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Looking at the events of September 11: some effects and implications; while the impact on insurers is large and apparent, there are many other possibilities, even probabilities, of contention and litigation.

WITH estimates of financial losses from the attacks of September 11, 2001, at $70 billion or more, the impact on the insurance industry will be profound. There will be numerous disputes at various Levels--cutting across many forms of insurance--as to the amount and nature of the losses and how they should be borne. September 11 will affect how policies are written and underwritten. Some legislation has been enacted, and other proposed legislation would provide federal support for coverage for terrorism acts in the future.

The immediate issues for the insurance industry will include the scope of coverages, the applicability of exclusions and the amount of damage sustained. The claims will involve virtually all forms of insurance and reinsurance, including property and casualty, business interruption, life, health, accidental death and disability, workers' compensation, aviation, and automobile. Some commentators anticipate that most disputes will stem from the amount of money requested in claims and not from whether coverage actually exists, but certainly there will be coverage issues.

One dispute that arose immediately relates to the number of occurrences. Given their close coordination, were all four attacks one occurrence? Were they all separate? Were the attacks on the World Trade Center one occurrence regardless of the others? It also will be necessary to determine where and how disputes are to be resolved. Does the legislation giving the U.S. District Court for the Southern District of New York exclusive jurisdiction over the claims preclude contractually agreed arbitration of coverage issues?

The attacks will have a profound impact on the internal operation of the insurance market. Aside from the staggering financial losses the industry will incur, future policies face dramatic changes. Some premiums already are affected as insurance and reinsurance contracts renewed on January 1,2002. In addition to increasing premiums, some policies now will include exclusions for losses from terrorism or will price terrorist risks separately. Policyholders will face higher costs and additional exclusions.

The various claims also will present a variety of reinsurance issues. For example, some primary insurers have indicated that they will not seek to rely on war exclusion clauses in their policies, and some may not even invoke exclusions for terrorism. Reinsurers with similar exclusions will have to decide whether to rely on those exclusions, or, if the reinsurer does not have such an exclusion, will need to consider whether to take the position that the primary carrier must enforce such limitations on coverage. Reinsurers will have to consider whether there are rights of subrogation to pursue not only against the terrorists and their backers, as well as governmental bodies and other entities that may be held in some respect responsible for the losses.

WAR EXCLUSION CLAUSES

A. Introduction

A number of policies that may be implicated contain war exclusion clauses, one form of which excludes coverage for "war, invasion, civil war, revolution, rebellion, insurrection or warlike operations, whether there be a declaration of war or not." While many U.S. carriers have indicated that they will not seek to invoke those exclusions, some, including some reinsurers, may do so. (1)

While decisions as to any specific exclusion must turn on policy language, there is some case law as to how an act of war will be defined by the courts. The Second Circuit, addressing that issue in Pan American World Airways v. Aetna Casualty & Surety Co., (2) reasoned that the terrorist act there at issue did not equate to an act of war as used in the insurance contract. To date, no case has held that a terrorist act does constitute an act of war, (3) and the prevailing view of commentators appears to be that the events of September 11 will not fall within a war exclusion. It may be worthwhile, however, to examine the facts and reasoning of Pan Am, as well as those cases that have followed it, and to consider whether there may be potential distinctions between the events of 9/11 and those at issue in Pan Am.

B. Pan Am

Two men from the Popular Front for the Liberation of Palestine (PFLP) hijacked Pan Am Flight 83, a 747, while en route from Brussels to New York. The hijackers demanded that the pilots fly to Lebanon. When the aircraft reached the Beirut airport, several more PFLP members came aboard and placed explosives in the plane. The hijackers then forced the pilots to fly to Cairo, where they gave the passengers and crew only a few minutes to exit before the PFLP detonated the explosives, destroying the aircraft. The incident was not isolated. The PFLP had staged three other airplane hijackings on the same day, resulting in the destruction of two more planes.

The PFLP was one of more than 10 organizations dedicated to the "Arab reconquest of Palestine," but it was unique among the groups because its central belief structure centered on a "militant, Marxist-Leninist-Maoist ideology," according to the district court opinion. It advocated a revolution throughout the Middle East, not just in Palestine. For these reasons, the PFLP followed an independent course from the other Palestinian organizations. Indeed, the district court went to great lengths to paint the PFLP as a minor group, adrift among the sea of Palestinian causes. It characterized the PFLP's objectives as "relatively subordinate, separate, often tangential, and concentrated primarily upon the organization's own advancement and unique objectives." (4)

The PFLP had a unique objective. The hijackings arose as an attempt to "instill pride, bolster spirits, generally to inspire and be applauded by the fedayeen and the Palestinian masses." The group's leadership did not design the events to impact those beyond the Arab world; they were designed primarily to further the PFLP's revolution among Palestinians and other Arabs.

When the hijacking occurred, Pan Am maintained an "all-risk" insurance policy through Aetna on its 747. The policy contained an exclusion for "war, invasion, civil war, revolution, rebellion, insurrection or warlike operations, whether there be a declaration of war or not." The "all-risk" insurers maintained that the PFLP's destruction of the 747 fell under this exclusion. Pan Am argued that the incident and subsequent loss were not due to war within the meaning of that clause. Pan Am also obtained coverage via the London war risk insurance market covering the exclusion left by the Aetna policy.

The primary issue was whether the war risk exclusion applied. The Second Circuit held that it did not. In arriving at this decision, the court addressed the definition of "war" for the purposes of the insurance policy, reasoning, "The cases establish that war is a course of hostility engaged in by entities that have at least significant attributes of sovereignty. Under international law war is waged by states or state-like entities." The court also examined a series of English and American cases that dealt with the definition of war, embracing the opinion that "war refers to and includes only hostilities carded on by entities that constitute governments at least de facto in character." According to the court, the key criteria centered on the entities' attributes of sovereignty.

Applying this definition to the PFLP's actions, the court concluded, "the loss of the Pan American 747 was in no sense proximately caused by any `war' being waged by or between recognized states." The court compared the structure of the PFLP and determined that it could not amount to a state, nor did the PFLP act on the part of any state at the time it carried out its attacks. Indeed, as the facts suggest, the PFLP remained an isolated group with very few ties to other organizations.

The Second Circuit went further, however, noting that "war can exist between quasi-sovereign entities.... And of course an undeclared de facto war may exist between sovereign states." (5) It concluded that the PFLP could not constitute a "quasi-sovereign entity" because it had no claim to sovereignty, never acted on behalf of a recognized government, and no Arab state had recognized it.

