IN RE SEPTEMBER 11 PROPERTY DAMAGE LITIGATION Docket Nos. 10-2970-cv(L), 10-3128-cv(CON), 10-3131-cv(CON), 10-3133-cv(CON), 10-3135-cv(CON), 10-3136-cv(CON), 10-3137-cv(CON), 10-3139-cv(CON), 10-3140-cv(CON), 10-3141-cv(CON), 10-3143-cv(CON), 10-3144-cv(CON), 10-3145-cv(CON), 10-3148-cv(CON), 10-3153-cv(CON), 10-3157-cv(CON), 10-3159-cv(CON), 10-3178-cv(CON), 10-3180-cv(CON).
650 F.3d 145 (2011)
In re SEPTEMBER 11 PROPERTY DAMAGE LITIGATION. World Trade Center Properties LLC; 1 World Trade Center LLC; 2 World Trade Center LLC; 3 World Trade Center LLC; 4 World Trade Center LLC; 7 World Trade Company, L.P., Intervenors-Appellants, v. Certain Underwriters at Lloyd's of London Comprising Syndicates No. 33, 1003, 2003, 1208, 1243, 0376; Great Lakes Reinsurance (UK), PLC; Underwriter at Lloyd's, Syndicate No. 1225; Munich-American Risk Partners 7244 GmbH; Greater New York Mutual Insurance Company; Insurance Company of Greater New York; Munich Reinsurance Company UK General Branch; Muenchener Rueckversicherunes-Gesellschaft; Woburn Insurance, Ltd.; Great Lakes Reinsurance U.K. PLC; American Alternative Insurance Corporation; The Princeton Excess & Surplus Lines Insurance Company; Munich Reinsurance America, Inc., formerly known as American Re-Insurance Company; Colisee Re, formerly known as AXA Re and successor to the interests and liabilities of SPS Reassurance; Colisee Re Canadian Branch, formerly known as AXA Re Canadian Branch and formerly known as AXA Corporate Solutions Reassurance Canadian Branch; Colisee Re Madeira Branch, formerly known as AXA Re Madeira Branch; Portman Insurance Limited, formerly known as AXA Global Risks (UK) Ltd. and successor to the interests and liabilities of AXA Reinsurance UK PLC; AXA Corporate Solutions Assurance UK Branch; AXA Insurance Company, formerly AXA CS Insurance Co.; Coliseum Reinsurance Company, formerly AXA CS Reinsurance CO. US; AXA Versicherung AG; AXA Cessions; AXA Corporate Solutions Services UK Ltd. and AXA Corporate Solutions Assurance, for itself and successor to the interests and liabilities of AXA Corporate Solutions Assurance Canadian Branch; AXA Art Insurance Corporation; Paris Re Asia Pacific Pte. Ltd., formerly known as AXA Re Asia Pacific Pte. Ltd.; Paris Re, successor to the interests and liabilities of Compagnie Generale De Reassurance de Monte Carlo; Industrial Risk Insurers and its members; Aegis Insurance Services, Inc.; Liberty Insurance Underwriters, Inc.; National Union Insurance Company of Pittsburgh; Nuclear Electric Insurance Limited; Certain Underwriters at Lloyd's Comprising Syndicates No. 1225 and 1511; Consolidated Edison Company of New York, Inc.; QBE International Insurance Ltd.; Certain Underwriters at Lloyd's London, as members of Syndicates Numbered 1212, 1241, 79, 506, and 2791; Assurances Generales de France Iart; Assurances Generales de France; Allianz Global Risks US Insurance Company F/K/A Allianz Insurance Company; Allianz Insurance Company of Canada; Allianz Suisse Versicherungs-Gesellschaft; Allianz Versicherungs-Aktiengesellschaft; Fireman's Fund Insurance Company; Mayore Estates, LLC; 80 Lafayette Associates, LLC; Barcley Dwyer Co., Inc.; Karoon Capital Management, Inc.; N.S. Windows LLC; Tower Computer Services, Inc.; Wall Street Realty Capital, Inc.; World Trade Farmers Market, Inc.; Adem Arici; Omer Ipek; MVN Associates, Inc.; Marsha Van Name; Daniel D'Aquila; Floyd Van Name, Plaintiffs-Appellees, American Airlines, Inc.; AMR Corporation; United Air Lines, Inc.; UAL Corporation; US Airways, Inc.; US Airways Group, Inc.; Colgan Air, Inc.; Globe Aviation Services Corporation; Globe Airport Security Services, Inc.; Huntleigh USA Corporation; ICTS International N.V.; The Boeing Company; Massachusetts Port Authority; Burns International Security Services Company, LLC, formerly known as Burns International Security Services Corporation; Burns International Services Company, LLC, formerly known as Burns International Services Corporation; Pinkerton's LLC, formerly known as Pinkerton's Inc.; Securitas AB, Defendants-Appellees.
