2015 International Law Update, Volume 21, Number 3 (July – August - September)

2015 International Law Update, Volume 21, Number 3 (July – August - September)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

DISCOVERY/ENFORCEMENT

Second Circuit considers whether Spanish Bank must respond to information subpoena to support enforcement of damages awarded under FSIA terrorism exception against Cuba

Aldo Vera, Sr. was a Police Chief in Havana, Cuba. Disillusioned with the Communist regime, he fled Cuba and lived in Florida and Puerto Rico, where he participated in counter-revolutionary activities. In 1976, he was shot dead in San Juan, Puerto Rico, allegedly by Cuban agents.

Acting as representative of his father’s estate, Aldo Vera, Jr. in 2001, sued the Republic of Cuba in Florida state court for money damages resulting from his father’s murder. Vera, Jr. based his complaint on the terrorism-exception provision of the Foreign Sovereign Immunities Act (“FSIA”). Cuba failed to appear in the Florida action. After a bench trial in 2008, the state court entered a default judgment in Vera, Jr.’s favor. In 2012, Vera, Jr. filed suit against the Republic of Cuba in the Southern District of New York seeking entry of the Florida Judgment under the Full Faith and Credit Act, 28 U.S.C. § 1738. As Cuba again failed to appear, the district court, by default, entered the Florida judgment on August 20, 2012. On October 11, 2012, the district court authorized Vera, Jr., to pursue attachment and execution on the judgment. Vera, Jr., issued subpoenas to the New York branches of various banks, including Banco Bilbao Vizcaya Argentaria’s (“BBVA”) New York branch, seeking to discover assets that Cuba held at those banks worldwide. BBVA responded by identifying Cuba’s sovereign assets at its New York branch, but did not provide information about Cuba’s assets that the bank may hold abroad. On November 13, 2013, Vera, Jr., moved to compel BBVA’s full compliance with the subpoena. BBVA then cross-moved to quash the subpoena.

Vera, Jr., also filed motions in the district court for orders directing various banks to turn over identified Cuban sovereign assets held at the banks’ New York branches. As a number of banks objected, the district court orally directed Vera, Jr., to file and serve a formal pleading for turnover naming the banks as defendants. As per the court, this action ensured its jurisdiction to order the banks to turn over Cuba’s assets and allowed the banks to interplead other potential claimants to the assets at issue. Accordingly, Vera, Jr., filed with the court, and thereafter served on BBVA and other banks, an omnibus petition for the turnover of Cuban sovereign assets in New York against which writs of execution had been levied under the Southern-District-recognized Florida judgment. While this turnover petition was pending, the district court rejected BBVA’s challenges to jurisdiction and ordered BBVA to provide full and complete answers in respect to Cuba’s assets located in BBVA’s branches in and outside of United States. In its appeal BBVA argued that according to the court’s intervening decision in Gucci America, Inc. v. Weixing Li, 768 F.3d 122 (2d Cir. 2014), BBVA was not subject to general personal jurisdiction in New York, and moved for reconsideration. The district court both denied reconsideration of tis enforcement order and granted the omnibus turnover petition as to Cuba’s sovereign assets held at BBVA’s New York branch. BBVA appealed both orders.

BBVA moved for a stay of the district court’s enforcement orders pending resolution of its appeals, arguing that the district court lacked jurisdiction to order worldwide discovery. Vera, Jr., opposed a stay, arguing, that the court is without jurisdiction because the appealed decisions are not final orders under 28 U.S.C. § 1291.

The United States District Court of Appeals for the Second Circuit dismisses BBVA’s appeals for lack of jurisdiction and denies the stay motion as moot. The key issue here is whether the appealed orders enforcing the subpoena and denying reconsideration are “final decisions” within the meaning of § 1291.

The Court concludes that the orders here at issued do not qualify as final decisions in either of the following respects:

“A final decision is one that ‘ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.’ Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978) (internal quotation marks omitted); accord Cox v. United States, 783 F.3d 145, 147 (2d Cir. 2015). Under the collateral order doctrine, an interlocutory order can also be deemed final and immediately appealable under § 1291 if it ‘(1) conclusively determines a disputed question; (2) resolves an important issue completely separate from the merits of the action; and (3) is effectively unreviewable on appeal from final judgment.’ EM Ltd. v. Republic of Argentina, 695 F.3d 201, 20506 (2d Cir. 2012); see Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 54547 (1949).”

“As precedent makes clear, ‘[u]nder traditional finality principles, a district court’s decision to compel compliance with a subpoena or to deny a motion to quash a subpoena is generally not a `final decision’ and therefore is not immediately appealable.’ In re Air Crash at Belle Harbor, 490 F.3d 99, 104 (2d Cir. 2007) (internal quotation marks omitted). To obtain immediate appellate review of such an order absent § 1292(b) certification, the subpoenaed party must typically ‘defy the district court’s enforcement order, be held in contempt, and then appeal the contempt order, which is regarded as final under § 1291.’ Id. (internal quotation marks omitted). This process, which recognizes only the contempt judgment, not the underlying enforcement order, as a final decision subject to appeal, ‘promotes the strong congressional policy—embodied in 28 U.S.C. § 1291—against piecemeal reviews, and against obstructing or impeding an ongoing judicial proceeding by interlocutory appeals.’ Id. at 105 (internal quotation marks omitted). The availability to BBVA of review upon contempt also precludes application of the collateral order doctrine, which BBVA does not invoke in any event. See Gross v. Rell, 585 F.3d 72, 95 (2d Cir. 2009) (stating that arguments not raised on appeal are deemed waived). Compare Gucci Am., Inc. v. Weixing Li, 768 F.3d at 14142 (reviewing validity of subpoena issued to third-party bank where bank defied enforcement order and was cited for contempt), with EM Ltd. v. Republic of Argentina, 695 F.3d at 20607 (holding that collateral order doctrine afforded Argentina immediate review of order requiring foreign bank to disclose Argentina’s worldwide assets because subsequent appellate review was unavailable and Argentina, as judgment debtor rather than party to whom disclosure order was directed, could not obtain review through disobedience and contempt). “

“The fact that the challenged orders are part of post-judgment litigation warrants no different conclusion. In such circumstances, the relevant “`final decision’ is not the underlying judgment,’ i.e., the Florida judgment that Vera, Jr., was ‘attempting to enforce, but the subsequent judgment that concludes the collection proceedings.’ EM Ltd. v. Republic of Argentina, 695 F.3d at 205. Absent defiance and contempt, appellate review of an order enforcing a subpoena—even one directed to a third party—is generally unavailable until the collection proceedings terminate, at which point the order will merge into the final judgment effecting that termination. See id. at 20506 (holding that discovery order directed to third-party bank is not ‘final decision’ because it does not terminate creditors’ collection proceedings against Argentina); accord United States v. Fried, 386 F.2d 691, 69395 (2d Cir. 1967) (Friendly, J.) (holding that decision to enforce subpoena against third party in post-judgment collection proceedings was not appealable final order).”

The Court does not accept the cases BBVA cited recognizing some subpoena-enforcement orders as § 1291 final decisions, nor that it accept BBVA’s reliance on 28 U.S.C. § 1782 to establish the finality of the challenged orders.

“In those cases, however, the orders were issued to benefit proceedings pending before other authorities. Because the enforcement orders granted all relief sought and thus concluded the work of the issuing district courts, the orders were akin to final judgments, even if not denominated as such. See United States v. Constr. Prods. Research, Inc., 73 F.3d 464, 469 (2d Cir. 1996). […] In such circumstances, ‘[t]he litigation to enforce the subpoena is an entirely self-contained court proceeding, and the court’s order compelling compliance completely dispose[s] of the case, leaving nothing more for the court to do but enforce the judgment.’ Midstream Servs., LP v. Trammochem, 451 F.3d at 94; see Cobbledick v. United States, 309 U.S. 323, 330 (1940) […]. That is not this case. The Southern District order compelling BBVA’s compliance with the challenged subpoena was in furtherance of collection proceedings against Cuba that were, and remain, pending in that court, not in some other tribunal.”

“The same reasoning defeats BBVA’s reliance on 28 U.S.C. § 1782 to establish the finality of the challenged orders. Section 1782(a) allows United States courts to order discovery ‘for use in a proceeding in a foreign or international tribunal.’ Because the issuance of such an order concludes all proceedings before the issuing district court, we have recognized § 1782 orders as final decisions subject to immediate appeal. See Chevron Corp. v. Berlinger, 629 F.3d 297, 306 (2d Cir. 2011). But BBVA was not here subpoenaed to provide discovery for use in a foreign tribunal; it was subpoenaed to provide information in a collection proceeding pending in the Southern District—the same court that issued the discovery order in question. […]”

The Court thus holds that “[…] the finality of the underlying Florida judgment does not determine the finality of the enforcement order issued by the district court. See EM Ltd. v. Republic of Argentina, 695 F.3d at 205. Whether or not the district court’s turnover order is a final decision as to assets already identified and subject to writs of execution, that order plainly does not encompass the unidentified extraterritorial assets that are the subject of the challenged orders. As for the registration and collection action, because we have above determined that it is not yet concluded, an order enforcing a subpoena issued in that action is not a final decision. See In re Air Crash at Belle Harbor, 490 F.3d at 10405.” And concluded that it lacks jurisdiction under 28 U.S.C. § 1291 to review these orders.

The Court dismisses BBVA’s appeals for lack of jurisdiction and denies the stay motion as moot.

Citation:  Vera v. Republic of Cuba, 802 F.3d 242 (2nd Cir. 2015).

