Volume 11, Issue 2 - January 2013

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VOLUME 11, ISSUE 2: LEAD ARTICLE

2012 James K. Lawrence Lecture: Featuring Mr. Kenneth Feinberg

The following is an edited version of “Unconventional Responses to Unique Catastrophes: Tailoring the Law to Meet the Challenges,” the annual James K. Lawrence Lecture, delivered on October 25, 2012 by Mr. Kenneth Feinberg. Mr. Feinberg has been key to resolving many of the nation’s most challenging and widely known disputes of the past two decades, including administering compensation for the 9/11 Victim Compensation Fund; the Wall Street meltdown; the BP Deepwater Horizon oil spill; and the Aurora, Colorado theater shootings. This year’s lecture was co-sponsored by the Moritz College of Law’s Program on Dispute Resolution, The Ohio State University Center for Ethics and Human Values, and the ABA Section on Alternative Dispute Resolution. Mr. Feinberg’s lecture is followed by a Q&A with the audience.

Mr. Feinberg’s Remarks

The dean mentions both of my books, What Is Life Worth, Public Affairs Press 2005, and Who Gets What, Public Affairs Press 2012. You may have trouble finding these books in the bookstore. Don’t worry. My personal supply of these books is virtually inexhaustible, and if you have trouble finding the books, just let the dean know and we’ll manage to get you copies.

I want to thank [Dean Michaels], obviously, for inviting me here to the Law School; and Sonja [Amadae] from the Ethics School; Sarah Cole, who not only teaches Torts, but is so important to the school and its dispute resolution program; and, of course, Mr. Lawrence, who is an international figure when it comes to alternative dispute resolution, looking for creative, alternative ways to resolve disputes. The mere fact that I’m here under his auspices, in part, is an honor and I’m grateful that he’s here today once again to hear what I think he has probably heard from me a hundred times.

But the main reason that I’m here is because I hope everybody understands that when it comes to dispute resolution, Ohio State Law School is the gold standard. There isn’t a law school in the country that has been at the forefront of thinking about the issues I pose today more than Ohio State. Pepperdine is another school on the West coast, very active. Harvard Law School, with its systems design class, taught by Bob Bordone, is very good. But Ohio State is first among equals when it comes to this whole area of ADR.

I [was] invited back for a second time to Ohio State – and I will come a third time – anybody who does what I do will jump at the chance to come to the venue where this stuff gets discussed on a very high plane. I’m grateful to Sarah and everybody for inviting me back here to talk about this further, and Don [Hubin], as well, for greeting with me and chatting with me about our work.

Now, the dean mentions the topic, unconventional responses to unique catastrophes. Let’s set out the thesis. Every once in a while in America, not often, but once in a while, there is a tragedy or an event that so galvanizes the American people that policymakers say we ought to resolve it. We ought to help the victims. We ought to deal with the subject of compensation out of the box, in an unconventional way.

Normally after tragedy – and tragedy is very, very personal – normally after tragedy, you know what happens: judge and jury will decide. That’s the American way. And the winner and the loser deal with money. Not a truth and reconciliation commission. Not barter. Not I’ll give you my first-born. Nothing like that. Money. Pay me or I won’t pay you. That’s the way it’s always been in this country for over 200 years, and that’s the way I suspect it always will be in a capitalist society where money is used as the vehicle of exchange in rectifying wrong or balancing unfairness. That’s the way it’s been.

We could have a philosophy class about this as to whether or not that’s the best way, but it remains in this country the main way. And when you tie money to law, the rule of law, when you integrate money into court, jury, lawyer, victim, defendant, plaintiff, you have a flawed solution that is so engrained in the fabric of our country, in the history of our country, that when you talk about ADR, remember, it is an outlier. It will always be, in my opinion, an exception to the general way we go about resolving the great bulk of disputes in our country. Now, this is a very important fundamental point to make at the outset, because when you talk about a tragedy like 9/11, or BP, where policymakers decide, let’s think out of the box, you are in no-man’s land, you are creating a unique public policy response to a very unconventional, unique, unprecedented tragedy. That’s important, because when I’m asked all of the time, do I think that the 9/11 fund, or the BP oil spill fund are waves of the future, I say no, they are not waves of the future. I also say that they shouldn’t be waves of the future.

These are programs, however successful they may be – and they are very successful – that should be considered one-off responses to very unique situations. They are a precedent for nothing. They should be studied more in the department of history at Ohio State, or perhaps by those seeking a divinity degree, than in law school. The advantage of looking at these programs in law school is to see how they contrast with torts or corporate law, or the conventional way that we go about resolving tragedy. But they are a poor example of precedent, it seems to me. And we’ll see why in a few minutes.

