THE NEW YORK TIMES
n the most sweeping challenge yet to the federal fund intended to compensate relatives of Sept. 11 victims, the families of seven victims who worked at Cantor Fitzgerald have filed a lawsuit accusing the fund's administrator of acting illegally and unfairly, thereby shortchanging the families of all New York victims.
The lawsuit calls the administrator, Kenneth R. Feinberg, autocratic and arrogant, and accuses him of having "run roughshod" over legislation governing the the Sept. 11 Victim Compensation Fund. It also says Mr. Feinberg has "alienated and disenfranchised the very constituency he was appointed to serve."
And it says that the fund violates New York law by calculating awards based on after-tax projections of lost income, discriminates against unmarried victims and imposes an illegal cap that could leave some high-income families with as little as one-tenth of what they should be awarded under the law establishing the fund.
The lawsuit, which was filed in Federal District Court in Manhattan on Saturday, details many misgivings that have been circulating for months among some families and companies that lost relatives and employees in the attack on the World Trade Center.
If successful, the lawsuit could force Mr. Feinberg, whose title is special master of the fund, to pay out hundreds of millions, if not billions, of dollars more than the $4 billion to $5 billion the fund is expected to cost taxpayers. He would also have to review, and possibly recalibrate, the 154 awards that have already been offered to decedents' families. Those awards have totaled $240 million, an average of $1.56 million per family.
The failure of the suit could also work against Mr. Feinberg and the fund because some families may agree that its formulas calculate awards that are too low. Those families might then decide to sue the airlines, airport-security companies and other entities that have been cited as bearing some responsibility for allowing the hijacking of the four jetliners involved in the Sept. 11 terrorist attacks.
But against the current backdrop of impending war and economic malaise, the tide of public opinion could also shift in favor of Mr. Feinberg and against the families for seemingly blurring the lines between grief and greed.
Reached at his home yesterday, Mr. Feinberg said he had not seen the suit. "I know nothing about it," he said, "and I have no comment. After I read it, I will turn the complaint over to the Department of Justice."
The lawsuit does not seek to overturn the statute that created the compensation fund as part of an airline bailout package after Sept. 11. Nor does it seek damages. Instead, it challenges the rules of the fund and the formulas Mr. Feinberg has come up with to determine monetary awards. It also seeks to create a single class of the approximately 2,800 victims who died at the World Trade Center.
It does not include those people who died in the planes that crashed into the Pentagon and in Pennsylvania.
The lawsuit was filed by John F. Cambria, managing partner of the New York office of Salans, an international law firm. The seven Cantor employees named in the suit were of varying ages and work experience. Their annual salaries ranged from less than $50,000 to more than $1 million.
Some of the lawsuit's arguments echo those made in a September report on the fund's shortcomings that was prepared by Cantor; the New York law firm of Skadden, Arps, Slate, Meagher & Flom; and the economic consulting firm of Chicago Partners. They also mirror arguments made either formally or informally by other companies that lost employees in the trade center attack.
Pamela S. Falk, a professor at the City University of New York who has no connection to the suit, said, "The court will have to weigh a strong and sympathetic case by the victims that they have not been fairly compensated against a longstanding tradition in U.S. law to give deference to government administrators."
And Perry Binder, a professor at Georgia State University in Atlanta, said that while the lawsuit may be technically correct, the courts may decide that Mr. Feinberg has not been unreasonable or unfair. But the real question, Mr. Binder said, was whether Congress would amend a hastily drawn and flawed statute.
"We all should have seen this lawsuit coming," he said.
The first of the four major areas of contention in the 30-page suit concerns taxes. Under New York law, pretax earnings are used in computing wrongful death awards. But Mr. Feinberg uses after-tax earnings, the complaint charges. As a result, while the survivor of a victim who made $225,000 a year should stand to receive $4.48 million under New York law, the fund would offer $3.35 million.
The second concerns the rate at which single people spend money. In computing wrongful-death awards, New York law does not differentiate between married and unmarried decedents. But according to the complaint, Mr. Feinberg calculates that a single decedent with an annual income of $70,000 spent 60.8 percent of that income, while a married decedent spent 17.4 percent because married people tend to spend less and can avail themselves of their spouses' income.
The complaint also charges that Mr. Feinberg computes income levels by averaging the years 1998 through 2000, and ignores the annualized earnings of 2001, which were presumably higher in part because of the strength of the local economy, particularly Wall Street, in the early part of the year. It accuses Mr. Feinberg of using national, not New York, statistics in calculating the growth rates of annual compensation and also says that he ignored stock options and other forms of compensation beyond salaries and bonuses.
Finally, the complaint says that Mr. Feinberg has "played a cat-and-mouse game" when it comes to figuring awards for victims who earned more than $231,000 a year.
The plaintiffs' lawyer, Mr. Cambria, said Mr. Feinberg has been loath to offer awards of more than $5 million or $6 million even though under his formula, a mother of two children who lost a 35-year-old husband should be offered $20 million.
Mr. Cambria stressed that his high-income clients — as well as the hundreds of others who died on Sept. 11 — do not expect to receive awards of quite that magnitude. But still, he said, they felt that the numbers were far too low, and unfair.
"Some of what he has said sounds like he views his job as the sentry at the federal treasury," Mr. Cambria said. "But it's not his job to balance the budget, or bring this project in under a certain number. It's his job to carry out this statute passed by Congress."
Mr. Cambria said that his clients did not want to be interviewed because of privacy concerns and personal grief. But in a statement released by Mr. Cambria, one widow, who was not identified, said: "My husband worked a second job to support our children and me, and now he's gone. The amount of money we'll get if Feinberg's rules stay the way they are now is unfair. The simple fact is that we need more help."
Mr. Feinberg and the federal government have 60 days to respond to the complaint, Mr. Cambria said. But given the fact that the deadline to apply to the fund is Dec. 21, 2003, and that other legal matters related to Sept. 11 are still pending, Mr. Cambria said that he anticipated an expedited resolution.
He suggested that the best solution would be a settlement that adjusted the formulas worked out by Mr. Feinberg, who Mr. Cambria said also wanted to do right by the families.
"We believe in the fund," Mr. Cambria said. "I think the fund is a good thing. And at the end of the day, the amount of money between the way Feinberg wants to do it and the way the statute requires it — that delta is, in terms of the federal budget or other Congressionally mandated programs, very insignificant. But to my clients, it's life or death. It's the rest of their lives."