to steer clients away from the fund and into lawsuits, predicted Victor Schwartz, a partner with the law firm of Shook, Hardy & Bacon and author of a textbook on torts used in many law schools.

But that may not be in the interest of the victim or surviving family members, he said. With the fund, there's a bird in the hand, an assured monetary award that can be used immediately.

Litigation is more like two in the bush, Schwartz said: a chance for greater compensation, but not a certainty of it, and the award many years away.

That presents a dilemma.

"Say you can get several hundred thousand dollars from the fund now. But if you sue somebody you have the potential to eventually get $5-million. What do you do?" Schwartz said.

Stewart, the lawyer heading the pro bono victims' effort, said lawyers donating their time would not take any fees for their work or accept any fees for referrals.

He said the volunteers will also sign a pledge not to represent any Sept. 11 clients in any lawsuits at all. Stewart said the pledge is not legally binding, but lawyers who sign it would be required to abide by it "as a matter of ethics."

Expenses, he said, are another matter. The lawyers who volunteer with Trial Lawyers Care might ask the fund to pay for special reports, expert witnesses, medical records and other evidence that is expensive to collect.

Claimants deserve the chance to put on complete presentations, Stewart said. And if those expenses are not covered by the government, victims will have to cover them from their awards, he said.

Stewart said he did not expect presentations of evidence to hamper the government's ability to make awards within the 120-day deadline. But the rules, when finally issued, will clarify whether such lengthy presentations will be allowed, or whether a more simple awards formula will be employed.

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