Hundreds of millions of dollars could be awarded to victims of the state’s biggest wildfire for the hardship they endured when the federally caused wildfire roared across their land in 2022, based on a judge’s comments Tuesday in federal court.

Judge James Browning said at the end of a hearing Tuesday afternoon he was “leaning” toward ruling on behalf of fire victims who sued the Federal Emergency Management Agency last year. He said he would issue a ruling as soon as possible, but likely not until next month.

If Browning does indeed side with the fire victims, which lawyers on both sides of the courtroom expect is likely, FEMA could be required to establish a system to quantify and compensate fire victims not only for the economic losses they suffered in the state’s biggest wildfire but also for the emotional harm.

For thousands of victims, that could mean additional compensation for the “annoyance, discomfort and inconvenience” of the “nuisance” or “trespass” the fire caused, victims’ lawyers said.

A few others could get sizable payments for their “pain and suffering” resulting from physical injuries they suffered in the fire, in addition to the medical costs. So far, the only recourse for those who were injured or for families of those who died in the fire or ensuing floods has been filing time-consuming and uncertain lawsuits in federal court.

Gerald Singleton, whose San Diego-based firm is representing about 1,000 fire victims, estimated these sorts of emotional harm losses could amount to about $400 million.

He also said the payments could result in a more-equitable distribution of fire compensation funding, as renters or those with low incomes would receive additional compensation beyond just the dollar value for their limited losses in the fire.

Even with the expected ruling, it’s not clear how quickly these payments could arrive in victims’ bank accounts. Because the legal battle centers around a regulation FEMA created, the agency’s lawyers said in court it would have to go through a whole new, formal rulemaking process. That could take months.

Feds try to skirt responsibility in lawsuit for people who died after state’s biggest wildfire

The money would come out of a nearly $4 billion fund Congress established in September 2022 that members hoped would “fully compensate” victims of the Hermits Peak-Calf Canyon Fire, started earlier that year by two federal prescribed burns that escaped and combined to destroy several hundred homes and scorched a 534-square-mile area.

As of Sept. 24, the Hermits Peak-Calf Canyon Claims Office had paid $1.35 billion of the fund in 10,417 different claims from households, nonprofits, businesses and local and tribal governments.

Jay Mitchell, director of the claims office, watched the half-day court hearing Tuesday. In a brief interview with Source New Mexico after the judge’s comments, Mitchell suggested the compensation required by the expected ruling could be challenging to administer.

Even though $4 billion might seem like a huge number, “It is a limited fund,” Mitchell said. He suggested the ruling could open the door to a flood of new claims seeking damages for “nuisance” or “trespass” from people whose properties were touched by wildfire smoke.

“Smoke goes where it goes,” he said as he walked into a meeting with lawyers representing FEMA after the hearing.

Did Congress intend to limit damages?

Singleton’s was among four firms representing dozens of named plaintiffs who sued FEMA last October, alleging the agency improperly denied so-called “non-economic damages” to fire victims in a final set of regulations it published last summer. The rules limited compensation to only economic damages, which are the type of losses with a price tag: things like cars, homes, business expenses and cattle.

The rule was based on the agency’s interpretation of the Hermits Peak-Calf Calf Canyon Fire Assistance Act, written and sponsored by U.S. Rep. Teresa Leger Fernandez and U.S. Sen. Ben Ray Luján, both Democrats from New Mexico.

Luján’s office did not respond to a request for comment. U.S. Sen. Martin Heinrich’s office said the senator would wait until the ruling to weigh in. Leger Fernandez’s office told Source NM she couldn’t comment due to the pending litigation, but she’s “following the issue closely.”

The victims’ lawsuit alleged the agency was wrong when it interpreted the act as excluding non-economic damage payments. To make their argument, lawyers parsed the act’s language to try to determine congressional intent and analyzed state law about what recourse victims would have under New Mexico law if a private company had started the fire and not the federal government.

Months of back and forth between lawyers centered on what Congress meant when they wrote the act. Browning on Tuesday questioned victims’ lawyers and the United States Attorney’s Office about what they think Congress intended by language such as “limited to,” “allowable damages,” “injured person” and “actual compensatory damages.”

In the scar of New Mexico’s largest wildfire, a legal battle is brewing over the cost of suffering

For example, the law says payments “shall be limited to actual compensatory damages.” Victims’ lawyers argued, with numerous citations in New Mexico law and elsewhere, that “actual compensatory damages” historically means both economic and non-economic damages. FEMA’s lawyers interpreted the clause to mean that Congress was imposing a limitation: Only economic damages were allowed.

The lawsuit occurred after a Supreme Court ruling that removed deference to federal agencies when they write regulations based on ambiguous laws passed by Congress. It’s not clear how much the court’s ruling on the so-called “Chevron deference” precedent impacted the judge’s comments. But plaintiffs’ lawyer Tom Tosdal repeatedly cited Justice Neil Gorsuch’s ruling in his arguments Tuesday, and the judge wondered aloud whether it applied.

By the time the hearing started Tuesday, Browning said he’d already made up his mind on one important aspect of the lawsuit: He agreed that New Mexico law allows non-economic damages to be paid to victims in a scenario like the fire. That’s important because of a provision in the law requiring the calculation of damages to be based on what’s allowed under state law.

He cited an opinion from the New Mexico Attorney General that concluded emotional hardship payments are allowed for victims of “nuisance and trespass” here. An official at the New Mexico Department of Justicewrote the opinion after a request from two state lawmakers made shortly after a Source New Mexico and ProPublica article on the legal battle.

Victims’ lawyers have a ‘better reading’ of the law, judge says

In describing his inclination to side with the fire victims over the government, Browning also cited one piece of language that lawyers on both sides argued showed congressional intent to either exclude or include emotional hardship payments.

One of the laws’ sections is titled “Allowable Damages” in capital letters and goes on to list three categories of payments: Financial, business or property. To FEMA’s lawyers, Congress was listing all the types of allowable payments, which they said in a legal brief was “implied” by the phrase “allowable damages.”

FEMA has paid out just 2% of fund to help wildfire victims rebuild. Some can’t wait much longer.

To the fire victims’ lawyers, Congress was just specifying some types of compensation the act allowed but not limiting payments to those categories of loss.

The judge agreed: “Plaintiffs have a better reading,” he said. He seized on the fact that FEMA’s lawyers wrote in their brief that Congress “implied” its intent to limit damages in that section of the law. An implication is not enough, he said.

Browning also said he would try to issue a ruling as quickly as he could, and discussed with lawyers the best way to avoid further delays in getting the compensation to victims. He cited previous delays in the claims office compensation as the reason for his urgency.

“I don’t live under a rock,” he said. “I know that there has been a lot of criticism of how slow the process was.”