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Developer (Silverstein) Sues to Win $12.3 Billion in 9/11 Attack

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March 27, 2008
By Anemona Hartocollis

Larry A. Silverstein, who has won nearly $4.6 billion in insurance payments to cover his losses and help him rebuild at the World Trade Center site, is seeking $12.3 billion in damages from airlines and airport security companies for the 9/11 attack.

Mr. Silverstein, the developer of ground zero, sought the damages, whose amount was not previously known, in a claim filed in 2004, that says the airlines and airport security companies failed to prevent terrorists from hijacking the planes used to destroy the buildings.

His case was consolidated last week with similar, earlier lawsuits brought by families of some victims of the attack and by other property owners. But in seeking $12.3 billion, he is by far the biggest claimant in the litigation.

The size of Mr. Silverstein’s claim was revealed last week at a status conference on the litigation in United States District Court in Manhattan.

The claims by the parties involved total about $23 billion, and Mr. Silverstein’s claim for such a large chunk could jeopardize claims from other businesses and property owners, according to defense lawyers. A lawyer for the victims’ families, Donald Migliori, said he was confident that their claims would not be affected because they would take priority over the property claims.

A lawyer for the airlines, Desmond Barry, said that if Mr. Silverstein won his claim, he could push the total claims beyond the amount of insurance that the airlines and security companies have available. “There ain’t that much insurance,” Mr. Barry said.

The federal government has capped the liability at the amount of available insurance, to avoid bankrupting the airlines. The exact amount of insurance available is still being explored in the court proceedings.

Richard A. Williamson, a lawyer for Mr. Silverstein, said at the court conference on March 18 that Mr. Silverstein was seeking damages to compensate him for continuing losses at the site. Mr. Silverstein, through his company, World Trade Center Properties, has a 99-year lease, worth $3.2 billion, on four buildings at the site, including the fallen twin towers. He signed the lease in July 2001, just six weeks before the attack.

Since the attack, Mr. Silverstein has been paying rent to the Port Authority of New York and New Jersey on towers that no longer exist, his lawyer told the judge, Alvin K. Hellerstein. Mr. Williamson said that his client had also lost rental income from about 400 tenants.

Dara McQuillan, a spokesman for Mr. Silverstein, said that the $12.3 billion represented $8.4 billion for the replacement value of the destroyed buildings and $3.9 billion in other costs, including $100 million a year in rent to the Port Authority and $300 million a year in lost rental income, as well as the cost of marketing and leasing the new buildings.

Mr. Barry, speaking for the airlines, contended that Mr. Silverstein had been more than compensated by the nearly $4.6 billion insurance settlement, reached after almost six years of litigation. He argued that Mr. Silverstein was entitled to the market value of the property, which he said had been established by the $3.2 billion lease.

Judge Hellerstein expressed skepticism about Mr. Silverstein’s claim, and asked why he had not stemmed his losses by just “walking away.”

Turning to Mr. Williamson, Judge Hellerstein asked: “What’s the nature of your recovery?”

To which Mr. Williamson replied, “For damages suffered by the events of 9/11, not value. Damages.”

Mr. Williamson said that the lease required Mr. Silverstein to rebuild and to continue paying rent.

“And so I’m putting to you if you walked away from the lease, you would lose the value of the lease,” Judge Hellerstein said. “Would you have a further obligation to pay money?”

Mr. Williamson replied, “You have to examine that question. “But to me that’s not the test of what are our damages.”

Judge Hellerstein pressed Mr. Williamson to put a dollar figure on the damages. “I don’t think it’s necessary to know the precise amount,” the judge said. “I think some order of magnitude would be appropriate.”

When Mr. Williamson balked, Mr. Barry jumped in.

“I think their claim is $12.3 billion,” he said.

“Plus prejudgement interest,” Mr. Williamson confirmed.

To which the judge tartly replied, “We shouldn’t forget that.”

Judge Hellerstein ordered Mr. Silverstein to provide more documentation of his claim, or risk losing it.

Mr. McQuillan, the spokesman for Mr. Silverstein, said on Wednesday the developer felt both an obligation under his lease and a moral obligation to rebuild, rather than walk away. He said that the insurance companies who paid him would be repaid if he prevails.

Plaintiffs also revealed that after a spate of settlements, there are seven wrongful death cases and two injury cases remaining, out of more than 90 filed.

Those who sued represent just a small fraction of the casualties on Sept. 11. Most of the victims of the attack and their families chose to take the compensation offered through a federal fund, forgoing their right to sue.

Mr. Migliori, the lawyer for victims’ survivors, said he believed that the claimants with property-damage claims — including Mr. Silverstein and some insurance companies trying to recoup their payments — would allow the death and injury cases to get priority in payment of damages.

The judge declined to set any trial date in the case, saying that it would be “fictitious,” but set a fact-finding deadline at the end of this year. Any trials in the case appear to be more than a year away.

Source URL: http://www.nytimes.com/2008/03/27/nyregion/27rebuild.html?ex=1207281600&en=0261765c3042a010&ei=5070&emc=eta1