The court finally rejected as "wholly untenable" an argument by the insurance companies that the PFLP engaged in a guerrilla war with the United States, stating, "The only evidence that the PFLP and the United States were at war consists of the PFLP's self-serving propaganda, propaganda claiming that the PFLP was effectively at war with the entire Western World. Such radical rhetoric cannot affect the outcome of this insurance case." (6)

In the end, the court held that the PFLP's actions could not constitute "war" nor could the PFLP amount to a sovereign state; none of the other terms in the policy exclusions accurately described the actions taken by the PFLP. The court focused specifically on the intent of the PFLP, and it simply could not find that the PFLP intended their actions to initiate a war.

C. Since Pan Am

The handful of cases discussing war exclusions within the context of insurance policies since Pan Am have primarily followed that decision. Perhaps the most comprehensive elaboration is found in Holiday Inns Inc. v. Aetna Insurance Co., (7) in the which the U.S. District Court for the Southern District of New York relied on Pan Am in determining whether the loss Holiday Inn sustained from damage during a strife between Christians and Muslims in Beirut was covered under its insurance policy.

The court engaged in a lengthy and exhaustive discussion concerning the facts surrounding the hostilities that led to the damage at the Beirut Holiday Inn. Heavy damage occurred from October 1975 to April 1976 during intense fighting among several factional groups for control of a wealthy area of Beirut. Aetna argued that the damage occurred as a direct result of fighting between three distinct groups within Lebanon: Syria, the Palestine Liberation Organization, and various Lebanese rightists factions.

In resolving whether the hostility among the various factions constituted "war," the court noted that Pan Am did not undertake detailed definitions of "entities that have at least significant attributes of sovereignty," "governments at least de facto in character" and "quasi-sovereign entities." Consequently, it surmised from Pan Am what attributes are necessary before an entity may be called a "state."

The court declared:
      It is not sufficient to achieve such status that the group or entity in
   question occupy territory within the boundary of the sovereign state upon
   the consent of that state's de jure government. That is so, even if that
   government's consent extends to permitting its guests to exercise
   considerable control and autonomy within the camps or other facilities in
   which they dwell. "De facto governments" manifest "attributes of
   sovereignty" when they stake out and maintain adverse claims to territory,
   accompanying those claims with declarations of independence and
   sovereignty. (8)


The court then analyzed each of the three entities in turn, first examining the various Lebanese factions. The court found that the Lebanese government never ceased to function. Indeed, it noted, the government functioned with "considerable difficulty ... but functioned nonetheless." At best, the court went on, as the Lebanese government lost power, the factions increased the level of violence and fighting within Lebanon. But the court stated that despite the escalation, the factions never manifested "attributes of sovereignty."

Next the court considered the Syrian involvement. According to the available evidence, while Syrian military forces did enter Lebanon, their actions could not amount to war. Indeed, the court stated: "On the contrary: the evidence makes it clear that, at the pertinent times, Syria's intervention was for peacekeeping purposes. ... Syria became involved in Lebanon not as the result of a war with Lebanon or any other sovereign state, but rather as the result of a `brokered' diplomatic arrangement ..." The court acknowledged that Syrian troops engaged "combat" situations, but none of their activities contributed toward the damage sustained at the Holiday Inn.

Finally, the court considered the PLO's quasi-sovereign attributes. Rejecting the notion that it constituted a quasi-sovereign state, the court noted that the PLO actually agreed not to disturb the sovereignty of the Lebanese government. In fact, the PLO's presence in Lebanon resulted from the consent by the government. The court also pointed out that the PLO had no unified structure and remained divided among several hostile factions.

In another case, Wilker Bros. Co. v. Lumbermans Mutual Casualty Co., (9) the same federal district court held that a business owner could not recover from his insurer because the war exclusion excluded his loss, which occurred when a mob looted a pajama manufacturing plant in Nicaragua during the Nicaraguan civil war. The policy contained an exclusion for "civil war, revolution, rebellion, insurrection or civil strife arising there from." In dismissing the plaintiff's claim, the court stated unequivocally that "the factual situation here is exactly the sort for which the exclusionary clause (referred to as `free from capture and seizure warranty') was traditionally used and intended to exclude insurance coverage."

Courts also have considered insurance claims that arose from the U.S. invasion of Panama in 1989. In TRT/FTC Communications Inc. v. Insurance Co. of State of Pennsylvania, (10) the federal district court in Delaware held that losses suffered by a telecommunications business during the invasion came within the war exclusion. Shortly before the invasion, the Panamanian National Assembly had declared war against the United States. During the hostilities, a group of armed men damaged TRT's business when they broke into a store and stole merchandise and equipment.

The court concluded that the war exclusion clause precluded TRT's recovery under the insurance policy because the facts indicated that the armed men participated with the war effort. The court did not engage in an exhaustive resuscitation of the facts, but it seemed persuaded by Panama's declaration of war against the United States, combined with Panama's "war preparedness status." Even so, the court held that "regardless of whether the men were part of the Panamanian forces or a band of looters, there is ample evidence to support the conclusion that their actions against TRT were enabled by the military hostilities occurring between Panama and the U.S." It seems, however, that primary in the court's decision was the formal declaration of war that was issued by the Panamanian government prior to TRT's loss.

In a similar case, looters ransacked and partially destroyed a number of Sherwin-Williams retail outlets in Panama City following the invasion. (11) The insurance policy issued to Sherwin-Williams, however, contained a war exclusion provision, and a federal court in Ohio held that the war exclusion precluded coverage for business losses. Despite the court's denial of coverage under that exclusion, Sherwin-Williams covered its losses under the policy because it contained a coverage provision that included "civil commotion."

D. Pan Am and 9/11

On the surface, it appears that Pan Am and its progeny would preclude an insurance company from invoking a war exclusion provision with respect to the events of September 11, but the facts are sufficiently different to permit possible distinctions: (1) the events of September 11 may have been state sponsored; (2) the nature of the attacks was much more militaristic; and (3) the goals and effects of the events are quite different from those in Pan Am; and (4) the United States responded with a declaration of war.

1. State Sponsorship

State sponsorship or actions by a state-like entity would provide a sound basis for concluding that the September 11 tragedy constituted an act of war. If a government, sovereign or quasi-sovereign, directed the 9/11 attacks, Pan Am would not preclude an insurer from invoking a war exclusion provision. Even with the facts as we understand them, a war exclusion provision arguably may apply.

In the Pan Am case, the court established that "war is a course of hostility engaged in by entities that have at least significant attributes of sovereignty." Several sources suggest that Al Qaeda possesses attributes that indicate its "quasi-sovereign" nature. The strong ties between the Taliban and Al Qaeda also provide the impression that the attacks may have been state-sponsored. The sources include a report by the British government that suggests a strong interdependent relationship between Al Qaeda and the Afghanistan government. (12) Both these theories arguably suggest that the September 11 events may constitute war under the Pan Am criteria.

