The wizardry of Kenneth Feinberg.

The law, lawyers, and the court.
July 22 2010 2:11 PM

Feinberg's Wizardry

How he'll help the down-and-out businesses of the Gulf states—despite the law.

(Continued from Page 1)

That decision amounts to a rule against any recovery in many cases. There have been exceptions, but these are usually cited as reasons to retain the rule against recovery for purely economic loss. For example, in 1985, the progressive New Jersey Supreme Court decided People Express Airlines Inc. v. Consolidated Rail Corp. The court held that the plaintiff airline could recover its economic losses stemming from the defendant's negligence in creating a toxic spill (sound familiar?). Because of the danger posed by the spill, People Express had been forced to shut down operations and cancel flights.

How far would that liability extend? The New Jersey court, always sensitive to the implications of its holdings for future cases, tried to limit the scope of its ruling by emphasizing (among other facts) that People Express' terminal was near the site of the spill and that economic injury to this plaintiff was "particularly foreseeable" to the negligent defendant.


Among other state courts, People Express has had few takers. After all, what does the term "particularly foreseeable" mean, and how would it serve as a real limitation on liability? Those daunting questions have caused most courts to go the way of Louisiana's. As Robert Rabin of Stanford Law has memorably stated, the People Express case is a "historical artifact" and "a lonely outpost."

Despite the overwhelming consensus view, one recognized exception to the rule limiting recovery may help the people of the Gulf. Those who make a living by fishing can recover their economic losses from negligent parties—like BP—that foul the water they rely on. Courts haven't been entirely clear or consistent in their reasoning in these fishing cases, but at least Feinberg has a good place to start here. Not so in the cases of the ice vendor who sells to the fishermen or the hotels that have lost business because of the spill. If anything, these ripples seem far fainter than those for which recovery was denied in PPG Industries.

Does this mean that the great majority of claimants will leave their meeting with Feinberg empty-handed? I doubt it. Feinberg probably won't look to state law in the same strict way a judge would. As long as his awards seem reasonable to BP, the company is not likely to complain. It can't take the PR hit, and in any event, it can only appeal awards in excess of $500,000. (Claimants, though, can appeal any award they're not satisfied with.) So expect the ice supplier who can show weak sales since the spill, or the hotel owner whose tourist business has dropped to, say, zero to recover—whatever the state law says.

The 9/11 fund again provides a good comparative lesson. Feinberg was directed to look to state law in one aspect of those cases, to determine which of the bereaved qualified as "family." Even though the relevant law would have frozen out many surviving members of same-sex couples, some of them in the end were compensated. Using his considerable charm and problem-solving skills, Feinberg found a way to help these gay and lesbian mourners.

There's $20 billion on the table. I expect Ken Feinberg to find a reasonable way to push it all across and into the pocket of deserving claimants, whatever the state law says. In an important sense, that's why he was hired.

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