N001348
Friday, January 04, 2002 5:27 PM
Comments on Victim Compensation Regulations
Attachment 1:
January 4, 2002
COMMENTS OF ALAN B. MORRISON
IRVINE VISITING FELLOW
STANFORD LAW SCHOOL
REGARDING THE REGULATIONS OF
THE DEPARTMENT OF JUSTICE
CONCERNING THE 9/11 VICTIM FUND
Introduction
These comments focus primarily on the details of the program and on the need to
clarify and in some cases highlight specific aspects of it. Because of the limited time that have available, the failure to comment on any aspect of the regulations should not be
construed to constitute approval of it.
Because these are interim regulations, there will almost certainly be changes. Since the regulations and accompanying materials are so lengthy, the final regulations should be accompanied by a redline version so that those who are familiar with the interim regulations can readily determine what changes have been made and for what reasons.
Calculating Damages
Don’t Hide Key Information. After reading the regulations, I discovered that many of my questions were answered in the explanation to the Presumed Loss Tables. These include matters such as whether discounting will be done (yes); whether inflation would be included (yes); whether merit increases would be assumed (yes) and if so, how would they be calculated; and whether deductions would be made for expected income tax payments (also yes), to name just a few. Since one of the goals of the regulations is to inform the public of what is likely to be paid out, all of these "adjustments" should be included in the body of the regulations, either explicitly or at least cross-referenced in them, as well as in the explanation that precedes them. In the present form they are too late and too hidden.
Define Applicable State Law. The statute requires that determinations be made in accordance with applicable state law, but the regulations say nothing of substance on this subject (see 104.42), although they do use the domicile of a decedent when determining the Personal Representative. Determining the applicable state law may matter because, for example, state laws vary widely on damages in wrongful death cases, and different states have different income tax levels (or none at all). In order to avoid controversies, and to further the goal of compassion that the regulations have adopted, the regulations should provide that a claimant may elect to apply the state law of either the state of domicile of the victim or the location of the death/injury to all choice of law questions; if no such election is made, the claimant would have the burden of establishing the appropriate choice of law, but even that may vary depending on where suit were filed. At the very least, the regulations should state the position of the Department on choice of applicable law issues.
Explain How Benefits Will Be Handled. In several places (such as 104.43), the regulations contemplate that benefits will be included in the allowed compensation, but there is no further information on them. Suppose an employer pays all (or half) of the health insurance; will that be included, and is that consistent with the collateral source provision? The same is true for pension and profit-sharing contributions, life insurance, long term disability, cafeteria plans and the like. These omissions should be cured.
The Handling of Salaries and Bonuses. The regulations imply, but do not directly state, that the earnings of the decedent for the period 1998-2000 will be averaged and assumed to be base on which future earnings are projected etc. If that is what is being done, it should be stated explicitly. And if it is, that raises questions about how bonuses will be treated, especially for those in the investment business, when the years 1998-2000 produced record earnings and bonuses.
Track A vs. Track B. The procedural differences between these alternatives are reasonably clear, but I am confused as to what the relative advantages and disadvantages are of the two choices. It appears that Track B is for a claimant who believes that he or she has special circumstances and does not want to use any of the presumptions or perhaps wants to prove facts that would alter the presumptions (e.g., projected salary increases or why the deceased’s prior earnings do not fairly reflect his average income). It would be helpful to all Personal Representatives and their counsel to include a brief statement as to why one might choose Track B (assuming that Track A is the route that you expect most claimants to follow). It is also unclear whether selecting Track B can lead to results less favorable than the standard adjustments, and if so, that should be made clear in the explanatory materials.
Effect of the Presumptions. It is unclear whether a person who selects Track A and the presumed loss as calculated by the tables (and their adjustments) has to worry that there will be further downward adjustments based on applicable state law. For example, the regulations seem to contemplate that the fact that a person is a minor who has no current earnings will not alter the loss computation, even if the applicable state law provides that in a wrongful death case an award can only be made to a person who is a dependent of the decedent, which would be rare in the case of a child who is the victim. Similarly, under Alabama law, only punitive damages are generally allowed in wrongful death cases, and it seems quite likely that the laws of some foreign countries may not have any provision for wrongful death. In addition, while many people work until they are 65 (which would be a reasonable assumption), there are some occupations where work life is much shorter (either as a practice or as a matter of law). It appears that there will be no reductions for any of these situations (at least under Track A), and if that is the case, the regulations should make that clear.
