In re September 11 Litig..Cantor Fitzgerald & Co. Et Al.

• Decision Date: 19 January 2011
• Docket Number: No. 21 MC 101 (AKH).No. 04 Civ. 7318.,21 MC 101 (AKH).No. 04 Civ. 7318.
• Citation: 760 F.Supp.2d 433
• Parties: In re SEPTEMBER 11 LITIGATION.Cantor Fitzgerald & Co. et al., Plaintiffs,v.American Airlines, Inc. and AMR Corp., Defendants.
• Court: U.S. District Court — Southern District of New York

760 F.Supp.2d 433

In re SEPTEMBER 11 LITIGATION.Cantor Fitzgerald & Co. et al., Plaintiffs,

v.American Airlines, Inc. and AMR Corp., Defendants.

No. 21 MC 101 (AKH).No. 04 Civ. 7318.

United States District Court, S.D. New York.

Jan. 19, 2011.

ORDER AND OPINION GRANTING PARTIAL SUMMARY JUDGMENT TO LIMIT PLAINTIFFS' DAMAGES

ALVIN K. HELLERSTEIN, District Judge:

Defendants American Airlines, Inc., and AMR Corporation (collectively “American”) move under Federal Rule of Civil Procedure 56 for partial summary judgment to limit the scope of damages that Plaintiffs associated with Cantor Fitzgerald & Company (collectively “Cantor Fitzgerald”) may recover should Cantor Fitzgerald prove American was negligent on September 11, 2001, by failing to prevent terrorists from entering and hijacking American Airlines flight 11 and crashing it into Tower One of the World Trade Center. American contends that portions of the damages Cantor Fitzgerald claims are excessive and in contravention of New York law, because they are claim as damages the revenues that could have been produced if Cantor Fitzgerald's employees had not been killed. For the reasons that follow, I grant American's motion and limit the damages that Cantor Fitzgerald may claim.

Cantor Fitzgerald, a financial services firm, had its main offices in the top five floors of Tower One. On the morning of September 11, 2001, terrorists hijacked American Airlines flight 11 after it departed from Logan International Airport in Boston and crashed the fuel-laden 767 jumbo jet into Tower One, practically severing the building between the 90th and 100th floors. The crash caused intense fires within the building, and its collapse later that morning. Cantor Fitzgerald lost its principal office and 658 of the approximately 1,000 officers and employees who worked there.

Cantor Fitzgerald sued American and other defendants,¹ alleging negligence and other wrongs in failing to detect and screen the hijackers and permitting them to board and capture the airplane. Cantor Fitzgerald alleged several categories of injuries: (i) harm to its brand identity as a leading financial services firm, (ii) destruction of its office, (iii) destruction of its corporate property, such as furniture and artwork, (iv) destruction of its technological infrastructure, (v) destruction of its business records and transactions, and (vi) business interruption losses. Cantor Fitzgerald's complaint did not specify the amount of damages it sought.

In October 2009, all twenty-one plaintiffs alleging property damage arising from the events of September 11, and the defendants whom they sued, took part in comprehensive formal mediation efforts before retired United States District Judge John S. Martin. The mediation efforts were based on the twenty-one plaintiffs' estimates of the damages they had incurred, as reflected in their pre-trial disclosures. Cantor Fitzgerald's own initial estimate was approximately $100 million.

Immediately prior to the mediation, Cantor Fitzgerald amended its damage estimate to increase it ten-fold, to nearly $1 billion. The increase caused a breakdown in mediation efforts before they had even begun. Of the twenty other plaintiffs, eighteen succeeded in mediation by compromising at a figure approximating a 72 percent discount from their overall claimed damages amount. The only two other plaintiffs who did not mediate successfully were Cedar & Washington Associates, LLC (“Cedar and Washington”) and a collective group of plaintiffs associated with the developer Larry Silverstein—the “WTCP Plaintiffs.” ² I discuss the resolutions of these claims later in this opinion.

American now moves for partial summary judgment to define and limit Cantor Fitzgerald's damage claims.

I. Backgrounda. The ATSSSA

This lawsuit arises under the Air Transportation Safety and System Stabilization Act (“ATSSSA”), 49 U.S.C. § 40101 et seq. Immediately following the events of September 11, Congress passed the ATSSSA to protect the aviation industry against the prospect of ruinous liability from exposure to lawsuits; to regulate and concentrate anticipated lawsuits; and to provide a fair, efficient and economical administrative procedure to compensate the victims and their families. See 147 Cong. Rec. S9589–01, S9594 (Statement of Sen. McCain).

