Compass Lexecon’s President, Professor Daniel R. Fischel Testifies Successfully at Trial
Following the 9/11 Terrorist Attacks on the World Trade Center, leaseholder Larry Silverstein and associated business entities (“Silverstein”) filed suit against various airline defendants including American Airlines, United Airlines, and Boeing seeking tort damages for losses sustained as a result of destruction of the buildings. Subsequent litigation had established that the maximum tort damages recoverable were approximately $3.5 billion. The issue in the current case was whether Silverstein could proceed with his tort damage claim, even though he had already recovered approximately $5 billion in business interruption and replacement cost insurance proceeds.
The airline defendants, represented by lead counsel Roger Podesta of Debevoise & Plimpton LLP, argued that the $5 billion in insurance payments already received “corresponded” to the $3.5 billion of potential tort damages because they were both for the same economic loss and, therefore, Silverstein was entitled to no further compensation. Silverstein, by contrast, claimed that there was no correspondence because of his obligation to rebuild the destroyed buildings and, therefore, he should be allowed to proceed to trial to recover tort damages of billions of dollars against the airlines, in addition to the $5 billion in insurance recoveries. After a July 2013 bench trial, Judge Alvin K. Hellerstein of the United States District Court, Southern District of New York ruled in favor of the airline defendants and held that the $5 billion in insurance recoveries corresponded to and “completely offset” potential tort damages against the airline defendants and, therefore, Silverstein was entitled to no further compensation.
Compass Lexecon’s President, Professor Daniel R. Fischel, testified for the airline defendants at trial. Among other things, Professor Fischel explained the relationship between replacement cost and diminution in market value as two different ways to measure the loss caused by damage to property. Professor Fischel further explained that a plaintiff is fully compensated if they receive insurance proceeds for business interruption and/ or replacement cost in an amount greater than the lesser of diminution in market value or replacement cost. Judge Hellerstein quoted from and relied on Professor Fischel’s testimony in his opinion, concluding that it was “more credible” than the testimony by the opposing expert.
Compass Lexecon also was heavily involved in earlier phases of the litigation. We worked closely with Brian Fraser of Richards Kibbe & Orbe LLP (who also was one of the counsel for the airline defendants at the correspondence trial) on various issues relating to the valuation of the destroyed World Trade Center buildings. During this earlier phase, Professor Fischel made numerous oral and written presentations discussing the proper valuation methodology for calculating losses caused by the terrorist attacks.
Apart from the counsel listed above, we also worked with Maura Kathleen Monaghan and Erica Weisgerber of Debevoise & Plimpton LLP, Desmond T. Barry, Jr. and Evan Kwarta of Condon & Forsyth LLP, Rowan Gaither of Richards Kibbe & Orbe LLP, Jeffrey J. Ellis of Quirk & Bakalor, P.C., and Ann Taylor and T. Patrick Byrnes of Locke Lord Bissell & Liddell LLP. The Compass Lexecon team that worked on this matter in addition to Professor Fischel included Rajiv Gokhale (who also filed several declarations), Todd Kendall, and Erika Morris of our Chicago office.