Shatsky v. Syrian Arab Republic ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA F I L E D
SHABTAI SCOTT SHATSKY,
e,a,_, § JUL 06 2011
) Clerk, U.S. Dlst_rict & Bankruptcy
Plaintiff, ) Courts for the D¢strict of Colurnhi».
)
v. ) Civ. Acti0n No. 02cv2280 (RJL)
)
THE SYRIAN ARAB REPUBLIC, )
el al., )
)
Defendant. )
MEMORANDUM OPINION
(JuneԤ 201()) [#77]
Plaintiffs are U.S. citizens, and the guardians, family members and the personal
representatives of U.S. citizens, who were the victims of the February 16, 2002 suicide
bombing in the West Bank village of Kamei Shomron in Israel. They bring this action
against the Palestinian Authority ("PA") and the Palestinian Liberation Organization
("PL()," collectively "defendants") alleging wrongful death, personal injury and related
torts under the Anti-Terrorism Act ("ATA"), 18 U.S.C. § 2333. Currently before this
Court is defendants’ motion to vacate the default entered against them on April 12, 2005.
F or the reasons set forth below and upon consideration of the pleadings, oral argument
and the entire record herein, the Court GRANTS defendants’ motion and vacates the
entry of default
BACKGROUND
Plaintiffs filed this lawsuit on November 18, 2002 naming the PA, PLO, John
Does l-99, as well as various Syrian entities and individuals, including the Syrian Arab
Republic,' as defendants. Compl. 1111 16-27. Plaintiffs allege that in February 2002, the
PLO planned and carried out a suicide bombing that targeted and killed two American
teenagers, and injured many others, at a pizzeria in the West Bank. Compl. 111 57, 62-63.
Plaintiffs and defendants agree that shortly after this tragic event, a wing of the Popular
Front for the Liberation of Palestine ("PFLP") claimed credit for the bombing. Defs.’
Mot. to Vacate Clerk’s Entry of Default [#77] ("Defs.’ Mot."); Pls.’ Mem. in Opp’n to
Def.’s Mot. to Vacate ("Pls.’ Opp’n") at 2. Plaintiffs contend that the PFLP, as a member
of the PLO, shared in PLO funding during the relevant period and conspired with the
PLO to plan and execute the attack. As such, plaintiffs contend that the PLO bears direct
responsibility for the attack under the ATA. Pls.’ Opp’n at 2-4. Plaintiffs further allege
that the PA, for its part, provided "massive material support and resources" to the PL()
for the purpose of "causing and facilitating . . . the terrorist bombing." Compl. 1 45.
Initially, the parties actively litigated this action.z Indeed, after the Court denied
defendants’ motion to dismiss for lack of jurisdiction in 2005, see Minute Order, Feb. 7,
l Plaintiffs voluntarily dismissed the Complaint against the Syrian defendants on May 2,
2005. The case against the Syrian defendants was re-filed as a related case on April 21,
2006. See Civil Docket No. 06-724 (RJL). That case is still pending before this Court.
2 Early in the proceedings, default was entered against the PA and PLO defendants,
Clerk’s Entry of Default as to PLO and PA, Sept. ll, 2003 [#18]; however, the PA and
PLO promptly moved to strike the entry, arguing that the clerk had entered default
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2005, counsel for the PA and PLO informed the Court at a status conference that the
defendants intended only to litigate the question of jurisdiction, possibly through an
interlocutory appeal, Status Conf. Tr. at ll:2l-l2:l, 16:17-20 (Mar. 29, 2005). A motion
seeking such an appeal, however, was never filed, and on April l2, 2005, plaintiffs
obtained an entry of default against the PA and PLO defendants. See Clerk’s Entry of
Default, Apr. l2, 2005 [#52].
On April 30, 2007, plaintiffs moved this Court for a default judgment. Pls.’ Mot.
for Default J., Apr. 30, 2007 [#64]. Defendants, having appointed new counsel, opposed
plaintiffs’ motion, and the parties began discovery on the question of damages. ()n
December 21, 2007, defendants moved to vacate the entry of default Defs.’ Mot.
Plaintiffs, in turn, moved to compel continued discovery. Pls.’ Mot. to Compel, Apr. 25,
2008 [#93]. After hearing oral argument on June 13, 2008, this Court denied plaintiffs’
motion to compel discovery and ordered plaintiffs to respond to defendants’ motion to
vacate. Mot. Hearing Tr. at 2313-8 (June l3, 2008). Thereafter, on July 28, 2008, this
Court heard oral argument on defendants’ motion to vacate, inviting further briefing at
the close of argument, which was promptly filed. See Mot. Hearing Tr. at 38:8-17 (July
28, 2008).
prematurely, and, indeed, no default had occurred. Mot. to Strike Default, Sept. 25, 2003
[##21, 22]. Plaintiffs did not oppose, and this Court granted the motion. See Minute
Order, June 23, 2004.
