N002377

Tuesday, January 22, 2002 11:28 PM
#584215 v4 - L&W Comments

Attachment 1:
Before the UNITED STATES DEPARTMENT OF JUSTICE Washington, D.C. 20350

September 11th Victim Compensation Fund of 2001
Notice of Inquiry and Advance Notice of Rulemaking
66 Fed. Reg. 66273 (December 21, 2001)
January 22, 2002

COMMENTS OF LATHAM & WATKINS


Latham & Watkins, an international law firm with more than 1,400 lawyers, is representing more than two dozen clients who have lost family members in the terrorist attacks of September 11, 2001. These clients include spouses and children of individuals who lost their lives in the World Trade Center or on the hijacked airlines, and the widows of firefighters. Many of these clients were referred to the firm by local bar associations, including the Association of the Bar of the City of New York, the District of Columbia Bar, the Volunteer Legal Services Program of San Francisco and the Los Angeles County Bar Association. More than 75 attorneys in the firm are involved in providing legal advice to these clients on a pro bono basis.

These comments to the Interim Final Rule for the September 11th Victim Compensation Fund of 2001 (the "Fund") are the product of the questions and concerns our clients and attorneys have faced in interpreting and discussing the Interim Final Rule. These comments do not necessarily represent a consensus among our clients or any individual client’s position with respect to the Interim Final Rule.

As discussed in more detail below, we recommend that the Department of Justice consider the following in implementing a Final Rule for the Fund:

In addition, Latham & Watkins received an "Explanation of Process for Computing Presumed Economic Loss" ("Explanation") in the evening on Friday, January 18th. We have several initial concerns about the Explanation, including:

We will provide more fulsome comments to the Explanation in another set of late filed comments after we have had the opportunity to more fully examine the Explanation.

DISCUSSION


I. LIMITATIONS PERIOD ON CLAIMS

The Interim Final Rule indicates that claims with the Fund must be filed on or before two years after the effective date of the regulations "i.e., December 21, 2003." However, the final regulations, including the formula for calculating presumptive economic awards have not yet been published nor have the Personal Injury Compensation Form or the Death Compensation Form become available. Since "no claim may be considered until the claimant has submitted both an ‘Eligibility Form’ and either a ‘Personal Injury Compensation Form’ or a ‘Death Compensation Form’" (28 C.F.R. § 104.21), it would be more equitable for the Fund to sunset two years after the Final Rule has been published or both the Personal Injury Compensation Form and the Death Compensation Form have become available.

II. COMPENSATORY AWARD

A. Calculation of Presumed Economic Loss

In calculating awards, the fund must treat all victims equally. This means that neither the formula for calculating economic loss nor the type or quantity of proof that the Final Rule requires should vary based on the victim’s individual circumstances. At present, the quantum of evidence required to prove a victim’s benchmark compensable income level varies based on the victim’s income percentile. While a victim who was in the 97th percentile of wage earners is required to provide only his past three years of tax returns to establish his compensable income, the Special Master has indicated that such a showing would not be sufficient to prove compensable income for a victim who was above the 98th percentile of wage earners. In addition, the Interim Final Rule does not provide the methodology for calculating the presumptive award for the families of victims who earned more than $231,000. As such, the families of "high earners" have no way of anticipating their possible awards, which is a substantial deterrent to their filing under the Fund.

Latham & Watkins believes that the current method can be adopted for use by all claimants, including high earners. The Interim Final Rule indicates that one of the factors to be considered in determining the decedent’s loss of earnings or other employment benefits will be "the amount and nature of the decedent’s income for recent years." The rule further indicates the Special Master will consider the decedent’s average income for the years 1998-2000. In order for this requirement to be equitable to all claimants, the Fund should allow submissions based on either 1998, 1999 and 2000 or 1999, 2000 and a projected full year of income for 2001.

This is true because limiting the initial determination of loss of earnings to the decedent’s income in years 1998-2000 is likely to yield extraordinarily inequitable results in many cases. Specifically, where the decedent was just beginning his career, focus on earnings before 2000-2001 will greatly distort the calculation of future loss of earnings. Using 1998-2000 income as a benchmark will penalize those who spent some or all of this period in the military, in school, training, or apprenticeship, and thus had little or no income. Rather than using the years 1998-2000 as a benchmark, the Final Rule should invite claimants to provide the decedent’s most recent earnings through September 11, 2001, and specifically take into account the rate at which the decedent was promoted to determine probable growth. Moreover, the Final Rule should require the Special Master to consider, as part of compensable income, future non-monetary compensation, such as stock options that did not vest before September 11, 2001.

For instance, one of our clients is the widow of an engineer who served in the military until 1998. Upon finishing his military service, which included three tours of duty in the Persian Gulf, and war service, he continued taking college courses part-time, and received his degree in August 2001. At the beginning of that period, he worked multiple part-time jobs for relatively low wages to help maintain the household. By the end of 2000, however, he had proven himself in his field and was hired by a leading data integration company as a senior engineer. In the course of the next 11 months, he received two raises, three promotions, and more than doubled his stock options based on his outstanding performance. His income before 2001 is not representative of his future earnings, and therefore should not be considered in determining his family’s economic loss. We believe that this type of case is fairly representative, and therefore the Final Rule should specifically invite claimants to include the most recent income information about the decedent, and any other information pertinent to determining future earning potential. However, if a claimant wishes to submit only the three years of tax returns without further evidence of incoming earning potential, the amount indicated on the returns should be taken on its face.

