Bennett v. Islamic Republic of Iran
| Decision Date | 28 February 2013 |
| Docket Number | No. C 11-05807 CRB,C 11-05807 CRB |
| Court | U.S. District Court — Northern District of California |
| Parties | MICHAEL BENNETT, ET AL., Plaintiffs, v. THE ISLAMIC REPUBLIC OF IRAN, ET AL., Defendants. |
This case involves an Iranian instrumentality that seeks to avoid payment to American victims of Iranian terrorist acts. Specifically, four groups of judgment creditors ("Plaintiffs") who hold judgments against Iran seek to recover assets ("the Blocked Assets") held by Third Party Plaintiffs Visa and Franklin.1 Those assets are owed to an Iranian instrumentality, Bank Melli, but have been blocked by executive orders issued by the President of the United States and blocking regulations issued by the United States Department of the Treasury, Office of Foreign Assets Control ("OFAC"). Visa and Franklin brought this interpleader action "to obtain a determination as to which [of the groups of judgment creditors], if any, has priority with respect to those assets to satisfy their judgments or their claims." Compl.¶ 4. Bank Melli has appeared in the case, and now moves to dismiss it in its entirety. See generally MTD (dkt. 112).
Bank Melli is Iran's largest financial institution. MTD at 2. Its stock is wholly owned by the Iranian government. Id. The Blocked Assets at issue in this case are "funds due and owing by contract to Bank Melli pursuant to a commercial relationship with [Visa]." Compl. ¶ 16. In 1984, the United States designated Iran a terrorist party pursuant to section 6(j) of the Export Administration Act of 1797, and, pursuant to the International Emergency Economic Powers Act, the President directed that "all property and interests in property in the United States of persons and entities listed in the order or subsequently listed are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in." Id. ¶ 17. The United States added Bank Melli to the list, freezing its assets, in October 2007, upon finding that from 2002 to 2006, Bank Melli had "facilitated numerous purchases of sensitive materials for Iran's nuclear and missile programs," "provided a range of financial services on behalf of Iran's nuclear and missile industries," and "employed deceptive banking practices to obscure its involvement from the international banking system." Id.; Fact Sheet: Designation of Iranian Entities and Individuals for Proliferation Activities and Support for Terrorism, U.S. Dep't of the Treasury Press Ctr. (Oct. 25, 2007), http://www.treasury.gov/press-center/press-releases/pages/hp644.aspx (hereinafter "10/25/07 Fact Sheet").
Visa and Franklin claim no ownership interest in the Blocked Assets and "only continue[] to hold them because, pursuant to OFAC regulations, the assets cannot be released to Bank Melli or to anyone else without a license from OFAC or an appropriate court order." Compl. ¶ 18.2
Plaintiffs are four groups of individuals (the Bennett Plaintiffs, the Greenbaum Plaintiffs, the Acosta Plaintiffs, and the Heiser Plaintiffs) who obtained default judgments against the government of Iran. See MTD at 2. The Bennett Plaintiffs sued Iran over the July 31, 2002 bombing of a cafeteria at Hebrew University in Jerusalem. MTD at 3 n.2. On August 30, 2007, they obtained a default judgment of almost $13 million under 28 U.S.C. § 1605(a)(7). Id. The Greenbaum Plaintiffs sued Iran over the August 9, 2001 bombing of a Jerusalem restaurant. Id. On August 10, 2006, they obtained a default judgment of almost $20 million under 28 U.S.C. § 1605(a)(7). Id. The Acosta Plaintiffs sued Iran over the November 5, 1990 shooting of various individuals, including U.S. Postal Officer Carlos Acosta. Id. On August 26, 2008, they obtained a default judgment exceeding $350 million under 28 U.S.C. § 1605A. Id. The Heiser Plaintiffs sued Iran over the June 25, 1996 bombing of the Khobar Towers in Saudi Arabia. Id. On December 22, 2006, they obtained a default judgment of over $254 million under 28 U.S.C. § 1605(a)(7); on September 30, 2009, they obtained a further default judgment of almost $337 million under 28 U.S.C. § 1605A. Id. Bank Melli is not named as a party to any of the judgments and is not alleged to have been involved in any of the events underlying them. Id. at 4.
