1 76EAASEPA1 Argument 1 UNITED STATES DISTRICT COURT 1 SOUTHERN DISTRICT OF NEW YORK 2 ------------------------------x 2 3 IN RE SEPTEMBER 11TH 3 LITIGATION, 4 5 21 MC 97 6 ------------------------------x 6 New York, N.Y. 7 June 14, 2007 7 10:15 a.m. 8 8 Before: 9 9 HON. ALVIN K. HELLERSTEIN, 10 10 District Judge 11 11 APPEARANCES 12 12 MOTLEY RICE 13 Attorneys for Plaintiff 13 BY: DON MIGLIORI 14 MICHAEL E. ELSNER 14 BY: GREGORY P. JOSEPH LAW OFFICES, LLC 15 Attorney for Plaintiff 15 16 FLEMMING ZULACK WILLIAMSON ZAUDERER, LLP 16 Attorneys for Plaintiff 17 BY: RICHARD A. WILLIAMSON 17 18 CLIFFORD LAW OFFICE 18 Attorneys for Plaintiff 19 BY: TIMOTHY S. TOMASIK 19 20 U.S. DEPARTMENT OF JUSTICE 20 Attorneys for Plaintiff 21 BY: BETH GOLDMAN 21 SARAH SHEIVE NORMAND 22 JEANNETTE VARGAS 22 23 AZRAEL GANN & FRANZ, LLP 23 BY: KEITH S. FRANZ 24 24 25 KREINDLER & KREINDLER, LLP 25 Attorneys for Plaintiff SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 2 76EAASEPA1 Argument 1 BY: MARC MOLLER 1 2 CONDON & FORSYTH, LLP 2 Attorneys for Defendant 3 BY: DESMOND T. BARRY, JR. 3 4 DEBEVOISE & PLIMPTON, LLP 4 Attorneys for Defendant 5 BY: ROGER E. PODESTA 5 6 SIMPSON THACHER & BARTLETT, LLP 6 Attorneys for Defendant 7 BY: JOSEPH F. WAYLAND 7 8 O'MELVENY & MYERS, LLP 8 Attorneys for Defendant 9 BY: MARK WOOD 9 10 PERKINS COIE, LLP 10 Attorneys for Defendant 11 BY: MARY P. GASTON 11 MACK H. SHULTZ 12 12 QUIRK AND BAKALOR, P.C. 13 Attorneys for Defendant 13 BY: JEFFREY J. ELLIS 14 15 16 17 18 19 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 3 76EAASEPA1 Argument 1 (Case called) 2 THE COURT: Good morning. Please, be seated. 3 I want to thank Mr. Barry and Mr. Moller for helping 4 organize the activities today, and we will follow the agenda 5 that has been distributed. There are four main issues about 6 which we will have discussion. 7 The first, whether federal law pre-empts state law 8 concerning the standard of care applicable to the aviation 9 defendant's conduct. 10 The second, whether punitive damages are available. 11 The third, whether aviation defendants should be able 12 to discover from the government preSeptember 11th intelligence 13 and other threat information known to the government but not 14 conveyed to the aviation defendants. 15 And fourth, whether Pennsylvania law should apply to 16 United Airlines flight number 93 compensatory damages claim. 17 Those are the four issues. Have we missed anything 18 that someone else has raised in motions? 19 There will be no time limits. We will discuss each 20 issue in turn until the discussion has been completed. 21 Sometimes the hearer of a discussion completes his 22 hearing before the transmitter of information completes the 23 transmission, and if there is that dichotomy we will try to 24 deal with it as best we can. 25 On the first issue having to do with the standard of SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 4 76EAASEPA1 Argument 1 care, Mr. Podesta for the aviation defendants will speak first. 2 Ms. Gaston for Boeing will speak second. Mr. Wood for the 3 airport operators will speak third. Now, I think much of what 4 Mr. Wood would probably be covering will be covered by 5 Mr. Podesta and Mr. Joseph will speak for the plaintiffs. 6 As you know this judge has a bit of impatience in 7 argument and has the habit of cutting in and entering into 8 dialogue before the presenter may be finished. I'll try to 9 discipline myself more than usual this morning. 10 Mr. Podesta, there's lot of people here. I don't know 11 how adequately the room is mic-ed. If anyone in the back can't 12 hear, please, raise your hand. We will raise our voices, but I 13 want everyone here to be able it to hear and pay attention. 14 Mr. Podesta. 15 MR. PODESTA: Good morning, your Honor. 16 Roger Podesta, for American Airlines on behalf of the 17 aviation defendant's motion for determination of the federal 18 aviation security regulations established the standard of care 19 governing their conduct on 9/11. I'd like to reserve with the 20 Court's permission a couple of minutes for rebuttal. 21 THE COURT: We will have interchange. There is no 22 time limits. We will leave that to the Court of Appeals. They 23 have lights. 24 MR. PODESTA: I will try to focus my argument on a few 25 key highlights and rely on my colleagues and the briefing for SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 5 76EAASEPA1 Argument 1 most of the points. I don't want to argue so long that Judge 2 Griesa starts knocking on the door. 3 The main theme for my argument this morning, your 4 Honor, is that the issue before you on this motion is 5 essentially one of statutory interpretation. And its 6 interpretation not so much of the Federal Aviation Act but of 7 the Stabilization Act or ATSSA Congress specifically created 8 for purposes of the 9/11 litigation. 9 And even more precisely the issue is what did Congress 10 mean when it wrote in Section 408 B 26 ATSSA that the 11 substantive law for its new federal cause of action was to be 12 derived from the law of the state where the crash occurred 13 unless such law is inconsistent with or pre-empted by federal 14 law. 15 Now, plaintiffs tend to read Section 408 B 2 as if the 16 sentence stopped with the words "where the crash occurred" and 17 attribute little significance to the remainder of the sentence. 18 They argue that inconsistent with is just another way 19 of saying conflict pre-emption and that there is no preemption 20 here at all because the federal regulations only establish 21 minimum standards. But we submit that that ignores the basic 22 principal. Then in construing statutory language courts ought 23 to strive to give meaning to every word in the statute. 24 And under that cannon of construction the worlds 25 inconsistent with and pre-empted by should each be given SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 6 76EAASEPA1 Argument 1 independent meaning. And I would suggest that plaintiff's 2 position also fits poorly both the text of Section 408 B 2 and 3 the context of the enactment of the Stabilization Act. 4 When you look at it the phrase pre-empted by 5 inconsistent with or pre-empted by is a uniquely powerful 6 combination of terms. As far as the parties research has 7 revealed Congress had never once used that combination of terms 8 inconsistent with or pre-empted by in any federal statute prior 9 to 9/11. 10 THE COURT: It seemed to me, Mr. Podesta, that the 11 latter phrase raises an issue of intent. On the former phrase 12 raises an issue of logical inconsistency. That is to say if it 13 was the intent of a particular statute and perhaps regulation 14 to pre-empt state law. That is expressive of an intent by 15 Congress to supersede state law by federal law. The issue 16 raises congressional intent and the supremacy clause. The 17 phrase inconsistent with would suggest that the operation of a 18 state statute or common law standard would be inconsistent with 19 the federal standard. Again, the issue is the supremacy clause 20 of the Constitution. But it's a feature other than specific 21 intent and it then goes beyond normal pre-emption law which 22 normally takes in both standards but deals with a first 23 inconsistent with as a suggestion of the second congressional 24 intent. Here they're made independent. 25 MR. PODESTA: I would say that the pre-emptive by SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 7 76EAASEPA1 Argument 1 language refers to the normal pre-emption principles which are 2 both expressed and implied occupation appealed and conflict 3 pre-emptions and inconsistent with is really an expansion of 4 those concepts in the operation and that what really -- 5 inconsistent with is really stating, inconsistent with is a 6 softer word than conflict or direct conflict. 7 THE COURT: I think your point is that it connotes 8 something more than normal pre-emption. 9 MR. PODESTA: Yes, that is correct. 10 THE COURT: That the ATSSA is intended to have a more 11 inclusive effect superseding state law more than would 12 otherwise be the case in normal pre-emption analysis. 13 MR. PODESTA: That's correct. If Congress wished to 14 confine the analysis under this statute simply to the 15 traditional principals of expressed or implied pre-emption it 16 could simply have said pre-empted by. But it said inconsistent 17 with pre-empted buy. And to my way of thinking, the way I read 18 the English language that involves a less lower level of 19 conflict between the federal and state interests is required 20 for federal law to control than it would be if it were purely a 21 conflict pre-emptive issue and I think when you look at the 22 text of the statute derived from state law -- 23 THE COURT: Let's say you've persuaded me of this 24 point, let's move on and see where it goes. 25 MR. PODESTA: All right. Then I would say if Congress SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 8 76EAASEPA1 Argument 1 puts those words inconsistent with or pre-emptive by I think it 2 is hard to avoid the conclusion that in drafting that language 3 Congress must have intended that there was some body of state 4 law that would apply and some aspects of state law that would 5 be displaced. 6 THE COURT: Not necessarily. It could be 7 hypothetical. It could be an expression of Congress that if 8 there is a straight standard that is inconsistent with the 9 ATSSA that state law won't be applied. 10 MR. PODESTA: That, hypothetically, that hypothetical 11 possibly possibility exists. But Congress I think I'll try to 12 persuade you that Congress was aware that there was an 13 extensive body of federal regulations in the aviation security 14 industry. 15 THE COURT: I think everyone will agree that there is 16 extensive occupation in the field by Congress. 17 MR. PODESTA: And I would think that it's also logical 18 to conclude that if Congress meant to displace, to adopt any 19 body of federal law it would be the detailed aviation security 20 regulations such as the ACSSP the cog and the provisions of the 21 Federal Aviation Act. I suggest that if you step back from the 22 statutory language and forget about the verbiage of the brief 23 what the statute is really saying and being -- is where state 24 and federal law cover the same subject matter and the state law 25 is appreciably different than the federal, then the state law SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 9 76EAASEPA1 Argument 1 yields to the federal and the federal controls. 2 THE COURT: Mr. Podesta, I think the trouble with 3 urging that point and persuading me of that point is it's too 4 general, and as a judge I really occupy the position of an 5 educated layman. I don't know the term. I don't know the 6 specific areas. I don't know the techniques and the technique 7 of the legislation, so I would like you as an experienced 8 lawyer in this area to lead me through it. I take your first 9 point. There is something more in ATSAA than normal 10 pre-emption analysis but I am anxious to see where that goes. 11 MR. PODESTA: All right. I think one key clue to what 12 Congress meant is the situation in which it was acting on 9/11. 13 Congress obviously wanted to centralize all of the 9/11 14 litigation in a single court and it could only do that by 15 citing a federal forum, but it had a problem. There are 16 several Supreme Court decisions that is pointed out serious 17 constitutional issues with Congress, just taking stated court 18 cases and bringing them into a federal court under a purer 19 jurisdiction statute. So in order to avoid the constitutional 20 issues Congress had to create a federal cause of action that 21 gave rise to another problem. 22 There is no preexisting federal common law of torts to 23 which Congress could readily make reference. So what it 24 decided to do, rather than create its own new body of federal 25 tort law from scratch, was to borrow the pre-existing body of SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 10 76EAASEPA1 Argument 1 state authority law from the law of the state of each crash. 2 But I suggested it didn't disregard the federal regulatory 3 scheme, but what the last phrases of Section 48 B 2 really are 4 saying is that where there is pre-existing federal law on point 5 there is no need to borrow from the state common law and 6 federal law controls over the state law. 7 Now, I'd suggest that that is the most logical 8 interpretation of what Congress was doing, but I am sure the 9 plaintiffs will say where is your proof? 10 THE COURT: Mr. Podesta, I have to say you I want to 11 step back from your point as well. We don't know what Congress 12 had in mind because the legislative history of ATSSA is sparse 13 to nonexistent. So we take the statute and we try to 14 understand what the words say and mean and how far they may be 15 applied. It is quite possible and I think probable that the 16 legislators had in mind standards of care that customarily are 17 addressed by the common law of the several states. And the 18 overlay of extensive regulation in the federal statutes and 19 regulations book and would depend on the courts to bring those 20 several bodies together and make sense of them, noting the 21 federal supremacy, particularly, in the breath of the wording 22 that we discussed a few minutes ago. But dealing with 23 standards of the common law as well as the regulatory book. 24 That's how I would approach the subject. 25 MR. PODESTA: I think the common law standard is SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 11 76EAASEPA1 Argument 1 basically one of reasonableness and I think what Congress is 2 saying in the last clause is where there is a federal 3 regulation that told the aviation defendants what they were 4 supposed to do. That is the reason. That supplies, answers 5 the questions what is reasonable under state law in the 6 circumstances of the federal regulatory -- 7 THE COURT: I would say it provides answers but it may 8 not answer. 9 MR. PODESTA: All right. 10 THE COURT: I'd like to move from the abstract to the 11 actual. I'd like to deal with the specific federal statutes 12 and regulations that may be applicable here and look at their 13 text and see if we can apply the ATSSA their text. 14 MR. PODESTA: All right. But I would just like to 15 make one more point and that relates to the Price Anderson Act. 16 Congress had faced an identical problem. 17 THE COURT: Price Anderson Act for those who may not 18 know is the congressional regulation that deals with the atomic 19 energy developments in the 1960s, in particular. I don't 20 remember the date of the statutes. 21 MR. PODESTA: These are the 1988 amendments. This is 22 Congress's final solution to the problem. In the Price 23 Anderson Amendment Acts Congress created, as it did in that 24 statute, an exclusive federal cause of action and provided that 25 the substance of the federal cause of action for nuclear power SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 12 76EAASEPA1 Argument 1 plant accidents was to be derived from the law of the state 2 where the accident occurred except where that law was 3 inconsistent with federal law. And because of the sparseness 4 of the legislative history I can't point to something and say 5 Congress specifically considered this but think of this as if 6 it were a federal case. I don't have an eyewitness that would 7 say the Price Anderson Act was present at the creation of the 8 Stabilization Act. 9 THE COURT: It was a model. 10 MR. PODESTA: I've got something better. I've got 11 effective the statutory DNA of the Price Anderson Act is 12 present in the Stabilization Act that you look at the structure 13 and language of the two statutes they're too strikingly similar 14 for that to be a mere coincidence and Congress also had before 15 it on 9/11 -- 16 THE COURT: It also has similarities of function and 17 purpose. The Price Anderson Act reflected Congressional 18 concern that a catastrophe resulting from a nuclear accident 19 would ruin the industry and by the threat of a ruination 20 prevent proper development and investment in the field and so 21 Congress entered it with schemes of federal insurance and the 22 statute that you discussed. And I would take your point and 23 agree with it that it is a model that can be persuasive. 24 MR. PODESTA: There is an important nuance on that and 25 that is that Congress when it puts new language in the federal SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 13 76EAASEPA1 Argument 1 statutes is presumed to be aware of how that language that has 2 previously been interpreted by the courts. 3 THE COURT: I accept that as well. 4 MR. PODESTA: And as of 9/11 there was a unanimous 5 body of federal judicial opinions consisting of four different 6 federal circuit courts and at least 12 district courts 7 including Judge Cote in this district who had held that the 8 words inconsistent with in the Price Anderson Amendment Act 9 established an exclusive federal standard of care for assessing 10 the liability of nuclear power plant operators. And the courts 11 have also held that that standard of care was to be provided by 12 the regulations of the nuclear energy regulatory commission, 13 and that the issue in Price Anderson in that case is, did the 14 defendants comply with the provisions of the statute and the 15 nuclear energy commission regulations? If so there is no 16 liability. 17 In other words, the common law standard of 18 reasonableness is converted into compliance with the nuclear 19 energy regulatory commission regulations where there is a 20 nuclear energy regulatory commission regulation on point. And 21 that was the unanimous interpretation from four circuits and 22 Judge Cote as of the date Congress modeled the Stabilization 23 Act on the Price Anderson Act Amendment. 24 But let's move into the area of some specific examples 25 of inconsistencies and possible direct conflicts. I am SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 14 76EAASEPA1 Argument 1 focusing on and inconsistent with. That really reflect the 2 allocation of my argument with my colleagues. I certainly 3 endorse the pre-empted by arguments but I know Mary is going to 4 cover a lot of them and I -- 5 THE COURT: Mr. Podesta, I would like you to occupy 6 the field. 7 MR. PODESTA: Okay. Unfortunately, I think Mr. Joseph 8 is going to carve out an area that's not pre-empted for 9 himself. 10 But in our opening brief we provided numerous examples 11 of what the aviation defendants were required to do under the 12 federal aviations and compared them to what the plaintiffs' 13 theories of liability appear to be insofar as we can determine 14 them from the questions that the plaintiffs were asking our 15 witnesses at their depositions. 16 For example, plaintiffs appear to suggest that the 17 aviation defendants should have given special scrutiny to the 18 persons and the carry on baggage of CAPPS selectees. 19 THE COURT: Sorry. Say again. 20 MR. PODESTA: CAPPS. The computer had a number of 21 factors who determine the trying to select passenger who were 22 perceived as above high risk and over the years there was a 23 variety of FAA regulations telling the aviation defendants what 24 they were supposed to do with these CAPPS selectees. And it's 25 important here because I believe nine or ten of the hijackers SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 15 76EAASEPA1 Argument 1 were cab selectees. And plaintiffs are basically contending 2 that the common law of the states where the crash occurred 3 required the airlines and the screening companies to give 4 special scrutiny to the persons and the carry on bags of CAPPS 5 selectees. 6 Beyond that you would be given to a normal passenger. 7 In other words, you open every bag, hand wand or pat-down every 8 selectee. Now, the problem with that analysis is that it's 9 flatly inconsistent with the security directives that were in 10 place for CAPPS selectees on 9/11. 11 As of 9/11 the standard was set forth in security 12 directive -- I think it is a 9701, they all have these catchy 13 titles -- and that basically said that the only special 14 scrutiny that a CAPPS selectee was to receive on 9/11 related 15 to the checked baggage of the cab selectee, not to his person, 16 not to her carry on bags. They were all otherwise except for 17 their checked baggage same scrutiny as other passengers were to 18 receive. 19 There was good reason for that. It was largely a 20 product of the views of the Gore commission that basically was 21 concerned about ethnic, racial or religious profiling in 22 selection of passengers for screening. And it also is premised 23 on the assumption that the FAA and the Gore Commission both 24 made that the biggest threat was explosives, particularly, in 25 checked baggage because that had been the problem with Pan Am SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 16 76EAASEPA1 Argument 1 and was thought to have been the problem with TWA flight 800 at 2 the time these regulations took effect. So plaintiffs here 3 there have a direct inconsistency here. 4 THE COURT: Mr. Podesta, take me through the language, 5 please. I want to see the regulations. I want to you walk me 6 through the regulations. First, show me the special scrutiny 7 point and the general scrutiny point. I think that this is 8 extremely important -- and this a word to the rest of you -- 9 it's extremely important to work with the precise text of the 10 language that we're dealing with any analysis or inconsistency 11 has to deal with text and expressions. 12 (Pause) 13 MR. PODESTA: Well, this is to the easiest thing to do 14 live because the attachment that we're referring to is Exhibit 15 C to -- Exhibit D. I'm sorry -- to Mr. Barry's initial 16 affidavit. 17 Do you have it in front of you? 18 THE COURT: We will have it in a minute. 19 (Pause) 20 THE COURT: What is the regulation. 21 MR. PODESTA: Security direct 9701, security directive 22 and I don't think this is consist have the same binding affect 23 as FAA regulations. 24 THE COURT: This is a regulation issued by the 25 Department of Transportation, October 27, 1997. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 17 76EAASEPA1 Argument 1 MR. PODESTA: Yes. And although this particular one 2 expired March 1988. In fact, successors continued it through 3 September 11, 2001. 4 THE COURT: This is the one in effect as of September 5 11, 2001. 6 MR. PODESTA: That's right. And this is for CAPPS. 7 THE COURT: I noticed the TSA redactions. 8 MR. PODESTA: Yes. Well, that's an issue we 9 frequently have. But I think we can take you through the 10 meaning and I think probably for purposes of this argument make 11 sense to look at the revision summary and in the first page and 12 it says in the first paragraph this security -- 13 THE COURT: I don't know if there are any reporters 14 here who want to have the benefit of this information, but my 15 staff will work with you afterwards to allow you to see the 16 information that may not be readily available to you to get the 17 story straight. 18 MR. PODESTA: You'll see first bullet point, your 19 Honor, says this security directive allows for the use of an 20 FAA approved computer assisted passenger screening CAPPS system 21 to profile passengers. And the very second bullet point 22 requires profiling of only, in bold face, those passengers 23 checking baggage. 24 THE COURT: It doesn't say the checked baggage. It 25 says the passengers checking bags. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 18 76EAASEPA1 Argument 1 MR. PODESTA: That's right. Then if you turn to the 2 third page it talks about actions required by U.S. carriers and 3 then it goes through the requirement of a profile and then it 4 says, A, the checked baggage belonging to a passenger is 5 identified as selectee using CAPPS shall be cleared using one 6 of the procedures outlined in section four. Then it goes on -- 7 THE COURT: So what I understand from this is that the 8 focus is on the checked baggage. 9 MR. PODESTA: Correct. 10 THE COURT: Your point is that the experience at 11 Lockerbie and other places showed dangers and risks in the 12 checked baggage. 13 MR. PODESTA: Yes. And this is confirmed by the 14 findings of the Kane Commission which said that the only effect 15 of the CAPPS profiled select system on 9/11 was as to checked 16 baggage and I think it is like page 846 the Kane Commission 17 interpreting those regulations that CAPPS selectees on 9/11 18 were to be subject to no special scrutiny for their persons or 19 for their carry on bags. 20 But there are many other examples that I can give you, 21 your Honor, of inconsistencies between what they think the 22 plaintiffs are claiming. 23 THE COURT: Let's talk about this. This has a certain 24 degree of force. What is the force of a security directive? 25 MR. PODESTA: A security directive has the affect of a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 19 76EAASEPA1 Argument 1 federal aviation administration regulations. It has the 2 binding effect of law and that was also noted by the Kane 3 Commission in their report. It is to be distinguished from an 4 information circular which simply provides the aviation 5 defendants with information about possible terrorist threats 6 but doesn't require them to do anything. 7 THE COURT: Now, you read this, Mr. Podesta, and I 8 think it is a fair reading of it, that this is an instruction 9 to those responsible for checking people coming into the 10 airplanes, that if a person exceeds the profile and therefore 11 is a potential security risk, the focus of attention should be 12 on the baggage and not on the person. 13 MR. PODESTA: Checked baggage. 14 THE COURT: And not on the person or the hand carry 15 baggage. So this is what the instruction is, it's binding 16 instruction. It instructs everyone. I'll put a hypothetical 17 to you. Those responsible for security are concerned about a 18 risk and suspect a certain person. Are they forbidden to have 19 a more rigorous review of that person, inspection of that 20 person and that which he carries than they would do if you or I 21 assuming we are boring persons go through a checkpoint. 22 MR. PODESTA: It would depend. The answer is as a 23 general matter under the federal regulations all passengers are 24 to be given the same degree of scrutiny. Only exception is for 25 CAPPS -- SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 20 76EAASEPA1 Argument 1 THE COURT: They say all persons other all categories 2 of persons? I put the question -- 3 MR. PODESTA: They talk generally about persons 4 passing through the screening checkpoint. 5 THE COURT: Is a checker forbidden to have a more 6 rigorous inspection? 7 MR. PODESTA: I would say that there is an element, of 8 course, of common sense in the federal regulations which 9 doesn't mean they're superseded by state law standards, but if 10 someone comes in and is acting dramatically suspicious is 11 intoxicated or says I have a bomb or starts being belligerent 12 and fighting with people, obviously, the screener would have 13 the authority to take a special look at that person. 14 THE COURT: Do we know and can we say publicly what it 15 was about nine of the ten people that made them more 16 suspicious? 17 MR. PODESTA: I can say publicly. 18 THE COURT: Let me talk to you about that for a 19 moment. There is a precise issue that can be drawn here. It's 20 wrong to profile people by racial type or ethnic type, perhaps, 21 other forbidden categories. But it makes sense when you are 22 suspicious about a person -- than his ethnic or her ethnic make 23 up to have a more rigorous standard. Do we have to know in 24 this case what were the bases of suspicion about these nine 25 people? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 21 76EAASEPA1 Argument 1 MS. GOLDMAN: The perhaps selection process is 2 computer generated selection process, so it wasn't man made. 3 It was done by the computer. So I think that that plays -- 4 THE COURT: In other words, there were criteria that 5 if noticed would have raised suspicion about these nine people. 6 MS. GOLDMAN: Correct. 7 THE COURT: And are the criteria based on mannerisms, 8 can you say, or are they based on matters that various among us 9 with consider improper profiling characteristics? 10 MS. GOLDMAN: I'll start by explaining that the CAPPS 11 criteria themselves that I think your Honor understands are SSI 12 and that's why we're not discussing what they are. 13 THE COURT: Sensitive security information. 14 MS. GOLDMAN: But your Honor should understand that 15 the CAPPS program was submitted to the Department of Justice 16 for review to ensure that it was not a violation of any civil 17 rights laws by putting it into place, and I think that's 18 probably what I can say right here. This is an issue that is 19 going to be, I think, an element of discussion among the 20 parties in discovery. So it may be premature for us to give 21 you factual information at this point about the nature of this 22 but -- 23 THE COURT: I think we have crossed that, Mr. Podesta. 24 MR. PODESTA: I would note, your Honor, that the CAPPs 25 selection is a computer system. It has nothing, whatsoever, to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 22 76EAASEPA1 Argument 1 do with how the passengers behaved when they presented 2 themselves on the airport because the computer has no way of 3 knowing how they are conducting themselves, and there is also a 4 random selection. So some people are selected for no run 5 reason at all other than we want to select a random election 6 and others are selected because of their particular information 7 about them in the computer. 8 THE COURT: What can you say about these nine people 9 in terms of how they presented themselves, whether they were 10 noted as designees under CAPPS, whether their baggage was 11 scrutinize, whether their hand luggage was not? 12 MR. PODESTA: I believe that all of the CAPPS 13 selectees were subject to the required procedures under 14 security direct 970 and its successors. Now, if they didn't 15 have any checked baggage and a number of them didn't, the 16 designation of selectees really has no consequences. If they 17 did have checked baggage the checked baggage was handled in 18 accordance with the regulations which varied, I think, a bit. 19 THE COURT: What you are telling me is there was no 20 heightened scrutiny given of these nine in relationship to 21 their persons or their hand luggage in relationship to what 22 might be given to all others. 23 MR. PODESTA: I believe that is correct, your Honor, 24 and I think -- 25 THE COURT: And the plaintiffs would argue that it was SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 23 76EAASEPA1 Argument 1 negligent to do that and the question is how do we articulate 2 the standard that would be instructed the jury. 3 MR. PODESTA: The standard in terms of CAPPS selectees 4 we would argue the standard is whether we met the requirement 5 set forth in the federal regulations. CAPPS selectee program 6 was created by federal regulations that was exclusively a 7 federal creation and the question of whether we were negligent 8 in applying CAPPS is a question of whether we substantially and 9 reasonably complied with the federal CAPPS regulations. 10 THE COURT: So what would be the consequence of your 11 motion? Suppose I granted your motion. What difference would 12 it make in the trial? 13 MR. PODESTA: I think that we, I believe that the 14 instruction if our motion were granted --The standard of care 15 that the aviation defendants were expected to follow on 9/11 16 was established by federal regulations. Those regulations and 17 I guess you would read the pertinent ones -- 18 THE COURT: What would really be taken by the jury, 19 the gut of it would be that there was not to be any greater 20 scrutiny of a person who was identified by CAPPS except for his 21 checked baggage. 22 MR. PODESTA: That is correct, beyond what an ordinary 23 passenger would receive. You want me to instruct that as a 24 matter of law. That would be the instruction. I think that 25 could be the instruction as a matter of law. Then the question SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 24 76EAASEPA1 Argument 1 of fact for the jury would be whether the aviation defendants 2 substantially collide with the federal aviation and whether any 3 breach of that regulation was a proximate cause of the 4 plaintiff's injuries. 5 THE COURT: I'm going to take the liberty of a judge. 6 Keep you in place and ask Mr. Joseph how you would want me to 7 rule on this and what would be its consequence. 8 MR. JOSEPH: Your Honor, we would want to rule the way 9 the FAA described a significance. 10 THE COURT: Louder. 11 MR. JOSEPH: In Exhibit 12 of our declaration we 12 actually have the associate administrator for the FAA and civil 13 aviation describe the importance of a security directive. This 14 is Exhibit number 2. 15 THE COURT: Give me a moment. 16 MR. JOSEPH: Sure, your Honor. 17 If your Honor who look at the beginning of the third 18 paragraph. 19 THE COURT: This is the letter of March 13, 1996. 20 MR. JOSEPH: Correct. By the associate administrator 21 for civil aviation security. In the third paragraph he 22 describes what the significance of a security directive is and 23 it says security counter measures issued by the FAA in a 24 security directive established security minimums for adoption 25 by airlines and airports. Airlines and airports may exceed SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 25 76EAASEPA1 Argument 1 these minimum standards by implementing more stringent security 2 requirements. That would be the instruction we would say, your 3 Honor, with respect to all of these standards because he has 4 pointed to -- 5 THE COURT: Let me help you out on this. What would 6 be the way I would articulate a standard to the jury under your 7 view given these two sentences. 8 MR. JOSEPH: Your Honor, I would use what Lockerbie 9 says because Lockerbie was the law that presumably Congress had 10 in mind when they were looking at what's inconsistent. These 11 minimum standards what -- 12 THE COURT: You would want me to tell the jury that 13 what is stated in security directive 9701 was a minimum 14 standard and whether or not some higher standard was to be used 15 in relationship to these nine people was an exercise of what 16 reason, judgment, stated standards. 17 MR. JOSEPH: And federal to use the highest degree of 18 safety possible in the circumstances. But I also point out, 19 look at the text that he is calling your attention to. It just 20 allows in the first bullet point, it requires in the second 21 bullet point. It doesn't purport to be exclusive or exclusive, 22 but it doesn't say you can do no more. 23 THE COURT: Let me draw you out on here because I 24 think we have a serious tension between two facets of a 25 program. The concept of profiling is a very serious one. As SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 26 76EAASEPA1 Argument 1 of the early morning of September 11, 2001 there was concern 2 that profiling should not be exercised on ethnic lines among 3 other aspects of forbidden categories and so if it was an 4 ethnic base for suspicion the airlines could look at this court 5 directive and say if we do more because these people appear 6 ethnically suspicious, we're violating rights of citizens under 7 American law and right of people and we should not do it and we 8 should only do that which we're required to do. I think that 9 would be your point, Mr. Podesta. 