According to the British report, the Al Qaeda leader, Osama bin Laden, and the Taliban "have a close and mutually dependent alliance." Bin Laden provided Afghanistan with a significant amount of material, financial and military support-troops, arms and financial resources to fight the Northern Alliance. Bin Laden was closely involved with Taliban military training, planning and operations, and he had representatives throughout the Afghan military and government-governing base. He also provided the Afghanistan government with a significant amount of infrastructure, including funding the construction of an irrigation canal and upgrading electricity and water supplies throughout Afghanistan. (13)

In return, the Taliban provided Al Qaeda and bin Laden protection from outside attacks and allowed Al Qaeda to operate terrorist training camps. Arguably, Al Qaeda could not have operated its terrorist network without the support of the Taliban, and the Taliban would have been significantly weakened but for Al Qaeda's financial and military support.

In Pan Am, the PFLP maintained no such bond between itself and a government; it was a small organization that did not act on behalf of a recognized government. In contrast, the Al Qaeda organization operates on a global scale with agents and resources throughout the Middle East, Europe, Africa, Asia and the Americas. Many reports indicate that Al Qaeda membership numbers in the thousands.

These distinctions between suggest that Al Qaeda functioned together in such close cooperation with the Taliban government of Afghanistan that its acts might be at least "quasi sovereign." If so, it may be argued that the events of September 11 may constitute a "war" for the purpose of insurance coverage. Never before has there been a "non-governmental" organization with the resources capable of mounting such an attack. Al Qaeda's resources and interdependence with the Taliban arguably rival the capabilities of many world nations.

2. Attacks' Complexity

By themselves, the attacks against the United States appear much more militaristic than those undertaken by the PFLP. Although the PFLP staged a series of hijackings throughout the Middle East and Europe on the same day, those events pale in comparison to the precision, planning and organization involved in the September 11 attacks. The PFLP attacks were less organized, according to the court--the hijackers took the wrong flight; they had no direct control over the aircraft; they originally planned to take the 747 to an abandoned airstrip in Jordan, but abandoned those plans by flying to Beirut and then on to Cairo.

By contrast, the September 11 attacks reportedly were organized and well planned by Al Qaeda's most senior associates. The attacks themselves featured trained pilots who steered large jet aircraft into their targets within minutes of each other. These facts suggest a complexity and co-ordination beyond that of the PFLP attack, even recognizing that the PFLP planned their attack in concert with other hijackings and involved a number of PFLP members.

The September 11 attacks also entailed a larger amount of resources, both financially and strategically. Although many of the details remain unknown, the individuals involved attended flight schools, used flight simulators to study the controls of larger aircraft and placed potential airports and routes under surveillance. The dead and missing toll exceeds three thousand persons, and the insurance industry has calculated the losses stemming from the attacks at more than $70 billion. It could be argued that these facts alone suggest that September 11 cannot be trusted as governed by the Pan Am case.

3. 9/11 Effect

The goals and effects of the PFLP attack and the September 11 attacks differ substantially. The PFLP designed their attacks to impact the Arab world and further the PFLP agenda among Palestinians and other Arabs. The attacks of September 11, by contrast, were much broader in scope and vision. They killed thousands and devastated the U.S. financial center and military headquarters. The hijackers use of airplanes to hit their targets resembled the use of missiles attacking targets, rather than simple hijackings.

Moreover, Al Qaeda's goals in carrying out its atrocities are much broader than those of the PFLP. On several occasions, bin Laden has openly advocated a jihad against the United States, calling on all Muslims to launch attacks. The September 11 attacks were not isolated incidents. Since the early 1990s, Al Qaeda has targeted and conducted multiple attacks against the United States. Those attacks include participating in the attack against U.S. military personnel in Somalia, the attacks against two U.S. embassies in Africa, an attack against a military base in Saudi Arabia, the 1993 bombing at the World Trade Center, as well as foiled attempts to blow up several 747s over the Pacific Ocean and multiple Y2K attacks against the United States.

4. Declaration of War

The U.S. response to the attacks lends further support to the argument that the attacks were more than a terrorist incident. Many of the nation's principal leaders in the executive branch and Congress have called the attacks "acts of war," and on September 12, 2001, the Congress declared war against the perpetrators of the attacks pursuant to the war powers clause of the Constitution, and the War Powers Resolution Act, 50 U.S.C. [section] 1541. (14) Pursuant to that declaration of war, the U.S. has invaded Afghanistan and has launched extensive military attacks. Indeed, one of the main U.S. objectives was to root out the Taliban and replace that government with a new Afghan leadership, making the effort one between governments. Because this response must properly be termed acts of war within the meaning of the exclusion, the attack that triggered the response might be considered a part of that war.

5. Is Coverage There?

Pan Am and its progeny provide the clearest authority on whether a war exclusion clause provides coverage for a terrorist attack. Several commentators suggest that Pan Am bars an insurer from invoking a war exclusion clause. But the Pan Am framework remains relatively untested. There are several important factual distinctions between Pan Am and the September 11 attacks. If an insurance company faced a substantial exposure to the September 11, it might invoke a war exclusion clause. Such a strategy is, of course, not without pitfalls--including intense litigation and public relations issues--but that course may not be precluded by Pan Am.

TERRORISM EXCLUSION CLAUSES

Policies excluding damages arising from acts of terrorism should present a relatively clearer basis to deny coverage. Much has been written about differences of opinion as to what constitutes "terrorism"--for instance, that one person's "terrorist" is another's "freedom fighter"--but there does seem to be a clear consensus, especially in the United States, that the acts of September 11 were terrorists acts. Other limitations may come into play, however, such as requirements relating to either temporal or physical proximity to the events, or issues of causation. There also may be some reluctance among insurers and reinsurers to rely on those exclusions or to adopt a restrictive interpretation, given the possible adverse reactions of the public and insurance regulators. (15)

Insurers are moving to include terrorism exclusions in policies and to offer separately priced terrorism coverage. The National Underwriter of December 17, 2001, reported that more than 100 insurers have filed with the New York Insurance Department for permission to exclude coverage for losses resulting from terrorism and from anthrax or anthrax-like risks. The New York Insurance Superintendent has reported that terrorism exclusions are being added to every form of reinsurance contract regardless of the size or type of property to be insured. This will cause primary insurers to exclude such risks as well. Some hospitals reportedly have had difficulty getting coverage at all, and large commercial structures are in some instances able to obtain coverage only at greatly increased rates. With respect to the separate pricing, consumer groups are pressing the Congress, as well as state regulators, to require rigorous analysis to ensure insurers are not overcharging for the coverage.

