Where
Plaintiffs obtained $2.6 billion default judgment against Iran real estate in
the U.S. under Foreign Sovereign Immunities Act for its involvement in 1983
suicide bombing of United States military barracks in Lebanon, Ninth Circuit
raises “immunity from execution” defense sua sponte and affirms dismissal of
case
In October 1983,
a suicide bomber drove a truck loaded with explosives into the U.S. Marine
barracks in Beirut, Lebanon. When he detonated the explosives, it killed 241
American servicemen and injured many more. Evidence showed that the bombers had
planned and executed the attack with massive support from the Iranian
government.
In 2001,
representatives of the more than 1,000 victims and survivors (Plaintiffs) sued
Iran in the federal district court for the District of Columbia. Iran failed to
respond, and the district court entered a $2.6 billion default judgment.
Plaintiffs then registered the judgment in the federal district court for the
Northern District of California pursuant to 28 U.S.C. Section 1963. In later
motions, Plaintiffs identified various shipping companies that allegedly owed
payments to Iran and sought a court order assigning to Plaintiffs the rights to
payment of damages. The first motion involved the French shipping company CMA
CGM which allegedly serves the Iranian port of Bandar Abbas and thus must be
making payments to the Iranian Ports & Shipping Organization.
Despite
Iran’s failure to appear, the district court sua sponte raised the issue of
Iran’s sovereign immunity. The district court concluded that the Foreign
Sovereign Immunities Act (FSIA), 28 U.S.C. 1602ff, had abrogated the immunity
of Iranian property in the U.S. Nevertheless, Plaintiffs had not only failed to
identify any such property but also had failed to properly serve Iran with the
assignment motion.
Plaintiffs
duly noted their appeal. The U.S. Court of Appeals for the Ninth Circuit,
however, affirms. It rules that the alleged payments due to Iran are not
“property in the United States” amenable to attachment. A key issue is whether
immunity from execution is jurisdictional or an affirmative defense that the
foreign state must appear and raise.
The Court
first reviews whether the district court can raise immunity from execution sua
sponte. “Few courts have squarely addressed the question of who may raise the
issue of immunity from execution, and those that have are divided. One district
court has held that immunity is an affirmative defense that can only be
asserted by a foreign state defendant. Rubin v. Islamic Republic of Iran, 436
F.Supp.2d 938, 941 (N.D.Ill. 2006) ... The Fifth Circuit has disagreed and held
that, when a court is asked to attach the property of a foreign state, it must
raise and decide the issue of immunity from execution on its own initiative.
See FG Hemisphere Assocs., LLC v. Republique du Congo, 455 F.3d 575, 590‑91
(5th Cir. 2006) ... We agree with the Fifth Circuit and, accordingly, affirm
the district court’s order denying the Plaintiffs’ assignment motion.” [1124].
“Allowing
courts to independently raise and decide the question of immunity from
execution is not only consistent with historical practice, but also with the
purposes underlying the FSIA. A burden‑shifting approach, unlike one that
places the burden on the foreign state to plead and prove that its property is
immune, is appropriately respectful of the ‘perfect equality and absolute
independence of sovereigns, and th[e] common interest impelling them to mutual
intercourse.’ The Schooner Exchange, 11 U.S. at 137, 7 Cranch 116 ... The FSIA
was meant to spare foreign states not only from liability on the merits but
also from the cost and inconvenience of trial. See Foremost‑McKesson, Inc. v.
Islamic Republic of Iran, 905 F.2d 438, 443 (D.C.Cir. 1990) (‘[S]overeign
immunity is an immunity from trial and the attendant burdens of litigation, and
not just a defense to liability on the merits.’. Requiring the plaintiff to
prove that immunity does not exist, rather than placing the burden on the
defendant foreign state, best accomplishes that goal.”
“These
policy considerations apply more strongly in the context of immunity from
execution. ‘[T]he judicial seizure of the property of a friendly state may be
regarded as an affront to its dignity and may ... affect our relations with
it.’ ... See Philippines v. Pimentel, 553 U.S. 851, 128 S.Ct. 2180, 2190, 171
L.Ed.2d 131 (2008). Congress was aware that, although the restrictive theory of
sovereign immunity from suit had become an accepted principle of international
law by the time of the FSIA’s enactment, ‘the enforcement of judgments against
foreign state property remain [ed] a somewhat controversial subject.’ H.R.Rep.
No. 94‑1487, 1976 U.S.C.C.A.N. at 6626 ...” “Accordingly, the exceptions to
immunity from execution are more narrow than the exceptions from immunity from
suit. Congress fully intended to create rights without remedies, aware that
plaintiffs would often have to rely on foreign states to voluntarily comply
with U.S. court judgments. ... In light of the special sensitivities implicated
by executing against foreign state property, courts should proceed carefully in
enforcement actions against foreign states and consider the issue of immunity
from execution sua sponte.” [1127‑8]. Here, the Plaintiffs themselves admit
that the rights to payment belong to Iran. Thus, the district court did not err
by raising the issue sua sponte.
