The Permanent Impact of September 11th

Does increased awareness of security issues and the threat of future
terrorist activity raise the standard of care for businesses and
property owners providing security for employees and customers?

by Stephen P. Watters and Joseph S. Lawder

That fateful day in our history a year ago has made a severe and permanent impact on our nation. Although few of us in Minnesota may have known anyone killed or seriously injured, we all have felt sympathy for the orphaned children and victims' families. The grievous human loss at the points of impact ripples outward with financial loss. From the market instability to the countless layoffs in aviation and other affected industries, the economic damage touches all of our lives. Broadening out from the circle of human, physical and financial destruction is an ever-present, heightened national awareness of security issues.

The devastating nature of the tragedy called for an enormous human, financial and military response. Our armed services were put into action to find and punish the perpetrators. Our legislative branch also quickly mobilized to redress some of the damage by creating a "no-fault" Victims' Compensation Fund, a $15 billion assistance package for airlines and mandated security measures. Now, almost one year later, we can look back at the effect of these changes with the benefit of some hindsight.

For a legal system founded upon basic principles of fairness and stare decisis, what does this mean for the future? Are these legislative enactments the appropriate model for a legal response to any future terrorist act or should our traditional tort system handle such losses? Debate over the appropriateness of the legislation, the Air Transportation Safety and System Stabilization Act ("the Act"),1 will continue with supporters proclaiming its necessity to preserve our economy, save our air transportation system and insurance industry, and provide sure compensation for victims. Opponents will criticize it as an unfair subsidy of airlines and that takes advantage of victims with a quick, cheap payoff.

Regardless of where one stands on that issue, the effect of the tragedy and the legislative response pose even more uncertainty as to the future. Over this last year, the government and media have been regularly warning the public of the likelihood of the next terrorist attack. Extensive security measures are being required and implemented at our airports and borders, not to mention in many of our businesses. Each of us has safety and security concerns while traveling on an aircraft or perhaps, while attending a sporting event at one of Minnesota's prominent venues.

Does our increased awareness of security, derived from past terrorist acts and the real threat of future terrorist activity in our homeland, raise the standard of care for businesses and property owners in providing security for employees and customers? This question goes beyond the airlines and aviation security companies and asks of every business what is a reasonable measure of security, or a foreseeable use of a product, based on the previously unforeseen becoming a reality. A brief review of the laws enacted to redress the civil issues presented by the terrorist attacks is necessary to understand these broader questions.

Legislative Response

American citizens have been victims of terrorist activity many times in the past in situations not involving aviation -- the Oklahoma City Federal Building bombing; the U.S.S. Cole, the attacks on our embassies in East Africa, and the first World Trade Center bombing. Although each was a despicable act and a terrible tragedy, the damage, loss of life, and effect on particular industries and our economy in those situations were not so great as the effects of September 11th.

Hijackings and terrorism on international flights, such as the bombing of Pan Am Flight 103 over Lockerbie, Scotland, have also been risks that we have accepted and dealt with through the tort system. Our legal system traditionally handled damage caused by terrorist acts like any other mass transportation disaster. Although the liability litigation was often consolidated in those situations, the substantive approach to liability and damages did not yield to the enormity of each tragedy.

But the hijackings out of our own airports of aircraft loaded with United States citizens to be used as a suicide missiles on our own national landmarks was not a known or accepted risk and caused unprecedented damage, financial peril, and insecurity. The government quickly acted. In 11 days it signed the Aviation Security and Transportation Security Act into law establishing three major components: an airline assistance package, a Victim's Compensation Fund, and an assortment of mandated security measures.2

To redress the damage caused to the aviation industry, Congress enacted a $5 billion grant to cover losses and $10 billion loan program.3 The major airlines received grant money and by midsummer 2002, America West, Vanguard, U.S. Air, and United had applied to the loan program in exchange for close scrutiny by the government and large fees and concessions of stock. In light of the massive layoffs in the aviation industry, some have criticized this program as an unfair subsidy without any protection for employees built into the legislation.4

The airports, airlines (American and United), and aircraft manufacturers (Boeing) also received indirect protection in that the Act limits their liability to the extent of the limits of their liability insurance.5 Assuming those policies provide coverage, this legislative limitation means that there will not be sufficient insurance to cover the $10 billion to $15 billion in projected damages for the death and injury cases. Interestingly, the airport security companies did not receive that same protection. But it is doubtful those entities would have enough insurance or available assets to cover the excess liability.