ENFORCEMENT OF JUDGMENTS

In case where investors seek to enforce $122 million Moroccan judgment in Texas, Fifth Circuit reviews whether district court correctly refused to recognize the judgment based on Morocco’s purported lack of judicial safeguards

John Paul DeJoria (“DeJoria”), a major investor in an American company called Skidmore Energy, Inc. (“Skidmore”), formed and capitalized a Moroccan corporation, Lone Star Energy Corporation (“Lone Star”) in order to engage in oil exploration and technology projects in Morocco. Because a corporation established under Moroccan law is required to have a “local” shareholder, for Lone Star that local shareholder was Mediholding, S.A. owned by Prince Moulay Abdallah Alaoui, a first cousin of the Moroccan King, King Mohammed VI.

In March 2000, Lone Star entered into an “Investment Agreement” obligating it to invest in hydrocarbon exploration in Morocco. In order to ensure adequate funding, King Mohammed lined up additional investors, Armadillo Holdings (“Armadillo”) (now Mideast Fund for Morocco, or “MFM”), a Liechtenstein — based company. During the agreement negotiations, Skidmore represented to Armadillo that it invested $27.5 million in Lone Star and that Lone Star’s market value was roughly $175.75 million.

In August 2000, King Mohammed announced the discovery of “copious and high-quality oil” in Morocco, however, the oil reserves were not as plentiful as announced. This damaged both the Moroccan government’s credibility and Lone Star’s viability. The business relationship between MFM and Skidmore/DeJoria also suffered. MFM then sued Skidmore, DeJoria, Gustin, and a number of other Skidmore officers in their individual capacities in Moroccan court, asserting that Skidmore fraudulently induced its investment by misrepresenting Skidmore’s actual investment in Lone Star. MPE also joined as plaintiff in the suit and claimed that Skidmore’s fraudulent misrepresentations deprived Lone Star of necessary capital. In response, Skidmore filed two quickly-dismissed lawsuits against MPE, MFM, and other parties in the United States.

The Moroccan court ruled against DeJoria and Gustin but absolved five of their co-defendants – including Skidmore – of liability. The court entered a $122.9 million judgment in favor of MPE and MFM.

When DeJoria sued MPE and MFM in the Texas state court challenging domestic recognition of the Moroccan judgment under Sections 36.005(a)(1), (a)(2), (b)(3), (b)(6), and (b)(7) of the Texas Recognition Act, MPE and MFM removed the action to federal district court based on diversity of citizenship. The district court granted DeJoria’s motion for non-recognition, concluding that Morocco’s judicial system failed to provide impartial tribunals and procedures compatible with due process as required under Section 36.005(a)(1) of the Act. MPE and MFM appealed.

The United States Court of Appeals for the Fifth Circuit reverses the district court’s decision.

The Court reviews de novo district court’s decision not to recognize the foreign judgment.

“In Texas, the recognition of foreign judgments is governed by the Texas Recognition Act. Tex. Civ. Prac. & Rem. Code Ann. §§ 36.00136.008. Under the Act, unless a ground for non-recognition applies, the judgment of a foreign country is ‘conclusive between the parties’ and ‘enforceable in the same manner as a judgment of a sister state that is entitled to full faith and credit.’ Id. § 36.004. The ten statutory grounds for non-recognition are the only defenses available to a judgment debtor. See Beluga Chartering B.V., 294 S.W.3d at 304.”

“The party seeking to avoid recognition of a foreign judgment has the burden of establishing one of these statutory grounds for non-recognition. Presley, 370 S.W.3d at 432; see also Diamond Offshore (Bermuda), Ltd. v. Haaksman, 355 S.W.3d 842, 845 (Tex. App.Houston [14th Dist.] 2011) (‘Unless the judgment debtor satisfies its burden of proof by establishing one or more of the specific grounds for non-recognition, the court is required to recognize the foreign judgment.’)”

One of the grounds that DeJoria asserted for non-recognition of the Moroccan judgment was that the Moroccan judicial system does not provide due process. The Court disagrees, and states:

“[…]Under the Texas Recognition Act, a foreign judgment is not conclusive and is thus unenforceable if ‘the judgment was rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law.’ Tex. Civ. Prac. & Rem. Code Ann. § 36.005(a)(1). ‘[T]he statute requires only the use of procedures compatible with the requirements of due process[. T]he foreign proceedings need not comply with the traditional rigors of American due process to meet the requirements of enforceability under the statute.’ Soc’y of Lloyd’s v. Turner, 303 F.3d 325, 330 (5th Cir. 2002) (internal quotations omitted). That is, the foreign judicial system must only be ‘fundamentally fair’ and ‘not offend against basic fairness.’ Id. (internal quotations omitted);  […] This concept sets a high bar for non-recognition. See Turner, 303 F.3d at 330 n.16 (‘A case of serious injustice must be involved.’) (quoting Uniform Foreign Money-Judgments Recognition Act § 4 cmt., U.L.A. (1986)).”

“The court’s inquiry under Section 36.005(a)(1) focuses on the fairness of the foreign judicial system as a whole, and we do not parse the particular judgment challenged. See Turner, 303 F.3d at 330. The plain language of the Texas Recognition Act requires that the foreign judgment be ‘rendered [only] under a system that provides impartial tribunals and procedures compatible with due process.’ Id. (internal quotations omitted). […]”

The Court declines to accept DeJoria’s evidence presented in order to justify non-recognition of the Moroccan judgment, concluding that this evidence did not present the entire picture.

“The Texas Recognition Act does not require that the foreign judicial system be perfect. Instead, a judgment debtor must meet the high burden of showing that the foreign judicial system as a whole is so lacking in impartial tribunals or procedures compatible with due process so as to justify routine non-recognition of the foreign judgments. See Turner, 303 F.3d at 330. DeJoria has not met this burden. Based on the evidence in the record, we cannot agree that the Moroccan judicial system lacks sufficient independence such that fair litigation in Morocco is impossible. The due process requirement is not ‘intended to bar the enforcement of all judgments of any foreign legal system that does not conform its procedural doctrines to the latest twist and turn of our courts.’ Ashenden, 233 F.3d at 476. […]”

The Court then compares the Moroccan judicial system with the judicial systems of foreign countries that have failed to meet due process standards, taking as example the Ninght Circuit decision in Bank Melli Iran v. Pahlavi, . 58 F.3d 1406, 1411-13 (9th Cir. 1995) and Second Circuit’s decision in Bridgeway Corp. v. Citibank, 201 F.3d 134, 144 (2d Cir. 2000).

 “Pahlavi and Bridgeway … exemplify how a foreign judicial system can be so fundamentally flawed as to offend basic notions of fairness. Unlike the Iranian system in Pahlavi, there is simply no indication that it would be impossible for an American to receive due process or impartial tribunals in Morocco. In further contrast with Pahlavi, there is no record evidence of a demonstrable anti-American sentiment in Morocco; in fact, American law firms do business in Morocco. While the judgment debtor in Pahlavi could not have retained representation in Iran, Skidmore—a codefendant in the Moroccan case—did briefly retain Moroccan attorney Azzedine Kettani until a conflict of interest forced his withdrawal. One expert opined that it is ‘not at all uncommon’ for Moroccan attorneys to represent unpopular figures in Moroccan courts. Bridgeway presents an even more stark contrast. Morocco’s judicial system is not in a state of complete collapse, and there is no evidence that Moroccan courts or the Moroccan government routinely disregard constitutional provisions or the rule of law. Because Morocco’s judicial system is not in such a dire situation, it does not present the unusual case of a foreign judicial system that ‘offend[s] against basic fairness.’ Turner, 303 F.3d at 330 (internal quotations omitted).”

“The Texas Recognition Act’s due process standard requires only that the foreign proceedings be fundamentally fair and inoffensive to ‘basic fairness.’ Presley, 370 S.W.3d at 434. This standard sets a high bar for non-recognition. The Moroccan judicial system does not present an exceptional case of ‘serious injustice’ that renders the entire system fundamentally unfair and incompatible with due process. The district court thus erred in concluding that non-recognition was justified under Section 36.005(a)(1) of the Texas Recognition Act.”

The Court holds that the district court erred in concluding that non-recognition was justified under Section 36.005(a)(1) of the Texas Recognition Act, and reverses the district court decision.

Citation:  DeJoria v. Maghreb Petroleum Exploration, SA, 804 F.3d 373 (5th Cir. 2015).

HOSTAGE TAKING

After hostage takers who abducted U.S. citizen in the Republic of Trinidad and Tobago where extradited to U.S., District of Columbia Circuit ponders whether Hostage Taking Act applies in cases where the alleged victim obtained U.S. citizenship by fraud

Defendants Wayne Pierre, Ricardo De Four, Zion Clarke, Kevon Demerieux, Kevin Nixon, Christopher Sealey, and Anderson Straker, nationals of the Republic of Trinidad and Tobago, throughout the years abducted wealthy individuals, held them captive, and extorted ransoms from their family and friends.

On April 6, 2005, they abducted a Trinidad-native and a United States citizen, Balram Maharaj, who visited his children in Trinidad. The defendants delivered Maharaj to an isolated camp deep within the forest where they tied him to a post and gave him little food and water. Maharaj suffered from severe diabetes, hypertension and tuberculosis. The defendants ignored his pleas for medication and used his worsening health as leverage to demand three million Trinidadian dollars from his family. After six days in captivity, missing the medication, Maharaj slipped into a diabetic coma and died. Defendants dismembered his body, packed the remains in Styrofoam containers and buried them in the woods.

