Silverstein denied right to seek $3.5 Billion from Airlines

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The Living Force
http://www.businessweek.com/news/2013-07-18/silverstein-denied-right-to-seek-3-dot-5-billion-from-carriers

July 19, 2013

Real estate developer Larry Silverstein can’t seek $3.5 billion from airlines whose planes were hijacked by terrorists and flown into the World Trade Center’s twin towers on Sept. 11, 2001, a judge ruled.

Silverstein, who leased the skyscrapers about two months before they were destroyed, already collected $4.1 billion from insurers and can’t collect twice under New York law, U.S. District Judge Alvin K. Hellerstein ruled yesterday in a courtroom less than a mile and a half from the World Trade Center site.

“If this case were to go forward, the WTC companies would not be able to recover anything against the airlines,” said Hellerstein. The judge rejected any suggestion that Silverstein had sought a windfall, saying he was among the “heroes” who sought to “create beauty out of the destruction.”

Silverstein’s World Trade Center Properties LLC in 2008 sued United Continental Holdings Inc. (UAL:US), American Airlines and its parent AMR Corp. (AAMRQ:US), claiming their negligence led to the destruction of the towers.

The company, which rebuilt the destroyed 7 World Trade Center and is rebuilding three other towers on the site, argued that the insurance accord didn’t bar it from seeking additional damages in civil cases because the payout didn’t correspond to specific types of economic losses, such as replacement costs for the buildings or lost rent from tenants. Hellerstein disagreed.

“There’s complete correspondence,” Hellerstein said. When such a link is made between an insurance payout and a specific type of loss, collecting on that same type of loss is barred under New York law, he said.

“We did not believe that the plaintiff could be permitted any further compensation and we are pleased the judge ruled in our favor,” United spokeswoman Christen David said in an e-mail.

“We are gratified by the judge’s decision,” Mike Trevino, American Airlines spokesman, said in a statement.

Tallest Building
Silverstein’s lawyer Richard Williamson had said in closing arguments yesterday that the airlines “dramatically understate” the developer’s actual economic losses from the attack, including by using an arbitrary 2007 cutoff date for calculating lost rents.

The developer said it will use proceeds from the case to build Norman Foster’s 2 World Trade Center adjacent to the centerpiece 1 World Trade Center -- now the tallest building in North America -- and continue revitalizing the area 12 years after the attack.

“In my opinion, no one is enjoying a windfall -- everyone is suffering from 9/11,” the judge said. Talking about a windfall “is obnoxious in this case,” he said.

About two months before the attacks, Silverstein’s Silverstein Properties signed four 99-year leases on the towers and two smaller buildings in the complex.

Initial Payment
He also made a $491 million initial payment as part of the Port Authority of New York and New Jersey’s privatization of the World Trade Center site.

“We are deeply disappointed” in the decision, Bud Perrone, a spokesman for Silverstein Properties, said in a statement. “While we respect Judge Hellerstein, we believe his ruling on this issue, and on prior issues, to be in error and intend to file an immediate appeal. We will not rest until we have exhausted every option to assure that the aviation industry’s insurers pay their fair share toward the complete rebuilding of the World Trade Center.”

The 2001 lease required Silverstein to insure the buildings and rebuild if the site was destroyed. He insured them for $3.5 billion “per occurrence,” more than required, court papers show.

The 2001 lease required Silverstein to insure the buildings and rebuild if the site was destroyed. He insured them for $3.5 billion “per occurrence,” more than required, court papers show.

Silverstein in 2007 reached the $4.1 billion settlement with insurers after suing to collect more than $7 billion -- twice the value of the policy.
 
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