Who Gets What: Fair Compensation after Tragedy and Financial Upheaval

By Kenneth R. Feinberg

This book review originally published in the summer issue of the JAMS Dispute Resolution Alert. For a full-length review, please click here.

Mass disasters are mercifully rare. However, when one occurs, many lives are altered in one stroke.  These tragedies call for special care and expertise in determining whether and how anyone involved will be compensated. Fortunately Kenneth Feinberg has the special talent to deal with these crises and has also written a book describing the inner workings of his professional life, titled, Who Gets What.

In WGW, Feinberg details his involvement in five enormous crises.

The first chapter—titled, “The Professor, the Judge, the Lawyer, and the Senator—is an extended thank-you card to Feinberg’s great mentors:  law professor Robert Pitofsky, the Honorable Jack Weinstein, now-U.S. Supreme Court Justice Stephen Breyer and the late U.S. Senator Ted Kennedy. Feinberg describes the debt he owes to each of these men, and following Kennedy’s advice about the “advantages of sharing credit with others,” he begins by thanking the mentors who made his career possible.

In Chapter Two, “Agent Orange,” Feinberg discusses how between two and three million soldiers and eight to 10 million family members were implicated in litigation over consequences stemming from the use of Agent Orange. Traditional tort law would require calculations of causation and damage that were impractical in this case. After extensive rounds of conversations with the vets, Feinberg proposed that only claimants who had illnesses—not injuries—associated with Agent Orange would be compensated and that approximately one-quarter of the money be dedicated to a fund that would be used for advocacy, insurance and other social services for anyone affected by Agent Orange.

Chapter Three, “The September 11th Victim Compensation Fund,” is full of heart-rending quotes from surviving family members and details of insider discussions with government players desperately trying to prevent the airlines from being sued into bankruptcy. More than $7 billion was distributed to more than 5,500 claimants.

Chapter Four, “The Hokie Spirit Memorial Fund,” involves a much smaller amount of money and a smaller pool of affected parties, but the massacre on the Virginia Tech campus affected college students and their families everywhere. Feinberg describes all the complexities of determining whether nightmares caused by seeing the events are as compensation-worthy as physical injuries that came from being wounded.

Chapter Five, “Paying Wall Street Executives,” and Chapter Six, “Oil Spill in the Gulf of Mexico” are equally compelling in ways that are simultaneously intellectual, political and profoundly personal.

Feinberg takes a first-person approach to his writing, and the reader is given an inside account of the people, ideas and arguments at the core of each of these complex issues of compensation. The book provides a terrific narrative of some of America’s hardest-to-solve problems and an even deeper insight into the mind of the man who brought resolution to each of them. We highly recommend it.

LIBOR Liability: What’s next in Securities Litigation?

V. James Mann, Esq.

V. James Mann is a New York-based JAMS panelist who spent 25 years as an in-house attorney with Merrill Lynch, where he represented the broker-dealer, investment banking, institutional trading and sales businesses.

Securities litigators looking for the “next big thing” cannot have failed to take note of the manipulated LIBOR (London Interbank Offered Rate) investigations and potential prosecutions in the United States and Europe. Although it is premature to predict the ultimate success of likely lawsuits, a wave of class action litigation is probably on the horizon.

Complex issues involving damages and loss causation are likely to feature prominently in many of those cases, and the risk and the cost to both sides will be significant. For example, an institution with a complex balance sheet will probably both make and receive LIBOR-linked payments.  Netting such payments to calculate losses measured in a few basis points may prove both challenging and costly. As a consequence, a jury trial is not likely to be attractive to many litigants, and it is likely that significant cases involving LIBOR-manipulation will be resolved without a trial. In those cases that survive motions to dismiss or for summary judgment, a sophisticated and knowledgeable mediator can offer valuable insights and assistance to the parties as they negotiate the labyrinth of what will otherwise be a difficult, costly and time-consuming process.

LIBOR is used as a benchmark rate for credit and other financial transactions around the world, and was established in the 1980s as demand grew for an accurate measure of the rate at which banks would lend to each other. LIBOR is set for different currencies based on different panels of banks by asking them at what rate they could borrow funds “in a reasonable market size.” The rate is established by averaging the rates submitted, after excluding the highest and lowest rates.

In June, Barclays PLC paid approximately $450 million in fines to U.S. and British authorities, and admitted that some traders and executives tried to fix the LIBOR rate by submitting lower than justified rates. The scandal has since spread to more than 16 financial institutions.

Potential plaintiffs without direct contractual or other relationships with alleged manipulators might face some challenges to bringing suit against the wrongdoers, and may find themselves limited to claims against defendants with whom they are in privity.

Class action cases often settle for very little and often institutional plaintiffs choose to opt out of these cases in favor of a separate lawsuit. The Wall Street Journal recently reported that several large mutual fund companies, including Blackrock, Inc. and Vanguard Group, Inc., are exploring the viability of LIBOR-manipulation litigation. These companies are paying particular attention to whether they have suffered compensable damages.  Nonetheless, cases will be brought. But by utilizing the confidential and efficient nature of ADR, resolution can occur in a more timely matter than a lengthy and costly litigation.