Take the 9/11 fund. Thirteen days after 9/11, Congress passed a law, signed by President Bush. The law simply said, in one page, anybody who lost a loved one on 9/11, World Trade Center, airplanes, Pentagon, or anybody who was physically injured as a result of the terrorist attacks, can voluntarily waive their right to litigate. Don’t go to court. Don’t sue the airlines. Don’t sue the World Trade Center. Don’t sue the Massport. Don’t sue Boeing. Don’t sue the Port Authority of New York. Don’t sue the security guard companies. Don’t sue. Instead, if you so chose, come into a very generous, no-fault compensation fund, where liability will be presumed and where you will be eligible to receive tax-free compensation, fully funded by the American taxpayer, nobody else. This is public money. In return, I hereby waive my right to sue anybody except maybe the nations that harbored the terrorists to begin with. But I hereby give up my right to sue any alleged American tortfeasor.

You don’t have to. Go get a lawyer and sue if you want. But if you’d rather take the money and run, here’s the program. It will be designed and administered by one person, Ken Feinberg, delegated that authority by the Attorney General of the United States, and no appeals. This is it. Simple, efficient, quick, generous. Damages grounded in tort law.

Over 33 months, 97 percent of all eligible claimants who lost loved ones on 9/11 took the money, [and] $7 billion was paid out, all taxpayer money. Only 94 people decided to opt out of the fund and litigate, and they all settled their cases five years later. There was never any trial on 9/11. The average award for a death claim: $2 million tax -free. The average award for a physical injury claim: $400,000 tax-free. Virtually everybody came into the fund and took the money and waived their right to sue. If numbers are any indication of success, this unconventional response to a unique catastrophe was an absolute stunning success.

BP [was] similar in some ways, very different in other ways, but essentially a first cousin to the 9/11 fund. In April of 2010, the Deepwater Horizon oil rig explodes in the Gulf, killing 11, injuring 80, and spewing millions of gallons of raw oil into the Gulf. Two weeks later, BP, that ran the rig, goes into the White House to see President Obama. And when BP comes out of the White House, it makes a startling announcement. We will front $20 billion to pay any eligible claimant harmed by the oil spill as a result of the explosion. We may some day get contribution from Transocean or Anadarko or Halliburton because we think they’re as responsible, if not more so, than we are, for the explosion. It doesn’t matter. For now, let’s agree to pay the claimants, and we will publicize around the world, we have stepped up with a $20 billion advance. And unlike the taxpayer in 9/11, we’ll pay the claims and worry later about co-defendant contribution. President Obama and we also agreed, let Ken Feinberg do it. He designed and administered the 9/11 fund. Let him design and administer the Gulf Coast Claims Facility.

Over the next 16 months, before the first scheduled trial ever began, the Gulf Coast Claims Facility paid out $6.5 billion and received 220,000 releases not to sue. Different from 9/11; it’s private money. Similar to 9/11, it’s a voluntary alternative to the tort system. If you want to sue, go sue. Why sue? Come on into the fund and get your money. In the first 90 days, we paid out $2.5 billion in emergency money. An obvious success. We basically corralled all the claims in the Gulf of Mexico arising out of that spill.

Notice, because we’re all sophisticated lawyers in this room, how both of those programs are tied to the hip of the tort system. They are fundamental alternatives to what we’re studying in Tort 1 with the professor. If you want to litigate, go litigate. Hire a lawyer and file your claim.  But if you’d rather get quick money in satisfactory amounts, step up here, Feinberg will pay.

Look how different those programs are from Virginia Tech or Aurora, Colorado, to other claims programs that I’ve worked on. In Virginia Tech, a deranged student gunman on campus kills 32 students and faculty and then kills himself. Money pours in from around the nation from sympathetic, empathetic citizens, about $7 million. The governor of Virginia, the president of Virginia Tech says, “Ken, why don’t you design and administer this program to compensate the victims?”

In a way, it’s like 9/11. You’re setting up an alternative compensation scheme to pay victims. But it’s not a first cousin of 9/11 or BP. It’s sort of like a long-lost uncle. Notice we’re distributing $7 million to eligible claimants, but it’s a gift. These are charitable donations that come in from around the country from people taking a charitable deduction, who want their money to be used to help alleviate the financial plight of families and loved ones.

All we do in Virginia Tech is pass that money through to eligible families of the dead and those injured. There’s no release. There’s no waiver of a right to sue. The tort system is in no way implicated in Virginia Tech. [It] has nothing to do with the tort system. Nothing. It’s a gift. Here’s your money. Frankly, if you want, go hire a lawyer and sue the Commonwealth of Virginia. In Virginia Tech, that’s your right. Take the money. Use it to hire a lawyer and go to court.

