Michael Bennett v. Bank Melli

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHAEL BENNETT; LINDA No. 13-15442
BENNETT, as Co-Administrators of
the Estate of Maria Ann Bennett, D.C. No.
Plaintiffs-Appellees, 3:11-cv-05807-
CRB
v.
THE ISLAMIC REPUBLIC OF IRAN,
Defendant,
v.
VISA INC.; FRANKLIN RESOURCES,
INC.,
Defendants-third-party-
plaintiffs–Appellees,
v.
GREENBERG AND ACOSTA
JUDGEMENT CREDITORS,
Plaintiff-third-party-
defendant–Appellee,
HEISER JUDGMENT CREDITORS,
Plaintiff-fourth-party-
defendant–Appellee,
v.
2 BENNETT V. BANK MELLI
BANK MELLI,
Plaintiff-third-party-
defendant–Appellant.
MICHAEL BENNETT; LINDA No. 13-16100
BENNETT, as Co-Administrators of
the Estate of Maria Ann Bennett, D.C. No.
Plaintiffs-Appellees, 3:11-cv-05807-
CRB
v.
THE ISLAMIC REPUBLIC OF IRAN, OPINION
Defendant,
v.
VISA INC.; FRANKLIN RESOURCES,
INC.,
Defendants-third-party-
plaintiffs–Appellees,
v.
GREENBERG AND ACOSTA
JUDGEMENT CREDITORS,
Plaintiff-third-party-
defendant–Appellee,
HEISER JUDGMENT CREDITORS,
Plaintiff-fourth-party-
defendant–Appellee,
BENNETT V. BANK MELLI 3
v.
BANK MELLI,
Plaintiff-third-party-
defendant–Appellant.
Appeals from the United States District Court
for the Northern District of California
Charles R. Breyer, Senior District Judge, Presiding
Argued and Submitted
April 15, 2015—San Francisco, California
Filed August 26, 2015
Before: Alex Kozinski and Susan P. Graber, Circuit Judges,
and Dee V. Benson,* Senior District Judge.
Opinion by Judge Kozinski
*
The Honorable Dee V. Benson, Senior District Judge for the U.S.
District Court for the District of Utah, sitting by designation.
4 BENNETT V. BANK MELLI
SUMMARY**
Terrorism Risk Insurance Act / Foreign Sovereign
Immunities Act
The panel affirmed the district court’s denial of the
motion of Bank Melli, the national bank of the Islamic
Republic of Iran, to dismiss claims filed against it in an action
seeking enforcement pursuant to the Terrorism Risk
Insurance Act and the Foreign Sovereign Immunities Act of
terrorism-based judgments entered against Iran.
Creditors sought access to blocked Iranian assets held by
other parties but owed to Bank Melli. The panel held that the
TRIA and 28 U.S.C. § 1610(g) abrogate the asset immunity
of all of a terrorist state’s instrumentalities, including those
that are not alter egos of the state. The panel held that Bank
Melli was not an indispensable party that could not be joined
under Federal Rule of Civil Procedure 19. The panel rejected
the argument that applying the TRIA and section 1610(g) to
the judgments at issue would be impermissibly retroactive
because the creditors obtained the judgments against Iran
before the statutes’ enactment. The panel also rejected the
argument that Bank Melli did not own the assets.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
BENNETT V. BANK MELLI 5
COUNSEL
Jeffrey A. Lamken, Robert K. Kry (argued), Lucas M.
Walker, MoloLamken LLP, Washington D.C., for Appellant.
Curtis C. Mechling (argued) of Stroock & Stroock & Lavan
LLP, New York, New York, and Dale K. Cathell of DLA
Piper LLP, Baltimore, Maryland, and Jane Carol Norman of
Bond & Norman, Washington, D.C., for Judgment Creditor
Appellees.
Benjamin T. Peele, III (argued) of Baker & McKenzie LLP,
Washington, D.C., and Bruce H. Jackson of Baker &
McKenzie LLP, San Francisco, California for Appellees Visa,
Inc. and Franklin Resources, Inc.
OPINION
KOZINSKI, Circuit Judge:
Congress has enacted two statutes to help victims of
terrorism collect on money judgments against the foreign
states responsible for sponsoring the attacks. We consider
whether victims can collect from an instrumentality of a state
that has sponsored terrorism when the instrumentality is a
separate juridical entity that wasn’t a party to the underlying
lawsuit.
