9th Circuit Affirms Iran’s Terror Victims Can Seize Funds
Terror victims seek to collect on judgments against Iran
The 9th Circuit Court of Appeals has affirmed a judgment allowing victims of Iranian terror to attach a judgment owed to Iran. This is separate from the Bank Markazi case argued before the Supreme Court last month.
In this case – Ministry Of Defense And Support For The Armed forces Of The Islamic Republic Of Iran v. Frym – ten victims of Iranian terrorism who hold valid judgments against Iran from previous cases seek to collect by attaching a judgment owed to Iran in yet another previous dispute. All of the victim/Plaintiffs are U.S. citizens and have successfully navigated a welter of procedural and jurisprudential pitfalls.
The case is a good reminder of Iran’s global reach and commitment to terror. It’s also fairly complicated, so bear down.
1997 Ben Yehuda Bombing
Nine of the Plaintiffs seeing to enforce judgements against Iran were injured or had loved ones injured in the same attack. According to the United States District Court for the District of Columbia:
4. On the afternoon of September 4, 1997, three Hamas suicide bombers with cases of powerful explosive bombs arrived at the crowded Ben Yehuda Street pedestrian mall in downtown Jerusalem. The bombers packed the bombs with nails, screws, pieces of glass, and chemical poisons to cause maximum pain, suffering, and death.
5. The detonated bombs killed five people and wounded nearly two hundred others . . . The plaintiffs injured by the detonated bombs are Diana Campuzano, Avi Elishis, Gregg Salzman, Jenny Rubin, Daniel Miller, Abraham Mendelson, Stuart Hersh, and Noam Rozenman. . .
6. Israeli police arrested and charged two Hamas operatives, Muaid Said Bilal (Bilal) and Omar Abdel Rahman al-Zaban (Zaban) for participation in the bombing. An Israeli court subsequently convicted both Bilal and Zaban of multiple counts of murder, attempted murder, and active membership in Hamas. Bilal, Zaban, and other members of their Hamas cell gave Israeli authorities a detailed account of the planning, funding and execution of the September 4, 1997.
7. Hamas claimed responsibility for the bombing.
8. Hamas, an Islamic militant terrorist organization, has a close relationship with Iran.
9. Iran provides ongoing terrorist training and economic assistance to Hamas. Dr. Bruce Tefft, an expert in the field of terrorism, testified that Iran’s support of Hamas was $30,000,000 in 1995. Another expert in terrorist activities, Dr. Patrick Clawson, testified that Iran supported Hamas with $20,000,000-50,000,000 annually over the past decade. . .
11. [Iraanian Revolutionary Guards (“IRG”)] is the military wing of [the Ministry of Information and Security (“MOIS”)]. Under the direction of MOIS, IRG provides professional military and terrorist training to Hamas operatives responsible for executing terrorist acts throughout the Middle East. Dr. Tefft testified that IRG is MOIS’s “action arm or paramilitary arm” responsible for “implementing the military or quasi-military actions abroad.”
12. Iranian governmental support for terrorism is an official state policy and the approval of high-ranking Iranian officials, including Ayatollah Ali Hoseini Khamenei, Ali Akbar Hashemi-Rafsanjani, and Ali Fallahian-Khuzestani, was necessary for Iran and MOIS to support Hamas with training and economic assistance. Irans support of Hamas could not have occurred without this senior leadership approval.
13. The bombing also would not have occurred without Iranian sponsorship. Until his death in November 2001, Hamas operative Mahmoud Abu Hanoud organized, planned, and executed a large number of deadly terrorist bombings, including the bombing at issue here. Without the material support and resources the defendants provided to Hamas, particularly the terrorist training of Hamas operative Mahmoud Abu Hanoud, Hamas could not have carried out the bombing. . .
15. Since 1984, the U.S. Department of State has included Iran on its list of state sponsors of terrorism. According to the 1997 Global Patterns report, Iran was the principal state sponsor of terrorism from 1996-1997.