Now, we’re getting ready to distribute $5 million in Aurora, Colorado, arising out of the Dark Knight shooting. This deranged gunman walks into a movie theater and kills 12, physically injuries scores more. Horrible. Five million private dollars flow into the Colorado coffers. That money is about to be distributed, just like Virginia Tech, as a gift. The long-lost uncle. Do what you want with the money. Hire a lawyer and sue the movie chain. Hire and sue whoever you want, the University of Colorado. That’s your business. All we’re doing is distributing money in a manner designed to promote – not guarantee – promote equity…

All of these programs that I work on, they’re similar in some respects. They are alternatives, or they are grafted into a system that is out of the box, out of the ordinary thinking. Each one of them, however, raises very unique problems that are not transmitted to the other examples. In other words, when you look at the 9/11 fund, there are problems only with the 9/11 fund. BP problems only with BP. Virginia Tech, the Reno [Air Show], Aurora, problems only with them – each of them. And when you design these programs before you administer them, first you’ve got to design the protocol. How are they going to work in practice? Some very interesting problems arise.

Let’s look at a couple of examples and delve just in the surface of some of the problems that come up in each of these examples…The 9/11 victim compensation fund will never, ever be replicated. Ever is a long, long time. I can’t conceive of the 9/11 fund being a precedent for anything. The idea that you’re going to take public taxpayer money to pay the victims of an unprecedented tragedy, a tragedy I think rivaled in American history only by the Civil War, Pearl Harbor, [and] the assassination of President Kennedy…is very, very problematic. Bad things happen to good people every day in this country, and there isn’t a 9/11 fund. I didn’t see any 9/11 fund for Katrina, for Oklahoma City, for Tuscaloosa, Alabama tornadoes, or Joplin, Missouri tornadoes. I didn’t. Where was the 9/11 fund for all of those innocent victims?

You should have read some of the e-mails I got when I was administering the 9/11 fund:

“Dear Mr. Feinberg, my son died in Oklahoma City. Where’s my check?”

“Dear Mr. Feinberg, my son died on the USS Cole fighting terrorists in Yemen, the victim of a suicide bomb. How come I’m not eligible?”

“Dear Mr. Feinberg, I don’t get it. My daughter died in the basement of the World Trade Center, in the original 1993 attacks, committed by the very same people. Where’s my check?”

And it didn’t stop with terror:

“Dear Mr. Feinberg, you’ve got to explain something to me. Last year, my wife saved three little girls from drowning in the Mississippi River, and then she drowned a heroine. Where’s my check?”

How do you justify taking public money to pay only you? Everybody else, fend for yourself. Why do our policymakers, our elected officials in a representative democracy, say, “Well, this is special? This is an unconventional response to a unique catastrophe. We’ll pay them. We’ll pay them not from the perspective of the victim, we’ll pay them from the perspective of the American people. We want to show our cohesion, our sense of community, our communitarian ethic, our empathy. We’ll show the world we take care of our own. It’s different.”

Is it? Is it so different? Also, remember in 9/11, first principle, the 9/11 fund is joined at the hip of the tort system. You’re trying to get people to voluntarily come into a fund, get their money, and waive their right to sue. Well, that guarantees, as a matter of public policy, everybody is going to get a different amount of money. If you’re looking at a track sheet, the stockbroker and the banker, to get them out of the tort system, you better be cutting a bigger check than the waiter, the busboy, the soldier, the fireman, the cop. The tort system looks to economic loss. One size does not fit all.

“Mr. Feinberg, I lost my husband at the World Trade Center. He was a fireman. You’re giving me $2 million. You’re giving my next-door neighbor, whose wife was a banker, $3 million. How dare you demean the memory of my husband! He died a hero. You set up the 9/11 fund. You’re promoting the very divisiveness among claimants that you’re trying to avoid by giving everybody a different amount of money.”

Let me tell you something about the tort system, and any of these funds. It’s not only absolute dollars. How much is this life worth? That’s a problem that we in this room, this sophisticated audience, can address without being a rabbi or a priest. It’s when you give $2 million to the fireman’s widow, who sees that the banker’s widow is getting $3 million. It’s not only absolute loss.

Everybody counts other people’s money. That’s human nature. Everybody counts other people’s money. “So you’re giving me $2 million, huh? Well, what’s she getting? What’s he getting? Why more for him than me? What do you got against me?” Huge problems, you see, unasked.

Does your law degree help with the 9/11 fund? Well, it doesn’t hurt. A divinity degree would be better. A degree in psychology would be helpful. Human nature being what it is you’re going to run into these types of serious problems.

BP [was] similar in some ways, very different in other ways. In BP, you’re paying for, largely, economic damage caused by the oil spill. And BP is announcing to the world, if you’ve been damaged by the oil spill, come one, come all. Well, when you announce a $20 billion fund, and you invite people to file claims; build it and they will come.

We received, in 16 months in BP, 1,200,000 claims, from 50 states and 35 foreign countries. We received about – I didn’t check exactly – about 400 claims from Ohio. Now, the oil didn’t reach Ohio, as far as I know, but we received about 400 claims from Ohio.