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ANALYSIS
Default judgments are disfavored by our Circuit. Jackson v. Beech, 636 F.2d 831,
835 (D.C. Cir. 1980), Generally, "courts are . . . reluctant to enter and enforce judgments
unwarranted by the facts." Ia'. Thus, under Rule 55(0), an entry of default may be
vacated for "good cause" shown. Fed. R. Civ. P. 55(0). Although the decision to set
aside a default lies within the discretion of the district court, our Circuit has outlined the
following factors that should be taken into account: (l) whether the default was willful,
(2) whether a set-aside would prejudice the plaintiff, and (3) whether the defaulting party
has presented a meritorious defense. Keegel v. Key West & Caribbean Tradz'ng Co., Inc.,
627 F.2d 372, 373 (D.C. Cir. 1980). The Rule 55(c) standard is notably less strict than
the standard for vacating a default judgment under Rule 60(b). Jackson, 636 F.2d at 835.
Nonetheless, "[o]n a motion for relief from the entry of a default or a default judgment,
all doubts are resolved in favor of the party seeking relief." Ia’. at 836.
Here, defendants argue that they meet the good cause standard. ln particular,
defendants contend that the default was not willful, and, in any event, was excusable, that
plaintiffs will not suffer any prejudice from proceeding on the merits, and that defendants
have set forth a meritorious defense. Further, defendants highlight various practical and
political considerations, including the size of defendants’ potential liability, which favor
resolution on the merits. In response, plaintiffs contend that defendants do not meet the
good cause standard because: (l) the default was both willful and strategic; (2) the
motion to vacate was egregiously untimely; (3) plaintiffs will suffer incurable prejudice;
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and (4) defendants have failed to state a meritorious defense. Unfortunately for plaintiffs,
I find good cause, for the following reasons, to set aside the default.
I. T he Willfulness of the Default
The Rule 55(c) good cause factors must be analyzed in light of our Circuit’s clear
preference for a resolution on the merits. Jackson, 636 F.2d at 835. Accordingly,
although I may deny a motion to vacate based solely on a finding that the default was
willful, see Bz``ton v. Palestinian Interim Self-Gov ’t Auth., 252 F.R.D. l, 2 (D.D.C. 2008),
such a denial is not required, see Gz'lmore v. Palestinian Interz``m Self-Gov ’t Auth., 675 F.
Supp. 2d 104 (D.D.C. 2009); see also Owens v. Republic ofSudan, 374 F. Supp. 2d l, 10
n.5 (D.D.C. 2005) ("Although the Sudan defendants’ delay appears to have been at least
somewhat willful, that concem is overridden in this case by the absence of significant
prejudice, the potential of a meritorious defense, and the strong presumption against an
entry of default judgment against a foreign state.").
Indeed, it seems overwhelmingly clear that defendants’ default in this case was
willful. I am not persuaded in the least bit by defendants’ arguments that their default
was the result of regional turmoil, the lack of an institutional decision-making
mechanism, or defendants’ inability to understand the Court’s jurisdiction. See Defs.’
Mot. at 23-29. 'l``hose arguments are flatly contradicted not only by their counsel’s own
statements, see Status Conf. Tr. at ll:2l-l2:l, l6:l7-20 (Mar. 29, 2005) (indicating that
defendants only intended to litigate jurisdiction and nothing more), but also by
defendants’ conduct in parallel cases, see, e.g., Knox v. Palestinian Liberation Org., 248
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F.R.D. 420, 426 (S.D.N.Y. 2008) (citing to an August l5, 2005 letter sent by the PA and
PLO counsel, "expressly conveying Defendants’ intent to default"); Gilmore, 675 F.
Supp. 2d at l04; Bz'ton, 252 F.R.D. at 2; Saperslez``n v. Palestinian Auth., 2008 U.S. Dist.
