Beer v. Islamic Republic of Iran ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
HARRY BEER, et al., )
)
Plaintiffs, )
)
v. ) 08-cv-1807 (RCL)
)
ISLAMIC REPUBLIC OF IRAN, et al., )
)
Defendants. )
)
MEMORANDUM OPINION
I. INTRODUCTION AND BACKGROUND
This action arises out of the June 11, 2003 suicide bombing of a bus in Jerusalem, Israel
by members of the terrorist organization Hamas. 1 The attack killed 17 individuals, including
Alan Beer, a United States citizen living in Israel at the time. Plaintiffs, who include Mr. Beer’s
estate, his mother and his siblings, brought suit under the state-sponsored terrorism exception to
the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1605A, alleging that defendants
Islamic Republic of Iran (“Iran”) and the Iranian Ministry of Information and Security (“MOIS”)
provided financial and material support to Hamas, and are thus liable for the death of Mr. Beer.
They seek $150 million in compensatory damages and $300 million in punitive damages.
Complaint 8, Oct. 17, 2008 [3]. The Court has already determined that defendants are “liable for
the death of Alan Beer, which resulted from the tragic suicide bombing of Egged bus 14A in
Jerusalem on June 11, 2003.” Beer v. Islamic Republic of Iran, ___ F. Supp. 2d __, __, No. 08
Civ. 1807, 2010 U.S. Dist. LEXIS 129953, at * 43 (D.D.C. Dec. 9, 2010) (“Beer II”).
1
References to “Hamas” are to “Harakat al-Muqawama al-Islamiyya, the jihadist Palestinian militia”
generally known by that name. Sisso v. Islamic Republic of Iran, 448 F. Supp. 2d 76, 79 (D.D.C. 2006).
This is not the first action brought by plaintiffs against these defendants. In Beer v.
Islamic Republic of Iran, 574 F. Supp. 2d 1 (D.D.C. 2008) (“Beer I”), these same plaintiffs
successfully pursued claims against Iran and MOIS under the former state-sponsored terrorism
exception, which was codified at 28 U.S.C. § 1605(a)(7). In that case, this Court held that
defendants were liable under state-law theories of wrongful death, infliction of conscious pain
and suffering, and intentional infliction of emotional distress. Beer I, 574 F. Supp. 2d at 11–12.
The Beer I Court awarded plaintiffs compensatory damages totaling $13 million, id. at 13–14,
and denied plaintiffs’ request for a punitive award. Id. at 14. 2
Because plaintiffs previously received compensatory damages, this Court has already
rejected plaintiffs’ request for such an award in this case, holding that
[p]laintiffs who obtained compensatory damages from a suit
brought pursuant to former § 1605(a)(7)—including those before
the Court in this case—may not obtain additional compensatory
relief as a remedy to the federal cause of action in § 1605A where
that subsequent suit arises out of the same terrorist act.
Beer II, ___ F. Supp. 2d at __, 2010 U.S. Dist. LEXIS 129953 at *43–46. However, punitive
damages are available under the current state-sponsored terrorism exception, 28 U.S.C. §
1605A(c), and thus plaintiffs may recover such damages here. 3 Though a procedure for the
calculation of punitive damages is well-established in FSIA jurisprudence, the Court in Beer II
expressed, for the first time, concern as to whether this traditional method remains appropriate in
light of recent Supreme Court decisions calling for increased restraint and heightened review of
punitive damages. ___ F. Supp. 2d at __, 2010 U.S. Dist. LEXIS 129953 at *46–53. After
articulating these concerns, the Beer II Court announced that it would “await[] plaintiffs’ view as
2
Under the prior state-sponsored terrorism exception, “punitive damages were not available against foreign
states.” Beer I, 574 F. Supp. 2d at 14.
3
Principles of finality would normally bar a second suit against defendants for the same events. However,
when Congress passed the current state-sponsored terrorism exception it also created a provision that permits
plaintiffs with existing suits to bring subsequent actions under the new exception. In re Islamic Republic of Iran
Terrorism Litig., 659 F. Supp. 2d 31, 65 (D.D.C. 2009).
2
to the appropriate punitive measures” in this case. Id. In response, plaintiffs submitted a brief in
which they argue that “the amount of punitive damages requested . . . passes Constitutional
muster,” because defendants’ conduct was “without a doubt highly reprehensible.”
Memorandum Regarding Punitive Damages 4, Jan. 10, 2011 [28] (“Ps.’ Br.”). Plaintiffs also
emphasize that their request “is based on a specific methodology formulated by an expert . . . and
adopted by this Court” that is “carefully designed to deter Iran from future misconduct.” Id. at 5.
For the reasons set forth below, the Court holds that the long-standing method for calculating
punitive damages in terrorism-related suits under the FSIA should continue to govern suits under
§ 1605A, and awards punitive damages as appropriate under that framework.