“Mr. Feinberg, I own the best seafood restaurant in Columbus. Our shrimp scampi is our signature dish. We couldn’t get shrimp from the Gulf. We lost 12 percent of our clientele. Pay on the dotted line.”

No, we’re not going to pay that claim. We’re not going to pay that claim because we took a serious course in torts. There is no proximate cause. You try explaining to a seafood restaurant in Columbus proximate cause. They will throw you out of the restaurant. All that mumbo jumbo. But for causation. Now, forget whether you can even show but for causation. No proximate cause. As a matter of public policy, the chain from tortfeasor to victim starts somewhere in a proximate definition.

We received 1,200,000 claims. We paid a little less than half of them, and around 65 percent were denied as being ineligible, no proximate cause, or no proof. Proof.

“Mr. Feinberg, I lost a $100,000 because I couldn’t fish.”

“All right. Show me.”

“What do you mean, show you?”

“Well, where are the records that you lost a $100,000?”

“Records? We do things with a handshake down here in the Gulf of Mexico.”

“You may do business with a handshake, but I’m not paying a $100,000 with a handshake. If I pay you a $100,000 based on a handshake, $200 billion won’t be enough. Show me.”

“Okay, I’ll show you. What do you want?”

“Well, let’s see your tax records.”

“I don’t have any tax records.”

“Okay. What do you have?”

“Here’s my corporate profit and loss statements. Here’s my checkbook. Here’s our trip tickets that we went fishing on those days and now we can’t. How is that?”

“Good. Okay. I’m going to cut you a check for $100,000 and send it to you next week. Now, with it, I’m going to send you a 1099 from the IRS.”

“I waive it.”

“You can’t waive a 1099. I’ve got to send you the 1099. You can’t waive the 1099.”

“You’re going to send me a 1099?”

“I have to.”

“I withdraw my claim.”

“Wait a minute. You’re going to withdraw a claim for $100,000 because you’re going to get a 1099?”

“I said, ‘I withdraw the claim.’ Rip it up. I don’t want the money.”

Proof. Sometimes I find in tort law, people focus on causation and they forget all about proving damages. Proof. What do you have to demonstrate your harm caused by the tortfeasor?

In the Gulf of Mexico, [it was] hard to come by. It was tough. I went down to Plaquemines Parish in the back waters of Louisiana, and I met like this with 300 fishermen. The president of the parish introduces me. I’ll never forget this. He says, “All right, everybody. We’ve got Mr. Feinberg here to talk about the oil spill fund. He’s a model public servant. A model.”

Some fisherman in the back row grabs the mic, he goes, “I’ll tell you, I can see now, he is a model. You know what a model is? A small replica of the real thing.”

They put up with a lot of nonsense. But those are the problems with BP. Proof. Volume. The mere magnitude of the claims.

Virginia Tech [was] not tied to the tort system, but [was] a very difficult problem. Thirty-two dead. There’s no tort system. There’s no waiver of any rights. It’s a gift. How much of the $7 million do you give to the families of the dead, and how much do you reserve and set aside for those that are injured? And as to the money that you set aside for the families of the dead, now that you’re not dealing with the tort system, does everybody get the same amount of money if you lost a loved one, or do you give more to the wage earner, the professor?

“Mr. Feinberg, I lost my wife. She was earning $180,000 a year. When you give me money for Virginia Tech, you should give me more than the student who wasn’t working at all and was on scholarship.”

Why? Why would I do that? I’m not tied to the tort system. We’ll take 70 percent of the money that we’ve got and we’ll give it in pro rata, 1/32nd to each of the dead. I don’t care if you’re a student or a faculty member. If you’re a faculty member’s widow and you want to take the money, hire a lawyer, and go get economic loss, go ahead. You’re not giving up any rights to sue in the tort system.

Only two people sued. You talk about how mediation or alternative dispute resolution can promote a sense of community so that people who have every right to sue, once they believe they’ve been treated fairly, forego that right? It’s a fascinating topic for a philosophy department or a psychiatry department, or a sociology department. Why do all but two people decide, I’ve been treated fairly by Virginia Tech, Feinberg gave me the same as my next door neighbor, so I’m not going to sue? Why? I’ve been treated fairly. Life hasn’t treated me fairly. The fund did.

What about the other 30 percent? Well, let’s take some of that and give it to the physically injured: bullet wounds, jumping out of windows, breaking ankles to escape the gunman. How do you decide how much to give to each of the wounded? It’s not like death. The physically wounded vary in intensity, seriousness of injury.

“We’ll give you our medical records.”