10 MR. PODESTA: Yes, it would. 11 THE COURT: And then we're told, hey, this is only 12 minimum. You are supposed to do more. The airlines are at 13 sea. What more should they do? 14 MR. JOSEPH: Your Honor, first of all, you understand 15 that several of these individuals were CAPPS selectees. 16 Secondly, a ticket agent -- 17 THE COURT: What is CAPPS selectee. 18 MR. JOSEPH: Somebody who was identified under the 19 CAPPS computer profile. 20 THE COURT: Mr. Podesta, it says nine out of ten. 21 MR. JOSEPH: So they weren't pulled out. Nothing 22 procures them from doing further computer -- based on the 23 circumstances and when you look at the cog and the ACSSP. 24 THE COURT: What the cog? 25 MR. JOSEPH: Check point operations guide which is SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 27 76EAASEPA1 Argument 1 Exhibit 10 of our compilation. 2 THE COURT: Take me through that when I give you the 3 chance and what was the other? 4 MR. JOSEPH: ACSSP air carrier standard security 5 program. Both of them say -- 6 THE COURT: You'll get back to me. 7 MR. JOSEPH: Yes, sir. 8 THE COURT: But now you've gotten a better heads up 9 about what Mr. Joseph is going to say. 10 MR. PODESTA: First of all, with respect to 11 Mr. Josephs example it has nothing to do with CAPPS. It's a 12 letter about photo identification. In fact, if you look we 13 submitted an FAA memo that was produced in FAA document 14 discovery dated -- it says and it's dated February 14, 2000 and 15 it says that by January one, 2000 -- 16 THE COURT: What exhibit? 17 MR. PODESTA: Exhibit K. By January 1, 2000 all major 18 airlines had voluntarily implemented CAPPS in advance of the 19 rules mandating it as the only acceptable form of prescreening 20 for scheduled operations. 21 THE COURT: Where is this? 22 MR. PODESTA: In the replay declaration. 23 THE COURT: No. Where in the exhibit? I want to read 24 it with you. 25 MR. PODESTA: I am reading it from my brief actually. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 28 76EAASEPA1 Argument 1 MR. JOSEPH: TSA 0526, your Honor. 2 THE COURT: What paragraph? 3 MR. JOSEPH: The fourth bullet. 4 THE COURT: Got it. 5 MR. PODESTA: Now that language certainly doesn't seem 6 to me the only acceptable form of passenger prescreening seems 7 pretty mandatory and not minimum. 8 THE COURT: Now, do you accept or reject the 9 proposition that an airline could do more if it wished to do 10 more without violating the law? 11 MR. PODESTA: The answer to that is complicated. So 12 give me a minute to answer it. There are certain limited areas 13 where an airline could voluntarily do more tests coming into 14 compliance with the FAA regulations before their due date 15 giving additional screener training. You would say that has 16 nothing to do with the issue of pre-emption. The minimum 17 standard -- 18 THE COURT: Let me put a hypothetical to you. I come 19 in to an airport screener at LaGuardia. It's a busy day. I am 20 above the CAPPS profile. I have no checked baggage. My bag 21 goes through the flourescent device the magnetometer. I go 22 through the magnetometer. I'm pulled aside even though nothing 23 is registered for more scrutiny. If I refused I say I bought a 24 ticket I am entitled to go on this airplane. You can't do 25 anything more to me and the airline insists they will do more. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 29 76EAASEPA1 Argument 1 Is the airline subject to liability for preventing that person? 2 MR. PODESTA: You didn't alarm the magnetometer. 3 THE COURT: I did not. 4 MR. PODESTA: I believe that the airline if it pulled 5 you aside after you didn't alarm the magnetometer and you did 6 not exhibit any suspicious signs you were not belligerent, you 7 were not -- 8 THE COURT: I was very nice. 9 MR. PODESTA: You conducted yourself like Judge 10 Hellerstein. 11 THE COURT: The best I could but I went to special 12 acting school and I was able to get through. 13 MR. PODESTA: That would be inconsistent with the 14 requirements of the federal regulation. 15 THE COURT: Therefore the airline could be liable for 16 refusing a passenger on the plane. 17 MR. PODESTA: I can give you citations to that as well 18 appendix three to the ACSSP which is Exhibit A to Mr. -- -- if 19 you look at Exhibit A to the original declaration of Mr. Barry. 20 THE COURT: I have it. 21 MR. PODESTA: You will see and turn to Appendix three 22 which is AALTSA 7592 and you'll see this is, this first page is 23 the screening guidelines for persons and hand carry on items, 24 the screening guidelines and you'll see in the introduction 25 that this basically says this is what the FAA prescribes and it SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 30 76EAASEPA1 Argument 1 says these guidelines are consistent with current legal 2 guidelines, consistent with current legal guidelines not 3 dissimilar from the language of the statue and are designed to 4 effect uniform application optimum safety and the courteous and 5 efficient treatment of all persons subject to preboard 6 screening. 7 Then if you look down in Roman two on that page it 8 says guideline or screening persons. And it says initial 9 process something conducted by air carrier representative 10 employee or agent screening company using either a walk through 11 metal detector or a hand held metal detector and then it says 12 if the person being screened does not alarm the detector the 13 person is cleared to proceed beyond the screening point. There 14 is no -- unless there is some special circumstance, but if you 15 were just behaving in the courteous way you ordinarily do there 16 would be no legal basis for the airline or the screener company 17 to subject you to additional scrutiny and that's right in the 18 regulations. 19 And the plaintiffs with the benefit of hindsight want 20 to come in and say, well, we believe that New York law or 21 Virginia law or Pennsylvania law required that even if you 22 didn't alarm the magnetometer and were to the otherwise 23 suspicious you could be subjected to additional hand held or 24 pat-down searches. The regulations don't provide for that. 25 Now, in a special threat situation like if there was a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 31 76EAASEPA1 Argument 1 threat of a bomb for a particular flight the FAA could alter 2 these regulations and say we are going to randomly inspect 3 people but those weren't regulations we were operating on 9/11. 4 I think that that's a very clear example of where the 5 plaintiffs appear to be suggesting something that we were not 6 permitted to do. And they also seem to suggest that we should 7 have conducted more physical searches of carry on bags instead 8 of relying principally on x-rays. 9 But here again in this same exhibit if you turn to 10 page 28 of the ACSSP and I'll give you the -- it sets forth 11 the, it's TSA 7439 and it sets forth the requirements for 12 screening carry on items and it's raised in -- all carry on 13 items passing through the screening check point shall, 14 mandatory language -- 15 THE COURT: Where? I have it. 16 MR. PODESTA: Shall be screened using FAA approved 17 inspection methods. And it basically goes, first it says when 18 an image is displayed on an x-ray monitor and it looks -- then 19 it must be subjected to additional screening. And it provides 20 for two possibilities. 21 THE COURT: So there has to be a display. It has to 22 be displayed how? Physically or through a -- 23 MR. PODESTA: The primary. Let me take you through 24 this. The primary method of inspection is x-ray. X-ray 25 operator sees a possible threat item on the x-ray and he then SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 32 76EAASEPA1 Argument 1 is supposed to direct the bag, the carry on bag to be sent for 2 additional scrutiny. Now, what scrutiny it receives depends on 3 what the threat item is perceived to be. If its perceived to 4 be an explosive then you look at item A under two, which says 5 exam the carry on item using an EDT device. 6 THE COURT: What is that? 7 MR. PODESTA: Explosive trace detector. 8 On the other hand if it's a gun or a knife you go to B 9 and you conduct a physical inspection of the item which would 10 be a hand search but that's only if the x-ray operator 11 perceives a threat item when he looks through the screen. 12 Now, there is another requirement and that's continual 13 inspections. And if you go down to item three it says, the 14 following measure shall be conducted at all category X airports 15 which included Logan and Newark and Dulles and it says 16 inspections of carry on items shall be -- and where the first 17 reference was A and unfortunately the TSA has deleted certain 18 language but what the random search was if ETD devices were 19 available they were supposed to be used to inspect carry on 20 items that cannot be cleared by the x-ray operator then when a 21 number of carry on items is not -- in other words the x-ray 22 operator isn't saying any -- then there is supposed to be 23 random inspection under item one. Other items must be 24 random -- 25 THE COURT: I don't think I understand. The number of SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 33 76EAASEPA1 Argument 1 carry on items selected by the x-ray operator for image 2 resolution not enough to insure continual ETD devices for 3 inspection. I don't think I know what that means. 4 MR. PODESTA: Let me you try to explain it to you. 5 The x-ray operator is looking through the bags and it happens 6 to be that a whole bunch of nuns are boarding the plane and 7 there is nothing at all suspicious, so the operator isn't 8 selecting any items for the other screener to use the ETD 9 device on or to do hand searches to look for a gun or a knife. 10 In that event they just don't want them doing nothing. They 11 want the screeners to randomly select for explosive trace 12 detection inspection more carry on items so that randomly 13 people coming through it see that on a random basis not every 14 bag by any means but a certain percentage of bags are being 15 subject to ETD and this shows, look -- 16 THE COURT: The idea being deterrence of other people 17 in the airport. 18 MR. PODESTA: Yes. It shows the preferred method was 19 x-ray and ETD and you only got into hand searches where you 20 didn't have ETD which was not the case at the 9/11 airports or 21 where you had a trace item. 22 THE COURT: The point that you are teaching me, 23 Mr. Podesta, is that these regulations were the sum and 24 substance of what check point operators had to do and there is 25 no room in your argument for additional high ended standards. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 34 76EAASEPA1 Argument 1 MR. PODESTA: Right. That is correct. 2 THE COURT: That if the airline was more diligent it 3 exposed itself to liability. 4 MR. PODESTA: It was just, these are the legal 5 requirements is my argument. Even if we could do more our 6 failure to do more didn't expose us to legal liability. 7 THE COURT: I want to put this question. The -- law 8 when standards are set out in regulation whether compliance is 9 evidence of reasonable conduct or conclusive evidence of 10 reasonable conduct. The first argument would say that the 11 airlines could argue that I am not negligent because I did 12 everything the lawyer told me to do, and other side will say 13 but you could have done more and should have done more given 14 whatever was going on at the time. You are saying that there 15 is no room for that second argument and if there Mr. Joseph 16 were to make that argument you would stand up and object and I 17 should sustain your objection. 18 MR. PODESTA: I would hope you've taken care of it on 19 a pretrial ruling but, yes, I would hope you would sustain my 20 objection. The reason for that is that's what the statute is 21 saying when it says inconsistent with or pre-empted by. 22 THE COURT: Mr. Joseph would say that it's certainly 23 not pre-empted. There is no intent and is -- there is nothing 24 inconsistent in this book of regulations with doing something 25 extra if the circumstances made it reasonable for do something SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 35 76EAASEPA1 Argument 1 extra. You are arguing that as a matter of law. 2 MR. PODESTA: I make two arguments on that. First, 3 almost every standard of care is in some sense of minimum 4 standard of care. You can always do more than the law legally 5 requires. 6 If the tests were that you can do voluntarily 7 something more than the reasonable care or the FAA regulations 8 there would never be pre-emption indeed state law would just 9 feed on itself. As reasonable care you exceed in reasonable 10 care you set a new standard. There numerous case that define 11 pre-emption that under the Federal Aviation Act, the 58 Act 12 that Mary will get into and under the Price Anderson Amendments 13 Act and many other statutes where the defendant could 14 voluntarily have done something more. But he satisfied his 15 legal obligation by meeting the federal regulations and the 16 states were not entitled to require the defendant to do more 17 than the federal regulations required on pain of liability. 18 THE COURT: Mr. Joseph would argue that if you can do 19 more it then becomes a question of reasonableness. Should you 20 do more? 21 MR. PODESTA: That's because Mr. Joseph reads the 22 statutes it depends with the language where the crash occurred. 23 THE COURT: I am trying to bring out another point, 24 Mr. Podesta. The consequence of your argument may be that it's 25 wrong to do more, that it would be a violation of federal SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 36 76EAASEPA1 Argument 1 regulations to do more, that if a passenger were to be stopped 2 doing more that passenger could sue you for denying his 3 entrance to a public transportation vehicle and I am wondering 4 if I am drawing your argument too much. 5 MR. PODESTA: No. You are drawing the argument quite 6 correctly. It is too facile to say -- 7 THE COURT: You are not arguing the minimum. You are 8 saying exclusive. 9 MR. PODESTA: Yes. 10 THE COURT: You can't do more. You shouldn't do more. 11 You shouldn't do more. 12 MR. PODESTA: In most instances we shouldn't do 13 anything more or different and it's -- 14 THE COURT: When should you do more? 15 MR. PODESTA: Well, that gets me -- all right. There 16 is an element of common sense required under the regulations. 17 That is not a -- 18 THE COURT: Mr. Joseph would rise up -- 19 MR. PODESTA: He might rise. 20 THE COURT: I'll rise for him. 21 MR. PODESTA: The federal regulations set forth the 22 exclusive standard to the extent they use words like "common 23 sense" like in judging whether a particular knife is menacing. 24 There might conceivably be a question of fact under the federal 25 standards whether the particular screener or airline -- SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 37 76EAASEPA1 Argument 1 THE COURT: What do I care? The jury doesn't care, 2 federal or state what the jury cares about and what I care 3 about I am trying to think what I am supposed to do with the 4 trial that is my test. So I am right to think if Mr. Joseph 5 starts arguing reasonableness, you aren't reasonable, you 6 aren't paying attention then I can't sustain our your objection 7 whether it's federal source or state it makes no difference if 8 it's federal -- of state makes no difference. 9 MR. PODESTA: Federal standard of common sense that 10 has to be decided in the context of the federal regulations 11 which say that four inch knives are generally permitted, Swiss 12 army knives are generally permitted. 13 THE COURT: You use words like "generally". 14 MR. PODESTA: That is the federal standard. The cog 15 says Swiss army knives are permitted, but the common -- 16 THE COURT: What it generally means, what common sense 17 exceptions mean is that the airlines could argue that I was 18 absolutely reasonable, perfectly reasonable in doing what the 19 federal law required me to do and not doing more and it would 20 be permissible for Mr. Joseph to argue that in the 21 circumstances presented on the morning of September 11, 2001, 22 you should have done more and you would say what is the basis 23 of that. And the basis of that is common sense. So you would 24 say as matter of argument that I did what I had to do and you 25 should have done more and the jury would decide. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 38 76EAASEPA1 Argument 1 MR. PODESTA: That is true, but that would be decided 2 under the federal regulations. 3 THE COURT: What is the difference? The jury doesn't 4 care about -- 5 MR. PODESTA: Because if you just have a naked state 6 law rule you don't have the basic starting point that knives 7 under four inches are permitted unless they are menacing and 8 the common sense comes into place in making a judgment as to 9 whether a particular knife is menacing. The plaintiffs cont 10 argue we should have banned all the -- 11 THE COURT: I would think I agree with you. In other 12 words, where there is a specific statement on an absolute -- in 13 the regulation you should follow that. But where there is any 14 kind of exception for common sense or where words like 15 "generally" are used that suggest looking at circumstance that 16 your conduct could be challenged on standards of reasonableness 17 in the circumstance. 18 The jury doesn't hear whether it's a federal 19 incorporation of the state standard to talk about common sense 20 or not. What the jury is told is that the regulations say four 21 inches and generally or common sense exception and then the 22 question is is there grounds for an exception. 23 MR. PODESTA: There could be a question of fact. I 24 think I agree with the way you phrase it as long as they're 25 told this is what the federal regulation says we're obliged to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 39 76EAASEPA1 Argument 1 follow the federal regulations. You have to decide, ladies and 2 gentlemen, whether in carrying out that regulation we exercise 3 the -- 4 THE COURT: I am going to want to talk with you more 5 about this after I hear Mr. Joseph. I think what we're coming 6 down to is something that I quite understand. It's going to be 7 a difficult instruction to give because I have to incorporate 8 all the specific regulations and deal with the common sense 9 exceptions but it can be done and I think that's what I am 10 learning from you, Mr. Podesta. 11 MR. PODESTA: You want me to sit down or may I 12 continue? 13 THE COURT: Well, it's tempted to say yes. 14 MR. PODESTA: I can voluntarily do more. 15 THE COURT: I really enjoyed listening to you. 16 MR. PODESTA: Can I just make one more point then I 17 will sit down complying with your Honor's regulation. To get 18 back to your point about it's a very differ judgment to 19 determine whether voluntarily exceeding is consistent with the 20 regulations. For example, we could do more, could have done 21 more than 9/11 by for example singling out all young Arab males 22 or pat-down searches. That would have been more but it would 23 have been inconsistent with the policy and the regulation. 24 Would it have been doing more to arm our pilots on 25 9/11 and just disregard the common strategy? Some might argue SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 40 76EAASEPA1 Argument 1 was doing more, but it would be inconsistent the regulations. 2 The regulations are based on a series of policy judgments that 3 were designed, what is the threat, what is the best measure to 4 meet the threat? How do I adopt these security measures while 5 still maintaining an efficient air transportation system 6 while still meeting our civil rights obligations to the 7 passengers and that's why the FAA regulations control. 8 They're the ones who were making the judgment as to 9 how to best take into account those various considerations. A 10 jury 9/11 just given a post reasonable care standard is surely 11 going to focus on security and ignore the other policy 12 consideration the FAA had to take into account. 13 THE COURT: One of challenges of this trial would be 14 to put the jury in a frame of mine before the events of 9/11 15 clearly and I fully anticipate the very interesting rhetoric 16 that you've just expressed will be heard again in the mouth of 17 an expert. 18 MR. PODESTA: Yes. But I would note that rhetoric 19 would be a lot more speculative if we get some of discovery 20 from the government that Mr. Wayland is going to be asking you 21 for and I will try not to jump up, your Honor. 22 THE COURT: All right. 23 24 MR. ELLIS: Your Honor, I know you wanted limited 25 argument from one attorney given until last evening that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 41 76EAASEPA1 Argument 1 Mr. Podesta would be the only presenter from our side. He 2 focused on inconsistent with. I think adds your Honor started 3 to say beginning of his presentation you were interested in 4 pre-empted buy as well and if I would intrude on you too much 5 if you gave me just a couple of minutes I could briefly address 6 it. 7 THE COURT: Go ahead, Mr. Ellis. 8 MR. ELLIS: Thank you, your Honor. 9 THE COURT: Then I think we will break. 10 MR. ELLIS: Thank you, your Honor. 11 Just briefly, Jeffery Ellis on behalf of United. 12 The language of the statute not only has the words 13 inconsistent with but also has the worlds pre-emptive buy. And 14 as our supplemental briefing set forth there are three statutes 15 that are at issue that, quite frankly, you need to look at in 16 order to determine what is their pre-empted scheme and what the 17 scope of any pre-empted that might be focused by that scheme. 18 Those statutes are the 1958 Federal Aviation Act, the 19 cases we have cited to unequivocally establish that it was 20 Congress's intent as long back as 1926 to establish a 21 uniformity of regulation. It is that statute in 1958 that 22 contained in its safety regulatory provisions, a minimum 23 standards provision, as well as a savings of remedy provision 24 for remedies existing at that time. 25 I might add, your Honor, that actually that provision SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 42 76EAASEPA1 Argument 1 goes back to I believe it was 1926 and at that time including 2 in 1958 any intervening criminal act would not allow any 3 recovery for anyone. 4 So the remedies that were saved are saved in that 5 statute. What is important I think most important in this 6 litigation is the Aviation Security Improvement act which was 7 passed in 1990 in response to Lockerbie. The Lockerbie 8 decision did not have the Aviation Security Improvement Act to 9 consider because it wasn't in effect. 10 The president established a commission to evaluate 11 aviation security in the aftermath of Lockerbie and to come up 12 with a solution to try and combat what was starting to be a 13 growing problem international terrorism. The solution that 14 Congress came up with in words of the statute are quite clear. 15 They didn't want to have any screw-ups here. They wanted to 16 try and set up a system to do the best they could and that 17 system required in accordance with 29 U.S.C. 44904 it 18 specifically required the director of the Federal Bureau of 19 Investigation, the Administrator of the FAA to consult, to 20 decide what are the most effective counter measures to address 21 any deficiencies that they found to exist with respect to the 22 security significance system. 23 Those words most effective correct any deficiency 24 clearly mean what they say. The system that they mandated to 25 be implemented was supposed to be the most effective and to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 43 76EAASEPA1 Argument 1 have corrected any deficiencies. The plaintiffs arguments is 2 in essence, that system was not the most effective. It wasn't 3 even reasonably effective and there were deficiencies. That 4 flies in the face of the congressional language that Congress 5 used in the Aviation Security Improvement Act and Section 44903 6 of that section specifically states that that system is 7 supposed to be uniform for every air carrier -- 8 THE COURT: I want to follow your argument. You are 9 referencing sections 316 A of the public law -- 10 MR. ELLIS: Your Honor, I wish I could tell you, but I 11 think that was it, yes. 12 THE COURT: It reads as follows: The administrator of 13 Federal Aviation Administration shall prescribe such reasonable 14 rule and regulations; is that the one? Is that the section? 15 MR. ELLIS: I'm reading from the codification, your 16 Honor, but go ahead. 17 THE COURT: Shall prescribe such reasonable -- I tell 18 you what, let me ask you to look at the book. 19 (Pause) 20 MR. ELLIS: I think you are looking at the wrong 21 section, your Honor. 22 THE COURT: I could follow you. I have it here. What 23 is the section again? 24 MR. ELLIS: Your Honor, if you could look at 44904. 25 Domestic air transportation security system. Your Honor, if SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 44 76EAASEPA1 Argument 1 this is a good time for a break we can get the stuff and make 2 it easier. 3 THE COURT: I don't want you to feel pressed. Let's 4 take ten. 5 (Recess) 6 THE COURT: Okay. 7 MR. ELLIS: Thank you, your Honor. 8 I have a copy of the U.S.C., your Honor. And there 9 were two sections I was going to refer you to. The first is 10 44904 and that section has three subparts. The statute itself 11 is entitled Domestic Air Transportation security system. 12 Section A is entitled Assessing Threats and it states: The 13 administrator of the FAA and the director of the FBI jointly 14 shall assess current and potential threats to the domestic air 15 transportation security system. The assessment shall include 16 consideration of the extent to which there are individuals with 17 the capability and intent to carry out terrorist or related 18 unlawful acts against that system and the ways in which those 19 individuals might carry out those acts. The administrator and 20 the director jointly shall decide on and carry out the most 21 effective method for continuous analysis and monitoring of 22 security threats to that system. 23 Section B again ascribes to the director and the 24 administrator director of the FBI and the administrator of the 25 FAA the challenge of assessing security that is in place in SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 45 76EAASEPA1 Argument 1 response to those threats. 2 And Section C, improving security, states: The 3 administrator shall take necessary actions to improve domestic 4 air transportation security by correcting any deficiencies in 5 that security discovered in the assessment analyses and 6 monitoring carried out under this section. 7 And in conjunction with that, your Honor, Section 8 4944903 Subsection B (3) says: The administrator shall 9 prescribe regulations to protect passengers and property on an 10 aircraft operating in air transportation or intrastate air 11 transportation against acts of criminal violence or aircraft 12 piracy. When prescribing a regulation under this subsection 13 the administrator shall and it goes on to state -- 14 THE COURT: To the maximum extent practical to require 15 a uniform procedure for searching and detaining passengers and 16 property to ensure their safety and other criteria. 17 MR. ELLIS: It also says courteous and efficient 18 treatment by an air carrier. 19 Your Honor, I can tell you that from the pre-emptive 20 aspect of the issues that are before you -- 21 THE COURT: What you are telling me, Mr. Ellis, 22 implementing what Mr. Podesta was telling me is that there is a 23 federal regulatory mechanism that needs to be observed. 24 Whether there is any room for additive im put in terms of words 25 like generally, minimum standard etc. that is the area where SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 46 76EAASEPA1 Argument 1 reasonableness can be exercised. And to define what is 2 reasonableness we look to what is established in the federal 3 law and to whatever extent appropriate and to the common law. 4 MR. ELLIS: I would respectfully disagree to this 5 extent, your Honor. You had asked a question of Mr. Podesta 6 with respect to whether or not the failure to do more could 7 hold airlines liable. I argue the third, before the Third 8 Circuit the Abdulla case and argue before the Fifth Circuit the 9 Witty case and that was the claim in both of those cases. In 10 Abdulla it was claimed that American Airlines pilots instead of 11 avoiding a thunder storm by 20 miles should have avoided by 40 12 or 100 miles. 13 THE COURT: Because of the dangerous nature of that 14 thunder storm. 15 MR. ELLIS: More safety. An expert appeared and said 16 that is what they should have done. The jury came back with a 17 verdict and we moved to set the verdict aside. The district 18 court judge agreed with us. He said that federal law 19 pre-empted, you can't argue for more and the Third Circuit 20 agreed. 21 In the Witty case which the Fifth Circuit took a 22 couple of years ago after they had the Hodges case and they 23 clarified what they meant in the Hodges case. But in the Witty 24 case the argument was I got deep vein thrombosis on your 25 flight. I got it because I was sitting in a cramped seat. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 47 76EAASEPA1 Argument 1 What you should have done is two things. You should have given 2 me more of a warning telling me I could get deep vein 3 thrombosis on an airline flight and you should have given me 4 more leg room. 5 And what the Fifth Circuit said, number one, airline 6 warnings are controlled by federal law. And airline warnings 7 are prescribed by federal law not to require this additional 8 information. You can't use that as a basis for liability. 9 The second thing that they said was the Airline 10 Deregulation Act of 1978 precluded a claim requiring you to 11 have more leg room because the net result of that would be 12 increased fares and you can't use state law to try and achieve 13 that result. 14 THE COURT: I think you'd like me to take note of 15 several holdings in the Witty case. We hold that federal 16 regulatory requirements for passenger safety warnings and 17 instructions are exclusive and pre-empt all state standards and 18 requirement. 19 MR. ELLIS: Yes, your Honor. 20 THE COURT: That's at page 385. Allowing courts and 21 juries to decide under state law that warnings should be given 22 in addition to those required by the Federal Aviation 23 Administration would necessarily conflict with the federal 24 regulations. 25 Here is another statement. We do not, for example, SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 48 76EAASEPA1 Argument 1 express an opinion as to whether emergency or unplanned 2 situations on flights can form the basis of a state failure to 3 warn claim that is not pre-emptive. 4 MR. ELLIS: Yes, your Honor. Witty does -- I am 5 sorry, your Honor. 6 THE COURT: I was just thinking to myself that there 7 is room in these decisions for exercise of reasonable conduct. 8 But the field is very largely occupied by its precise federal 9 requirements. 10 MR. ELLIS: Your Honor, I would say this, and I'm 11 going to cut my presentation off because you have been very 12 kind to let me say a few words but I will say this, the Abdulla 13 case, the Witty case which I know Ms. Gaston will get into, of 14 course, will say that the entire field is occupied and they'll 15 get into that aspect of it. But at the end of the day 16 plaintiff's claim boils down to them saying that what the FAA 17 was mandated to do by statute, namely, correct any deficiencies 18 in the current system they didn't do and that we can be held 19 liable for that. Not only do we say federal law pre-empts that 20 argument, but I would also say this, your Honor, they do not 21 dispute the fact -- 22 THE COURT: I would like to hear that after I hear 23 from Mr. Joseph. 24 MR. ELLIS: And I will just end with one thing, to the 25 extent they claim that state law actually imposes higher SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 49 76EAASEPA1 Argument 1 security requirements there is absolutely nothing -- 2 THE COURT: Save that too. 3 MR. ELLIS: Okay. Thank you very much. 4 THE COURT: Ms. Gaston. 5 MS. GASTON: May it please the Court, your Honor, Mary 6 Gaston, on behalf of the Boeing company. 7 As your Honor is aware, Boeing moved independently for 8 a determination of the applicable law. Boeing did that, your 9 Honor, for a very simple reason. All of the claims against 10 Boeing. 11 THE COURT: Speak a little louder, please. 12 MS. GASTON: Yes, your Honor. 13 All of claims against Boeing are predicated on the 14 factual allegation that the planes that were hijacked on 9/11 15 were defectively designed. Because the issue of whether 16 Congress has pre-empted the area of aircraft design depends on 17 an analysis of Federal Aviation Act of 1958 and its predecessor 18 statute. That is the reason Boeing moved independently, your 19 Honor. It required this Court to construct whether Congress 20 intended to pre-empt the field of aircraft design from state 21 regulation. 22 And I'd like to start there, your Honor, because of 23 something that you just mentioned. You indicated that you felt 24 that there was room in state law to both impose the federal 25 regulations which you recognize are extensive as well as impose SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 50 76EAASEPA1 Argument 1 state tort law. 2 THE COURT: No, I don't think so. If I said that I 3 don't think that was an accurate reflection of what probably is 4 the case. What I thought to say was that where there are 5 issues of reasonableness probably they are federally sourced, 6 but that since there is so little definition in federal law of 7 standards and care, undoubtedly, the federal law would 8 incorporate much of what the common law has developed. 9 I keep thinking, Ms. Gaston, how I am going to apply 10 the information today. Presumably, it's in jury instructions. 11 Presumably it will be in terms of objections. It may also be 12 in the kinds of evidence that will be presented, for example, 13 expert evidence. None of which is before me. So, largely, 14 this can be informational. I don't know. But there is no 15 motion to dismiss. There is no motion for summary judgment 16 before me. But it's very important material that is been 17 presented because it does inform how we all think about these 18 cases. 