United States Court of Appeals, Second Circuit.
Decided: April 8, 2011.
Cathi Hession ( Richard Williamson, on the brief), Flemming Zulack Williamson Zauderer LLP, New York, New York, for Intervenors-Appellants.
Gregory P. Joseph ( Douglas J. Pepe, on the brief), Gregory P. Joseph Law Offices LLC, New York, New York, for Plaintiffs-Appellees.
Roger E. Podesta, Debevoise and Plimpton LLP; Desmond T. Barry, Jr., Condon & Forsyth LLP, New York, New York, for Defendants-Appellees.
Before: B.D. PARKER, LIVINGSTON, and LYNCH, Circuit Judges.
DEBRA ANN LIVINGSTON, Circuit Judge:
Intervenors-Appellants World Trade Center Properties LLC, 1 World Trade Center LLC, 2 World Trade Center LLC, 3 World Trade Center LLC, 4 World Trade Center LLC, and 7 World Trade Company, L.P. (collectively "WTCP Plaintiffs") appeal from a final Order of the United States District Court for the Southern District of New York (Alvin K. Hellerstein, District Judge) granting Plaintiffs-Appellees' (collectively "Settling Plaintiffs") and Defendants-Appellees' (collectively "Aviation Defendants") joint motion for orders approving their Settlement
The WTCP Plaintiffs argue that the district court's application of New York state settlement rules was contrary to, and thus preempted by, ATSSSA. They also contend that the court failed to make a proper evaluation of the fairness of the settlement agreement, and that the court erred in crediting the proposed settlement payments to the contributing Aviation Defendants' respective liability limits under ATSSSA. We hold that ATSSSA does not preempt New York State's "first-come, first-served" settlement rule, and that the proposed settlement payments pursuant to the settlement agreement properly reduce the contributing Aviation Defendants' remaining liability under ATSSSA's liability limits. We further conclude that the district court did not abuse its discretion in finding that the Settling Plaintiffs and Aviation Defendants entered into their settlement in good faith.
This case concerns the multitude of property damage claims that arose from the terrorist attacks of September 11, 2001, when American Airlines Flight 11 and United Air Lines Flight 175 struck Towers One and Two of the World Trade Center. Defendant-Appellee Globe Airport Security Services, Inc. ("Globe") provided security services for Defendant-Appellee American Airlines, Inc. ("American") and screened the passengers aboard Flight 11. Huntleigh provided similar services for Defendant-Appellee United Air Lines, Inc. ("United"), and screened the passengers aboard Flight 175.
Among the several groups of plaintiffs that filed suit against the Aviation Defendants, the Settling Plaintiffs alleged subrogated and uninsured property damage and business interruption claims. The WTCP Plaintiffs similarly asserted claims, alleging, inter alia, that, but for the negligence of the Aviation Defendants, the terrorists would not have boarded Flights 11 and 175, and the WTCP Plaintiffs' property would not have been destroyed. After a lengthy period of discovery, the Settling Plaintiffs and Aviation Defendants entered into a mediation process in which retired U.S. District Judge John S. Martin, Jr., served as mediator. The WTCP Plaintiffs, however, did not participate after Judge Martin concluded that their position was so far apart from that of the Aviation Defendants that mediation efforts would be unproductive.
Towards the end of the mediation proceedings between the Settling Plaintiffs and the Aviation Defendants, which lasted two full weeks, Judge Martin concluded that the two sides remained far apart. He proposed a "mediator's number" of $1.2 billion to settle all claims. The proposed amount, which Judge Martin believed to represent a reasonable settlement of all of the Settling Plaintiffs' claims, reflected a 72 percent discount from the Settling Plaintiffs' total claimed damages of $4.4 billion, and was higher than the last settlement offer by the Aviation Defendants. Both sides accepted Judge Martin's number
The settlement resolves 18 of the 21 property damage actions comprising the master calendar for September 11 property damage claims, 21 MC 101.
In an Opinion and Order dated July 1, 2010, the district court approved the settlement agreement and ordered all amounts paid pursuant to the settlement agreement to be credited against the liability ceilings of the contributing Aviation Defendants. The court also concluded that payment by Huntleigh's insurers exhausted the limits of Huntleigh's liability insurance coverage. On July 23, 2010, the district court issued an order clarifying that its Opinion and Order was final and appealable in each of the settled actions and in the collective 21 MC 101 action. It also granted intervenor status in each of the settled actions to the WTCP Plaintiffs. The court directed entry of final judgment pursuant to Fed.R.Civ.P. 54(b). Judgment was entered in the collective 21 MC 101 action on July 23, 2010, and in each of the settled actions on July 29, 2010. The WTCP Plaintiffs timely appealed from the collective action on July 30, 2010, and from each settled action on August 9, 2010.
