In a brief filed Tuesday, attorneys for the families said the settlement would significantly limit financial awards and keep survivors from learning the full extent of misconduct involved in the September 1998 crash off the coast of Nova Scotia.
The proposed settlement would have covered 167 cases involving U.S. victims as well as any future claims.
The offer was worth about $300 million to families, compared to an estimated $1 billion award if punitive damages are awarded by a jury, according to an attorney for the victims' families.
"It is their fault and there is a price to be paid for fault," plaintiff's attorney Arthur Wolk said Wednesday. "There needs to be recognition that this person had value beyond the recovery of the strict economic contribution that the person would have made to his family."
The brief, filed in U.S. District Court in Philadelphia, requests that the suit continue against Swissair; Boeing, which owns the company that built the MD-11 jetliner; Delta Airlines, which had a ticket-sharing deal with Swissair; and Inflight Technologies, which provided the plane's electronic entertainment system.
Swissair, Boeing and Delta last month offered the settlement, although Swissair said the proposal was not an admission of guilt.
An attorney representing Swissair, Boeing and Delta said that the victims' families are unlikely to receive punitive damages whether or not they reject the settlement.
"It's like they are saying, 'Please, we want to spend 10 years litigating this case'," attorney Mike Holland of New York-based Condon & Forsyth said. "We've already agreed to accept liability. There's no issue to contest."