II. LEGAL STANDARD
A. The Standard Method for Calculating Punitive Damages in FSIA Cases
When Congress passed the FSIA, it was clear that the state-sponsored terrorism exception
rendered foreign states subject to suit in the United States for acts of terrorism. However, the
original Act left several questions, including what sorts of damages were available to plaintiffs,
unanswered. In re Islamic Republic of Iran Terrorism Litig., 659 F. Supp. 2d 31, 43 (D.D.C.
2009) (“In re Terrorism Litig.”). In an effort to resolve these issues, Congress enacted Pub. L.
104-208, § 589, 110, 110 Stat. 3009-1, 3007-172 (1996) (codified at § 1605 note), which is
commonly known as the “Flatow Amendment.” This provision, among other things, specified
that “money damages [in FSIA suits] may include economic damages, solatium, pain, and
suffering, and punitive damages,” id. (emphasis added), and thus provided the basis for the
earliest judgments awarding punitive damages under the FSIA.
In Flatow v. Islamic Republic of Iran, 999 F. Supp. 1 (D.D.C. 1998), this Court issued the
first opinion finding Iran liable under the state-sponsored terrorism exception. In re Terrorism
3
Litig., 659 F. Supp. 2d at 44. That opinion included a substantial discussion on the best method
for calculating punitive damages in state-sponsored terrorism cases. See generally Flatow, 999
F. Supp. at 32–34. Relying on “traditional principles of tort law and analogous opinions under
the Alien Tort Claims Act . . . and the Torture Victim Protection Act . . . for guidance,” id. at 32,
this Court identified four factors relevant to the assessment of punitive damages: “(1) the nature
of the [defendant’s] act . . .; (2) the circumstances of its planning; (3) defendants’ economic
status with regard to the ability of defendants to pay; and (4) the basis upon which a court might
determine the amount of an award reasonably sufficient to deter like conduct in the future.” Id.
at 33. The Court also received testimony from Dr. Patrick Clawson, a well-known expert on
international terrorism and Iranian affairs, 4 who explained that Iran’s annual expenditures on
international terrorism were approximately $75 million and opined that “a factor of three times
[Iran’s] annual expenditure for terrorist activities would be the minimum amount which would
affect the conduct of . . . Iran.” Id. at 34. Drawing from the four-factor test and Dr. Clawson’s
expert testimony, the Flatow Court adopted a process for calculating punitive damages in which
a FSIA court multiplies a defendant’s financial support for international terrorism (then $75
million) by a pre-determined multiplier (generally between 3 and 5) (the “Flatow Method”). Id.
This Court explained that the resulting award—$225 million in Flatow—best serves the societal
interests in punishment and deterrence that warrant imposition of punitive sanctions. Id.
While a number of FSIA courts subsequently assessed punitive damages using the Flatow
Method, such awards were brought to a screeching halt by the D.C. Circuit in Cicippio-Puleo v.
Islamic Republic of Iran, in which it held that “neither section 1605(a)(7) nor the Flatow
Amendment, separately or together, establishes a cause of action against foreign state sponsors
4
See Beer II, ___ F. Supp. 2d at __, 2010 U.S. Dist. LEXIS 129953 at *4 (collecting cases in which Dr.
Clawson is described as “an expert on Iranian affairs and international terrorism”).
4
of terrorism.” 353 F.3d 1024, 1027 (D.C. Cir. 2004). The Cicippio-Puleo decision thus reduced
the prior state-sponsored terrorism exception to a jurisdictional “pass-through” and forced future
plaintiffs to look to other sources of law—primarily state tort law—to identify legal bases for
their suits. See, e.g., Rimkus v. Islamic Republic of Iran, 575 F. Supp. 2d 181, 197–98 (D.D.C.
2008) (awarding damages for intentional infliction of emotional distress under Missouri law)
(“Rimkus I”); Beer I, 574 F. Supp. 2d at 11–14 (awarding damages for wrongful death and
conscious pain and suffering under Ohio law); Haim v. Islamic Republic of Iran, 425 F. Supp. 2d
56, 69–75 (D.D.C. 2006) (awarding damages for assault and battery under D.C. law). “Another
consequence of the Cicippio-Puleo decision was that the Flatow Amendment could not serve as
an independent basis for punitive damage awards” against foreign states. In re Terrorism Litig.,
659 F. Supp. 2d at 48. Thus, while courts continued to award substantial compensatory relief to
plaintiffs, they had to repeatedly deny those plaintiffs’ requests for punitive damages. See, e.g.,
Rimkus I, 575 F. Supp. 2d at 198 (“As a general rule, punitive damages are not available against
foreign states.”); Beer I, 574 F. Supp. 2d at 14 (holding punitive damages unavailable under §
1605(a)(7)); Haim, 425 F. Supp. 2d at 71 (same).