LEXIS ll0375, at *39 (S.D. Fla. Sept. 29, 2008); see also Pls.’ Opp’n, Ex. I. Notably,
Knox, Gilmore, Biton and Saperstez``n each involved the same defense counsel (both
former ~ Mr. Ramsey Clark ~ and current - Mr. Richard Hibey) and the same types of
claims under the ATA. lt is informative, therefore, that a variety of courts have
unanimously found, based on defense counsel’s conduct and statements, that defendants’
default was, in fact, willful. Knox, 248 F.R.D at 426; Gilmore, 675 F. Supp. 2d at 104;
Biton, 252 F.R.D. at 2; Saperstein, 2008 U.S. Dist. LEXIS ll0375, at *39. Finally,
defendants’ argument that they did not understand this Court’s jurisdiction must fail in
the face of this Court’s clear denial of defendants’ jurisdictional challenge. See
Gregorian v. Izvestz``a, 871 F.2d l5l5, 1525 (9th Cir. 1989) (holding that it is no longer
reasonable for a foreign entity to assume immunity once it has "received a definitive
indication to the contrary from the United States courts").
Despite defendants’ willful default, however, this Court is now convinced that
they are truly committed to litigating this matter. Further, as explained below, l find that
plaintiffs will not suffer any prejudice by proceeding on the merits and that defendants
have asserted a meritorious defense. As such, defendants’ willfulness alone does not, on
balance, preclude vacatur here.z
II. Prejudice to Plaintijj”s
ln determining whether a plaintiff has suffered prejudice, delay alone is not
sufficient. Keegel, 627 F.2d at 373. Instead, courts look to tangible harms that may have
resulted from the delay. Gilrnore, 675 F. Supp. 2d at l04. Tangible harms may include
"‘loss of evidence, increased difficulties of discovery, and an enhanced opportunity for
fraud or collusion."’ Gz``lmore, 675 F. Supp. 2d at 109 (quoting Fed. Dep. Ins. Corp. v.
Frarzcisco Inv. Corp., 873 F.2d 474, 479 (lst Cir. 1989)); Capital Yacht Club v. Vessel
Aviva, 228 F.R.D. 389, 394 (D.D.C. 2005) (citing KPS & Assocs., Inc. v. Designs By
FMC, Inc., 318 F.3d l, 15 (lst Cir. 2003)).
Here, plaintiffs claim two sources of prejudice resulting from defendants’ default:
(l) the inability to obtain evidence in the Gaza Strip; and (2) the imminent dissolution of
the PA. Specifically, plaintiffs claim that a potential body of evidence was lost in 2007
when "the PA was driven out of Gaza by Hamas." Pls.’ Opp’n at 28. Plaintiffs explain
that in 2002, the PA and PLO operated in two distinct regions, the West Bank and the
Gaza Strip. Id. at 27. Because the PA no longer exercises authority in Gaza, any
materials or witnesses, which were located there, would no longer be available in
3 This Court fully recognizes that a willful default cannot be excused without sanction.
Unless a settlement on this issue is agreed to by the parties, this Court will entertain a
motion seeking attorneys’ fees and other damages that have resulted from defendants’
dilatory conduct.
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discovery. Icl. at 28. Plaintiffs additionally argue that, because of contemporaneous
events relating to the creation of a Palestinian state, the PA, which is an interim
governmental body, will soon cease to exist. Icl. at 32. Because a new Palestinian state
would not inherit the legal obligations of the PA, plaintiffs would lose the ability to bring
their claims. Ia'. at 33.
Defendants, to the contrary, contend that plaintiffs’ assertions are purely
speculative. Indeed, they claim, this case "has nothing to do with Gaza." Defs.’ Reply at
l3. The suicide bombing here occurred in the West Bank and a Syrian-based wing of the
PFLP took credit for the bombing. Id. Further, plaintiffs have not identified any
materials or witnesses that were, in fact, lost because of the loss of Gaza. With respect to
the PA, defendants argue that there is no certainty regarding whether, or when, the PA
will cease to exist. Ia’. at 15. Prejudice based on so many possible contingencies is
insufficient to preclude vacatur. Ia’. Finally, defendants volunteer that any additional
harms are mitigated by defendants’ concession that plaintiffs may be reimbursed for
reasonable costs and by defendants’ offer of a $l million bond, which will serve to ensure
their continued participation in this suit. l agree.
First, the facts of this case bear little, if any, connection to Gaza. In fact,
plaintiffs’ exact argument has already been squarely rejected in Knox. Knox, 248 F.R.D
at 429. The Knox Court found that with respect to any potential loss of evidence,
plaintiffs and defendants had a duty to preserve evidence from the moment that they were
on notice that the evidence would be relevant to a litigation. Ia’. A speculative loss of
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potential documents, therefore, was insufficient to create prejudice. See ia’. For the same
reasons, I agree with defendants that "the years of active litigation that occurred before
April 2005 make it unlikely that Plaintiffs would suffer any prejudice from delay." See
Defs.’ Mot. at 3 l. This is true particularly in light of plaintiffs’ inability to identify any
specific evidence that was lost in Gaza. In addition, the prejudice arising out of the
imminent dissolution of the PA is even more speculative. Plaintiffs’ argument was
largely based on contemporaneous negotiations between the Palestinians and Israelis that
have since broken down. See Pls.’ Opp’n at 32. Simply put, rank speculation that
evidence may be lost or may have been lost is insufficient to preclude vacatur.