“Don’t send me medical records. I am not a doctor. I am not going to pore through medical records that your ankle is worse than her elbow. I’m not going to do that. We don’t have time. We don’t have the wherewithal. We’re not going to eat up limited funds. We’ve got to come up with a creative way to prioritize injury without looking at medical records. Here’s all we want you to do. When you file your claim for injury, attach a statement from the hospital, how long were you admitted. Hospitalization is a pretty good barometer of seriousness of injury. Outpatient? Nothing. Not enough money. One to three days and nights in the hospital? $5,000. Three to nine days in the hospital? $10,000.”

“Mr. Feinberg, this is very unfair. My son was wounded in the leg with a bullet. He went to the hospital and they admitted him. He said, ‘nope, I’m going back to my dorm. I want to be with my friends.’ ‘No, you really should stay here a night or two.’ ‘No, I am not staying here a night or two. I’m going home.’ And he went home. Mr. Feinberg, when you cut your checks, you should treat my son like the courageous patient he was. He refused, despite doctor’s orders to stay in the hospital for two nights, that would have made him eligible for compensation, and instead, he went home. Honor his coverage. Pay him as if he was in the hospital two days.”

“We’re not going to do that. We’re not making subjective determinations about courage…You were in the hospital two days, we’ll pay you. You weren’t in the hospital two days, we won’t pay you. Objective. Not subjective. No subjective decisions. Show us how long you were in the hospital, we’ll pay you.”

“I wasn’t physically injured, but I was in the classroom where the gunman came and I saw the carnage. My student to my left, I saw her head get blown off. The student to my right, I saw him get shot in the chest and die, and then the gunman looked at me, pulled the trigger, and the gun was empty. While he was reloading, I jumped out a window and escaped. I can’t get out of bed. I’m shaking like a leaf. Pay me.”

“We don’t have enough money to pay you, but since you were a witness, since you actually were in the room and observed the carnage, we will give you $5,000 and a scholarship. If you were outside that room watching from your door or on CNN, sorry, there’s not enough money.”

These are decisions you have to make yourself. That’s how these programs work. They all have unique problems.

In Aurora, Colorado…the gunman comes into the movie theater [and] kills 12. Four are physically injured, but so seriously injured that one is in a vegetative state, a brain injury. The other three are quadriplegics, paraplegics. Awful. We’ll treat them like the dead in terms of compensation. And physical injury, we’re basing upon how long you were in the hospital. If you were in the theater and you escaped without a scratch and witnessed the carnage, there’s not enough money. You get zero.

“Mr. Feinberg, I don’t think your systems are fair.”

Don’t ever use that word. What’s fair about any of this? Nothing’s fair. Money as a substitute for loss or horrible injury; It’s not fair. You do the best you can with the hand you’re dealt to try and come up with a program that is an unconventional alternative, where you’re trying to tailor the law to meet the objective. I don’t set the objectives. Policymakers decide in a democracy, let’s set this objective for these people. Let’s do that. Truly rough justice.

[Here are] some final principles: There’s an irony here, and we’ve talked about it. These programs, the ones I’ve worked on, they work. They achieved the objectives. They are, in some sense, some legal and personal sense, a success. Don’t replicate them. Don’t.

These programs ought to be very few and far between, because when you start singling out for special treatment certain victims, while other innocent victims are not entitled to the benefit of these programs, you are promoting the type of favoritism, the type of elitism, the absence of equal protection of the law that we frown on.

BP [was], come one, come all, there’s money to be had. Exxon Valdez is still litigating after over 20 years. Sorry. Keep paying your lawyer. Keep promoting uncertainty in the courtroom. The litigation lottery. No one knows. Take your chances. BP was different. The president has spoken. Different.

If you’re a victim on 9/11, here’s money. If you’re a victim of Oklahoma City, or the USS Cole, or the African Embassy bombings, or the first World Trade Center attack, or whatever, sorry. Don’t even bother to apply. Even in 9/11, with physical injury, not death, [there were] terrible problems.

“Mr. Feinberg, the statute says I’m entitled to get paid for physical injury in the immediate vicinity of the attacks. I live in Jersey City. When the World Trade Center collapsed and that dust and the guck wafted over the Hudson, I breathed the guck in Jersey City. Now I have emphysema. Pay me.”

“No. Ineligible. You’re not in the immediate vicinity.”

“Mr. Feinberg, I broke my leg on East 96th Street. I watched that plane hit the World Trade Center. I fell off the ladder and broke my leg.”

“No, sorry. You’re not in the immediate vicinity.”

“Mr. Feinberg, my husband was a cop. He gathered together all of these people who barely escaped with their lives, and he put them on the Staten Island Ferry and he took them across to Staten Island. And when he got across there, he collapsed and died of a heart attack.”

“Pay him. That’s because of 9/11.”

You make the decisions. You decide these programs. [It’s] very, very difficult. So a final principle here: Be very careful about setting up special programs for special people. Be careful. You’re, in a way, the victim of your success.