On December 2, 2011, the Bennett Plaintiffs filed a complaint against Visa and Franklin, seeking to execute against the Blocked Assets in order to satisfy their judgment. Id. On February 3, 2012, Visa and Franklin filed their Third Party Complaint in the nature of an interpleader, naming as defendants Bank Melli and other third-party defendants with potential claims to the Blocked Assets. See generally Compl. Visa and Franklin subsequently deposited the assets into this Court's registry. See dkts. 88-89.
On April 26, 2012, the Clerk entered a default against Bank Melli. See dkt. 79. On June 12, 2012, however, Bank Melli entered its appearance, see dkt. 96, and on July 5, 2012, this Court entered a stipulated order vacating the default, see dkt. 109. Bank Melli then moved to dismiss the case. See generally MTD.
The Court discharged Visa and Franklin at the November 16, 2012 hearing, and heard preliminary argument on the merits of Bank Melli's motion to dismiss. The parties each filed supplemental briefs, see Bank Melli Br. (dkt. 124); Pls. Br. (dkt. 125), and then, on December 13, 2012, participated in a second and more fulsome hearing on the motion to dismiss. See Mins. (dkt. 127). The Court then took the motion under submission.
Bank Melli's motion makes four arguments for dismissal: (A) that under First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983) ("Bancec"), it cannot be held liable for Iran's debts; (B) that the statutes on which Plaintiffs rely to pursue the Blocked Assets, the Terrorism Risk Insurance Act of 2002 (TRIA), Pub. L. No. 107-297, § 201(a), 116 Stat. 2322, 2337 (hereinafter "TRIA"), and the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1610(g) (hereinafter "section 1610(g)"), do not apply retroactively; (C) that TRIA and section 1610(g) only apply where the assets at issue are "assets of" and "property of" Bank Melli, allegations that are missing here; and (D) that Federal Rule of Civil Procedure 19 requires dismissal. See generally MTD. This Order addresses each argument in turn.
Bank Melli argues first that it cannot be held liable for the debts of Iran, because, although it is an instrumentality of Iran, it is juridically distinct. See MTD at 6. No doubt, the Supreme Court held in Bancec, 462 U.S. at 626-27, that "government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such." In addition, the Treaty of Amity between the United States and Iran states that "[c]ompanies constituted under the applicable laws" of each country must "have their juridical status recognized within the territories of the other." Treaty of Amity,Economic Relations, and Consular Rights, U.S.-Iran, Art. III ¶ 1, Aug. 15, 1955, 8 U.S.T. 899.3
However, two statutes permit judgment creditors to execute on Blocked Assets in this context, abrogating Bancec as to terrorism-based judgments against foreign state sponsors of terrorism. Section 1610(g)4 states 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 . . . is subject to attachment in aid of execution, and execution, upon that judgment." TRIA5 similarly provides:
Notwithstanding any other provision of law . . . 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 1605(a)(7) of title 28 United States Code, the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to executionor attachment in aid of execution in order to satisfy such judgment.
Neither of these statutes is the least bit ambiguous - both allow for attaching the blocked assets of a terrorist instrumentality.6 The Court therefore agrees with the Second Circuit's holding in Weinstein that the statutes' plain language defeats Bank Melli's argument. 609 F.3d at 49 ().
Incidentally, the Second Circuit went on to explain that its interpretation was also supported by a floor statement by one of TRIA's sponsors.7 Id. at 50. Bank Melli mischaracterizes Weinstein as having "based its holding on" that legislative history - not so. See Reply (dkt. 117) at 6; Weinstein, 609 F.3d at 50 (). Bank Melli then makes much of the fact that Senator Harkin's words "were never uttered on the Senate floor" but were added to the congressional record after the vote. See Reply at 6-7. As Plaintiffs note, "Senators can, and routinely do, revise and extend their on-floor remarks for inclusion in the Congressional Record." Pls.' Opp'n to MTD (dkt. 115) at 9 n.7. Regardless of the weight to which the floor statement is entitled, however, the plain language of the statutes is unambiguous and dispositive. The Court therefore rejects this argument for dismissal.
Bank Melli next argues that, even if the statutes mean what the Court understands them to mean, they cannot be applied to this case without rendering them impermissibly retroactive. MTD at 15-17. A statute "is retroactive if it alters the legal consequences of acts completed before its effective date."...
To continue reading
Request your trial