Judge ups Ground Zero settlement to account for fees

The federal judge overseeing the $712-million settlement for Ground Zero responders' health claims Friday sweetened the pot for claimants by $6.1 million, ruling that their lawyers can't deduct that amount in interest on loans used to finance the litigation from settlements their clients receive.

"You stand to make $150 million," U.S. District Judge Alvin Hellerstein told lawyers for Worby Groner Edelman & Napoli Bern at a federal court hearing in Manhattan, estimating the value of their 25 percent contingency fee. "In the context of a fee of $150 million, you could stand to absorb $6,128,000."

The law firm, which represents 9,500 claimants, says it had to borrow between $30 million and $40 million at high interest rates to pay costs of pursuing the cases for more than six years. Passing on the interest to clients became a sore point last month when letters were sent out with settlement offers identifying how much would be deducted for lawyer fees and other case expenses - including interest.

The settlement needs to be approved by 95 percent of the 10,000-plus total plaintiffs to take effect. This week, the insurance company representing New York City and its contractors said more than 50 percent have opted into the deal, and extended the deadline for doing so by two months, until Nov. 8.

Two law professors retained by the Worby Groner firm told Hellerstein at Friday's hearing that borrowing and charging interest to clients was permissible in New York, and amounts in the World Trade Center case had been reasonable and adequately disclosed in retainers.

The interest charges averaged $74 per client for those in the lowest settlement tier, and $2,400 in the highest. Lawyer Paul Napoli said his firm was the only one willing to take on the cases, and it didn't have the money to pay the costs of pursuing them without loans.

"Without financing . . . it would have been impossible or very difficult to proceed with the number of cases we have," Napoli said.

But another major plaintiffs' firm that handled about 650 cases did not need to seek outside financing or charge interest. Hellerstein - who previously insisted lawyers' fees be cut from 33 percent to 25 percent - questioned whether Worby Groner's clients should have to pay a price for the firm's decision to take on so many cases that it needed outside borrowing.

In light of the firm's fee, he said, it wasn't right to further diminish clients' net recoveries. "Beyond the legalities and ethics," he told Napoli, "it is important to have a sense of balance."