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WTC Properties Loses Bid to Bar Act-of-War 9/11 Defense

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May 21 (Bloomberg) -- World Trade Center Properties LLC lost its bid to prevent American Airlines and its parent AMR Corp. from raising “act of war” as a defense to its alleged negligence in the Sept. 11, 2001, terrorist attacks.

U.S. District Judge Alvin K. Hellerstein in Manhattan denied the bid by the leaseholder of the twin 110-story towers in a May 17 ruling posted yesterday on the court’s docket. The buildings collapsed after hijackers flew an American Airlines jet into one and a United Airlines jet into the other.

The airlines promised Congress and the U.S. public they wouldn’t raise “act of war” to avoid paying claims, lawyers for the leaseholder, an affiliate of Silverstein Properties, argued in a February court filing.

“Whether there is any merit to this defense depends on how it is to be presented at trial, and therefore it is premature to decide this issue now,” Hellerstein said.

About 3,000 people were killed in the Sept. 11 attacks, in which two other planes were hijacked. One crashed into the Pentagon near Washington. The fourth crashed in a field in Pennsylvania.

The Silverstein organization accused American of breaking promises that coincided with a federal bailout of the aviation industry.

American Airlines has “timely, consistently and vigorously asserted the act of war defense,” during the 11 years of post-attack litigation, its lawyers said in a March 5 court filing. There is no act-of-war exclusion it its insurance coverage, its attorneys said.

‘No Shortcut’

“There is no shortcut” for WTC Properties, the defense lawyers said. “It is entitled to payment from American’s insurance proceeds if and only if it prevails on the merits of its litigation against American,” including overcoming the act-of-war defense.

In the same two-page order, the judge also declined to rule on a defense motion for a reduction of the amount of money damages for which they may be responsible associated with the collapse of 7 World Trade Center, an office tower adjacent to the twin towers site in lower Manhattan, which was struck by debris as the other buildings fell.

The defendants asked for an interpretation of agreements between World Trade Center Properties and its carrier, Industrial Risk Insurers, which wasn’t before the court, Hellerstein said.

The case is In Re September 11 Litigation, 21-MC-101, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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