Some state insurance departments have approved a new version of a terrorism exclusion developed by Insurance Services Office, 36 states at last count, but California and New York have not approved the form on the ground that it is too broad.

NUMBER OF OCCURRENCES

Insurers and reinsurers are familiar with disputes over situations in which a determination as to the number of occurrences can have major financial significance. Environmental claims are one familiar example. In this situation at least one lawsuit has already raised the issue as to whether the two World Trade Center attacks are one occurrence or two. (16) Others will no doubt raise the issue with respect to the other two attacks. Resolution of that issue may in turn lead to others. For example, if the WTC attacks are two separate occurrences, there may be a need to allocate damage to surrounding property, including some forms of business interruption coverage, to a particular occurrence. (17)

POSSIBLE SUBROGATION CLAIMS

Given the massive exposure at stake, insurers and reinsurers will have every incentive to assert subrogation claims. The real wrongdoers are gone or hard to find, and in any event they do not have seizable assets of any great consequence. Nonetheless, there may be some claims worth considering.

A. Terrorists and Their Supporters

The U.S. government has frozen assets of certain organizations linked to the terrorists responsible for the events of September 11, and it is continuing to pursue sources of Al Qaeda's financing. Although funds frozen at present are insufficient to address in a meaningful way the vast damages involved, tens of millions of dollars have been seized. So it may be useful to consider whether, under the Foreign Sovereign Immunities Act (FSIA), 22 U.S.C. [subsection] 1330, 1602-11, and applicable case precedent, a victim may assert a successful claim for losses against the terrorists and their financial supporters and attach the frozen assets of terrorist organizations. One also might consider whether a claim could be asserted against Afghanistan or Iraq.

Because the events of September 11 were unlike any other the United States has experienced, legal proceedings probably will venture into uncharted and rarely navigated waters. Although some prior events, such as the seizure of the U.S. embassy in Tehran and the taking or destruction of many U.S. business interests during the revolution in Iran, provide some precedent, this situation presents several novel issues.

1. Foreign Sovereign Immunities Act

The FSIA, enacted in 1976, specifies the conditions under which parties can maintain lawsuits in the United States against foreign governments or their entities. (18) Although the act grants immunity to foreign state governments, Congress has created numerous exceptions to FSIA, the most important for present purposes being the 1996 Antiterrorism and Effective Death Penalty Act, 28 U.S.C. [section] 1605, which denies immunity to those states designated by the State Department as terrorist states "if the foreign state commits a terrorist act, or provides material support and resources to an individual or entity which commits such an act, which results in the death or personal injury of a United States citizen." (19)

Two other exceptions are the commercial activity exception and the non-commercial tortious activity exception. The commercial activity exception waives sovereign immunity when the action is based on: (1) a commercial activity carried on by the foreign state within the United States, (2) an act performed in the United States in connection with a commercial activity of the foreign state elsewhere or (3) an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere, which act causes a direct effect in the United States. 28 U.S.C. [section] 1605(a)(2). The tortious activity exception applies when the action seeks damages for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of a foreign state or of any official or employee of a foreign state while acting within the scope of his office or employment. 28 U.S.C. [section] 1605(a)(5). Courts have gone to great lengths to distinguish the tortious activity from the commercial activity exception.

18 U.S.C. [section] 2333(a) also provides an avenue for recovering damages arising from September 11. It states under the title "Civil Remedies":
   Any national of the United States injured in his or her person, property,
   or business by reason of an act of international terrorism, or his or her
   estate, survivors, or heirs, may sue therefore in any appropriate district
   court of the United States and shall recover threefold the damages he or
   she sustains and the cost of the suit including attorney's fees. [Emphasis
   added]


"International terrorism" is defined in 18 U.S.C. [section] 2331 as activities that:

(A) involve violent acts or acts dangerous to human life that are a violation of the criminal laws of the United States or of any state, or that would be a criminal violation if committed within the jurisdiction of the United States or of any state;

(B) appear to be intended--

(i) to intimidate or coerce a civilian population;

(ii) to influence the policy of a government by intimidation or coercion; or

(iii) to affect the conduct of a government by assassination or kidnapping; and

(C) occur primarily outside the territorial jurisdiction of the United States, or transcend national boundaries in terms of the means by which they are accomplished, the persons they appear intended to intimidate or coerce, or the locale in which their perpetrators operate or seek asylum. [Emphasis added]

The statute appears to apply only to terrorist acts that occur internationally. It has been applied in only two reported instances, and both of those dealt with terrorist attacks internationally. But Subsection (C) may provide a means under which the events of September 11 may be construed as international terrorism. Those events involved violent acts that were intended to intimidate and influence the United States. By the statute's plain language, however, the events transcend the U.S. national boundaries in terms of their impact and the suspected perpetrators, who operate primarily internationally.

(a) Afghanistan

Any suit against the government, agencies or instrumentalities of Afghanistan would need to cross the FSIA hurdle. Under current law, it appears that the Afghan government would be immune from suit because Afghanistan is not on the list of countries that support terrorists. Although the U.S. government in the future could eliminate Afghanistan's immunity, that seems unlikely so long as it is supporting the new government. Alternatively, the non-commercial tortious action exception may provide a means to file a claim against Afghanistan, or against the Taliban, if involvement in the planning or preparation of the attacks can be shown.

(b) Al Qaeda and Osama bin Laden

FSIA would not seem to bar a suit against either Al Qaeda or Osama bin Laden because neither are sovereign states nor agencies, instrumentalities or employees of a sovereign state, although some of the war exclusion discussion above might be important. 18 USCA [section] 2333 provides an approach to file a civil suit against either Al Qaeda or bin Laden. Procedural issues such as service of process may become difficult, but Judge Baer of the Southern District of New York has authorized service by unconventional means, such as television broadcasts and advertisements in regional newspapers, given the unavailability of normal service. (20)

(c) Al Qaeda Financial Network

A recent decision has held that under Section 2333 a suit for aiding and abetting can be brought against organizations that contribute money or finance terrorist operations. (21) The most difficult hurdle in such an action would be untangling the complex web of financial sources and connections to prove the requisite level of knowledge and intent required for an aiding and abetting suit.

(d) Iraq

It is possible to bring a claim against Iraq under FSIA. Unlike Afghanistan, Iraq has been designated a state sponsor of terrorism and would be exempt from immunity under Section 1605(a)(7) if Iraq either perpetrated or provided support to the terrorist attacks. To date, there have been several unconfirmed reports of meetings between Al Qaeda members and Iraq government officials, however, the nature of these contacts have been pure speculation. Without more factual information, it would be difficult at best to maintain an action against Iraq.