The other be careful point is something that I can personally tell you is a subject that keeps you up at 3:00 a.m. when you do these programs: All this authority to do – design, implement, and administer these programs, is delegated to one person.

Even Judge Weinstein in the Eastern District of Brooklyn would send his opinions to Judge Feinberg and others in the 2nd Circuit and they’d pass on it. These programs have no appeals. We’re counting on Ken Feinberg. He’ll do it, and if you don’t like it, you don’t have to do it. It’s voluntary. But if you decide you want to do this program, go right ahead, but he is the last word. You have no other rights when you go into these programs. We trust him.

That’s a pretty stressful delegation. I tell people, I’m only as popular as my last assignment. One of these days, I’ll flop, and when I flop, I won’t be coming back to Ohio State.  I’ll be put to pasture somewhere when I flop.

Right now, if the programs work, it’s a very good, efficient way to get compensation out. I’m not sure it’s a very efficient political science mechanism. It’s administrative law run riot when you have one person with all that type of authority. So that’s a problem.

Final point. I’m asked all the time, what’s the toughest part of the job? The toughest part of the job is the due process component. Giving victims the right to be heard. Now, you can’t do it in BP. There’s 1,200,000 claims. In 9/11, I invited in any family member who lost a loved one who wanted to come in and meet me personally to talk.

It is a subject worthy of a seminar at Ohio State Law School, the role of procedural due process in promoting a sense of fairness. I personally conducted 900 individual confidential hearings with families that lost loved ones. The stories I heard shook me. Horrible. I don’t think one family member came to talk to me about money. That’s not human nature. They came instead to validate the memory of a lost loved one. That’s human nature.

“Mr. Feinberg, thank you for holding this hearing. I was married to my wife for 25 years. She died in the World Trade Center. And I’d like to begin this hearing by showing you a video of our wedding 25 years ago.”

“Well,  Mr. Jones, you can do that. It really won’t – it won’t have any impact on compensation. And I’m not sure…”

“I’m going to show you that video.”

“Mr. Feinberg, my son died at the Pentagon. He was 25 years old. I’d like to show you a video of his bar mitzvah when he was 13. Look how great he looked. See? I just thought you’d want to see that video.”

“Mr. Feinberg, I’m 73 years old. I lost my son at the Pentagon. He escaped. He escaped after the plane hit the Pentagon, but he thought his sister, who also worked there, was trapped, so he went back in to look for her. She had got out a side door. He died looking for her. My life is over. I just want you to know that.”

And then there was this one, my last story. All you brilliant law students at Ohio State and all you undergrads, professors of philosophy, what would you do with this story? What would you do? A lady comes to see me, 24 years old, sobbing. I thought she was going to collapse right in front of me.

“Mr. Feinberg, I lost my husband at the World Trade Center. He was a fireman, and he died there. And he left me with our three kids, 6, 4, and 2. He was Mr. Mom. Mr. Mom. Every day that he wasn’t at the firehouse, he was home teaching the 6-year-old how to play baseball, teaching the 4-year-old how to read, reading a bedtime story to the 2-year-old. What a cook. He cooked all our meals. He was the gardener around the house. He was Mr. Mom. Mr. Feinberg, I will never be the same. My life is over. The only reason I’m even here is to take care of our three children. Otherwise, I would jump out a window and join him. My life is over without Mr. Mom. My life is finished. And I’m just here to let you know that.”

She leaves. The next day, I get a telephone call from a lawyer in Queens.

“Mr. Feinberg, did you meet yesterday with Mrs. Jones?”

“Yeah. Woman with the three kids, 6, 4, and 2. Mr. Mom.”

“Mr. Feinberg, you’ve got one tough job. I don’t envy you and what you have to do. It’s not easy. But I’ve got to tell you, she doesn’t know that Mr. Mom has two other kids by his girlfriend in Queens, 5 and 3. So when you cut your check from the 9/11 fund, there’s not three surviving children. There’s five surviving children. But I’m sure you’ll do the right thing.”

Click. Hangs up the phone. Do you tell her? Do you tell her about the two other kids in Queens? Do you tell her about Mr. Mom having a second wife? That’s what keeps you up, you see. It’s not the legal problems that arise in these cases. It’s all about human nature. Ethical dilemmas. I didn’t tell her. She must know by now somehow, but who am I to tell her? She’s grieving for her husband. Who am I to tell her, “Oh, by the way, there’s two other kids.” I’m not going to – I don’t know the facts. I don’t know what’s going on. I’m just a bureaucrat trying to give money out. I can’t deal with these curve balls that get thrown at you. I don’t think it’s appropriate. She has a memory of her husband. If that’s the memory she has of her husband, so be it. So I didn’t tell her. We cut one check for her and the three kids, and a separate check that she didn’t know about to the girlfriend as the guardian of the two kids. That’s it. That’s the best we can do. But that’s what keeps you up at 3:00 a.m.

