Suit against Blackwater over contractor deaths moves to arbitration

Virginian Pilot (2007-05-20) Bill Sizemore

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Thanks to some high-stakes legal maneuvering, Blackwater USA may yet manage to avoid a public examination of the bloody event that catapulted the company to worldwide attention and changed the course of the Iraq war.

After appealing unsuccessfully all the way to the Supreme Court, Blackwater now appears to have found another way to derail what promised to be a landmark lawsuit brought by the families of four security contractors killed in a convoy ambush in Fallujah, Iraq, in 2004.

This week, on orders of a federal judge, the dispute is scheduled to be taken up out of court by a three-man panel of arbitrators.

By steering the case into arbitration, Blackwater has shifted a legal showdown over issues of battlefield accountability and presidential authority into a non judicial arena where the proceedings occur behind closed doors and the outcome is confidential.

One of the three arbitrators is William Webster, a Reagan-era director of the FBI and CIA with personal and business ties to several Blackwater lawyers.

"The state court action is over," Kirk Warner, a Blackwater lawyer in Raleigh, said Friday. He was referring to the lawsuit filed in January 2005 by the families of the four Blackwater contractors ambushed by insurgents in Fallujah in March 2004.

The four were shot and dismembered, and two of the bodies were strung from a bridge while a crowd of Iraqis cheered. Televised images of the gruesome scene were flashed worldwide, prompting a devastating retaliatory assault on the city by U.S. forces that further fanned the flames of the insurgency.

The lawsuit says Blackwater broke its contractual obligations to the four men by sending them into hostile territory in unarmored vehicles without automatic weapons or a rear gunner.

For two years, the Moyock, N.C.-based private military company fought to get the case moved from state court to federal court, believing it would get a more favorable hearing there. The company appealed that jurisdictional issue all the way to the Supreme Court, hiring Kenneth Starr - the special prosecutor who investigated President Clinton - to argue its case.

The hiring of Starr illuminated the importance of the case - for Blackwater and the entire private military industry, which has flourished under a Bush administration drive to privatize some government functions.

A successful wrongful-death suit could set a precedent for holding companies liable when their contractors are wounded or killed on the battlefield.

In a largely invisible cost of the war in Iraq, hundreds of civilian contractors have been killed and thousands wounded doing jobs that would have been handled by U.S. military personnel in previous wars. A report Friday in The New York Times said at least 917 contractors have been killed.

Blackwater has argued in court papers that contractors have become such an integral part of the war effort that it should be held immune from liability for battlefield casualties under the sovereign immunity principle, which bars soldiers from suing the government.

In February, the Supreme Court declined to hear Blackwater's appeal, allowing the lawsuit to proceed in state court.

But on May 11, Senior U.S. District Judge James Fox issued an order requiring the parties to take the dispute to arbitration, effectively halting the court case.

The judge agreed with Blackwater's contention that the lawsuit is barred by the employment contract that the four Fallujah victims signed - an 18-page document in which they gave up a list of rights, including the right to sue the company.

The contract says any dispute with Blackwater must be resolved by binding arbitration under the rules of the American Arbitration Association, a private nonprofit organization that facilitates non judicial settlement of disputes.

Under those rules, the proceedings are confidential and the arbitrators' decisions are final, subject to only limited review by the courts.

"Anyone who supports the rule of law should be encouraged to see the written agreement finally being honored and the dispute heading to arbitration as the parties agreed," Anne Tyrrell, a Blackwater spokeswoman, said Friday.

The victims' families and their lawyer declined to comment.

A preliminary hearing before the three arbitrators is set for Friday.

The four families' lawyer successfully challenged one arbitrator proposed for the panel: William Sessions, a former FBI director whose law firm represents Blackwater.

But Webster, Sessions' predecessor as FBI director, was left on the panel despite what the families' lawyer has called "glaring conflicts."

According to his disclosure statement, Webster's law firm has business relationships with three of Blackwater's law firms. In addition, Webster is acquainted professionally with Starr and another former Blackwater lawyer, Fred Fielding, and he serves on a corporate board with Joseph Schmitz, chief operating officer and general counsel of Blackwater's parent company.

The other two arbitrators on the panel are Edward Dreyfus, a New Jersey patent lawyer, and Jean Kalicki, a Washington lawyer who specializes in international arbitration. In addition to the underlying dispute with the Fallujah victims' families, Blackwater is seeking to arbitrate a $10 million counterclaim against Richard Nordan, the Raleigh lawyer who filed the original lawsuit as administrator of the four men's estates.

The company is trying to hold Nordan personally liable for violating the men's contract, even though he was not a party to it.

Going after Nordan in an arbitration proceeding, bypassing the courts, "just offends me.... It greatly offends me," Wake County Superior Court Judge Donald Stephens said in a hearing in Raleigh last week. "There are some fundamental due-process rights, including right to trial by jury.... They may not exist necessarily in other courts, but they exist in this court."

Stephens issued an order barring Blackwater from proceeding further against Nordan in arbitration until the propriety of its counterclaim is clarified by the federal courts.

"If you violate this order," Stephens told Blackwater's lawyer, "you violate it at your peril."

Blackwater is contesting Stephens' order in federal court.

Meanwhile, Blackwater lawyers will be in court Wednesday in Miami in another high-stakes legal battle with similar themes.

In that case, the company's aviation affiliate is being sued by the families of three American soldiers killed, along with three civilian crewmen, in a plane crash in Afghanistan in November 2004.

As in the Fallujah case, Blackwater is claiming immunity from liability and will argue for dismissal of the case before a three-judge panel of the U.S. 11th Circuit Court of Appeals.

Reach Bill Sizemore at (757) 446-2276 or bill.sizemore@pilotonline.com.

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