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2002-01-22

Tuesday, January 22, 2002 10:56 PM
Public Comment


Kenneth L. Zwick
Director, Office of Management Programs
Civil Division
U.S. Department of Justice
Main Building, Room 3140
950 Pennsylvania Avenue NW
Washington, DC 20530

Re: September 11th Victim Compensation Fund of 2001, Title IV of Public Law
107-42, 28 CFR Part 104

I am a relative of a partner from New York State that died on September 11. I am submitting this public comment in connection with the
U.S. Department of Justice's Interim Final Rule regarding the September 11th
Victim Compensation Fund of 2001 (the ?Fund?) on his widow?s behalf, and on
behalf of other similarly situated individuals. Please note that my
statements below are specifically directed at the interpretation of
?economic loss? under the Interim Final Rule; however, I request that this
submission be treated as supporting and fully incorporating the public
comment submission(s) of and its affiliates.

THE FUND BACKGROUND

In reading a number of prior public comments, I am struck by the fundamental
misunderstanding of the nature of the Fund as I read ?taxpayer? arguments
that victim?s families have ?gotten enough?, are receiving a ?gift?, and,
amazingly, that they are ?greedy?. The Fund is just one part of a statute
created by Congress and titled the ?Air Transportation Safety and
Stabilization Act? (the ?Act?) to provide an alternative to litigation and
to avert the possible bankrupting of airlines by litigation. One goal of
the Act is to encourage claimants to obtain compensation from the Fund,
rather than from the filing of lawsuits. Even the Special Master appointed
to administer the Fund acknowledges this fact by stating that it ?offers the
eligible claimant an alternative to litigation.? (Statement of Special
Master, Interim Final Rule at
http://www.usdoj.gov/victimcompensation/victimcompfedreg.htm, hereinafter
the ?Special Master Statement?). For a number of potential claimants, this
is simply not the case.

It is true that the Fund is an unprecedented act on behalf of the U.S.
government and its people; however, it is also true that the Act was drafted
not simply to provide gifts at taxpayer expense. Again, it must be
remembered that the Act was created as a $15 Billion bailout to keep the
airlines flying and to place a cap on airline and insurance liability.
Moreover, it will effectively, if victim?s families participate in the Fund,
immunize from suit the various governmental entities (and other
non-governmental parties) that also face potentially enormous liability.
The purpose of the Act would be circumvented by anything that arbitrarily
limited the amount claimants could recover from the Fund or severely
undercompensated them for their economic loss. Indeed, any such
interpretation undoubtedly would encourage those with the largest economic
losses to file suit. That is exactly what will happen if the Fund is
administered in accordance with the rules as currently set forth in the
Interim Final Rule.

?ECONOMIC LOSS? IS NOT NEEDS BASED

The express language of the Act reflects Congress? mandate, as well as its
intent. Nowhere does the Act mention or in any way authorize compensation
of anything less than a claimant's full damages. Specifically, ?economic
loss? is defined as "any pecuniary loss?to the extent recovery for such loss
is allowed under applicable State law." (See Section 402(5) of the Act).
This Section provides, in no uncertain terms, that a claimant has a right to
receive full and complete compensation for at least the same pecuniary
losses that could be recovered under applicable state law. Economic damages
under state law are based on the individual circumstances of the victim,
including that victim?s full economic loss. There is no doubt that the
September 11 victims earned different incomes and suffered varying economic
losses; however, state law compensates for and reflects those differences.
And what is clear is that basic formulas can be created to apply to all
claimants in a fair, predictable and consistent manner.

However, for some unknown reason, and despite the plain language of the Act,
the Special Master and the Justice Department have determined that economic
loss shall de determined based on individual ?needs?. The specific reason
given by the Special Master is that ?[w]e have concluded that the purpose of
the Act is not simply to examine economic and non-economic harm, but also to
provide compensation that is just and appropriate in light of claimants'
individual circumstances. We have concluded that any methodology that does
nothing more than attempt to replicate a theoretically possible future
income stream would lead to awards that would be insufficient relative to
the needs of some victims' families, and excessive relative to the needs of
others.? (See Special Master Statement).

It is abundantly clear that this is not an appropriate interpretation under
either state law or the Act itself. The Fund was not designed to be needs
based, and any needs based reading would be in violation of its provisions.
Neither New York State law nor the Act provide for a measure of economic
loss through this type of analysis. I can only surmise that this is a
cost-cutting solution of the Justice Department, the Special Master or the
Office of Management & Budget, presumably as a result of some financial or
political pressure. The problem is that given the blatant disregard of the
plain language of the Act (without any statutory support or relevant
explanation), the interpretation of the Act by the Justice Department and
the Special Master is an unacceptable abuse of the legislative process.

ARBITRARY (AND POSSIBLY UNLAWFUL) LIMIT ON ?ECONOMIC LOSS?

The Justice Department and the Special Master have taken the needs based
analysis even further in Section 104.43 of the Interim Final Rule. This
Section provides in pertinent part that ?[t]he Special Master's methodology
and schedules, tables, or charts shall yield presumed determinations of loss
of earnings or other benefits related to employment for annual incomes up to
but not beyond the 98th percentile of individual income in the United States
for the year 2000?? This artificial limitation on salaries above the 98th
percentile has come completely out of nowhere. There is absolutely no
justification for it?indeed, this limitation was arrived at in a completely
arbitrary manner and was incorporated into the Interim Final Rule despite
very specific congressional language in the Act to the contrary. Moreover,
in an October 25, 2001 proposal directed to Attorney General Ashcroft,
Congressional leaders stated that claimants ?shall be entitled to recover
full economic and non-economic loss?? (See Public Comment W000787; emphasis
added). Even the Special Master states that ?[w]e were required, of course,
to adhere to the language which Congress set out in the [Act]?? (See Special
Master Statement). Despite the above, the Interim Final Rule clearly does
not adhere to the language of the Act.

