NEW YORK CITY-Lawyers for the city, its contractors and plaintiffs huddled Thursday with special masters in an attempt to reframe a settlement that will satisfy US Southern District Judge Alvin K. Hellerstein in the litigation involving respiratory illnesses allegedly caused by toxic dust at the World Trade Center site. The meeting among the lawyers and special masters Aaron D. Twerski and James A. Henderson came before what had been scheduled to be a full fairness hearing Monday on a proposed $657-million settlement that could cover up to and beyond 10,000 plaintiffs.

But the need for Monday's hearing was called into question on March 19, when Judge Hellerstein, to the consternation of attorneys for all sides in In re World Trade Center Disaster Site Litigation, said the settlement amount was not large enough. On Wednesday, Twerski and Henderson received a special plea from lawyers for the main contractors who responded to the site on and after the Sept. 11, 2001, terror attacks and handled the removal of debris. Those contractors are Bovis Lend Lease LMB Inc., Turner Construction Co., AMEC Construction Management Inc., Tully Construction Co. Inc. and Plaza Construction Corp.

The contractors' attorneys wrote the special masters that the settlement strikes the appropriate balance between paying current claims and saving funds for future liabilities. The monies would come from the $1.1-billion World Trade Center Captive Insurance Co., established by a grant from the Federal Emergency Management Agency in 2004 to help the city and contractors with insurance costs associated with the aftermath of the terror attacks. That balance between present funds and future reserves was hailed by Margaret Warner of McDermott Will & Emery, the lead lawyer for Captive, at the March 19 hearing.

The letter sent by contractors asserts "the absolute necessity that the Captive reserve substantial funds to protect the WTC prime contractors from the risk of potential future litigation concerning the rescue, recovery and debris-removal operations at Ground Zero, and to explain why, at a minimum, the amount reserved under the current settlement is necessary." The letter continues, "It must not be forgotten that the WTC prime contractors, and all of the subcontractors for that matter, selflessly responded to the 9/11 attacks" and "put their companies on the line."

The concern over future liabilities is critical in litigation clouded by the fact that cancers and other respiratory illnesses may not manifest themselves for some time and new claims are filed every day. "Adding to this uncertainty is the fact that the scope of the potential legal obligations of the WTC prime contractors in the current cases has yet to be clarified by the court, making it impossible to evaluate their potential exposure in any future cases," the attorneys write.

The amount of reserves would also be affected should Hellerstein prevail on another priority he outlined on March 19, his insistence that the plaintiffs attorneys fees, at a 33% contingency rate the judge found unacceptable, come out of the Captive fund over and above the compensation paid to the victims. The letter also laments that Hellerstein has yet to decide dispositive motions by the city and the contractors who claim immunity because the rescue response and cleanup came in reaction to a civil emergency.

"The WTC prime contractors believe that their responsibility for any injuries suffered by the plaintiffs is highly questionable and, as it relates to uniformed workers (police and firefighters) who make up nearly half of the plaintiff population, essentially implausible," the attorneys state.

In the letter, the contractors' lawyers complain that "the compelling injustice of simply continuing to expose the WTC prime contractors to unprecedented liability has been largely ignored, masked by the glaring presence of the city as lead defendant and a highly visible pot of funds" held by Captive. To illustrate their potential exposure in the future, they say that, in addition to the current plaintiffs, as many as 90,000 people worked on the debris pile at Ground Zero.

The contractors also fault the city, saying that it had initially promised "full indemnity" for work at the site but "has since disavowed that promise." They say the city has argued that the Air Transportation Safety and System Stabilization Act limits the city's indemnity or contribution obligations to the contractors. But the contractors argue that the act, passed in the wake of 9/11, does not apply to debris-removal claims.

The city's Law Department answered with a letter of its own to the special masters late Wednesday. Lawrence S. Kahn, chief litigating assistant corporation counsel, wrote that "the city disagrees with the contractors assertions in their letter concerning indemnification."

But Kahn also made clear that the city "fully supports the contractors position that a substantial reserve is necessary in order to safeguard against the possibility that numerous lawsuits may be brought in the years ahead by persons claiming to be suffering from conditions resulting from their presence in or about Ground Zero in the period following September 11."

Kahn told the special masters that if they granted the contractors request for a meeting, the city wanted to attend. Lawyers for the city attended the meeting Thursday.

Mark Hamblett can be reached at [email protected].