In early 2008, Congress moved to reverse this trend through amendments to the FSIA
enacted as part of the National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-
181, § 1083, 122 Stat. 3. 338–44 (2008) (“NDAA”). These Amendments struck § 1605(a)(7)
and replaced it with the current state-sponsored terrorism exception, which is codified at 28
U.S.C. § 1605A. Among numerous changes to the law, § 1605A now “provides for the recovery
of punitive damages in suits based on acts of terrorism.” Rimkus v. Islamic Republic of Iran, 750
F. Supp. 2d 163, 167 (D.D.C. 2010) (citing 28 U.S.C. § 1605A(c)). Over the past three years,
FSIA courts have resumed awarding punitive damages pursuant to this statute—a trend aided by
5
the NDAA’s provision for retroactive application of § 1605A. See NDAA § 1083(c)(2)–(3)
(permitting retroactive application of § 1605A to cases concluded under prior exception).
In awarding damages following passage of the NDAA, courts have generally identified
the Flatow Method as the procedure that best serves the retribution and deterrence interests that
Congress sought to promote in enacting the 2008 Amendments. See In re Terrorism Litig., 659
F. Supp. 2d at 61 (holding that, post-NDAA, courts “reaffirm[] the principles first articulated in
Flatow with respect to awards of punitive damages” under FSIA). Just as it was prior to
Cicippio-Puleo, current judicial assessments of punitive damages in state-sponsored terrorism
cases involve two figures: the amount that a foreign state annually provides in support of
terrorist activities, known as the multiplicand, and the multiplier that FSIA courts deem
necessary to deter future conduct. As seen in one recent case: “[T]he Court chooses to take the
mean of the range’s two extremes ($50 million and $150 million) and multiply it ($100 million)
by three. The result, as an award of $300 million, appears fitting.” Heiser v. Islamic Republic of
Iran, 659 F. Supp. 2d 20, 30 (D.D.C. 2009) (“Heiser II”); see also, e.g., Brewer v. Islamic
Republic of Iran, 664 F. Supp. 2d 43, 58–59 (D.D.C. 2009) (multiplying $100 million times 3 to
award $300 million in punitive damages). Thus, today the Flatow Method is “well settled case
law on the methodology by which punitive-damage awards in FSIA cases are calculated.”
Valore v. Islamic Republic of Iran, 700 F. Supp. 2d 52, 90 (D.D.C. 2010).
B. Recent Supreme Court Jurisprudence on Punitive Damages
Outside the limited arena covered by federal statutes, development of the law of punitive
damages has historically been left to the States, whose legislatures and courts have passed laws
and developed principles concerning such sanctions. See BMW of N. Am., Inc. v. Gore, 517 U.S.
559, 568 (1998) (“States necessarily have considerable flexibility in determining the level of
6
punitive damages that they will allow in different classes of cases and in any particular case.”)
(“Gore”). Recently, however, the Supreme Court has begun to scrutinize punitive awards with
increasing intensity, and has articulated several principles derived from both the Due Process
Clause—which forbids awards that are “grossly excessive,” id.—and general notions of fairness.
As the Gore Court explained: “Elementary notions of fairness . . . dictate that a person receive
fair notice not only of the conduct that will subject him to punishment, but also the severity of
the penalty that” may be imposed. Id. at 574. The Supreme Court has identified three
“guideposts” for analyzing whether these basic requirements are met: (1) “the degree of
reprehensibility of the” defendant’s act; (2) “the disparity between the harm or potential harm
suffered . . . and [the] punitive award;” and (3) the difference between the punitive award and
“the civil penalties authorized or imposed in comparable cases.” Id. at 574–75.
The concerns expressed in Gore are not merely problems of a constitutional dimension,
however, as the Supreme Court recently made clear in Exxon Shipping Co. v. Baker, 554 U.S.
471 (2008). That case presented the Court with a challenge to a punitive award that “differ[ed]
from due process review because the case ar[ose] under federal maritime jurisdiction.” Id. at
501. As the Exxon Court explained, the objections to the purportedly excessive punitive damage
awards in that case “go[] to our understanding of the place of punishment in modern civil law
and reasonable standards of process in administering punitive law.” Id. at 490. In response, the
Supreme Court imported into the field of maritime law many of the principles concerning
punitive damages that it originally developed as matters of Due Process. See generally id. at
508–13. Together with its Due Process formulations, the Supreme Court’s recent jurisprudence
has produced a method for evaluating punitive damage awards in which reviewing courts
examine the ratio between punitive damages and compensatory damages to determine whether
7
the sanctions are improperly excessive or arbitrary. Beer II, ___ F. Supp. 2d at __, 2010 U.S.
Dist. LEXIS 129953 at *47–48.