Other Issues
Withdrawing/Not Filing Lawsuits. Suppose that a Personal Representative files a claim and the Special Master determines lack of eligibility. Under 104.21 and 104.61, no lawsuit can be filed (or maintained) if a person files for compensation. That rule makes sense if the person is given an award, but is dissatisfied with the amount, but it seems very unfair to be denied the right to sue when a claimant is found ineligible for any payment from the Fund. The regulations should be changed to allow a lawsuit after a finding of ineligibility.
Filing Tax Returns. Under 104.21(c)(1), a person seeking damages for an injury must file copies of tax returns for 1998-2000, but when a claim is made on behalf of a deceased person, 104.21(b)(4) only requires that the returns be made available if requested. What is the rationale for that distinction?
Proving Dependent Status. Under 104.3(b) & (c) dependent (spouse) status is normally proved by a 2000 federal income tax return, with certain exceptions (the choice of the term “unless” is odd, but probably not disabling). One exception is where the person was not required to file a tax return for 2000. But there are a significant number of people who did not file tax returns for 2000 prior to September 11th, many of whom had lawful extensions (this is especially true for self-employed persons and those with complicated financial situations). In addition, there may be a few individuals who should have filed for 2000, but did not. Whatever penalties the IRS may impose for non-filing or late filing, the Department should not disallow claims for a spouse or dependent because of such failure to file. The regulations should be changed to allow an additional exception for other proof of spousal status or dependency, deemed sufficient by the Special Master (as they allow in other areas where the usual proof is not available).
Representation of Claimants. On page 13 of the Internet version of the explanation, the Department correctly recognizes that it has no authority to limit the fees paid to any attorney who assists a claimant of the Fund. It then goes on to state that "the Department believes that contingency arrangements exceeding 5% of a claimant’s recovery would not be in the best interest of the claimants [sic]." Aside from the question of whether the proper test is the "best interest of the claimant" or "would be justified by the effort and skill required and the relatively small contingency involved," the statement is at least too categoric. When a claimant chooses not to accept a presumptive determination or decides to follow Track B (presumably because Track A seems almost certain to lead to a low award), the attorney for such a claimant may have to expend considerable time and bring considerable expertise to bear to obtain a substantially higher award. In addition, since probate courts will supervise the fees of many of the attorneys, they will be available to check any excesses. Therefore, at the very least, the word "ordinarily" should be included in this statement lest it be interpreted as the equivalent of a federal fee cap for all cases.
Another issue of representation relates to whether claimants are permitted to utilize the services of non-lawyers to assist them. The regulations contemplate that many people will be able to process their claims without help from counsel, but some people may be too old (young) or infirm or not be fluent in English, and hence will need some assistance, but perhaps not from a lawyer. Many administrative schemes allow for non-lawyer assistance, and there is no good reason why this one should not also, both with respect to filing papers and to presenting the case for the claimant at a hearing (104.33(d)).
Publication of Awards. The decision to publish some awards while the process is ongoing (104.34) (hopefully on the DOJ website) is commendable. The names and other identifying details of the victim should not be made public (as the regulations provide), but there must be enough information about the status of the victim to provide useful information for others considering using the process. This should include both the presumptive award and the total of collateral source exclusions (even recognizing that many claimants who will have large collateral source exclusions may prefer litigation).
Although it is not necessary or even desirable to make available to the public information on all claims paid while the process is ongoing, when it is concluded, information on every claim paid should be made public (perhaps in statistical form). Doing so would provide an enormously useful database for other mass disasters and for studying damages awards generally. It is vital that the Department make that commitment now so that the system can be designed to create the database as part of the process and not have to do so at the end of the day when everyone will want to close down the office.
Individual Comment
Stanford, CA