In late 2005, assisted by FBI, the Trinidad and Tobago Police Service uncovered evidence of Maharaj’s death. The United States sought the extradition of the defendants and charged them with conspiracy and hostage-taking resulting in death in violation of The Hostage Taking Act, 18 U.S.C. § 1203. As the United States citizenship is an essential element of a Hostage Taking Act prosecution, defendants argued that Maharaj secured his citizenship through fraud. He had allegedly failed to disclose an assault on his wife in his U.S. immigration applications. The district court denied this argument. The jury convicted defendants of all charges, and the district court sentenced them to life imprisonment without the possibility of release. Defendants appealed.

The United States Court of Appeals for the District of Columbia Circuit affirms defendants’ convictions and the judgment of the district court.

The issue here is whether The Hostage Taking Act, 18 U.S.C. § 1203, that prescribes criminal penalties for foreign nationals who abduct American citizens, applies if after the crime was committed the victim’s citizenship is found invalid.

The Hostage Taking Act was enacted to fulfill the United States’ obligations under the International Convention Against the Taking of Hostages. Section 18 U.S.C. § 1203, and makes extraterritorial hostage-taking a criminal offense when the victim is a United States national.

Before the trial defendants uncovered evidence they claimed demonstrated that Maharaj obtained his naturalization through fraud, by misrepresenting facts on his green card application, and later on his naturalization application. The defendants thus argued that because conviction under the Hostage Taking Act requires U.S. citizenship and because Maharaj’s fraud negated his citizenship, the district court lacked jurisdiction.

“The district court disagreed. Citing a long and unbroken line of Supreme Court precedent, see, e.g., United States v. Zucca, 351 U.S. 91, 95 & n.8 (1956); see also Bindczyck v. Finucane, 342 U.S. 76, 83 (1951), the district court held that 8 U.S.C. § 1451, which permits the United States Attorney to institute denaturalization proceedings in a federal district court, is the exclusive procedure for voiding the citizenship of a person naturalized due to fraud. United States v. Clarke, 628 F. Supp. 2d 1, 9 (D.D.C. 2009). Citizenship, the court held, remains valid until a district court, acting upon a United States Attorney’s section 1451 motion, determines that naturalization was ‘procured by concealment of a material fact or fraud.’ Id. at 6 (quoting 8 U.S.C. § 1451(a)). Given that no district court had ever made such a finding as to Maharaj, the court denied the motion. Clarke, 628 F. Supp. 2d at 10.”

“The district court also granted the government’s motion in limine to exclude from trial any evidence regarding Maharaj’s alleged fraud. Id. at 13. Conviction under the Hostage Taking Act, the court held, requires the government to prove that the victim acquired citizenship by birth or naturalization. Id. at 13. Evidence disputing whether the victim should have been naturalized or the circumstances surrounding naturalization is irrelevant. Id. The court therefore rejected defendants’ argument that they had a Sixth Amendment right to present evidence regarding Maharaj’s alleged fraud to the jury. Id. at 14. ‘[T]he jury,’ the district court concluded, ‘may not decide the validity of Maharaj’s citizenship.’ Id. at 13.”

Furthermore, defendants argued that “[a] claim that an element of the offense is unsatisfied—that the victim was not a United States citizen, for example—goes only to a defendant’s guilt or innocence. In other words, jurisdiction hinges not on the merits, but rather on the court’s constitutional or statutory power to adjudicate the case. Lamar v. United States, 240 U.S. 60, 64 (1916) (‘Jurisdiction is a matter of power, and covers wrong as well as right decisions.’). Under 18 U.S.C. § 3231, federal district courts possess statutory authority over ‘all offenses against the laws of the United States.’ Because violation of the Hostage Taking Act is an offense against the laws of the United States, our jurisdictional inquiry ends and we turn to the merits of defendants’ appeal. United States v. Fahnbulleh, 752 F.3d 470, 476 (D.C. Cir. 2014) (‘If an indictment or information alleges the violation of a crime set out in Title 18 or in one of the other statutes defining federal crimes, that is the end of the jurisdictional inquiry.’) (internal quotation marks omitted).”

“[…] [T]he Hostage Taking Act. Section 1203(b)(1)(A) criminalizes hostage-taking that occurs outside the United States if ‘the person seized or detained is a national of the United States.’ A ‘national of the United States’ is, in turn, defined by reference to the Immigration and Nationality Act as ‘a citizen of the United States.’ 18 U.S.C. § 1203(c); 8 U.S.C. § 1101(a)(22). By its plain language, then, section 1203 broadly protects United States citizens. The statute imposes no restriction on this protection. It does not, for example, exclude citizens who, in retrospect, are unworthy of the honor. Nor does it exclude persons whose citizenship might at some later time be invalidated. In other words, section 1203 protects victims according to their status at the time of the hostage-taking.”

“True, section 1203 is written in the present tense—the statute applies if ‘the person seized or detained is a national of the United States.’ But that clause appears in a criminal statute that requires examination of past events—whether the victim was seized or detained. See Cullen v. Pinholster, 131 S. Ct. 1388, 1398 (2011) (use of backward-looking language such as ‘resulted in’ and ‘involved’ in federal habeas statute, 28 U.S.C. § 2254(d), requires examination of the state-court decision at the time it was made). […]Determining whether an American citizen was seized or detained under the Hostage Taking Act requires examination of the victim’s status at the time of the abduction.”

The Court concludes that “Congress has vested sole naturalization authority in the Attorney General, 8 U.S.C. § 1421(a), and a certificate of naturalization represents conclusive evidence of the Attorney General’s determination, Tutun v. United States, 270 U.S. 568, 577 (1926); 8 U.S.C. § 1443(e). […] [W]hether the Attorney General, acting through INS, should have issued a certificate to Maharaj—as opposed to whether the certificate was itself authentic—is irrelevant under the Hostage Taking Act”, and affirms district court’s decision.

Citation: U.S. v. Straker, 800 F.3d 570 (D.C. Cir. 2015).

SOVEREIGN IMMUNITY

After Argentina defaulted on bonds, creditors seek to satisfy $2.4 billion judgment through funds held by the Argentine Central Bank through declaratory judgment that the Central Bank is an alter ego; Second Circuit reviews whether district court erred in denying the Central Bank’s motion to dismiss based on sovereign immunity

In 1994, the Republic of Argentina (“Argentina”) began issuing debt securities pursuant to a Fiscal Agency Agreement (“FAA”). The FAA included a waiver of Argentina’s foreign sovereign immunity as to “any suit, action, or proceeding against it or its properties, assets or revenues with respect to the” FAA bonds, and any suit brought “for the purpose of enforcing or executing” a judgment obtained in a related proceeding.

In December 2001, Argentina declared a moratorium on principal and interest payments for more than $80 billion in sovereign debt, including the bounds issued under the FAA, and since then did not make principal or interest payments on these bonds. In 2005 and 2010, Argentina restructured over 91% of its debt by launching “global exchange offers”, pursuant to which creditors holding the defaulted bonds could exchange them for new securities with modified terms that substantially reduced their value. EM Ltd. (“EM”) and NML Capital Ltd. (“NML”) (jointly, “plaintiffs”) own FAA bonds that were not restructured.

In an effort to recover the full amounts due on their defaulted bonds, beginning in 2003, plaintiffs filed multiple actions against Argentina in the Southern District of New York and obtained numerous final judgments against Argentina, totaling in $2.4 billion. Argentina did not dispute that its sovereign immunity had been waived in the FAA, but the judgments remained unpaid.

In their third amended complaint (“TAC”), plaintiffs seek to satisfy their judgments against Argentina by attaching funds held by Argentina’s central banking authority, the Banco Central de la Republica Argentina (“BCRA”)requesting a declaratory judgment that BCRA is Argentina’s “alter ego” and, therefore,  liable for Argentina’s debts. BCRA moved to dismiss plaintiffs’ complaint for lack of subject matter jurisdiction on sovereign-immunity grounds under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1602 et seq. (“FSIA”), as well as for lack of personal jurisdiction and for failure to state a claim upon which relief can be granted. On September 26, 2013, the District Court issued an order denying BCRA’s motion, concluding that BCRA waived it sovereign immunity under the statutory exceptions for two reasons: (1) the District Court held that the FAA’s express waiver of sovereign immunity also waived BCRA’s immunity— under 28 U.S.C. § 1605(a)(1)—because BCRA is Argentina’s “alter ego,” and (2) the District Court held that BCRA’s use of its account with the Federal Reserve Bank of New York (“FRBNY”) constituted “commercial activity” in the United States, which waived BCRA’s sovereign immunity under 28 U.S.C. § 1605(a)(2). This appeal followed.

The United States Court of Appeals for the Second Circuit reverses the District Courts’ order and remands the cause with instructions to dismiss the TAC with prejudice, concluding that neither of the statutory exceptions applies to this case, and that the District court erred in denying BCRA’s motion to dismiss for lack of subject matter jurisdiction.

The Court proceeds to solve the issue of whether an instrumentality of a sovereign state becomes the “alter ego” of that state under the FSIA 28 U.S.C. § 1605(a)(1), starting with the controlling case of First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983)—known as Bancec.

“[…] In Bancec, the Supreme Court created a presumption that ‘government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such.’  According to the Court,

[f]reely ignoring the separate status of government instrumentalities would result in substantial uncertainty over whether an instrumentality’s assets would be diverted to satisfy a claim against the sovereign, and might thereby cause third parties to hesitate before extending credit to a government instrumentality without the government’s guarantee. As a result, the efforts of sovereign nations to structure their governmental activities in a manner deemed necessary to promote economic development and efficient administration would surely be frustrated.”