C. The Flatow Method in Light of Recent Jurisprudence
As the foregoing discussion highlights, an examination of the continuing viability of the
established process for calculating punitive damages first set forth in Flatow requires the Court
to confront two issues: whether the bases for the Supreme Court’s decisions are applicable in
FSIA suits and, if so, whether the Flatow Method complies with the constraints implemented by
this recent jurisprudence. This first issue in turn raises two distinct questions. First, do the
limitations on punitive damage awards articulated by the Supreme Court under the Due Process
Clause of the Fourteenth Amendment apply with equal force in this context? Second, does the
extension of these constraints to general maritime law by the Exxon Court necessitate further
extension of these same principles to FSIA suits? For the reasons set forth below, the Court
answers both questions in the negative and holds that recent Supreme Court decisions play no
role in terrorism-related FSIA suits. The Court thus concludes that the Flatow Method remains
controlling in actions brought pursuant to the state-sponsored terrorism exception. 5
1. Defendants in FSIA State-Sponsored Terrorism Cases May Not Rely
Upon Principles of Due Process to Shield Themselves from Punitive
Damage Awards
With the exception of Exxon, which is discussed infra, the Supreme Court’s recent
jurisprudence concerning punitive damages finds its genesis in individual liberty interests
inherent to notions of Due Process embodied in the Constitution. In Gore—the case in which the
Supreme Court first elevated the review of state court punitive damage awards to a constitutional
dimension—the opinion begins with one fundamental tenet: “The Due Process Clause of the
5
Because the Court concludes that the Supreme Court’s punitive damage jurisprudence has no effect on the
procedures employed by the FSIA courts, it does not reach the issue of whether the Flatow Method itself would
comply with the principles articulated in those recent decisions.
8
Fourteenth Amendment prohibits a State from imposing a ‘grossly excessive’ punishment on a
tortfeasor.” 517 U.S. at 562. From this central principle, the Court derives its three guideposts
for the review of punitive damage awards. Id. at 574–86. In this same vein, several punitive
damage principles the Supreme Court has subsequently articulated—including its concerns with
excessive or arbitrary awards, see State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416
(2003) (“The Due Process Clause of the Fourteenth Amendment prohibits the imposition of
grossly excessive or arbitrary punishments on a tortfeasor.”), its focus on the importance of
damage ratios to the proper evaluation of punitive damage awards, see id. at 425 (“[F]ew awards
exceeding a single-digit ratio between punitive and compensatory damages, to a significant
degree, will satisfy due process.”), and its concern with the adjudication of harm to non-parties
through the imposition of excessive penalties in a single case, see Philip Morris USA v. Williams,
549 U.S. 346, 353 (2007) (“[T]he Constitution’s Due Process Clause forbids a State to use a
punitive damage award to punish a defendant for injury that it inflicts upon nonparties or those
whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers
to the litigation.”)—are all explicitly drawn from the Due Process Clause.
These constitutional concerns, however, are inapplicable here. As an initial matter, FSIA
litigation arises under a federal statute and does not involve the exercise of State authority
against the defendant; as a result, the Fourteenth Amendment—upon which the Supreme Court’s
recent line of decisions all rely—is not implicated here. See SEC v. Lines Overseas Mgmt., Ltd.,
No. 04 Misc. 302, 2007 U.S. Dist. LEXIS 11753, at *8 (D.D.C. Feb. 21, 2007) (“‘It is well
established that when, as here, a federal statute provides the basis for jurisdiction, the
constitutional limits of due process derive from the Fifth, rather than the Fourteenth,
Amendment.’”) (quoting Rep. of Panama v. BCCI Holdings, 119 F.3d 935, 942 (11th Cir.
9
1997)). This is not the end of the matter, however, as suits—such as this one—brought pursuant
to the federal statute remain subject to the Fifth Amendment’s Due Process Clause, id., and it is
generally accepted that the same prohibitions against grossly excessive punitive damage awards
articulated by the Supreme Court under the Fourteenth Amendment operate with equal force
under the Fifth. See, e.g., Kunz v. DeFelice, 538 F.3d 667, 678–79 (7th Cir. 2008) (applying
Gore guideposts to punitive damage award under § 1983).
Though the Fifth Amendment supplies equal limitations on punitive damages in cases
brought under federal statutes, defendants here, as foreign sovereigns, cannot use these
constitutional constraints to shield themselves. In Price v. Socialist People’s Libyan Arab
Jamahiriya, the D.C. Circuit squarely held that “foreign states are not ‘persons’ protected by the
Fifth Amendment,” and thus cannot assert protections afforded to U.S. citizens by the Due
Process Clause. 294 F.3d 82, 96 (D.C. Cir. 2002). In that opinion, the Circuit Court articulated
several justifications in support of this conclusion. First, as a simple matter as statutory
interpretation, the Price Court observed that “in common usage, the term ‘person’ does not
include the sovereign, and statutes employing the word are ordinarily construed to exclude it.”
