World Trade Ctr. Disaster Site Litig. Christopher Cirino v. City of N.Y.
| Decision Date | 09 June 2014 |
| Docket Number | Docket No. 12-3025 (XAP),Docket No. 11-0355 (Con.),Docket No. 12-2960 (Con.),Docket No. 11-0392 (Con.),Docket No. 11-4021-cv (L),Docket No. 12-3042 (Con.),Docket No. 11-4313 (XAP),Docket No. 12-2964 (XAP),Docket No. 10-3175 (XAP),Docket No. 11-3902 (Con.),Docket No. 12-2963 (Con.),Docket No. 12-3254 (Con.),Docket No. 12-2977 (XAP),Docket No. 11-3933 (Con.),Docket No. 10-2795 (Con.),Docket No. 11-0411 (Con.),Docket No. 10-2794 (Con.),Docket No. 11-4888 (XAP),Docket No. 10-1377 (Con.),Docket No. 11-3925 (Con.),Docket No. 12-3186 (XAP),Docket No. 12-3282 (Con.),Docket No. 11-4379 (XAP),Docket No. 10-2765 (Con.),Docket No. 10-1378 (Con.),Docket No. 11-4365 (XAP),Docket No. 11-4502 (XAP),Docket No. 10-3172 (XAP),Docket No. 11-3903 (Con.),Docket No. 11-4317 (Con.),Docket No. 10-1379 (Con.),Docket No. 11-3937 (Con.),Docket No. 11-4800 (XAP),Docket No. 12-3185 (Con.),Docket No. 12-2974 (Con.),Docket No. 12-2998 (Con.),Docket No. 11-4410 (XAP),Docket No. 10-3176 (XAP) |
| Parties | IN RE: WORLD TRADE CENTER DISASTER SITE LITIGATION CHRISTOPHER CIRINO, et al., Plaintiffs-Appellees-Cross-Appellants, v. CITY OF NEW YORK, et al. Defendants-Appellants-Cross-Appellees, SULLIVAN PAPAIN BLOCK MCGRATH & CANNAVO P.C., Interested Party-Cross-Appellant. |
| Court | U.S. Court of Appeals — Second Circuit |
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
Before:
and RESTANI, Judge.*
Consolidated appeals from three orders of the United States District Court for the Southern District of New York (Alvin K. Hellerstein, J.) issued with respect to the settlement of personal injury claims brought by individuals participating in rescue, recovery, and clean-up operations at the World Trade Center site following the attacks on the World Trade Center on September 11, 2001.
REVERSED IN PART, AFFIRMED IN PART,
AND VACATED AND REMANDED IN PART.
N.Y., for Plaintiffs-Appellees-Cross-Appellants.
for Sullivan Plaintiffs-Appellees and Interested Party-
Cross-Appellant.
MARGARET H. WARNER ( M. Miller Baker, Mark A.
Collins, Joshua D. Rogaczewski, on the brief),
McDermott Will & Emery, New York, N.Y., for
Appellant WTC Captive Insurance Company, Inc.
James E. Tyrell, Jr., Joseph E. Hopkins, Jason W.
Rockwell, Alyson N. Villano, Patton Boggs, LLP,
Newark, N.J., for Defendant-Appellants-Cross
Appellees City of New York and Contractors.
In the aftermath of the attacks on the World Trade Center on September 11, 2001, thousands of individuals -- firefighters, police officers, construction and cleaning workers, and others -- participated in rescue, recovery, and clean-up operations at the World Trade Center site and surrounding areas. Many sustained injuries, and eventually more than 10,000 lawsuits were filed against the City of New York, private contractors, and the WTC Captive Insurance Company, Inc. (the "WTC Captive"). The cases were consolidated before a single judge, the Honorable Alvin K. Hellerstein, in the United States District Court for the Southern District of New York.
After years of litigation and extensive negotiations, the parties agreed on a comprehensive settlement process, which was set forth in a detailed master settlement agreement executed in June 2010. The settlement process gave each plaintiff the opportunity to participate in the settlement, and the parties agreed that the settlement would become effective only if at least 95% of the plaintiffs "eligible" to participate agreed to do so. Questions were raised -- some by the district court sua sponte -- with respect to the implementation of the settlement process. The district court issued three orders addressing these questions; they are the subject of these consolidated appeals.
For the reasons set forth below, we affirm in part, reverse in part, and vacate and remand in part.