19 MS. GASTON: That clarification, your Honor, is very 20 helpful. It is very helpful in a couple of contexts, 21 specifically, with regard to the Court's discussion of minimum 22 standards. Turning to Section 408 B 2, your Honor, of the 23 Stabilization Act which simply has the language in it that 24 state law will be applied only if it is inconsistent or 25 pre-empted. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 51 76EAASEPA1 Argument 1 Mr. Podesta covered at length the inconsistent 2 provision. And I am going to occupy the field, your Honor, 3 because I am going to devote almost all of my discussion to the 4 issue of field pre-emption. But I would like to make one 5 comment with regard to the inconsistent as it relates to 6 Boeing. 7 You asked for examples of where there were any 8 inconsistencies and we pointed out in our brief, your Honor, 9 that as I mentioned earlier they are suing Boeing alleging that 10 the door, the cockpit door was allegedly defective because it 11 didn't prevent this hijacking. 12 On a totally collateral note, we've moved for summary 13 judgment on the issue of causation that there is no linkage 14 between the door and the hijacking. But, nonetheless, before 15 the Court is the briefings on the standard of care which is why 16 Boeing obviously submitted its Boeing motion. 17 With regard to that claim that the doors were 18 defective and should have prevented a hijacking, we pointed out 19 to the Court that this was an issue that the FAA specifically 20 looked at back in the early 70s. The FAA explicitly published 21 a notice of rule making, identifying that the issue of 22 hijackers getting into the cockpit and harming the crew and 23 taking over the plane was a matter of concerning to the FAA. 24 And at FAA, therefore, put out a variety of rules suggesting 25 ways that the cockpit could be made more intrusion resistant. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 52 76EAASEPA1 Argument 1 And over the course of several years it considered those 2 options. And ultimately, your Honor, the FAA rejected any 3 additional cockpit intrusion resistant measures for safety 4 reasons. 5 We have provided that the federal registry sites in 6 our brief, your Honor. The point of that is only that it would 7 be inconsistent for obvious reason to hold Boeing liable under 8 state tort law for an issue that the FAA, explicitly, as the 9 determiner of aviation aircraft design safety determined was 10 not appropriate. 11 THE COURT: I'd like you to take me through the 12 applicable regulations. 13 MS. GASTON: I will, your Honor, if you could just 14 give me one second. 15 (Pause) 16 MS. GASTON: The FAA notice of proposed rule making 17 was first published in the federal register at volume 35 number 18 145 on Tuesday July 28, 1970 and it was docket number 1046D 19 Notice of Proposed Rule Making 70-20. The name of the proposed 20 rule was Pilot Compartment Security Large Passenger Carrier 21 Airplanes. And in there, your Honor -- I don't know that I 22 have the page in the federal register -- but on a second column 23 in the proposed rule making it specifically identifies that 24 despite concerted efforts being made by the FAA and air 25 carriers incidents continue to occur within the safety of the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 53 76EAASEPA1 Argument 1 flight of aircraft engaged in passenger carrying operations 2 under part 121 of the -- has before jeopardized by persons 3 intending to harm the crew or take command of the aircraft. 4 In the context for this is, obviously, your Honor, the 5 rash of hijackings that were occurring in the 1960s. The 6 notice of proposed rule making goes on to discuss a variety of 7 ways that they could increase the security of, for example, the 8 cockpit door by improving the hinges, by improving the locking 9 mechanism. It did discuss a way to permit the crew to view 10 through the doors and a variety of other measures. 11 Approximately two years later there were additional 12 security measures proposed by the FAA in conjunction with that 13 same rule and it dealt with bulletproofing the cockpit, 14 additional means that could be taken to protect the pilot in 15 the event of a hijacking. 16 That occurred on Friday March 17, 1972 and was 17 published in the Federal Register, volume 37, number 53. 18 Ultimately, your Honor, after receiving public 19 comments, I believe they received approximately 20 different 20 public comments, On Thursday September 27, 1973 Federal 21 Registered, volume 38, number 187, the FAA published notice 22 that it was withdrawing its proposed rule making notice 72-7 23 which was the subsequent number. You have to kind of walk it 24 through to follow the numbering. 25 And the FAA explained why it was that it did so. It SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 54 76EAASEPA1 Argument 1 explained that in light of the, what it referred to here as the 2 comment strategy, the FAA approved way of dealing with 3 hijackers. It referred to the fact that it was unlikely that 4 simply strengthening the door would actually result in 5 hijackers not entering the compartment because the pilot would 6 let them in any way with a threat to a passenger or crew 7 member. It did you say the fact that there was the fear that 8 pilots negotiating behind a secured door might actually trigger 9 more violence. The FAA actually discussed the fact that it 10 also may increase the use of explosives to get into the 11 cockpit. But the bottom line, your Honor, is these types of -- 12 THE COURT: What you are saying is that there was a 13 deliberate decision on the part of the agency regulating air 14 craft manufacturer not to have intrusion proof doors. 15 MS. GASTON: That is correct, your Honor. And the FAA 16 has made clear -- 17 THE COURT: That's preclusive. What you are saying is 18 that since the FAA made a conscious deliberate decision after 19 proposed rule making not to do it. Then the states don't have 20 the power, common law or statute to mandate doing it. 21 MS. GASTON: I agree, your Honor. 22 THE COURT: That's your argument. 23 MS. GASTON: I agree, your Honor, for two different 24 reasons. First because of conflict pre-emption because it 25 would be inconsistent for the states to require something which SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 55 76EAASEPA1 Argument 1 the FAA has decided not to do. So under classic conflict 2 pre-emption and in fact under the -- decision of 2000 that 3 conclusion is mandated. You cannot force, the states can't 4 force the manufacturers -- 5 THE COURT: That is what I was trying to say. 6 MS. GASTON: But the second issue is equally important 7 and that is you cannot do it because the issue -- because 8 Congress has decided that the field is occupied and that is 9 important, your Honor, and that is what I'd like to focus my 10 attention on. I'd actually like to discuss -- 11 THE COURT: I don't think you need to say much about 12 that. This is aircraft design state to state. It's not a 13 matter of having state interest. State can supersede the 14 federal interests. It is clearly an argument for commonality 15 here. 16 MS. GASTON: I would agree. 17 THE COURT: I think you can reserve on that point. If 18 it's raised you can come back but I think that point is clear. 19 MS. GASTON: Okay. In that case, your Honor, the 20 reason I had and intended to focus the discussion on field 21 pre-emption is because it seems from the judge's comments that 22 where there were minimum standards, and there is no question 23 that that language is in the Federal Aviation Act -- 24 THE COURT: You are saying that the Federal Aviation 25 Administration deliberately decided that it did not want SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 56 76EAASEPA1 Argument 1 intrusion proof doors being manufactured on airplanes. 2 MS. GASTON: Right. 3 THE COURT: Because in its judgment it thought it was 4 counterproductive. That is a very important decision. Now, I 5 guess the way it decided it may be important and why they 6 decided it may be important. But you are telling me that this 7 was a deliberate, conscious decision weighing the pros and cons 8 of the situation and exercising judgment by the federal agency 9 and how it exercises such judgment. 10 MS. GASTON: That is correct, your Honor. But given 11 the creativity -- 12 THE COURT: Why didn't you move for summary judgment. 13 MS. GASTON: My expectation that we will after you 14 rule on our causation position. 15 THE COURT: Well, I ruled against you on causation. 16 No, on duty. But the causation argument is a different 17 argument. 18 MS. GASTON: That is correct, your Honor. 19 THE COURT: You are saying that the argument of 20 negligence is faulty because you did what the feds told you to 21 do. 22 MS. GASTON: That's correct, your Honor. 23 THE COURT: Well, it's a different argument from that 24 which was made before. The argument I ruled against you was on 25 duty. The issue of proximate cause is, I think, factor and SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 57 76EAASEPA1 Argument 1 very much depends on the issue of intervening cause. But 2 that's not why we're here today. We are talking about standard 3 negligence and you are saying that you complied with standards. 4 MS. GASTON: Your Honor, yes, I am saying that we 5 complied with the standard including the standard with regard 6 to the cockpit door and we did exactly what the FAA told us to 7 do. There are also, however, this plaintiff's complaint, some 8 more amorphous allegations of numbers against Boeing where they 9 allege that the plane is defective but they don't allege with 10 any specificity how the plane is defective. 11 The concept of field pre-emption, therefore, is still 12 applicable. 13 THE COURT: Well, at this point in time I think we're 14 going to need some more definition. I want to read out the 15 portion of my decision on duty reported at 28 F.Supp 2d 279 16 having to do with Boeing. It appears at pages 307 and 308 of 17 the decision. 18 Boeing also argues that the regulations of FAA 19 relating to the design of passenger airplanes did not require 20 an impenetrable cockpit door and thus it designs which 21 satisfied FAA requirements could not be defective. However, 22 the only support provided by Boeing of its argument is after 23 the fact FAA policy statement issued to explain why the FAA in 24 2002 was requiring airplane manufacturers to provide such doors 25 even though the FAA previously had not done so. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 58 76EAASEPA1 Argument 1 And what you are doing now is going back to 1973 and 2 showing me that this had been a conscious decision much earlier 3 and controlled what was done in relationship to aircraft that 4 were flown on September 11, 2001. 5 MS. GASTON: That is correct. 6 THE COURT: Why don't we reserve everything else until 7 after we here from Joseph? 8 MS. GASTON: Will do. 9 Thank you very much, your Honor. 10 MR. WOOD: My name is Mark Wood and I am counsel for 11 Massachusetts Port Authority, although, this morning I am also 12 speaking on behalf of Dulles International Airport and Newark 13 International Airport. 14 Your Honor, I will try to be brief and not to repeat 15 what has been gone over by my colleagues. 16 THE COURT: I won't let you. 17 MR. WOOD: I am sure of that. I have previous 18 experience. 19 After the airport operators, of course, there is about 20 airport security, this case. And we seek a ruling that federal 21 law assigns the airport security responsibilities. In other 22 words, you have to look at federal law to find out at an 23 airport, JFK or Logan or any other of these airports in the 24 country, you have to look at federal law to find out what the 25 security responsibilities are and one of the reasons -- SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 59 76EAASEPA1 Argument 1 THE COURT: Doesn't Mr. Ellis's argument on 2 pre-emption and Mr. Podesta's argument on an inconsistent with 3 and the specific statutes given to me by Mr. Ellis really say 4 what you want to say? 5 MR. WOOD: Well, it does, your Honor. If you would 6 also note that at pages ten to 14 of our opening brief we have 7 other specific statutes and regulations that are apply 8 specifically, your Honor, to airports. 9 THE COURT: Let's go to those. Go right to the extra 10 stuff. 11 MR. WOOD: Okay. 12 THE COURT: I have your brief in front of me. 13 MR. WOOD: We start out with -- if you look at page 11 14 at 49 U.S.C. 449003B and in those sections Aviation Act 15 specifically delineates security responsibilities. 16 I think if you look at the brief rather than have me 17 treck through all of this, your Honor -- 18 THE COURT: You know, Mr. Wood, I learned in law 19 school that you go to the source. Stay you away from secondary 20 stuff. 21 MR. WOOD: And if you go to the source you find out 22 that the administrator of the FAA is directed to prescribe 23 regulations requiring preboarding screening and that's the 24 obligation of the air carrier. 25 THE COURT: Administrator shall prescribe regulations SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 60 76EAASEPA1 Argument 1 to protect passengers and property on an aircraft operating in 2 air transportation or intrastate air transportation against an 3 act of criminal violation or aircraft piracy 44903B. That's 4 what Mr. Ellis read. 5 I really want to move you into new stuff. Let's 6 assume that one of the requirements that Congress required of 7 you -- decide to consented to the President's Act is I knew how 8 to read and remember. So let's go from there. 9 MR. WOOD: The same act then talks about what the 10 airports are to do which Mr. Ellis didn't talk about and that 11 is the administrator will prescribe rules and regulations. I 12 am looking at 44903C2A to address access control by carrier at 13 an airport operates and to take measures to improved system of 14 access control. 15 And the way, your Honor, if you look further in our 16 brief that that is done is under 14 CFR Section 107. And under 17 107 there is a whole many pages of specifics federal 18 regulations on how that is to be done. You have to give badges 19 to people who use the doors. You have to keep the doors 20 looked. You have to put a fence up around your airport and a 21 number of other things. 22 This is very carefully, specifically set out as to how 23 security at an airport is to be handled and it is divided up 24 among three parties. It is divided up among the airport 25 operator, the airlines that are using the airport and the FAA. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 61 76EAASEPA1 Argument 1 And the FAA, your Honor, in 49 U.S.C. Section 44933B3 2 are directed to supervise and to approve the way these 3 responsibilities are being carried and that has to be done with 4 a written plan, your Honor, an ASP that we talk about for the 5 airports and by a written plan for the airlines. And once 6 those are approved you can't deviate from those plans at Logan 7 or Dulles or Newark without having the FAA approve the 8 deviation that you would like to implement at your airport. 9 THE COURT: Each airport has a federal security 10 manager appointed by the FAA? 11 MR. WOOD: Yes, your Honor. 12 THE COURT: And that manager is to receive 13 intelligence information related to aviation security. 14 MR. WOOD: One of his duties. 15 THE COURT: And insure and assist in the development 16 of a comprehensive security plan for the airport, establishing 17 each carrier's responsibility. 18 MR. WOOD: Yes, your Honor. 19 THE COURT: And measures to be taken during periods of 20 normal aircraft operations and during periods where the manager 21 decides that there is a need for additional airport security. 22 What else is there to look at? 23 MR. WOOD: I think the other point is that if you are 24 going to deviate from what that regional administrator has 25 approved that you can do at Newark Airport you have to get SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 62 76EAASEPA1 Argument 1 specific authorization and approval from him in order, or her, 2 in order to do that. 3 THE COURT: Where does it say that? 4 MR. WOOD: It's found, your Honor, in Part 107.3A. 5 The citation would be 14 CFR 107.3A. It's a requirement that 6 the airports adopt and carry out a security program that must 7 be approved by the director of civil aviation security by the 8 FAA. And for example, your Honor, and this applies to the 9 airlines with the manual or with the approved plan that we were 10 talking, Mr. Ellis was talking about. American airlines out 11 at -- 12 THE COURT: Let me ask this question. This fellow is 13 a federal appointee, the security manager? He is a federal 14 appointee? 15 MR. WOOD: Yes, he is. 16 THE COURT: If he is a federal appointee and he makes 17 a mistake the airport authority doesn't get blamed, does it? 18 MR. WOOD: Well, if the airport authority follows the 19 approved plan it doesn't get blamed, that's correct. 20 THE COURT: So the question then becomes, is there 21 anything in the regulations that apply to the airport authority 22 which gives judgment in and discretion to the airport 23 authority. 24 MR. WOOD: Not with respect to the delineation of 25 these responsibilities. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 63 76EAASEPA1 Argument 1 THE COURT: Well, you are saying then -- 2 MR. WOOD: If Dulles couldn't decide, we're going to 3 start screening passenger. They're not authorized or approved 4 in the ASP to do that. And without getting the FAA's approval 5 to do that they couldn't do that. It would be illegal to do 6 that. And of course the reason for this, your Honor, is that 7 if it's everybody's responsibility for security at an airport 8 then nobody's accountable and -- 9 THE COURT: So who is responsible at Dulles? 10 MR. WOOD: At Dulles it is very specifically set out 11 that the responsibility, for example, for screening passenger 12 and cargo carriers are the air carriers. It's set out by 13 Congressional statute -- 14 THE COURT: So your argument is that there is no room 15 for liability on the part of airport authority? 16 MR. WOOD: Not as to that defining responsibility. 17 THE COURT: What is the argument of liability on the 18 part of the airport authority? 19 MR. WOOD: What is the plaintiff's argument against 20 the airport authorities? Well, in the master complaint, your 21 Honor, it is so vague and amorphous. That was one of the 22 reasons we came in with a motion to dismiss. We don't know. 23 We're responsible for a safe airport. 24 THE COURT: You don't know why you are being sued? 25 MR. WOOD: That's basically what the contention is we SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 64 76EAASEPA1 Argument 1 are responsible for a safe airport. 2 THE COURT: You are saying that as long as I've 3 delegated to the right people, that is all I have to do. 4 MR. WOOD: No. What I am saying is that as long as we 5 have complied, not negligently complied with the 6 responsibilities that are assigned to us under this federal 7 scheme then we're not liable. 8 THE COURT: Do you know what, if any, aspect of 9 responsibility is complained of as actionable against you? 10 MR. WOOD: Not other than operating a safe airport 11 there has been no allegation -- Someone came through a fence or 12 a door. 13 THE COURT: Why don't you reserve until after 14 Mr. Joseph speaks. 15 MR. WOOD: If I could just make one other part -- 16 THE COURT: I think you should reserve. Since you 17 don't know, then there is no point in arguing. 18 Mr. Joseph, you are going to divide it up in, I guess, 19 the same sequence as we heard this morning. 20 MR. JOSEPH: Speaking for the plaintiffs, my argument 21 going to be direct primarily to the airlines in the security 22 companies. We did not sue the airport operators. 23 Mr. Williamson can address that. I may cover Boeing a bit 24 because the statute -- I'm going to go through a statutory 25 analysis was your Honor as I believe your Honor has indicated a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 65 76EAASEPA1 Argument 1 penchant to do and I will touch on the Boeing issue as well. 2 But I am not first in that. Mr. Williamson will do that. 3 THE COURT: Mr. Williamson, you will do Boeing and 4 airport authority. 5 MR. WILLIAMSON: Yes, your Honor. 6 MR. JOSEPH: Your Honor, let me begin with 7 inconsistent with. I am not going to go definitionally first. 8 We actually have some learning from Second Circuit as contours 9 as inconsistent with. We have some legislative history, but 10 I'll come back to that. Let's just take it in a colloquial way 11 from now. 12 If Congress said they didn't want actions to be 13 premised on notions that were inconsistent with federal law 14 what is it that Congress would have in mind? What was it that 15 the industry, that the FAA said these regulations meant? Were 16 they a pass, a free pass if they were honored to go forward or 17 were they minimum standards because of the statutory duty to 18 exercise the highest possible degree of safety in the public 19 interest? 20 And your Honor if you have our declaration handy that 21 might be useful. 22 THE COURT: Yes. 23 MR. JOSEPH: Exhibit 19 of that declaration is from 24 the FAA web site as it existed on 9/11. At the top of page 25 you'll see it's dealing with civil aviation security. So this SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 66 76EAASEPA1 Argument 1 is what the FAA thought on 9/11 with respect to civil aviation 2 security. If you look at the third question on the first page, 3 can an airline exceed FAA minimum requirements? Answer: Yes, 4 the FAA sets minimum requirements for airlines to follow. 5 Should airlines wish to exceed those requirements, the FAA 6 cannot prohibit them from doing so. 7 And if your Honor will with me turn to page four of 8 five, again, this is the printout from the FAA web site. 9 THE COURT: This responds directly to Mr. Ellis's 10 argument. 11 MR. JOSEPH: Exactly, your Honor. 12 THE COURT: Of Abdulla and Witty teach that the 13 regulations are conclusive. 14 MR. JOSEPH: Your Honor, the Abdulla case deals with a 15 specific regulation that specifically sets out a standard of 16 care. We have a small statutory compilation for your Honor 17 that might be handy, if I could hand it to you and opposing 18 counsel that I will be referring to. 19 THE COURT: Yes. 20 MR. JOSEPH: Your Honor, Abdulla standard is number 21 nine in here, the last one. It's 14 CFR 91.13, careless or 22 reckless operation. And it says, A, aircraft operations for 23 the purpose of air navigation. No person may operate an 24 aircraft in a careless or reckless manner so as to endanger the 25 life or property of another. Here the FAA has spoken and set SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 67 76EAASEPA1 Argument 1 forth a standard of care and that is a standard of care that 2 does not apply to security. 3 We have a statutory standard of care which is in the 4 first tab 44701, Subdivision D. And this is in prescribing 5 regulations which includes security regulation. It says when 6 prescribing regulation or standard under Subsection A or B -- 7 THE COURT: Slow down. 8 MR. JOSEPH: Subsection D is the last subsection on 9 the last threes line up from the bottom. When prescribing a 10 regular or standard under subsection A or B of this section or 11 any of other sections of this title, the administrator shall, 12 one, consider, A, the duty of an air carrier to provide service 13 with the highest possible degree of safety in the public 14 interest. 15 Now, this statute has a predecessor which the Second 16 Circuit has spoken on and said that this is the standard in the 17 security case. The predecessor statute is Section 601 of the 18 1958 Act which we have as Tab 7. 19 THE COURT: That one that says minimum standards. 20 MR. JOSEPH: The minimum standards is here also at the 21 top of the same page. This is as it is on 9/11 Subdivision A 22 at the top. The administrator of the Federal Aviation 23 administration shall promote safe flight of civil aircraft in 24 air commerce by prescribing -- and if you skip down to 25 subdivision five -- regulations a minimum standards for other SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 68 76EAASEPA1 Argument 1 practices, methods and procedures the administrator finds 2 necessary for safety in air commerce and international 3 security. 4 And when we get to it I'll show that the security 5 regulations cite this statute and the next one which says the 6 same thing as authority for the regulations. So minimum 7 standards are premised with the regulations, the highest degree 8 of safety is the premise, and this existed back throughout the 9 time we're dealing with through since 1958. I believe it's 10 subdivision tab 6. I believe it's tab four, your Honor. 11 This is the 1958 version which says exactly the same 12 thing in another order. In Section 601A at the top it says the 13 administrator is empowered and it shall be his duty to promote 14 safety of flight of civil aircraft and air commerce by 15 prescribing and revising from time to time such minimum 16 standards governing the designs, materials, workmanship 17 construction and performance -- and if you skip all the way 18 down to six -- such reasonable rules and regulations or minimal 19 standards governing other practices, methods and procedure as 20 the administrator may find necessary to provide adequately for 21 national security safety and commerce. And subdivision B 22 states again in prescribing standards, rules and regulations. 23 And in issuing certificates under this title. The 24 administrator shall give full consideration resting upon air 25 carriers to perform their services with the highest possible SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 69 76EAASEPA1 Argument 1 degree of safety in the public interest. 2 In 1975 the Second Circuit had a hijacking case 3 refusal of -- it was called Williams against TWA. And Williams 4 TWA 509 F.2d at 946, the Court says that under this statute and 5 under the common law in dealing with these court obligations 6 the airline has the duty to exercise highest possible degree of 7 safety. And in effect it would be remarkable if any court 8 ruled otherwise that when millions of lives are at stake the 9 defendants have a duty other than to exercise the highest 10 possible degree of safety in the public interest. 11 So we have then minimum standards in the statute. We 12 have as I started to show you from the FAA web site, the FAA 13 says, these are minimums. If your Honor would turn on Exhibit 14 19 to page 4 it is actually even more specific on screening 15 issues since that's come up today. 16 It's page 405 at the top. It's 513 at the bottom. 17 The first question at the top: 18 "Q. Why can I carry the same item through bun passenger 19 screening check point and not through others? 20 "A. Some airlines or airports have stricter interpretations of 21 deadly and dangerous items. What one airline will allow, other 22 airlines will not. 23 Next question. 24 Q. What items are prohibited beyond the passenger screening 25 check point? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 70 76EAASEPA1 Argument 1 A. The FAA prohibits airlines from allowing dangerous or 2 deadly items through the passenger screening check point. 3 Because of the subjective description of dangerous or deadly 4 items it is the airlines' responsibility to determine what they 5 will allow. Most airlines will prohibit items such as 6 scissors, tray tools and items resembling firearms. 7 There was no question that if we just tak inconsistent 8 with as a colloquial use of language, what the FAA thought, 9 what Congress is presumed to have thought they were dealing 10 with minimum standards that there was discretion. 11 THE COURT: What is the legal strength of this 12 document? 13 MR. JOSEPH: Your Honor, it is some deference if you 14 find it persuasive. I'm going to go through the statutory 15 basis for why it should be given. It's some deference because 16 it's not an official one. I intend to go through statute, 17 regulation -- 18 THE COURT: Mr. Joseph, don't rush it. 19 MR. JOSEPH: Thank you, your Honor. 20 We went through Exhibit 12 before which is the 21 associated administrator of the FAA for civil aviation security 22 saying that security directives established security minimums. 23 That gentleman's predecessor, that was '96, issued a similar 24 statement a letter in 2001, two months before 9/11 and that's 25 Exhibit 14 of the binder you have before you. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 71 76EAASEPA1 Argument 1 THE COURT: I have it. 2 MR. JOSEPH: All right. Your Honor, the second 3 paragraph beginning in the fourth line at the end of the line 4 the sentence begins: The Federal Aviation Administration, FAA, 5 provides guidelines for air carriers to determine what may 6 constitute a deadly or dangerous weapon. While airlines are 7 required to meet certain standards, they possess the final 8 decision to impose more stringent restrictions for carry on 9 items. 10 THE COURT: This letter by Michael A. Caravan, 11 associate administrator for civil aviation security has what 12 effect? 13 MR. JOSEPH: Again, your Honor, an expression of an 14 agency's view that is not codified is due some deference if 15 your Honor finds it persuasive. But since we're dealing with 16 what Congress had in mind when its issuing a statute that says 17 inconsistent with, we suggest that it is worth deference -- 18 THE COURT: I certainly have to look at it. 19 MR. JOSEPH: It will depend on whether you find it 20 persuasive. We saw what 44701 and afterwards 44702 says the 21 same thing. The highest degree of public safety and minimum 22 standards. And this is completely consistent with a minimum 23 standard analysis. It is more than just the FAA though because 24 the airlines themselves were aware of this. But before I leave 25 the FAA there was discussion by counsel earlier -- I believe it SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 72 76EAASEPA1 Argument 1 was by Mr. Podesta -- of an ACSSP and various provisions of the 2 ACSSP. And the argument was if we follow the ACSSP we're 3 blessed. That isn't what they were told by the FAA and it 4 isn't what they told their own ground coordinators. 5 And if your Honor would look with me at Exhibit 25 in 6 the binder before you, this is a PowerPoint presentation by an 7 FAA employee, Annmarie Avala who was the principal security 8 inspector for U.S. Airways an employee of the FAA. Your 9 Honor, the last -- the second to the last page of this 10 exhibit -- 233 is the Bates number at the bottom -- is entitled 11 program oversight and it's a talking about prescreening, the 12 first dashed item dealing with this is U.S. Air carriers must 13 follow the air carrier standard security program, ACSSP 14 requirements. And then if you look at the last line of text on 15 the page, and her comments it is says U.S. Airways may go 16 above and beyond the requirements. Everybody understood on the 17 FAA side and on the airlines side these are minimum 18 requirements. 19 And the next exhibit in the binders, Exhibit 26, which 20 is a set of PowerPoints three weeks before 9/11 that were put 21 together by U.S. Air to instruct the ground security 22 coordinators, the initial training August 21, 22 and 23 of 23 2001. 24 And if you will turn with me, your Honor, to the Bates 25 numbered page. It's about third from the end. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 73 76EAASEPA1 Argument 1 THE COURT: Okay. This is -- 2 MR. JOSEPH: This is a U.S. Air document. This was 3 not to show what the industry actually understood. 4 THE COURT: Who is presenting? 5 MR. JOSEPH: All we know is that they've produced it 6 as a PowerPoint. It's being given as training to their ground 7 security coordinators. 8 THE COURT: U.S. Air? 9 MR. JOSEPH: U.S. Air. The first textural paragraph 10 on page 2426 beneath the PowerPoint. The PowerPoint says base 11 line security measures. The explanatory text beneath it reads: 12 The ACSSP manual establishes base line security measures. 13 These measures are the minimum requirements necessary for each 14 carrier. Each carrier may implement more restrictive measures 15 when deemed necessary. 16 Contrary to what your Honor is being told now the 17 airlines did not on 9/11 believe that they could and should do 18 only what was required, what the base line was. That is 19 evidence. Or we would not dispute that that is evidence of 20 their compliance with the standard of care. It is not 21 dispositive. The circumstances determine that. And we are 22 going to go into a few moments to the check point operations 23 guide and even the ACS that's more discretion because all of 24 these are context driven. 25 But I just want to step back for a second. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 74 76EAASEPA1 Argument 1 THE COURT: Supposing I agree with you. 2 MR. JOSEPH: Yes, your Honor. 3 THE COURT: What is the practical consequence of 4 today's exercise? 5 MR. JOSEPH: Let me read Lockerbie instruction because 6 this is what we would like, something like that standards of 7 care Lockerbie was a Warsaw Act case. This was the 8 instruction: Mere compliance of government regulations -- 9 THE COURT: Slowly, please. 10 MR. JOSEPH: Mere compliance with government 11 regulations is not necessarily proof of absence of willful 12 misconduct, a much higher standard because it was a Warsaw 13 convention case. Compliance where government regulations is 14 not necessarily proof of absence of willful misconduct. You 15 may, for example, find that the circumstances existing for the 16 security of Flight 103 on December 1, 1988, required the 17 defendants to provide security measures in addition to the 18 minimum standards required by the FAA regulations and the 19 ACSSP. And that's really where we are, your Honor, that what 20 Lockerbie said, what the FAA said. 21 THE COURT: So what you want is ruling that one 22 instruction over another will be appropriate. 23 MR. JOSEPH: Correct. That that is something that is 24 evidence -- 25 THE COURT: Like a motion in limine. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 75 76EAASEPA1 Argument 1 MR. JOSEPH: Like our precharge conference, your 2 Honor. 3 THE COURT: Way too early though. 4 MR. JOSEPH: We didn't file the first brief but we are 5 not going to sit quietly by when it is filed. 6 THE COURT: I think this is very, very useful and 7 important. 8 MR. JOSEPH: Your Honor, what I don't want to do is -- 9 THE COURT: The later -- Younger taught trial advocacy 10 better than anybody else and one of the things I took from him 11 is that when you prepare a trial you prepare for what you'll 12 say last and what the judge will instruct last. So in effect 13 you are conditioning me, both sides, of what I have to say to 14 the jury and that conditioning will influence everything you do 15 during the trial. So therefore it is important. 16 MR. JOSEPH: Your Honor, what I don't want to do is 17 wear the patience of Court. 18 THE COURT: I'll let you know. 19 MR. JOSEPH: I would like to turn to a few provisions 20 in check point operations guide. 