Furthermore, the FSIA 28 U.S.C. § 1610(b) provision’s legislative history addressing the circumstances in which a judgment creditor may execute upon the assets of a foreign government’s instrumentality:

“Section 1610(b) [of the FSIA] will not permit execution against the property of one agency or instrumentality to satisfy a judgment against another, unrelated agency or instrumentality. There are compelling reasons for this. If U.S. law did not respect the separate juridical identities of different agencies or instrumentalities, it might encourage foreign jurisdictions to disregard the juridical divisions between different U.S. [public] corporations or between a U.S. [public] corporation and its independent subsidiary. However, a court might find that property held by one agency is really the property of another.”

“Therefore, Bancec recognizes a statutory ‘presumption that a foreign government’s determination that its instrumentality is to be accorded separate legal status’ will be honored. But this presumption of separateness may be rebutted by evidence establishing an alter-ego relationship between the instrumentality and the sovereign state that created it. Specifically, the presumption may be overcome and an alter-ego relationship established if: (1) the instrumentality ‘is so extensively controlled by its owner that a relationship of principal and agent is created’ or (2) the recognition of an instrumentality’s separate legal status would work a ‘fraud or injustice.’ As we previously noted, ‘both Bancec and the FSIA legislative history caution against too easily overcoming the presumption of separateness.’”

As TAC did not allege facts sufficient to establish that either: “[…](1)  Argentina so extensively controlled BCRA that a relationship of principal and agent was created or (2) recognizing BCRA as a separate entity would work a fraud or injustice[…],” it did not overcome the presumption that BCRA is legally separated and distinct from Argentina. Thus the Court concluded that “[b]ecause Argentina’s express waiver of sovereign immunity in the FAA does not apply to BCRA, plaintiffs’ reliance on the § 1605(a)(1) exception necessarily fails.”

The Court first addresses Bancec’s “extensive control” prong, listing the factors that have been deemed relevant in measuring the level of control exercised over an instrumentality by a foreign sovereign. As the Court states, “[t]hese factors are relevant to answering the touchstone inquiry for ‘extensive control’: namely, whether the sovereign state exercises significant and repeated control over the instrumentality’s day-to-day operations”, such as (1) uses the instrumentality’s property as its own; (2) ignores the instrumentality’s separate status or ordinary corporate formalities; (3) deprives the instrumentality of the independence from close political control that is generally enjoyed by government agencies; (4) requires the instrumentality to obtain approvals for ordinary business decisions from a political actor; and (5) issues policies or directives that cause the instrumentality to act directly on behalf of the sovereign state.” Applying these factors to BCRA the court concluded that “’on paper,’ BCRA appears to be a typical government instrumentality entitled to separate legal status, ” and added that “these facts do not support a claim of ‘extensive control,’ because whatever control Argentina exerted was not tied to BCRA’s day-to-day operations.”

The Court states two reasons for that:

“First, [t]he hiring and firing of board members or officers is an exercise of power incidental to ownership, and ownership of an instrumentality by the parent state is not synonymous with control over the instrumentality’s day-to-day operations. Governments commonly exercise some measure of control over their instrumentalities, much like parent corporations commonly control certain aspects of otherwise independent subsidiaries. […][Moreover] [e]nsuring that a board of directors of an instrumentality shares the sovereign’s goals and policies for the instrumentality is not, by itself, extensive control. The sovereign must instead use its influence over these directors in order to interfere with the   instrumentality’s ordinary business affairs.”

Second,” [t] he Republic’s decision to use BCRA to repay its debt to the IMF and other creditors is not indicative of the extensive control that concerned the Supreme Court in Bancec.”

Furthermore, the Court denied the allegations in TAC that Argentina and BCRA coordinated their activities in implementing an “inflationary” monetary policy, stating that “[t]he alleged ‘coordination’ of monetary-policy actions between Argentina and BCRA is simply not sufficient to establish ‘extensive control.’ The Court thus concluded that “[b]ecause the facts alleged do not establish that the Republic exercised extensive control over BCRA’s day-to-day operations, the first prong of the Bancec test has not been met.”

The Court then turns to the second prong of the Bancec alter-ego test, stating that “[t]he purpose of this prong is to prevent foreign states from ‘avoid[ing] their obligations by engaging in abuses of corporate form.’”

Starting from Bancec, Bridas S.A.P.I.C , 447 F.3d at 417, and  Kensington International Ltd. v. Republic of Congo, No. 03 Civ. 4578 (LAP), 2007 WL 1032269 (S.D.N.Y. Mar. 30, 2007), the Court denied plaintiffs’ claim that it would be a fraud or injustice to allow Argentina to use funds from BCRA to pay certain “preferred” creditors while at the same time “stiffing” plaintiffs, and concluded that “[…]there is nothing irregular or fraudulent about Argentina recognizing a preference for repaying one set of creditors over another.”

Moreover, the Court sees plaintiffs’ allegations that BCRA transferred some of the funds deposited in its FRBNY account to the Bank of International Settlements in Switzerland as an action that did nothing to frustrate plaintiffs’ ability to collect on their judgments against Argentina. As the “funds deposited in BCRA’s own account were in any event immune from attachment,” the Court concluded that “BCRA was only guilty of moving funds from one attachment-proof account to another.”

“Plaintiffs’ factual allegations simply do not show that Argentina has used BCRA to frustrate the collection efforts of its creditors, or that Argentina treated BCRA as a ‘sham’ entity to hide its own assets. These allegations simply do not establish that the recognition of BCRA’s separate status would work a ‘fraud or injustice’ within the meaning of Bancec.”

“Because the TAC fails to counter, much less overcome, the presumption that BCRA and Argentina are legally separate entities, BCRA does not constitute Argentina’s ‘alter ego’ for the purposes of this suit. Argentina’s express waiver of its own sovereign immunity in the FAA, therefore, may not be imputed to BCRA. Accordingly, we conclude that the express waiver exception— § 1605(a)(1)—does not apply to this case.”

The Court reverses the District Court’s order and remands the cause with instructions to dismiss the Third Amended Complaint with prejudice.

Citation: EM Ltd. v. Banco Central de La Republica Argentina, 800 F.3D 78 (2nd Cir. 2015).

SOVEREIGN IMMUNITY

Second Circuit affirms $314 million default judgment against Sudan resulting from terrorist attack on U.S.S. Cole in the Port of Aden, Yemen; service through Sudanese Embassy in U.S. was proper

The plaintiffs—appellants in this case are sailors and spouses of sailors injured in the bombing of the U.S.S. Cole, on October 12, 2000, in the port of Aden, Yemen. In 2010, they brought suit in the United States District Court for the District of Columbia (the “D.C. District Court”) under the Foreign Sovereign Immunities Act (the “FSIA”), 28 U.S.C. §§ 1330, 1602 et seq., alleging that al Qaeda was responsible for the attack and that the Republic of Sudan (“Sudan”) had provided material support to al Qaeda.

Plaintiffs filed an Affidavit Requesting Foreign Mailing, pursuant to 28 U.S.C. § 1608(a)(3), and requested that the Clerk of Court mails the summons and complaint via registered mail, return receipt requested, to Republic of Sudan’s Minister of Foreign Affairs at the time, through the Embassy located in Washington DC. On November 17, 2010, the Clerk of Court entered a Certificate of Mailing certifying that the summons and complaint were sent via domestic certified mail at the Sudanese Embassy in Washington, D.C., and that the return receipt was returned to the Clerk of Court and received on November 23, 2010. Sudan failed to serve an answer or other responsive pleading within sixty days after plaintiffs’ service, and the Clerk of Court entered a default against Sudan.

On March 30, 2012, the D.C. District Court entered a default judgment against Sudan in the amount of $314,705,896, and found that service on Sudan had been proper. Plaintiff then filed a second Affidavit Requesting Foreign Mailing, requesting the Clerk to mail notice of the Order and Judgment and the Memorandum Opinion entered by the D.C. District Court, by registered mail, return receipt requested. The Clerk certified in April 2012 that the documents had been mailed, however Sudan failed to appear or contest the judgment.

On October 2, 2012, plaintiffs registered the judgment in the Southern District of New York, seeking to execute against respondent bank holding Sudanese frozen assets, while on May 9, 2013, filed a Notice of Pending Action.

Following a motion by plaintiffs, the D.C. District Court entered an order finding that post-judgment service had been effectuated, and that sufficient time had elapsed following the entry of judgment and the giving of notice of such judgment to seek attachment and execution; and a few months later, entered an order finding that sufficient time had passed since entry of the default judgment, and that service of the default judgment had been properly effectuated. Sudan failed to challenge both orders.

When the plaintiffs filed a series of petitions in the Southern District seeking turnover of Sudanese assets, the District Court granted the petitions, issuing turnover orders. Plaintiffs then served all three petitions, as well as their § 1610(c) motion, by U.S. mail addressed to Sudan’s Minister of Foreign Affairs via the Embassy of Sudan in Washington. Sudan then filed its notice of appearance, and the same day appealed.

The United States Court of Appeals for the Second Circuit affirms the District Court’s decision.

The issue here is whether service of process on the Sudanese Minister of Foreign Affairs via the Sudanese Embassy in Washington complied with the requirement of 28 U.S.C. § 1608(a)(3) that service be sent to the head of the ministry of foreign affairs.

