Families of dead Blackwater contractors settle suit

Seven years after it was filed, what could have been a landmark lawsuit over battlefield accountability in an era of privatized warfare has been quietly laid to rest.

As a result, the security company formerly known as Blackwater has avoided a public examination of the bloody event that catapulted the company to worldwide attention and changed the course of the Iraq war.

The lawsuit was filed in January 2005 by the families of four Blackwater guards killed in a convoy ambush in Fallujah, Iraq, in March 2004. In what became an iconic image of the war, the four were shot and dismembered, and two of the bodies were strung from a bridge while a crowd of Iraqis cheered and chanted.

Televised images of the gruesome scene were flashed worldwide, prompting a devastating retaliatory assault on the city by U.S. forces that fanned the flames of the Iraqi insurgency.

The security company, now known as Academi, reached a confidential settlement with the families last week.

Two sources who insisted on anonymity said the company agreed to a total payout of $635,000 - a mere fraction of the legal fees in the long-running case, let alone the $30 million in claims and counterclaims at stake.

The settlement is in keeping with an aggressive makeover effort by Academi's current owners, who bought the company from founder Erik Prince a year ago and are doing their best to distance themselves from allegations of lawless behavior at Blackwater, from the streets of Baghdad to the executive suite in Moyock, N.C.

Beyond any financial considerations, the Fallujah victims' families never got what they always said they wanted most: an opportunity to hold the company publicly accountable for their loved ones' deaths.

The four men - Wesley Batalona, Scott Helvenston, Michael Teague and Jerry Zovko - were traveling in two Mitsubishi SUVs, escorting a convoy of flatbed trucks to pick up kitchen equipment from a U.S. military base.

Helvenston was a former Navy SEAL once stationed in Virginia Beach. The other three were former Army Rangers.

Bypassing a U.S. Marine checkpoint, the convoy entered Fallujah, a hotbed of Iraqi rage over the 2003 U.S. invasion. The four guards were killed in a fusillade of small-arms fire. A furious mob then set the vehicles ablaze, dragged the bodies out and put them on display.

Then-President George W. Bush ordered a major assault on the city that featured the first street-by-street fighting by U.S. military forces since the Vietnam War. In that and a second attack seven months later, 150 American troops and thousands of Iraqis were killed, and the city was virtually leveled.

In their lawsuit, the four guards' families alleged that Blackwater, cutting corners in the interest of higher profits, broke its contractual obligations to the men by sending them into hostile territory in unarmored vehicles without automatic weapons or a rear gunner.

Had the case gone to trial, it could have set a precedent for holding companies liable when their contractors are wounded or killed on the battlefield.

In a largely invisible cost of the nearly nine-year war in Iraq, hundreds of civilian contractors were killed and thousands wounded doing jobs that would have been handled by U.S. military personnel in previous wars.

Blackwater argued that private contractors had become such an integral part of the war effort that the company should be held immune from liability for battlefield casualties under the sovereign immunity principle, which bars soldiers from suing the government.

Fearing a punishing jury award in the North Carolina state court where the case was filed, Blackwater fought for years to keep it from being heard there.

The company appealed that jurisdictional issue all the way to the Supreme Court, hiring Kenneth Starr - the special prosecutor who investigated President Bill Clinton - to argue its case.

When the Supreme Court declined to hear the case, Blackwater played a trump card.

In a new argument, the company said the lawsuit was barred by the employment contract that the four Fallujah victims had signed - an 18-page document in which they gave up various rights, including the right to sue the company.

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

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

In May 2007, Senior U.S. District Judge James Fox agreed with Blackwater's argument and ordered the dispute to arbitration. The case was put in the hands of a three-member panel of arbitrators despite the families' objection that one of the panelists, William Webster, a former director of the FBI and CIA, had personal and business ties to several Blackwater lawyers.

The families further argued that they couldn't afford to pay the hundreds of thousands of dollars in fees and expenses billed to the parties by the arbitrators.

For nearly two years, Blackwater paid both its share and the families' share of the bills, but the company finally decided to quit paying unless the other side started chipping in.

The families refused, characterizing the arbitration process as "pay-to-play justice." As a result, the arbitrators closed the case for nonpayment in June 2010 without reaching a conclusion.

Judge Fox refused to send the case back to state court, noting in a January 2011 order that neither party had been able to cite another case "that has wrestled with the likes of the gnarly situation they have created and presented here."

The families appealed Fox's order to the U.S. 4th Circuit Court of Appeals, setting the stage for last week's settlement.

J.H. Verkerke, a law professor at the University of Virginia, said arbitration clauses are becoming increasingly common in employment contracts and have been found to be generally enforceable by the courts.

He added, however, that inability to pay arbitrators' fees has been recognized as a legitimate objection to the process.

Verkerke said the settlement may reflect a decision by Academi not to risk a finding by the appeals court that the cost of arbitration was prohibitive and an obstacle to justice for the families.

"It's a very strange case."

Bill Sizemore, (757) 446-2276, bill.sizemore@pilotonline.com