(e) Frozen Assets

It is possible to attach the frozen terrorist assets. One must possess a valid cause of action under which a money judgment exists in favor of the plaintiff and against the defendants. Depending on the location of the initial cause of action, that state's attachment proceedings would apply for purposes of attachment of frozen assets.

The most promising course of action appears to file a claim under 28 U.S.C. [subsection] 2333, 2339A and 2339B against A1 Qaeda, bin Laden and the Al Qaeda financial network. Thereafter, a claim against the defendants' frozen assets may be possible. This approach, however, is not without its pitfalls. Procedural issues may be difficult to overcome, and untangling the web of financial connections could prove to be even more difficult.

VICTIM COMPENSATION FUND

The airlines were the most obvious potential targets for claims arising from the events of September 11, and there will be substantial claims against them. Their exposure was limited, however, by Title IV of the Air Transportation Safety and System Stabilization Act (ATSSSA), which created the Victim Compensation Fund of 2001. Generally, those involved in the September 11 disaster have two compensation choices: litigation or submission of a claim to be paid from the fund. The fund provides for compensation without a showing of fault, but it also limits recovery, and punitive damages cannot be awarded. (22)

The ATSSSA caps liability of the airlines. Section 408(a) states, "Liability from all claims ... against any air carrier shall not be in an amount greater than the limits of the liability coverage maintained by the air carrier." Reportedly, the airlines maintain coverage in the amount of $1.5 billion per aircraft. This amount must be shared among more than $70 billion in estimated claims arising from property claims, as well as life insurance claims.

Despite some drawbacks, it appears on balance that using the victim compensation fund would be advantageous to most claimants. The guaranteed and timely recovery makes it attractive given the speculation, risk cost and delay involved in litigation. If potential claimants utilize the fund, it will have a profound impact on airports, airlines and the insurance industry. Fewer potential claimants may file actions against them because using the fund precludes claimants from filing civil actions. Moreover, if an individual files an action or a claim with an insurance company and later files under the fund, the amount recoverable from the fund would be reduced by any amount they received from insurance claims.

The victim compensation fund is designed to discourage litigation and encourage victims to utilize the fund for claiming losses.

FEDERAL GOVERNMENT LIABILITY

In view of the magnitude of the September losses and the nature and resources of the actual wrongdoers, the difficulty of pursuing actions against them means that there is every incentive to look for a more accessible "deep pocket." The U.S. government is that ultimate pocket. It is possible that there could be potential bases for federal government liability under the Federal Tort Claims Act (FTCA), 28 U.S.C. [section] 2671-2680.

A. Discretionary Function Exception

Although the federal government generally has sovereign immunity from tort suits for monetary damages, it has waived its immunity in certain situations. Under the FTCA, the United States is liable for tort claims "in the same manner and to the same extent as a private individual under like circumstances." (23) At the same time, however, the act establishes certain exceptions under which federal sovereign immunity is not waived, so if an exception applies, there is no jurisdiction for a court to entertain a tort suit against the United States.

The most relevant exception to September 11 is 28 U.S.C. [section] 2680(a), which directs that sovereign immunity is not waived for:
   Any claim based upon an act or omission of an employee of the government,
   exercising due care, in the execution of a statute or regulation, whether
   or not such statute or regulation be valid, or based upon the exercise or
   performance or the failure to exercise or perform a discretionary function
   or duty on the part of a federal agency or an employee of the government,
   whether or not the discretion involved be abused.


The scope of this exception, commonly known as the "discretionary function" exception, is set forth in two U.S. Supreme Court cases--United States v. Varig Airlines. (24) and Berkovitz v. United States. (25)

1. Varig Airlines -- Tort Claim Barred

Varig Airlines was two consolidated cases arising from separate airline accidents, both of which involved in-flight fires. Various suits were brought against the United States under the FTCA, asserting claims for property damage to the aircraft and for wrongful death on behalf of the victims' families. The suits were predicated on the theory that the fire had originated because of defects in certain equipment onboard the aircraft; that federal air safety regulations required equipment to comply with certain safety standards; and that the Civil Aeronautics Agency (the predecessor to the Federal Aviation Administration) negligently inspected the aircraft in question and issued a compliance certificate that did not comply with the regulations.

The CAA's regulations required an airplane to acquire a series of safety compliance certificates. Manufacturers were responsible for conducting the necessary tests and providing proof of compliance to the CAA, which then reviewed the evidence and issued a certificate if it was satisfied that the safety regulations were met. Because of the CAA's limited resources, it monitored compliance by means of a "spot-check" program. As a result, neither aircraft in question was actually inspected or reviewed by a CAA inspector or representative. The plaintiffs alleged that the "spot-check" system itself, as well as the application of that system to these particular aircraft, was negligent.

The Supreme Court unanimously held that the suits were barred under the discretionary function exception, which was added to the act, the Court said, "to make clear that the act was not to be extended into the realm of the validity of legislation or discretionary administrative action." In other words, it added, "Congress wished to prevent judicial `second-guessing' of legislative and administrative decisions grounded in social, economic, and political policy through the medium of an action in tort." The exception, the Court went on to state, reaches both the "determinations made by executives or administrators in establishing plans," as well as the "acts of subordinates in carrying out the operations of government in accordance with official directions." (26)

The Court noted, however, that "it is unnecessary--and indeed impossible--to define with precision every contour of the discretionary function exception," adding in Berkovitz that the exception, "properly construed, ... protects only governmental actions and decisions based on considerations of public policy." To determine whether the exception applies, the Varig Airlines Court stated, there are two criteria--the nature of the conduct in question and whether the acts are undertaken by a person in his or her role as a regulator of the conduct of private individuals.

Varig Airlines held that the establishment of the spot-check system did not present the basis for an actionable tort under the FTCA. The agency had been given by statute the authority to determine how best to provide for air carrier safety, and its determination as to the spot-check system was a permissible act of discretion on its part. Decisions of this type balance the need for safety against practical considerations, such as staffing and funding, precisely the kind of decision making the FTCA exempts from judicial second-guessing.

The Court also held that the execution of the spot-check system fell within the discretionary function exception, for the CAA employees implementing the system, the Court stated, were "empowered to make policy judgments regarding the degree of confidence that might reasonably be placed in a given manufacturer, the need to maximize compliance with FAA regulations, and the efficient allocation of agency resources."

2. Berkovitz -- Tort Claim Not Barred

In this case, the plaintiff was injured when he took an oral polio vaccine. He sued the United States under the FTCA on the ground that federal agencies wrongfully licensed the laboratory that produced the vaccines and wrongfully approved the release of the particular lot of vaccine in question. A unanimous Supreme Court rejected the federal government's discretionary function argument.