21 THE COURT: The reason I want you to do this slowly, 22 Mr. Joseph, is because I have to deal with text and I need to 23 absorb the text and you are giving me a run through of the 24 applicable text. So I need to be absorb what you say and I 25 think everyone else needs to absorb. You are doing what is SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 76 76EAASEPA1 Argument 1 essential. Take your time to do it. 2 MR. JOSEPH: Thank you, your Honor. 3 If we could turn to Exhibit 10 in the compilation 4 which is the check point operations guide. And there is lot in 5 the briefs about this document which is something that is -- 6 let's be candid. There is no question there are uniformed 7 procedures. The only question is whether that's the be all and 8 end all or whether, in fact, they have discretion and a duty to 9 exercise that 10 THE COURT: I think Mr. Podesta agreed that this is an 11 exercise in discretion and that charge I have to give and it's 12 not the Lockerbie charge, but the charge I have to give has to 13 take into consideration what the check point people are 14 instructed to do and what element of discretion they have and 15 what standards you should govern that element of discretion. 16 And I have a feeling that at the end of today there is going to 17 be a large area of agreement. 18 MR. JOSEPH: I think looking a check point you'll see 19 that they have complete discretion whenever there was any 20 threat potential threat to safety. 21 THE COURT: That begs the question of what I was 22 asking Mr. Podesta about how do we deal with this computer 23 generated heightened threat analysis. You know, I don't want 24 to disturb your -- 25 MR. JOSEPH: Your Honor, in 2007 if there is anybody SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 77 76EAASEPA1 Argument 1 who suggest that there is not anti-air -- in the United States 2 would be a lie, but in 2001 we hadn't had 9/11. Nobody knew 3 who Osama Bin Laden was. We're concerned now about focusing on 4 what was going on in 9/11. Ticketing agents -- and we have 5 testimony about this -- had the discretion to put somebody into 6 the CAPPS system. It wasn't just the computer profile. There 7 is nothing preclusive. Safety is the paramount goal. And we 8 have testimony from a person named Ernie Miller to that effect. 9 THE COURT: I would believe that. But the question is 10 what are the criteria that allows someone to do that? And 11 we're a little frustrated because of what Ms. Goldman said 12 before about we don't know what the criteria are and we're 13 concerned that profiling by ethnicity may not have been 14 appropriate. 15 MR. JOSEPH: Your Honor, these people were computer 16 generated selectees. These people looked suspicious. It 17 wasn't ethnicity. But if that's an argument they want to make 18 that it was because they were concerned about issues whether 19 you call it political correctness or legitimate concern about 20 people's rights, they can make the argument. But it's a 21 factual determination. We don't determine if -- this isn't 22 even a 56 motion on motion a determining the applicable 23 standard of care. The applicable standard of care is set forth 24 in Williams and Lockerbie. It's a high standard of care and 25 it's reasonableness the circumstances given that duty. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 78 76EAASEPA1 Argument 1 THE COURT: Federal standard you are saying. 2 MR. JOSEPH: Williams says the common law in the 3 states is the same. The reason we focused on the state 4 standards access says you apply state law unless it's 5 inconsistent and there's no inconsistency. I think we're 6 saying the same thing though. 7 THE COURT: You know the trouble with dealing with 8 large abstractions is they appear to be a guidelines but they 9 cause more trouble because your experience, my experience, 10 Mr. Podesta and Ms. Gaston, everything depends on the 11 particular matter before the Court, particular document that's 12 given before the Court, the particular expression of a witness. 13 It's very hard to deal in limine with these kinds of issues. 14 MR. JOSEPH: You are right, your Honor. We were on 15 Exhibit 10 which is the check point operations guide. If your 16 Honor will turn to the second page of the document, page 11991. 17 It's the preface, this applies to the entire check point 18 operations guide. And if you look at the fourth paragraph it 19 says the cog as is inclusive as possible. However, some 20 situations do not lend themselves to specific procedures. 21 Screeners, supervisors and managers must keep in mind that some 22 day-to-day situations will require -- will occur that require 23 on-site decisions. Discretion is built into the system. 24 If your Honor will turn with me to the next page. 25 THE COURT: You didn't want to read the next sentence? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 79 76EAASEPA1 Argument 1 MR. JOSEPH: No action should ever be taken that could 2 compromise the aviation security process. All probables should 3 be resolved by the most experienced screener or supervisor 4 available and/or referred to responsible airline. The 5 responsible airline. 6 Discretion is built into the system because we're 7 dealing with minimum standard. The next page is dealing with 8 weapons and explosive devices. It makes exactly the same 9 point. I am looking at the last paragraph. And if you start 10 on the third line it begins with the sentence that says: 11 Knives with blades under 4 inches, such as Swiss army knives, 12 scout knives, pocket utility fives, etc. may be allowed to 13 enter -- may. However, some knives with blades under 4 inches 14 could be considered by a reasonable person to be a "menacing 15 knife" and/or maybe illegal under local law. No. Local law is 16 stricter you have to apply local law. And should not be 17 allowed to enter into the sterile area and we have serrated 18 knives. 19 THE COURT: Stay with this. Explore this with me. 20 MR. JOSEPH: This means that when these gentlemen 21 walked through there was discretion. It wasn't enough just to 22 say the blades were 3.9 inches. 23 THE COURT: What did they have? They had box cutters. 24 MR. JOSEPH: Your Honor, if we are going to get into 25 the facts, it's not a 56 motion. I'm not the right person to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 80 76EAASEPA1 Argument 1 be giving you all the facts. 2 THE COURT: The reason I am asking is because I am 3 reluctant to express a view. I think although educational and 4 important it is also premature. I am reluctant to express a 5 point of view except with respect to something very specific 6 put before me. 7 MR. JOSEPH: It may be, your Honor, that this is 8 something that needs to be done in a 56 context after 9 discovery. We've only had -- 10 THE COURT: If I let you all go you'll have 6500 more. 11 MR. JOSEPH: Any time, your Honor, you want to set a 12 trial date that's okay. Let me just, my point here is simply 13 we're dealing with generalities with the standard of care 14 discretion is built into this federal system. 15 THE COURT: What would you think of a trial date on 16 damages? Discovery that's still to go with liability. The 17 damages issue are discrete. 18 MR. JOSEPH: My inclination, Judge, is to say any 19 trial we can get is a good trial. 20 THE COURT: I think so too. 21 MR. JOSEPH: I may have 35 cocounsel to disagree with 22 me. Your Honor, again, I am going to go through two more pages 23 of this. 24 THE COURT: Go ahead. 25 MR. JOSEPH: When we are talking about whether or not SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 81 76EAASEPA1 Argument 1 actions are prescribed and as an automaton does it. 2 THE COURT: Just stop it. I am thinking, you know, 3 what am I supposed to take from this? If the knives are under 4 four inches Mr. Podesta's clients would say that they didn't 5 have to stop. They also tell me about the rules that say look 6 only at the checked baggage. 7 MR. JOSEPH: Nothing stops anybody from doing -- 8 THE COURT: And then the question comes what are the 9 reasons that arguably require them to do more? And how do I 10 formulate that standard to my mind? The jury doesn't care if 11 it's a federal mandate or a state mandated standard. They need 12 to know what the right rule is to be applied. 13 MR. JOSEPH: Your Honor, I think this the only issue 14 that can be resolved today is that we're dealing with are 15 minimum standards and there is discretion involved and there is 16 a factual determination whether or not the behavior was 17 reasonable given -- I don't think that there is anything else 18 that can come out of today's hearing. It is not a summary 19 judgment hearing. But the argument that's being made by the 20 defendants is that near compliance exonerates them. Now 21 Mr. Podesta seemed to back off at that and I respect that 22 but -- 23 THE COURT: Well, he didn't back off that. That was 24 his argument throughout. He had to lead me through it the way 25 you are leading me through it. The question I keep coming back SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 82 76EAASEPA1 Argument 1 to is, what do I take from this? What do I learn from this? I 2 know that we all have to respect what is stated in the federal 3 law and we do. The question is where are the outside 4 perimeters of when we start to argue. 5 MR. JOSEPH: There are two points that are basically 6 summarized in -- Your Honor, what I was saying is that I think 7 the clear dichotomy -- to go back to your question -- the clear 8 dichotomy is are the standards preclusive if honored. We won't 9 say they weren't honored. But they preclusive if honored 10 minimum standards -- we think that the law is very clear that 11 the latter is correct. But I don't think more than that could 12 is correct. Your Honor wouldn't be ruling that they have -- 13 The second take away, I believe, would come from the 14 Williams case from 44701-44702 and from the regs that are 15 security regs enacted pursuant to those statutes and others and 16 that it is a duty to exercise the highest possible degree of 17 safety in the public interest in connection with operations 18 including security operations. 19 Now, that doesn't decide anything other than what is 20 the framework that we're working with, but I believe those are 21 the take aways from today. Those are the two issues because 22 the contract position simply we do what we're told and that was 23 sufficient. 24 Your Honor, there is one more, perhaps, two more in 25 the cog that I could point out, but I think your Honor has the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 83 76EAASEPA1 Argument 1 flavor for this and our brief does recite the specifics here 2 and since we're going to break in about 5 minutes I think -- 3 let's turn to Exhibit 11 which is -- 4 THE COURT: I'm very interested in Ms. Gaston's point. 5 MR. JOSEPH: That's not my area, but I can point one 6 thing out because she alluded to it, but your Honor didn't -- 7 your Honor just said why don't you reserve on it. If you go 8 back to tab one in the statutory compilation, the manageable 9 one that ended up. Tab one. I read Section A and then I read 10 A5. A being the administrator of the FAA shall promote safe 11 light -- 12 THE COURT: I took note of that. That's minimum 13 standard also in aircraft design but what she pointed out to me 14 is something more that a deliberate choice was made by FAA 15 don't have cockpit intrusion proof doors. 16 MR. JOSEPH: I'm not the right person, all I can say 17 is, your Honor -- 18 THE COURT: Then pass on it. 19 MR. JOSEPH: -- counsel will address that. Let me 20 just pass for that. 21 The ACSSP is the other document to which they would 22 give preclusive effect. That's the air carrier standard 23 security program. We have that as Exhibit 11 in the large 24 document. And, perhaps, the quickest way just to give an 25 example if you go to the page at the bottom that is XC and then SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 84 76EAASEPA1 Argument 1 at the end 966. 2 THE COURT: Last page I have is 909. 3 MR. JOSEPH: I'm sorry. It's further up than that. 4 It's in the middle somewhere. 5 THE COURT: Oh, I see. I have it. 6 MR. JOSEPH: At the top of the page is deadly or 7 dangerous weapon guidelines and you will just read the first 8 paragraph. The following guidelines are furnished to assist in 9 making a reasonable determination of what property in the 10 possession of a person should be considered a deadly or 11 dangerous weapon. They are only guidelines however and common 12 sense should always prevail. So everything here whether it's 13 in a reasonableness standard -- 14 THE COURT: How do I find common sense? How do I 15 instruct the jury as to common sense? 16 MR. JOSEPH: They have to act reasonably recognizing 17 what their duty is to act -- 18 THE COURT: How does it differ from what came out at 19 the end of Mr. Podesta's argument or Mr. Ellis's argument? 20 MR. JOSEPH: Compliance is not preclusive. Mr. Ellis 21 was talking about -- but in terms of actually what the standard 22 is, I believe we may all be in agreement that the standard is 23 that we have regulations that evidence of compliance of 24 regulations is evidence a jury may consider on the issue of 25 reasonableness, but it's not dispositive. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 85 76EAASEPA1 Argument 1 THE COURT: Whether you do more depends on the 2 circumstances. 3 MR. JOSEPH: Exactly right. Perhaps I should turn for 4 a second to the pre-emption issue. It's been fully briefed. 5 THE COURT: I think your point here is that where 6 there are specific ways of flying outside of the thunder storm 7 or whom to admit or whom not to admit in some specific 8 instance, I follow it. You don't do less and you don't do 9 more. But where regulations are intended to be setting minimum 10 standards, the suggestion in the regulations themselves that 11 there may be times when you do more. 12 MR. JOSEPH: Your Honor, let me address Abdulla for a 13 second. Abdulla was tried under the state common law standard 14 of reasonableness. The Third Circuit I pointed your Honor to 15 the reg and the Court said, of course, the district court may 16 just reinstate the same verdict because the standard may be no 17 different. The regs that they are relying on don't purport to 18 be preclusive of anything else and that is why we point to what 19 the FAA is saying what the cog says. 20 THE COURT: I keep asking what are the take away 21 points and I'm not sure that there is differences among you. 22 MR. JOSEPH: We would agree with the articulation of 23 what your Honor just made of what that duty is and what that 24 standard is. May I make a couple points? I am perfectly 25 prepared to be told no. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 86 76EAASEPA1 Argument 1 THE COURT: Cardoza expressed himself as a state judge 2 and later as a federal judge, justice, the same person who 3 spoke and if he made sense in one category he made sense in a 4 different category. Defined the common law standards of 5 reasonableness. It's the same thing as reasonableness in a 6 federal statute with one exception that where the federal 7 statute is specific and tells you what you can and can't do you 8 follow. It's probably a generality. It probably just doesn't 9 help but anyway. 10 MR. JOSEPH: If your Honor in the small binder would 11 just turn to tab seven since Mr. Ellis was pointing to the 12 Aviation Improvement Act of 1990. It is not very long. I 13 would simply point out that neither in this act nor in any 14 other is there any expressed preclusion of the state common law 15 standard. 16 THE COURT: No. Clearly there is -- well, again it's 17 abstraction. Where something is specifically stated you can't 18 have something that's different and whether you call it a 19 pre-emption but intent or pre-emption by affect is not very 20 important to me. 21 MR. JOSEPH: There is a line of cases the Supreme 22 Court in Hillsborough or R.J. Reynolds that says that agencies 23 in Congress know how to pre-empt when they want to. 24 THE COURT: All find language that says something 25 else. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 87 76EAASEPA1 Argument 1 MR. JOSEPH: But the FAA has pre-empted the area of 2 drug testing and the Drake case in the Second Circuit pointed 3 that out the. The Aviation Security Act of 1990 was in 4 response to Lockerbie bombing. Nothing had anything to do with 5 pre-emptions. The ADA, the Deregulation Act is an economic 6 regulation act and it precludes. It pre-empts rates, roots and 7 services. So we have the Supreme Court saying you can't effect 8 those. 9 Nothing in any ATSSA verdict is going to effect rates, 10 rooms and services. We have completely insulated defendants 11 which is why the Price Anderson parallel, I'll say two things 12 about that, first, the language isn't identical. Their breach 13 says the language isn't identical. But the context isn't 14 identical either. We have complete protection of this industry 15 because any award is limited to insurance. 16 And the third point I'd make is -- 17 THE COURT: Well, it's parallel. 18 MR. JOSEPH: When the same language is used in 19 different statute, but damages under the Clayton and RICO Act 20 is both limited to business or property. Under the Clayton Act 21 it means competitive. Under RICO it means anything. So I 22 think we have to look at this statute and we know -- 23 THE COURT: Mr. Ellis, the point I take from 24 Mr. Joseph is that the standards of what should have been done 25 at the check points were minimal standards and that in various SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 88 76EAASEPA1 Argument 1 circumstances more could be done, more can be done, more may be 2 required to be done and I am not interested in whether it's a 3 federal reason for more or a state reason for more, but more 4 could be done. Are you saying something different? 5 MR. ELLIS: Yes, your Honor. 6 First of all, Mr. Joseph omits from his brief and from 7 his presentation the provisions of the Aviation Security 8 Improvement Act that we discussed after the break which said, 9 not the airlines, but the FAA and logically the FBI, by the 10 way, injunction with the intelligence community of the United 11 States assess the threats. 12 THE COURT: Depends now what are the circumstances 13 that make it a threat. I am told on this motion that nine out 14 of the ten people were identified in the computer as raising a 15 suspicion but I don't know why and I don't know whether it 16 should have been noted or not noted at the check point or not. 17 The question, I think, is a little question of begging and 18 that's why I am kind of resistent. 19 MR. ELLIS: Something more should have been done for 20 those nine people. 21 THE COURT: Sure. In the appropriate circumstances if 22 a perception of threat were involved should something more have 23 been done? 24 MR. ELLIS: May I first say one I thing, your Honor? 25 Like you sure as heck like when it gets specific and I wish SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 89 76EAASEPA1 Argument 1 they had been this specific before we came to court today, 2 because one of the things I would have brought to Court, your 3 Honor, is the testimony of Captain Edmund Soliday who appeared 4 before the 9/11 commission and was asked about profiling 9/11 5 and what you could do. 6 THE COURT: This is another day. I started to open 7 this open with Ms. Goldman and she told me to stay away from 8 that. 9 MR. ELLIS: The point of the matter is, your Honor, 10 the answer is when we get specific, no, you couldn't vary and 11 profile more and if we want to get into a factual inquiry about 12 that we'd be happy to do that. 13 THE COURT: Now, if Mr. Ellis is right on facts 14 because it fits squarely into a regulation then there is 15 pre-emption. 16 MR. JOSEPH: Your Honor, that regulation states what 17 is required, but in any event the CAPPS system which we haven't 18 had full discovery on, we don't have information. which -- was 19 developed voluntarily by the airlines permitted agent, ticket 20 agents to put people into the system and that was done on at 21 least one instance in a case. There was discretion built into 22 that system ticket agents put a -- 23 THE COURT: So that if there was discretion built into 24 the system then I have to instruct the jury how to exercise 25 discretion. How to review the exercise in discretion. It is SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 90 76EAASEPA1 Argument 1 a -- just I am confused about what I have to do. What do you 2 want me to do, Mr. Ellis? 3 MR. ELLIS: Your Honor, yes. 4 Your Honor, quite frankly I agree with you when your 5 statements when we're discussing things in the abstract. I 6 would say what they need to identify today is in order to award 7 a damage remedy, have the right to regulate conduct differently 8 than what the federal system required. 9 THE COURT: I think the answer to that is, probably 10 no, but absolutely I won't say and whether -- 11 MR. ELLIS: I liked the first answer. 12 THE COURT: Probably we are looking at the federal 13 sources. But you know the federal sources bounce right back 14 into the state sources. 15 MR. ELLIS: Except for one thing when we bounce back 16 into a state remedy then we -- 17 THE COURT: Not state remedy, state standard. 18 Remedies are different. Remedies are how much damages you 19 award. We're not talking about that now. 20 MR. ELLIS: Right. But what is the standard for 21 conduct? And in fact the states do not impose liability for 22 doing what the airlines were doing at the airports. We are 23 referring to those as minimums, your Honor. 24 THE COURT: What the states say is that any person 25 causes injury to another by doing something or failing to do SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 91 76EAASEPA1 Argument 1 something which in the circumstances is unreasonable and 2 negligent the damages have to be paid. I may have stated it 3 wrong, but, basically, I think you get the drift of what I am 4 saying. 5 Here with a large overlay of federal regulation we 6 certainly have to pay attention to what is federally required 7 and to some extent it may be preclusive and to some extent it 8 may require the exercise of discretion and if it does require 9 the exercise of discretion, how that discretion was exercised 10 or if it was failed to be exercised whether the failure was 11 negligent is a question that the jury will have to decide. And 12 if it comes to elaborating on the definition of how to exercise 13 due care in the circumstances, both of you are going to be 14 giving me cases that probably arise under state law because 15 they're not too much federal law on the point. And I don't 16 know that I can say anything more useful than that. 17 18 MR. ELLIS: I appreciate what you've said, your Honor, 19 and I guess that the first point is simply one that I think 20 you've indicated. You probably see the way that we see it 21 which is that the states don't have the right to regulate. 22 Where it gets tricky is -- 23 THE COURT: You are enlarging now. 24 MR. ELLIS: Where it get's tricky, of course, is when 25 there are built into what the federal program requires some SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 92 76EAASEPA1 Argument 1 area of discretion. I would like at some point if we get 2 specific about those thing. We could decide whether or not 3 there actually was discretion because there seems to be -- 4 THE COURT: I think it's going to be left to another 5 day. 6 MR. JOSEPH: Your Honor, it's one o'clock. I think 7 you've said everything I could usefully say unless there is a 8 particular area. Let's talk off the record about this 9 afternoon. 10 (Discussion held off the record) 11 THE COURT: Can you do your brief rebuttal now? 12 MR. PODESTA: First of all, with respect to source of 13 the aviation regulation screening authority that is contained 14 in 44903. 15 THE COURT: I understand. 16 MR. PODESTA: Which is not the statute Mr. Joseph 17 read. This is a 1974 enactment that deals with the 18 administrator for prescribing regulations to protect passengers 19 and property on aircraft operating in air transportation 20 against an act of criminal violence or aircraft piracy. The 21 statute didn't exist at the time of the Williams case or the 22 events in the Williams case. 23 THE COURT: What is the difference? 24 MR. PODESTA: The difference is this statute doesn't 25 talk about highest duty of safety. It talks about protecting SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 93 76EAASEPA1 Argument 1 passengers and the public interest in promoting air 2 transportation and interstate air transportation. This is 3 44903. And it talk about to the maximum extent practical 4 requiring a uniform procedure for searching and detaining 5 passengers or property to insure that their safety courteous 6 and -- 7 THE COURT: But the FAA knowing about this issues an 8 educational bulletin just before September 11 which talks again 9 about minimum standards. 10 MR. PODESTA: In the sense that there is -- that's 11 just a reference to the common sense element. 12 Second, even minimum standards aren't pre-empted as 13 Abdulla has found, as -- 14 THE COURT: Even minimum standards. 15 MR. PODESTA: Even standards that can be described as 16 something a defendant can voluntarily accede have pre-empted 17 effect under the decisions affecting the Federal Aviation Act. 18 THE COURT: First of all, what do you mean by 19 voluntary. 20 MR. PODESTA: Our position, let me make it very clear, 21 is that the cog and the ACSSP set forth the legal standards 22 that we were obliged to follow. 23 THE COURT: You are saying that the minimum standard 24 is the satisfaction of reasonableness. 25 MR. PODESTA: The ACSSP and the cog define SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 94 76EAASEPA1 Argument 1 reasonableness for purposes of the Stabilization Act or ATSSA. 2 THE COURT: What you would say is the definition of 3 reasonableness, Mr. Joseph would say is the minimum standard. 4 MR. PODESTA: Right. And there are numerous -- those 5 cases, the cases that Mr. Ellis cited, Abdulla and Green and 6 four district court decisions in this circuit since Lockerbie 7 have found pre-emption of the very FAA, by the very FAA 8 aviation standards. 9 THE COURT: Suppose I agree. What different does it 10 make? The difference is that still there's a common sentence 11 standard that comes right back in and whether I call it a 12 Cardoza standard or a U.S. standards makes no difference. 13 MR. PODESTA: It makes a great deal of difference and 14 the reason why we're having trouble discerning that difference 15 today is when we gave specific examples of what the plaintiffs 16 were saying in deposition, this is what you should do. And we 17 pointed out in our opening brief how the FAA regulations 18 basically set forth different rules. They made no response. 19 They were completely silent. They have never identified what 20 it is they say we should have done above the supposed minimum. 21 They hint in their deposition questions that we should have had 22 an intensive interview program, behavioral profiling such, as 23 el al, but that is entirely outside the federal system and it 24 involves an entirely different approach. 25 THE COURT: Are they required to specify what you SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 95 76EAASEPA1 Argument 1 should have done. 2 MR. PODESTA: I think that they should be -- how can 3 we have effective discovery? How can your Honor make rulings 4 on critical issues until they say, look, this is what you 5 should have done beyond that which is specified in the cog, in 6 the ACSSP. 7 THE COURT: Mr. Moller, should you be required to 8 respond to a bill of particulars at this point. 9 MR. MOLLER: I think the answer to that is, no, until 10 we get some additional discovery which you had informed us 11 precisely how to respond. 12 MR. PODESTA: The chicken and the egg, Judge. 13 THE COURT: Mr. Podesta, we have decided to put this 14 up for decision at this point. But it's part of the 15 frustration I think that permeates that discussion. You want 16 to know what the contentions are so you can rebut them. They 17 don't want to tell you till they finish discovery, federal 18 rules side with Mr. Moller but I have discretion to modify. 19 MR. PODESTA: And your Honor recognizes the March 22 20 conference is that it was important to key these issues up. In 21 our opening brief we gave six or seven examples such as 22 behavioral profiling, extensive hand waning, putting special 23 scrutiny on Arabs and Middle Eastern people and we pointed each 24 of them reason afoul of the federal regulations and should 25 be -- they didn't respond at all. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 96 76EAASEPA1 Argument 1 THE COURT: I think what you do to me now, 2 Mr. Podesta, is illustrate why I feel frustrated because there 3 is nothing specific on which to rule. I find what has been 4 done this morning extremely important and extremely helpful in 5 my understanding of the respective positions, but it's nothing 6 on which I can rule. 7 I feel at this point in time that I am not going to 8 make a ruling and as I do with motions in limine I give you my 9 indications and reserve complete freedom of action on the 10 trial. When the facts are clear and specific and something is 11 tendered to me for decision, I'll rule. But in this kind of an 12 amorphous record I find the motion -- 13 MR. PODESTA: That creates enormous practical 14 difficulties as for the scope of discovery to be conducted and 15 for the scope -- 16 THE COURT: Why don't you tell me that after lunch. 17 You'll be first up. 18 (Luncheon recess) 19 (Continued on next page) 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 97 76E59112 argument 1 THE COURT: Roger Podesta for the aviation defendants. 2 MR. PODESTA: May I begin? 3 THE COURT: Go ahead, Mr. Podesta. 4 MR. PODESTA: You will be glad to know, your Honor, I 5 did not take advantage of this interval to come up with more 6 comments. 7 My first point is with respect to the F.A.A. websites 8 and the travel and correspondence, these are obviously not 9 official statements of the F.A.A. and they are obviously 10 entitled to a great deal less weight than the actual text of 11 the ACTSSP or the cog in which the F.A.A. approved and which 12 was in use for many years. 13 But, most importantly, they don't address the critical 14 issue before this Court which is not whether the aviation 15 defendants can sometimes exceed the F.A.A. requirements but 16 whether the states can require the aviation defendants to 17 exceed the federal requirements. 18 THE COURT: That's not an important issue because the 19 answer is clearly, "No," and no one is urging that that 20 happened. 21 MR. PODESTA: All right. Well, thank you. I was 22 going to cite the authorities in our brief where the F.A.A. has 23 taken official positions endorsing Abdella including their own 24 administrative rule in the Fairview case saying the states have 25 no role. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 98 76E59112 argument 1 THE COURT: The bottom line is what do you want me to 2 rule on? What practical decision do I make on the basis of the 3 decision? 4 MR. PODESTA: I think at the time what we would like 5 from your Honor is a ruling that federal law controls where 6 it -- 7 THE COURT: I'm not going to make that abstract 8 ruling. If there is a piece of evidence that I have to rule 9 on, there is a jury instruction that I have to rule on, I will 10 rule. But I'm not going to pronounce a statement of law which 11 has no practical implementation. 12 MR. PODESTA: Well, I think it would be very useful 13 through the course of discovery in this case and particularly 14 in developing experts if we had some idea of the jury 15 instruction that your Honor would propose to give. 16 THE COURT: If you want to have a procedure to 17 formulate jury instructions, I will be glad to participate in 18 that when it is appropriate and it will be when the evidence is 19 completed or perhaps before you make final choices of experts. 20 I will be agreeable to that. As you know, I will do whatever 21 has to be done to move the case. 22 This has been a very useful exercise because I've 23 learned the issues, I have seen the respective positions, I 24 have heard respective arguments and I have a certain set of 25 ideas as to how this case has to be shaped and I think I've SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 99 76E59112 argument 1 expressed that in terms of argument. I have not ruled and I do 2 not intend to rule unless there is some practical 3 implementation that is at hand. And there is none. 4 MR. PODESTA: I think the starting of a process as to 5 how to develop jury instructions would be very helpful, 6 particularly before we get into experts because right now one 7 of the issues that troubles us is the plaintiffs can contend 8 that state common law required that we develop an El Al system 9 for -- 10 THE COURT: Mr. Podesta, let me -- time is precious 11 and I want to be a little more efficient than I was this 12 morning. 13 You have pointed out that the plaintiffs have not 14 stated their contentions as to what you should have done and 15 did not do, or in what respects you didn't do something you 16 should have done. 17 Until they do that there are no instructions to give. 18 At some point they're going to have to do that. We'll get to 19 that and you will have rulings when that comes about. 20 MR. PODESTA: I would then just add -- and this will 21 lead into Wayland -- that if we don't have guidance on what the 22 arguments the plaintiffs can make state law says we should have 23 done, we are going to have to take more discovery from the 24 government as to why it made the decisions it did. 25 THE COURT: We will get to that in the next part. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 100 76E59112 argument 1 MR. PODESTA: Thank you for your forbearance. 2 THE COURT: We are now finished with the first topic 3 and ready for the second topic which has to do with discovery. 4 The topic is whether aviation defendants should be able to 5 discover from the government pre-September 11th intelligence 6 and other threat information known to the government but not 7 conveyed to the aviation defendants. 8 Mr. Joseph Wayland will speak for the aviation 9 defendants. 10 MR. WAYLAND: Thank you, your Honor. 11 Joe Wayland, Simpson, Thacher and Bartlett for 12 Argenbright Security and for the aviation defendants. 13 Your Honor, I want to start with what I think is the 14 false premise of both the government's brief and the 15 plaintiff's brief and that is the following: That our 16 liability depends solely on what the defendants knew and what 17 they did. They cannot and they do not support this proposition 18 with any authority. They do not cite to any principles of 19 authority law and they can't because that proposition is 20 directly contrary to the basic principles of tort law and 21 evidence and it is contradicted by every single case that is 22 ever considered what defendants are allowed to prove at trial 23 to defend themselves in negligence cases. 