Opinion ID: 2512475
Heading Depth: 2
Heading Rank: 1

Heading: Whether the District Court Properly Applied State Law to Approve the Settlement Agreement

Text: As the district court noted, under New York State law, an insurer has discretion to settle whenever and with whomever it chooses, provided it does not act in bad faith. See Allstate Ins. Co. v. Russell, 13 A.D.3d 617, 788 N.Y.S.2d 401, 402 (N.Y.App.Div.2d Dep't 2004). This `first in time, first in right' principle applies regardless of whether the priority is by way of judgment or by way of settlement. David v. Bauman, 24 Misc.2d 67, 196 N.Y.S.2d 746, 748 (N.Y.Sup.Ct.1960). The WTCP Plaintiffs argue that the district court's application of this first-come, first-served settlement rule was contrary to, and therefore preempted by, ATSSSA for two primary reasons. First, they contend that ATSSSA's liability limits created a limited fund, from which they are entitled to a just and fair distribution. Second, they argue that pursuant to ATSSSA's provisions and its overall statutory scheme, they are entitled to adequate compensation notwithstanding the statute's liability limitations. Relying on our prior decision in Canada Life Assurance Co. v. Converium Ruckversicherung (Deutschland) AG, 335 F.3d 52 (2d Cir.2003), they assert that they are one of those injured or killed in the terrorist attacks, to whom ATSSSA ensur[ed] ... adequate compensation. Id. at 55. The WTCP Plaintiffs' contentions lack merit. Section 408(b)(2) of ATSSSA provides that the substantive law for decision in actions arising out of the September 11 terrorist attacks shall be derived from the law ... of the State in which the crash occurred unless such law is inconsistent with or preempted by Federal law. ATSSSA § 408(b)(2). In construing various provisions of ATSSSA, we have recognized that federal law preempts state law pursuant to the Supremacy Clause, U.S. Const. art. VI, cl. 2, where, inter alia: 1) Congress preempts state law in express terms (and within its constitutional limits); 2) state law actually conflicts with federal law; or 3) state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. In re WTC Disaster Site, 414 F.3d 352, 371-72 (2d Cir.2005) (quoting Hillsborough Cnty. v. Automated Med. Labs., Inc., 471 U.S. 707, 713, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985)). If, as here, a statute contains an express preemption clause, `the task of statutory construction must in the first instance focus on the plain wording of the clause, which necessarily contains the best evidence of Congress' pre-emptive intent.' Id. at 372 (quoting CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664, 113 S.Ct. 1732, 123 L.Ed.2d 387 (1993)).
The WTCP Plaintiffs' claim that ATSSSA created a limited fund, preempting New York's first-come, first-served settlement rule, is without merit. In a section entitled Limitation on liability, ATSSSA specifies that liability for all claims, whether for compensatory or punitive damages or for contribution or indemnity, against the Aviation Defendants shall not be in an amount greater than the limits of liability insurance coverage maintained by the Aviation Defendants. ATSSSA § 408(a)(1). We have repeatedly made clear that this provisionfar from creating a fund for the payment of claimsinstead caps tort liability stemming from the attacks at `the limits of the liability insurance coverage maintained by the [Aviation Defendants].' Schneider v. Feinberg, 345 F.3d 135, 139 (2d Cir.2003) (per curiam) (quoting ATSSSA § 408(a)); see also In re WTC Disaster Site, 414 F.3d at 373 (noting that a principal component[ ] of ATSSSA was the limitation of the airlines' liability for damages sustained as a result of those crashes (emphasis added)); Canada Life, 335 F.3d at 55 (noting that § 408(a) limits the liability for the events of September 11 of the Aviation Defendants). A primary purpose of ATSSSA, as we have noted, was to preserve the continued viability of the United States air transportation system from potentially ruinous tort liability in the wake of the attacks. Schneider, 345 F.3d at 139 (internal quotation marks omitted); see also In re WTC Disaster Site, 414 F.3d at 377 (observing that a principal goal[ ] was to limit the liability of entities that were likely to be sued for injuries suffered in connection with the crashes); Canada Life, 335 F.3d at 55 (finding that a general purpose of ATSSSA was to protect the airline industry and other potentially liable entities from financially fatal liabilities). Nothing in ATSSSA's text suggests that Congress intended to create a limited fund from which plaintiffs bringing a federal cause of action under ATSSSA against the Aviation Defendants are entitled to an equitable share. To the contrary, various provisions of the statute concern the administration of, and eligibility regarding, a Victim Compensation Fund for individuals willing to waive such a cause of action pursuant to § 408(b). See ATSSSA §§ 404-06. And Congress provided explicitly for the treatment of certain other claims involving other defendants, specifying, for instance, the funds from which debris removal claims were to be paid, and the manner in which settlements or judgments were to be treated. See ATSSSA § 408(a)(5) (Payments to plaintiffs who obtain a settlement or judgment with respect to a claim or action to which paragraph (4) [(debris removal actions)] applies, shall be paid solely from the following funds in the following order.). Had Congress intended to create a limited fund for those plaintiffs pursuing an ATSSSA cause of action against the Aviation Defendants, and to constrain the manner in which settlements could be made, it would have done so in far more explicit terms.
The WTCP Plaintiffs next contend that this Court in Canada Life concluded that Congress intended to ensure that ATSSSA's liability limit preserved the ability of any claimant to recover a damages award, requiring, here, the preemption of New York's first-come, first served settlement rule. We disagree. Canada Life discussed Congress's decision to require a single forum for all actions, and found that the goal of requiring a single forum was to ensure consistency and efficiency in resolving the many expected actions arising from the events of September 11. 335 F.3d at 58. We acknowledged that Congress sought to avoid the undesirable effects of litigation in multiple state and federal fora, and noted that such effects might include adjudications having a preclusive effect on non-parties or substantially impairing or impeding non-parties' abilities to protect their rights. Id. at 59 (emphasis added). This discussion in Canada Life, however, referred solely to the purposes of ATSSSA's exclusive venue provision. We never suggested there that ATSSSA pursued the goal of avoiding preclusive effects by any means other than requiring an exclusive forum. Canada Life therefore does not support the WTCP Plaintiffs' argument. We conclude that New York's first-come, first-served rule, as applied by the district court, is neither inconsistent with ATSSSA, nor does it stand as an obstacle to the accomplishment of Congress's objectives in enacting ATSSSA. Moreover, because neither ATSSSA nor other federal law controls the approval of settlements in actions commenced under § 408(b)(1), state law settlement rules apply to this case. See id. § 408(b)(2). The district court therefore properly applied state law settlement rules to the settlement agreement.