I. Background
The Foreign Sovereign Immunities Act (FSIA) is the sole
basis for jurisdiction over foreign states in U.S. courts.
28 U.S.C. § 1330. Under the FSIA, foreign sovereigns are
6 BENNETT V. BANK MELLI
generally immune from jurisdiction, except for a few
carefully delineated exceptions. One such exception is for
claims arising out of acts of state-sponsored terrorism. See
id. § 1605A.
Four groups of individuals—the Bennett, Greenbaum,
Acosta and Heiser creditors—hold separate judgments
obtained in U.S. courts against the Republic of Iran, based on
various terrorist attacks that occurred between 1990 and
2002. The Bennett creditors are owed almost $13 million in
damages for Iran’s role in the 2002 bombing of a cafeteria at
Hebrew University in Jerusalem. The Greenbaum creditors
are owed almost $20 million for a 2001 bombing of a
Jerusalem restaurant. The Acosta creditors are owed over
$350 million for Iran’s part in a 1990 mass shooting. And,
finally, the Heiser creditors are owed over $590 million for
the 1996 bombing of the Khobar Towers in Saudi Arabia. All
judgments were by default, but no one disputes that they are
valid and that all four sets of creditors are owed money by
Iran.
However, winning a money judgment against a foreign
state isn’t the end of the story, because sovereign immunity
separately protects the assets of a foreign sovereign from
attachment. For years, the state-sponsored terrorism
exception to the FSIA created an anomaly—it abrogated a
foreign sovereign’s immunity from judgment, but not its
immunity from collection. Terrorism victims therefore had
a right without a meaningful remedy.
Congress subsequently enacted two statutes closing this
loophole: section 201(a) of the Terrorism Risk Insurance Act
(TRIA) and 28 U.S.C. § 1610(g). Section 201 was enacted to
“deal comprehensively with the problem of enforcement of
BENNETT V. BANK MELLI 7
judgments rendered on behalf of victims of terrorism . . . by
enabling them to satisfy such judgments through the
attachment of blocked assets of terrorist parties.” H.R. Rep.
No. 107-779, at 27 (2002) (Conf. Rep). “Blocked assets” are
those that have been seized or frozen by the federal
government. The TRIA provides that “the blocked assets of
[a] terrorist party (including the blocked assets of any agency
or instrumentality of that terrorist party) shall be subject to
execution.” Terrorism Risk Insurance Act of 2002, Pub L.
No. 107-297, § 201(a), 116 Stat. 2322, 2337 (codified at
28 U.S.C. § 1610 Note “Satisfaction of Judgments from
Blocked Assets of Terrorists, Terrorist Organizations, and
State Sponsors of Terrorism”).
Section 1610(g), enacted in 2008 as an amendment to the
FSIA, extended the TRIA’s abrogation of asset immunity to
funds that were not blocked. It provides that “the property of
a foreign state against which a judgment is entered under [this
statute], and the property of an agency or instrumentality of
such a state, including property that is a separate juridical
entity or is an interest held directly or indirectly in a separate
juridical entity, is subject to attachment in aid of execution
. . . upon that judgment as provided in this section.”
28 U.S.C. § 1610(g).
These two statutes give creditors a theoretical avenue to
collect on the judgments they’ve obtained. But, of course,
they have to find the money first—and Iranian assets within
the United States are notoriously hard to come by. An
opportunity arose in 2007, when the Department of Treasury
issued a blocking order prohibiting certain Iranian assets in
the United States from being transferred back to Iran. That
blocking order was based on Iran’s illicit nuclear program,
not its state-sponsored terrorism. Nonetheless, it meant that
8 BENNETT V. BANK MELLI
various financial institutions had money owed to Iran sitting
in accounts within the United States. The creditors here saw
a rare chance to collect on their judgments and filed a
complaint seeking access to $17.6 million in blocked assets
held by Visa and Franklin,1 but owed to Bank Melli—Iran’s
national bank. Fearing they might be liable to Bank Melli if
they simply handed the money over to the creditors, Visa and
Franklin responded by filing a third-party complaint to
interplead Bank Melli and obtain final resolution of who was
entitled to the funds. Visa and Franklin deposited the funds
into the district court’s registry. Bank Melli made an
appearance and moved to dismiss. The district court denied
that motion but certified its order for interlocutory appeal
under 28 U.S.C. § 1292(b). We review de novo. See Colony
Cove Props., LLC v. City of Carson, 640 F.3d 948, 955 (9th
Cir. 2011).
