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.
Citation: Peterson v. Islamic Republic of Iran, 627
F.3d 1117 (9th Cir. 2010).
**** 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