Finally, claimants whose average salaries exceed $231,000 should not be forced to submit additional forms of proof in order to establish their compensable income level, as such a requirement would discriminate against them based on their level of income. If, however, a claimant elects to submit additional documentation to argue for upward departure from the presumed award, the Special Master should encourage their efforts and consider all evidence the claimant is able to provide.

B. Extraordinary Circumstances

The Interim Final Rule indicates that, "absent extraordinary circumstances," awards in excess of $3 million will rarely be appropriate. Please provide more detailed guidance as to what will constitute an "extraordinary circumstance" and what quantum of evidence a victim must show to prove "extraordinary circumstances."

For example, we have a client who is the deceased victim’s spouse, who has a four year old child who is disabled and will be unable to care for himself after he turns 18. Another client has four children under the age of 12 and her husband earned a base salary of $500,000. These potential claimants do not know how their circumstances would be considered in determining a presumptive award and thus do not have a reasonable basis on which to determine whether to submit a claim. The Final Rule should provide guidance to these families as to the likely categories of factors that will be considered "extraordinary" and the kind of evidence they will be required to show to prove that a factor is indeed extraordinary.

III. COLLATERAL OFFSETS

A. Pension Funds

It is unclear how pension funds will fit within the statutory definition of assets received "by reason of the decedent’s death." Pension funds normally do not vest for a number of years after an employee has started working. However, once they have vested, they continue to grow tax-free during a worker’s lifetime and are paid out over time after a worker reaches retirement age. Therefore, while the funds may become available earlier than they ultimately would "by reason of the decedent’s death," the pension funds should not be characterized as a collateral offset since they were not received as a result of the decedent’s death, but would in any event have become available to the worker at a later date. The Special Master should take this into careful consideration in drafting the Final Rule regarding collateral offsets and should characterize only the interest on the pension amount as a collateral offset.

B. Worker’s Compensation

The Interim Final Rule, while providing some guidelines as to what constitutes a collateral offset, is also unclear regarding whether worker’s compensation payouts will be counted as collateral offsets. Moreover, if the Special Master reduces or offsets a claimant’s presumptive award by worker’s compensation payouts received or payouts a claimant is entitled to, the Interim Regulations provide no guidance on how to calculate the amount by which a claimant’s presumptive award ought to be reduced. Since worker’s compensation is paid for life or until a spouse remarries, calculating the present value of possible worker’s compensation payouts to a surviving spouse is both impractical and inequitable. What will the Special Master assume is the life expectancy of a spouse? In addition, how will the Special Master factor into the present value calculation the possibility that benefits will not be paid? Will the Special Master assume a spouse will not remarry? Given these ambiguities, is our opinion that the Special Master should not include worker’s compensation as a collateral offset in the Final Rule for the Fund.

C. Social Security

Similarly, the Interim Final Rule does not clearly provide for the inclusion or exclusion of Social Security as a collateral offset. The Interim Final Rule does not furnish potential claimants with a formula to calculate the Social Security offset applicable to a claimant’s presumptive award. Social Security is paid to widows aged 60 or older and widows caring for a child under 16 years of age. A spouse that is not currently entitled to social security (because the spouse is younger than 60 and does not have children under 16 years of age) will become eligible to receive Social Security payments at the age of 60, provided the spouse has not remarried. We are of the opinion that to consider Social Security payments a collateral offset is inequitable to claimants in need of the compensation and redress the Fund affords. The Special Master should make clear in the Final Rule that Social Security is not considered a collateral offset. In the event the Special Master chooses to characterize Social Security payments as a collateral offset, we ask that the amount of the offset be reduced by the Social Security contributions made by the decedent or victim during his or her lifetime.

D. 401(k) Plans

It is our position that 401(k) payments should not be considered a collateral offset. We believe that any money in a victim’s 401(k) account that is attributable to employer contributions should be characterized in the way it was given, as part of the employee's overall compensation package. A 401(k) plan is a voluntary plan to which an employee may contribute a fixed portion of his earnings, and to the extent that an employee has invested money in his or her plan, it should be treated no differently than any bank account or investment account. This is not a third-party benefit paid to the victim’s family; it is money that the victim contributed to a 401(k) plan rather than choosing to invest it in another way. It is inherently inconsistent to treat 401(k) funds any differently than money saved in a regular bank account or money in an investment account. Thus, employer contributions should not be deducted from any victim's award as a collateral offset.

Respectfully submitted,

Comments By:
LATHAM & WATKINS
Washington, D.C.
New York, NY
Los Angeles, CA
San Francisco, CA

Previous Next Back to Comments by Date Back to Comments by Date
(Graphical Version) (Text Only Version)