Bennett v. Islamic Republic of Iran

• Citation: 825 F.3d 949
• Decision Date: 22 February 2016
• Docket Number: Nos. 13-15442,13-16100,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.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

825 F.3d 949

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—San Francisco, California

Filed February 22, 2016

Amended June 14, 2016

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

Curtis C. Mechling (argued), Benjamin Weathers-Lowin, and Patrick N. Petrocelli, Stroock & Stroock & Lavan LLP, New York, New York; Dale K. Cathell and Richard M. Kremen, DLA Piper LLP, Baltimore, Maryland; Jane Carol Norman and Thomas Fortune Fay, Bond & Norman, Washington, D.C., for Judgment Plaintiffs-Appellees.

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

Before: Sidney R. Thomas,^* and Susan P. Graber, Circuit Judges, and

Dee V. Benson,^** Senior District Judge.

Partial Concurrence and Partial Dissent by Judge Benson

ORDER

The opinion and partial dissent filed February 22, 2016, and reported at 817 F.3d 1131

, are amended by the opinion and partial dissent filed concurrently with this order.

With these amendments, Judges Thomas and Graber have voted to deny Appellant's petition for panel rehearing and petition for rehearing en banc. Judge Benson has voted to grant the petition for panel rehearing and has recommended granting the petition for rehearing en banc.

The full court has been advised of the petition for rehearing en banc, and no judge of the court has requested a vote on it.

Appellant's petition for panel rehearing and petition for rehearing en banc are DENIED . No further petitions for panel rehearing or for rehearing en banc may be filed.

OPINION

GRABER

, Circuit Judge:

Approximately 90 United States citizens (or the representatives of their estates) are attempting to collect on unsatisfied money judgments that they hold against the Islamic Republic of Iran for deaths and injuries suffered in terrorist attacks sponsored by Iran. The assets that are the subject of this interpleader action are monies contractually owed to Bank Melli by Visa Inc. and Franklin Resources Inc. (“Franklin”). Bank Melli is an instrumentality of Iran. It asserts that Plaintiffs cannot execute on the assets (1) because Bank Melli enjoys sovereign immunity under the Foreign Sovereign Immunities Act of 1976 (“FSIA”), (2) because the relevant statutory exceptions to sovereign immunity may not be applied retroactively, (3) because the blocked assets are not property of Bank Melli, and (4) because Bank Melli is a required party that cannot be joined, thus requiring dismissal under Federal Rule of Civil Procedure 19

. We disagree and, accordingly, affirm the judgment of the district court.

BACKGROUND LEGAL PRINCIPLES

The jurisdiction of the United States over persons and property within its territory “is susceptible of no limitation not imposed by itself.” Schooner Exch. v. McFaddon , 11 U.S. (7 Cranch) 116, 136, 3 L.Ed. 287 (1812)

. Accordingly, foreign sovereign immunity is “a matter of grace and comity rather than a constitutional requirement.” Republic of Austria v. Altmann , 541 U.S. 677, 689, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004). Courts consistently “defer [ ] to the decisions of the political branches” on whether to take actions against foreign sovereigns and their instrumentalities. Id. (quoting Verlinden B.V. v. Cent. Bank of Nigeria , 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983) ).

The FSIA, 28 U.S.C. §§ 1330

, 1602 –1611, establishes a default rule that foreign states are immune from suit in United States courts. Id. § 1604. Congress enacted the statute to provide a “comprehensive ... ‘set of legal standards governing claims of immunity in every civil action against a foreign state or its political subdivisions, agencies, or instrumentalities.’ ” Altmann , 541 U.S. at 691, 124 S.Ct. 2240 (quoting Verlinden B.V. , 461 U.S. at 488, 103 S.Ct. 1962

). The FSIA provides the exclusive vehicle for subject matter jurisdiction in all civil actions against foreign state defendants. Bank Markazi v. Peterson , ––– U.S. ––––, 136 S.Ct. 1310, 1317 n. 1, 194 L.Ed.2d 463 (2016) ; OBB Personenverkehr AG v. Sachs , ––– U.S. ––––, 136 S.Ct. 390, 393, 193 L.Ed.2d 269 (2015) ; Flatow v. Islamic Republic of Iran , 308 F.3d 1065, 1069 (9th Cir. 2002).