“The FSIA provides the sole means for effecting service of process on a foreign state. See 28 U.S.C. § 1608(a) H.R. Rep. No. 941487, at 23 (1976), as reprinted in 1976 U.S.C.C.A.N. 6604, 6622 (‘Section 1608 sets forth the exclusive procedures with respect to service on . . . a foreign state. . . .’). Four methods of service are prescribed, in descending order of preference. 28 U.S.C. § 1608(a)(1)(4). Plaintiffs must attempt service by the first method, or determine that it is unavailable, before attempting subsequent methods in the order in which they are laid out.”

“The first method is service ‘in accordance with any special arrangement for service between the plaintiff and the foreign state or political subdivision.’ Id. § 1608(a)(1). In the absence of such a special arrangement, the statute next permits service ‘in accordance with an applicable international convention on service of judicial documents.’ Id. § 1608(a)(2). If neither of these first two methods is available, plaintiffs may proceed according to the third method, which permits service ‘by sending a copy of the summons and complaint and a notice of suit, together with a translation of each into the official language of the foreign state, by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the head of the ministry of foreign affairs of the foreign state concerned.’ Id. § 1608(a)(3) (emphasis added). Finally, the statute provides that if service cannot be made under the first three paragraphs, service is permitted as a last resort ‘by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the Secretary of State in Washington, District of Columbia, to the attention of the Director of Special Consular Services — and the Secretary shall transmit one copy of the papers through diplomatic channels to the foreign state.’ Id. § 1608(a)(4).”

The Court finds that plaintiffs complied with the first three clauses of 28 U.S.C. § 1608(a)(3). However, on appeal, Sudan argued that the service did not comply with the requirements of the final clause of  28 U.S.C. § 1608(a)(3), and that the service should have been sent to Sudan’s Minister of Foreign Affairs at the Ministry of Foreign Affairs in Khartoum, and that because service was ineffective under § 1608(a), the D.C.  District Court lacked personal jurisdiction over Sudan.

To answer this issue, the Court takes a look at the statutory language:

“On its face, the statute requires that process be mailed ‘to the head of the ministry of foreign affairs of the foreign state.’ 28 U.S.C. § 1608(a)(3). It is silent as to a specific location where the mailing is to be addressed. If Congress had wanted to require that the mailing be sent to the head of the ministry of foreign affairs in the foreign county, it could have said so. In § 1608(a)(4), for example, Congress specified that the papers be mailed ‘to the Secretary of State in Washington, District of Columbia, to the attention of the Director of Special Consular Services,” for transmittal to the foreign state ‘through diplomatic channels.’ Id. § 1608(a)(4) (emphasis added). Nothing in § 1608(a)(3) requires that the papers be mailed to a location in the foreign state, and the method chosen by plaintiffs — a mailing addressed to the minister of foreign affairs at the embassy — was consistent with the language of the statute and could reasonably be expected to result in delivery to the intended person.”

The Court then looks at the case law.

“[…]In Rux v. Republic of Sudan, the Eastern District of Virginia rejected Sudan’s contention that service had to be mailed directly to the Minister of Foreign Affairs at the Ministry of Foreign Affairs in Khartoum, rather than to the Minister of Foreign Affairs via the Sudanese Embassy. No. 04CV428, 2005 WL 2086202, at *16 (E.D. Va. Aug. 26, 2005), aff’d on other grounds, 461 F.3d 461 (4th Cir. 2006). The district court found that ‘[t]he text of § 1608(a)(3) does not prohibit service on the Minister of Foreign Affairs at an embassy address. Indeed, the statute does not prescribe the place of service, only the person to whom process must be served.’ Id.”

“In another case, Wye Oak Technology, Inc. v. Republic of Iraq, the Eastern District of Virginia similarly held that service via an embassy is sufficient to satisfy the FSIA as long as the service is directed to the Minister of Foreign Affairs. No. 09CV793, 2010 WL 2613323, at *56 (E.D. Va. June 29, 2010), aff’d on other grounds, 666 F.3d 2015 (4th Cir. 2011). In Wye Oak, a summons was issued by the clerk of the court to the ‘Head of the Ministry of Foreign Affairs of Iraq, care of the Embassy of the Republic of Iraq in Washington, DC.’ Id. at *4 (internal quotation marks omitted). The district court found that:

Section (a)(3) does not impose a requirement that an otherwise proper service package must be delivered to a particular destination. No doubt, the address to which the service package is directed must bear some objectively reasonable relationship to the head of the Ministry of Foreign Affairs and the chosen method of delivery must have some reasonable expectation of success. However, there is nothing on the face of Section (a)(3) that prohibits [plaintiff]’s chosen method of delivery to the head of the Ministry of Foreign Affairs. . . .

Id. at *5. We agree.”

The Court also looks at the legislative record on § 1608(a)(3).

“The 1976 House Judiciary Committee Report seemed to contemplate—and reject—service on an embassy in its discussion of proposed methods of service under the FSIA:

A second means [of service], of questionable validity, involves the mailing of a copy of the summons and complaint to a diplomatic mission of the foreign state. Section 1608 precludes this method so as to avoid questions of inconsistency with section 1 of article 22 of the Vienna Convention on Diplomatic Relations, 23 UST 3227, TIAS 7502 (1972), which entered into force in the United States on December 13, 1972. Service on an embassy by mail would be precluded under this bill. See 71 Dept. of State Bull. 45859 (1974). H.R. Rep. No. 941487, at 26 (1976), as reprinted in 1976 U.S.C.C.A.N. 6604, 6625. This report, though, fails to make the distinction at issue in the instant case, between ‘[s]ervice on an embassy by mail,’ id. (emphasis added), and service on a minister of foreign affairs via or care of an embassy. The House Report suggests that § 1608 precludes service on an embassy to prevent any inconsistency with the Vienna Convention on Diplomatic Relations, Apr. 18, 1961, 23 U.S.T. 3227 (entered into force in United States Dec. 13, 1972) [hereinafter Vienna Convention]. The relevant sections of the Vienna Convention say only that ‘[t]he premises of the mission shall be inviolable,’ and that ‘[a] diplomatic agent shall. . .. enjoy immunity from [the host state’s] civil and administrative jurisdiction.” Id. arts. 22, 31. In a case where the suit is not against the embassy or diplomatic agent, but against the foreign state with service on the foreign minister via the embassy address, we do not see how principles of mission inviolability and diplomatic immunity are implicated. Moreover, Sudan has not sought to rely on this legislative history.”

“In this case, service was directed to the right individual, using the Sudanese Embassy address for transmittal. Process was not served on the foreign mission rather, process was served on the Minister of Foreign Affairs via the foreign mission. The requirement advanced by Sudan, that service be mailed directly to a ministry of foreign affairs in the foreign country, makes little sense from a reliability perspective and as a matter of policy. While direct mailing relies on the capacity of the foreign postal service or a commercial carrier, mail addressed to an embassy — as an extension of the foreign state — can be forwarded to the minister by diplomatic pouch. See Rux, 2005 WL 2086202, at *16 (addressing the ‘inherent reliability and security associated with diplomatic pouches,’ which, ‘unlike the United States Postal Service, DHL, or any other commercial carrier, is accorded heightened protection under international law to ensure safe and uncompromised delivery of documents between countries.’ (citing Vienna Convention, art. 27)).”

The Court thus concludes that plaintiffs complied with the FSIA’s service of process requirements at 28 U.S.C. § 1608(a)(3).

The Court affirms the district court’s decision.

Citation:  Harrison v. Republic of Sudan, 882 F.Supp.2d 23 (2nd Cir. 2015).

SOVEREIGN IMMUNITY

In the context of enforcing judgments against Iran for terrorist acts it allegedly sponsored, Ninth Circuit reviews whether victims of terrorism can collect on money judgments against the sponsoring states or their instrumentalities that were not parties to the underlying lawsuit

Four separate groups, 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 were 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 were owed almost $20 million for a 2001 bombing of a Jerusalem restaurant. The Acosta creditors were owed over $350 million for Iran’s part in a 1990 mass shooting. Finally, the Heiser creditors were owed over $590 million for a 1996 bombing in Saudi Arabia. All judgments were by default and no one disputes that all four creditors are owed money by Iran.

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

However, winning a money judgment is only half the battle because sovereign immunity separately protects the assets of a foreign sovereign from attachment. Therefore, Congress enacted two statutes to address this problem: 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). The TRIA provides that “the blocked assets of a 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 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 provide creditors an opportunity to collect on the judgments they have obtained. Such opportunity arose when the Department of Treasury issued an 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 seized their chance to collect on their judgments and filed a complaint seeking access to $17.6 million in blocked assets held by Visa and Franklin, but owed to Bank Melli, Iran’s national bank. Fearing they might be liable to Bank Melli if they 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 subsequently deposited the funds into the district court’s registry. Bank Melli moved to dismiss. The district court denied that motion but certified its order for interlocutory appeal under 28 U.S.C. § 1292(b).

The U.S Court of Appeals for the Ninth Circuit affirms. The core issue is whether victims can collect from an instrumentality of a state that has sponsored terrorism when the instrumentality is a separate juridical entity that was not a party to the underlying lawsuit.

Bank Melli offered four arguments why the creditors should be barred from collecting the funds. First, it argued that the assets are protected by sovereign immunity notwithstanding the TRIA and section 1610(g) since those statutes waive sovereign immunity only for the “terrorist party”, Iran, and Bank Melli is a separate juridical entity. Second, it asserts that Federal Rule of Civil Procedure 19 requires dismissal of this 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 statute was enacted. Finally, Bank Melli claims that the frozen assets are not 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 are not “owned” by Bank Melli.

