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Benchmark 9/11 Litigation Ruling Bars World Trade Center Owner From Seeking Additional $3.5 Billion From Airline Defendants

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By: Timothy S. Tomasik

Judge Alvin K. Hellerstein issued a critical benchmark ruling yesterday that brought the protracted litigation arising from the 9/11 terrorist attacks one step closer to full resolution.  Judge Hellerstein presided over the first portion of a bifurcated trial to determine whether Silverstein World Trade Center Properties (WTCP) was entitled to demand $3.5 billion from United Airlines and American Airlines for its claim that the Airlines were negligent in allowing terrorists to board planes with weapons and gain access to cockpits.  Judge Hellerstein found that WTCP could not move forward with its claim.

Approximately 55 days before the tragic attacks, after conducting a worldwide competitive auction involving bids from the most sophisticated commercial real estate developers in the world, the port authority leased the World Trade Center Complex to WTCP through a transaction wherein it was agreed that the present value of the lease hold was $3.2 billion.  Following the attacks, WTCP claimed that the replacement value of the properties was $12.3 billion.  In other litigation, WTCP obtained a settlement in excess of $4 billion for ground damage from its own property insurers.

Interestingly, New York’s “Lesser of Two Rule” sets the measure for tort damages for destroyed property as the lesser of the diminished value of the property or its replacement value.  Further, New York law requires that property damage recovery can be reduced by collateral source payments.

Judge Hellerstein's rulings on the proper measure of damages in the 9/11 litigation have been extremely well-reasoned and premised on longstanding legal principles.  They have continuously demonstrated proper application of the Lesser of Two Rule in that victims of tortious property damage who are indemnified through collateral source insurance payments are subject to a set off.  Since WTCP has already collected insurance proceeds ($4 billion) well in excess of the fair market value of the lease ($2.8 billion), Judge Hellerstein correctly recognized that WTCP essentially has no legally recoverable claim against the Airlines.

Tim Tomasik served as a member of the Property Damage Plaintiffs’ Executive Committee, which obtained a $1.2 billion settlement for insurers and property owners for claims arising from the terrorist attacks.  In February 2012, Tim lectured on the profound effects 9/11 has had on the aviation industry and aviation litigation to the International Air Transport Association Legal Symposium in Shanghai.

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