Id. Second, the D.C. Circuit stressed the incongruence that would arise if courts were to extend
basic Due Process protections to foreign sovereigns when the States of the Union themselves are
forbidden from asserting such rights under the Fifth Amendment. Id. It also reasoned that
because the Constitution explicitly places limits upon the power that the States can exert against
the federal government, were it to extend Due Process protections to foreign states it would be
granting powers to sovereign entities that go beyond those possessed by the States. Id. at 97.
Finally, the D.C. Circuit explained that “[r]elations between nations in the international
community are seldom governed by the domestic law of one state or the other,” noting that
10
“legal disputes between the United States and foreign governments are not mediated through the
Constitution.” Id. For all these reasons, the Circuit Court concluded that foreign state
defendants in terrorism-related suits under the FSIA may not raise objections grounded in the
Due Process Clause of the Fifth Amendment.
Though Price addressed foreign states and not other foreign entities, see 294 F.3d at 99–
100 (“We express no view as to whether other entities that fall within the FSIA’s definition of
‘foreign state’ . . . could yet be considered persons under the Due Process Clause.”), the D.C.
Circuit returned to the issue in TMR Energy Ltd. v. St. Prop. Fund of Ukraine, in which it held
that where a foreign state “exert[s] sufficient control over [an entity] to make it an agent of the
State, then there is no reason to extend to [that entity] a constitutional right that is denied to the
sovereign itself.” 411 F.3d 296, 301 (D.C. Cir. 2005); see GSS Grp., Ltd. v. Nat’l Port Auth.,
No. 09 Civ. 1322, 2011 U.S. Dist. LEXIS 33617, at *9 (D.D.C. Mar. 30, 2011) (“[A] foreign
instrumentality . . . may nevertheless be so closely associated with the foreign sovereign that the
two are legally indistinguishable, with the result that the instrumentality, as part of the foreign
government, is not a ‘person’ entitled to due process protections”). To determine if an entity is
sufficiently intertwined so as to be considered the sovereign, the TMR Energy Court drew a
distinction between entities that perform “classic government functions” and those that operate
“in the field of commerce,” explaining that only the former are considered the foreign state for
constitutional purposes. 411 F.3d at 300–02. Courts subsequently applying this test have
consistently found that MOIS constitutes the foreign state and is thus unworthy of Due Process
protections. See Murphy v. Islamic Republic of Iran, 740 F. Supp. 2d 51, 68 (D.D.C. 2010)
(holding that “[i]t is clear . . . that Iran has plenary control of MOIS” and thus MOIS is “not a
person entitled to Fifth Amendment” protections); see also Valore, 700 F. Supp. 2d at 71 (same).
11
The opinions in Price, TMR Energy and their progeny focus on questions of Due Process
inherent to a court’s assertion of jurisdiction; however, the rationales for denying constitutional
safeguards to foreign entities set forth in those decisions are equally applicable to any Due
Process problems raised by the imposition of punitive damage awards. Whether the issue is the
assertion of jurisdiction or potentially-excessive punitive damages, the key concern implicated is
the right to personal liberty enshrined in the Due Process Clause. See Gore, 517 U.S. at 587
(explaining that constitutional problems posed by excessive punitive damage awards “arise[] out
of the basic unfairness of depriving citizens of life, liberty, or property, through the application . .
. of arbitrary coercion”); Price, 294 F.3d at 95 (“[T]he liberty interest protected by the Due
Process Clause shields the defendant from the burden of litigating in [a distant] forum.”). And in
weighing this liberty interest in Price, the D.C. Circuit concluded that “foreign nations are
external to the constitutional compact” and thus incapable of asserting that interest, which is
reserved for citizens of the United States. Id. at 97. The D.C. Circuit’s holding thus leads the
Court to the same conclusion as the Circuit Court with respect to personal jurisdiction—any
constraints on punitive damages that may be found in the Fifth Amendment cannot be relied
upon by a foreign sovereign. As in Price, foreign states need not be granted constitutional
protections to shield them from the imposition of harsh or unsound financial sanctions—“[i]f
they believe that they have suffered harm by virtue of [imposition of such an award], foreign
states have available to them a panoply of mechanisms in the international arena through which
to seek vindication or redress.” Id. at 98. The Court will not cross the constitutional Rubicon to
extend Due Process protections against punitive damage awards to foreign states here, as such an
act would undermine both international and domestic law by extending citizen’s safeguards to
foreign powers in the face of a clear determination by the Legislative and Executive branches
12
that foreign sovereigns and their instrumentalities—where engaged in terrorism—should be
subject to such punitive sanctions. See id. at 98–99 (“Conferring on [the foreign state] the due
process trump that it seeks against the authority of the United States is thus not only textually
and structurally unsound, but it would distort the very notion of ‘liberty’ that underlies the Due
Process Clause.”). Quite simply, “a foreign State lies outside the structure of the Union,” id. at
96, and the Court sees no justification for extending the protections for “persons” provided by
that structure to foreign powers such as Iran and MOIS.