To make its case, Bank Melli relies 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 (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. Bank Melli contends that the TRIA and section 1610(g) incorporate Bancec’s distinction only as to those instrumentalities that fall within Bancec’s two exceptions. Because an alter ego under Bancec is the terrorist party, there would be no need for Congress to separately provide for attachment against instrumentalities unless it sought to extend coverage to those instrumentalities that cannot be equated with the terrorist party itself.

The court agreed with the Second Circuit that Section 201(a) of the TRIA provides courts with subject matter jurisdiction over attachment proceedings against property held in the hands of an instrumentality of the judgment-debtor, even if the instrumentality is not itself named in the judgment.” Weinstein v. Islamic Republic of Iran, 609 F.3d 43, 50 (2d Cir. 2010).

Bank Melli argued that section 1610(g) does not permit attachment because the 1955 Treaty of Amity between the U.S. and Iran prohibits “unreasonable or discriminatory measures” against them and requires that their property be protected in accordance with international law. Treaty of Amity, Economic Relations and Consular Rights Between the United States of America and Iran, Aug. 15, 1955, 8 U.S.T. 899, 902-903. However, the court declined to read a 60-year old treaty provision as barring application of the plain text of a later enacted federal law. See Breard v. Greene, 523 U.S. 371, 376 (1998) (per curiam). In any event, Bank Melli’s assets are subject to attachment because it is an instrumentality of a state that has sponsored terrorism.

Finally, Bank Melli interprets section 1610(g) to mean that attachment immunity is abrogated only if some other provision of section 1610 independently authorizes the attachment. But the other provisions of section 1610 that abrogate attachment immunity already apply to instrumentalities with separate juridical status. And the plain text of section 1610(g) requires only that the foreign state be subject to a section 1605A judgment before the property of an instrumentality becomes available for collection. Id. § 1610(g). Thus, reading section 1610(g) to require attachment immunity to be grounded in some other subsection of section 1610 would render section 1610(g) a nullity.

Moreover, Federal Rule of Civil Procedure 19 requires that a person be joined if he “claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may impair or impede the person’s ability to protect the interest or leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.” Fed. R. Civ. P. 19(a). Bank Melli argues that this case must be dismissed because it is an indispensable party to the lawsuit that cannot be joined. According to Bank Melli, the case is controlled by the Supreme Court’s holding in Republic of Philippines v. Pimentel, that when “sovereign immunity is asserted, and the claims of the sovereign are not frivolous, dismissal of the action must be ordered where there is a potential for injury to the interests of the absent sovereign.” 553 U.S. 851, 867 (2008).

However, Pimentel does not apply here. In Pimentel, the judgment at issue was not against the sovereign, the Republic of Philippines, but rather against the estate of its former dictator, Ferdinand Marcos. No one disputed that the Philippines was a required party, because it clearly had a legal interest in how the funds were disposed of. Nor was there a dispute that the Philippines was sovereignly immune and therefore couldn’t be joined.

Here, it is undisputed that Iran owes money to the creditors and that the money held by Visa and Franklin is owed to Iran. Iran, therefore, has no further interests to assert. Nor does Bank Melli have an independent interest to assert: Because its attachment immunity with respect to the funds held by Visa and Franklin is abrogated by the TRIA and section 1610(g), Bank Melli is Iran for the limited purposes of this interpleader action. This is solely a collection proceeding, and a judgment debtor is not generally considered an indispensable party to an action to enforce its debts. See Restatement (Second) of Judgments § 8 (1982) (suggesting courts may enforce attachment of property absent the judgment debtor because he “may make an appearance to contest the court’s jurisdiction over the property without thereby submitting to the jurisdiction of the court”). Bank Melli’s ability to protect its interests is not hindered; and there is no “substantial risk of an existing party incurring double, multiple, or otherwise inconsistent obligations.” Fed. R. Civ. P. 19(a).

Even if that were not so, Rule 19(a) is different because Bank Melli can be joined in this action. Unlike the Philippines in Pimentel, Bank Melli is not protected by sovereign immunity in this proceeding, because, as discussed above, Congress has abrogated the immunity of instrumentalities of terrorist parties in collection actions.

Finally, to hold that Rule 19 requires dismissal in this case would effectively eviscerate section 201 of the TRIA and section 1610(g). If dismissal is required every time such an entity sets forth a “non-frivolous” argument as to why it should not have to pay, collection will be impossible as a practical matter.

Bank Melli next argues that the creditors cannot use the TRIA and section 1610(g) to collect on their judgments because those judgments predated the enactment of the two collection statutes. When Congress has not explicitly provided for a statute’s retroactive effect, the court must ask whether retroactive application “would impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.” Landgraf v. USI Film Prods., 511 U.S. 244, 280 (1994). Bank Melli argues that if the TRIA and section 1610(g) permit attachment of its assets, it “would go from having no liability for [conduct predating the statutes’] enactment to being liable for the entirety of the resulting judgments.”

But the TRIA and section 1610(g) do not impose retroactive liability on Iran; they merely provide a means of collection for judgments where liability has already been established. That statute was in force at the time of Iran’s unlawful conduct. The TRIA and section 1610(g) do not attach any additional penalty to that conduct; they only create an avenue for creditors to obtain money they are already owed. Thus, Bank Melli’s argument must be that, although Iran knew its conduct was subject to liability in U.S. courts when it sponsored the relevant terrorist attacks, it did not know that victims would have a means for collection they now have. Here, Iran knew it was violating the law and could be liable; it just believed that the existing procedures would be insufficient to allow victims to collect. Iran assumed the risk that the money it owed in damages based on its sponsorship of terrorism would eventually be collected upon. Indeed, it is clear that the TRIA and section 1610(g) were designed to provide an avenue to recovery for existing claimants with judgments against terrorist states. See Estate of Heiser v. Islamic Republic of Iran, 807 F. Supp. 2d 9, 26 (D.D.C. 2011).

Bank Melli argues that the TRIA and section 1610(g) apply only to assets “owned” by Bank Melli and claims it does not own them yet because the funds have been blocked. The question of how to determine the fund’s ownership is controlled by our holding in Peterson v. Islamic Republic of Iran, 627 F.3d 1117, 1130 (9th Cir. 2010). The court held that the “FSIA does not provide methods for the enforcement of judgments against foreign states, only that those judgments may not be enforced by resort to immune property.” Finally, the court noted that “California enforcement law authorizes a court to `order the judgment debtor to assign to the judgment creditor all or part of a right to payment due or to become due, whether or not the right is conditioned on future developments.’” Id. at 1130-31 (quoting Cal. Civ. Proc. Code § 708.510(a)).

Because the FSIA fails to provide a method for enforcement, California law applies to this proceeding and, under California law, money owed to Bank Melli may be assigned to judgment creditors. The fact that Bank Melli is not yet in physical possession of the funds is immaterial.

“Bank Melli has set forth numerous arguments why it should not be liable for Iran’s debt. But this is an arena in which Congress has spoken with unmistakable clarity. Section 201 of the TRIA and 28 U.S.C. § 1610(g) permit victims of terrorism to collect money they’re owed from instrumentalities of the state that sponsored the attacks. Nothing in the text of the FSIA, Rule 19 or the Supreme Court’s retroactivity cases compels a different result.”

In conclusion, the district court correctly denied Bank Melli’s motion to dismiss.

Citation: Bennett v. Islamic Republic of Iran, 799 F.3d 1281 (9th Cir. 2015).

SURVEILLANCE

Second Circuit considers the effect of the intervening USA Freedom Act on the Government’s bulk telephone metadata collection program; in prior case on the merits, the Court had held that the USA Patriot Act does not authorize such data collection

In ACLU v. Clapper 785 F.3d 787 (2nd Cir. 2015), the Court held that the bulk telephone metadata collection program under which the National Security Agency (“NSA”) collects metadata about telephone calls made by and to Americans, and aggregates those metadata into a repository that can later be queried, was not authorized by provisions of the USA Patriot Act (“Patriot Act”). Subsequent to this decision the Congress passed the USA Freedom Act (“Freedom Act”). Even though the Freedom Act effectively put an end to the telephone metadata program and created an alternative program, it also provided for a 180-day transition period.

This case dates back to June 11, 2013, when the appellants in this matter, the American Civil Liberties Union and American Civil Liberties Union Foundation (collectively, “ACLU”) and the New York Civil Liberties Union and New York Civil Liberties Union Foundation (collectively, “NYCLU”) sued the government officials responsible for administering the telephone metadata program, challenged the program on both statutory and constitutional grounds and sought declaratory and injunctive relief. In their complaint the appellants asked the court to declare that the telephone metadata program exceeded the authority granted by § 215 of the Patriot Act, and violated the First and Fourth Amendments to the U.S. Constitution.

Reasoning that if the Congress had intended to authorize bulk collection of virtually all metadata associated with telephone calls made by and to Americans, it would have done so explicitly, the Court held that § 215 of the Patriot Act did not authorize the bulk telephone metadata program. Furthermore, the Court reasoned that “[t]he collection of these call detail records was not ‘relevant’ to authorized counterterrorism investigation by the government under 50 U.S.C. § 1861(b)(2)(A), and thus, the telephone metadata program exceeded the authority granted by FISA. Clapper, 785 F.3d at 81819, 826.”