The Court noted that the first principle is "whether the action is a matter of choice for the acting employee," for "conduct cannot be discretionary unless it involves an element of judgment or choice." "Thus," the Court continued, "the discretionary function exception will not apply when a federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow. In this event, the employee has no rightful option but to adhere to the directive." (27)

Applying this standard, the Court held that the plaintiffs' first cause of action--that the federal agency wrongfully licensed the laboratory that produced the vaccines--as not barred by the discretionary function exception. The relevant statute and regulations required the agency to receive certain data from a manufacturer, to examine the product and make a safety determination before issuing a license. The plaintiffs had alleged that the agency issued a license without first receiving the data from the manufacturer. Because the agency had no discretion under the statute and regulations to do anything other than receive the data prior to issuing a license, the discretionary function exception was inapplicable.

As for second claim--that the federal agency had wrongfully approved the release of the particular lot of vaccine in question--the Court held that the action might be barred by the discretionary function exception. Here the statutory and regulatory authorities required the federal agency to examine the product and determine that it met safety standards. The Court held that if the plaintiffs' second claim meant that the federal agency made an incorrect determination of safety, that would fall under the discretionary function exception, because the question would turn on an agency's policy judgment. On the other hand, if the plaintiffs' second claim meant that the agency either approved the vaccine without making the required safety determination, or that the agency determined that the vaccine was unsafe but approved the vaccine anyway, either action would not be an act of discretion but a clear violation of the law, and the discretionary function exception would not apply.

3. Parameters of the Exception

In sum, under Varig Airlines, both the government's choice of regulation and its execution thereof were exempt from FTCA suit. Under Berkovitz, however, if the government violates its own legal requirements, that action is not "discretionary" and not exempt from suit. The discretionary function exception protects decisions made by both high-level and low-level employees so long as the decisions made and the actions undertaken are premised on the policy-based discretion that has been afforded them in the relevant statute or regulation.

As the Supreme Court later summarized in United States v. Gaubert:
   When established governmental policy, as expressed or implied by statute,
   regulation, or agency guidelines, allows a government agent to exercise
   discretion, it must be presumed that the agent's acts are grounded in
   policy when exercising that discretion. For a complaint to survive a motion
   to dismiss, it must allege facts, which would support a finding that the
   challenged actions are not the kind of conduct that can be said to be
   grounded in the policy of the regulatory regime. The focus of the inquiry
   is not on the agent's subjective intent in exercising the discretion
   conferred by statute or regulation, but on the nature of the actions taken
   and on whether they are susceptible to policy analysis.

      There are obviously discretionary acts performed by a government agent
   that are within the scope of his employment but not within the
   discretionary function exception because these acts cannot be said to be
   based on the purposes that the regulatory regime seeks to accomplish. If
   one of the officials involved in this case drove an automobile on a mission
   connected with his official duties and negligently collided with another
   car, the exception would not apply. Although driving requires the constant
   exercise of discretion, the official's decision in exercising that
   discretion can hardly be said to be grounded in regulatory policy. (28)


In general, it can be said that claims arising from the events of September 11 based on the sufficiency of existing federal regulations, the amount of effort expended by the government enforcing those regulations or the failure of the government to enact alternative regulations are likely to be barred under the FTCA. Claims with greater potential to succeed are those unrelated to the government's role in making and effectuating public policy. In particular, claims that would most likely be viable are those based on the general negligence of government employees in performing job-related duties when those duties do not involve policy-based discretion, or the failure of employees to adhere to specific and unambiguous statutory requirements.

GOVERNMENT AUTHORIZATION DEFENSE

Efforts may be made to impose liability for the damages flowing from the events of September 11 on various entities having some responsibility for security or other aspects of air travel. (29) Because those entities often acted in the context of extensive government regulation, it is appropriate to consider the potential applicability of a "government authorization" defense. In this situation, the question may be whether a party relied on official statements or interpretations of law from a government agency or official.

In spite of the well-established principle that "ignorance of the law is no excuse," courts have carved out an exception for situations in which defendants rely on official statements or interpretations of law from. Although the parameters of this defense vary by jurisdiction, courts and commentators generally agree that it has four requirements: (1) the official must have affirmatively or actively led the defendant into believing the conduct was not prohibited; (2) the official involved must have given an actual interpretation of the law; (3) the defendant's reliance on the official's interpretation must have been actual, reasonable and in good faith; and (4) the official involved must have had actual authority to enforce or interpret the law. (30)

The applicability of this defense to suits brought in connection with the terrorist attacks of September 11 will likely depend on who is initiating the legal action. Is it a government prosecution for criminal or civil penalties? Or is it a private civil suit for tort damages? The defense has historically been employed against the government in criminal or civil prosecutions.

This is because the defense has constitutional underpinnings, in that it violates traditional notions of fairness and due process for the government to prosecute an individual for conduct that was the result of that individual's reliance on a statement from the government. In fact, a common title for this defense is "entrapment by estoppel." The idea is that the government inadvertently entraps individuals when it offers an official statement or interpretation of law and then prosecutes them for their conduct in reliance on the statement or interpretation.

Because of these policies underlying the "government authorization" or "entrapment by estoppel" defense, it is clear that the truest form of this defense applies directly to prosecutions by the government against the recipient of the legal interpretation. There are, however, at least two reported cases in defendants advanced these arguments against private parties in civil suits for damages, although only one of the decisions explicitly dealt with the issue of whether the defense is appropriate in a civil suit, as opposed to a criminal prosecution brought by a private party.

In Kratz v. Kratz, (31) the U.S. District Court for the Eastern District of Pennsylvania expressly upheld the use of the defense in a civil suit between private parties. A divorced husband relied on a case that was later disfavored in concluding that he could wiretap his former wife's phones without civil penalty. The ex-wife subsequently sued for civil damages under Title III of the Omnibus Crime Control and Safe Streets Act of 1968.

The court recognized that the defense was intended to be asserted against the government, but nevertheless it held that it would not be fair to deny the husband the right to assert the defense when he had relied in good faith on a judicial opinion that clearly authorized his conduct. The court emphasized, however, that its ruling was influenced by the fact that Title III was foremost a criminal statute, the civil remedy sought by the wife under Title III was an inherent part of the criminal legislation, and the conduct engaged in by the defendant did not constitute a tort for which he could be sued in federal court absent Title III.

In re Air Disaster at Lockerbie, Scotland on December 21, 1988, (32) is another civil case discussing the government authorization defense. Although Lockerbie did not expressly address the criminal forum versus the civil forum issue, its facts are nearly analogous to the events of September 11. It involved a civil suit against Pan Am brought pursuant to the Warsaw Convention following the bombing of Pan Am's Flight 103 over Lockerbie, Scotland. Pan Am was accused of negligence in that it failed to follow the Air Carrier Standard Security Program (ACSSP) by only x-raying checked luggage rather than subjecting it to a hand search. In its defense, Pan Am claimed that an FAA agent had given the airline oral authorization for this practice.

