Bennett v. Islamic Republic of Iran
817 F.3d 1131
9th Cir.2016Background
- ~90 U.S. judgment creditors hold final money judgments (totaling ~ $1 billion) against Iran under FSIA §1605A and related predecessor provisions for state‑sponsored terrorist acts.
- Bank Melli, Iran’s state‑owned bank and an FSIA instrumentality, has U.S. funds owed to it by Visa and Franklin; those funds are blocked by OFAC sanctions.
- Visa and Franklin initiated an interpleader to determine rights to the blocked funds and to obtain discharge; Bank Melli appeared and moved to dismiss.
- Bank Melli argued (1) sovereign immunity; (2) TRIA §201(a) and FSIA §1610(g) cannot be applied retroactively; (3) the blocked funds are not Bank Melli’s property; and (4) Rule 19 dismissal was required because it was a required party that could not be joined.
- The district court denied dismissal and certified interlocutory appeal; the Ninth Circuit affirmed, holding TRIA §201(a) and FSIA §1610(g) permit attachment/execution, the statutes are not impermissibly retroactive here, the blocked funds are Bank Melli’s property, and Bank Melli may be joined so Rule 19 dismissal is inappropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Do TRIA §201(a) and FSIA §1610(g) permit attachment/execution of funds owed to an instrumentality? | TRIA and §1610(g) allow creditors to reach blocked assets of instrumentalities to satisfy §1605A judgments. | Bank Melli: statutes apply only to instrumentalities that are alter‑egos (Bancec), not to separate juridical entities generally. | Yes. TRIA §201(a) and §1610(g) authorize attachment/execution against blocked assets of instrumentalities; Congress abrogated Bancec protections in this context. |
| 2. Would applying those statutes to judgments from pre‑enactment terrorist acts be impermissibly retroactive? | Plaintiffs: statutes do not create new substantive liability but provide collection remedies; sovereign‑immunity statutes are presumptively retroactive. | Bank Melli: application imposes retroactive liability. | No. The statutes provide remedial collection tools, and Altmann supports retroactivity for sovereign‑immunity rules; Congress intended coverage of existing judgments. |
| 3. Are the blocked funds "property of" Bank Melli (ownership question)? | Plaintiffs: under California law (or federal law), contractual rights to payments due Bank Melli make the funds its property and subject to attachment/assignment. | Bank Melli: Visa/Franklin own the funds; Bank Melli has no attachable property interest. | Yes. California law permits attachment/assignment of payment rights owed to Bank Melli; same result under relevant federal analysis. |
| 4. Must the case be dismissed under Rule 19 because Bank Melli is a required party that cannot be joined? | Plaintiffs: Bank Melli can be joined because TRIA and §1610(g) abrogate immunity for the relevant assets. | Bank Melli: sovereign immunity would prevent joinder, requiring dismissal under Pimentel. | No. Because immunity was abrogated for these collection claims, Bank Melli can be joined; Pimentel is distinguishable. |
Key Cases Cited
- Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch) 116 (early principle that U.S. jurisdiction over persons/property is plenary)
- Republic of Austria v. Altmann, 541 U.S. 677 (2004) (FSIA is a matter of grace; presumption permitting retroactive application of sovereign‑immunity statutes absent contrary intent)
- Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480 (1983) (deference to political branches on foreign sovereign suits; background on FSIA jurisdiction)
- First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba (Bancec), 462 U.S. 611 (1983) (presumption of separate juridical status for instrumentalities; factors to rebut)
- Landgraf v. USI Film Prods., 511 U.S. 244 (1994) (default rules on retroactivity of statutes)
- Peterson v. Islamic Republic of Iran, 627 F.3d 1117 (9th Cir.) (ownership/assignment analysis and application of state law to FSIA property questions)
- Heiser v. Islamic Republic of Iran, 735 F.3d 934 (D.C. Cir.) (federal approach to ownership of blocked funds and limits of Heiser‑type transfers)
- Weinstein v. Islamic Republic of Iran, 609 F.3d 43 (2d Cir.) (TRIA §201(a) permits execution against instrumentalities’ blocked assets)