With respect to any additional harms, in light of my authority to oversee discovery
and impose appropriate sanctions, I find that the delay in this case will not cause
significant prejudice to plaintiffs. See Keegel, 627 F.2d at 373.
III. Meritorious Defense
The third and final factor to be considered under Rule 55(c) is whether defendants
have asserted a meritorious defense. Defendants need not prove their defense. Whelan v.
Abell, 48 F.3d 1247, 1259 (D.C. Cir. 1995). Instcad, "[d]efendants’ allegations are
meritorious if they contain even a hint of a suggestion which, proven at trial, would
constitute a complete defense." Keegel, 627 F.2d at 374 (intemal quotation omitted).
Ultimately, the proffered defense "need not be . . . persuasive at this stage," but must only
"give the factfinder some determination to make." Am. Allz``ance Ins. C0. v. Eagle Ins.
C0., 92 F.3d 57, 61 (2d Cir. l996) (internal quotations omitted). As plaintiffs themselves
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concede, therefore, a meritorious defense is "extremely easy to present." Pl. Opp’n at 34.
Not surprisingly, defendants have done so here.
Specifically, defendants contend that the suicide bombing was, in fact, carried out
by a militant wing of the PFLP. Defs.’ Mot. at 35. The PFLP, in turn, is an organization
that had "suspended its participation in the PLO" at the time of the Oslo Accords in 1993
and had been outlawed by the PA several months prior to the attack. Defs. Reply at 5-6.
Furthermore, in 2002, the PA and PLO leadership detained the leader of the PFLP,
thereby verifying the schism between the entities. Defs.’ l\/lot. at 37. In short, defendants
argue that these facts show that the PA/PLO had broken with the PFLP and did not share
or support PFLP’s continued use of violence. Notwithstanding plaintiffs’ contentions to
the contrary, see Mot. Hearing Tr. at 34: 23-25 (July 28, 2008), l find that defendants
have presented more than a "mere general denial" of plaintiffs’ allegations. See
Whittaker v. Dz'strz``ct ofColuml)z``a, 228 F.R.D. 378, 381 (D.D.C. 2005). lndeed, l find
defendants’ assertions are sufficient to constitute a defense against plaintiffs’ allegations
that the PA and PLO were responsible for the attacks through their wide-ranging support
of and conspiracy with the PFLP. See Keegel, 627 F.2d at 374.4
4 Plaintiffs’ argument regarding the inadequacy of defendants’ defense is inapposite.
Plaintiffs argue that because defendants do not specifically deny plaintiffs’ factual
allegations, they have somehow failed to assert a meritorious defense. See Pl. Opp’n at
35. Nothing in our Circuit precedent requires such a showing. Plaintiffs allege in their
Complaint that the PA and the PLO are responsible for various harms under the ATA.
Defendants need only show, with more than a general denial, that they were not, in fact,
responsible for those harins. See Keegel, 627 F.2d at 374; Whittaker, 228 F.R.D. at 381.
Defendants have done so here.
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1 V. Conclusion
On balarice, defendants have shown good cause to set aside the default entered
against them. See Fed. R. Civ. P. 55(0). Although the default was willful at the time,$
they have clearly demonstrated their commitment to engaging in this litigation. Further,
the practical and political considerations alleged by defendants resonate with this Court.
Plaintiffs seek $300 million dollars in this case, which may be trebled under the ATA.
imposing such liability on a struggling government - even if that government is not a
recognized state - is not something this Court takes lightly. Given our Circuit’s clear
preference under these circumstances that this case be resolved on the facts, this Court
finds that it is appropriate to vacate the default and allow the parties to proceed on the
merits.
CONCLUSION
Accordingly, for the foregoing reasons, the Court GRANTS defendants’ Motion to
Vacate Clerk’s Entry of Default [#77]. An order consistent with this decision
accompanies this Memorandum Opinion.
United States istrict Judge
5 This Court also agrees with plaintiffs that waiting three years to attempt to vacate an
entry of default may be egregious and subject to sanction. However, even if the Court
finds that it is egregious, without a cognizable prejudice, the delay is simply insufficient
to defeat defendants’ motion here. See Keegel, 627 F.2d at 374.
ll