The Second Circuit ruled that the defense failed because exemptions from the ACSSP had to be made in writing by the FAA following written application. It also ruled that "heavily regulated air carriers--certified by the FAA and charged with knowledge of the relevant statutes and regulations under which they operate" can never claim ignorance of the law as an excuse.

The court stated:
   Our holding is narrow. We reiterate it to emphasize its limitations: in a
   case brought under the Warsaw Convention involving violations of FAA
   regulations that pertain to the safety of those aboard an aircraft, against
   a defendant air carrier charged with knowing and following those
   regulations, that air carrier may not mount a mistake of law defense. In
   the instant case, therefore, the evidence offered by Pan Am regarding its
   mistaken view of what was required by the ACSSP was inadmissible for the
   purposes of mounting a mistake of law defense. (33)


Despite the strong language of this "clarification," Lockerbie's holding is difficult to pin down with respect to the "government authorization," "mistake of law" and "state of mind" defenses. First, the court failed to undertake the same type of analysis seen in Kratz to explain why the government authorization defense was being discussed in a civil tort suit, despite the fact that it is generally a criminal defense used against the government. Second, the Lockerbie court's handling of Pan Am's various defenses makes it difficult to understand the precise nature of the court's stance. At one moment, the court seems to characterize these three distinct defenses as just different faces of the same basic argument, but later it analyzed each defense in its own separate section. As a result, it is not clear whether the Second Circuit viewed the "government authorization" defense as a distinct, valid construction apart from the garden-variety "mistake of law" defense, or if it lumped the two together.

The separate treatment and ultimate resolution on the merits of the "government authorization" defense would seem to indicate that the court recognized the validity of this defense as asserted by an airline. However, the fact that the same communication from the FAA agent formed the basis of each defense, in addition to the fact that the court relied heavily on the nature of Pan Am as a sophisticated entity charged with ensuring the safety of its passengers, suggests that Lockerbie stands for the proposition that even a "government authorization" defense would be difficult to assert in the context of aviation security.

Because of the separate treatment of the defense, the best reading of the case may be that a "government authorization" defense can succeed in the right circumstances, and it is only the garden-variety "ignorance or mistake of law" defense that is unavailable to a heavily regulated entity.

It is also worth mentioning that, while the Lockerbie court's reasoning seems to be heavily influenced by the allegedly gross negligence of Pan Am and the emotional backdrop of Flight 103's demise, it might serve as a good indication of how a court would react to an attempt by a defendant to point the finger toward the FAA following the September 11 tragedy. In order to succeed on a "government authorization" or "entrapment by estoppel" defense--assuming those defenses were made available in a civil proceeding--the defendant likely would have to make a very thorough, formal showing. It would be preferable for there to be a written FAA policy from the upper ranks of the agency specifically addressing whatever security procedures were directly relevant to September 11, as well as a consistent, good-faith reliance on that policy. In addition, whatever conduct the defendants engaged in reliance on that policy must appear reasonable and diligent to the average observer and not simply an attempt by a large corporate entity to meet the minimum requirements.

The principles of due process and estoppel, which are central to the rationale of the defense, may not readily apply if it is asserted in a private action. Thus, a defendant could utilize this defense--if the above requirements are met--to defend itself in a criminal or civil action brought by the government. There is some possibility that the defense could succeed if formally asserted in a civil suit, and it could still have value even if it did not succeed.

In the case of a private tort suit brought in relation to the September 11 events, a defendant's reliance on an official statement or interpretation of law from the FAA could be relevant to whether that entity had exercised due care. This would be particularly true if the applicable standard of care was drawn from the very regulations that the FAA was interpreting and enforcing. Thus, while such reliance would provide good arguments that the airport or airline wasn't negligent in performing its security functions, it probably wouldn't trigger a true "government authorization" or "entrapment by estoppel" defense. The true form of this defense is best utilized in an action brought by the government.

(1.) Testimony of the National Association of Insurance Commissioners: Hearings Regarding the Impact of the September 11, 2001 Terrorist Attacks on America's Insurance System Before the Committee on Financial Services, U.S. House of Representatives, September 26, (statement of Kathleen Sebelius, Commissioner of Insurance, Kansas). In her remarks, Commissioner Sebelius noted that she was unaware of any insurance or reinsurance company that was raising the war exclusion but that her commission was watching non-U.S. companies very closely.

(2.) 505 F.2d 989 (2d Cir. 1974), aff'g 368 F.Supp. 1098 (S.D.N.Y. 1973).

(3.) In Stawski v. John Hancock & Mut. Life Ins. Co., 163 N.Y.S.2d 155 (N.Y.Sup. Ct. N.Y. Cty. 1957), motion to dismiss appeal granted on consent, 170 N.Y.S.2d 489 (App.Div. 1st Dep't 1957), an attack by the Israeli army on a ship transporting members of a terrorist group was found to be an act of war within the exclusion.

(4.) "The hijacking was the work of a relatively minuscule, militarily impotent, essentially isolated group of dedicated revolutionaries pursuing long-range objectives." 368 F.Supp. at 1115-16.

(5.) The Second Circuit, however, disagreed with the insurers that "war" includes conflicts between guerrilla groups. The court explained that even in conflicts between guerrilla groups, those groups must maintain some indicia of sovereignty before their conflict may be styled a war.

(6.) 505 F.2d at 1015. By contrast, Al Qaeda had not only waged a propaganda campaign against the United States but has attacked the United States and its interests on multiple occasions.

(7.) 571 F.Supp. 1460 (S.D.N.Y. 1983).

(8.) Id. at 1500. Application of this standard is somewhat unclear in the context of September 11. The court seems to suggest that groups can only become "quasi-sovereign" if they acquire territory that is adverse to the governing party. Al Qaeda, however, would fall squarely within the second sentence of the above quotation, namely, that the Taliban allowed Al Qaeda to operate and control several training camps and bases within Afghanistan. Al Qaeda's territorial claims always were accompanied by the Taliban's favor and blessing. Despite this technicality, as is discussed below, one can argue that Al Qaeda operated in conjunction with the Taliban. If so, this relationship could serve as a basis for determining that a "state" initiated the September 11 attack.

(9.) 529 F.Supp. 113 (S.D.N.Y. 1981).

(10.) 847 F.Supp. 28 (D.Del. 1993), aff'd, 9 F.3d 1541 (3d Cir. 1993)(table).