2. Exxon Does Not Require Alteration of the Flatow Method
The second question relevant to this inquiry is whether the Supreme Court’s extension of
its articulated framework for evaluating punitive damages from Due Process to general maritime
law requires FSIA courts to reevaluate the established Flatow Method in cases brought under the
state-sponsored terrorism exception. Based on the discussion below, the Court holds, for three
reasons, that the Exxon decision does not undermine the traditional procedure.
a. The Holding in Exxon is Limited
While the Supreme Court in Exxon first ventured out of the constitutional realm in
reviewing punitive damage assessments, it did so in limited fashion and over an area of law
which has been specially committed to the discretion of the judiciary. The legal landscape in
which the Exxon Court operated—maritime law—“falls within a federal court’s jurisdiction to
decide in the manner of a common law court, subject to the authority of Congress to legislate
otherwise if it disagrees.” Exxon, 554 U.S. at 490. The federal judiciary’s special role as the
overseers of maritime law is deeply rooted and traces its origins to the beginning of our
constitutional republic: “Article III, § 2, cl. 1 (3d provision) of the Constitution and section 9 of
the Act of September 24, 1789, have from the beginning been the sources of jurisdiction in
13
litigation based upon federal maritime law.” Romero v. Int’l Terminal Operating Co., 358 U.S.
354, 360 (1959). Historically, the federal courts have been called upon to fashion rules of law
sui generis to govern admiralty disputes, see Fitzgerald v. U.S Lines Co., 374 U.S. 16, 20–21
(1963) (“This Court has long recognized its power and responsibility in this area [of admiralty
law] and has exercised that power where necessary to do so.”), and thus maritime has been an
area of law in which the judiciary has operated almost exclusively. Romero, 358 U.S. at 369. In
this unique legal context, the Supreme Court in Exxon was left without any legislative or
executive guidance through statute or regulation, and thus was obligated to fashion governing
principles without consideration of other legal contexts. See id. at 502 (“[W]e are examining the
verdict in the exercise of federal maritime common law authority, which precedes and should
obviate any application [of other sources of law.]”).
Rules articulated in the context of maritime law are not necessarily applicable to non-
admiralty proceedings. The Supreme Court has observed that the implications of changes or
evolution in maritime law are generally limited to Article III and do not require equivalent
adjustments to the federal common law. Romero, 358 U.S. at 373. And this inherent limitation
to admiralty-law decisions is of even greater importance when interpreting and applying federal
statutes—in the face of legislation enacted by Congress, the federal judiciary is simply not
imbued with the same authority it possesses in its unique role as the purveyor of maritime law.
See Exxon, 554 U.S. at 502 (emphasizing courts’ special authority “as a source of judge-made
law in the absence of statute”). Indeed, the Exxon Court itself acknowledged the crucial
distinction between its specialized function in the creation of rules governing admiralty disputes
and its traditional role in applying many federal statutes. See id. at 511 (“Federal treble-damages
statutes govern areas far afield from maritime concerns . . . ; the relevance of the governing rules
14
in patent or trademark cases, say, is doubtful at best.”). And at least one federal court, relying on
this distinction, has declined to extend the holding of Exxon to cases brought under the federal
Title VII statute. Pickett v. Sheridan Health Care Ctr., 610 F.3d 434, 447 (7th Cir. 2010). Thus,
mindful of the special context in which Exxon was articulated, the Court is not prepared to affect
a sea-change in the law governing the assessment of punitive damages under federal statutes or
federal common law generally. See Valore, 700 F. Supp. 2d at 90 n.17 (noting that Supreme
Court in Exxon “explicitly limited its holding” to facts and context of that case).
b. Congress Re-Affirmed the Established Procedure
An independent justification for adhering to the Flatow Method is that Congress did not
see fit to alter or otherwise question that procedure when enacting the NDAA. At the time the
2008 Amendments were passed, the Supreme Court had issued its highly-publicized opinions in
Gore, State Farm, and Philip Morris, and was hearing arguments in Exxon to much fanfare. At
the same time, the method for calculating punitive damages under the state-sponsored terrorism
exception had been long-settled. Shortly after the decision in Flatow, numerous courts in this
district came to rely upon the procedure established in that case. In Anderson v. Islamic Republic
of Iran, for example, Judge Jackson, after observing that “[i]t is never a simple task to calibrate
an award of punitive damages,” turned to the Flatow Method and the testimony of Dr. Clawson
to conclude that “an award of thrice the . . . maximum annual budget for terrorist activities, or
$300 million, is the closest approximation that [the Court] can make to an appropriate award.”
