Bennett v. Islamic Republic of Iran

• Citation: 799 F.3d 1281
• Decision Date: 26 August 2015
• Docket Number: 13–16100.,Nos. 13–15442,s. 13–15442
• Parties: Michael BENNETT; Linda Bennett, as Co–Administrators of the Estate of Maria Ann Bennett, Plaintiffs–Appellees, v. The ISLAMIC REPUBLIC OF IRAN, Defendant, v. Visa Inc.; Franklin Resources, Inc., Defendants–third–party–plaintiffs–Appellees, v. Greenberg and Acosta Judgement Creditors, Plaintiff–third–party–defendant–Appellee, Heiser Judgment Creditors, Plaintiff–fourth–party–defendant–Appellee, v. Bank Melli, Plaintiff–third–party–defendant–Appellant. Michael Bennett; Linda Bennett, as Co–Administrators of the Estate of Maria Ann Bennett, Plaintiffs–Appellees, v. The Islamic Republic of Iran, Defendant, v. Visa Inc.; Franklin Resources, Inc., Defendants–third–party–plaintiffs–Appellees, v. Greenberg and Acosta Judgement Creditors, Plaintiff–third–party–defendant–Appellee, Heiser Judgment Creditors, Plaintiff–fourth–party–defendant–Appellee, v. Bank Melli, Plaintiff–third–party–defendant–Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

799 F.3d 1281

Michael BENNETT;

Linda Bennett, as Co–Administrators of the Estate of Maria Ann Bennett, Plaintiffs–Appellees

v.The ISLAMIC REPUBLIC OF IRAN, Defendant

v.Visa Inc.;

Franklin Resources, Inc., Defendants–third–party–plaintiffs–Appellees

v.Greenberg and Acosta Judgement Creditors, Plaintiff–third–party–defendant–Appellee

Heiser Judgment Creditors, Plaintiff–fourth–party–defendant–Appellee

v.Bank Melli, Plaintiff–third–party–defendant–Appellant.

Michael Bennett;

Linda Bennett, as Co–Administrators of the Estate of Maria Ann Bennett, Plaintiffs–Appellees

v.The Islamic Republic of Iran, Defendant

v.Visa Inc.;

Franklin Resources, Inc., Defendants–third–party–plaintiffs–Appellees

v.Greenberg and Acosta Judgement Creditors, Plaintiff–third–party–defendant–Appellee

Heiser Judgment Creditors, Plaintiff–fourth–party–defendant–Appellee

v.Bank Melli, Plaintiff–third–party–defendant–Appellant.

Nos. 13–15442

13–16100.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 15, 2015.

Filed Aug. 26, 2015.

Jeffrey A. Lamken, Robert K. Kry (argued), Lucas M. Walker, MoloLamken LLP, Washington D.C., for Appellant.

Curtis C. Mechling (argued) of Stroock & Stroock & Lavan LLP, New York, New York, and Dale K. Cathell of DLA Piper LLP, Baltimore, Maryland, and Jane Carol Norman of Bond & Norman, Washington, D.C., for Judgment Creditor Appellees.

Benjamin T. Peele, III (argued) of Baker & McKenzie LLP, Washington, D.C., and Bruce H. Jackson of Baker & McKenzie LLP, San Francisco, CA for Appellees Visa, Inc. and Franklin Resources, Inc.

Appeals from the United States District Court for the Northern District of California, Charles R. Breyer, Senior District Judge, Presiding. D.C. No. 3:11–cv–05807–CRB.

Before: ALEX KOZINSKI and SUSAN P. GRABER, Circuit Judges, and DEE V. BENSON,^* Senior District Judge.

OPINION

KOZINSKI, Circuit Judge:

Congress has enacted two statutes to help victims of terrorism collect on money judgments against the foreign states responsible for sponsoring the attacks. We consider whether victims can collect from an instrumentality of a state that has sponsored terrorism when the instrumentality is a separate juridical entity that wasn't a party to the underlying lawsuit.

I. Background

The Foreign Sovereign Immunities Act (FSIA) is the sole basis for jurisdiction over foreign states in U.S. courts. 28 U.S.C. § 1330. Under the FSIA, foreign sovereigns are generally immune from jurisdiction, except for a few carefully delineated exceptions. One such exception is for claims arising out of acts of state-sponsored terrorism. See id. § 1605A.

Four groups of individuals—the Bennett, Greenbaum, Acosta and Heiser creditors—hold separate judgments obtained in U.S. courts against the Republic of Iran, based on various terrorist attacks that occurred between 1990 and 2002. The Bennett creditors are owed almost $13 million in damages for Iran's role in the 2002 bombing of a cafeteria at Hebrew University in Jerusalem. The Greenbaum creditors are owed almost $20 million for a 2001 bombing of a Jerusalem restaurant. The Acosta creditors are owed over $350 million for Iran's part in a 1990 mass shooting. And, finally, the Heiser creditors are owed over $590 million for the 1996 bombing of the Khobar Towers in Saudi Arabia. All judgments were by default, but no one disputes that they are valid and that all four sets of creditors are owed money by Iran.

However, winning a money judgment against a foreign state isn't the end of the story, because sovereign immunity separately protects the assets of a foreign sovereign from attachment. For years, the state-sponsored terrorism exception to the FSIA created an anomaly—it abrogated a foreign sovereign's immunity from judgment, but not its immunity from collection. Terrorism victims therefore had a right without a meaningful remedy.