Compuzano v. Islamic Republic of Iran, 281 F. Supp. 2d 258, 261-62 (D.D.C. 2003) (citations omitted). Iran did not appear to defend the Campuzano litigation and in 2003 the District Court entered default judgment, awarding the victims of the Ben Yehuda bombing awards ranging from $2.5 million to $15 million. Ministry Of Defense And Support For The Armed forces Of The Islamic Republic Of Iran v. Frym, No. 13-57182, slip op. at 6 (9th Cir., Feb. 26, 2016).
The trial court described the physical injuries and their aftermath in some detail. It is a sobering reminder that death tolls make headlines, but many more people are injured in any given attack, and those injuries are often horrific, lifelong and forgotten.
The Bakhtiar Assassination
The tenth plaintiff, France Okhateb Rafii, is the youngest daughter of Dr. Chapour Bakhtiar and a U.S. citizen. Again, according to the United States District Court for the District of Columbia:
7. After the overthrow of the Shah [in 1979], Plaintiff was the only child of Dr. Bahtiar living in Iran. In the early days of the revolutionary regime, Dr. Bakhtiar was forced into hiding, and the Plaintiff would visit him occasionally even though her father feared her visits could result in her death.
8. In 1979, both Plaintiff and her father managed to escape Iran, with Dr. Bakhtiar settling in Paris, France and Plaintiff in the Washington, D.C. area. Plaintiff was naturalized as a United States citizen on February 21, 1991. . .
10. Dr. Bakhtiar earned a Ph.D. in law and philosophy. During World War II, he fought with the French resistance. He worked in the labor movement in Iran, and was an advocate of democracy in Iran. . . . Dr. Bakhtiar could easily have joined the government of the Shah and taken the opportunity to ascend to the highest office of that regime. However, he refused and instead served in opposition to the regime, often spending time in hail as a result of his political activities. His imprisonment was one of the causes of his divorce from the Plaintiff’s mother.
11. Dr. Bakhtiar was appointed Prime Minister of Iran in January 1979 an served in that capacity for thirty seven [sic] days until [Ayatollah] Khomeini returned to Iran and led an insurrection which toppled the regime.
12. With the rise of the Khomeini regime in Iran, Dr. Bakhtiar’s life was in danger. Dr. Bakhtiar remained popular after the fall of the Shah’s regime, a fact that worried Iran’s leadership. On May 14, 1979, Ayatollah Khalkhali, a religious judge and Chairman of the Revolutionary Court, . . . announced his intention to eliminate “the corrupters on earth,” naming Dr. Bakhtiar specifically as a criminal who had incurred the death penalty. . .
13. After a period of hiding in Iran, Dr. Bakhtiar fled to Paris where he started a group called the National Movement for the Iranian Resistance, or NAMIR . . . NAMIR was a major Iranian dissident group based outside of Iran.
14. In 1980 there was an attempt to kill Dr. Bakhtiar in Paris. The gunman killed a policeman an a neighbor in the attack, but failed to kill Dr. Bakhtiar. A man named Arich Naccache was found guilty of the attack, and the French court foudn that Caccache was acting pursuant to the order of Ayatollah Khomeini to assassinate Dr. Bakhtiar. . .
18. Dr. Bakhtiar was living under a heavy security presence twenty-our hours a day in France [in the early 1990s]. After the attempted assassinatino in 1980, French special police began providing secutity for Dr. Bakhtiar A police truck with plicemen was stationed outside his home, and the basement of his house was turned into guard quarters where four special police rom the French riot squad lived. Dr. Bakhtiar restricted his excursions outside his home, and when he did leave his house he was taken out in armored cars. . .
19. On August 6, 1991, Guy Bakhtiar left Paris on a two day trip. At around 5:00 pm, Dr. Bakhtiar received an expected visit from Farydoun Boyerhmadi, a member of NAMIR and a close associate. Boyerhmadi was accompanied by Mohammad Azadi and Ali-Vakili Rad. Dr. Bakhtiar had never met Azadi nor Rad. Boyerhmadi hasbeen found to have been a Iranian agent who successfully infiltrated NAMIR. He and the other men murdered Dr. Bakhtiar and his assistant . . . . using two kitchen knives. It is clear that the murderers took efforts to mutilate Dr. Bakkhtiar’s body. . .