The FSIA includes many exceptions to its general rule of immunity. 28 U.S.C. §§ 1605

–1607. Relevant here, in 1996, Congress added a new exception, stripping a foreign state of its sovereign immunity when (1) the United States officially designates the foreign state a state sponsor of terrorism and (2) the foreign state is sued “for personal injury or death that was caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources for such an act.” Id. § 1605A.

Iran was designated a terrorist party pursuant to section 6(j) of the Export Administration Act of 1979, 50 U.S.C. app. § 2405(j)

(effective Jan. 19, 1984). Peterson v. Islamic Republic of Iran , 627 F.3d 1117, 1123 (9th Cir. 2010) ; Weinstein v. Islamic Republic of Iran , 609 F.3d 43, 48 (2d Cir. 2010). That designation means that Iran is not entitled to sovereign immunity for claims under § 1605A.

Separately, the FSIA addresses the immunity of sovereign property from execution and attachment. Subject to enumerated exceptions, a foreign state's property in the United States is immune from attachment and execution. 28 U.S.C. § 1609

.

In First National City Bank v. Banco Para el Comercio Exterior de Cuba (“Bancec ”), 462 U.S. 611, 620–21, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983)

, the Supreme Court concluded that the FSIA did not control whether and to what extent instrumentalities could be held liable for the debts of their sovereigns. Applying international law and federal common law, the Court held that “government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such.” Id. at 626–27, 103 S.Ct. 2591. That rule, referred to as the “Bancec presumption,” may be overcome only in limited circumstances. Id. at 628–34, 103 S.Ct. 2591. The federal courts later described five “Bancec factors” that may be considered in determining whether the presumption has been overcome in any given case. E.g.,

Flatow , 308 F.3d at 1071 n.9.¹

Even after Congress added § 1605(a)(7)

(now § 1605A) to the FSIA in 1996, successful plaintiffs struggled to enforce judgments against Iran when they were harmed by its terrorist activities. See, e.g. , In re Islamic Republic of Iran Terrorism Litig. , 659 F.Supp.2d 31, 49–58 (D.D.C. 2009) (describing “The Never-Ending Struggle to Enforce Judgments Against Iran”). Once again, Congress responded by enacting new statutes, this time designed to facilitate the satisfaction of such judgments by expanding successful plaintiffs' ability to attach and execute on the property of agencies and instrumentalities of terrorist states. Bank Markazi , 136 S.Ct. at 1318

.

First, in 2002, Congress enacted the Terrorism Risk Insurance Act of 2002 (“TRIA”), Pub. L. No. 107–297, 116 Stat. 2322.

Section 201(a) of the TRIA provides:

Notwithstanding any other provision of law, and except as provided in subsection (b) [of this note, pertaining to Presidential waiver], in every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism, or for which a terrorist party is not immune under section 1605A

or 1605(a)(7) ..., the blocked assets^[2

^] of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of any compensatory damages for which such terrorist party has been adjudged liable.

TRIA § 201(a) was codified as a statutory note to 28 U.S.C. § 1610

on “Treatment of Terrorist Assets.”

Second, in 2008, Congress amended the FSIA as part of the National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110–181, § 1083, 122 Stat. 3

, 338. Among other changes, Congress added a new subsection to the FSIA, which provides in part that

the property of a foreign state against which a judgment is entered under section 1605A

, 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, and execution, upon that judgment as provided in this section, regardless of [the same five factors described by the federal courts as the “Bancec factors”].

28 U.S.C. § 1610(g)(1)

; see also

Bank Markazi , 136 S.Ct. at 1318 n. 2. For ease of reference, we refer to this section as “FSIA § 1610(g).”

FACTUAL AND PROCEDURAL HISTORY

Four groups of individuals sued the Islamic Republic of Iran for damages arising from deaths and injuries suffered in terrorist attacks sponsored by Iran; in each case, a final money judgment was entered in favor of the plaintiffs and against Iran. In Estate of Heiser v. Islamic Republic of Iran , 659 F.Supp.2d 20 (D.D.C. 2009)

, and Estate of Heiser v. Islamic Republic of Iran , 466 F.Supp.2d 229 (D.D.C. 2006), the plaintiffs secured judgments for more than $590 million for the 1996 bombing of the Khobar Towers in Saudi Arabia. In Acosta v. Islamic Republic of Iran , 574 F.Supp.2d 15 (D.D.C. 2008), the plaintiffs received a judgment of more than...