As a countermeasure to that apparent limitation of liability and risk of uncollectibility, the September 11th Victims' Compensation Fund of 2001 ("the Fund") was created by the Act to compensate victims of the terrorist attacks.6 The Fund provides compensation to individuals who suffered physical injury, or to representatives of individuals who died as a result of the attacks, provided they do not seek restitution for claims through the courts. The Fund is unlimited in amount and administered by an appointee of the United States Attorney General. A claim must be filed by December 21, 2003, in order to obtain recovery.

There is no liability or negligence showing required to recover from the Fund. This is a "no-fault" system similar to what we have in Minnesota in the automobile insurance setting. The Sept. 11th Fund, however, prohibits civil recovery in court except from the terrorist entities. Although obtaining a judgment against the terrorists who committed the acts may be straightforward, the recent $1 trillion Burnett lawsuit filed by 600 victims and families seeks to impose liability on banks, charities, Saudi royalty, the government of Sudan, and many Middle Eastern sponsors for their financing and support of the individual terrorists.7

The Fund also includes several significant provisions that affect the amount of damages that can be recovered. It prohibits punitive damages but allows the recovery of "economic" and a broad range of "noneconomic" damages, including physical and emotional pain and suffering. Despite the generous measure of allowable noneconomic damages, the rules promulgated under the Act limit noneconomic damages for deaths to $250,000 per decedent and an additional $100,000 for each spouse and dependent.8 This limit applies regardless of whether the victim was in an aircraft, in a building, or on the ground and no matter how long the decedent may have lived after the impact.

The Special Master designated to oversee the Fund also attempts to maintain consistency and predictability with respect to economic damages by establishing presumptive economic loss tables. The cost of achieving such consistency and predictability will likely be a limitation of economic recovery for higher income earners.9 Furthermore, victims who maintained life insurance will also find the Fund less appealing because collateral sources are required to be deducted from the award.10 This could virtually eliminate an award for many individuals who maintained large life insurance policies.

The Special Master has stated outright that awards from the fund exceeding $3 million "will rarely be appropriate."11 Yet the 120-day processing period and the certainty of recovery has its appeal. Through July of 2002, over 600 claims had been filed.12 This is in comparison to the relatively few lawsuits that have been filed, none of which have yet yielded a recovery.

Tort Recovery

Several factors are inhibiting the race to the courthouse. There is only one courthouse to race to because the Act limits venue to the Southern District of New York. It also requires application of the substantive law, including choice of law rules, of the state where the crash occurred.13 This complicates the issues because New York, Pennsylvania and Virginia choice-of-law analyses may require the application of other states' liability and damages laws.

Aside from being unable to proceed in a favorable state court of their choosing, plaintiffs may not be able to recover large judgments because of the limited liability of airlines, airports, and manufacturers. Various reports put the estimated claims for the over 3,000 deaths at over $10 billion.14 This figure does not include the personal injury, property damage and loss-of-business claims. Nevertheless, the insurance coverages of American and United have been reported at only $3 billion.15 Unless plaintiffs are well within the first third of those making successful court recoveries, there may not be sufficient assets from which to recover.

The uncertainty of being the test case for future plaintiffs, however, could be what is more hindering. The risk of forgoing fund recovery and the prospect of establishing liability for entities beyond the terrorists are daunting challenges legally, factually and professionally. Obviously, the terrorists and their organizations are primarily to blame. But can sufficient facts be pled, discovered and proven to allocate fault to the airlines and the airport security companies? While it is easy to theorize various claims and lay blame in the abstract, principles such as foreseeability and causation pose hurdles the facts might not overcome. For example, does a security company breach a duty when it allows a passenger to carry on a box-cutter that at the time was not prohibited on aircraft.

