Bennett v. Islamic Republic of Iran
2016 U.S. App. LEXIS 3154
| 9th Cir. | 2016Background
- Nearly 90 U.S. judgment creditors hold final money judgments against Iran for terrorism-related deaths and injuries and seek to collect nearly $1 billion.
- Bank Melli, an Iranian government instrumentality, has U.S.-blocked funds (~$17.6 million owed by Visa and Franklin) due to U.S. sanctions; Visa and Franklin initiated interpleader to determine entitlement.
- Bank Melli moved to dismiss, arguing sovereign immunity under the FSIA, that TRIA §201(a) and FSIA §1610(g) cannot be applied retroactively, that the blocked funds are not Bank Melli’s property, and that it is a required but unjoinable party under Rule 19.
- The district court denied dismissal, holding TRIA §201(a) and FSIA §1610(g) permit attachment of instrumentality assets, are not impermissibly retroactive, the blocked funds are Bank Melli’s property, and Rule 19 dismissal is not required; the order was certified for interlocutory appeal.
- The Ninth Circuit affirmed: it read TRIA §201(a) and FSIA §1610(g) to allow attachment/execution against blocked assets of state instrumentalities, applied those provisions to existing judgments, found the funds were Bank Melli’s property under California (and federal) law, and held Bank Melli may be joined so Rule 19 does not mandate dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TRIA §201(a) permits attachment of assets held by a state instrumentality | TRIA §201(a) expressly includes "blocked assets of any agency or instrumentality" and thus allows attachment | TRIA applies only to instrumentalities that are alter egos of the state (Bancec), so the Bancec presumption still bars attachment | Held: TRIA §201(a) authorizes attachment of instrumentality blocked assets; Congress overrode Bancec in this context |
| Whether FSIA §1610(g) independently authorizes attachment/execution of instrumentality property | §1610(g) makes property of agencies/instrumentalities subject to execution for §1605A judgments, regardless of Bancec factors | §1610(g) must be read as dependent on other §1610 provisions (e.g., commercial-activity requirements in (a)/(b)) and therefore is not freestanding | Held: §1610(g) is a freestanding basis for attachment/execution for §1605A judgments and abrogates Bancec in that context |
| Whether application of TRIA §201(a) and §1610(g) to pre-enactment terrorist acts is impermissible retroactive imposition of liability | Statutes do not create new liability; they provide additional collection tools for existing §1605(a)(7)/§1605A judgments | Retroactivity would improperly impose new burdens for past conduct | Held: Not impermissibly retroactive — statutes apply to existing judgments; sovereign-immunity statutes carry a presumption favoring retroactivity (Altmann) |
| Ownership of blocked funds — are the funds "property of" Bank Melli? | Judgment creditors: Visa/Franklin owe payments to Bank Melli; under California law (and federal law), that right is Bank Melli’s property and assignable to satisfy judgments | Bank Melli: Visa/Franklin own the blocked assets; they are not Bank Melli’s property | Held: Under California (and aligned federal) law, Bank Melli has a property interest in the payments; funds are attachable as Bank Melli’s property |
| Whether Bank Melli is a required but unjoinable party under Rule 19 necessitating dismissal | Plaintiffs: Bank Melli can be joined because TRIA §201(a) and §1610(g) abrogate immunity for collection purposes | Bank Melli: Its absence would impair its interests; sovereign immunity would bar joinder and require dismissal (Pimentel) | Held: Bank Melli is not immune for these purposes and can be joined; Rule 19 dismissal is not required |
Key Cases Cited
- Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch) 116 (establishes foreign sovereign immunity as matter of comity)
- Republic of Austria v. Altmann, 541 U.S. 677 (statutes governing sovereign immunity are presumptively retroactive absent contrary intent)
- First National City Bank v. Banco Para el Comercio Exterior de Cuba (Bancec), 462 U.S. 611 (presumption that instrumentalities are juridically distinct from sovereign; factors to overcome presumption)
- Bank Markazi v. Peterson, 136 S. Ct. 1310 (FSIA provides exclusive jurisdictional framework; Congress expanded collection tools against state sponsors of terrorism)
- Flatow v. Islamic Republic of Iran, 308 F.3d 1065 (discusses Bancec factors)
- Weinstein v. Islamic Republic of Iran, 609 F.3d 43 (TRIA §201(a) provides subject-matter jurisdiction for post-judgment execution against instrumentality assets)
- Peterson v. Islamic Republic of Iran, 627 F.3d 1117 (California-law approach to attachability of payment streams)
- Heiser v. Islamic Republic of Iran, 735 F.3d 934 (D.C. Cir. decision on ownership of blocked funds and federal rule of decision)
- Pimentel v. Republic of Philippines, 553 U.S. 851 (a required sovereign-party entitled to immunity can defeat adjudication where joinder is impossible)