II. Discussion
Bank Melli makes four distinct arguments as to why the
creditors shouldn’t be able to collect from the funds held by
Visa and Franklin. First, it argues that the assets are
protected by sovereign immunity notwithstanding the TRIA
and section 1610(g), because those statutes waive sovereign
immunity only for the “terrorist party”—Iran—and Bank
Melli is a separate juridical entity from Iran. Second, it
asserts that Federal Rule of Civil Procedure 19 requires
dismissal of this entire action, because Bank Melli is an
indispensable party that cannot be joined. Third, it argues
1
Visa allegedly owes Bank Melli the money for the bank’s facilitation
of Visa cards in Iran. When the blocking order was issued, Visa invested
the assets owed to Bank Melli in a mutual fund held by Franklin, an
investment company.
BENNETT V. BANK MELLI 9
that applying the TRIA and section 1610(g) to the judgments
at issue here would be impermissibly retroactive, because the
creditors obtained their judgments against Iran before the
statutes’ enactment. And, finally, Bank Melli claims that the
frozen assets aren’t subject to the TRIA or section 1610(g)
because those statutes extend only to assets “owned” by the
foreign entity. Because the assets here are technically in the
possession of Visa and Franklin, Bank Melli argues that they
aren’t yet “owned” by Bank Melli.
1. Foreign Sovereign Immunity
Bank Melli argues that the TRIA and section 1610(g) do
not abrogate the asset immunity of all of a terrorist state’s
instrumentalities, only those that are alter egos of the state.
For this proposition, Bank Melli relies principally on the
Supreme Court’s holding in First National City Bank v.
Banco Para El Comercio Exterior de Cuba (“Bancec”), that
“government instrumentalities established as juridical entities
distinct and independent from their sovereign should
normally be treated as such.” 462 U.S. 611, 626–27 (1983).
Under Bancec, the only conditions under which an
instrumentality may be equated with the sovereign are
(1) when it is “so extensively controlled by its owner that a
relationship of principal and agent is created” or (2) when
failure to regard them as equivalent “would work fraud or
injustice.” Id. at 629 (internal quotation marks omitted).
Bank Melli contends that the TRIA and section 1610(g)
incorporate Bancec’s distinction between instrumentalities
that are separate juridical entities and those that are alter egos,
and abrogates immunity only as to those instrumentalities
that, unlike Bank Melli, fall within Bancec’s two exceptions.
10 BENNETT V. BANK MELLI
We cannot reconcile Bank Melli’s argument with the
plain text of either statute. Section 201(a) of the TRIA
specifically states that “the blocked assets of [a] terrorist
party (including the blocked assets of any agency or
instrumentality of that terrorist party) shall be subject to
execution.” § 201(a) (emphasis added). Bank Melli argues
that the parenthetical phrase is merely illustrative and does
not purport to expand the meaning of “terrorist party” beyond
Bancec. But we must assume Congress meant what it said
when it used the term “any agency or instrumentality.” See
United States v. Gonzales, 520 U.S. 1, 5 (1997). “Read
naturally, the word ‘any’ has an expansive meaning, that is,
‘one or some indiscriminately of whatever kind.’” Id.
(quoting Webster’s Third New International Dictionary 97
(1976)). Because “Congress did not add any language
limiting the breadth of that word,” we must read the statute as
referring to all instrumentalities. Id.
Furthermore, Bank Melli’s interpretation “flouts the rule
that a statute should be construed so that effect is given to all
its provisions, [and] no part will be inoperative or
superfluous.” Clark v. Rameker, 134 S. Ct. 2242, 2248
(2014) (internal quotation marks omitted). Because an alter
ego under Bancec is the terrorist party, there would be no
need for Congress to separately provide for attachment
against instrumentalities unless it sought to extend coverage
to those instrumentalities that cannot be equated with the
terrorist party itself.
We therefore agree with the Second Circuit that it is
“clear beyond cavil that Section 201(a) of the TRIA provides
courts with subject matter jurisdiction over post-judgment
execution and attachment proceedings against property held
in the hands of an instrumentality of the judgment-debtor,
BENNETT V. BANK MELLI 11
even if the instrumentality is not itself named in the
judgment.” Weinstein v. Islamic Republic of Iran, 609 F.3d
43, 50 (2d Cir. 2010).