90 F. Supp. 2d 107, 114 (D.D.C. 2000). In a similar manner, the district court in Eisenfeld v.
Islamic Republic of Iran relied explicitly on Flatow to determine that “a total award of punitive
damages equal to three times Iran’s annual expenditure in 1996 on terrorism—$300 million—
will serve to deter future attacks.” 172 F. Supp. 2d 1, 9 (D.D.C. 2000). Indeed, a litany of cases
15
throughout this period applied the Flatow Method. See Mousa v. Islamic Republic of Iran, 238
F. Supp. 2d 1, 13 (D.D.C. 2001) (awarding $120 million); Weinstein v. Islamic Republic of Iran,
184 F. Supp. 2d 13, 25–26 (D.D.C. 2002) (awarding $150 million); Hill v. Republic of Iraq, 175
F. Supp. 2d 36, 48 (D.D.C. 2001) (awarding $300 million); Wagner v. Islamic Republic of Iran,
172 F. Supp. 2d 128 (D.D.C. 2001) (awarding $300 million); Jenco v. Islamic Republic of Iran,
154 F. Supp. 2d 27, 39–40 (D.D.C. 2001) (awarding $300 million); Sutherland v. Islamic
Republic of Iran, 151 F. Supp. 2d 27, 53 (D.D.C. 2001) (awarding $300 million); Elahi v.
Islamic Republic of Iran, 124 F. Supp. 2d 97, 114 (D.D.C. 2000) (awarding $300 million).
“Courts ‘generally presume that Congress is knowledgeable about existing law pertinent
to the legislation it enacts.’” Ark. Dairy Coop. Ass’n v. Dep’t of Agriculture, 573 F.3d 815, 829
(D.C. Cir. 2009) (quoting Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 184–85 (1988)). For
example, in Partolo v. Johanns, the district court held that Congress, in reenacting a law creating
an aid program for farmers with lost crops using language identical to that in the original statute,
implicitly adopted the manner in which the program had been run by the managing agency. No.
04 Civ. 1462, 2010 U.S. Dist. LEXIS 43071, at *103–04 (D.D.C. June 11, 2006); see also id.(“[W]hen Congress enacted the 2001/2002 CLDAP, explicitly in identical form to the 2000
CLDAP statute and without any indication of disapproval of the Secretary’s earlier law . . . it
effectively endorsed the Secretary’s existing administration and interpretation.”). In reaching
this conclusion, the Partolo Court noted that “it is well established that Congress is presumed to
have knowledge of judicial and administrative interpretations when it re-enacts the earlier laws
without change.” Id. at *102–03 (citing Barhart v. Walton, 535 U.S. 212, 220 (2002)).
Here, the decisions of this Court and many others adopting the Flatow Method were
based on the Flatow Amendment, which provided that money damages in state-sponsored
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terrorism suits could “include economic damages, solatium, pain and suffering, and punitive
damages.” Flatow Amendment § 589. Had Congress been concerned that this established
procedure was in conflict with the Supreme Court’s recently-articulated constraints on punitive
damage awards, it could easily have easily imposed statutory protections against excessive
awards in § 1605A by, inter alia, directing punitive sanctions to take the form of treble
damages—as it often has—or instructing that any punitive damage award must be consistent
with the guideposts articulated by the Supreme Court in Gore and its progeny. Instead, Congress
chose to once again permit an award of punitive damages in state-sponsored terrorism suits by
employing the very same language that it had used in the Flatow Amendment. See 28 U.S.C. §
1605A (“[D]amages may include economic damages, solatium, pain and suffering, and punitive
damages.”). This choice of language in § 1605A is a clear indication that Congress sought to
return FSIA proceedings—at least with respect to punitive damages—to the period prior to the
Cicippio-Puleo decision, when courts generally adhered to the Flatow Method.
Indeed, the presumption that Congress acted with knowledge of the Flatow framework is
even stronger here, as there is no question that, in passing the NDAA, it was made aware of the
history of punitive damages in terrorism-related FSIA cases. This Court has previously observed
that when considering the 2008 Amendments, members of Congress were provided with a
Congressional Research Service report informing them that, to date, judgments totaling nearly
$10 billion had accumulated against Iran and its instrumentalities for involvement in terrorist
atrocities. In re Terrorism Litig., 659 F. Supp. 2d 31, 58 (D.D.C. 2009). And armed with this
information, one of the explicit purposes in passing the NDAA was to abrogate the D.C.
Circuit’s decision in Cicippio-Puleo and reinstitute FSIA plaintiffs’ ability to seek punitive
damages in actions against foreign states brought pursuant to the state-sponsored terrorism
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exception. See Heiser II, 659 F. Supp. 2d at 23 (observing that Ҥ 1605A abrogates Cicippio-
Puleo . . . and provides that punitive damages may be awarded in [FSIA] actions”). This goal
included the replacement of the regime relying on 50 states’ laws to govern FSIA actions with a
uniform set of rules—such as those concerning punitive damages developed in Flatow—under §
1605A. Id. at 24–25. Based on this history, the Court holds that Congress, by drawing directly
upon the language of the Flatow Amendment while well-aware of the established Flatow
Method, implicitly approved the reinstitution of that traditional procedure after concluding that it
best serves societal interests in punishment and deterrence.
