N001647

Tuesday, January 15, 2002 4:57 PM
Interim Regulations

Overall, I think the published Interim Regulations for the September 11th Victim Compensation Fund of 2001 establish a fair and efficient process for expediting reasonable compensation to most of the individuals and families harmed by this tragedy. I do see, however, one substantial defect in the regulations, which may well serve to undermine one of the statutory purposes: litigation avoidance. I comment upon that defect below.

It appears from the interim regulations, and the accompanying loss tables, that compensation awards for "economic loss" are being capped at the level of the 98th percentile of income earners ($231,000). Placing such an artificial cap on the potential fund awards for this type of demonstrable loss leaves a huge gap in the fairness of this regulatory system. That gap, stated plainly, is wholly inadequate compensation for the families of the highest wage earners: for example, a bond trader at Cantor Fitzgerald who might have been earning an annual salary of $1 million. Why should fund compensation for the economic loss experienced by that bond trader's family be capped through reference to a $231,000 salary, rather than the trader's actual salary of $1 million? How can it possibly be fair for that bond trader's family to receive the same economic loss compensation from the fund as the family of another victim who might have been earning exactly $231,000 annually?

Ironically, this irrational shortfall in economic loss compensation for all victims who were earning above $231,000 on 9/11 will potentially alienate the very individuals likely to have the contacts, resources and motivation to pursue the type of plaintiff's litigation against the airline industry that the fund seeks to avoid. Higher wage-earning victims, of course, will also lead to higher damages claims - and, ultimately, higher potential awards - against the airlines as well. Thus, the artificial cap on economic loss recoveries from the fund for the highest earning victims may well serve to drive the families of those victims to the very litigation that the fund seeks to abrogate in the first instance.

Fortunately, there is a simple solution to this defect in the Interim Regulations: just remove the 98th percentile/$231,000 cap used under the fund's formulas to calculate economic loss in these upper end circumstances, and allow those same formulas to use each victim's actual earnings to calculate true - not deemed - economic loss.

Individual Comment
Washington, D.C.

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