23.The report [from French lower courts] was sent to the Chambre D’Accusation, which agreed that Iran andits intelligence service were behind the assassination. . . the report was then sent to the Court of Assizes which convicted three defendants of the murder in 1995.
24. [During legal proceedings in France, and Iranian defector testified] “there was a special section within the Iranian government which was in charge of assassination [sic] of freedom fighter [sic].” . . .
25. The Bundeskriminalamt, or BKA, the German equivalent of the Americn Federal Bureau of Investigation, conducted an investigation of Iranian state-sponsored terrorism and issued a report with its findings. The BKA concluded that the assassination of Dr. Bakhtiar was ordered and organized by the Iranian government. The United States Department of State also concluded that Iran was responsible for Dr. Bakhtiar’s assassination.
Rafii v. The Islamic Republic of Iran, No. 01-850 (D.D.C. Dec. 2, 2002).
In 2002, District Court awarded Ms. Rafii, $5 million in damages for the mental anguish from her father’s assassination.
So What’s The Problem?
All together, the ten Plaintiffs from Rafii and Compuzano (together “Plaintiffs”) have hundreds of millions of dollars in judgements against the government of Iran, but they’re having trouble getting paid. The problem is a quirk with the Foreign Sovereign Immunities Act (FSIA). Historically, nation-states and their departments or agencies were immune to private suits. Sovereign states simply are not susceptible to private lawsuits.
FSIA carves out certain exceptions, including most relevantly for state sponsors of terrorism. FSIA’s terrorism exception provides:
A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case not otherwise covered by this chapter in which money damages are sought against a foreign state for personal injury or death that was caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources for such an act if such act or provision of material support or resources is engaged in by an official, employee, or agent of such foreign state while acting within the scope of his or her office, employment, or agency.
28 U.S.C. § 1605A(a)(1). However, this provision rescinds foreign sovereign immunity for substantive liability – allowing a court to hold Iran liable for a terrorist act – and not for enforcing the resultant judgement. According to the Ninth Circuit:
Despite [Plaintiff’s] valid judgements against Iran, [Plaintiffs] initially lacked any means to collect because the state-sponsored terrorism exception to the FSIA created an anomaly. While the [FSIA] abrogated foreign sovereign’s immunity from judgment, it left in place the foreign sovereign’s immunity from attachment of its assets.
Frym, No. 13-57182, slip op. at 6. In other words, just because Plaintiffs obtained judgements against the Islamic Republic of Iran, it didn’t mean they could just go and attach Iran’s assets to make good.
After 9/11, the government closed the loophole, in part, by permitting Plaintiffs to enforce judgments obtained under the terrorism exception by attaching terrorists’ assets blocked under Presidential authority. Under the Terrorism Risk Insurance Act of 2002 (“TRIA”):
in every case in which a person has obtained a judgement against a terrorist party on a claim based upon an act of terrorism, or for which a terrorist party is not immune under [FSIA], the blocked assets of that terrorist party (including the blocked assets of any agency of instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of compensatory damages for which such terrorist party has been adjudged liable.
Even so, the Plaintiffs have been searching for attachable assets for more than a decade. The have successfully attached Iranian government accounts at Bank of America, only to have another lienholder with a superior claim receive the paltry $9000 in the account. They have tried but failed to attach assets at BNY Mellon and two Iranian Banks in New York, but the Court determined those were not “blocked assets” under TRIA.
Plaintiffs managed to force the sale of a house in Lubbock, Texas where the former crown prince of Iran lived while receiving military training before the Islamic Revolution, but it yielded only a pittance after legal and procedural costs.