24 Your Honor wanted to be specific, I'm going to get 25 very specific very quickly. Let's turn first to the issue of SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 101 76E59112 argument 1 proximate cause. 2 It is a fundamental principle of tort law that 3 defendants are permitted to show that events and circumstances 4 beyond the defendant's actions are the substantial cause of the 5 plaintiff's injury. That's horn book law. There is nothing in 6 the plaintiff's brief or the government's brief that says 7 otherwise. 8 This is what the restatement of torts says and it is 9 what courts across the country have said and we cited to it. 10 Let me just read one section from the restatement that makes it 11 pretty clear. Some other event which is a contributing factor 12 in producing the harm may have such a predominant effect in 13 bringing it about as to make the effect of the actor's 14 negligence insignificant and therefor to prevent it from 15 becoming a substantial factor. 16 So, too, although no one of the contributing factors 17 may have such a predominant effect their combined effect may, 18 as it were, so dilute the effects of the actor's negligence as 19 to prevent them from being a substantial factor. 20 The Court emphasized -- the Court, and I mean you, 21 your Honor -- emphasized this principle in your September 2003 22 decision and in which you recognized that the actions of others 23 may, quote, so attenuate defendants' negligence from the injury 24 that responsibility for the injury may not be reasonably 25 attributed to the defendant. And I think your Honor, this SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 102 76E59112 argument 1 morning, essentially said the same thing. 2 So, I think there is no doubt that we are entitled to 3 show evidence of circumstances other than defendant's own 4 actions. And there is also no doubt -- and I will get into the 5 specifics now -- that the government intelligence regarding 6 terrorist threats and the government's actions in response to 7 those threats is directly relevant to proximate cause. 8 I have a number of examples, your Honor. Let's start 9 with the first one, and it has to do with a critical issue that 10 you, yourself, identified in the 2003 opinion. You said that 11 liability may turn on, quote, who was best able to protect 12 against the risks at issue. Who was best able to protect 13 against the risks at issue. We think that is a critical issue 14 and it goes to proximate cause. 15 How does government intelligence play in? Congress 16 charged the FBI and the F.A.A. with the statutory 17 responsibility to assess terrorist threat against the domestic 18 air transportation system. That's 49 U.S.C. 44904. It was 19 cited this morning by number of counsel. 20 The statutory instruction is explicit. The FBI and 21 the F.A.A. are required to assess the extent to which there are 22 individuals with the capability and intent to carry out 23 terrorist or related unlawful acts against the domestic 24 aviation system and the ways in which those individuals might 25 carry out those acts. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 103 76E59112 argument 1 The FBI has a duty to identify any top terrorists that 2 are in the country and the F.A.A. has the responsibility to 3 determine the procedures and equipment that will most 4 effectively deter those terrorists. 5 Based on this statutory authority we should be 6 permitted to show that the best way to prevent the 7 sophisticated attacks by terrorist organizations such as 8 Al Qaeda is to identify the plots in advance and to take action 9 to eliminate the threat. 10 In fact, your Honor, is it all right if I approach and 11 hand up something? 12 THE COURT: Sure. 13 MR. WAYLAND: I want to hand up to your Honor two 14 excerpts from the 9/11 Commission report. If you turn to page 15 83, your Honor. 16 THE COURT: Hold on, Mr. Wayland. 17 MR. WAYLAND: Thank you, your Honor. 18 Your Honor, I ask that you direct your attention to 19 page 83 of the 9/11 Commission report. The second full 20 paragraph on that page begins with the phrase "The F.A.A.'s 21 policy was to use... 22 Do you see that, your Honor? 23 THE COURT: Yes. 24 MR. WAYLAND: I will continue: The F.A.A.'s policy 25 was to use intelligence to identify both specific plots and SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 104 76E59112 argument 1 general threats to civil avation security so that the agency 2 could develop and deploy appropriate counter measures. 3 So, I think what the Commission is explicitly 4 acknowledging is that government intelligence was a critical 5 component in the nation's efforts to stop the kind of attack 6 that was visited on the United States on September 11th. 7 We should be permitted to show further that despite 8 having substantial information about an impending attack by 9 terrorists against the U.S. in the months leading up to 10 September 11th, the government was unable to identify the 11 specific threat and could not stop the attacks. 12 And I want to direct your attention, your Honor, to 13 the second excerpts from 9/11 which I just handed up because I 14 think it is very important that your Honor understands the 15 extent and the type of information that we are talking about. 16 If you would look at page 255, your Honor? 17 THE COURT: I have it. 18 MR. WAYLAND: Under the heading, The Drum Beat 19 Begins -- and, by the way, your Honor, this chapter is 20 entitled, The System was Blinking Red. It is Chapter 8. I 21 think it is one of the most significant chapters in the report 22 and critical to understanding what our defense will be, your 23 Honor, and it also is critical, as we talk today, about what 24 specific threat information we expect to receive from the 25 government. And it is also critical to show that this is the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 105 76E59112 argument 1 type of information that the government has already decided as 2 a general matter it is okay for the public to have an 3 understanding of. So, this we will get to later on but it goes 4 to the issue, the fact if we are creating a burden for 5 government. 6 To return to the test. In the spring of 2001 the 7 level of reporting on terrorist threats and planned attacks 8 increased dramatically to its highest level since the 9 millennium alert. At the end of March the intelligence 10 community disseminated terrorist threat advisory indicating a 11 heightened Sunni extremist terrorist attacks against U.S. 12 facilities -- 13 THE COURT: It is better, actually, if you speak more 14 slowly. 15 MR. WAYLAND: Your Honor, a heightened threat of Sunni 16 extremist terrorist attacks against U.S. facilities, personnel 17 and other interests. 18 If you turn the page to 257 the first -- second full 19 paragraph, a terrorist threat advisory distributed in late June 20 indicated a high probability of near term "spectacular 21 terrorist attacks resulting in numerous casualties." 22 And then it goes on to refer specifically to Milan 23 attacks may be imminent and so on. 24 And there are a number of other excerpts I don't want 25 to burden the Court with now but I do want to turn to the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 106 76E59112 argument 1 evidence, based on government intelligence, as to what happened 2 next and that we go, your Honor, to page 263. 3 THE COURT: Yes. 4 MR. WAYLAND: And here the report goes through what 5 the government response was to the threats and, basically, and 6 the Court has it, but the thrust of this is the government had 7 a substantial amount of information and yet it didn't know what 8 to do about the information. It had much more information than 9 any of the defendants did, certainly. 10 The summation was really in the bottom paragraph. 11 THE COURT: I will take judicial notice of that. 12 MR. WAYLAND: The summation, your Honor, is at the 13 bottom of the page. The September 11th attacks fell into a 14 void between foreign and domestic threats. It goes on later on 15 that domestic agencies were waiting for evidence of a domestic 16 threat from sleeper cells. No one was looking for a foreign 17 threat. The threat was coming from -- that was coming was not 18 from sleeper cells, etc. 19 And then, on the next page, I think also very 20 important, the report says, A second cause of this disparity in 21 response is that domestic agencies did not know what to do and 22 no one gave them direction. 23 This, despite all of the threat information that's set 24 forth in documents like the 9/11 Commission report. 25 THE COURT: Can I digress? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 107 76E59112 argument 1 MR. WAYLAND: Yes. 2 THE COURT: Suppose you wanted to introduce this 3 statement: A second cause of this disparity is that the 4 domestic agencies did not know what to do and no one gave them 5 direction. 6 Under 803(8) of the Federal Rules of Evidence, could I 7 allow this in? 8 MR. WAYLAND: I think there are a number of issues, 9 your Honor. 10 First of all, I would -- 11 THE COURT: That was if one was, of course, prompted 12 to be prepared for this. 13 MR. WAYLAND: I could quote an eminent jurist who 14 said, "Stay away from secondary sources." 15 So, as a matter of trying a case to jury, your 16 Honor -- that was from Hellerstein -- but as a matter of trying 17 a case to a jury, your Honor, that's a very separate issue. Do 18 I want to put it in through statement or do I want the 19 government witnesses to be able to get on the stand and say 20 these are the facts that we knew, these are the conclusions we 21 reached, and these are the actions that we took. 22 So, I think that the parties will have a lot to say 23 about how much of this report comes in when the time is 24 appropriate. I would argue that this comes in. 25 THE COURT: Good answer, Mr. Wayland. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 108 76E59112 argument 1 MR. WAYLAND: Anyway, so I think, your Honor, what 2 this tells us -- this sort of information tells us is that the 3 government had substantial information -- let me start at the 4 beginning. 5 The government was charged with assessing threats. It 6 was their business to go out and look and decide what the 7 threats were. They did that. There was a lot of information 8 out there that wasn't conveyed to us and the government took 9 certain actions and didn't take other actions. And we think 10 when the jury is asked to decide what's the proximate cause of 11 what happened on 9/11, they need to hear not only the testimony 12 of Hermie Miller. And let me talk for a moment about Hermie 13 Miller because that's a witness who Mr. Joseph referred to in 14 his argument this morning. 15 First of all, she was security screener for Flight 93 16 not flight 77, but Hermie Miller is a retired, inner-city, 17 Newark grandmother who has raised a family and she worked at 18 Newark on the date in question. And she was deposed by the 19 plaintiffs and the thrust of the deposition, as far as I could 20 tell was, did you know who Osama Bin Laden was? And remember 21 Mr. Joseph said no one knew who he was. We had to go through a 22 whole hour of this. 23 THE COURT: Slow down. 24 MR. WAYLAND: Yes. We had to go through a whole hour 25 of: Did Hermie Miller know who Osama Bin Laden was? Did SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 109 76E59112 argument 1 Hermie Miller know about these attacks in Paris 10 years ago? 2 Did Hermie Miller know about the Bojinka plot? And then we 3 have to find out her exact interpretation of the cog is the 4 same as Joe Smith in Newark or Ronald McDonald in Dulles. Do 5 they all have the same interpretation. 6 And if that is what the case is about, if that's all 7 the jury gets to hear it will be a very different world and a 8 very unfair world and very unrealistic world. 9 THE COURT: What makes you think that I would allow 10 those questions? 11 MR. WAYLAND: I hope you won't, your Honor. I don't 12 think they should be allowed. 13 But, in any event, when the jury is asked to decide 14 whether it was the activity or conduct of any particular 15 defendant individually at a check point or collectively through 16 the procedures that they had in place, I think the jury is 17 entitled, under basic principles of proximate cause, to be able 18 to consider other factors and those factors, by statute, are 19 the government's action and the government's knowledge that led 20 to whatever action or inaction it took. 21 Let me give you a second example of proximate cause 22 that I think is relevant. 23 We think that the government's knowledge of the 24 terrorist threat will show that this sophisticated, dedicated 25 and ideologically driven nature of the threat and that these SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 110 76E59112 argument 1 groups planned and executed attacks that take advantage of 2 existing vulnerabilities in a targeted security system and do 3 not depend as a modus operandi on the negligence of the 4 victims. 5 The 9/11 Commission report says that the 9/11 6 terrorists were instructed to use weapons that were not 7 detectable. We should be able to show that the government had 8 knowledge about the nature of the terrorist threat and the 9 modus operandi of terrorist organizations. And it is 10 particularly important because, as far as we know, there is no 11 direct evidence of how the terrorists succeeded in getting 12 items on board the aircrafts that could be used as weapons and 13 whether they had any other means to achieve their objective if 14 any particular items had been confiscated before the 15 highjackers boarded the planes. 16 One final example, your Honor, on proximate cause. 17 The 9/11 Commission noted that the government's avation 18 security strategy assumed that the highjackers would not 19 undertake suicide missions. They expected the attacks would be 20 bombs on planes placed on there and then the terrorist leaves 21 and doesn't go on the plane. That view actually underlies key 22 aspects of the avation security system. 23 For example, the decision not to fight the highjackers 24 was based on that decision. The decision that not to have a 25 system that could prevent any possible item that could be used SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 111 76E59112 argument 1 as a weapon was not included -- was not part of the system. 2 And we think that the government's decision, which was clearly 3 based on its intelligence -- 4 THE COURT: Mr. Wayland, were those simply not done or 5 were they pursuant to a decision not to do? 6 MR. WAYLAND: I think what the evidence will show, 7 your Honor, is that the -- and what we have to go on right now 8 is mostly the 9/11 Commission report is that the -- and some 9 other documents too, but that the government considered the 10 various threats. They explicitly determined that suicide 11 highjacking was not a high priority and they designed a system 12 that focused on the threats that they did recognize which were 13 the remote bombing. 14 THE COURT: Is there any evidence to believe that the 15 government made a deliberate choice not to pursue methods of 16 detection in dealing with, say, suicide bombers? 17 MR. WAYLAND: Your Honor, I can point you to sections 18 in here that we can then go find the government witnesses to 19 sponsor; but, yes. 20 If you look at page 83 of the report -- I think it is 21 83 -- I can find it -- on 84, your Honor. I will just read it 22 to you. It is talking about the CAPS procedures which were 23 discussed this morning and why they were set up the way they 24 were. And what it says is this policy change, meaning an 25 affirmative act, was also reflected of the perspective that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 112 76E59112 argument 1 non-suicide sabotage was the primary threat to civil avation. 2 So, yes. There is evidence to support that there was 3 an affirmative determination to take certain steps in the 4 security system based on a belief, government intelligence, as 5 to what the most likely threat was. 6 One final point about proximate cause, your Honor, and 7 then I will move on to reasonableness. One of the issues on 8 proximate cause, I think, is the nature of the plot itself. 9 And the government, as you know, has agreed that it will not 10 raise relevancy objections as to what the government knows, 11 apparently, about the planning and execution of the plot as 12 well as the nature of the security system. 13 So, there is going to be government discovery and I 14 think that's a key -- a key -- factor to keep in mind, your 15 Honor. There is going to be extensive government discovery 16 because the government has agreed to it. 17 One of the problems was if you were to carve out this 18 exception for government intelligence about the terrorist 19 threat not known to the avation defendants would be the 20 following: I think it is very hard in practice to decide 21 whether some of this material goes directly to the 9/11 plot 22 itself or more generally to what the government knew about 23 terrorists and the Osama Bin Laden organization. 24 Now, I would argue, obviously, that most of that is 25 relevant to the plot itself. I can see debates with the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 113 76E59112 argument 1 plaintiffs and perhaps with the government about whether a 2 particular piece of evidence goes to the plot and its 3 implementation or whether it goes to, "the general knowledge 4 the government has." 5 So, I think adopting what the government wants and 6 what the plaintiffs want would actually cause more problems 7 than it would -- 8 THE COURT: What does the government want? Say that 9 again. 10 MR. WAYLAND: One of the objections that the 11 government has raised to our request is that it is going to 12 create a problem for them because they're going to have to 13 decide whether certain evidence is -- is subject to a national 14 security privilege or otherwise privileged. And I guess my 15 issue here, your Honor, is that they're going to have to do 16 that anyway with respect to information about the 9/11 plot 17 because they say they're going to produce that sort of 18 information to us. 19 So, it is not a substantial additional burden since it 20 most likely will be the same witnesses and many of the same 21 documents for them to make that determination with respect to 22 the small cash out that they're trying to make. 23 Let me talk about reasonableness just for a minute, 24 your Honor. And it follows on from everything that was 25 discussed this morning and one of the difficulties in deciding SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 114 76E59112 argument 1 what it is that ultimately is going to be put before the jury. 2 But, as Mr. Josephson suggests -- 3 THE COURT: Joseph. 4 MR. WAYLAND: Mr. Joseph suggested. 5 THE COURT: Josephson is a partner, used to be a 6 partner. 7 MR. WAYLAND: I actually worked for him as a summer 8 associate which is why I confused the two. But yes. 9 THE COURT: You went on to a distinguished career with 10 the attorney general. 11 MR. WAYLAND: Right. 12 We think it is pretty clear why government 13 intelligence would be directly relevant to the kind of 14 reasonableness case that the plaintiffs apparently want to put 15 in against us. 16 The theory is that we should have done something more. 17 And we can debate what that means but we should have done 18 something more. And it seems crystal clear that in judging 19 whether we acted reasonably in doing whatever it was that the 20 plaintiffs say we should have done, to take into account what 21 it was that the government knew about the terrorist threat and 22 what it required the defendants to do and what actions it took 23 in response to these threats. 24 We think that's pretty clear and it is hard to imagine 25 any way to come back at that. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 115 76E59112 argument 1 I want to spend a little bit of a moment on taking 2 that one step further which is, if you were to cut back a 3 little bit on what the plaintiffs want to do and say, look, 4 what matters is whether you substantially and reasonably 5 complied with the federal regulations, which is where we think 6 the instruction ought to be at the end of the day, my question 7 is, is it still relevant? Is what the government did still 8 relevant? And it is precisely because, as your Honor 9 recognized, there is an amount of discretion even within the 10 federal regulations. 11 So take, for example, what we talked about this 12 morning, the idea that the regulations prohibit menacing 13 knives. 14 THE COURT: Men -- 15 MR. WAYLAND: Menacing knives. 16 THE COURT: Menacing knives. Okay. 17 MR. WAYLAND: I don't know the exact language but four 18 inches is the general rule unless otherwise menacing. So, 19 there is judgment involved in whether the knife is menacing or 20 not. 21 So, the question is how do you judge whether what we 22 did was sufficient to satisfy our standard under the government 23 regulation unless we can use the menacing as an example. 24 On the one hand we have evidence that was available to 25 the defendants which is we knew that for decades what we were SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 116 76E59112 argument 1 doing was working in the sense that we had prevented 2 highjacking, domestic highjacking for decades, so we will be 3 able to tell the jury that that was a reasonable basis perhaps 4 not to do anything more than what we were doing. 5 We also think we ought to be able to tell the jury the 6 following: The government was responsible for these 7 regulations. The government had F.A.A. people in the airport 8 supervising us every day. The government knew what the threats 9 were. The government also new what our performance was. 10 So, the government knew, for example, that there was 11 never 100 percent certainty in stopping all the prohibited 12 items. The government knew about a lot of other problems that 13 came up in the system. And the government also knew what was 14 out there, what was making the system blink red for months and 15 months and months before 9/11. 16 And the fact that the government had that information, 17 knew what was happening at checkpoints with all its flaws and 18 all its excesses and determined not to require any changes 19 within the federal regulations, we think, goes to the 20 reasonableness of our actions. 21 THE COURT: But, this dysfunction of government 22 administration, therefore, is an excuse for your own negligence 23 generals? 24 MR. WAYLAND: No. Not at all, your Honor. It has 25 nothing to do with an excuse. It has to do with the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 117 76E59112 argument 1 reasonableness of our action. It has to do with whether people 2 sitting in a jury box. 3 THE COURT: The dysfunction of somebody else? 4 MR. WAYLAND: It is not dysfunction. It is function, 5 we are not -- 6 THE COURT: The conclusion of that 9/11 report was 7 that the government was dysfunctional. 8 MR. WAYLAND: Right. But that's not the issue for 9 which we want the evidence and that's not the issue that we are 10 putting before the jury. 11 The issue we are putting before the jury is whether 12 those actions, however you want to describe them, you can call 13 them bad, you can call them good -- 14 THE COURT: You are creating a deliberation on the 15 part of the government when the 9/11 commissioners thought it 16 was a dysfunction? 17 MR. WAYLAND: I think -- I don't think it matters how 18 we characterize what the government did. I think what matters 19 is that we have the information that's described in the 20 report -- 21 THE COURT: It seems to me a matter a lot that you are 22 going to create a separate trial longer than this trial. 23 MR. WAYLAND: Not at all. Not at all. 24 THE COURT: Tell me about limits. 25 What do you propose? How many depositions? How many SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 118 76E59112 argument 1 documents? How many proceedings with the TSA? How many issues 2 of SSI? How many appeals to various Courts of Appeals 3 throughout the country? Much delay in these cases getting to 4 trial? 5 Talk to me about that. 6 MR. WAYLAND: I think that's a great place to go, your 7 Honor. And, again, let's start with the premise that the 8 government has accepted that we are entitled to a fair amount 9 of discovery already so a lot of those things are going to 10 happen. 11 THE COURT: I have noted that in how much delay it has 12 caused already. 13 MR. WAYLAND: So it is going to happen. 14 THE COURT: The full employment policy from 15 Ms. Goldman and Ms. Norman notwithstanding the full employment 16 policy of about 15 other matters at least. 17 MR. WAYLAND: It is going to happen, your Honor. The 18 only question is whether what we want is going to add. 19 THE COURT: No, it is not going to happen. It may 20 happen. 21 MR. WAYLAND: Right. 22 Well, so far the government says it is going to 23 happen. We would like it not to happen. If they can give us 24 the stuff, we can come back and be done. 25 THE COURT: The government is not the judge. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 119 76E59112 argument 1 MR. WAYLAND: I know. 2 The question is, your Honor, what do I see happening 3 next and how quickly can we get it done. Here is what I think 4 and I have thought about this a lot: 5 I think once we get this issue of what we can see and 6 not see resolved, we will sit down with the government with 7 this book and several other government reports and say this is 8 the type of information we need to get in front of a jury. 9 THE COURT: This book is the 9/11 report? 10 MR. WAYLAND: I'm sorry, your Honor; the 9/11 report 11 and similar documents. This is the type of information we want 12 and it is not a lot. We have summarized it in our briefs. The 13 report itself identifies the number of witnesses who purport to 14 be the sources of this. 15 THE COURT: How many? 16 MR. WAYLAND: I would say my estimate is the same as 17 it was last time, 20 to 30. 18 THE COURT: Mr. Barry, how many depositions have you 19 told me you wanted? 65? 20 MR. BARRY: Of the parties? We said at least another 21 65, from them. They wanted it of us. That's what the 22 plaintiff wants of us. 23 THE COURT: You want 65. 24 MR. BARRY: No, plaintiff wants of us, of the 25 defendants. That's what they said this morning. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 120 76E59112 argument 1 THE COURT: Mr. Moller, I don't remember that number 2 being used. 3 MR. MOLLER: The numbers are a surprise to me and I 4 don't think I could stay awake for 65 depositions. 5 THE COURT: Well, I do know -- 6 MR. BARRY: They gave us a list of 130 so I cut it in 7 half. 8 THE COURT: I think I woke you up. It is not Saturday 9 morning, Mr. Moller. It is still Thursday. 10 Mr. Barry, what are you talking about? You have a 11 Sunday function, he has a Saturday function. 12 THE COURT: To cut this short, I don't have any 13 confidence that the numbers will be limited to 20 or 30. I 14 have every reason to believe that the numbers will be 15 considerably more and a multiple of those. 16 MR. WAYLAND: Not for government witnesses, your 17 Honor. I don't think so. And, your Honor, that's an issue of 18 burden which we can resist if we take advantage of this. 19 THE COURT: This issue is all 403. You know under 20 Rule 26 of the Federal Rules of Civil Procedure anything that's 21 useful in effect is a bound of discovery. And since usefulness 22 is very much subjective to a party, it tends to be very little 23 in the way of limits to discovery responsibly pursued. 24 MR. WAYLAND: You can set those limits, your Honor. 25 THE COURT: It is not so easy. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 121 76E59112 argument 1 Under Rule 403 of the Federal Rules of Evidence I have 2 to worry about something else. Although relevant, evidence may 3 be excluded if its probative value is substantially outweighed 4 by the danger of unfair prejudice, confusion of the issues or 5 misleading the jury or by considerations of undue delay, waste 6 of time, or needless presentation of cumulative evidence. 7 Leaving aside various of the characteristics here, 8 what you are asking me to authorize is another trial of the 9 government. 10 MR. WAYLAND: Absolutely, not, your Honor. Absolutely 11 not. 12 THE COURT: And I do not wish to do that. 13 MR. WAYLAND: That is absolutely not true, your Honor. 14 And I think the wording of that rule is precisely on point. It 15 talks about unfair prejudice and confusion. And if the jury is 16 not permitted to hear what the government knew and then what it 17 decided to do or not to do, we will be severely prejudiced 18 because it will create a false world that didn't exist on 9/11 19 and it will put us at a substantial disadvantage and I think it 20 would be a serious error to put us in that position. 21 I think the burden is overstated, your Honor. This is 22 the only discovery, essentially, the defendants are taking. 23 They've had all of the -- because that's what matters to us 24 because we were part of a system. We were part of a system in 25 which the rules were dictated to us by statute, by the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 122 76E59112 argument 1 government, and a threat assessment -- 2 THE COURT: Dictation is not a problem because that's 3 information conveyed. 4 UNIDENTIFIED SPEAKER: That's right. 5 MR. WAYLAND: I'm sorry, your Honor? 6 THE COURT: I don't need to have confirmation from 7 plaintiff's bench, please. So far I'm doing all right. 8 That's information that's conveyed. Nothing that 9 prevents you from taking discovery of information transmitted 10 to you. 11 What you are looking for is information that was not 12 transmitted to you. 13 MR. WAYLAND: Because that's critical in understanding 14 the reasonableness of our actions and the proximate cause. 15 If the government had this information it couldn't 16 stop the terrorists. The idea that Hermie Miller and people 17 like her could stop it, it just makes no sense. So, it is 18 critical to us, your Honor, for that reason. 19 THE COURT: Thank you, Mr. Wayland. 20 Who will present the government's position? 21 MS. GOLDMAN: Beth Goldman. 22 Your Honor, I would like to start with the issue of 23 the burden because I think that one of the things Mr. Wayland 24 has done today and in their papers is to underestimate, to the 25 extreme, the burden that's going to be imposed on the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 123 76E59112 argument 1 government by the discovery they seek. 2 They try to describe it today as something -- 3 THE COURT: While you are describing burden on the 4 government, talk to me also about the delay to the Court and 5 the burden to the Judge. 6 MS. GOLDMAN: Certainly. 7 They describe it as limited and narrow, not 8 burdensome. And, in fact, they are seeking discovery so far 9 not only from the F.A.A. And one of the lessons of 10 Mr. Wayland's statement is that no good deed goes unpunished 11 because we have agreed to provide certain limited discovery on 12 issues that are clearly relevant here. 13 THE COURT: I'm going to take issue with good deeds. 14 You do what is necessary, Ms. Goldman. 15 MS. GOLDMAN: We are doing what is appropriate and 16 then we are told, Well, it can't be much more of a burden to go 17 way beyond that. 18 But, of course, it is. Because they've asked not only 19 for information from the F.A.A. but from three United States 20 intelligence agencies, the CIA, the FBI and the NSC. And they 21 seek from those agencies a wide ranging topics of inquiry. And 22 we don't yet have all of the requests. We can only -- 23 THE COURT: What is NIC? 24 MS. GOLDMAN: NSC, National Security Council. 25 We don't have all of the requests but we have some and SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 124 76E59112 argument 1 the requests include things like they want CIA and FBI 2 information and NSC information on pre-September 11th threats 3 to civil avation. They want what the CIA and FBI had before 4 9/11 on Osama Bin Laden. They want what the CIA and the FBI 5 had on Al Qaeda. And they want all of the federal agencies 6 information about the highjackers. And then, in their papers, 7 they admit that they may want to pursue other leads based on 8 the information that they may get. 9 So, this must be the tip of the iceberg if there is 10 any more. 11 Now, beyond that they have said consistently that they 12 want 20 to 30 government witnesses. Now, 20 to 30 government 13 witnesses including multiple 30(b)6 witnesses is not the 14 equivalent of 20 do 30 screeners who have a limited amount of 15 information. What they want are witnesses from the CIA, for 16 instance, to talk about raw threat information that they had 17 and what was done with that threat information. 18 This is the kind of discovery that will require the 19 government to spend countless hours and days finding 20 information and then preparing witnesses. And, add to that, 21 that these are very sensitive areas of inquiry. These are 22 areas where there is classified information -- 23 THE COURT: Suppose the government decides that it 24 does not want to give this information. Where is their 25 recourse? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 125 76E59112 argument 1 MS. GOLDMAN: Well, what the government will do is 2 respond to the requests and, as we have agreed to the parties, 3 the next step would be would be if we were to say "No" in the 4 Touhy response the parties would be to disagree to challenge 5 that Touhy comes -- 6 THE COURT: That comes to me? 7 MS. GOLDMAN: To you under the APA. 8 THE COURT: Well, Touhy is not APA. 9 MS. GOLDMAN: Well, it would be to you because we have 10 agreed not to insist that they go to the fourth circuit or any 11 other circuit where the agencies may be cloaked. 12 THE COURT: So, I would expect a weekly, long letter 13 under my individual rule 2E asking me to rule on various 14 questions? 15 MS. GOLDMAN: Well, we would have to discuss whether 16 you believe Touhy because -- because the way you do it for this 17 is for them to file an action that's related that's an APA 18 action challenging the Touhy denial. 19 THE COURT: File an action under the administrative 20 procedure act. 21 MS. GOLDMAN: Right. 22 THE COURT: They can do it here or they can do it in 23 the District of Columbia. 24 MS. GOLDMAN: Right. Although we did agree with the 25 parties in order to avoid having to force everybody to do that, SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 126 76E59112 argument 1 that they would all agree to do it here, if that's okay with 2 your Honor. 