The district court issued the three orders in question during its supervision of the settlement process in this complex litigation. The district court employed a number of case-management techniques to improve efficiency and to encourage settlement, including consolidating the cases for pretrial purposes, organizing the cases into three master dockets, appointing "Plaintiffs' Liaison Counsel," appointing special masters, and permitting counsel to use a "Master Complaint" and a "Core Discovery" program. The district court also called forthe parties, with assistance from the special masters, to identify the cases alleging the most serious injuries for early trial; the first of these trials was scheduled to commence in May 2010.
In March 2010, two months before the first trials were to begin, the City and plaintiffs' counsel advised the district court that they had reached a settlement. The City's insurer -- the WTC Captive Insurance Company ("WTC Captive")1 -- participated in the settlement negotiations. The agreement provided for the WTC Captive to pay at least $575 million to settle claims against the City, provided that at least 95% of the plaintiffs eligible to participate accepted the settlement. The agreement provided that the WTC Captive would pay additional amounts if (1) more than 95% of eligible plaintiffs participated and (2) relatively few new lawsuits were filed. The proposed settlement also provided for plaintiffs' counsel to receive a one-third contingency fee. The parties also agreed to a process whereby an independent arbiter, the "Allocation Neutral," would divide the eligible plaintiffs into four tiers for purposes of awarding payments according to the severity of the injury.
Although the parties did not seek its approval, the district court found the settlement to be inadequate. The district court concluded, inter alia, that the proposed settlement provided insufficient consideration for the settlement of nearly all the claims while providing overly generous compensation for plaintiffs' counsel. The district court was also concerned about the lack of any meaningful review of decisions of the Allocation Neutral.
The parties renegotiated and returned in June 2010 with an amended Settlement Process Agreement (the "Agreement"), which responded to a number of the district court's concerns. Among other changes, the principal settlement amount was increased from a range of $575 to $632.5 million to a range of $625 to $712.5 million. Plaintiffs' counsel agreed to reduce their contingency fees from one-third to one-quarter. The parties also created the position of "Appeal Neutral" to review determinations of the Allocation Neutral.
Over the parties' objection, the district court conducted a hearing to determine whether the amended settlement process, as set forth in the Agreement, was fair and reasonable. The district court also appointed an ethics expert to review plaintiffs' counsel's communications with their clients about the settlement. The district court noted the possibility of conflicts of interest stemming from the fact that as participation in the settlement increased, sowould plaintiffs' counsel's fee. After extensive inquiry into the Agreement, the district court found it to be fair and reasonable.
As implementation of the Agreement proceeded, a number of issues arose. Three aspects of the Agreement are now before us: (1) the "Bonus Payment," (2) the "Contingent Payments," and (3) attorneys' fees.
The Agreement provided that it did not become effective unless 95% of eligible plaintiffs opted in to the settlement. if more than 95% opted in, however, the WTC Captive would pay a "Bonus Payment," the amount of which would increase as the percentage of opt-ins increased.2 The Agreement calculated the opt-in percentage as the number of eligible plaintiffs who affirmatively opted in to the settlement over the total number of plaintiffs eligible for recovery. Plaintiffs were required to track the eligible plaintiffs through the Eligible Plaintiffs List ("EPL"). Eligibility was defined as follows:
Only Plaintiffs with Debris Removal Claims filed . . . on or before April 12, 2010 . . . shall be eligible for inclusion on the Eligible Plaintiff List; provided, however, that such Plaintiffs who dismiss with prejudice . . . by executing the Stipulation of Dismissal WithPrejudice attached as Exhibit S to this Agreement need not be included on the [EPL] . . . .
The Agreement further provided:
Plaintiffs who dismiss all of their Debris Removal Claims against the Insureds with prejudice by filing the Stipulation of Dismissal with Prejudice attached as Exhibit S . . . shall not be counted for purposes of determining compliance with the Opt-In Threshold. . . .
The parties were eager to reach 95% participation, and they twice requested an extension of the opt-in deadline. The district court granted the requests. Shortly before the second extended deadline, the parties submitted stipulations of dismissal as to 185 plaintiffs. Troubled by the fact that so many stipulations surfaced on the eve of the opt-in deadline, the district court sua sponte ordered a hearing to determine whether the dismissals were authorized by the clients. At the hearing, the district court learned that plaintiffs' counsel were inferring authorization to dismiss from their clients' failure to respond to their communications. in other words, the clients did not explicitly authorize counsel to dismiss their claims, but had simply not responded to counsel's inquiries.
The district court refused to accept these dismissals, and sua sponte appointed Special Counsel to try to speak to every plaintiff who rejected the Agreement or had failed...
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