(11.) Sherwin-Williams Co. v. Ins. Co. of State Pennsylvania, 863 F.Supp. 542 (N.D. Ohio 1994).

(12.) The United Kingdom government published a document purporting to explain why the U.S. and U.K. believe that the Al Qaeda network is responsible for the terrorist attacks. The document reveals extensive ties and relationships between the Taliban and Al Qaeda and intimates a connection between those organizations and September 11.

(13.) SIMON REEVE, THE NEW JACKALS: RAMZI YOUSEF, OSAMA BIN LADEN AND THE FUTURE OF TERRORISM 189 (Northeastern University Press 1999). Reeve catalogues the history of Al Qaeda and describes the relationship between Al Qaeda and the Taliban.

(14.) H.R.J. Res. 62, Congressional Declaration of War, 107th Cong. (2001) (enacted).

(15.) At least one lawsuit raises the applicability of a terrorism exclusion, Combined Ins. Co. of Am. v. Certain Underwriters at Lloyd's, London, No. 01-10023, U.S.D.C. S.D. N.Y.) (exclusion for "terrorism hazard").

(16.) S.R. Int'l Bus. Ins. Co. v. World Trade Center Properties LLC, No. 01-CV-0233, U.S.D.C. S.D. N.Y. The clause at issue defines as one occurrence "all losses that are attributable directly or indirectly to one cause or to one series of similar causes."

(17.) For a full discussion of the issue of "occurrences," see Michael F. Aylward, Twin Towers: The $3.6 Billion Question Arising from the Worm Trade Center Attacks, in this issue of Defense Counsel Journal, 69 DEF. COUNS. J. 169 (2002).

(18.) See George K. Chamberlin, Exceptions to Jurisdictional Immunity of Foreign States and Their Property under the Foreign Sovereign Immunities Act of 1976, 59 A.L.R. Fed. 99, [section] 2.

(19.) See Flatow v. Islamic Republic of Iran, 999 F.Supp. 1, 12 (D. D.C. 1998), citing 28 U.S.C. [section] 1605(a)(7).

(20.) See Melissa Sepos, TV Newspaper Ads Will Be Used to Serve Notice on Bin Laden, Al Qaeda, available at www.law.com by navigating through Search type News, then keyword Sepos (January 8, 2002).

(21.) Biom v. Quranic Literacy Institute, 127 F.Supp.2d 1002 (N.D. Ill. 2001) (allowing family of man killed in Israel by Hamas to sue several Islamic organizations that support Hamas).

(22.) For a full discussion of the ATSSSA and the victim compensation fund, see Richard P. Campbell, America Acts: Swift Legislative Response to the September 11 Attacks, in this issue of Defense Counsel Journal, 69 DEF. COUNS. J. 139 (2002).

(23.) 28 U.S.C. [section] 1346(b)(1) grants jurisdiction over claims to the federal district courts).

(24.) 467 U.S. 797 (1984).

(25.) 486 U.S. 531 (1988).

(26.) 467 U.S. at 811, quoting Dalehite v. United States, 346 U.S. 15, 35-36 (1953). Courts used to rely heavily on a distinction between decisions made at the "planning level," which fell within the discretionary function exception, and decisions made at the "operational level," which did not. See, e.g., Bernitsky v. United States, 620 F.2d 948, 951 (3d Cir. 1980) (collecting cases); United Air Lines v. Wiener, 335 F.2d 379, 392-93 (9th Cir. 1964). This distinction was essentially one between high-level and low-level employees. Strict reliance on this dichotomy was rejected in Varig Airlines and again later in United States v. Gaubert, 499 U.S. 315, 325 (1991), which the Court held, "In light of our cases and their interpretation of [section] 2680(a), it is clear that the Court of Appeals erred in holding that the exception does not reach decisions made at the operational or management level of the bank involved in this case. A discretionary act is one that involves choice or judgment; there is nothing in that description that refers exclusively to policymaking or planning functions." Thus, the actions and decisions of a low-level employee can be protected by the discretionary function where the statute governing the employee's duties is vague and the employee's judgment is grounded in policy considerations. See Palay v. United States, 125 F.Supp.2d 855 (N.D.Ill 2000). Likewise, the actions and decisions of a management or high-level official can fall outside the protection of the discretionary function exception where the official is required to follow a specific statutory mandate.

(27.) The language of the statute in question is a key factor when considering whether the discretionary function exception should apply. If the statute is vague and gives the employee charged with interpreting and enforcing the statute wide leeway, there is no liability. But if the statute is specific and does not leave room for judgment, there can be liability. Compare Barton v. United States, 609 F.2d 977, 979 (10th Cir. 1979) (stating that "if a government official in performing his statutory duties must act without reliance on a fixed or readily ascertainable standard, the decision he makes is discretionary and within the exception") and Reminga v. United States, 631 F.2d 449 (6th Cir. 1980) (holding that FAA regulations containing permissive words like "This study may include" and "To the extent necessary" denote discretion rather than mandatory requirements, and thus FAA was not liable for its failure to designate a TV tower as hazard) with Collins v. United States, 783 F.2d 1225 (5th Cir. 1986) (holding that the decision whether to classify mine shaft as gassy was not discretionary because statute in question specifically required such classification to be made when gases in question rose above 25 percent level).

(28.) 499 U.S. 315, at 324-25 & n.7 (1991).

(29.) This article will not discuss theories of liability against such entities because of certain current client representations of the author's firm.

(30.) See e.g., Raley v. Ohio, 360 U.S. 423 (1959).

(31.) 477 F.Supp. 463 (E.D. Pa. 1979).

(32.) 37 F.3d 804 (2d Cir. 1994).

(33.) Id. at 819. Lockerbie was impliedly overruled by the U.S. Supreme Court in Zicherman v. Koreian Air Lines Co., 516 U.S. 217 (1996), on grounds related to this discussion. Zicherman concerned what body of law applies under the Warsaw Convention. The holding has been recognized as impliedly overruling Lockerbie's conclusion that otherwise applicable state or federal law was pre-empted by federal common law in actions brought pursuant to the Warsaw Convention. See Anderson v. SAM Airlines, 1997 WL 117995 at *2 (E.D.N.Y.).

IADC member John W. Stamper is a litigation partner practicing from the Los Angeles and San Francisco offices of O'Melveny & Myers LLP, where he heads the firm's international dispute resolution practice. He has extensive experience in complex commercial litigation, arbitration and mediation in the United States and international tribunals. He is a graduate of Indiana University (B.S. 1969), attended the University of Hamburg in 1968-69, and Northwestern University School of Law (J.D. 1972).
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Author:Stamper, John W.
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Date:Apr 1, 2002
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