Congress subsequently enacted two statutes closing this loophole: section 201(a) of the Terrorism Risk Insurance Act (TRIA) and 28 U.S.C. § 1610(g). Section 201 was enacted to “deal comprehensively with the problem of enforcement of judgments rendered on behalf of victims of terrorism ... by enabling them to satisfy such judgments through the attachment of blocked assets of terrorist parties.” H.R.Rep. No. 107–779, at 27 (2002) (Conf. Rep). “Blocked assets” are those that have been seized or frozen by the federal government. The TRIA provides that “the blocked assets of [a] terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution.” Terrorism Risk Insurance Act of 2002, Pub L. No. 107–297, § 201(a), 116 Stat. 2322, 2337 (codified at 28 U.S.C. § 1610 Note “Satisfaction of Judgments from Blocked Assets of Terrorists, Terrorist Organizations, and State Sponsors of Terrorism”).

Section 1610(g), enacted in 2008 as an amendment to the FSIA, extended the TRIA's abrogation of asset immunity to funds that were not blocked. It provides that “the property of a foreign state against which a judgment is entered under [this statute], and the property of an agency or instrumentality of such a state, including property that is a separate juridical entity or is an interest held directly or indirectly in a separate juridical entity, is subject to attachment in aid of execution ... upon that judgment as provided in this section.” 28 U.S.C. § 1610(g).

These two statutes give creditors a theoretical avenue to collect on the judgments they've obtained. But, of course, they have to find the money first—and Iranian assets within the United States are notoriously hard to come by. An opportunity arose in 2007, when the Department of Treasury issued a blocking order prohibiting certain Iranian assets in the United States from being transferred back to Iran. That blocking order was based on Iran's illicit nuclear program, not its state-sponsored terrorism. Nonetheless, it meant that various financial institutions had money owed to Iran sitting in accounts within the United States. The creditors here saw a rare chance to collect on their judgments and filed a complaint seeking access to $17.6 million in blocked assets held by Visa and Franklin,¹ but owed to Bank Melli—Iran's national bank. Fearing they might be liable to Bank Melli if they simply handed the money over to the creditors, Visa and Franklin responded by filing a third-party complaint to interplead Bank Melli and obtain final resolution of who was entitled to the funds. Visa and Franklin deposited the funds into the district court's registry. Bank Melli made an appearance and moved to dismiss. The district court denied that motion but certified its order for interlocutory appeal under 28 U.S.C. § 1292(b). We review de novo. See Colony Cove Props., LLC v. City of Carson, 640 F.3d 948, 955 (9th Cir.2011).

II. Discussion

Bank Melli makes four distinct arguments as to why the creditors shouldn't be able to collect from the funds held by Visa and Franklin. First, it argues that the assets are protected by sovereign immunity notwithstanding the TRIA and section 1610(g), because those statutes waive sovereign immunity only for the “terrorist party”—Iran—and Bank Melli is a separate juridical entity from Iran. Second, it asserts that Federal Rule of Civil Procedure 19 requires dismissal of this entire action, because Bank Melli is an indispensable party that cannot be joined. Third, it argues that applying the TRIA and section 1610(g) to the judgments at issue here would be impermissibly retroactive, because the creditors obtained their judgments against Iran before the statutes' enactment. And, finally, Bank Melli claims that the frozen assets aren't subject to the TRIA or section 1610(g) because those statutes extend only to assets “owned” by the foreign entity. Because the assets here are technically in the possession of Visa and Franklin, Bank Melli argues that they aren't yet “owned” by Bank Melli.

1. Foreign Sovereign Immunity

Bank Melli argues that the TRIA and section 1610(g) do not abrogate the asset immunity of all of a terrorist state's instrumentalities, only those that are alter egos of the state. For this proposition, Bank Melli relies principally on the Supreme Court's holding in First National City Bank v. Banco Para El Comercio Exterior de Cuba

(“Bancec ”), that “government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such.” 462 U.S. 611, 626–27, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983). Under Bancec, the only conditions under which an instrumentality may be equated with the sovereign are (1) when it is “so extensively controlled by its owner that a relationship of principal and agent is created” or (2) when failure to regard them as equivalent “would work fraud or injustice.” Id. at 629, 103 S.Ct. 2591 (internal quotation marks omitted). Bank Melli contends that the TRIA and section 1610(g) incorporate Bancec's distinction between instrumentalities that are separate juridical entities and those that are alter egos, and abrogates immunity only as to those instrumentalities that, unlike Bank Melli, fall within Bancec's two exceptions.

We cannot reconcile Bank Melli's argument with the plain text of either statute. Section 201(a) of the TRIA specifically states that “the blocked assets of [a] terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution.” § 201(a) (emphasis added). Bank Melli argues that the parenthetical phrase is merely illustrative and does not purport to expand the meaning of “terrorist party” beyond Bancec . But we must assume Congress meant what it said when it used the term “any agency or instrumentality.” See United States v. Gonzales, 520 U.S. 1, 5, 117 S.Ct. 1032, 137 L.Ed.2d 132 (1997). “Read naturally, the word ‘any’ has an expansive meaning, that is, ‘one or some indiscriminately of whatever kind.’ ” Id. (quoting Webster's Third New International Dictionary 97 (1976...