On appeal, the WTCP Plaintiffs contend that the district court erred in three respects. First, the WTCP Plaintiffs argue that the district court's approval of the settlement pursuant to New York state law was contrary to ATSSSA. Second, they argue that the district court failed to make a proper evaluation of the settlement agreement and its fairness. Third, they contend that the district court erred in crediting the settlement payments to the Aviation Defendants' ATSSSA liability limits because such payments were not based on these defendants' "liability."
"Typically, settlement rests solely in the discretion of the parties, and the judicial system plays no role." In re Masters Mates & Pilots Pension Plan & IRAP
I. Whether the District Court Properly Applied State Law to Approve the Settlement Agreement
As the district court noted, under New York State law, an insurer has discretion to settle whenever and with whomever it chooses, provided it does not act in bad faith. See Allstate Ins. Co. v. Russell,
Section 408(b)(2) of ATSSSA provides that the substantive law for decision in actions arising out of the September 11 terrorist attacks "shall be derived from the law ... of the State in which the crash occurred unless such law is inconsistent with or preempted by Federal law." ATSSSA § 408(b)(2). In construing various provisions of ATSSSA, we have recognized that federal law preempts state law pursuant to the Supremacy Clause, U.S. Const. art. VI, cl. 2, where, inter alia: 1) Congress preempts state law in express terms (and within its constitutional limits); 2) state law "actually conflicts" with federal law; or 3) state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." In re WTC Disaster Site,
A. Whether ATSSSA's Liability Limits Create a "Limited Fund"
The WTCP Plaintiffs' claim that ATSSSA created a "limited fund," preempting
Nothing in ATSSSA's text suggests that Congress intended to create a "limited fund" from which plaintiffs bringing a federal cause of action under ATSSSA against the Aviation Defendants are entitled to an equitable share. To the contrary, various provisions of the statute concern the administration of, and eligibility regarding, a Victim Compensation Fund for individuals willing to waive such a cause of action pursuant to § 408(b). See ATSSSA §§ 404-06. And Congress provided explicitly for the treatment of certain other claims involving other defendants, specifying, for instance, the funds from which debris removal claims were to be paid, and the manner in which settlements or judgments were to be treated. See ATSSSA § 408(a)(5) ("Payments to plaintiffs who obtain a settlement or judgment with respect to a claim or action to which paragraph (4) [(debris removal actions)] applies, shall be paid solely from the following funds in the following order."). Had Congress intended to create a "limited fund" for those plaintiffs pursuing an ATSSSA cause of action against the Aviation Defendants, and to constrain the manner in which settlements could be made, it would have done so in far more explicit terms.
B. Whether ATSSSA's Purpose and Statutory Scheme Preempt New York's "First-Come, First-Served" Settlement Rule
The WTCP Plaintiffs next contend that this Court in Canada Life concluded that Congress intended to ensure that ATSSSA's liability limit preserved the ability of any claimant to recover a damages award, requiring, here, the preemption of New York's "first-come, first served" settlement rule. We disagree. Canada Life discussed Congress's decision to require a single forum for all actions, and found that the goal of requiring a single forum was to "ensure consistency and efficiency in resolving the many expected actions arising from the events of September 11." 335
We conclude that New York's "first-come, first-served" rule, as applied by the district court, is neither inconsistent with ATSSSA, nor does it stand as an obstacle to the accomplishment of Congress's objectives in enacting ATSSSA. Moreover, because neither ATSSSA nor other federal law controls the approval of settlements in actions commenced under § 408(b)(1), state law settlement rules apply to this case. See id. § 408(b)(2). The district court therefore properly applied state law settlement rules to the settlement agreement.
II. Whether the District Court Failed to Make a Proper Evaluation of the Settlement
The WTCP Plaintiffs next argue that the district court failed to make a proper evaluation of the settlement and its relative fairness. Under New York law, an insurer "has no duty to pay out claims ratably and/or consolidate them," so long as it does not act in bad faith. Allstate Ins. Co., 788 N.Y.S.2d at 402 (citing Duprey v. Sec. Mut. Cas. Co.,
The WTCP Plaintiffs have presented no evidence of the bad faith necessary to draw into question the settlement in this case.
