WTC Developer Claim on Airlines Still Has Fuel

     MANHATTAN (CN) – The World Trade Center developer who recovered billions from insurers may yet recover money from the airlines, the Second Circuit ruled Thursday.
     Real estate developer Larry Silverstein purchased the leases on the World Trade Center Complex just six weeks before planes crashed into the Twin Towers on Sept. 11, 2001.
     Though settlements with the insurers netted him $4.6 billion by 2007, Silverstein also sought to have the American Airlines and United Airlines pay him $3.5 billion, claiming that their lax security allowed terrorists to bring box cutters onto the planes and hijack them.
     Lawyers for the airlines had balked at the amount, calling it essentially “double compensation.”
     A federal judge agreed with them in 2013, finding that the interest Silverstein’s companies had in the leases declined by, at most, $2.8 billion and that consequential damages were not on the table.
     In addition to reconstruction costs, consequential damages would cover, for example, the replacement of tenant property and hiring attorneys.
     Though the Second Circuit agreed 2-1 as to barring consequential damages Thursday, the panel faulted the trial court for miscalculating the decline in leasehold interests and for applying the incorrect prejudgment interest rate.
     “On remand, the district court should reexamine the diminution in value of plaintiffs’ leasehold interests in accordance with the guidance provided in this opinion and, if appropriate, calculate interest based on any resulting award (after accounting for the offset of plaintiffs’ insurance recoveries) using New York’s statutory prejudgment interest rate,” Judge Debra Livingston wrote for the majority (parentheses in original).
     Livingston said the trial court “relied on an incorrect method of measuring the market value of leasehold estates.”
     As to the interest rate, the lower court had improperly used the federal funds rate instead of New York’s rate.
     The court refused, however, to waver on consequential damages.
     “Purchasing a commercial leasehold interest, like any other business venture, entails risk,” Livingston wrote. “It is emphatically not the case that plaintiffs are entitled to damages that reflect a guaranteed profit on their leases.”
     Livingston emphasized that the ruling “no means minimizes the importance of the World Trade Center Complex to New York and New Jersey or the country’ interest in seeing the site rebuilt.”
     “Compensatory damages are not designed, and courts adjudicating civil claims are not well suited, to heal a region’s and a nation’s wounds,” she added.
     Judge Chester Straub dissented on this issue, citing New York Court of Appeals precedent allowing tort victims to seek damages in excess of the value of destroyed property.
     New York state had submitted an amicus brief in the case at hand, asking the panel to certify the issue to New York’s highest judicial authority, the Court of Appeals.
     Straub said this route might have better resolved the issue.
     “The New York Court of Appeals might decline to answer our certified questions, although it does so rarely,” he wrote. “But by declining to certify at all, we deny it the opportunity to resolve, in the first instance, novel questions of state law rife with public policy implications.”
     A separate company, 7 World Trade Co., had tried to sue United Airlines, but those claims were guttered because it was American Airlines Flight 11 that destroyed 7 World Trade Center.
     The Second Circuit refused to revive the claims against United based on the fact that the two terrorists who flew out of Portland, Maine, on the Americans flight had gone through a security checkpoint that was shared by U.S. Airways and United.
     “United had no responsibility for ticketing or security along the terrorists’ route to Flight 11,” Livingston wrote.
     While United had a sharing agreement with the other airlines on the security checkpoint, it had no functional control over it, the court found.
     “United was never in a position to serve as ‘the first line of defense’ for Flight 11.”
     Silverstein Properties, which has said in the past that it will cost more than $7 billion to rebuild the four buildings in the World Trade Center, has been moving ahead in recent months with a number of leases in the newly constructed 4 WTC, including with News Corp and 21st Century Fox.
     Today’s Second Circuit decision “re-opens the door for a jury to determine the extent of the airlines’ and security companies’ responsibility for their negligent actions on 9/11,” a spokesman for Silverstein Properties said in a statement.

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