That’s the final point, you see. It’s dealing with human nature that makes these problems so profound. It’s dealing with the emotional response of human beings to tragedy that makes this so complex. Even with the Pay Czar, when I was setting pay at Wall Street, you’re dealing with people who just don’t get it. What do you mean, you’re fixing my pay? My pay, who are you to fix my pay? Well, Congress passed a law…It’s human nature. You’ve got to be part lawyer, part rabbi or priest, part psychiatrist…study human nature. That’s how we respond unconventionally to tragedy.

Question and Answer Session

Question: Given the fact that the BP oil spill program that you executed was essentially a settlement procedure with private money, private individuals’ claims, why shouldn’t we set precedential value in moving forward for similar corporate disasters?

Mr. Feinberg’s Answer: That’s a fabulous question. Why is the BP oil spill fund just another settlement between a private company, BP, and victims? Why isn’t it a wonderful precedent? I know of no company in American history that ever fronted $20 billion before having one day in court. The reason I think the BP private settlement – largely private, maybe encouraged, shall we say, by President Obama – is so unique is the magnitude of the settlement. You’re right that companies settle every day. Somebody falls off a defective ladder, the ladder company settles. Somebody gets injured in an automobile accident; if it’s a design defect, have General Motors or Ford pay. But I don’t know of a mass settlement, where thousands are potentially injured and the company announces within weeks, here’s $20 billion. Not 20 cents, $20 billion, and we’re not the right ones to process the settlement. Let’s pick Ken Feinberg. He’s a neutral. He’s not really working for us. We’ll pay him, but it’s up to him. So the magnitude of the settlement, the scope of the settlement, the structure of the settlement, I think very unique. Your point is well taken. Private people settle their disputes every day. It’s the massive scope of the settlement that I think is so unique.

Question: One of the things that I saw in the DVD that was [made about the 9/11] victims compensation fund was that one of the victims said that what was really meaningful to her was when you listened to her and you touched her hand. I noticed just speaking with you beforehand that you do listen when people are talking. I know that’s a mediator skill. To what extent did you use some of your skills as a mediator to potentially make the whole process more palatable and essential?

Mr. Feinberg’s Answer: How did mediation enter more directly, not implicitly, but more explicitly, enter into 9/11 claims processing? Good question.  One, I’m a much better listener than I was before 9/11. The ability to step back and not jump the gun and listen, to just let people vent, has carried forward to my mediation practice now, where I’m much more willing to be passive and to let the mediation participants vent. Secondly, actually there was a whole strain or type of claim, where actual mediation skills were implemented. You talk about the money going out the door in 9/11 to the families of the victim. I gave you some examples. Well, who speaks for the family?

“Mr. Feinberg, I lost my brother at the Pentagon. He hated his sister. Make sure she doesn’t get a dime.”

“Mr. Feinberg, I was the fiancée of the victim. We were going to be married on September 12th. I should be treated like a spouse.”

“Biological parents of the victim – what do you say that?”

“That wedding was never going to take place. On September 10th, our son called and said, ‘Mom, I’m calling the whole thing off.’”

“Fiancée – what do you say to that?”

“Here’s the invitation to the wedding, Mr. Feinberg. How dare they!”

We set up a mediation program to help would-be family recipients of the funds work out how the money’s going to be distributed. And out of 5,300 payments to claimants dead and injured, we were unable to work out only 18. All other disputes, we worked out through mediation. Only 18 people, we couldn’t work it out, so we took the money, put it in the surrogate’s court, and said, “You guys go fight it out. We’ve tried.” Mediation is very large in these programs, and giving people the right to speak is a big, big help.

Question: You said that in retrospect, you would have handed the money to the victims’ compensation fund equitably, but you’ve said how hard it is to decouple the process from the tort system.

Mr. Feinberg’s Answer: It’s not for me to decide, you see. If I had my druthers and you want to set up a fund to acknowledge the community support for the victims and the sense of communitarianism, give every victim the same amount of money, just like we did in Virginia Tech. In order to do that, you’ve got to decouple it from the tort system. If you decouple it from the tort system, there might not be a fund. If one objective of the 9/11 fund is to prevent people from suing the airlines, you’ve got to tie it to the tort system. Once you tie it to the tort system, once you say you shall, in return for the money, sign a release, you’re opening yourself up to all sorts of problems. So I say don’t do these programs, and if you’re going to do them, give everybody the same amount of money. All lives are equal. Not physical injury. You can’t do that. But all lives are equal. I think that’s a much easier way, less divisive way, assuming the community wants to express itself in that manner. One thing I always tell people, I don’t decide to do these programs. Policymakers come to me and say, we’re going to do it. How it’s decided, that’s different. If somebody came to me, [and asked] should there be a fund? No, I don’t think so.

Question: Do you think there have been implications for the tort system?