During the pendency of the litigation the Appellants moved for a preliminary injunction to bar the government from collecting Appellants’ call records under the telephone metadata program, to require the government to quarantine all of Appellants’ call records already collected under the program, and to prohibit the government from querying metadata obtained through the program using any phone number or other identifier associated with them.

As the primary issue before the Court was the 180-day transition period provided by the Freedom Act, the US Court of Appeals for the Second Circuit declined to disturb the Congress’ decision and denied the motion for preliminary injunction.

The Court had first to determine whether the Freedom Act authorizes the continuation of the bulk telephone metadata collection program during the 180-day transition period. The Appellants argued that the transition period cannot authorize the use of bulk collection, because the Court earlier found that the plain language of the statute did not authorize it, and the Congress did not change the language for the duration of the 180-day period.

“Certainly it is true that if statutory language is plain, we must enforce it according to its terms. Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 251 (2010). However, “when deciding whether the language is plain, we must read the words in their context and with a view to their place in the overall statutory scheme.” King v. Burwell, 135 S. Ct. 2480, 2489 (2015) (internal quotation marks omitted). We must also strive to avoid interpretations of a statute that would render any phrase or provision superfluous. TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001).”

Appellants also noted that the Court earlier held that a decision by Congress to authorize such surveillance must be “expressed in unmistakable language.” Clapper, 785 F.3d at 818. Furthermore, they argued that because the Congress left the language of the Act unchanged during the transition period, the surveillance had to remain unauthorized, and added that the Congress was legislating “in the shadow of this Court’s May 7 opinion,” which could only have meant that “by delaying the effective date of §§ 101-103, to legislatively ratify our understanding of the statute as not authorizing bulk collection.” Motion & Brief for Appellants at 10.  The Court disagreed.

“To argue that the plain language of the present statute is clear based on its previous form is spurious. Congress passed the Freedom Act in part to prohibit bulk telephone metadata collection, and in doing so endorsed our understanding of the key term ‘relevance.’ See H.R. Rep. No. 114109, at 19. Contrary to Appellants’ assertion, the language of the Act as a whole has not remained unchanged. The statute has been amended in several important respects, including to prohibit bulk telephone metadata collection, with a provision delaying that effective date by 180 days. That is far from a mere reenactment that fails to give a clear indication that Congress made an affirmative decision regarding its intention.”

“[…] The 180-day transition period represents Congress’s considered judgment that there should be time for an orderly transition from the existing program to the new, targeted surveillance program. That orderly transition requires that the government retain the tools it has been using to investigate threats of foreign terrorism until new tools may be put in place. […]The intention of the democratically elected branches of government is thus clear.”

The Appellants did not provide evidence to support the proposition that Congress intended to ban bulk telephone metadata collection immediately, and their argument that the clarification of “relevance” is meant to end the telephone metadata program immediately, failed.

“The committee report on the Freedom Act states that ‘Congress’ decision to leave in place the `relevance’ standard for Section 501 orders should not be construed as Congress’ intent to ratify the FISA Court’s interpretation of that term.’ H. R. Rep. No. 114109, at 1819. […]However, there is not one iota of evidence that this complicated rationale was the reason for the later effective date, nor have Appellants pointed us to any evidence to demonstrate that any member of Congress intended or believed that bulk collection would end the day the bill was passed. Further, the ‘relevance’ language remains in the statute as amended after the 180day transition period, and thus we agree with the government that the clarification of the relevance standard, like the other amendments to the telephone metadata program, is meant to apply to the statute after the 180-day transition period.”

“Most convincingly, the government argues that the language of FISA, as amended by the Freedom Act, demonstrates that Congress intended for the telephone metadata program to continue during the transition period. That Congress did not change the language of § 215 must be viewed in the context of the larger changes to the statute. See King v. Burwell, 135 S. Ct. at 2489. The Freedom Act made many amendments to FISA, including banning other types of bulk collection, such as that for pen registers and trap and trace orders, but enacted no such transition provision as that in § 109 to delay the effect of other bans on bulk collections. It makes no sense to conclude that Congress, while providing for the immediate effect of other amendments, also intended for bulk telephone metadata collection to end immediately, by including language that those provisions not take effect for 180 days.”

“Finally, giving immediate effect to the ban on bulk telephone metadata collection would render the language of § 109 superfluous. See TRW, 534 U.S. at 31. Appellants’ tenuous argument that the clarification of the relevance standard was meant to take effect in the meantime, with the final ban merely sealing the deal, is unconvincing. If Congress had intended to end bulk collection on June 2, it would have simply said so, or at least, as in the remainder of the Freedom Act, said nothing to the contrary. The language of § 215 as amended by the Freedom Act indicates that Congress intended the telephone metadata program to continue during the transition period.”

The Court then rejected Appellants’ argument that the government should be enjoined on the ground that the bulk telephone metadata program continues to be unauthorized by statute, and stated:

“Regardless of whether the bulk telephone metadata program was illegal prior to May, as we have held, and whether it would be illegal after November 29, as Congress has now explicitly provided, it is clear that Congress intended to authorize it during the transitionary period.”

The Court then turns to answer to Appellants’ argument that if it decided that the Congress allowed the telephone metadata program to continue during the 180-day transition period, it would have to reach the “vexing” constitutional issues whether § 215 violates Appellants’ rights under the Fourth and First Amendments to the Constitution.

“The question posed by Appellants invokes one of the most difficult issues of modern jurisprudence: whether modern technology changes traditional and reasonable expectations of privacy. The Fourth Amendment issue raised here, as we noted earlier, is a ‘dispute [that] touches an issue on which the Supreme Court’s jurisprudence is in some turmoil.’ Clapper, 785 F.3d at 821. Whatever we might ultimately conclude about the Constitution’s demands in such a novel and contentious area, it is, at a minimum, difficult to conclude that Appellants are ‘likely to succeed’ in arguing that new conditions require a reconsideration of the reach of a long-established precedent.”

“The government urges us not to reach these issues, because we should respect the judgment of the democratically elected branches of government to dismantle the program in a way that heeds national security concerns. We agree with the government that we ought not meddle with Congress’s considered decision regarding the transition away from bulk telephone metadata collection, and also find that addressing these issues at this time would not be a prudent use of judicial authority. We need not, and should not, decide such momentous constitutional issues based on a request for such narrow and temporary relief.”

“Congress has decided, after nearly two years of debate, that this type of data collection shall not be authorized in the future. An abrupt end to the program would be contrary to the public interest in effective surveillance of terrorist threats, and Congress thus provided a 180-day transition period. Under the circumstances, we will defer to that reasonable decision.”

The Court thus concluded that “§ 215 authorizes the telephone metadata collection program for the period of 180 days from the Freedom Act’s enactment, as part of a larger move to dismantle the program.”

The Court denied Appellants’ motion for a preliminary injunction and remanded the matter for further proceedings in the district court consistent with this opinion and its prior opinion in this case.

Citation: American Civil Liberties Union v. Clapper, 804 F.3d 617 (2nd Cir. 2015).

TERRORISM

Where U.S. citizen was allegedly detained and tortured by U.S. agents in Africa, District of Columbia Circuit reviews whether Bivens applies extraterritorially

In 2006, Amir Meshal, a United States citizen and New Jersey resident, traveled to Mogadishu, Somalia. While he was in Somalia, violence erupted and Meshal fled to Kenya. In a joint U.S.-Kenyan-Ethiopian operation, in January 2007, Meshal was apprehended by Kenyan authorities and transported to Nairobi. He was told by a member of Kenya’s Criminal Investigation Department (“CID”) that the authorities need to determine “what the United states wanted to do with him” before sending him “back to United States”.

Meshal’s interrogation, in which Defendants Chris Higgenbotham, Steve Hersem, John Doe 1, and John Doe 2 (collectively “Defendants”) had significant roles, began when U.S. officials learned about his detention in Kenya. Meshal claimed that for the next four months Defendants detained him in secret, denied him access to counsel and the courts, and threatened him with torture and death. Meshal also claimed that defendant Hersme promised him that if he confessed his connection to al Qaeda, he would be returned to the United States to face civilian courts instead of being returned to Somalia.

Meshal alleged that he was transferred between three African countries without legal process: from Kenya to Somalia, where he was detained in handcuffs in an underground room; then to Addis Ababa, Ethiopia, where he was detained in a military barrack. While in Ethiopia the Ethiopian officials regularly transported Meshal to a villa for interrogation where Doe 1 and 2 repeatedly refused his requests to speak to a lawyer. Eventually, the FBI released Meshal, he returned to United States, and had never been charged with a crime.

Meshal then filed a Bivens action (see Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388 (1971)), against the Defendants, claiming they violated his Fourth and Fifth Amendment rights when they detained, interrogated, and tortured him over the course of four months in three African countries. In deciding Defendants’ motion to dismiss, the district court found Meshal had properly stated Fourth and Fifth Amendment claims, however, it dismissed the case concluding that a Bivens action was unavailable to Meshal because both this court, and several other circuits, had “expressly rejected a Bivens remedy for [U.S.] citizens who allege they have been mistreated, and even tortured, by [American officials] in the name of intelligence gathering, national security, or military affairs.” Meshal v. Higgenbotham, 47 F. Supp. 3d 115, 11617 (D.D.C. 2014).

The Court of Appeals for the District of Columbia Circuit affirms the district court’s judgment of dismissal.

The issue is whether an American citizen has a cause of action under the Fourth Amendment for tortious acts of federal officers that occurred in a foreign country.

