Peterson v. Islamic Republic of Iran
224 F. Supp. 3d 17
| D.D.C. | 2016Background
- Nearly 1,000 plaintiffs (family members and survivors of the 1983 Beirut bombing) obtained a default liability judgment against Iran under FSIA §1605(a)(7); the Court later awarded over $2 billion in damages after special masters reported on individual claims.
- Sixteen special masters were appointed to review voluminous evidence and recommend damages; they seek payment for their services.
- Plaintiffs obtained turnover of approximately $1.75–$1.9 billion in Iranian assets in S.D.N.Y., which were placed into a qualified settlement fund (QSF) created for the benefit of the Peterson plaintiffs and governed by a written Agreement and Trustee.
- Plaintiffs twice unsuccessfully sought to pay special masters from other sources and were advised in an Omnibus Opinion about potential avenues under the 2008 NDAA amendments (FSIA §1605A and §1083) to secure Victims of Crime Fund payment, but did not pursue those procedural routes.
- Plaintiffs moved under Fed. R. Civ. P. 53(g) to have the QSF pay the special masters; two special masters instead moved for sanctions against plaintiffs’ counsel to force counsel to pay.
- The District Court denied (1) plaintiffs’ request to direct QSF distributions to special masters and (2) the special masters’ request to sanction/tax plaintiffs’ counsel, finding no basis to override the QSF Agreement or to show counsel acted in bad faith.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Court may order payment to special masters from the QSF created in S.D.N.Y. | Peterson: Rule 53(g) permits payment from a fund under the Court's control; QSF should fund special masters. | Special masters (and Court finds): QSF was established for plaintiffs' benefits per S.D.N.Y. order and Agreement; Court should not unilaterally alter those terms. | Denied: QSF earmarked for plaintiffs, counsel, and trustee costs; Court will not order QSF to pay special masters. |
| Whether plaintiffs' counsel should be sanctioned or taxed to pay special masters for failing to invoke §1605A/§1083 procedures | Special masters: counsel acted in bad faith by not refiling under §1605A or seeking Rule 59/60 relief; court may tax counsel under inherent authority or Rule 53/§1920. | Peterson: counsel reasonably refrained given statutory ambiguity, procedural risk, and duty to clients; no sanctionable conduct. | Denied: No clear-and-convincing evidence of bad faith; counsel’s choices could be strategic or reasonable. |
| Whether Rule 53(g) or §1920 authorizes taxing special masters’ fees against plaintiffs or their counsel here | Peterson: Rule 53(g) allows allocation of master costs among parties; §1920 permits taxing court-appointed experts. | Court: Even if authority exists, applying it here would conflict with QSF terms and effectively penalize plaintiffs. | Denied: Court declines to reallocate or tax costs against plaintiffs/counsel under Rule 53(g) or §1920. |
| Whether special masters may obtain relief by characterizing their request as a response rather than a sanctions motion | Special masters: framed relief as response but sought monetary charges against counsel. | Court: substance controls; treated filing as affirmative sanctions motion and evaluated standards for sanctions. | Denied: Motion construed as sanctions request but fails on merits and procedural grounds. |
Key Cases Cited
- In re Islamic Republic of Iran Terrorism Litig., 659 F. Supp. 2d 31 (D.D.C. 2009) (omnibus opinion analyzing §1083/§1605A and advising procedural options)
- Simon v. Republic of Iraq, 529 F.3d 1187 (D.C. Cir. 2008) (limits retroactive application of §1605A to actions brought under that section)
- Peterson v. Islamic Republic of Iran, 758 F.3d 185 (D.C. Cir. 2014) (appellate proceedings relating to turnover and QSF)
- Bank Markazi v. Peterson, 136 S. Ct. 1310 (U.S. 2016) (Supreme Court affirmed aspects of S.D.N.Y. turnover)
- Chambers v. NASCO, Inc., 501 U.S. 32 (U.S. 1991) (limits and standards for courts’ inherent sanctioning power)
- Roadway Express, Inc. v. Piper, 447 U.S. 752 (U.S. 1980) (scope of courts’ sanctioning authority)