Beyond the legal issues, the evidentiary issues will make proof of crucial facts very difficult. Other than cockpit voice recordings and cell phone calls, there is little other evidence as to what weapons were smuggled on and used. If claims against the airline are based on vicarious liability for hiring the security companies, and there is no real independent basis, the challenge may be insurmountable. Yet, the heightened standard of care owed by airlines as common carriers to their passengers may allow such claims to proceed.16 Moreover, one Internet poll shows that 20 percent to 30 percent of respondents believe that the airlines and security companies should bear some responsibility for the hijackings.17
Seemingly beyond the limits of causation are claims against the aircraft manufacturers, the airports, the FAA, security officials in the World Trade Center, the NY/NJ Port Authority, designers/builders of the World Trade Center, manufacturers of products contained in the buildings, and flight schools that trained terrorists. This element will also be the focus of much argument in the Burnett lawsuit. Although it contains statutory victims' claims, RICO, negligence, and conspiracy claims, the ultimate question is whether those who finance or sponsor terrorism can be held civilly liable.

For significant wage earners who have large collateral sources that will minimize or eliminate any chance for recovery from the Fund, there is little to risk. If favorable joint and several liability principles apply, like those in Minnesota,18 that 20 percent opinion would be a sufficient basis to expose the airlines to the damages attributable to the fault of others.

These questions, as well as the risk of no recovery on a civil suit weighed against the Fund's guaranty of compensation, will provide angst for lawyers who must advise clients for whom the discrepancy between what the Fund would award and a potential verdict are significant. Commentators suggest that this will lead most to seek compensation from the Fund.19 That recommendation will be tested by the civil claims over the next few years.

Heightened Standard of Care

The future also poses uncertainty to our homeland security. September 11th has taught us that terrorism can cause widespread damage in unique, unexpected ways. The media regularly put us on notice and have heightened our awareness of possible terrorist threats to our air travel, nuclear power plants, treasured sites and landmarks, communication systems, and environment. Our government has responded to the nation's demand for preparedness at least with regard to aviation and transportation. In the Aviation Security and Transportation Security Act of 2001, specific security measures are being implemented: baggage screening, federalization of the work force, bag matching, air marshals, cockpit protection, National Guard security at airports, and carry-on restrictions.20 Because we are now more cognizant of and have mandated security against terrorist activities, will responsibility be accordingly apportioned when that security is breached in the future? or will the government step in to support the industry and businesses attacked?

Certainly our expectation of what are reasonable measures in the aviation setting has been raised. The heightened duty of care owed by airlines will be further raised when it comes to measures that are designed to protect against criminal acts. The legislated security changes will define the minimum standard of care owed; the breach of which will yield liability as negligence per se.

Arguably, heightened public expectations and businesses' increased awareness of the threat of terrorism together will increase the vulnerability to litigation of any business that congregates large numbers of people and any structure that is "high profile" or a desirable target.21 The factors that determine the desirability of a "target" and the reasonable measures that should have been taken will provide fodder for trial lawyers, security experts, and the media.

Although Minnesota courts have yet to deal with terrorist attacks, they have struggled with the assignment of responsibility to businesses and property owners for the intentional acts of others. Justice Simonett cogently addressed this dilemma in Erickson v. Curtis Inv. Co., 447 N.W.2d 165, 169 (Minn. 1989). In that case, the Minnesota Supreme Court applied the special relationship/foreseeability test with a new focus. In the context of a parking ramp where a woman was raped, the nature of the structure and the unique opportunity for criminal activities to occur there formed the relationship with the customer upon which the duty was based. The Court explained the practical difficulties of arriving at and specifying such a duty:

[A] duty to protect against the devious, sociopathic, and unpredictable conduct of criminals does not lend itself easily to an ascertainable standard of care uncorrupted by hindsight nor to a determination of causation that avoids speculation. There is a difference between a landowner's duty to sand a slippery step on his premises and his duty to contain a slippery criminal. In the latter instance, the landowner is being asked to take defensive measures against a third person not within his control, indeed, someone who tries to outwit any defenses. Yet when a crime does occur, the tendency is not to consider whether the defendant had taken reasonable precautions but what further security measures would have prevented the crime that did occur and to make these further safeguards, ex post facto, the applicable standard of care. Moreover, whether the failure to provide these further security precautions (e.g., more guards, television monitors, and signs) in fact permitted the crime to occur can be quite problematic, thereby raising serious questions whether breach of the duty was a cause of plaintiff's injury.