The Court started its analysis from the fact that federal tort causes of action are ordinarily created by Congress, not by the courts. However, the causes of actions created by the Congress are allowing plaintiffs to recover for tortious acts by federal officers, but do not allow plaintiffs to recover for tortious acts occurring in a foreign country. Having no statutory cause of action, Meshal had sued directly under the Constitution, relying on the decision in Bivens.

“In 1971, the Supreme Court recognized an implied private action, directly under the Constitution, for damages against federal officials alleged to have violated a citizen’s Fourth Amendment rights. Bivens, 403 U.S. 388. The case began when Webster Bivens sued Bureau of Narcotics Agents in federal court, alleging facts the Court ‘fairly read’ as claiming Bivens’ ‘arrest was made without probable cause.’ Id. at 389. Because the alleged constitutional violation had already occurred, Justice Harlan noted that, ‘[f]or people in Bivens’ shoes, it [was] damages or nothing.’ Id. at 410 (Harlan, J., concurring in judgment).”

“The Court recognized a federal damages remedy apart from the availability of state common law remedies. See id. at 39495. Noting Congress had not specifically provided a remedy for violations of constitutional rights and that ‘the Fourth Amendment does not in so many words provide for its enforcement by an award of money damages for the consequences of its violation,’ id. at 39697, the Court nevertheless relied on the rule that ‘where legal rights have been invaded . . . federal courts may use any available remedy to make good the wrong done.’ Id. at 396. Importantly, although no federal statute provided Bivens a right to sue for the invasion of his Fourth Amendment rights, the Court recognized a cause of action because it found ‘no special factors [counselled] hesitation in the absence of affirmative action by Congress.’ Id.”

The Court noted that since Bivens, the Supreme Court has proceeded cautiously in implying additional federal causes of action for money damages; and that it decided that the best way to implement a particular constitutional guarantee was to let Congress determine whether it warranted a cause of action. Moreover, the Court noted that courts in other circuits as well as this court itself “[…] recognized that cases involving national security and the military counseled hesitation in recognizing a Bivens cause of action where Congress has not done so. See id. at 199200 Lebron, 670 F.3d at 548-49; Arar, 585 F.3d at 575-76.”

“This case requires us to examine whether allowing a Bivens action to proceed would extend the remedy to a new context. See Iqbal, 556 U.S. at 675; Malesko, 534 U.S. at 68; Wilkie, 551 U.S. at 575 (Ginsburg, J., concurring in part and dissenting in part); see also Arar, 585 F.3d at 572 (“`Context’ is not defined in the case law.”). The Supreme Court has never defined what constitutes a new ‘context’ for Bivens purposes, but in reviewing the case law, some patterns emerge. First, the Court considers a Bivens claim ‘new’ when a plaintiff invokes a constitutional amendment outside the three amendments previously approved. […] But even if the plaintiff alleges the same type of constitutional violation, it does not automatically invoke the same context for Bivens purposes. […] In addition, the Court considers a Bivens claim ‘new’ when it involves a new category of defendants. See Minneci, 132 S. Ct. 617 (private prison employee); Malesko, 534 U.S. 61 (private prison corporation); Meyer, 510 U.S. 471 (federal agency); Chappell, 462 U.S. 296 (military defendants).”

“The context of this case is a potential damages remedy for alleged actions occurring in a terrorism investigation conducted overseas by federal law enforcement officers. Not only does Meshal’s claim involve new circumstances—a criminal terrorism investigation conducted abroad—it also involves different legal components—the extraterritorial application of constitutional protections. Such a different context requires us to think anew. […]”

“Meshal downplays the extraterritorial aspect of this case. But the extraterritorial aspect of the case is critical. After all, the presumption against extraterritoriality is a settled principle that the Supreme Court applies even in considering statutory remedies. See, e.g., Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659, 1664 (2013); Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869, 2877 (2010). If Congress had enacted a general tort cause of action applicable to Fourth Amendment violations committed by federal officers (a statutory Bivens, so to speak), that cause of action would not apply to torts committed by federal officers abroad absent sufficient indication that Congress meant the statute to apply extraterritorially. See Morrison, 130 S. Ct. at 2877. Whether the reason for reticence is concern for our sovereignty or respect for other states, extraterritoriality dictates constraint in the absence of clear congressional action.”

“Once we identify a new context, the decision whether to recognize a Bivens remedy requires us to first consider whether an alternative remedial scheme is available and next determine whether special factors counsel hesitation in creating a Bivens remedy. See Wilkie, 551 U.S. at 550.”

“Meshal has no alternative remedy; the government does not claim otherwise. See Meshal, 47 F. Supp. 3d at 122 (‘The parties agree that Mr. Meshal has no alternative remedy for his constitutional claims.’). Meshal, backed by a number of law professors appearing as amici curiae, argues that, when the choice is between damages or nothing, a Bivens cause of action must lie. The Supreme Court, however, has repeatedly held that ‘even in the absence of an alternative’ remedy, courts should not afford Bivens remedies if ‘any special factors counsel[ ] hesitation.’ Wilkie, 551 U.S. at 550; see also Schweiker, 487 U.S. at 42122. Cf. Wilson, 535 F.3d at 70809. Put differently, even if the choice is between Bivens or nothing, if special factors counsel hesitation, the answer may be nothing. See Andrew Kent, Are Damages Different?: Bivens and National Security, 87 S. CAL. L. REV. 1123, 1151 (2014) (‘Kent’) (noting ‘the Court’s Bivens doctrine has long tolerated denying Bivens even when there is no other effective remedy’).”

“The ‘special factors’ counseling hesitation in recognizing a common law damages action ‘relate not to the merits of the particular remedy, but to the question of who should decide whether such a remedy should be provided.’ Sanchez-Espinoza v. Reagan, 770 F.2d 202, 208 (D.C. Cir. 1985) (Scalia, J.).”

“Two special factors are present in this case. […] First, special factors counseling hesitation have foreclosed Bivens remedies in cases ‘involving the military, national security, or intelligence.’ Doe, 683 F.3d at 394. Second, the Supreme Court has never ‘created or even favorably mentioned a non-statutory right of action for damages on account of conduct that occurred outside the borders of the United States.’ Vance, 701 F.3d at 19899.”

“[… ] Matters touching on national security and foreign policy fall within an area of executive action where courts hesitate to intrude absent congressional authorization. See Dep’t of Navy v. Egan, 484 U.S. 518, 530 (1988). Thus, if there is to be a judicial inquiry—in the absence of congressional authorization—in a case involving both the national security and foreign policy arenas, ‘it will raise concerns for the separation of powers in trenching on matters committed to the other branches.’ Christopher v. Harbury, 536 U.S. 403, 417 (2002). The weight of authority against expanding Bivens, combined with our recognition that tort remedies in cases involving matters of national security and foreign policy are generally left to the political branches, counsels serious hesitation before recognizing a common law remedy in these circumstances.”

The Court also rejected Meshal’s, and several law professors as amici, claim that congressional actions amounted to statutory ratification of Bivens; and that courts have consistently misinterpreted these legislative actions, and, consequently, have taken an unduly narrow view of Bivens.

“[…] Congress … passed the Westfall Act, providing that the FTCA would be the exclusive remedy for federal officials sued for ‘scope-of-employment’ torts. Federal Employees Liability Reform and Tort Compensation Act of 1988, Pub. L. No. 100694, § 5, 102 Stat. 4563, 4564 (codified at 28 U.S.C. § 2679(b)). In addition to creating detailed procedures for converting state torts claims against individual officers into FTCA claims against the United States, the Westfall Act provided an exception to the exclusive-remedy provision, stating it would not ‘extend or apply to a civil action . . . which is brought for a violation of the Constitution of the United States.” 28 U.S.C. § 2679(b)(2)(A). Thus, Congress expressly granted an exemption from the FTCA for Bivens suits. See Hui v. Castaneda, 559 U.S. 799, 807 (2010)[…]; H.R. Rep. 100700, at 6, 1988 U.S.C.C.A.N. 5945, 5950 (‘Since the Supreme Court’s decision in [Bivens], the courts have identified [a constitutional] tort as a more serious intrusion of the rights of an individual that merits special attention. Consequently, [the Westfall Act] would not affect the ability of victims of constitutional torts to seek personal redress from Federal employees who allegedly violate their Constitutional rights.’).”

“But whether Congress, in rejecting Justice Department proposals and providing a FTCA exemption, meant to ratify Bivens is open to doubt. Congress may have viewed Bivens and federal tort claims as ‘parallel, complementary causes of action,’ Carlson, 446 U.S. at 20, and intended, through the Westfall Act, to “solidify the Bivens remedy,’ Pfander & Baltmanis, at 121-22. Or Congress could have thought ‘Bivens was a constitutionally required decision,’ Carlson, 446 at 33 n.2 (Rehnquist, J., dissenting), thus believing it could not legislate away Bivens remedies.”

“In any event, if the courts, as amici argue, have radically misunderstood the nature and scope of Bivens remedies, a course correction must come from the Supreme Court, which has repeatedly rejected calls for a broad application of Bivens. […] Because we follow its lead, we will ship our oars until that Court decides the scope of the remedy it created.”

The Court concluded that “[i]f people like Meshal are to have recourse to damages for alleged constitutional violations committed during a terrorism investigation occurring abroad, either Congress or the Supreme Court must specify the scope of the remedy.”

The Court affirms district court’s judgment of dismissal because Meshal had not stated a valid cause of action.

Citation: Meshal v. Higgenbotham, 804 F.3d 417 (D.C. Cir. 2015).