Iranian Assets Attachable in Terror Case

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By Nicholas Datlowe

April 20 — Nearly $2 billion in funds held in a U.S. bank will remain available to satisfy terrorism judgments against Iran after the U.S. Supreme Court April 20 affirmed a decision of the Second Circuit.

The court reaffirmed that Congress may amend laws and make them applicable to pending cases, even when they direct the outcome of those cases, Justice Ruth Bader Ginsburg's opinion for a six-justice majority said.

The statute here was not a “one-case-only” regime, as the petitioners had portrayed it, and was passed in furtherance of Congress's and the President's foreign policy powers, the court said.

It was therefore “no violation of separation-of-powers principles, and no threat to the independence of the judiciary,” it said.

The decision was “very strong,” with broad implications for national security law, Jimmy Gurulé, a professor at Notre Dame Law School, South Bend, Ind., told Bloomberg BNA in an April 20 call.

The opinion suggests that “when the political branches act in coordination to combat a national security threat, they are entitled to substantial deference,” he said. Gurulé submitted a friend of the court brief on behalf of several national security law professors supporting the judgment creditors.

But Ernest A. Young, a professor at Duke Law School, Durham, N.C., disagreed.

“It was a great day for substantive justice, but a bad day for constitutional principle,” he told Bloomberg BNA April 20. Young also filed an amicus brief, this one on behalf of federal courts scholars supporting the Iranian bank.

The principle of separation of powers, “one of the basic protections of the judicial power,” eroded today, he said.

Statute Didn't Mandate Result

The plaintiffs here—terrorism victims and their families and estates—sought to attach funds, held for the benefit of Bank Markazi, the central bank of Iran, to satisfy billions in unsatisfied default judgments stemming from terrorist acts including the 1983 Beirut barracks bombings.

While that litigation was ongoing, Congress passed 22 U.S.C. §8772. The statute allows “the financial assets that are identified in and the subject of proceedings in the United States District Court for the Southern District of New York in Peterson et al. v. Islamic Republic of Iran et al., Case No. 10 Civ. 4518 (BSJ) (GWG)”—the case below—to be attached to satisfy the judgments.

Bank Markazi argued that the statute prescribed a rule of decision for a single pending case, violating separation of powers principles by using legislative power to perform a judicial function.

But the legislation was constitutionally permissible because it “changed the law by establishing new substantive standards, entrusting to the District Court application of those standards to the facts (contested or uncontested) found by the court,” the Supreme Court said.

The ultimate principle is that “Congress was amending legislation,” Gurulé said. There was a change in substantive law, and then “application of the law by a court to a pending case,” he said.

Those judicial determinations were “‘not mere fig leaves,'” and left the district court “‘plenty … to adjudicate,'” the court said, quoting the district court itself.

“The court hasn't changed the basic principle—that Congress can't legislate with regard to a case without changing the underlying law,” Young said. “But if this is constitutional, it's unclear what would fail.”

‘Constitutional Maginot Line.'

For the second day in a row, Chief Justice John G. Roberts Jr. issued a dissent joined by only one other justice. Here his cohort was Justice Sonia Sotomayor.

Roberts argued that Section 8772 was “indistinguishable” from a statute saying, in the theoretical case of Smith v. Jones, “Smith wins.”

Under the court's approach, “Article III is but a constitutional Maginot Line, easily circumvented by the simplest maneuver of taking away every defense against Smith's victory, without saying ‘Smith wins,'” he said.

Gurulé disagreed.

“Roberts falls short because he can't distinguish Supreme Court decisions saying that Congress can legislate in pending cases. They've said this several times,” and it's “not really controversial,” he said.

Gurulé pointed out that Roberts was “very forceful” at oral argument (84 U.S.L.W. 948, 1/14/16) and appeared to “disagree strongly” with earlier separation of powers precedents.

Ultimately, however, “he lost ground,” Gurulé said.

From Many, One

Young thought it significant that Ginsburg appeared to see the case not as a single one, but as a “wave of litigation against Iran” that happened to be consolidated for purposes of collecting on the judgments.

“That may have mattered,” he said. If that's the case, “this result isn't so extreme.”

Even if the statute did affect only one case, the assertion that Congress has to legislate generally is a “suspect” assumption, the court said.

The court has “never had that strong of a principle of generality,” Young acknowledged, “but it has never approved anything this particular.”

‘Doing Their Jobs.'

The majority—with the exception of Justice Clarence Thomas, who otherwise joined the opinion—also found it persuasive that the statute was “an exercise of congressional authority regarding foreign affairs, a domain in which the controlling role of the political branches is both necessary and proper.”

“This matters,” Gurulé said. “The case is closer if it doesn't involve national security issues.”

“There may be some truth to that,” Young said, but “I don't get the sense that ‘but for' these issues, the case goes the other way,” Young said.

The national security angle may have contributed to the unusual lineup of justices, which had “liberals” and “conservatives” on both sides.

Regardless of why, it was “tremendously heartening that we scrambled the ideological divide,” Young said.

The uncommon alignment indicated that the justices “thought hard about this case. They're doing their jobs, and not thinking about politics.”

Theodore B. Olson of Gibson, Dunn & Crutcher LLP, Washington, represented the plaintiffs.

Jeffrey A. Lamken of MoloLamken LLP, Washington, represented Bank Markazi.

To contact the reporter on this story: Nicholas Datlowe in Washington at ndatlowe@bna.com

To contact the editor responsible for this story: Jessie Kokrda Kamens at jkamens@bna.com