3 THE COURT: And so I get a separate petition and it 4 comes to me as a related lawsuit and I rule on that and that's 5 not so easy because if I have to rule on information that has 6 very high classification, I may not be able to easily see this 7 information. I may not be able to have my law clerk view this 8 information. I may get into a fight with the government on 9 whether or not my law clerk has access to this information. We 10 may not have a court reporter who is cleared to see this 11 information. The information may have to be viewed in a sealed 12 room in the Department of Justice. There may be problems with 13 a record. There may be efforts by the government to summarize 14 the information. We would have problems of clearing how many 15 lawyers in this case? 16 We have spent several weeks dealing with -- weeks, 17 months, dealing with the lawyers in this case. But that's very 18 simple for me to do, handle that very easily without affecting 19 the timing of these proceedings. Right. 20 Mr. Wayland? 21 MR. WAYLAND: Actually, no, your Honor. And I think 22 you have it, with all due respect, wrong for the following 23 reasons: 24 What we have said is that we want information that the 25 government has already said is publicly disseminated. What I SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 127 76E59112 argument 1 want to do is sit down with her and find the 10 witnesses, if 2 that's what it takes, to get this stuff into evidence. That's 3 about 10 witnesses. 4 THE COURT: If information is publicly disseminated 5 there may be techniques of getting that information in without 6 having to go through the risks of these kinds of proceedings. 7 I have been through these proceedings, Mr. Wayland. I 8 speak not from hypothetical reasoning. 9 MR. WAYLAND: I appreciate that, your Honor. 10 Then I would say the ruling then -- 11 THE COURT: I had a fight with the U.S. Attorney's 12 office -- not U.S. Attorney but the Department of Justice of 13 whether one of my rulings on which I wrote could go into the 14 federal law books. 15 MR. WAYLAND: Your Honor. 16 THE COURT: I won. 17 MR. WAYLAND: Clearly, I think I have suggested -- 18 THE COURT: I'm the Judge. 19 MR. WAYLAND: I suggest this can happen in a way much 20 more expeditious than you are contemplating. 21 THE COURT: If there is a mutual will, there is a way. 22 MR. WAYLAND: There is a way, your Honor. 23 THE COURT: If there is not a mutual will, it is very 24 difficult, Mr. Wayland. Very difficult. And it should be very 25 difficult. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 128 76E59112 argument 1 MR. WAYLAND: I agree. We have said that we would do 2 everything necessary to make it go quickly. We will keep our 3 witnesses down. And if I can't convince you, your Honor, if 4 this is where you are going to go and this is the reason, then 5 I would ask that whatever ruling you make be limited to the 6 burden because, as you suggested, there are other ways to get 7 this evidence in so it would be a mistake, I think, to rule 8 broadly that we can't put any of this evidence in through some 9 other means. It might be appropriate to say you can't burden 10 the government to get it but I think, clearly, that goes to 11 burden, not relevance. 12 MS. GOLDMAN: Your Honor, if I may? I think 13 Mr. Wayland's -- 14 THE COURT: You already won, Ms. Goldman. Mr. Wayland 15 has said that I should restrict my ruling. 16 MR. WAYLAND: If you are inclined to rule against us, 17 your Honor. 18 THE COURT: I am. I am because I have had 19 experience -- in this case and in other cases -- and it is 20 grossly unfair to the progress of these cases to everything 21 else I have to do as a Judge in this court and to these 22 plaintiffs to get involved in these kinds of proceedings unless 23 I have no recourse. And there is recourse. At least there is 24 at this moment. 25 I don't have to rule on relevance. That can wait SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 129 76E59112 argument 1 another day. But, given the issues as they are presented to me 2 the burden, the confusion, the expense, and I won't go into 3 other considerations because these are enough, all dictate that 4 I should not allow this discovery. 5 Thank you very much, Ms. Goldman. You were eloquent. 6 MR. MIGLIORI: Can I thank her? 7 THE COURT: I'm not going to write on this issue 8 unless somebody feels they need to. I think I am better off. 9 Okay, nobody is asking to write. Let's go back to 10 number 1. We left Boeing's excellent argument made by 11 Ms. Gaston up for tantalizing review and Mr. Williamson is 12 going to respond. 13 Richard William son is speaking for -- who is your 14 client in this one, Mr. Williamson? 15 MR. WILLIAMSON: World Trade Center Property 16 cross-claimants, your Honor; good afternoon. 17 Good afternoon, your Honor. I was going to start, if 18 I may, with the arguments of Mr. Wood to go in, because they go 19 together with the arguments of Boeing. So, I will deal with 20 the airport operator argument and then Boeing, if I may. 21 THE COURT: That's fine. 22 (Continued on next page) 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 130 76E4WTC3 1 MR. WILLIAMSON: Essentially what each of these is 2 doing is saying we are a specific type of defendant, so for us, 3 we want to have a different duty of care and we want to have 4 the court find that there could be no liability to us in these 5 circumstances. 6 THE COURT: I don't think they are saying that. I 7 think they are saying that the building was occupied. I don't 8 want to do it on different arguments. So let's focus on either 9 one, but don't mix them because they are different. 10 MR. WILLIAMSON: OK. With respect to Massport, page 1 11 of their opening brief, the moving brief is very revealing. It 12 tells us in the third full paragraph that they are arguing that 13 under the regulations, the airport, I quote, the airport 14 operators had no duty to oversee, implement, supervise, or 15 other otherwise conduct passenger screening in any way, close 16 quote. That's really the guts of their argument. 17 THE COURT: I think what Mr. Wood taught me is that 18 their job was to allocate responsibilities among various 19 entities. Once they did that, unless they were negligent in 20 their choice, their responsibility ends. 21 Have I captured your argument. 22 MR. WOOD: If the FAA allocates responsibilities, then 23 we are to carry out ours and the airlines are to carry out 24 theirs. 25 THE COURT: I never heard from you what were your SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 131 76E4WTC3 1 responsibilities. 2 MR. WOOD: Our responsibilities under Part 107, your 3 Honor, are to put a fence around that airport, to control 4 access to that airport, to investigate and give badges to 5 people that want access to that airport, to provide a police 6 department at that airport, so that if we are summoned by the 7 airlines to deal with somebody at the airport, we have a 8 policeman that comes in. In general, it's access and providing 9 a police department at that airport that Dulles, Newark, and 10 Massport are obligated to do under the federal statutes and 11 regulations. 12 THE COURT: But not screening. 13 MR. WOOD: But not screening. Specifically 44901, 14 Congress specifically assigns that jobs to the air carriers or 15 their agents. 16 THE COURT: OK. 17 MR. WILLIAMSON: I think actually a number of 18 arguments were really made. One is that under the law they 19 can't be liable, then we will examine in a second if I may 20 whether Massport's abilities and duties are as limited as you 21 just heard and as stated in their brief whereas I say they had 22 no duty. Let's take a look at that together. First, it's 23 contrary to the law. The second Circuit has told us in Japan 24 Airlines in 1999 that such an argument is rejected when it was 25 made by a different airport operator. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 132 76E4WTC3 1 In that particular case, it was the Port Authority. 2 The Port Authority's main argument, in the words of the Second 3 Circuit, and I quote at page 109, is that a finding of 4 negligence cannot be predicated upon its failure to clear 5 beyond the edges of the runway because it had no duty to do so. 6 We disagree. The Port Authority's status as an airport 7 operator requires it to maintain JFK in a reasonably safe 8 manner for the benefit of passengers and carriers using the 9 airport, close quote. 10 It goes on to analyze that the Port Authority's 11 argument was predicated upon the fact that there were 12 regulations in place, it said we complied with them, we did the 13 minimum therefore we cannot possibly be liable. The Second 14 Circuit rejected that argument, as I said, and said that the 15 airport operator had a duty to maintain the airport in a 16 reasonably safe manner. 17 To continue, the proposition being advanced today is 18 rejected by the Second Circuit; it's contrary to Second Circuit 19 law. 20 THE COURT: What section. 21 MR. WOOD: 44901. 22 MR. WILLIAMSON: May I go on, your Honor. 23 THE COURT: One minute. 24 (Pause) 25 THE COURT: Section 44901(a) imposes on the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 133 76E4WTC3 1 administrator of the Federal Aviation Administration the 2 obligation to describe the regulations that require screening. 3 It goes on to say, the screening must take place before 4 boarding and be carried out by a weapon-detecting facility or 5 procedure used or operated by an employee or agent of the air 6 carrier, intrastate air carrier, or foreign air carrier. It 7 doesn't say anything about the airport facility itself. What 8 should I take from that statement. 9 MR. WILLIAMSON: You are being asked to look at the 10 wrong section. Let's look at the right section together. If 11 we look at 601(b) of the Federal Aviation Act, which is 12 discussed and explicated in the Federal Aviation Handbook, 13 Exhibit 8 to our declaration, establishes, quote, Section 14 601(b) of the FA Act specifies, and it goes on to say that the 15 FAA -- 16 THE COURT: Let me get it. 17 (Pause) 18 THE COURT: Entitled safety regulation of civil 19 aeronautics. 20 MR. WILLIAMSON: Yes. 21 THE COURT: It's describing standard rules and 22 regulations and issuing certificates, is that how it starts. 23 MR. WILLIAMSON: Section 601(b) of FA Act specifies in 24 part when describing, yes, I think we are in the same place. 25 THE COURT: OK. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 134 76E4WTC3 1 MR. WILLIAMSON: Here is what's important and what 2 debunks the propositions Mr. Wood was advancing. I was picking 3 up, your Honor, with the quote that FAA shall give full 4 consideration to the duty resting upon air operators, that's 5 Massport, to perform their services with the highest possible 6 degree of safety in the public interest. It continues and 7 says -- 8 THE COURT: My text says the administrator shall give 9 full consideration to the duty resting upon air carriers to 10 perform their services with the highest possible degree of 11 safety in the public interest. 12 MR. WILLIAMSON: I am referencing Section 8300, your 13 Honor; it's 6-5 at the bottom. 14 THE COURT: Tell me what this larger text is from. 15 MR. WILLIAMSON: This is the FAA handbook that I was 16 drawing your attention to. 17 THE COURT: What is the FAA handbook; is it a 18 regulation. 19 MR. WILLIAMSON: It's promulgated by the FAA. 20 I don't know if I understand the question. 21 THE COURT: What's the force of law; is it a 22 regulation codified in the Code of Federal Regulations. 23 MR. WILLIAMSON: No, I think similar to the answer 24 Mr. Joseph gave you, I think it has persuasive authority, and 25 it explicates -- SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 135 76E4WTC3 1 THE COURT: It's an informational bulletin. 2 MR. WILLIAMSON: It's more than that; it's what they 3 are operating under. We can brief that separate point. I just 4 wanted to draw your attention to its statement as to what the 5 FA Act is doing and what are the duties of airport operators, 6 which is what we are discussing. This is consistent completely 7 with the Second Circuit's decision that I just referenced in 8 Japan Airlines, which is discussed in our brief. There is 9 other law on point as well. 10 THE COURT: This does talk about air operator, and you 11 are saying that Port Authority and Dulles and Massport are air 12 operators. 13 MR. WILLIAMSON: Right. It says here the FA Act, 14 again that's in the text, what I was about to go to. 15 THE COURT: This reference to 601(b) and the statute 16 itself refers to air carriers. 17 MR. WILLIAMSON: But it indicates here that the FAA 18 shall give full consideration to the duty resting upon the air 19 operators. That was the point I was trying to make. 20 THE COURT: I understand. 21 MR. WILLIAMSON: So may I continue. 22 THE COURT: Please. 23 MR. WILLIAMSON: It goes on to say the FA Act 24 recognizes that holders of air operator certificates have a 25 direct responsibility for providing air transportation with the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 136 76E4WTC3 1 highest possible degree of safety. The meaning of Section 2 601(b) of the FA Act should be clearly understood. It means 3 that this responsibility rests directly with the air operator, 4 irrespective of any action taken or not taken by an individual 5 FAA inspector or the FAA. 6 So the effort, by the argument presented today, and at 7 page 1 of the brief, to say we have no duty then at page 3 of 8 the opening brief to say we have a duty, the standard of care 9 should be limited to doing the minimum under federal 10 regulations and then we are off the hook, that is debunked, as 11 I say, by the Second Circuit decision in Japan Airlines. The 12 FAA handbook tells us that's not right. Air operators are 13 governed by that. Let me continue. 14 We also have DiBenedetto, Second Circuit 2004. In 15 DiBenedetto, in a situation where it was dealing with airport 16 security on the ground, OK, is examining what can be the 17 possible liability of the parties involved in the airport 18 security. It concludes, this is at page 630, your Honor, they 19 have to taken reasonably appropriate steps to avoid or minimize 20 the likely harm. I was quoting from the Second Circuit. It's 21 not we are off the hook because we did what we say the 22 regulations provide and that minimum is good enough. 23 Let me continue. Mr. Wood advanced an argument -- 24 THE COURT: Do you have the cites of Japan Airlines 25 and DiBenedetto. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 137 76E4WTC3 1 MR. WILLIAMSON: Absolutely. Japan Airlines is 178 2 F.3d at 103, and the quotation I read to your Honor was at 109. 3 And should I give you the DiBenedetto as well. 4 THE COURT: I have it. Go on. 5 MR. WILLIAMSON: So the motion advanced earlier this 6 morning that the airport operators cannot exceed regulations, 7 can't even use common sense is contrary to the law in this 8 circuit. Also you were told I believe that Massport did not 9 know why it's being sued and couldn't really make it out from 10 the pleadings. As you recall, when we were together in 2003, 11 Massport made a 12(b) motion, arguing that the complaint 12 against should be dismissed. That was denied without 13 prejudice. 14 The proposition that Massport doesn't know why it's 15 being sued I submit is not supportable even under the barest 16 standards of notice pleading. If we look together at Exhibit 3 17 to our declaration, you have chapter and verse for why Massport 18 is being sued. Exhibit 3, your Honor. There are three counts 19 directed to Massport as well as other defendants, the first one 20 being for negligence at page 10. 21 THE COURT: In what respect. 22 MR. WILLIAMSON: Then we have paragraphs 41 to 53. 23 THE COURT: In what respect. 24 MR. WILLIAMSON: To begin, in paragraph 42, for 25 example, the fifth line down from the top, it's alleged that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 138 76E4WTC3 1 the defendants, this group including Massport, undertook and 2 did develop implement, own, operate, manage, supervise, staff, 3 equip, maintain, control and/or -- 4 THE COURT: Would it be fair to say that these 5 regulations are extremely general to satisfactory the rules of 6 pleading but they don't really give any specific knowledge to 7 the defendant. 8 MR. WILLIAMSON: I think -- 9 THE COURT: I am not saying you have to; I am saying 10 they don't. 11 MR. WILLIAMSON: This was only my first one; I have 12 many more paragraphs to go. 13 THE COURT: Go to the last one. It doesn't really 14 make a difference. What's the next point. 15 MR. WILLIAMSON: To the extent that, I think your 16 Honor asked this question as well, should you be moving for 17 summary judgment, if that's what Massport thinks it should be 18 doing, we stand prepared to -- 19 THE COURT: I am sure. 20 MR. WILLIAMSON: -- submit evidence which suggests 21 that what was represented was to the contrary. 22 THE COURT: Let me ask you, what is it you want me to 23 do at the end of today. 24 MR. WOOD: Your Honor, I want to read it into the 25 record, because over the lunch hour over my salad I thought I SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 139 76E4WTC3 1 should have answered that better this morning. 2 This is what I want you to do. 3 I request that you rule today that the standard of 4 care for Dulles, for Newark and Logan Airports security duties 5 is defined by the security duties specifically assigned to 6 those airports under federal law, specifically 44 U.S.C. 44903, 7 which tells the administrator what to do, 14 C.F.R. Part 107, 8 which tells the airports what to do from the FAA, and the 9 Airport Security Plan approved by FAA, which tells us in detail 10 what to do. 11 If you would rule that today going forward on divorce 12 against these airports which was supposed to be limited four 13 years ago, experts employed by these airports, summary 14 judgments framed up by these airports are all going to be a 15 whole lot more efficient for this case and for this court, 16 because those laws preempt and completely fill the field of 17 what we are supposed to do. 18 The Japan Airlines case is a perfect example. We are 19 supposed to take care of the runways, and the Japan Airlines 20 case was all about whether or not the snow and ice had been 21 properly removed from the runway. It had nothing to do with 22 screening. 23 THE COURT: I don't want to cut short Mr. Williamson. 24 MR. WOOD: Excuse me; I get a little wound up 25 sometimes. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 140 76E4WTC3 1 MR. WILLIAMSON: Thank you, your Honor. 2 With respect to the motion -- 3 THE COURT: You couldn't have had much time to enjoy 4 your salad. 5 MR. WOOD: You are more than important the salad. 6 THE COURT: I said that to my wife. 7 MR. WILLIAMSON: With respect to the motion that any 8 regulations that existed were ones that Massport satisfied and 9 they couldn't have done anything else, that is refuted in 10 numerous respects. 11 THE COURT: Do you sue Massport for derivative 12 liability because you argue those who operated the checkpoints 13 were negligent, their companies were negligent, and therefore 14 Massport was negligent. 15 MR. WILLIAMSON: Not only. I was about to say 16 Massport's involvement here is much greater than is being 17 portrayed. Let me be specific. Massport had the power over 18 areas of security and had recognized authority and 19 responsibilities for the checkpoints. It chose not to exercise 20 direct control over the checkpoints. 21 THE COURT: What do you mean they had control. 22 MR. WILLIAMSON: Massport's own airport, this is what 23 has emerged in discovery, there is no summary judgment motion 24 here so it's not being put forward, but since it was raised 25 today, Massport's airport security program provides, and I SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 141 76E4WTC3 1 quote, the FAA or Logan Airport and affected airlines will 2 determine when increased security measures are necessary. 3 THE COURT: That's enough. 4 MR. WILLIAMSON: So on. 5 THE COURT: That's enough. 6 MR. WILLIAMSON: I have more and more and more like 7 that. 8 THE COURT: I am not going to give you an abstract 9 ruling. If you want me to take specific action like dismiss 10 the case, I will consider it, but I am not going to give it, 11 just the way I declined to do it earlier. These are in effect 12 motions in limine that will determine in large part how I might 13 rule if a specific issue were presented by way of a piece of 14 evidence or an instruction to a jury or a disposition of the 15 case. I decline to do that. 16 MR. WOOD: Your Honor, I understand that. I wouldn't 17 stand here, because I understand the difference between summary 18 judgment and 12(b)(6) motions, I wouldn't stand here and ask 19 you to do that, because that's a question of how do we comply 20 with the law. What we are asking today because of these very 21 specific federal statutes and regulations is for you to simply 22 rule this is the law that applies to these airports. 23 THE COURT: I am not going to do that. I learned that 24 my power of definition is limited. I am not a legislator, I am 25 a judge, and I have to make rulings when I am compelled to do SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 142 76E4WTC3 1 so to decide a case. This is not a decision of anything in the 2 case, so I am not going to do it. 3 MR. WOOD: If I tried to frame it as this is the law 4 that applies to the very defined issue of security duties, 5 would I get any further down the road. 6 THE COURT: No. I don't supply a rule of decision 7 except with respect to a judicial action, and I am not asked to 8 do a judicial action. 9 Thank you very much, Mr. Williamson. 10 Let's go to Boeing. 11 MR. WILLIAMSON: Yes, your Honor. With respect to 12 Boeing, a number of interesting statements were made when 13 Ms. Gaston presented the argument. One of the more interesting 14 questions that your Honor posed was why didn't you move for 15 summary judgment, because that's really what this Boeing memo 16 of law is, we submit, and the answer is they did. 17 What happened is we served targeted discovery 18 requests, I have a copy with me, on Boeing seeking further 19 information, specifically among other items, to their airport, 20 their air carrier security system, including without limitation 21 the cockpit doors, because the way the argument was presented 22 to you, it was purportedly with claims being limited to the 23 cockpit doors, although near the end Ms. Gaston did concede 24 that there are claims, indeed there certainly are in our 25 cross-claims, beyond just the cockpit doors. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 143 76E4WTC3 1 We asked for discovery and document production with 2 respect to items going back to January 1, 1970, because you 3 hear today that in 1970, they decided that they shouldn't 4 change the way cockpit doors are made to be less intrusive. So 5 we are supposed believe that in the last 30 years -- 6 THE COURT: She said something different; she said the 7 government instructed. She is talking about government 8 regulations. 9 MR. WILLIAMSON: So within the last 30 years, we are 10 to believe nobody has thought about it again. I submit that 11 that's why we asked these questions numbers 66 to 78. 12 THE COURT: She said, Mr. Williamson, she said that 13 the government proposed rule making as to the desirability of 14 an intrusion-proof cockpit door, found on the basis of comments 15 from the public and its own investigations that it was not 16 desirable to have an intrusive-proof cockpit door and withdrew 17 the regulations, which means that the government made a 18 decision that as between having intrusion-proof cockpit doors 19 and not having intrusion-proof cockpit doors, it was better in 20 all the circumstances not to have intrusion-proof cockpit 21 doors. 22 Boeing says, not in a motion for summary judgment 23 because they are scared to make a motion, they think I will do 24 something very nasty, which I won't, they say that, therefore, 25 in compliance with a federal decision, they decided not to have SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 144 76E4WTC3 1 intrusion-proof cockpit doors. And since, as I have been given 2 to understand since I made my first decision in this case on 3 the issue of duty, the issue was intrusive-proof or not 4 intrusive-proof, I can understand their position that they 5 should not have an intrusion-proof cockpit door. Maybe the 6 government was wrong, but the government instructed them. 7 That's what they say. 8 MR. WILLIAMSON: That's what they say, your Honor. 9 Interesting. I was going to give you the chronology. We asked 10 for information on a category called interactions with 11 governmental agencies. This is our discovery request served 12 April 12. You asked why didn't they move motion for summary 13 judgment. They actually did. They did move motion for summary 14 judgment after they got our discovery requests targeted to, 15 among other things, their interactions with the governmental 16 agencies, one of which seeks to find out how come nobody has 17 woken up in 30 years, if you believe Boeing's story. 18 THE COURT: When was your interrogatory propounded. 19 MR. WILLIAMSON: April 12. 20 THE COURT: Why has it not been answered. 21 MR. WILLIAMSON: Because, interesting, tactics are 22 everything sometimes, the first thing they did was ask for more 23 time to produce documents or otherwise respond. 24 THE COURT: Which we gave. 25 MR. WILLIAMSON: Absolutely. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 145 76E4WTC3 1 THE COURT: What's the enlarged date. 2 MR. WILLIAMSON: It is supposed to be today. 3 THE COURT: Maybe in your office you have them. 4 MR. WILLIAMSON: No, because we were told that they 5 were mailed to us, but maybe they will arrive. Undoubtedly 6 they will; something will arrive. 7 THE COURT: If you were told they were mailed, I am 8 sure they were mailed. 9 MR. WILLIAMSON: I am sure they were mailed too. It 10 would have been nicer, obviously my point is, to have gotten 11 them faster. 12 THE COURT: Maybe I should hear this again after you 13 receive them. 14 MR. WILLIAMSON: That's exactly right, because we 15 should see what they have to say. 16 MS. GASTON: No, your Honor, it's an issue of law, not 17 of fact. 18 THE COURT: No, no. Suppose the government told you 19 that's what we thought about it in 1973, but we have had a 20 change of mind, it's up to you, Boeing, you decide what to do. 21 MS. GASTON: I would argue again that the issue of 22 preemption makes that issue irrelevant. First of all -- 23 THE COURT: It's not an issue of preemption. The 24 government told you, it's up to you. 25 MS. GASTON: Then it would be in the federal SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 146 76E4WTC3 1 regulations. 2 THE COURT: Not necessarily. On the record, all we 3 have is the government withdrew the proposed ruling; that's 4 what we have. It's like certiorari denied; there is no 5 precedent, except if there is nothing further, you have a very 6 strong argument, but there is no precedent. If the government 7 told you something different, in the interval or some 8 circumstance changed in the interval, there may be a case. I 9 don't know. 10 I am not going to make abstract rulings. It should be 11 clear to everybody that I don't have enough confidence in my 12 ability to do that. 13 MS. GASTON: Your Honor, respectfully, it requires 14 facts and it requires discovery in order to make conflict 15 preemption decisions. It does not require the governmental 16 facts in order to make a field preemption decision. 17 THE COURT: I don't want to do that. How many areas 18 of law do we have to deal with preemption. 19 MS. GASTON: I can't answer that. 20 THE COURT: Beyond labor law, is there anything else. 21 MS. GASTON: I don't know. 22 THE COURT: Labor law and ERISA, what else. 23 MS. GASTON: What other field is regulated to the 24 extent that aircraft design is, your Honor. 25 THE COURT: I don't know. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 147 76E4WTC3 1 MR. WOOD: Tanker design, you bet. 2 MS. GASTON: Maritime tankers. 3 THE COURT: Federal maritime law. I don't know. I am 4 not a jurisdictional scholar, I am not a jurisprudential 5 scholar, I am an Article III judge, which means I can back 6 switch hands. I am not making any rulings. 7 Mr. Williamson, thank you very much. 8 MR. WILLIAMSON: Thank you, your Honor. 9 THE COURT: I not writing on any of the issues so far. 10 It be has been a long day; I don't have anything to take back 11 so far. The next issue is punitive damages. Mr. Podesta. 12 MR. PODESTA: Your Honor, Roger Podesta for American 13 Airlines, with respect to the motion as to the punitive damages 14 claim in flights 11, 77 and 175. Let me get directly to the 15 concrete, your Honor. There appear to be certain aspects of 16 this motion that are unopposed. American and Ardenbrite have 17 moved for a dismissal of the Teague and Whittington flight 77 18 punitive damages claims because those are Warsaw Convention 19 cases, and the Second Circuit has held that punitive damages 20 are not recoverable against air carriers and their agents under 21 the Warsaw Convention. The Teague and Whittington plaintiffs 22 have not opposed this motion, so those claims should be 23 dismissed period. We are not requesting any abstract ruling; 24 we are requesting a dismissal of the punitive damages claim. 25 Secondly, it appears -- SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 148 76E4WTC3 1 THE COURT: Stop for a minute. 2 Any opposition to that. 3 MR. MIGLIORE: That issue came up earlier with Mr. 4 Moller this morning. There is a briefing schedule on other 5 issues relating to those claims. They were not raised 6 specifically for purposes of this motion. We ask that they 7 just be carried over to the briefing, because there is a 8 summary judgment motion pending on those cases on the issue of 9 the convention. 10 THE COURT: We were supposed to do punitive damages 11 today. 12 MR. MIGLIORE: Your Honor, I wasn't responsible. I am 13 asking the people who are briefing that issue. To my knowledge 14 it wasn't briefed in this particular motion. 15 MR. PODESTA: Yes, it was, and the proposed order 16 specifically called for the dismissal of the Teague and 17 Whittington punitive claims. 18 MR. MIGLIORE: Candidly, your Honor, this wasn't 19 something that I was doing; I was here on the government brief. 20 THE COURT: I will hear it on a rehearing if I give 21 it. 22 MR. MIGLIORE: It may well be given what it is, we can 23 agree to it as well. If you don't mind, let's defer it. 24 THE COURT: I am going to rule. I am going to dismiss 25 those cases. If you want to bring a motion for a rehearing, I SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 149 76E4WTC3 1 will hear it. 2 MR. MIGLIORE: You are going to dismiss that claim of 3 damages. 4 THE COURT: That claim of damages against Teague and 5 Whittington. OK, Mr. Podesta, doing great so far. 6 MR. PODESTA: I am on a roll. When I have a Second 7 Circuit decision directly on point and no opposition, I can win 8 them. 9 MR. MIGLIORE: Without prejudice. 10 MR. PODESTA: OK. I will move into more dangerous 11 ground. I believe that the motion to dismiss the punitive 12 damages claims is also unopposed as to the property damages. 13 The World Trade Center plaintiffs in their brief supporting 14 their cross-motion on severance and deferral expressly take no 15 position on the outcome of the punitive damages motions between 16 the aviation defendants and the other plaintiffs. 17 THE COURT: Mr. Williamson. 18 MR. WILLIAMSON: That is correct, your Honor. 19 THE COURT: OK. Dismissed. 20 MR. PODESTA: I win that one too. 21 MR. JOSEPH: We didn't make the punitive damages 22 claim, so it can't be dismissed. 23 THE COURT: OK. 24 MR. PODESTA: I am on a roll. The whole group of 25 plaintiffs in their opposition in Section 2(b), which was the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 150 76E4WTC3 1 only opposition on flights 11 and 175, which are the only cases 2 with property damages claims, only argue that they could pursue 3 their punitive damages claims with respect to personal injury 4 and wrongful death claims. 5 THE COURT: There are no punitive damages claims left 6 in Teague and Whittington in any and all property damages 7 claims. 8 MR. PODESTA: I believe that's correct. Building on 9 this momentum, I will now move to oppose. Look at the 10 progression here. I had no opposition and a Second Circuit 11 decision, then just no opposition. I am now graduating to the 12 point where I can deal with opposed motions. 13 THE COURT: Anything further you would become a 14 retired partner or a judge. 15 MR. PODESTA: The aviation defendants' motions as to 16 flights 11 and 175 rest on three basic premises, two of which 17 are undisputed by plaintiffs. Remember, these are the flights 18 that left Logan for New York. First, Section 408(a)(1) of the 19 ATSSSA or the Stabilization Act restricts recovery of all kinds 20 of damages in the 9/11 litigation to the limits of the aviation 21 defendants' liability insurance coverage. Thus, as plaintiffs 22 concede, there can be no direct financial recovery in these 23 cases from the aviation defendants. The only potential source 24 of recovery is from the liability insurance policies. So far, 25 I think we are in agreement. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 151 76E4WTC3 1 The second problem is the only one that I believe the 2 plaintiffs dispute. That is, the aviation defendants contend 3 that under Section 408(b)(2) of ERISA, which we discussed at 4 length this morning, punitive damages issues are covered by New 5 York law. 6 THE COURT: Not ERISA, I think you said ERISA. 7 MR. PODESTA: ATSSSA. 8 Third, as plaintiffs again concede, New York has a 9 strong public policy prohibiting insurance coverage for 10 punitive damages. That has been reaffirmed six times in the 11 last 30 years by the New York Court of Appeals. 12 Thus, a combination of these three premises -- 13 THE COURT: What was the second one. 14 MR. PODESTA: That New York law applies. 15 THE COURT: Because the flights ended up in New York. 16 MR. PODESTA: Because the flights ended up here, and 17 under New York's choice of law rules, New York would apply its 18 own conduct regulating rules to the issue of punitive damages 19 and would apply its own public policy, both as to forum and 20 under the operation of its choice of law rules. 21 Thus, if New York law applies to the flight 11 and 175 22 cases, plaintiffs are prohibited from recovering punitive 23 damages, not only from the aviation defendants by virtue of 24 ATSSSA, there can be no directed injury recovery, but also by 25 virtue of New York law, they cannot recover punitive damages SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 152 76E4WTC3 1 from the liability insurance policies, because New York law 2 prohibits insurance coverage for punitive damages. 3 This makes sense as a matter of New York law. 4 Punitive damages are not, according to the New York Court of 5 Appeals, designed to serve a compensatory function. They are 6 designed solely to deter and punish the wrongdoer by imposing 7 financial loss on that wrongdoer. Because ATSSSA makes that 8 impossible here, there can be no financial loss to the aviation 9 defendants. Punitive damages serve no conceivable purpose 10 under New York law and should be dismissed. 