$1 Billion Claim in Tunnel Disaster

(CN) - Survivors and families of people who died in the ski train tunnel fire that killed 155 in Kaprun, Austria filed a $1 billion claim against their longtime attorneys. In their complaint in Manhattan Federal Court, the 65 plaintiffs say the lawyers botched their compensation claim through incompetence, repeated breach of duties, double-dealing and outright fraud.

They seek $15 million per survivor or family, return of all case files and production of documents from the state investigation of the disaster and any purported settlements stemming from it.

The Kitzsteinhorn cable car system was the world's first underground mountain railway when it was built in 1974. The tunnel in Kaprun, a small town near Salzburg, was about 2½ miles long.

On the morning of Nov. 11, 2000, a train carrying 166 people, many of them children and young adults, caught fire in the tunnel and was incinerated. Most passengers escaped from the train, but died of smoke inhalation in the tunnel. Only 12 survived.

Survivors and families of the victims were approached by firms that claimed to have experience with mass disaster, liability, defective products, transportation, torts, negligence, and class actions.

The firms held themselves out as having experience litigating in the United States against domestic, foreign and multinational corporations, according to the complaint.

The plaintiffs chose to be represented by defendants Nagel Rice LLC; Speiser Krause LLC; Kohn, Swift & Graf LLC; and, individually, by attorneys Jay Rice, Ken Nolan, and Robert Swift.

According to the complaint, the plan was for the firms to file lawsuits in the United States, through which they would be in position to negotiate settlements with various entities in Europe.

Rather than filing individual or group claims, the firms decided to file an Opt-in Class Action with a U.S. plaintiff as class representative. At the same time, they solicited Austrian and German lawyers to refer their clients for inclusion in the class in return for a share of the fees.

But from the outset, the litigation ran into trouble. In 2003, the compensation case against one of the primary defendants, Siemens AG Osterreich, was dismissed on technical grounds.

Then, the plaintiffs say, while the firms had the wherewithal to get survivors and families to sign agreements extending their representation, they failed to seek reinstatement of the case before the statute of limitations expired.

Instead, they filed a new motion, which the court found defective. After a second attempt to file the motion was also found defective, the court dismissed the claim with prejudice, concluding that the firms had "carelessly allowed the statute of limitations to expire, that the claims they sought to bring were untimely and that they could not be refilled," the complaint states.

From that point on, the plaintiffs said, the defendants failed to determine the appropriate jurisdiction for claims, failed to investigate pertinent theories of liability against those involved in the design, construction, operation and testing of the train, tunnel, and the components of each element.

In May 2005, the 2nd Circuit U.S. Court of Appeals ruled that the case could not be refilled and decertified the class. It ruled that the case could be refilled as an "opt out" class action.

This, the current complaint states, the defendants failed to do.

"The defendants' litigation decisions were driven not by what was in the best interests of the plaintiffs, but by what was the most economical way to conduct the litigation," the complaint states. "By this time," the plaintiffs say, their case had "been ongoing for six years and was costing the defendants money they no longer wished to spend or which they believed was not cost effective for themselves."

As a result, "the defendants chose to attempt to settle the claims as quickly as possible, notwithstanding their obligations to the plaintiffs," the complaint states.

In trying to settle, the defendants focused their efforts on U.S.-based companies and those with easily identifiable business interests in the United States, and tried to coax them into mediation as an alternative to litigation, according to the complaint. These acts and others put foreign plaintiffs at a disadvantage compared with Americans, the complaint states.

The defendants also are accused of failing to address clients' concerns about the propriety of an investigative panel established by the Austrian government. The plaintiffs say the commission was designed to help the republic and its companies duck liability through a series of cover-ups.

The defendants are accused negligence, breach of contract, breach of fiduciary duty, fraud, misrepresentation, conflicts of interest, failure to disclose conflicts of interests, and malpractice.

The plaintiffs are represented by Joy Hochstadt of Manhattan.

In another development, German lawyers have sued Austrian authorities on grounds of "state fraud" in investigation of the disaster, according to a report in the Austrian Times.

Gerhard Podovsovnik, who represents the twelve survivors of the disaster and 68 relatives of victims, seeks access to "secret documents" he says the government is withholding about the fire. Podovsovnik also raised questions about the ethics of four experts on whom the government and court relied.

Sixteen people who faced charges related to the disaster have been found innocent by an Austrian court. An appeal has been filed in that case, but the petition for new proceedings has yet to be addressed by the Austrian Justice Ministry.

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