Where default judgment against
Iran under 28 U.S.C. 1605(a)(7) of FSIA turned out to be unenforceable, and
claimant had chosen compensation under Victims Protection Act (VPA), D.C.
Circuit holds that claimant had thereby relinquished his claims to Iranian real
estate assets which U.S. is regulating under IEEPA
Stephen Flatow obtained a $225
million default judgment, including compensatory and punitive damages, against
the Government of Iran and several Iranian officials under 28 U.S.C. Section
1607(a)(7) of the Foreign Sovereign Immunities Act of 1976 (FSIA). The claims
arose from the death of 20-year-old Alisa Flatow in April 1995 after a suicide
bomber of the Islamic Jihad had driven a van with explosives into her bus in
the Gaza Strip. Although Iran allegedly sponsors this extremist group, Flatow
could not collect on his judgment.
On October 28, 2000, the Victims
of Trafficking and Violence Protection Act of 2000, [Pub.L. No. 106-386, 114
Stat. 1464 (2000)] (VPA) became law to provide compensation for certain victims
of terrorist acts. Flatow received more than $26 million under the VPA.
The VPA offers claimants two
payment options. The first is equivalent to 110 percent of the compensatory
damages awarded by a court under 28 U.S.C. Section 1605(a)(7) plus
post-judgment interest. The recipient, however, has to give up all rights and
claims to punitive damages.
The second option is 100 percent
of the judicially awarded compensatory damages under 28 U.S.C. Section
1605(a)(7) plus post-judgment interest. Here, the claimant must surrender all
rights to execute against, or attach, all property at issue in claims against
the U.S. before an international tribunal. In a later Federal Register notice,
the U.S. Treasury (UST) explained that the law bars those claimants who choose
the 100 percent option from attaching almost all Iranian assets held by the
U.S. government (See 65 Fed. Reg. 70382, 70384, Nov. 22, 2000).
Flatow elected the second option,
and sought post-judgment interest from the UST on the punitive damages award.
The district court denied Flatow’s motion to compel this latter payment. In
June 1998, Flatow served a third-party subpoena on the UST pursuant to
Fed.R.Civ.P. 45, seeking information on regulated Iranian assets.
The UST first objected to the
broad scope of the subpoena. After Flatow had chosen option two, the UST
additionally asked the court to narrow the subpoena to reflect that Flatow had
given up his rights to attach such assets under the VPA.
Flatow also tried to levy upon
three parcels of Iranian real estate in Washington, D.C., held by the U.S.
Department of State (DOS) since 1980. The district court, however, contracted
the scope of Flatow’s subpoena to exclude Iranian property regulated by the
U.S.
The DOS then filed a “Statement
of Interest” explaining (1) that the Iranian properties in question are immune
from attachment under the Foreign Missions Act [22 U.S.C. Section 4301-4316]
and the FSIA, (2) that Executive Order 12170 [44 Fed. Reg. 65729, Nov. 15,
1979] has “blocked” them , and (3) that they are the subject of ongoing
proceedings in the Iran-U.S. Claims Tribunal.
Upon review, the U.S. Court of
Appeals for the D.C. Circuit dismisses the claim for post-judgment interest for
lack of jurisdiction. The Court, however, affirms the district court’s
interpretation of what constitutes “regulated” Iranian property under the
International Emergency Economic Powers Act (IEEPA) [50 U.S.C. Sections
1701-1702].
As for Flatow’s claim for
interest on the punitive damages, the Court finds that it has no jurisdiction
to consider this effort to compel the U. S., a non-party. Moreover, the
district court was wrong to hold that Flatow had waived his right to recover
such interest by electing the 100 percent option. Therefore, the Court vacates
the district court’s ruling on the merits of that claim.
“Flatow never named the United
States or any agency or officer of the federal government as a defendant in his
tort action against Iran under the FSIA. He does not claim to have served the
United States or the [UST] with a summons, much less to have made a demand on
the [UST] for post-judgment interest on his punitive damages award prior to
filing his motion to compel payment. Nor did Flatow amend his complaint to add
the United States as a party, and the district court docket does not indicate
that the United States was added as a party through joinder or intervention.”
“Furthermore, even if the filing
of the Statement were viewed as an appearance by the United States, [cite] it
clearly was a limited appearance, focusing on the attachments and not the
merits of the underlying tort action. In addition, the United States presented
a jurisdictional objection to Flatow’s motion to compel. ... Under the
circumstances, the United States took no action that subjected it to the
general jurisdiction of the district court.” [Slip op. 8-9]
The Court then turns to Flatow’s
claim that the district court had improperly limited the subpoena. The scope of
Flatow’s rights under 28 U.S.C. Section 1610(f)(1)(A) depends on the meaning of
“transactions [that] are prohibited or regulated” under IEEPA. The Court
concludes that the lower court had properly fenced in the subpoena to exclude
Iranian property subject to license by the U.S. government.
“Acting pursuant to IEEPA’s
national emergency powers, President Carter, in response to the Iranian hostage
crisis, declared a national emergency on November 14, 1979, and issued a series
of Executive Orders that, among other things, blocked the removal or transfer
of all Iranian property subject to U.S. jurisdiction. ... The President
authorized the [UST] to promulgate regulations carrying out the blocking
order.”
“Consequently, the Department’s
Office of Foreign Assets Control Regulations (“FAC”) administers two regulatory
programs involving Iranian property ... Such property may not be transferred,
paid, exported, withdrawn, or otherwise dealt in except as provided by FAC.
...”
“Pursuant to the Algiers Accords,
the [UST] established a general license that authorized post-1981 transactions
‘in which Iran or an Iranian entity has an interest.’ ... The fact that a
transaction is authorized by an FAC. license confirms that it is ‘regulated’ by
IEEPA and by regulations or licenses issued pursuant thereto.” [Slip op. 15-17]
Citation: Flatow v.
Islamic Republic of Iran, No. 01-7101 (D.C. Cir. October 18, 2002).
**** Mr. William B. Blanchard (“Bill Blanchard”) is a Real Estate Attorney with offices in St. Charles and Oakbrook Terrace, Illinois. Bill specializes in representing real estate clients for purchases and sales as well as home owner real estate tax assessment appeals. Mr. Blanchard is General Counsel for Gaia Title, Inc. a title insurance agency and settlement services provider. The Company is owned by real estate attorneys who demand exemplary title insurance services and accurate and efficient settlement services. As General Counsel he is responsible for title examination, commitment and policy review, escrow settlement supervision and regulatory review. - Attorney Profile: https://solomonlawguild.com/william-b-blanchard%2C-esq - Attorney News: https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7