11 Plaintiffs make three principal points in opposition. 12 The first of these is that Congress somehow endorsed the 13 recoverability of punitive damages in all 9/11 cases, 14 regardless what state law may say, because it mentioned, it 15 used the words punitive damages in section 408(a)(1) of ATSSSA, 16 the Stabilization Act. 17 THE COURT: Notwithstanding any other provision of 18 law, liability for all claims, whether for compensatory or 19 punitive damages or for contribution or indemnity arising from 20 the terrorist-related aircraft crashes on September 11, 2001, 21 against an air carrier, aircraft manufacturer, airport sponsor, 22 or person with a property interest in the World Trade Center on 23 September 11, 2001, I will skip some words, shall not be in an 24 amount greater than the limits of liability insurance coverage 25 maintained by that air carrier, aircraft manufacturer, airport SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 153 76E4WTC3 1 sponsor or person with a property interest. 2 MR. PODESTA: As that language as you just read shows, 3 your Honor, Section 408(a)(1) does not create a cause of action 4 for punitive damages or anything else. It operates solely as a 5 limitation on the liability of the aviation defendants to the 6 limits of their liability insurance coverage. That section of 7 the statute mentions punitive damages only to make clear that 8 all types of damages, whether for compensatory damages or 9 whether for punitive damages or whether for contribution or 10 whether for indemnity are subject to the liability cap. 11 The federal cause of action for damages -- 12 THE COURT: But the payor is not the insurance company 13 directly; it's the aircraft company. 14 MR. PODESTA: Well, they are the defendant. 15 THE COURT: The money comes from insurance and they 16 can't pay out more than insurance, but it doesn't directly say 17 either that the insurance company is the paying agent directly 18 or that they can't pay whatever damages are assessed, 19 compensatory or punitive or otherwise. 20 MR. PODESTA: 408(a)(1) does not say whether punitive 21 damages can be recovered period. It's totally neutral on the 22 subject. 23 THE COURT: It may be inconsistent with the scheme set 24 up by Congress but it's not I think a direct consequence of the 25 wording of the statute. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 154 76E4WTC3 1 MR. PODESTA: No. 408(a)(1) just says whatever kind 2 of damages you have, punitive or compensatory, are limited to 3 your insurance coverage. To reach my conclusion and to dismiss 4 their claims, you have to move beyond 408(a)(1) to New York 5 law. It's the interaction of 408(a)(1) with New York law 6 chosen under 408. 7 THE COURT: Why give up that argument. Why give up 8 the motion that the statute intended to allow recovery only to 9 the extent of the defendants' insurance coverage. It might be 10 inconsistent with giving windfall awards to particular people 11 as a means of punishing a defendant. There was no way to know 12 when statute was created that the insurance coverage would be 13 sufficient to pay all claims. It was only because of the 14 extraordinary work of the special master and the creation of 15 victim compensation fund in the same statute that that 16 particular problem seems to be academic. It may not be 17 academic. 18 There are considerable property claims. There are 19 considerable claims that come against the city with regard to 20 other aspects of the case. No one knows how this will all work 21 out in the end. It may be that there would not have been 22 enough money to pay all compensatory claims if there had not 23 been these other features. So one could argue that it is 24 inconsistent with the statutory scheme of limiting liability to 25 insurance to allow any particular plaintiff to recover the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 155 76E4WTC3 1 windfall of punitive damages 2 MR. PODESTA: I think that's certainly an argument. 3 THE COURT: It's a good argument. 4 MR. PODESTA: Yes, it's a very good argument. 5 THE COURT: Why don't you make this. 6 MR. PODESTA: Because it really goes more towards the 7 question of deferral and severance than it does to outright 8 dismissal. 9 THE COURT: I am not a bankruptcy judge. I am not 10 going to wait until all claims I have allowed, all these 11 settled claims to be paid out and paid out promptly. We can't 12 wait. Look what a destructive scheme it would be to wait. 13 People in need of money would have to wait. People who lost 14 their wage earner would have to wait. It is inconceivable that 15 it would be Congress' plan. It's a pay-as-you-go basis, and it 16 seems to me that the scheme is inconsistent with giving up 17 punitive damages. 18 MR. PODESTA: Then I make that argument, your Honor. 19 You persuaded me. I don't know whether you succeeded in 20 persuading Mr. Moller as yet, I endorse that argument. I would 21 like to go on to the argument that I did make. I am doing 22 great here; I am not only winning unopposed motions but I have 23 judges giving me arguments saying why don't you make those 24 arguments. What more can I ask for; this is paradise. 25 But in any event, assuming I win on that, the federal SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 156 76E4WTC3 1 cause of action for damages is created by 408(b) and 408(b)(2) 2 directs this court to look to the law of the state of the 3 crash, including its choice of law rules, to determine whether 4 punitive damages are available. In other words, Section 5 408(a)(1) does not authorize punitives. If any punitives are 6 authorized under the statute -- 7 THE COURT: It's certainly not inconsistent with 8 federal law that New York law forbidding punitive damages in 9 this situation if paid by the insurance company would be the 10 choice of law. Does New York law on the cases that have arisen 11 under New York law speak to a situation where a defendant is 12 being asked to pay punitive damages because insurance would pay 13 punitive damages and not apply. 14 MR. PODESTA: The New York Court of Appeal has held in 15 six occasions in the last 30 years that defendants may not look 16 to insurance coverage to pay punitive damages and they have so 17 held even in situations where the contract expressly provided 18 that punitive damages were covered under the policy. There is 19 absolutely no inconsistency between New York public policy 20 against insurance coverage for punitive damages and anything in 21 ATSSSA. 22 THE COURT: So now we can cover flight 11. 23 MR. PODESTA: And 175. 24 I have to cover the choice of law issue. 25 THE COURT: That leaves the Virginia flight and the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 157 76E4WTC3 1 Pennsylvania flight. 2 MR. PODESTA: I still have to establish that New York 3 law applies to flights 11 and 175 because that is disputed. 4 THE COURT: The crash was in New York. 5 MR. PODESTA: Yes, but the plaintiffs say that 6 Massachusetts law should control. 7 THE COURT: Why. 8 MR. PODESTA: Because under New York law rules, you 9 look to whether it's a conduct-regulating rule, and it's agreed 10 punitive damages are conduct-regulating rules, you look to the 11 law of the place of the tort. Where two jurisdictions may 12 claim to be the place of the tort -- 13 THE COURT: The State of Massachusetts was the 14 conduct-regulating state because it passed through Logan. 15 MR. PODESTA: The preboarding screening occurred 16 there. 17 THE COURT: That's why you want me to rule that 18 federal law applies. 19 MR. PODESTA: I want you to rule that New York law 20 controls as to the availability of punitives under, as flights 21 11 and 175, and 408(a)(1) also applies. 22 THE COURT: If the conduct was in Massachusetts and 23 the crash occurred in New York, wouldn't New York's conflict of 24 laws point to Massachusetts. 25 MR. PODESTA: No. New York's conflict of laws would SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 158 76E4WTC3 1 point to New York because New York says where two jurisdictions 2 may claim to have an interest in applying their own 3 conduct-regulating rules, New York applies as a tie-breaker 4 where the last event necessary to make defendants liable 5 occurred. That tie-breaker, I think even plaintiffs would 6 concede, operates here in favor of New York. 7 THE COURT: Why. 8 MR. PODESTA: Because the last event necessary to make 9 the defendants liable on the personal injury cases and the 10 ground wonderful death cases was the crash of the planes into 11 the World Trade Center. Until that point there had been no 12 breach of duty, there had been no injury to those plaintiffs. 13 With respect to the wrongful death passenger planes -- 14 THE COURT: What was the conduct-regulating activity 15 in New York. 16 MR. PODESTA: The place of the issue is whether they 17 are the place of the tort and the place of the tort typically 18 is where the last injury occurs. There is no tort until there 19 is injury, so that's what makes New York the place of the tort. 20 THE COURT: But the conduct regulating removes that 21 from the place of injury and goes back to where the conduct 22 was. The negligence, if there was negligence, was in the 23 airport screening that took place in Massachusetts. 24 MR. PODESTA: It's also alleged to have occurred 25 onboard the flight in the way the hijacking was handled. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 159 76E4WTC3 1 That's the cockpit door argument and common strategy argument. 2 THE COURT: The conduct with the cockpit door had to 3 do with Seattle, Washington. 4 MR. PODESTA: Not as to the airlines, it didn't. 5 THE COURT: What was the negligence of the cockpit 6 doors. 7 MR. PODESTA: That we didn't have a reinforced cockpit 8 door and that we did not take appropriate measures to secure 9 even an unreinforced cockpit door. But in any event, New York, 10 I mean the reason New York law applies is -- 11 THE COURT: Go on to Virginia. 12 MR. PODESTA: I need to go on to Massachusetts. It 13 doesn't really matter, it's academic, because Massachusetts is 14 one of the few states in the country that does not recognize 15 punitive damages at common law. If the personal injury claims, 16 if they were governed by Massachusetts, they have to be -- 17 THE COURT: You have New York law and Massachusetts 18 law. 19 MR. PODESTA: No conflict. The same is true as to 20 wrongful death cases, because while Massachusetts authorizes 21 punitives in wrongful deaths by statute, it applies the same 22 approach as New York. There is no Massachusetts case that has 23 allowed for insurance coverage for punitives. Massachusetts 24 rarely considers these issues. 25 THE COURT: Let's go on to Virginia. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 160 76E4WTC3 1 MR. PODESTA: OK. There is no truth conflict between 2 New York and Massachusetts. Either way -- 3 THE COURT: You are finished with Massachusetts. 4 MR. PODESTA: The Virginia issue is very simple 5 really. Virginia does allow for punitives. 6 THE COURT: Time out before you get to Virginia. 7 I am Part I judge this week; I have to sign some 8 papers. 9 (Pause) 10 MR. PODESTA: Virginia is relatively simple. Virginia 11 does permit insurance for punitive damages, but it has a 12 $350,000 statutory cap that applies, and our interpretation of 13 the statute has not been contested. 14 THE COURT: In the aggregate or per claim. 15 MR. PODESTA: It applies to all defendants in the 16 action as a single limit; in other words, the total amount that 17 any -- 18 THE COURT: How about all plaintiffs. 19 MR. PODESTA: That's not clear. We have asked for 20 purposes of this, one district court in Virginia has so 21 suggested, but I think that it's entirely possible that the 22 proper interpretation of the statute is that each decedent and 23 each injured plaintiff, not beneficiary or consortium people, 24 but each physically injured plaintiff and each wrongful death 25 plaintiff could recover $350,000 from all defendants who happen SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 161 76E4WTC3 1 to be at trial in the action. 2 THE COURT: Pennsylvania. 3 MR. PODESTA: As to that, I have to respond to 4 plaintiffs' argument. Plaintiffs say that cap can't apply 5 because it's inconsistent with ATSSSA. They say it's 6 inconsistent with 408(a)(1), and that's just repeating the same 7 mistake. 8 THE COURT: Pennsylvania. 9 MR. PODESTA: Pennsylvania, I have to defer to 10 Mr. Ellis. 11 (Continued on next page) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 162 76E59114 argument 1 THE COURT: Mr. Ellis. 2 Mr. Ellis, stay where you are. 3 MR. ELLIS: I will make it quick, Judge. First of 4 all, I adopt your argument. 5 Second of all, I would like to say Pennsylvania is 6 relatively easy. Really, there is no conflict. The only laws 7 that could apply would either be Pennsylvania, New Jersey, or 8 Illinois where plaintiffs claim there was corporate policy 9 issues that make us liable. Again, they haven't specified 10 which ones. 11 But, the bottom line is -- 12 THE COURT: Pennsylvania claim came from Newark, 13 right? 14 MR. ELLIS: Yes, your Honor. The flight took off from 15 Newark. Plaintiffs, in their choice of law argument explain -- 16 THE COURT: So, it is New Jersey or Pennsylvania. 17 MR. ELLIS: It is New Jersey, Pennsylvania or 18 Illinois. And basically they came out in first place. 19 United, as a result of their bankruptcy, any recovery 20 can only be from their insurance policy. Plaintiffs don't 21 dispute that. The only thing the plaintiffs claim is that the 22 law of Pennsylvania should apply. We will get into that in 23 their compensatory damage motion. But, for purposes of 24 punitives, as we point out in our reply brief, Pennsylvania law 25 does not allow the recovery of punitive damages if there is a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 163 76E59114 argument 1 finding of direct liability even if there was a finding also of 2 vicarious liability. 3 The point of the matter is New York, New Jersey -- I 4 mean Pennsylvania, New Jersey, Illinois, all do not allow these 5 damages to be insured. 6 THE COURT: Give me Pennsylvania again. What is the 7 law? 8 MR. ELLIS: The law in Pennsylvania is simply that if 9 you are only vicariously liable -- only vicariously liable. 10 THE COURT: Why is the aircraft vicariously liable? 11 MR. ELLIS: Again, Judge, I have no idea. They 12 haven't told us but this is what they claim, they claim we can 13 show. 14 THE COURT: They claim United's people allowed the 15 people on the plane. 16 MR. ELLIS: As a matter of fact, they briefed claims 17 specifically that we were both direct and vicariously liable. 18 So, they're out as a matter of law. 19 THE COURT: So, we have to assume that there is a 20 direct liability not a vicariously liability. 21 MR. ELLIS: And there is no recovery -- I can't insure 22 that under Pennsylvania law. 23 THE COURT: Same as New York? 24 MR. ELLIS: Same as New York. 25 THE COURT: Can't recover insurance money. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 164 76E59114 argument 1 MR. ELLIS: There is little nuances but under these 2 circumstances, same result. 3 THE COURT: And New Jersey? 4 MR. ELLIS: Same thing. 5 And Illinois doesn't allow recovery of punitives, 6 period. 7 THE COURT: I don't understand why Illinois is 8 involved. 9 MR. ELLIS: Because plaintiffs allege that there was 10 corporate policy decisions. United is headquartered in 11 Illinois. Again, it remains to be seen what they're going to 12 claim but it is cited because of the breadth of the their 13 claims. 14 Thank you, your Honor. 15 THE COURT: Okay. 16 Mr. Shultz. 17 MR. SHULTZ: Would you also prefer that I stay here as 18 opposed to the podium? I will keep my remarks brief, your 19 Honor. 20 First, Boeing also adopts the positions set forth and 21 agreed to by Mr. Podesta and Mr. Ellis, that any award -- 22 THE COURT: Just go to Washington. Where was the 23 plane made? 24 MR. SHULTZ: Designed in Washington, manufactured in 25 Washington, and all four planes were delivered to American and SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 165 76E59114 argument 1 United Airlines in the state of Washington. We believe 2 Washington covers Boeing's conduct including punitive damage 3 claims. 4 THE COURT: What is the rule of Washington? 5 MR. SHULTZ: Washington does not allow punitive damage 6 claims in this case. 7 THE COURT: Mr. Moller? 8 MR. MOLLER: Your Honor, I would like to step back for 9 a moment from jumping to the conclusions that my colleagues on 10 the other side have been doing. 11 Having now heard from the defendants in their 12 arguments to the Court and having read their briefs, they 13 persist, I believe mistakenly, in conflating the issues of 14 recoverability of punitive damages with the issue of 15 collectibility of punitive damages. 16 The states in which these planes crashed all allow 17 recovery for punitive damages either in a wrongful death case 18 or in a survival action. The defendants also carefully avoid 19 acknowledging the glaring inconsistency between the state 20 policies which do not permit the insurability of punitive 21 damages claims and impose that burden upon tort feasor with the 22 unprecedented federal legislation which Congress enacted to 23 deal with the 9/11 disasters, the Air Transportation Act that 24 we have been talking about. This legislation makes the 25 question of who should pay punitive damages a matter of federal SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 166 76E59114 argument 1 policy and not state policy. 2 The Act reflects a careful balance between three 3 competing interests -- first, the perceived desire of Congress 4 to be responsive to the avation industry's cry for protection 5 and assistance in the wake of 9/11 caused in part by the 6 avation defendants' concern that they might be held liable for 7 very substantial punitive damages as well as compensatory 8 damages, a prospect that was deemed real and still is in the 9 shadow of the horrific events of 9/11. 10 Second, Congress was concerned about the humanitarian 11 impulse of the nation to create a vehicle outside of the 12 litigation process for those people who elected to take 13 advantage of the Victims' Compensation Fund to receive 14 compensation without litigation. And those people had to give 15 up the right to recover punitive damages if they entered the 16 system. 17 THE COURT: It wasn't worded that way. You have the 18 right to sue under normal tort law. 19 MR. MOLLER: And by virtue of giving up the right to 20 sue they would give up right to seek punitive damages. 21 And, thirdly, Congress preserved all the rights and 22 remedies of parties who sustained losses through wrongful death 23 or personal injury who elected to pursue the litigation 24 process, as I just said. 25 The balance Congress struck to address these competing SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 167 76E59114 argument 1 interests was, of course, the victims' compensation fund; 2 second, statutory protection for the aviation defendants by 3 providing that their treasuries could not be reached to satisfy 4 judgments for compensatory or punitive damages, and of course 5 preserving the victims' rights to pursue claims for 6 compensatory and punitive damages which each state in which the 7 crashes occurred allowed. 8 And here is the tradeoff: We all know that for the 9 victims who elected not seek compensation they can only get 10 money from the insurance policies which cover the various 11 defendants up to the limits of coverage. 12 The New York policy precluding insurance coverage for 13 punitive damages was not one which was made in the context of 14 9/11 and the New York State courts dealing with the issue were 15 balancing different interests. 16 Congress could not, and there is no evidence to 17 suggest that it ever intended, a purchase to be permitted to 18 seek punitive damages and then not collect those damages. 19 To deny plaintiffs the ability to collect a punitive 20 damage award which Congress specifically allowed would mean 21 that the plaintiff would lose rights. And the loss of rights 22 cannot be presumed or inferred. 23 Therefore the answer, I believe, to the question you 24 posed earlier to counsel, is that it is the statute itself 25 which stands for the proposition that punitive damages are SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 168 76E59114 argument 1 collectible from the insurance policies here because there is 2 no statement in the legislation to preclude it. 3 Now, what I would like to do is walk through the ATSSA 4 statute to make the point of how often Congress addressed 5 punitive damages and, by doing so, they had to be aware of the 6 New York State policy which the defendants argue should come 7 into play because most of the debts occurred here. And when 8 Congress enacts a piece of legislation, it is presumed to know 9 what laws it will displace or affect. 10 The Second Circuit, when it was dealing with the 11 Virgilio case cited to a comment by Senator McCain on September 12 21st, 2001 in which he addressed specifically the purpose of 13 the federal legislation. The Congressional record of that day 14 records that he said that the purpose of the stabilization 15 act -- and this language is also cited in footnote 7 in 16 Virgilio -- was, "to ensure that the victims and families of 17 victims who were physically injured or killed on September 11th 18 are compensated even if Courts determine that the airlines and 19 any other potential corporate defendants are not liable for the 20 harm; if insurance monies are exhausted or are consumed by 21 massive punitive damages awards for attorneys fees. 22 The bill also creates a victims' compensation fund. 23 So, Senator McCain certainly knew that it was the 24 purpose of the statute to allow people to recover punitive 25 damages from the insurance policies if they were successful in SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 169 76E59114 argument 1 proving that claim at trial. 2 Now, Congress took another look at the ATSSA in 3 November of 2001 when amendments were under consideration. 4 When those amendments to the September 2001 legislation were on 5 the floor, Representative John Conyers wanted the right to 6 recover punitive damages stricken from the statute but he was 7 unsuccessful and he made a long statement in support of his 8 position which obviously did not carry. 9 Now, let's look at the statute itself. 10 THE COURT: What should I take from that? 11 MR. MOLLER: That Congress was aware that punitive 12 damages would be claimed and would have to be paid from the 13 only source available and that the attempt by Representative 14 Conyers to have punitive damages dropped from the legislation 15 was, simply, unsuccessful. 16 So, it endorses the original assistant that Senator 17 McCain put on the table. 18 THE COURT: Suppose Congress felt that punitive 19 damages would not likely be recovered. 20 MR. MOLLER: Well, Congress was guessing. But we 21 don't know that that's part of the equation. 22 THE COURT: One minute. (Pause) Be back in a minute. 23 (Pause) 24 THE COURT: Let's proceed. 25 MR. MOLLER: I wanted to make a point that what I SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 170 76E59114 argument 1 attributed to Congress was the flawed managements of the 2 amendments position which Conyers proposed. 3 But, the point is that the effort to drop the punitive 4 damages and the right to make a claim was defeated when the 5 November amendments were under consideration. 6 I would like to look at the Act and follow the Court's 7 suggestion of going to the source and figuring out what lessons 8 could be learned from it. 9 First, the obvious purpose of the ATSSA statute is to 10 protect the airline industry and not the insurance industry. 11 It is worth repeating that this debate is about insurance and 12 insurers trying to limit their exposure, and the aviation 13 defendants, at the end of the day, really don't have a dog in 14 this fight because their money is not at play. 15 Section 201(b)1 of the ATSSA -- and I thank my friend 16 Mr. Barry for putting that into play -- the 201(b) says: 17 Reimbursement of insurance cost increases. In general, the 18 secretary may reimburse an air carrier for an increase in the 19 cost of insurance with respect to a premium for coverage ending 20 before October 1, 2002, against loss or damage arising out of 21 any risk from the operation of an aircraft over the insurance 22 premium that was in effect for a comparable operation during 23 the period beginning September 4, 2001 and ending September 10, 24 2001. 25 I think that's relevant and is significant because it SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 171 76E59114 argument 1 recognizes that insurers are in the business of dealing with 2 and accepting and adjusting to risk and the losses they choose 3 to underwrite and the premiums they will charge. 4 Congress knew that there was a likelihood which 5 happens to have eventuated that insurers would raise premiums 6 and stepped in to protect the airlines. But the insurers' 7 responsibility to pay the bill was limited only by subsequent 8 sections of the act that we will address in a moment. 9 Second, Section 201(b)2 provides, and this I think 10 very significant, that for acts of terrorism committed on or to 11 an air carrier during the 180-day period following the date of 12 enactment of this act, the Secretary of Transportation may 13 certify that the air carrier was a victim of an act of 14 terrorism. And, the section goes on to provide that the 15 government will, essentially, be an excess carrier above $100 16 million. 17 The last sentence in that paragraph reads: No 18 punitive damages may be awarded against an air carrier 19 parenthetically, or the government taking responsibility for an 20 air carrier under this paragraph) under a cause of action 21 arising out of such act. 22 THE COURT: So, the argument is that by expressing the 23 particular in a following catastrophe -- 24 MR. MOLLER: That's correct. 25 THE COURT: -- by implication, the statute recognized SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 172 76E59114 argument 1 that punitive damages could be available, for instance on 2 September 11th. 3 MR. MOLLER: Precisely. 4 But it is not only that Congress recognized that 5 potential. It was recognizing and demonstrating its ability to 6 deal with punitive damages for 9/11 events. Had they wanted to 7 eliminate the right to recover and collect a punitive damages 8 claim, the statute would have said so. 9 Then you go to Title IV, Victims' Compensation Fund. 10 The Victims' Compensation Fund instructed the special master 11 that, and this is in 405, "no punitive damages." The special 12 master may not include amounts for punitive damages in any 13 compensation paid under this title. Another obvious 14 demonstration that punitive damages collectibility, 15 recoverability, payment, was on the mind of Congress and they 16 decided to foreclose the special master from making that kind 17 of an award. But, it is most important for the state of mind 18 of the Congress when it enacted ATSSA. 19 Now you get Section 408. 408(a)1, of course, provides 20 the key language allowing recovery of compensatory and punitive 21 damages provided that the recovery shall not be an amount 22 greater than the limits of coverage. 23 I would like to focus on the specific language of that 24 section and highlight a few words. 25 First, 408(a) says, notwithstanding any other SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 173 76E59114 argument 1 provision of law. Liability for all claims whether for 2 compensatory or punitive damages arising from the terrorist 3 related aircraft crashes of September 11th, 2001, against any 4 air carrier shall not be an amount greater than the limits of 5 coverage notwithstanding any other provision of law. 6 Those are not words to be disregarded. And, to the 7 extent that New York policy is a reflection of a competing body 8 of law, New York State is read out of the equation. 9 You go on, then, to -- I just want to put in a 10 paragraph that picks up on 408(a). In the November 2001 11 legislation an amendment granted similar ATSSA protection to 12 the City of New York. That became 408(a)(3). 408(a)(3) reads: 13 Liability for all claims, whether for compensatory or punitive 14 damages or for contribution or indemnity arising from the 15 terrorist-related aircraft crashes of September 11, 2001 16 against the City of New York, shall not exceed the greater of 17 the city's insurance coverage or $350,000. 18 Now, a lawsuit against the City of New York would 19 arise under New York Law. If they were going to limit punitive 20 and compensatory damages to insurance coverage and not permit a 21 victim or a damaged party from seeking the coverage, they would 22 have been able to rely upon the New York policy and the 23 language in (a)3 of insurance coverage would have been 24 surplusage. 25 They obviously knew that somebody with a punitive SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 174 76E59114 argument 1 damages claim that was proved could go against the coverage. 2 THE COURT: What's the language in that amendment? 3 Read it to me again. 4 MR. MOLLER: I will read first sentence: Liability 5 for all claims, whether for compensatory or punitive damages or 6 for contribution or indemnity arising from the 7 terrorist-related aircraft crashes of September 11, 2001 8 against the City of New York, shall not exceed the greater of 9 the city's insurance coverage or $350,000. 10 Shall not exceed the greater of $350 million -- excuse 11 me. $350 million. 12 So, there would have been no need for the reference to 13 insurance coverage as a limitation if you couldn't get to it 14 under New York Law. 15 Now 408(b)1 did several things. Let's go to 408(b)1. 16 The availability of action. There shall exist a federal cause 17 of action for damages arising out of the highjacking and 18 subsequent crashes. And the section goes on to say: This 19 cause of action shall be the exclusive remedy for such damages 20 arising out of the highjacking and the subsequent crashes of 21 such flights. 22 Collectibility of a punitive damages award is a 23 remedy. And if you can't get it, then this statute means 24 nothing. 25 THE COURT: Give me that again. I'm not following SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 175 76E59114 argument 1 this point. 2 MR. MOLLER: Section 408(b)1, federalized causes of 3 action -- 4 THE COURT: Right. 5 MR. MOLLER: -- and said that this cause of action 6 shall be the exclusive remedy for such damages arising out of 7 the highjacking. 8 THE COURT: Right. 9 MR. MOLLER: That does more than put the case into 10 this Court. It means that the remedies here -- 11 THE COURT: If federalizes the law, as Mr. Podesta 12 said. 13 MR. MOLLER: If federalizes the law but then it is no 14 longer state policy that would control the remedy. It is 15 federal law that controls the remedy, at least to the extent of 16 being able to collect a damages award. 17 THE COURT: What the federal law said is that as a 18 matter of federal law we will look to state law if that state 19 law is inconsistent with -- 20 MR. MOLLER: Correct. And it is clearly inconsistent. 21 Because what the federal law has done is it has said for 22 federal policy reasons that we are not going to let you go into 23 the tort feasor's treasury. 24 THE COURT: There is a bouncing back and forth which 25 is why I had trouble understanding, but the federal law, as you SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 176 76E59114 argument 1 have compounded it, is open to the possibility of punitive 2 damage recoveries under state law. And where there is a state 3 law that disallows, arguably punitive damages recovery, your 4 argument is that it is inconsistent with the federal law that 5 allows for the possibility of punitive damage recovery. 6 MR. MOLLER: Close, but not quite. I'm saying it a 7 little bit differently. 8 The states allow the recoverability of punitive 9 damages, period. The second question is who do you get the 10 money from? The state policy is you can't get it from an 11 insurance company. The federal policy, we submit, is that you 12 can get it from a insurance policy. Because once they 13 eliminated the right to go -- once the federal government -- 14 THE COURT: You are making it very difficult to deal 15 with the situation because you don't really know all the time 16 what is punitive and what is compensatory. And then you have 17 problems of administration. 18 MR. MOLLER: That depends on the charge that you give 19 the jury and how it responds on a verdict sheet. 20 THE COURT: But even if I had it on a verdict sheet 21 you have different problems because you don't know when your 22 recovery period of damages is unless you deal with it in the 23 aggregate. 24 MR. MOLLER: I don't think that's a problem that 25 defeats the argument that I am making. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 177 76E59114 argument 1 THE COURT: All right. 2 MR. MOLLER: There are two things at play. Can I 3 recover punitive damages and who pays them. 4 THE COURT: Mr. Moller, I follow you what you say. It 5 is a very careful and very good statutory exposition. In 6 looking at the statute, however, and having to administer it 7 for some period of time, I have come to the view that punitive 8 damage recovery could make it difficult for later recovering 9 claims to recover. I therefore put the argument to Mr. Podesta 10 that the overall statutory scheme may be inconsistent with any 11 kind of an award that is not tied to compensation. 12 Under Supreme Court law Phillip Morris v. Williams and 13 BMW v. Gore, it is clear that punitive damages have to do with 14 defendants' conduct and not compensation of a plaintiff. And 15 there is a factor that's introduced of harm of the 16 reprehensibility of the defendant's conduct as it applies to a 17 plaintiff. 18 Well, each of these plaintiffs were similarly situated 19 in relation to the harm that was caused and the prospect of 20 possibility is that earlier recoverers could recover punitive 21 damages and later recoverers might not because they're all 22 limited to insurance recoveries, not recover compensatory 23 damages, which would be obnoxious. 24 MR. MOLLER: Well, you have -- you have heard that the 25 property damage people are not pursuing punitive damages SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 178 76E59114 argument 1 claims. 2 The fact that there may be difficulty administering or 3 coming to grips with the Supreme Court's view of how to treat 4 punitive damages in Philip Morris v. Williams does not mitigate 5 in favor of dismissing those claims. 6 I grant you -- 7 THE COURT: Not the claim just -- yeah. Not the 8 claims. 9 MR. MOLLER: If I have got a right to assert a claim, 10 can prove it and win it but then can't collect the money -- 11 that's not a claim. 