Plaintiffs have also engaged in extensive litigation in Illinois and Massachusetts, seeking to attach Iranian (more appropriately Persian) archaeological and cultural artifacts held in the collections of the Field Museum and the Museum of Fine Art, respectively. The Illinois case has already been to the 7th Circuit Court of Appeals twice and had one petition for writ of certiorari to the Supreme Court denied, yet is seemingly ongoing after more than a decade. In Massachusetts, the Plaintiff’s attempt to attach the assets failed after nearly a decade of litigation.
The Cubic Claim
In this case, the Plaintiffs are going after money deposited with the Court to satisfy a judgment Iran won in a totally separate dispute.
Before the Ayatollahs came to power, the United States and Iran were allies. As allies, Iran was given access to and obtained military equipment from U.S. manufacturers. After Iran’s Islamic revolution in 1979, pending contracts between Iran and U.S. manufacturers of defense articles were cancelled.
In 1977, Cubic Defense Systems, Inc. agreed to sell Iran an air combat maneuvering range system and related maintenance services for more than $17 million. Frym, No. 13-57182, slip op. at 7. By the time of the revolution, Iran had paid Cubic at least $12 million, and Cubic had delivered neither the system nor the follow-on services. Id.
The U.S. trade embargo precluded Cubic from performing its obligations. Id. at 8.
Iran subsequently brought Cubic to arbitration and the arbitrator held Cubic owed Iran $2.8 million, plus interest and costs. Id. In 1999 the United States District Court for the Southern District of California entered judgment against Cubic for that amount. Id.
Cubic then deposited money covering the amount of the judgement (the “Cubic Money”) with the Southern District of California. Id. In other words, the Southern District of California is in possession of this money, but it is Iran’s.
Frym And The Ninth Circuit’s Decision
The Frym case the Ninth Circuit just affirmed is yet another, separate litigation. The Plaintiffs are the victims of the Ben Yehuda Street bombing and Ms. Rafii. They filed suit in the Southern District of California and moved to attach the Cubic Money to satisfy the default judgements they received from the District Court for the District of Columbia.
The Southern District of California held for the Plaintiffs and attached the Cubic Money.
The issue on appeal to the Circuit Court was whether the Algiers Accords which resolved the Iran Hostage Crisis prohibited the U.S. government from attaching Cubic Money.
In November, 1979, Iranians stormed the U.S. Embassy in Tehran and took hostages. In response, President Carter issued Executive Order 12170, blocking Iranian assets pursuant to the International Emergency Economic Powers Act. On January 19, 1981 (the last day of the Carter Administration), the United States and Iran resolved the hostage crisis through the Algiers Accords.
According to the Ninth Circuit:
The purpose of the Algiers Accords was to return Iran to the position it was in before President Carter froze Iran’s assets in response to the taking of hostages at the American Embassy.
Frym, No. 13-57182, slip op. at 11.
The District Court held that the Cubic Money was a blocked asset for purposes of the TRIA because President Obama’s Executive Order 13359 blocked it in 2012, and that the Algiers Accord was inapposite “because the United States committed only to restore Iran to its pre-November 1979 position” and “[a]s of 1979, . . . Iran did not have an interest” in the Cubic Money. Id. at 9.
The Ninth Circuit agreed and explained that the Supreme Court had already resolved a nearly identical argument, by Iran, regarding the very same Cubic Money. In that other case, the Supreme Court determined that even though Iran had a property interest in the underlying military equipment in November, 1979, it had no interest in the proceeds from Cubic’s subsequent sale of the equipment to Canada until the sale was consummated in 1982, and no interest in the arbitration award until it was confirmed in 1998. Id. at 11-13.
The Algiers Accord returning Iran to its November, 1979, does not prevent attaching a financial interest that arose twenty years later.
Conclusion
Phew. The Cliff’s Notes are that ten victims of Iranian terror get to split $9.4 million in Iranian assets (the $2.88 million-plus-fees arbitration award has accrued interest). Id. at 4 n.1. Any time Iran loses is good, even if the numbers involved are relatively inconsequential.
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Obama hardest hit.