If the Fund is administered in accordance with the Interim Final Rule as it
relates to this compensation limitation, the Justice Department and the
Special Master will have taken extraordinary (and quite possibly unlawful)
steps. The Justice Department and the Special Master attempt to craft a
reason for this arbitrary limitation. They state ?that projecting earnings
over worklife for people with extraordinary annual incomes is a very complex
exercise, often requiring a detailed evaluation of variable and often
complex formulae for nonvariable income, differing work life expectations,
often highly volatile industries or markets, and other factors that are not
often subject to easy generalization.? (See Special Master Statement). That
alone does not allow Justice, or the Special Master, to arbitrarily limit
salary levels. Indeed, this arbitrary limitation has no relation to the
supposed ?difficulties? that could be overcome with a simple formula. In
fact, a simple formula was used to create the presumptive award charts for
the Interim Final Rule.

This salary limitation has absolutely no connection to any supposed
difficulties. These were highly compensated individuals who were targeted
for that specific reason. For example, creating a consistent system for
determining a net present value for future income (similar to lottery lump
sum payments) is not difficult. An even simpler solution that would be
absolutely consistent would be as simple as continuing the Special Master?s
compensation charts forward for any appropriate average salary. Indeed, the
charts themselves are the best evidence that a simple calculation can be
made. The Justice Department and the Special Master cannot legitimately
state that determining a salary level of one victim that is $280,000 (as an
example) is so much more extraordinarily complex than determining
compensation based upon the $240,000 salary cutoff level. It is utter
nonsense.

The arbitrary salary cutoff at the 98th percentile is in direct
contravention of the express language of the Act as enacted and would not
likely withstand judicial review. If the Interim Final Rule is adopted as
drafted, it is entirely possible (and highly likely) that the Justice
Department and the Special Master will be in Federal Court litigating their
improper implementation. This cannot be the desired effect. Congress, in
mandating that claimants could recover the economic damages that are allowed
under state law, did not authorize the Justice Department or the Special
Master to discriminate against groups of victims by issuing awards for less
than their actual damages. Instead, the Special Master and the Justice
Department must act in accordance with the Act. The problem, however, is
that the Interim Final Rule, as drafted, is likely in direct violation of
the express will of Congress, as set forth in the Act. This is an
unacceptable abuse by the executive branch.

FUNDAMENTAL INCONSISTENCY

A very basic example of the serious inconsistencies found in the Interim
Final Rule is as follows: a victim earning $1.5 million a year purchases a
fairly standard 3x salary life insurance policy. Based on the Fund charts,
that victim?s salary would be automatically lowered to approximately
$240,000 per year for a Fund total award of approximately 3 to 4 million
dollars, which would then be diminished by $4.5 million of life insurance,
for a total award of $0. Next, taking a second victim earning $250,000 per
year with a similar 3x salary life insurance policy (or even no life
insurance). Using the same calculations, a Fund total award would be
approximately 3 to 4 million dollars, essentially the same as the higher
earner who had the wherewithal to purchase a life insurance safety net.
Even assuming the $750,000 of life insurance is offset as a collateral
source, the award would then only be diminished for a total award of
approximately 2.5 to 3 million dollars. While it is true that the higher
earner received a substantial payout from life insurance, that insurance was
purchased by the victim as a prudent investment. Indeed, these two victims
will have received nearly the same compensation?one as a direct result of
the Fund and one as a direct result of the victim?s own initiative.

The problem is that one of the Fund?s main objectives is ?[t]o provide fair,
predictable and consistent compensation to the victims of September 11 and
their families?? (See Special Master Statement). The above result may be
predictable, however it is entirely unfair and inconsistent because it
inexplicably, arbitrarily and unjustifiably limits compensation above the
98th percentile. In fact, despite the Special Master?s contentions
regarding the difficulty of measuring economic loss, these results are very
predictable (again, the Special Master?s own charts belie any claim of
difficulties). This economic loss limitation in no way represents the
language, nor the intent, of the Act. It bears repeating that the Fund was
created by Congress as one part of a broader act that provided an airline
and insurance bailout, as well as an incentive to get victims to waive their
rights in order to protect these businesses (and, ultimately, the various
governmental entities that have potential liability). There is absolutely
no incentive for high earners to participate in this situation. The
limitation is entirely inconsistent with the Act, despite the fact that
consistency is a main goal in administering the Fund. Moreover, and as I
stated above, there is no precedent for this limitation on the value of
economic loss under state law or the Act.

As a final matter, I feel compelled to respond to the Special Master?s
assertion that ?[c]laimants should not expect awards grossly in excess of
the highest awards listed on the Special Master's presumed award chart, as
the individual circumstances of the wealthiest and highest-income claimants
will often indicate that multi-million dollar awards out of the public
coffers are not necessary to provide them with a strong economic foundation
from which to rebuild their lives.? (See Special Master Statement). This
comment is insulting and offensive. Monies coming out of the ?public
coffers? are for an enormous airline, insurance, and government liability
bailout and not simply a gift to potential claimants. We must not forget
that these high earners also paid substantial taxes on these large salaries.
That tax money is now to be used in this same bailout; however, when it
comes to determining that victim?s economic loss, it will be as if the
victim never made that money. It is painfully clear that these people were
attacked for who they were: young, successful, businesspeople who
represented the pinnacle of America?s financial success. Their families
should not be penalized by arbitrary actions taken in contravention of the
express and unambiguous will of Congress.

Thank you.

Individual Comment
New York, NY

2002-01-22