Hegna v. Islamic Republic of Iran

• Decision Date: 14 July 2004
• Docket Number: No. 03-2159.,03-2159.
• Citation: 376 F.3d 226
• Parties: Craig HEGNA; Steven Hegna; Lynn Hegna; Paul Hegna; Edwena Hegna, Plaintiffs-Appellants, v. THE ISLAMIC REPUBLIC OF IRAN; The Iranian Ministry Of Information And Security, Defendants-Appellees, and United States Of America, Movant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

376 F.3d 226

Craig HEGNA; Steven Hegna; Lynn Hegna; Paul Hegna; Edwena Hegna, Plaintiffs-Appellants, v. THE ISLAMIC REPUBLIC OF IRAN; The Iranian Ministry Of Information And Security, Defendants-Appellees, and United States Of America, Movant-Appellee.

No. 03-2159.

United States Court of Appeals, Fourth Circuit.

Argued: May 4, 2004.

Decided: July 14, 2004.

Appeal from the United States District Court for the District of Maryland, J. Frederick Motz, J.

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ARGUED:

Ralph P. Dupont, Dupont & Radlauer, Stamford, Connecticut, for Appellants.

Lewis Stanley Yelin, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C., for Appellees.

ON BRIEF:

Robert B. Kershaw, Ward, Kershaw & Minton, P.A., Baltimore, Maryland; Barbara J. Radlauer, Dupont & Radlauer, Stamford, Connecticut, for Appellants.

Barbara C. Hammerle, Chief, Foreign Assets Control, Office of the General, United States Department of the Treasury, Washington, D.C.; Mark A. Clodfelter, Lisa J. Grosh, Attorney-Advisers, Office of the Legal Adviser, United States Department of State, Washington, D.C.; Peter D. Keisler, Assistant Attorney General, Thomas M. DiBiagio, United States Attorney, Gregory G. Katsas, Deputy Assistant Attorney General, Douglas N. Letter, H. Thomas Byron, III, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C., for Appellees.

Before LUTTIG and MICHAEL, Circuit Judges, and Bobby R. BALDOCK, Senior Circuit Judge of the United States Court of

Affirmed by published opinion. Judge LUTTIG wrote the opinion, in which Judge MICHAEL and Senior Judge BALDOCK joined.

OPINION

LUTTIG, Circuit Judge:

Appellants, the Hegna family, are judgment-creditors of the Islamic Republic of Iran ("Iran"). Invoking section 201(a) of the newly-enacted Terrorism Risk Insurance Act of 2002 ("TRIA"), Pub.L. No. 107-297, § 201(a), 116 Stat. 2,322, 2,337 (codified at 28 U.S.C. § 1610 note), the Hegnas attempted to enforce their judgment against Iran by obtaining writs of attachment in aid of execution on two Iranian-owned properties in Bethesda, Maryland. Due to the severance of diplomatic relations between Iran and the United States, both properties are currently in the possession of the United States government. At the motion of the United States, the district court quashed both writs of attachment, on the ground that the properties were not "blocked assets" as that term is defined in section 201(d)(2) of TRIA and, therefore, not subject to execution or attachment under the Act.

We affirm, though for different reasons than those relied upon by the district court. Regardless of whether the Bethesda properties are subject to execution or attachment under TRIA, we hold that, by accepting a compensatory payment under section 2002 of the Victims of Trafficking and Violence Protection Act of 2000 ("Victims Protection Act") Pub.L. No. 106-386, § 2002, 114 Stat. 1,464, 1,541, the Hegnas have relinquished their rights to effect the sale of the properties in satisfaction of their judgment. See Victims Protection Act § 2002(d)(5) (as amended by TRIA § 201(c)(4)). Accordingly, the writs of attachment in aid of execution levied on the Bethesda properties must be quashed.

I.

On or about December 4, 1984, Charles Hegna was murdered by members of Hezbollah, a terrorist organization with ties to the Islamic Republic of Iran ("Iran"), during that organization's hijacking of a Kuwaiti Airlines passenger airplane over the Gulf of Oman.