With respect to the damages caused by September 11th, the temptation to turn hindsight into the standard of care by which all of the stakeholders are judged does not seem fair, both because of the unforeseeability of the attack and because the victims will be compensated by the Fund. An irony of September 11th is that although the manner of attack was unforeseeable, the World Trade Center "parking ramp" was previously the target of a terrorist act -- the first terrorist bombing in 1993. It seems a stretch to argue that September 11th was foreseeable in light of the first World Trade Center bombing, and even more difficult to argue what the standard of care required. The future will be less forgiving of complete inaction. Just as the unique opportunity for criminal activity in a parking ramp provided cause to broaden a business/landowner's duty, the September 11th tragedy takes that question to the next level.

Creating a duty as a matter of policy also incorporates a cost-benefit equation according to the Minnesota Supreme Court:

Presumably we do not live in a risk-free society; if this is so, a cost-benefit analysis is unavoidable. To post security guards at each parking ramp level 24 hours a day might be the most effective crime deterrent, but the cost may be prohibitive for both the property owner and the customer. . . . The question of how much security is adequate raises, therefore, the further question of how much risk is an acceptable risk for members of the public.22

In Minnesota, any decision to expand on the duty owed by property and business owners must recognize that not all terrorist or criminal activity can be prevented. It is difficult to conceive of a reasonable way to guard against the theft and use of a small plane loaded with explosives and crashed to destroy a stadium or mall. A cost-benefit analysis would militate against imposing continuous monitoring of all small aircraft for this purpose where the financial condition of the general aviation industry is already precarious and the public would be asked to pick up the increased costs incurred by the FAA.

On the other hand, if the imposition of a duty would yield procedures that prohibit access to ventilation systems in prominent structures, or that plan and train for the orderly evacuation of a building and the expense is justifiable, the cost-benefit analysis should not prohibit the duty. Interestingly, the precautionary security measures and disaster plans that businesses are implementing derive from what they perceive as a real threat. It is good business to be prepared and to protect your employees and customers. Our law firm is developing a disaster plan to guard against the risk and possible losses. Unlike extensions of law where a duty arises after the fact, here precautionary conduct is driving the emergence of a duty and shaping the contours of the standard.

Perhaps the "next attack" scenario will involve circumstances beyond the reach of foreseeability. But in the wake of September 11th and the frenzied discussions of security in the media; mall owners, entertainment venues, and office buildings have been put on notice by the media's predictions and the expert's and government's suspicions. The generic merchant-customer relationship which was previously indistinguishable in the eyes of the law from the situation "out on the street and in the neighborhood generally,"23 will be subject to reexamination where that relationship focuses on the attractiveness of the location to threat. If a parking ramp presented a particular focus and unique opportunity for criminals and their activities justifying "some duty" before the age of homeland terrorism, this new world we live in demands greater duty.

How Much is Enough

It does not seem a stretch to suppose that the proposed jury instruction from Erickson could be incorporated in a case emanating from a terrorist attack at one of our treasured sites:

The operator or owner of a ______ has a duty to use reasonable care to deter criminal activity on its premises which may cause personal harm to customers. The care to be provided is that care which a reasonably prudent operator or owner would provide under like circumstances. Among the circumstances to be considered are the location and construction of the ______, the practical feasibility and cost of various security measures, and the risk of personal harm to customers which the owner or operator knows, or in the exercise of due care should know, presents a reasonable likelihood of happening. In this connection, the owner or operator is not an insurer or guarantor of the safety of its premises and cannot be expected to prevent all criminal activity.24

The practical and legal goal is to determine what measure of protection would be satisfactory and assigning responsibility for damages proximately caused by the breach of those reasonable expected measures. Obviously, the standard of care depends on the circumstances confronted by each business or property owner. How much preparation and security would satisfy this duty is not easily answered.
Surely lawyers and experts will advocate and criticize in the wake of a tragedy. If future tragedies are left to the discretion of the tort system, we will have to trust the jury to gauge what measures would be reasonable in light of the foreseeability of the act, and not to weigh the facts based purely on what, in hindsight, would have avoided the act. The practical standard should assign responsibility primarily where there is a failure to minimize injury and damage that could have been limited or prevented after the initial act or impact.

