Pan Am Flight 73: Victims of Terror Sue Their Lawyers

March 4, 2010 — -- Victims of a horrific hijacking that took place in Pakistan almost 25 years ago will be in a Washington courtroom Thursday morning to begin to resolve an unusual dispute with their lawyers over millions of dollars that Libya has agreed to pay them for their suffering.

A 2006 diplomatic agreement between then-President Bush and Muammar Qaddafi was supposed to be the final chapter for the hundreds of passengers who were sprayed with bullets after Pan Am Flight 73 was seized by terrorists in 1986. Twenty passengers on the Boeing 747 were killed, including two Americans, and more than 100 were injured. Survivors may be entitled to up $330 million in settlement money from the Libyan government.

Instead of finding closure, however, a group of the American survivors, led by two California women who were wounded during a frenzied escape through a window exit, are arguing that their lawyers are trying to confiscate most of the Libyan settlement money that's owed to them.

"We were vulnerable," Gargi Dave told ABC News in an exclusive interview. "I think they were taking advantage."

The attorneys in the case, from the law firm Crowell & Moring, counter that members of the small group of American victims are trying to maximize their own profit at the expense of others who were on the plane – including some of the heroes who helped passengers escape from a darkened jetliner through a barrage of gunfire and grenade explosions.

"I personally find it to be sad and disheartening that as the long process of finding justice and compensation for the victims of this horrific act of terrorism comes to an end, and begins to bear fruit, thoughtless allegations are being casually tossed around about my law firm," Stuart H. Newberger, the lead counsel in the case, said in a court filing.

The lawsuit is the latest burst of litigation stemming from an attempt by victims of terror attacks to collect from the government that was believed to have sponsored the attack – a fast growing area and potentially lucrative of the law that has exploded since Congress allowed for such suits to go forward 15 years ago.

Newberger, a Washington based lawyer who is one of the top specialists in the field said in his court filing that he considers the case to be "an attempt to increase the recovery of some members of the victim group obviously at the expense of others."

Newberger argues that the tens of millions of dollars collected from Libya for victims of this incident should be divided equally between all the survivors, even if most of them are not American. He says that was an agreement all of the survivors agreed to when they first decided to pursue the case.

That emotions are running high in this case is not unexpected. At the root of it is a terrifying ordeal that still leaves its victims shaken when they are asked to recount the details. The Pan Am flight bound for the United States from India carrying 400 passengers was at a stopover in Karachi when hijackers disguised as security guards snuck onto the airfield and stormed the plane. Passengers were held for more than 16 hours. Some were tortured or beaten. Others executed. When the auxiliary power in the jumbo jet shut down, lights went off, and the captors opened fire.

The Daves, who were just nine and 13 and traveling home from a summer vacation without their parents, escaped, but not without injury. Gargi Dave suffered a serious head trauma after falling off the plane's wing and was in a coma.

After Congress changed the laws surrounding legal action against foreign governments, Crowell & Moring was among those firms that began to help victims bring cases. The Daves received a letter on Oct. 17, 2004, suggesting they join a group that had retained the law firm. It promised the potential for both closure and a windfall.

The Daves joined the group of 178 survivors and relatives, which included both Americans and foreign nationals, agreeing that any legal judgment would be distributed among the entire group, with the lawyers taking a 25 percent cut.

But after the law firm brought suit against Libya, relations between the rogue nation and the U.S. began to thaw. In the eventual settlement, Libya agreed to set aside $1.5 billion to compensate the victims of several attacks that had been attributed to them – the Pan Am 103 bombing over Lockerbie, a Berlin disco bombing, and the Karachi hijacking among them.

Money from the diplomatic settlement began to be distributed under government formulas – but only to the roughly 40 Americans in the group of 178 claimants. Between them, the Daves were entitled to as much as $12 million, according to court records.

Crowell & Moring argued that any money recovered as a result of the diplomatic agreement should be sent to the firm to be divvied up and distributed to the entire group, regardless of nationality, (and to the lawyers on the case). The firm's court filings estimate that $330 million is owed to Pan Am 73 survivors.

The initial agreement between the passengers was "designed to avoid infighting," Newberger wrote.

As for the firm's fee, he said, that was "justified by the thousands of hours of work we have devoted, and continue to devote … initially without any guarantee we would ever recover a penny."

But the Daves said the lawyers had no hand in the diplomatic agreement, and should have no claim to the proceeds. They said they considered the state department settlement a separate matter entirely. Several other American passengers have joined their group in suing the firm.

They also took issue with the legal fees. Under rules governing the handout of funds from this type of diplomatic settlements, lawyers are not permitted to take more than 10 percent of the award. The law firm argues that the 10 percent cap doesn't apply in this case.

The first motions in a related case, brought in Washington to try and move the entire matter into arbitration, were set to get underway Thursday.

The Daves, along with several other victims, flew in to attend. The effort by the lawyers to try and scoop up their settlement money, distribute it to the remaining passengers, and take a cut for themselves, was unprofessional, Gargi Dave said.

"They saw an opportunity" to make money, she said. "I think that's what this was about."

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