c. Terrorism-Related FSIA Cases Involve Unique Circumstances
Finally, beyond the distinguishable legal contexts in which recent Supreme Court
jurisprudence arises and the legislative history of the NDAA, there are important policy
justifications for adhering to the Flatow Method. Terrorism, along with atrocities such as
genocide, occupies a unique place in the pantheon of human conduct as an activity devoid of
value that observes no respect for life and no hint of compassion. It is an “insidious and
murderous evil,” In re Terrorism Litig., 659 F. Supp. 2d at 136, that embraces “cruel and
inhuman activities,” Nikbin v. Islamic Republic of Iran, 517 F. Supp. 2d 416, 425 (D.D.C. 2007),
and results in harms “among the most heinous the Court can fathom.” Valore, 700 F. Supp. 2d at
88. In the context of punitive damages, this Court has previously explained that the particularly
malicious and evil nature of state-sponsored terrorism obviates the need for strict attention to the
punitive-to-compensatory ratio that recent Supreme Court guidance might otherwise require. See
id. at 90 n.17 (“Those harboring a deep-seeded and malicious hatred of the United States who
intentionally commit terroristic murder of American[s] . . . deserve to be punished at . . . ratio[s]
significantly higher [than discussed in Exxon and the like].”). And this Court has expressed
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concern that significant deviations from the Flatow Method in these cases could have the
disastrous and perverse consequence of undermining prior efforts at deterrence. See Heiser II,
659 F. Supp. 2d at 30–31 (“Were the Court to award an amount [of punitive damages] less than
any of those declared in prior cases, the U.S. . . . would risk seeming to Iran less concerned about
Iranian terrorism.”) (quotations omitted).
By contrast, the Supreme Court in Exxon addressed excessive punitive sanctions out of
concern that such awards “exceed[] the bounds justified by the punitive damages goal of
deterring reckless (or worse) behavior.” 554 U.S. at 490. And in importing Due Process
principles into maritime law, the Exxon Court emphasized that “[r]eckless conduct is not
intentional or malicious, nor is it necessarily callous toward the risk of harming others, as
opposed to unheedful of it.” Id. at 493. In light of this context, the Court finds it beyond the
pale that the Supreme Court would countenance similar restrictions on the institution of punitive
sanctions in response to acts of terrorism that impose a sentence of death or horrific physical and
psychological injury on victims, a lifetime of unimaginable grief on loved ones, and
immeasurable sorrow on the whole of humanity.
* * *
For all the reasons set forth above, the Court holds that the Flatow Method for the
calculation of punitive damage awards in FSIA cases should continue to govern cases arising
from the atrocities of state-sponsored terrorism.
III. APPLICATION
Having determined that the Flatow Method remains in force under § 1605A, the Court
now turns to the application of this established procedure to calculate punitive damages in this
case. As set forth above, see supra Section II.A, this process requires the Court to identify two
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numbers: the annual amount of money provided by defendants in support of international
terrorism, and an appropriate multiplier. As to the former input, plaintiffs make no attempt to
provide any new evidence concerning defendants’ support for terrorism, and instead point the
Court to the “typically adopted . . . figure[] of $100 million in annual expenditures” found in
earlier cases. Ps.’ Br. at 3. Given the lack of new evidence, the Court will take judicial notice of
Dr. Clawson’s expert testimony in Heiser II that Iran’s support for terrorism is somewhere
between $50 and $150 million annually, and will adopt the mid-range estimate—$100 million.
As to the appropriate multiplier, plaintiffs urge the Court to adhere to its standard choice of 3,
id., and the Court sees no reason to abandon this traditional magnitude. Thus, in the interest of
deterring future terrorist attacks, and consistent with established procedures, the Court will award
$300 million in punitive damages, to be dispersed in proportion to each plaintiff’s share of the
compensatory award.
IV. CONCLUSION
Punitive damages serve a societal interest in punishing wrongdoers and preventing
similar heinous conduct in the future. In recent cases, however, the Supreme Court has
recognized that these justifications are often countered—and thus constrained—by other
interests, such as an individual’s right to expect consistent and non-excessive punishments
(embodied by the Supreme Court’s Due Process jurisprudence), or the Court’s responsibility to
fill the gaps in an area of law in which it is the sole authority (embodied by the Exxon decision in
the field of maritime law.) These interests, however, are not implicated in the FSIA context, and
courts therefore should continue to adhere to methods designed to impose optimal sanctions
when faced with actors deliberately undertaking some of the most evil and inhuman acts
imaginable. The Court thus holds that its established approach to assessing punitive awards in
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state-sponsored terrorism cases under the FSIA should remain in place, and expresses hope that
the sanction it issues today will play a measurable role in changing the conduct of Iran—and
other supporters of international terrorism—in the future.
A separate Order and Judgment consistent with these findings shall issue this date.
Signed by Royce C. Lamberth, Chief Judge, on May 19, 2011.
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