Aviation & Gen. Ins. Co., Ltd. v. United States, 882 F.3d 1088

Background

In the 1980s Libya sponsored two terrorist attacks (EgyptAir Flight 648, 1985; Pan Am Flight 103, 1988) that produced insured losses. Appellants (insurers/reinsurers/asset manager) paid roughly $97 million in claims and sued Libya after Congress abrogated Libya’s immunity for terrorism claims in 1996 and expanded claims in 2008.
While suits were pending, the U.S. negotiated a settlement with Libya: Libya paid $1.5 billion, Congress enacted the Libyan Claims Resolution Act (LCRA) restoring Libya’s sovereign immunity, and the President issued Executive Order 13,477 terminating specified pending suits and directing certain claims to the Foreign Claims Settlement Commission (FCSC).
Appellants’ suits were dismissed for lack of jurisdiction. Some appellants applied to the FCSC and were denied under its continuous-nationality rule; many foreign appellants did not qualify for the Commission.
Appellants sued the United States in the Court of Federal Claims, alleging the Government effected a Fifth Amendment taking by terminating their lawsuits and excluding them from settlement proceeds.
The Court of Federal Claims denied dismissal on political-question grounds but granted summary judgment for the Government, applying Penn Central and concluding no compensable taking occurred; the Federal Circuit affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether challenge to exclusion from settlement proceeds is justiciable	Appellants: exclusion was the taking—entitled to compensation/distribution	U.S.: distribution of settlement funds and choice of beneficiaries are discretionary foreign-relations decisions (political question)	Nonjusticiable: claims about exclusion from proceeds are political questions and not for the courts
Whether takings claim based on termination of lawsuits is justiciable	Appellants: termination of their cognizable FSIA claims is a legal taking the courts can adjudicate	U.S.: review would impermissibly second-guess President’s settlement authority and foreign policy	Justiciable: courts may decide whether termination of suits effected a Fifth Amendment taking (but not entitlement to settlement proceeds)
Whether termination of suits constituted a compensable taking under Penn Central factors	Appellants: loss of claims, investment-backed expectations, and economic harm require compensation	U.S.: action was within longstanding foreign-relations practice; expectations were not reasonable; economic harm speculative; public interest favors settlement	No taking: balancing Penn Central factors (character, expectations, economic impact) favors government; summary judgment for U.S. affirmed
Whether appellants had standing/subrogation rights to sue U.S. for terminated claims (concurring/dissenting view)	Appellants: possess subrogation rights to pursue claims they paid on behalf of insureds/victims	U.S.: subrogation is derivative and limited; insureds/victims lacked a cognizable claim in U.S. courts after LCRA/EO; U.S. is not the tortfeasor	(Concurring in part/dissenting) Would hold no standing/subrogation against U.S.; and would treat the termination as nonjusticiable political question

Key Cases Cited

Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978) (three-factor takings balancing test)
Baker v. Carr, 369 U.S. 186 (1962) (political-question doctrine factors)
Belk v. United States, 858 F.2d 706 (Fed. Cir. 1988) (claims-espousal/settlement context and nonjusticiability of challenging settlement terms)
Dames & Moore v. Regan, 453 U.S. 654 (1981) (executive authority to settle foreign claims)
Republic of Iraq v. Beaty, 556 U.S. 848 (2009) (foreign sovereign immunity reflects political relationships)
United States v. Pink, 315 U.S. 203 (1942) (historical practice of settling foreign claims)
United States v. Sperry, 493 U.S. 52 (1989) (speculativeness of recovery absent settlement mechanisms)
Acceptance Ins. Cos. v. United States, 583 F.3d 849 (Fed. Cir. 2009) (takings claim standing and standards)