Accordingly, the ATSSSA provides that “any air carrier, aircraft manufacturer, [or] airport sponsor” may face liability only up to the limit of the individual aviation defendant's insurance coverage for claims “arising from the terrorist-related aircraft crashes of September 11, 2001.” ATSSSA §§ 408(a)(1), (a)(2). All lawsuits “arising from or relating to the terrorist-related aircraft crashes of September 11, 2001” are to be brought only in the United States District Court for the Southern District of New York, which is directed to apply “the law, including the choice of law principles, of the State in which the crash occurred unless such law is inconsistent with or preempted by federal law.” Id. §§ 408(b)(2), (b)(3).

The ATSSSA also established a Victim Compensation Fund (“VCF”), administered by a Special Master appointed by the Department of Justice. The Special Master developed regulations to provide recoveries from federal funds to surviving victims and to the families of deceased victims without the need to prove fault or face the complications arising from litigation. See id. §§ 401–407. Claimants eligible for the VCF were given a choice of opting into the fund or pursuing litigation. Id. § 405(c)(3)(B). Claimants for property damage were not eligible for the VCF.

b. The Wrongful Death and Personal Injury Lawsuits

The ATSSSA gave wrongful death and personal injury claimants a choice either to enter the VCF and seek speedy and certain recovery from the Special Master appointed to administer the VCF or to pursue traditional tort remedies in court. Ninety-five such suits were filed in connection with the crashes of the four hijacked airplanes, American Airlines flights 11 and 77 and United Airlines flights 93 and 175, and against numerous other Aviation Defendants. ³

Ninety-four of the ninety-five cases have settled. The history of the cases and the settlement proceedings is described in several of my decisions. See, e.g., In re Sept. 11 Litig., 600 F.Supp.2d 549 (S.D.N.Y.2009). The one remaining case, Bavis v. United Airlines, 02 Civ. 7154, is scheduled for trial beginning June 2011. See Order Regulating Proceedings, Bavis v. United Airlines, 02 Civ. 7154 (21 MC 101), Doc. No. 1320 (S.D.N.Y. Oct. 22, 2010).

c. The Property Damage Lawsuits

Twenty-one Plaintiffs sued the Aviation Defendants for damage to property from the terrorist attacks. These lawsuits were brought by subrogated insurers after having paid loss claims, and by uninsured businesses (collectively “Property Damage Plaintiffs”).

Discovery proceeded in these cases in coordination with the wrongful death actions, and through specially-designed procedures to streamline and economize disclosure of damages. See Stipulation and Order Regarding Settlements, In re Sept. 11 Litig., Doc. No. 747, 21 MC 97 (S.D.N.Y. Apr. 11, 2006). The discovery built on specially devised Damages Disclosure Forms (“DDFs”), in which each Property Damage Plaintiff had been directed to itemize its claimed damages. Order Requiring Disclosure of Property Damage Information, In re Sept. 11 Litig., 21 MC 101, Doc. No. 6. (S.D.N.Y. Apr. 12, 2005). The DDFs required the Property Damage Plaintiffs to itemize damages in stipulated categories—for example, damage to real property, movables and other personal property, furnishings and equipment, and the like. Claims for business interruption also were to be detailed. And recoveries and payments of insurance also were to be set out in itemized categories. Id.

In May 2008, after two years of discovery and as the prospect of trials approached, the parties were directed to enter into a damages protocol, a process intended to streamline remaining damages discovery and narrow the issues for trial. Stipulated Order, In re Sept. 11 Litig., 21 MC 101, Doc. No. 478 (S.D.N.Y. May 22, 2008). The parties proceeded in the protocol process before the mediator they selected, Judge Martin, from May 2008 to September 2009. In re September 11 Litig., 723 F.Supp.2d 534, 540 (S.D.N.Y.2010). While participating in the damages protocol, the parties also continued conducting formal liability discovery. The parties took approximately one hundred and eighty depositions and, after screening by the Transportation Security Authority (“TSA”) for Sensitive Security Information, inspected approximately one million pages of documents. Id.

Notwithstanding the parties' efforts to conduct the damages protocol process and the formal liability discovery, it soon became clear that they remained far apart on issues of settlement and the proper scope of trial. Despite repeated status conferences and case management orders, the cases—both the wrongful death and the property damage cases—remained difficult to govern. In particular, a status conference of September 24, 2008 gave me the impression that the pretrial proceedings had taken on lives of their own, subject to ever-growing requests for information, ever-increasingly complex disputes, and ever-increasing concerns by the TSA and the Department of Justice that discovery would compromise Sensitive Security Information. A proposed case management plan tendered by the parties reinforced my concerns. I rejected the plan, ordered motions to define the disputed issues and, by my Order and Opinion of July 16, 2009, resolved the discovery disputes and laid a clear path towards trial, first of any remaining wrongful death claims, and then of property damage claims. See In re Sept. 11 Litig., 621 F.Supp.2d 131 (S.D.N.Y.2009). Following my order, I directed the Property Damage Plaintiffs and Aviation Defendants to conduct formal mediation before Judge Martin. In re...