Until 1996, Hegna's wife and children — the appellants in this case — were barred by the Foreign Sovereign Immunities Act (FSIA) from bringing suit against Iran for its role in his murder. See 28 U.S.C. § 1604 (providing that "a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States," except as expressly provided in subsequent provisions of the FSIA). In that year, however, as part of the Antiterrorism and Effective Death Penalty Act ("AEDPA"), Congress amended the FSIA to allow victims of terrorism to sue countries that have been designated state sponsors of terrorism by the State Department, like Iran, for those countries' provision of "material support" for terrorist acts. See 28 U.S.C. § 1605(a)(7). The Hegna family took advantage of this exception to Iran's immunity from suit, and, on April 3, 2000, brought suit in federal court against Iran and its agent, the Iranian Ministry of Information and Security (MOIS), for their complicity in Charles Hegna's murder. Iran did not appear to defend itself in this action. In February 2002, the Hegnas obtained a default judgment of $42,000,000 in compensatory damages against Iran and the MOIS and $333,000,000 in punitive damages against the MOIS alone. Hegna v. Islamic Republic of Iran, No. 1:00CV00716 (D.D.C. Feb. 7, 2002) (amended order and judgment); J.A. 5-6.

Congress has devised two avenues by which individuals like the Hegnas — successful plaintiffs in suits brought under section 1605(a)(7)'s exception to sovereign immunity — may satisfy their judgments against state sponsors of terrorism. First, Congress has subjected an increasingly broad class of property owned by these nations in the United States to execution and attachment in aid of execution. Congress' latest effort in this regard is embodied in section 201(a) of the TRIA, 28 U.S.C. § 1610 note. Section 201(a) states:

Notwithstanding any other provision of law, and except as provided in subsection (b), 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, the blocked assets 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.

28 U.S.C. § 1610 note.

Second, in the Victims Protection Act, Congress directed the Secretary of the Treasury to make direct payments to certain judgment-creditors of Iran and Cuba from funds belonging to those nations but being held by the United States government. See Victims Protection Act § 2002. As first enacted, the group of individuals eligible to receive these payments under the Act was relatively small and, with five specific exceptions, did not include individuals, such as the Hegnas, who obtained their judgments after July 20, 2000. See Victims Protection Act, Pub.L. No. 106-386, § 2002(a)(2)(A), 114 Stat. 1,464, 1,542 (2002), amended by TRIA § 201(c)(1). Payments under the Act were not designed merely to supplement the plaintiffs' recoveries on their judgments, but rather to replace them. The initial payments authorized by the VPA were equal to the amount of compensatory damages awarded in judgments, and the VPA required the recipients of those payments to relinquish both their "rights and claims" to compensatory damages and, depending on the size of the payment the recipient elected to receive, either their rights to punitive damages or their rights "to execute against or attach" certain properties owned by Iran or Cuba, respectively, in satisfaction of those damages. Victims Protection Act § 2002(a)(2)(B)-(D).

The Victims Protection Act was amended substantially in November 2002 by section 201(c) of TRIA. See TRIA § 201(c), 116 Stat. 2,322, 2,337-39. First, section 201 of TRIA expanded the group of judgment holders eligible for payments to include persons, like the Hegnas, who filed suit against Iran before October 28, 2000. See TRIA § 201(c)(1) (amending Victims Protection Act § 2002(a)(2)(A)(ii)). Second, in anticipation that the funds designated for payments under the Victims Protection Act would not be sufficient to provide the newly-eligible judgment creditors with a payment in the full amount of their compensatory damages, the 2002 amendments directed the Secretary to distribute the remaining funds to qualified judgment holders on a pro-rata basis, based on the size of their respective compensatory damage awards. TRIA § 201(c)(4) (amending Victims Protection Act § 2002(d)). Finally, because these pro-rata payments were likely to be substantially smaller than the full amount of compensatory damages, the amendments no longer required recipients of payments under the Act to relinquish their rights to pursue compensatory damages; however, the Act did require them to forego their "rights and claims" to punitive damages, as well as "all rights to execute against or attach property that is at issue in claims against the United States before an international claims tribunal." TRIA § 201(c)(4) (amending Victims Protection Act § 2002(d)(5)).

In this case, the Hegna family attempted to satisfy their judgment against Iran by pursuing both avenues of recovery. The Hegnas first sought to recover on their judgment through the execution of Iranian properties located in the United States. Relying on the rights given them by section 201(a) of TRIA, the Hegnas obtained writs of attachment upon judgment from the district court in the district of Maryland on two Bethesda, Maryland properties owned by Iran and in the possession of the United States.¹ J.A. 11-12 (district court order of December 27, 2002 issuing writs of attachment on both properties). Pursuant to these writs of attachment a United States marshal levied² on the Bethesda properties on May 28, 2003, and formally executed the writs by filing a return with the clerk's office on June 3, 2003, J.A. 2. Butler v. Tilghman, 350 Md. 259, 711 A.2d 859, 864-65 (1998). The district court quashed the writs at the motion of the United States on August 25, 2003, on the ground that the Bethesda properties were not "blocked assets" under TRIA — and therefore not subject to attachment under the Act — because the properties were "being used exclusively for diplomatic......