The Court
then reviews whether Plaintiffs properly served notice of the default judgment
upon Iran. “It is true that Plaintiffs’ counsel erred by mailing a copy of the
default judgment to the Iranian Foreign Affairs Minister himself, rather than
asking the clerk of the court to mail the papers. 28 U.S.C. § 1608(a)(3). This
mistake, however, is not fatal. The Ninth Circuit has adopted a substantial
compliance test for the FSIA’s notice requirements; a plaintiff’s failure to
properly serve a foreign state defendant will not result in dismissal if the
plaintiff substantially complied with the FSIA’s notice requirements and the
defendant had actual notice. ...”
“CGM CMA and
the United States go further and argue that Iran should have been served with
the registration of judgment with the Northern District of California and the
subsequent motion for assignment of Iran’s rights to payment from CMA CGM.
Plaintiffs’ counsel did mail their various assignment motions by regular U.S.
mail, apparently without delivery confirmation, to a variety of high‑level
Iranian officials, including the Minister of Foreign Affairs. These papers do
not appear to have been translated into Farsi.”
“The FSIA is
quite clear what a plaintiff must serve on a foreign state before a court may
enforce a default judgment against that state: the default judgment [itself].
Service of post‑judgment motions is not required. ‘Section 1608 sets forth the
exclusive procedures with respect to service on ... a foreign state.’ ... We
may not add to those requirements. ... If Congress had intended for foreign
states to receive notice of every post‑judgment motion, it would have said so.
The district court erred in concluding that it could not enforce the Plaintiffs’
assignment motion because they had not complied with FSIA’s service
requirements.” [1129‑30]
“ ...[W]e
must now decide whether Iran’s rights to payment from CMA CGM constitute
‘property in the United States.’ 28 U.S.C. § 1610(a). We hold that they do not
and are, therefore, immune from execution. We affirm the district court’s
denial of Plaintiffs’ assignment motion.”
“Enforcement
proceedings in federal district court are governed by the law of the state in
which the court sits, ‘but a federal statute governs to the extent that it is
applicable.’ Fed. R. Civ. P. 69(a)(1). 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. See 28 U.S.C. §§ 1609‑1610.
Therefore, California law on the enforcement of judgments applies to this suit
insofar as it does not conflict with the FSIA. ...”
“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.’
Cal.Civ.Proc. Code § 708.510(a). The FSIA abrogates the immunity of all Iranian
commercial property in the United States. 28 U.S.C. § 1610(a)(7). Therefore, a
right to payment belonging to Iran is assignable only if that right is located
in the United States.”
“A right to
payment is intangible. It is difficult to assign a location to property that by
definition ‘lacks a physical existence.’ ... ‘The situs of intangibles is in
truth a legal fiction, but there are times when justice or convenience requires
that a legal situs be ascribed to them.’ ... This is one of those times. To
determine the location of an intangible right to payment, we must look to
California state law. ...”
“In
Philippine Export and Foreign Loan Guarantee Corp. v. Chuidian, 218 Cal.App.3d
1058, 267 Cal.Rptr. 457 (1990), the Court of Appeal of California ... squarely
held that the location of a right to payment—at least for the purpose of
applying section 708.510(a) in a suit against a foreign state defendant—is the
location of the debtor. ... Accordingly, a foreign state defendant’s rights to
payment from third‑party debtors are assignable only if those ‘debtors [ ] reside
in the United States.’ Id. at 481. The Court of Appeal instructed the trial
court to enter an ‘order compelling Philguarantee,’ an agency of the
Philippines, ‘to assign to Chuidian all debts owing, or to become owing, to
Philguarantee from individuals or entities located in the United States.’ Id.”
“CMA CGM is
a French corporation, therefore the debt obligation it owes to Iran is located
in France. Iran’s rights to payment from CMA CGM are not ‘property in the
United States’ and are immune from execution. 28 U.S.C. Section 1610(a)(7). We
affirm the district court’s denial of Plaintiffs’ motion to assign Iran’s
rights to payment from CMA CGM.” [1130‑32].
The Court
thus concludes: “The statutory text, structure, legislative history, and case
law suggest that sua sponte consideration is appropriate and serves the dual
goals of the FSIA: [1] affording American plaintiffs with a means for bringing
suit against foreign states and ensuring that their disputes will not be
resolved based on political considerations, and also [2] demonstrating a proper
respect for foreign states and sparing them the inconvenience of litigation. We
affirm the district court order on the basis that Iran’s rights to payment from
CMA CGM are not ‘property in the United States’ that are amenable to
attachment.” [1132]
The
Dissenter opines that immunity from execution is an affirmative defense.
Neither the history of sovereign immunity nor the purpose of the FSIA permit or
require the Court to raise this issue sua sponte. The Dissenter would remand to
the district court to review whether Iran’s right to payment was assignable
under California law without consideration of the FSIA.
Case:
Peterson v. Islamic
Republic of Iran, 627 F.3d 1117 (9th Cir.).
*** About Sarah Ellen Cox: Sarah E. Cox is a Personal Injury attorney in Fort Myers, Florida. Ms. Cox received her Juris Doctor from Whittier School of Law in 2005, and was admitted to the Florida Bar in 2008. News about Sarah E. Cox are at: https://attorneygazette.com/sarah-ellen-cox# Attorney Profile at: https://solomonlawguild.com/sarah-ellen-cox Blog at: http://SarahECoxBlog.blogspot.com