12 THE COURT: Let's suppose Mr. Williamson, who has a 13 very big claim for the World Trade Center is last in line, as 14 he is likely to be, and let's say he recovers and there is no 15 more money left. Now, we need not shed tears for the Port 16 Authority and the World Trade Center properties but, in law, 17 they have equal status to personal injury claims. And let's 18 say there is no more money? 19 MR. MOLLER: I think the answer to that is if we are 20 successful, as I think we would be in proving punitive damages 21 for reasons I can go into but this is not a fact analysis, the 22 award of punitive damages could be retained, could be held, 23 could not be enforced until you get the answer to the other 24 questions that you pose. 25 There is a practical way to deal with it but the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 179 76E59114 argument 1 practical problems -- 2 THE COURT: Gigantic escrow fund. 3 MR. MOLLER: Yes. So, put the rest of the money in 4 escrow. 5 THE COURT: What do I do with settlements? 6 MR. MOLLER: People who settle give up their right to 7 punitive damages because that's why they're settling if they 8 want to stick around, which some of them do. Remember that the 9 people who went into a litigation process did so for several 10 reasons, and I believe that the least of them was money. One 11 of them was the right to be able to prove their entitlement to 12 punitive damages, the conduct of the defendant and to see that 13 this doesn't happen again. 14 THE COURT: Mr. Migliori seems to object. 15 MR. MIGLIORI: No. No objection, just to buttress. 16 That was also the purpose of the parties in Motley, having the 17 bulk of the punitive claims left, presumably. 18 That was the purpose of the bifurcation stay that we 19 entered into with the other parties, that the execution or 20 collection of any such award would be held off until the end 21 and we would not seek payment under that component. So as to 22 allow -- 23 THE COURT: I didn't sign that. 24 MR. MIGLIORI: I know that. And yesterday the Court 25 ordered. But, I think it speaks directly to your question now SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 180 76E59114 argument 1 in terms of administration of this problem, at least on behalf 2 of the 30 of the 30 plus of those claimants with punitive 3 claims. We are saying we wouldn't seek that enforcement now 4 and we would defer it until the very end on just punitives. 5 MR. MOLLER: So, I hope I have addressed that. There 6 are practical problems that Williams v. Philip Morris and some 7 of the other cases raise, but the practical problems are 8 solvable but they don't mitigate so strongly that we should not 9 be permitted to pursue the claims of punitive damages and worry 10 about whether we collect a hundred cents on the dollar or 11 somewhat less. It is a very important and significant 12 distinction. 13 There was reference made to a stipulation but before I 14 get to the stipulations, one other point. Congress passed 15 legislation to support anti-terrorism by fostering effective 16 technologies in November of 2002. In that statute 6, U.S.C. 17 442, Section B1, there is another declaration that addresses 18 punitive damages and says: No punitive damages intended to 19 punish or deter exemplary damages or other damages not intended 20 to compensate a plaintiff for actual losses may be awarded, nor 21 shall any party be liable for interest prior to judgment. 22 It is another expression of Congress that they knew 23 how to deal with punitive damages and if they wanted, as a 24 matter of federal policy, not to allow those damages, they knew 25 how to do it. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 181 76E59114 argument 1 I think it would be wrong to infer into the ATSSA a 2 right to recover punitive damages which all of the relevant 3 states here allow and then say, sorry, you can't collect them. 4 THE COURT: If I rule against the argument of 5 presumption, what's your view of choice of law and other 6 applicable state laws? 7 MR. MOLLER: I don't think there is a real significant 8 choice of law issue. With respect to the interest analysis, 9 the case states involved share the same analysis. 10 I don't believe there is any state in the country that 11 is a higher interest than any other in deterring the conduct 12 that led to 9/11, whether it is a manufacturing issue of Boeing 13 or whether it is an operations issue of the airlines. 14 THE COURT: New York Law is set to have a limit that 15 does not allow recovery that will come from an insurance 16 company. 17 MR. MOLLER: That's correct. 18 THE COURT: And, let's say I don't accept your 19 preemption argument; do you agree with that statement of New 20 York Law? 21 MR. MOLLER: Yes. If I can't -- yes. New York Law 22 does not allow me to recover damages from an insurance company. 23 THE COURT: Is the same law operative in the other 24 states that are potentially appliable? 25 MR. MOLLER: There is a slight -- there is a nuance of SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 182 76E59114 argument 1 difference that you can recover punitive damages from insurance 2 company for vicarious liability in Texas and New Jersey. 3 THE COURT: I don't think we have vicarious liability. 4 MR. MOLLER: To the extent that the airlines are 5 responsible for what the security companies did you could 6 classify that as vicarious but airlines have a direct and 7 vicarious responsibility. 8 THE COURT: Vicarious requires non-involvement, 9 complete passivity, and we don't have that. 10 MR. MOLLER: Okay. But you asked me the distinction. 11 There are differences but I think basically the states involved 12 would not allow recovery from an insurance policy. 13 Keep in mind that Argenbright has been read out of the 14 ATSSA for purposes of the insulation of a liability cap, so 15 that's a slightly different situation. But, yes -- 16 THE COURT: By my ruling? 17 MR. MOLLER: No. The statute. There is a statute 18 which cuts Argenbright out of the limitation of liability to 19 insurance coverage. But, by and large, the states involved do 20 not allow recovery from an insurance policy which is precisely 21 why the glaring inconsistency exists between the ATSSA -- 22 THE COURT: So, your argument that punitive damages 23 are recoverable and the final analysis depends on a ruling that 24 federal law preempts these. 25 MR. MOLLER: If it is stated that way I would prefer SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 183 76E59114 argument 1 that it be stated that there is an inconsistency -- 2 THE COURT: Okay. 3 MR. MOLLER: -- with the two policies that state law 4 says, no; federal law says, essentially, yes. 5 THE COURT: I follow. Okay. 6 Okay, thank you on that. Unless there is someone that 7 needs a final word. I will reserve issue on the issue of 8 punitive damages. 9 The last issue today is whether Pennsylvania law 10 should apply to United Airlines flight 93 compensatory damage 11 claims. 12 Mr. Ellis will argue for United Airlines and 13 Mr. Motley here -- 14 MR. ELSNER: I'm sorry, your Honor. Mr. Motley is ill 15 so he has asked me to fill in. 16 THE COURT: Michael Elsner. 17 MR. ELSNER: Your Honor, the issue before us today is 18 choice of law for Flight 93. Flight 93 took off from Newark, 19 New Jersey and crashed in Pennsylvania, so under the ATSSA it 20 instructs us to file following choice of law rules and 21 subsequent law of Pennsylvania at the location of the crash. 22 Pennsylvania choice of law analysis follows a -- for 23 torts, a government interest analysis and the significant 24 relationship theory. And to do so it employed the restatement 25 second of conflicts of laws. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 184 76E59114 argument 1 As your Honor has previously ruled and as was affirmed 2 by the Second Circuit in the GSI versus the Silverstein 3 Properties case, the Court specifically considered whether the 4 wrongful death and survival statute choice of law analysis in 5 Pennsylvania should be governed by Pennsylvania law or some 6 other law. 7 And you ruled, your Honor, and Second Circuit affirmed 8 applying the restatement analysis, that the law that should 9 govern should be Pennsylvania law. And the reason was 10 two-fold. One was that there were several domiciles of the 11 parties in that case and, as was cited by the Second Circuit, 12 given possible compensations of potential litigation flowing 13 from the crash of Flight 93, it makes sense to apply one set of 14 law to the claims involved. Accordingly, deference to 15 uniformity weighs in favor of Pennsylvania law versus German 16 law. 17 And I think that the reasoning that you gave and the 18 Second Circuit gave was strong and firm and should be followed. 19 If your Honor would like to hear additional argument 20 on the other reasons, I'm happy to go forward. 21 THE COURT: What other arguments are implied? 22 MR. ELSNER: Well, one is whether a true conflict of 23 law exists or a false conflict. 24 THE COURT: As among which states? 25 MR. ELSNER: Between Pennsylvania, New Jersey, and the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 185 76E59114 argument 1 other domicile of the plaintiffs in the case, so that would 2 include New York, New Jersey, Florida, California. 3 THE COURT: Well, perhaps I should let Mr. Ellis make 4 his arguments and then we will see: 5 MR. ELLIS: It is a little unusual for me, Judge, to 6 stand up here and listen to the plaintiffs argue in favor of 7 preemptive scheme, but what they seem to be saying is that the 8 statute, for the sake of uniformity, would require the law of 9 one jurisdiction to apply for Flight 93. Well, if that 10 preemptive scheme from ATSSA was to apply, then it would apply 11 equally to Flight 175 and we would then be using New York Law 12 to settle those cases or to try those cases. 13 And I can only indicate, your Honor, that throughout 14 the course of this litigation when we have worked with you, 15 Ms. Birnbaum and the plaintiffs' attorneys to try and assure 16 some recovery for the individuals who lost their lives, we have 17 been following the law of the domicile which is, ironically, 18 with respect to Flight 93, what the Pennsylvania Supreme Court 19 has held on two occasions to be applicable when an airplane 20 crash occurs and it is labeled a fortuitous event. 21 The only exception to whether or not an event is 22 fortuitous is if -- and this is the test that is set forth in 23 the case law -- a party -- a party voluntarily and 24 intentionally enters the state. They cite one case -- one 25 case -- an automobile case -- SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 186 76E59114 argument 1 THE COURT: What's your candidate for choice of law? 2 MR. ELLIS: Your Honor, it can either be New Jersey or 3 it could be Illinois. Or, quite frankly, insofar as 4 compensatory -- well, that's for conduct. 5 For compensatory damages, very simple. The law of the 6 domicile. It is the law we have been following throughout this 7 litigation process and to change it here is perplexing to say 8 the least. 9 THE COURT: Mr. Elsner, why do you want Pennsylvania 10 to reign supreme? 11 MR. ELSNER: The opinion, your Honor, is because in 12 the cases cited by Mr. Ellis is that there is a strong and 13 overwhelmingly significant interest that Pennsylvania law has. 14 THE COURT: What does Pennsylvania law provide that is 15 particularly advantageous to your client? 16 MR. ELSNER: Pennsylvania law provides for a survival 17 right of action which includes fright, terror damage, 18 pre-impact damage. It also has a wrongful death law and the 19 law of other jurisdiction. It provides loss of consortium, 20 companionship, society and comfort. 21 It also allows the decedent estate to recover for loss 22 of decedent gross earning power from the time of death through 23 his estimated working life span. 24 THE COURT: The question I have is why, in this kind 25 of a tragic situation, we should favor Pennsylvania law just SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 187 76E59114 argument 1 because the crash occurred in the Shanksville Field? The plane 2 was destined for Washington. The plane originally was destined 3 for some place on the west coast. People boarded, I guess, for 4 San Francisco. People boarded in Newark. They could have come 5 from New York, they could have come from Pennsylvania. 6 MR. ELSNER: I don't think you should, your Honor. 7 Pennsylvania law rejected applying the location of the crash 8 site itself as the only indicating factor. They rejected that. 9 What it said was let's look at it a little more 10 broadly. There is a presumption under Pennsylvania law that 11 will look at the site of the injury but that's not the only 12 analysis. 13 THE COURT: Those are probably automobile cases. 14 MR. ELSNER: There are automobile cases but even the 15 aviation cases, when you take a step back and when you look at 16 what Pennsylvania's policy is, Pennsylvania's strong and 17 overwhelming policy is to provide full and complete damage 18 remedies to victims of torts that occur within Pennsylvania. 19 And, when you look at the seminal case on this issue 20 which is cited by the defendants, it is an aviation case, it 21 was a case in which there were Pennsylvania residents and they 22 crashed in Colorado. And what the Court said was that in the 23 face of a hundred years of applying the site of the location 24 itself, we think that Pennsylvania's law concerning damages and 25 our interest in fully compensating plaintiffs is so great that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 188 76E59114 argument 1 we are willing to overturn a 100-year history in order to 2 protect that significant interest. And that's a different 3 policy than many other states have. 4 And the point is, is it a true conflict or a false 5 conflict? A conflict only exists if the law of another state 6 is prejudiced. Counsel has not identified any significant 7 interest that New Jersey has. 8 THE COURT: I can't make that decision then unless I 9 have the specific plaintiffs in mind. 10 MR. ELSNER: And we have them. There are seven 11 plaintiffs who have claims that are pending from Flight 93, two 12 reside in New Jersey, two -- I'm sorry -- three reside in New 13 Jersey, two reside in California, one resides in Florida and 14 one resides in New York. 15 THE COURT: Three in New Jersey. How many in 16 California? 17 MR. ELSNER: Two in California. 18 THE COURT: One in Florida and one in New York? 19 MR. ELSNER: That's right. 20 THE COURT: Is there no differences among those 21 states? 22 MR. ELSNER: Yes, there are differences. 23 The damages law of Pennsylvania provides a greater 24 remedy in every circumstance than the law of those other 25 jurisdictions. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 189 76E59114 argument 1 But, what interest does the domicile state have in the 2 application of the wrongful death and survival statutes? The 3 only interest that the domicile state has is the proper 4 administration of a decedent's estate. 5 The only interest that New Jersey would have would be 6 conduct based. And so, the analysis leads us back to when we 7 step back and we look at all the analysis we say, Well, what 8 has the most significant relationship to this issue? And the 9 most significant interest here which has been expressed in 10 every single case -- 11 THE COURT: I can't see any real interest in 12 Pennsylvania except that it was the unlucky place where some 13 great people died. 14 MR. ELSNER: Well, the second point I make, your 15 Honor, is that it wasn't just fortuitous that the plane crashed 16 in Pennsylvania. The passengers on that flight took a 17 different course of action. 18 THE COURT: You don't know when they started to take 19 that course of action? 20 MR. ELSNER: They started that course of action over 21 Pennsylvania. 22 THE COURT: You don't know that. Nobody knows that. 23 MR. ELSNER: Well, your Honor. 24 THE COURT: Where did the plane turn around? Over 25 what city? SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 190 76E59114 argument 1 MR. ELSNER: The flight turned around in Ohio after it 2 was highjacked. We know from Cleveland Air Traffic control 3 that they heard the highjackers crashing through the cockpit. 4 We know from phone calls from passengers on board, including 5 phone call from Tom Burnett, who learned while he was in 6 Pennsylvania -- he didn't know he was in Pennsylvania -- but, 7 we know from the air traffic control diagrams provided by the 8 government where the plane was at different times that he 9 learned the fact that planes had been highjacked and flown into 10 the World Trade Center while in Pennsylvania. 11 THE COURT: Pennsylvania was the largest state so the 12 most geography in that route but it still was fortuitous. 13 MR. ELSNER: And no state has an interest in limiting 14 the recovery of any of these plaintiffs. 15 THE COURT: You know, the conduct regulating was 16 probably federal. The place -- the jurisdiction which had the 17 greatest interest in regulating conduct, in my judgment, was 18 federal, which accidents have a conflicts of law rule here. 19 The interest of New York, Florida, California and New Jersey 20 were just as tangential as Pennsylvania. 21 MR. ELSNER: I'm not an expert in this area and I'm 22 just filling in, your Honor. 23 THE COURT: I know. 24 MR. ELSNER: But my understanding of federal common 25 law is you look to sources of law including the restatement. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 191 76E59114 argument 1 THE COURT: I know. 2 MR. ELSNER: And the restatement here says that we 3 will look at a significant, what state has the most significant 4 interest. And the presumption would be the site of the injury. 5 THE COURT: I think there would be a federal interest 6 under the ATSSA, although there may not be any sources to 7 support my view that outliers in the states would not be 8 recognized and that a normal distribution rule, I think the 9 other states have pretty much the same kinds of rules would 10 probably be the better ruling decision. Whether that view is 11 supported in classic conflicts theory, I don't know. 12 I know Judge Weinstein had the notion that there 13 should be federal common law in the Agent Orange case and the 14 Second Circuit disagreed. 15 MR. ELSNER: Your Honor, if Congress wanted to do 16 that, they could have. 17 THE COURT: That's true with a lot of things. 18 MR. ELSNER: Apply substantive law and choice of law 19 rules by the states where the cashes occur. 20 THE COURT: All right, gentlemen. Anything more. 21 MR. ELLIS: I don't think so. 22 THE COURT: Thank you very much. Decision is reserved 23 on this decision as well. 24 Let's talk about going forward while I have your 25 attention. And Mr. Migliori may want to comment because the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 192 76E59114 argument 1 view was expressed by him earlier. 2 I have been thinking about how to handle this case -- 3 this set of cases. It is the same view I have of other cases 4 as well. 5 We are now going into close to the end of the sixth 6 year since the tragic events of September 11, 2001. Lives have 7 changed, children have grown up, widows and widowers have 8 remarried. Some have gone on with their lives. Some remain 9 substantially immobilized by the emotional loss that was 10 suffered on September 11. It is time to break the impasse. 11 I have been looking, with a great deal of favor, that 12 the settlements that have occurred in this case. And 13 Mr. Barry's latest report of five additional cases that are 14 settled is extremely welcomed. 15 In Flight 11, 22 cases have settled, five remain 16 pending including two ground claims. 17 In Flight 77, 16 have settled and 15 remain pending 18 including eight ground claims. 19 In Flight 175, nine have settled, 10 remain pending. 20 In Flight 93, seven have settled, seven remain 21 pending. 22 There are four personal injury claimants in the World 23 Trade Center as well. I think we may not be at the end of 24 settlements but they're getting more difficult. And so, I 25 think that the thought that these cases will be resolved by SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 193 76E59114 argument 1 settlements has become more romantic than previously. So, I 2 look to what remains possible in the resolution of these cases. 3 Even with the denial of the defendants' desire for additional 4 discovery, a great deal of discovery remains open. And it 5 would seem to me as a very rough guess that a year or two could 6 easily be consumed as we get into some knotty questions of 7 security, longer. 8 So, I don't have any sense of optimism that I can try 9 the whole case and the assignment of a trial date would not be 10 very useful given this uncertainty. 11 (Continued on next page) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 194 76E4WTC5 1 THE COURT: I believe counsel have been working hard 2 and they don't need as a goad the fixing of an arbitrary trial 3 date which would have to be continuously adjourned in light of 4 difficulties in the discovery process. I have to remember that 5 in back of the personal injury claims there are property 6 claims. There has not been a willingness on the part of the 7 defendants to deal with these property claims in a settlement 8 mode. I do not say this critically; I say this recognizing the 9 facts. 10 We thought long and hard on how to approach this very 11 difficult problem. What seems to be open is to obtain a value 12 for the cases through jury decisions that in turn I believe 13 will assist settlements. The discovery of issues of value 14 either have been completed or can quickly become completed. 15 Where they have not been completed, it is possible to identify 16 cases that can be put up for early trial so that the attorneys 17 can complete their discovery. The trials will be short, 18 relatively, and manageable and I think of substantial utility. 19 So I thought it might be a wise course to begin trials 20 of some of these cases as early as July. We can do one, two, 21 three trials and see what that does in the way of additional 22 settlements. I believe there is great value in settlements 23 because people are assigning values themselves. I think in 24 many respects that's a fairer way of approaching the 25 proposition of compensation for loss than particular jury SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 195 76E4WTC5 1 trials and jury verdicts. 2 So I thought we would try very hard to resolve the 3 decisions on which I reserved in a very short time, perhaps set 4 June 25 at 4:00 as a time for our next meeting to discuss how 5 we would proceed. Either then or prior to that, we could 6 identify one, two, or three cases for damages trials. 7 What do you think. 8 MR. MIGLIORE: Thank you, your Honor. Just to bring 9 the court up to date a little bit. We did on behalf of our 10 flight 175 clients provide United and Huntley, those 11 defendants, additional information towards resolution. And 12 just so the court doesn't believe that all is romantic, there 13 are in fact some actions and activity going on with respect to 14 still trying to resolve some cases. All is not completely 15 lost. We have been waiting about a month for a response to our 16 last foray. 17 That said, it's not a surprise to this court to hear 18 me say and to hear our clients directly say when the court was 19 involved with mediation that a lot of this has to do for them 20 with accountability and not compensation. I know the court's 21 response to our clients when they have said that, but I can 22 tell you that the idea that a client would be asked to try a 23 case only as to damage without that other component which 24 motivated most and to some extent all of our clients to opt out 25 of the fund and seek accountability as a component. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 196 76E4WTC5 1 THE COURT: Nothing prevents them from waiting around. 2 MR. MIGLIORE: When the court said that it was 3 considering -- 4 THE COURT: I could try damages, a jury could deliver 5 a verdict and if the client wishes to proceed and test 6 liability, they can do that. 7 MR. MIGLIORE: This just happened to me in a case; I 8 just finished a trial this week unsuccessfully I report. The 9 defendants in that case tried to sterilize my case on certain 10 medical causation issues. They signed a unilateral stipulation 11 saying they will not contest a certain component. The trial 12 judge in state court said it's the plaintiff's right to give 13 the context to its claim for damages so if the plaintiff still 14 wants to put those experts on the stand to explain causation 15 for whatever reasons, he or she should be allowed to. 16 The idea of sterilizing these damages claims by 17 removing from it all facts is problematic. That said, there 18 may be some clients of our 30 some-odd clients remaining who 19 may have a different level of concern about that piece or they 20 may be voluntarily willing to take on a damage-first 21 bifurcation. If the court is leaning that way, my request 22 would be simply that the court not pick those cases, that the 23 court allow us to identify cases in our group of cases where 24 that model may not be against their wishes, may not be against 25 what they had hoped would be their day in court. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 197 76E4WTC5 1 So it's a way of saying outright the accountability 2 factor is important to all our clients and sterilizing a 3 damages-only trial would necessarily be against why our clients 4 chose this long route. 5 THE COURT: I would be wanting to assign cases that 6 would appear to me to have a representative quality to them. 7 MR. MIGLIORE: I would suggest maybe we give the court 8 five examples from which it can choose but at least allow us 9 the opportunity to talk to our clients and say would this be 10 something that you would do willingly. Because I can tell you, 11 I know the court has met in this mediation process clients of 12 ours that if they were forced to do this, they would do it 13 very, very unwillingly. 14 THE COURT: It's mixed impressions that come out of 15 this, Mr. Migliori. My impression is that clients that enter 16 the process were willing to compromise but their numbers of 17 compromise were higher than that which was available and so 18 questions of principle often occluded. It's like a client who 19 comes to the lawyer and says, look, this is a question of 20 principle, I want you to go all the way, principle is what 21 counts, then the lawyer sends his first bill, and all of a 22 sudden there is no longer a principle, he settles. 23 MR. MIGLIORE: We don't bill on our side of the table. 24 I appreciate that. I can't separate out, none of the three 25 major reasons why plaintiffs sued are distinguishable; they SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 198 76E4WTC5 1 necessarily overlap. 2 THE COURT: I understand. 3 MR. MIGLIORE: I would ask your Honor that we at least 4 be allowed to focus, especially since this is a test plan, that 5 we at least be able to identify those plaintiffs that may be 6 very willing to do that, given where they are in this process, 7 the fatigue that they may feel as a result of this process, the 8 closure if there is any for them in this process. 9 THE COURT: I don't mind your making recommendations, 10 but I am going to reserve freedom of action, because if I am 11 going to do this, I want the maximum utility out of it. 12 Mr. Barry. 13 MR. BARRY: Thank you, your Honor. I must admit we 14 have discussed this among the defendants ourselves as to 15 whether or not this is a course of action that we think would 16 be beneficial to your Honor, to the parties, to achieve more 17 settlements. At the moment, we are not of one mind on that, I 18 can report to you, as to whether or not it would be beneficial 19 or that all of the defendants are willing to go through that 20 process. It's still under consideration. 21 I will tell you this, that I don't think July trial 22 dates is realistic at all even if we were to proceed with the 23 damages only, because we have not really conducted formal 24 discovery in any of these cases. We have gone along with what 25 plaintiffs have given to us in damages. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 199 76E4WTC5 1 THE COURT: A very good reason to start doing it. 2 This is not going to be meet up with SSI problems. 3 MR. BARRY: That's for sure, but it is going to take 4 time. It's something we have to discuss between now and June 5 25 when we met again. I don't think the issue, however, your 6 Honor -- 7 THE COURT: I have some long criminal trials coming up 8 in the fall. I can't predict my trial schedule completely. I 9 don't set up trial dates until people are ready. So I find 10 that I can try cases when I need to try cases. But I have some 11 long trials coming up. It's time, you know, five and a half 12 years, it's a long time. I don't like it; it makes me 13 uncomfortable. I want to see these cases disposed of. Many 14 are being disposed of in the best way possible. But you know, 15 it's getting harder and harder. 16 MR. BARRY: I think more will be disposed of. 17 THE COURT: I am sure, but it's getting harder and 18 harder. It takes longer each time. The ripe fruit has been 19 plucked. 20 MR. BARRY: I will tell you it is not a question of 21 what is the reasonable value of these cases. Every lawyer in 22 this room, plaintiff or defense lawyer, knows what these cases 23 are worth. That's not the issue. The issue is what was stated 24 by Mr. Migliori. 25 THE COURT: They know differently. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 200 76E4WTC5 1 MR. BARRY: No. I think there is an issue with many 2 of the plaintiffs that they want to get their day in court as 3 to liability. They want accountability and responsibility. 4 THE COURT: I have seen enough to know that there are 5 different conceptions of value. 6 MR. BARRY: I am not sure you are going to accomplish 7 the goal you are setting out to accomplish by doing this. You 8 may. I have been down this road before in many other cases. 9 And in the normal case, the normal air crash case, it has 10 worked, if there has been an issue; a couple of cases were 11 tried, the rest settled. I am very concerned about the fact 12 that this is the 9/11 case and what sort of publicity would 13 come out of it, what sort of message would be given if the 14 defendants were to stand up and say we do not contest 15 liability, because that's the only way that the case can be 16 tried on damages. 17 THE COURT: Why. 18 MR. BARRY: We would have to agree, if you are going 19 to have a verdict entered against the defendants in an amount 20 of money and a judgment entered -- 21 THE COURT: The judgment then would be entered and it 22 would be a provisional judgment. You would be able to retain 23 your right to contest liability. If liability is tried and 24 proved, the damages would be fixed. 25 MR. BARRY: So what does that accomplish. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 201 76E4WTC5 1 THE COURT: It fixes the value. It gives the most 2 important consideration of value it could be, and that's a 3 verdict of a jury. 4 MR. BARRY: Let us talk about it amongst ourselves and 5 we will be ready to report back to you on the 25th, but I will 6 tell you that, I can only repeat, everybody here knows the 7 value of these cases and what an appellate court would sustain 8 under the damage facts. 9 THE COURT: I disagree. 10 MR. MIGLIORE: I do too. We definitely have a 11 difference of opinion about that. 12 THE COURT: I don't need any testimony. I get 13 involved in the process. I can see the process. I know the 14 process. I know the conceptions. How could there be a 15 difference. So long as you have concepts that are as elusive 16 as you do in the compensation of a plaintiff in a tort case, 17 you have wide varieties of possibilities. A value has arisen 18 in terms of cases that have settled. I have been very strong 19 in my expressions in terms of not favoring early settlers 20 against later settlers and vice versa. There has been a rough 21 consistency but not everybody has to agree to that consistency. 22 I will not criticize a lawyer who thinks that he or 23 she can get more for his client by waiting or doing more or 24 doing differently or arguing differently 25 MR. BARRY: I don't think that those lawyers who think SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 202 76E4WTC5 1 they are going to get more are the ones that are going to agree 2 to a damages-only trial in the sterile atmosphere Mr. Migliori 3 is talking about because it will have to be sterile. 4 THE COURT: If I have discretion, it doesn't make a 5 difference if they agree or not, right. 6 MR. BARRY: I don't know whether you have discretion 7 to tell you the truth to order somebody to proceed with a 8 damages-only trial. 9 THE COURT: If I order such a trial someone is going 10 to have to bring a motion and I will have to decide the motion. 11 It may go up to the Court of Appeals by mandamus perhaps. This 12 will not be the first time in these case that that will happen, 13 probably not the last. 14 MR. MIGLIORE: Your Honor, what I would like to do if 15 it's welcome by the court, I would like to submit a list of 16 what we think are representative claims. I assume we are 17 talking about single non-dependent issues. 18 THE COURT: Probably. Ms. Birnbaum has worked very 19 effectively; everybody agrees to that. It will be good for 20 both sides to discuss this idea with her and see if you can 21 identify appropriate cases. To do it by consent is much more 22 valuable than if I have to do it by decision. 23 MR. MIGLIORE: There are issues with those that have 24 preimpact fear claims, those that don't. There will be a need 25 for discovery of, for example, an expert who can testify about SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 203 76E4WTC5 1 what happens in that period of time. I can tell you there is a 2 lot that still has to be revolved. If the court is inclined to 3 do this, we will do everything we can and would like to get 4 that trial as soon as possible. 5 THE COURT: Mr. Migliori, I want to resolve as many 6 cases as I can as early as I can. That's my job. For many 7 people, justice delayed is justice denied. For anyone, justice 8 delayed is justice denied. No matter how people want an 9 accounting, people are impatient, and it's five and more years, 10 and it's too much time. 11 MR. MIGLIORE: I am agreeing. If the court is going 12 to exercise its discretion to do this, we would rather do it 13 this summer. We agree with the court. 14 THE COURT: Talk together, talk with Ms. Birnbaum, and 15 I will have a report on June 25 at 4:00. 16 Thank you very much. It's been a wonderful day, it 17 was very interesting, and I compliment all of you who have 18 argued excellent arguments. 19 - - - 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300