Congress spoke even more clearly in section 1610(g).
Section 1610(g) allows attachment against property held by
an instrumentality “that is a separate juridical entity,”
“regardless of” the five factors that several courts—including
ours—have considered when deciding whether an
instrumentality is an alter ego under Bancec. See Flatow v.
Islamic Republic of Iran, 308 F.3d 1065, 1071–72 & n.9 (9th
Cir. 2002). By specifically referencing—and
disavowing—Bancec’s test, section 1610(g) makes
unmistakably clear that whether or not an instrumentality is
an alter ego is irrelevant to determining whether its assets are
attachable.
Bank Melli argues that section 1610(g) doesn’t permit
attachment because the 1955 Treaty of Amity between the
U.S. and Iran requires that Iranian companies “have their
juridicial status recognized,” prohibits “unreasonable or
discriminatory measures” against them and requires that their
property be protected in accordance with international law.
Treaty of Amity, Economic Relations and Consular Rights
Between the United States of America and Iran, Aug. 15,
1955, 8 U.S.T. 899, 902–903. But we cannot read a 60-year-
old treaty provision as barring application of the plain text of
a later-enacted federal law. See Breard v. Greene, 523 U.S.
371, 376 (1998) (per curiam). In any event, there’s nothing
unreasonable, discriminatory or in violation of international
law about waiving sovereign immunity for terrorism-based
judgments. Bank Melli’s assets aren’t subject to attachment
because it’s an Iranian company, but because it’s an
instrumentality of a state that has sponsored terrorism.
12 BENNETT V. BANK MELLI
Finally, Bank Melli reads section 1610(g)—which allows
attachment in aid of execution upon judgments “as provided
in this section”—to mean that attachment immunity is
abrogated only if some other provision of section 1610
independently authorizes the attachment. But the other
provisions of section 1610 that abrogate attachment immunity
already apply to instrumentalities with separate juridical
status. See 28 U.S.C. § 1610(a) (abrogating attachment
immunity of property of a foreign state when the property is
“used for commercial activity in the United States”); id.
(defining “foreign state” by reference to section 1603(a),
which states that a “foreign state” includes an instrumentality
“which is a separate legal person”); id. § 1610(b) (abrogating
attachment immunity of an instrumentality “engaged in
commercial activity in the United States”). And the plain text
of section 1610(g) requires only that the foreign state be
subject to a section 1605A judgment before the property of an
instrumentality becomes available for collection. Id.
§ 1610(g) (subjecting to attachment “the property of a foreign
state against which a judgment is entered under section
1605A, and the property of an agency or instrumentality of
such a state” (emphasis added)). Thus, reading section
1610(g) to require attachment immunity to be grounded in
some other subsection of section 1610 would render section
1610(g) a nullity.
In short, both the TRIA and section 1610(g) provide
independently sufficient grounds for abrogating Bank Melli’s
asset immunity for terrorism-based judgments.
2. Rule 19
Federal Rule of Civil Procedure 19 requires that a person
be joined if he “claims an interest relating to the subject of
BENNETT V. BANK MELLI 13
the action and is so situated that disposing of the action in the
person’s absence may . . . impair or impede the person’s
ability to protect the interest[] or . . . leave an existing party
subject to a substantial risk of incurring double, multiple, or
otherwise inconsistent obligations because of the interest.”
Fed. R. Civ. P. 19(a). “If a person who is required to be
joined if feasible cannot be joined, the court must determine
whether, in equity and good conscience, the action should
proceed among the existing parties or should be dismissed.”
Id. 19(b). Bank Melli argues that this case must be dismissed
because it is an indispensable party to the lawsuit that cannot
be joined, and the action cannot “in equity and good
conscience” proceed without it. According to Bank Melli, the
case is controlled by the Supreme Court’s holding in Republic
of Philippines v. Pimentel, that when “sovereign immunity is
asserted, and the claims of the sovereign are not frivolous,
dismissal of the action must be ordered where there is a
potential for injury to the interests of the absent sovereign.”