This imperfection in the system, as well as a recognition that business cannot be expected to carry out a governmental function, such as police-force security, justifies the creation of and compensation of victims from the "no-fault" Fund. The virtual inability to obtain insurance against this type of risk also warrants the government's stepping in. Of course, this also assumes that we deem it important enough to remedy the damages suffered by victims. For years we have been aiding the victims of terrorist regimes in other countries. It is a logical exercise of our compassion now to legislate aid to victims of terrorism in our own. Although the Fund is limited to the September 11th tragedy, the concept fills the chasm between our compassion to aid our suffering families and the uncertainty of our tort system.

Notes
1 Pub. L. No. 107-42, 115 Stat. 230 (codified as amended in section ___ of 49 U.S.C.).
2 Id.; The Aviation Security and Transportation Security Act of 2001, Pub. L. No. 107-71, 115 Stat. 597, signed into law on 11/19/01.
3 Act, supra note 1 at ¤ 101(a).
4 147 Cong. Rec. H5917 (motion to include health benefits for laid off employees rejected).
5 Act at ¤ 408(a).
6 Act at ¤¤ 401, 403.
7 Thomas Burnett et al. v. Al Baraka Investment and Development Corp., et al., U.S.D.C. D.C., Complaint 8/15/02.
8 28 C.F.R. ¤ 104.44.
9 U.S. Dept. of Justice, September 11th Victim's Compensation Fund of 2001, Presumed Economic and Non-Economic Loss Tables, ¤ II.A.1.
10 28 C.F.R. ¤ 104.47(a).
11 Victim's Compensation Fund, 66 Fed.Reg. 66,278 (12/21/01).
12 http://www.usdoj.gov/victimcompensation/victimrepresentatives.pdf
13 Act at ¤ 408(b).
14 Mariani, R., "The September 11th Victim Compensation Fund of 2001 and the Protection of the Airline Industry: A Bill for the American People," 67 J. Air L. & Com. 141, 144 (citing "A Nation Challenged; Dead and Missing," N.Y. Times, 01/06/02, at 15).
15 Mariani, R., 67 J. Air L. & Com. at 169, 179.
16 Kabo v. UAL, Inc., 762 F.Supp. 1190, 1194 (E.D. Pa. 1991); Boyette v. Trans World Airlines, Inc., 954 S.W.2d 350, 354 (Mo. Ct. App. 1997).
17 Bickell, B., www.crime.about.com/gi/pages/poll.htm?poll_id=0869600538&linkback.
18 Minn. Stat. ¤ 604.02.
19 Mariani, 67 J. Air L. & Com. at 182.
20 P. Dizikes, "Plane Truths Since Sept. 11, There are Plenty of New Laws; But is Flying Safer?" abcNEWS.com, 03/11/02.
21 E. Bethune, R. Housman, G. Foote, "What's Expected Now The 'Reasonable Man' Standard for Liability is Much Higher Since Sept. 11," Legal Times, 2/4/2002, at 24.
22 Erickson v. Curtis Inv. Co., 447 N.W.2d 165, 169 (Minn. 1989).
23 Id.at 169.
24 Id. at 170.

Joseph S. Lawder is a partner in the Litigation Department at Rider Bennett Egan & Arundel, LLP and has devoted a substantial portion of his practice to representing families of plane crash victims.

Steven P. Watters is a partner in the Litigation Department of Rider Bennett Egan & Arundel, LLP and has broad experience in litigation including aviation law and crash litigation.