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Seeking a Day in Court: When Litigants Reject Tenders of Damages

From the Business Conflict Blog of Peter Phillips.

The Supreme Court has ruled (again) that state laws purporting to condition the enforceability of arbitration agreements on grounds not ennumerated in Section 2 of the Federal Arbitration Act are themselves unenforceable on Supremacy grounds. I teach that principle in my class using Southland v. Keating, and now I can use this more recent case.

Many smarter and more sophisticated students of arbitration law will provide commentary on the AT&T Mobility decision, but I was struck by an article in the same day’s New York Times noting that, after waiting nine years, the family of Mark Bavis, a passenger on one of the planes that rammed into the World Trade Center, is about to go to trial in its wrongful death suit against United Airlines and other defendants.
What’s the link? Both claimants were offered full reimbursement for their loss. Both rejected the offer — not because they thought it inadequate, but because they wanted to prove something other than damages.
What is it that Americans seek, in the expensive, protracted and uncertain world of the courts, when they don’t seek damages for their injuries, but proceed with the horrors of litigation litigation anyway?

The Bavis’s are one of 90 claimants who rejected the offer of compensation by the victim’s compensation fund created by Congress in the wake of the attack. Their lawyer has been quoted:
“The Bavis family feels very strongly that the information about how checkpoint security failed wholesale on Sept. 11 needs to be brought out into the public light,” Migliori said.
He said the family, which includes the victim’s twin brother, his mother and other siblings, has the support of many other families who had brought 95 lawsuits on behalf of 96 victims. All other lawsuits were settled.

As previously noted on this Blog, the claimant in the AT&T case had also been offered his damages. In his dissent in the AT&T opinion, Justice Breyer proffered a rhetorical question, when confronted by the fact that the company offered to pay the claimant’s entire claim of $30.22, “What rational lawyer would have signed on to represent [the claimant] in litigation for the possibility of fees stemming from a $30.22 claim?”
I trust Justice Breyer didn’t mean this to suggest a standard of review, but the unintentional implication nevertheless remains: If the damages arising from a claim do not attract an attorney, then restricting the claimant to asserting an individual claim couldn’t be fair.
In many people’s worlds, attorneys are not the litmus test of fairness. A board game that is missing parts can be returned to the toy store for a complete game, without an attorney’s getting involved. An overcharge on a credit card bill or a dispute in an E-Bay transaction or a problem with a neighbor’s barking dogs can all be resolved to everyone’s satisfaction without an attorney’s assistance. Happens all the time. Why is the absence of sufficient attorney fees relevant to the Court’s consideration of the AT&T case?
I think the answer in AT&T is that the claim asserted was not overcharging an individual, but committing fraud upon a large group of consumers, and that the claimant’s counsel wanted fees based on an award of larger damages than his client’s injury. Representing his client’s interest was never really in the game except insofar as he was part of a class whose damages had many more than one zero. And AT&T’s offering to satisfy his client’s damages — or even treble his damages — didn’t cut it.
Similarly, the Bavis family seeks to show that the defendants were negligent. They have professed utter uninterest in being compensated for the wrongful death of their family member. Instead, they want to show bad acts of the defendants, just as the claimants in AT&T wanted to show bad acts of the mobile phone company.

I don’t know the answer but I think I know the question: Is it the job of a court to determine liability in order to award damages, or is it the job of a court to determine liability for its own sake?

I invite readers to review Federal Rule of Civil Procedure 68 and consider whether the courts are the right place to assert actions with respect to which full damages have already been tendered. Even more tantalizing, where the amount in controvery is a basis for federal court jurisdiction, can (or should) a court continue to assert jurisdiction when a party refuses an offer of that amount?


F. Peter Phillips

F. Peter Phillips is a commercial arbitrator and mediator with substantial experience providing consultation on the management of business disputes to companies around the globe. A cum laude graduate of Dartmouth College and a magna cum laude graduate of New York Law School, Mr. Phillips served for nearly ten years… MORE >

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