Originially from: World Arbitration and Mediation Review (WAMR)

U.S. District Court Upholds September 11 Victim Compensation
Scheme
by Robert M. Ackerman
Editor, Domestic Mediation
In the May issue of WAMR, we described the September 11
Victim Compensation Fund, along with an action brought in the U.S.
District Court for the Southern District of New York challenging the
regulations and methodologies employed by the Fund’s Special Master to
calculate awards to the families of September 11 victims. Since that issue
went to press, that action, along with two related actions, has been
dismissed.
The three actions sought declaratory and injunctive relief on behalf
of the families of several New York-based victims of the September 11
tragedy. They claimed, inter alia, that (1) the powers assumed by Special
Master Kenneth Feinberg exceeded the bounds of the congressional
delegation, (2) the methodologies used by the Special Master to calculate
awards were contrary to New York law and, therefore, in violation of the
statutory directive, and (3) the Special Master’s requirement that claimants
must prove “extraordinary circumstances” to warrant payment of
economic losses in excess of those experienced by the 98th percentile of
wage earners was an equal protection violation. District Judge Alvin K.
Hellerstein upheld the scheme adopted by the Special Master against all of
these challenges and dismissed the actions with prejudice.
As to the delegation challenge, the court, while acknowledging that
the Victim Compensation Act “invests the Special Master with
considerable discretion,” held that the statute nevertheless provides an
“intelligible principle” to guide administrative decision-making. In
particular, the court noted that Section 403 states that the Act’s purpose is
“to provide compensation,” and that “Section 405 provides the basic
criteria for determining the amount of the award—the harm to the
claimant, the facts of the claim, and the individual circumstances of the
claimant.” The lack of specificity provided by Congress regarding the
calculation of the awards does not, according to Judge Hellerstein, amount
to an excessive delegation of legislative power. Instead, that lack of
specificity invests the Special Master to make awards without being
hamstrung by a statutory formula, and, as a consequence, also defeats the
challenge to the Special Master’s methodologies.
With respect to the Special Master’s methodologies, the claimants
alleged that the Special Master had violated the statutory directive by (a)
placing a de facto cap on awards, (b) using a “needs” test to modify