Mr. Feinberg’s Answer: I don’t think so…but the lawyers worry, as well they should. These programs are alternatives to the way the rule of law works in this country. If you go study Tort 1 at Ohio State, you’re going to spend an awful lot of time talking about how the legal system deals with wrongdoing and civil redress. You’re not going to be spending a whole lot of time talking about the 9/11 victim compensation fund, which is a one-off alternative. The lawyers worry that this is the beginning of a bad public policy. I think that the lawyers’ criticism is largely unjustified because I don’t think that there’s any likelihood, virtually none, that these programs like 9/11 or BP are going to replace their livelihood or the way we go about resolving disputes.

Question: You’ve done a great job of showing the relevance to our students of their Torts classes, their Evidence classes, and even their tax class. But I hope to ask you how this applies in Civil Procedure class. You mentioned the criticism of a lack of appeal of Civil Procedure, and you also mentioned there’s trade-offs…Are there other procedural criticisms, procedural drawbacks, where perhaps some of the claimants might feel they were not given the same procedural justice that they would have gotten either in court or, from my perspective, in another type of settlement?

Mr. Feinberg’s Answer: I think so. I think that there’s always procedural trades-off. When your mantra is to promote efficiency and speed, you’re going to have tradeoffs.

In BP, we learned late to give people the right to file a claim in person. Not just electronically, and not just through the mails. Have enough people available in claims offices throughout the Gulf so that you can, in tailoring your claim to your own particular needs, get answers from a live body right then and there. Make lawyers available pro bono through the Mississippi Justice Center. A lot of these people in BP couldn’t afford a lawyer. We set up a program to provide them a lawyer. Give people procedurally the right to know exactly what they’re going to get before they’re asked to waive their right to sue. Don’t make them buy a pig in a poke. “Look, a free preview. Now do you still want to play?” Things like that are very important.

In 9/11, the way that Congress encouraged people voluntarily to come into the 9/11 fund is by telling them, “If you don’t come into the 9/11 fund, and you would rather sue the airlines or the World Trade Center, go right ahead. But you can only sue in the Manhattan venue. You can only sue in federal court in Manhattan jurisdictionally. You can only sue for compensatory damages, not punitive damages. All the claims are consolidated before one judge, Al Hellerstein, U.S. District Court, Southern District of New York. He’s the one judge.” The litigation avenue opened to people who voluntarily elected not to come into the fund was stacked to make it extremely disadvantageous and costly to go to New York City. Congress did that, not me.

Question: Would you say a little bit about how you thought, in the context of the public and the private funds, about the importance and the role of confidentiality?

Mr. Feinberg’s Answer: You try and promote confidentiality. It’s very important that these individual compensation decisions be kept private.

“Mr. Feinberg, you’re giving me $3 million. Nobody must know this. If it gets out that I’m getting 3 million, my kid will be kidnapped at school and held for ransom.”

How do we assure that it will be confidential? Now, we were very good at maintaining, as a rule, confidentiality in 9/11, BP, all of that. It’s not easy. In 9/11, you’re distributing public taxpayer money. It’s public money. The public has a right to know how its money is being spent. We came up with weekly aggregate reports. “This week, we distributed $41 million to 29 people, five firemen and two contractors.” We don’t tell how much each one got. We don’t tell the names. We mask it so that the media can’t find out. And that worked pretty well.  Confidentiality is essential to these programs.

People feel it’s their own money, and they don’t want anybody to know. The 94 people that opted out of the 9/11 fund and settled their cases in court five years later, we don’t know how much each of them got. It’s all sealed. Or how much their lawyers got. None of our business. The judge sealed it.

Question: From a student perspective, is there anything that you learned during your time at NYU that helped you decide this might be the path for you, or any advice for us as students?

Mr. Feinberg’s Answer: Do I have any advice for law students? Don’t plan too far ahead, for one thing. I teach at Columbia, and at NYU, and in Georgetown. I find that law students are too worried about what their resume will look like five years from now. I wouldn’t worry too much about long-range planning. Life has a way, I’ve learned, believe me, of changing the best laid plans.

Find a job, or search for a job that you like, that you’re glad to get up in the morning, and don’t worry too much about what the future holds. The future, with people like you, usually takes care of itself.

The other thing I learned in law school – I don’t know if it still applies – take the courses taught by the best professors. I was taking courses every year, like art and the law, and the guy was great who was teaching art and the law. Foreign policy, and international arbitration, I took a course in it. If whoever is teaching these courses is really good, it is invigorating, it will excite in you the passion of the law. I found that was very, very helpful, also.

But I’m wise enough to know not to give too much advice to law students, who, from what I find, tend to make the right decisions. At a great school like this, with all of the support that you have here, these teachers that you’ve got here, you are fortunate, indeed.

 

Posted in: Volume 11, Issue 2

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