The WTCP Plaintiffs argue that the settlement is improper because it is a lump sum applicable to all of the Settling Plaintiffs' claims, and is not based on a claim-by-claim assessment of potential liability. Judge Martin explained, however, that while the parties did spend a "substantial" amount of time discussing damages on a claim-by-claim basis, none of these issues could be resolved by the time mediation began. Id. ¶ 12. The settling parties decided that the assessment of damages on an underlying claim-by-claim and defendant-by-defendant basis "could not have been done in any reasonable amount of time and without substantial cost." Id. Instead, both parties independently concluded that damages should be allocated approximately 60 percent to Flight 11, and 40 percent to Flight 175. The 60/40 allocation resulted from each settling party deeming Flight 11 responsible for the destruction of Tower Seven—an assessment of responsibility that the WTCP Plaintiffs themselves assert in their complaint.
The WTCP Plaintiffs also contend that the settlement is improper because it releases all Aviation Defendants from liability when only four of them are responsible for paying the settlement amount. However, the settling parties articulated their reasons for limiting the settlement contributors to four of the Aviation Defendants. The Aviation Defendants believed that adding other defendants and insurers would increase plaintiffs' settlement demands and further complicate negotiations without reducing payment by the contributing Aviation Defendants' insurers. Further, they believed that the claims against the other Aviation Defendants were weaker than those against the two airlines and their checkpoint security companies. The Aviation Defendants were also concerned about setting an undesirable precedent for future disasters if non-carrier airlines (which might in the future include American and United) contributed to the settlement. In addition, the Aviation Defendants contributing to the settlement did not want to face potential indemnification claims by other Aviation Defendants not released. Finally, the contributing Aviation Defendants' insurers sought to avoid the costs of continued discovery of their four insureds if the other Aviation Defendants were not released.
In sum, we agree with the district court that the settling parties entered into their settlement agreement in good faith. We therefore conclude that the district court did not abuse its discretion in approving the settlement agreement.
III. Whether the Proposed Settlement Payments Count Towards the Aviation Defendants' Liability Limits
The WTCP Plaintiffs finally argue that the district court erred in crediting the settlement payments against the contributing Aviation Defendants' respective liability limits. They contend that ATSSSA's limitation only applies to payments for "liability," and that the settlement payments here should not count because they were not determined on the basis of the Aviation Defendants' liability. We are not persuaded.
When interpreting a statute, we must give terms their ordinary, common meaning and read them in their appropriate context. See Bilski v. Kappos, ___ U.S. ___,
ATSSSA states in relevant part, "liability for all claims ... shall not be in an amount greater than the limits of liability insurance coverage maintained by [an Aviation Defendant]." ATSSSA § 408(a)(1) (emphasis added). "Liability," meanwhile, is defined as either: 1) "[t]he quality or state of being legally obligated or accountable"; or 2) "[a] financial or pecuniary obligation." Black's Law Dictionary 997 (9th ed. 2009). Here, reading the term in context, it is clear that "liability" refers to a "financial or pecuniary obligation" that can arise through the settlement of claims. This reading of "liability" in § 408(a)(1) accords with the common understanding of "liability insurance," which commonly provides for an insured's claim to arise "once the insured's [legal obligation] to a third party has been asserted." Black's Law Dictionary 873 (9th ed. 2009) (emphasis added); see also 15 Holmes' Appleman on Insurance § 111.1 (2d ed. 2000) ("[L]iability insurance protects the insured against damages which he may be liable to pay to third parties arising out of the insured's conduct." (emphasis added)). Settlements, in turn, "reduc[e] the liability remaining under the policy." Duprey, 256 N.Y.S.2d at 989 (emphasis added).
This reading also coheres with other provisions of ATSSSA Title IV—namely § 408(a)(4), which uses similar language to limit the "liability" of certain defendants for debris removal claims. While paragraph (4) specifies the limits of "liability" for such entities, paragraph (5) specifies a priority of payments for plaintiffs who obtain "a settlement or judgment" with respect to "a claim or action to which paragraph (4) applies." ATSSSA § 408(a)(5) (emphasis added). If "liability," as used in § 408(a)(4), referred only to payments for legally adjudicated obligations, paragraph (5) would be rendered meaningless, and the word "settlement" reduced to surplusage, since there could be no "settlement... to which paragraph (4) applies" under the WTCP Plaintiffs' reading. It thus makes better sense to read "liability" to include the settlement payments made here. The district court therefore did not abuse its discretion or commit an error of law in crediting the settlement payments against the contributing Aviation Defendants' limits of liability.
We have considered the parties' remaining arguments and find them to be moot or without merit. For the foregoing reasons, the judgment of the district court is AFFIRMED.
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