553 U.S. 851, 867 (2008).
Pimentel is inapposite. In Pimentel, the judgment at issue
wasn’t against the sovereign—the Republic of Philippines—
but rather against the estate of its former dictator, Ferdinand
Marcos. The Philippines asserted a right to certain of
Marcos’s assets being held in the United States, out of which
various creditors were trying to satisfy their judgments
against Marcos. No one disputed that the Philippines was a
required party, because—as a type of creditor itself—it
clearly had a legal interest in how the funds were disposed of.
Nor was there a dispute that the Philippines was sovereignly
immune and therefore couldn’t be joined.
Here, by contrast, the sovereign is a judgment debtor, not
a creditor. Iran has already had a full and fair opportunity to
14 BENNETT V. BANK MELLI
assert its interests in court. It is undisputed that Iran owes
money to the creditors and that the money held by Visa and
Franklin is owed to Iran. Iran, therefore, has no further
interests to assert. Nor does Bank Melli have an independent
interest to assert: Because its attachment immunity with
respect to the funds held by Visa and Franklin is abrogated by
the TRIA and section 1610(g), Bank Melli is Iran for the
limited purposes of this interpleader action. This is solely a
collection proceeding, and a judgment debtor isn’t generally
considered an indispensable party to an action to enforce its
debts. See Restatement (Second) of Judgments § 8 (1982)
(suggesting courts may enforce attachment of property absent
the judgment debtor because he “may make an appearance to
contest the court’s jurisdiction over the property without
thereby submitting to the jurisdiction of the court”); cf. Cal.
Civ. Proc. Code § 708.220 (“judgment debtor . . . [is] not an
indispensable party” to an enforcement proceeding).
Therefore, none of Rule 19(a)’s prerequisites for dismissal
has been met: The court can “accord complete relief among
existing parties”; Bank Melli’s ability to protect its interests
isn’t impaired; and there’s no “substantial risk of an existing
party incurring double, multiple, or otherwise inconsistent
obligations.” Fed. R. Civ. P. 19(a).
Even if that were not so, Rule 19(a) is inapposite because
Bank Melli can be joined in this action. Unlike the
Philippines in Pimentel, Bank Melli is not protected by
sovereign immunity in this proceeding, because, as discussed
above, Congress has abrogated the immunity of
instrumentalities of terrorist parties in collection actions.
Finally, to hold, as Bank Melli urges, that Rule 19
requires dismissal in this case would effectively eviscerate
section 201 of the TRIA and section 1610(g). A collection
BENNETT V. BANK MELLI 15
action against a state inherently involves attempting to obtain
funds owned by an entity capable of asserting sovereign
immunity. If dismissal is required every time such an entity
sets forth a “non-frivolous” argument as to why it shouldn’t
have to pay, collection will be impossible as a practical
matter. Nothing in Pimentel or Rule 19 dictates such an
absurd result.
3. Retroactivity
Bank Melli next argues that the creditors cannot use the
TRIA and section 1610(g) to collect on their judgments
because those judgments predated the enactment of the two
collection statutes. When, as here, Congress has not
explicitly provided for a statute’s retroactive effect, we must
ask whether retroactive application “would impair rights a
party possessed when he acted, increase a party’s liability for
past conduct, or impose new duties with respect to
transactions already completed.” Landgraf v. USI Film
Prods., 511 U.S. 244, 280 (1994). Bank Melli argues that if
the TRIA and section 1610(g) permit attachment of its assets,
it “would go from having no liability for [conduct predating
the statutes’] enactment to being liable for the entirety of the
resulting judgments.”
But the TRIA and section 1610(g) do not impose
retroactive liability on Iran—they merely provide a means of
collection for judgments where liability has already been
established. Iran was liable for its terrorism-related conduct
long before the TRIA and section 1610(g) were enacted.
Iran’s liability results from the former 28 U.S.C. § 1605(a)(7)
(now section 1605A), which permitted U.S. citizen terrorism
victims to bring suit against Iran in federal court. That statute
was in force at the time of Iran’s unlawful conduct. The
16 BENNETT V. BANK MELLI
TRIA and section 1610(g) do not attach any additional
penalty to that conduct—they only create an avenue for
creditors to obtain money they are already owed.
Bank Melli’s real argument, therefore, must be that, even
though Iran knew its conduct was unlawful and subject to
liability in U.S. courts at the time it sponsored the relevant
terrorist attacks, it did not know that victims would have the
precise avenue for collection they now have. That hardly
implicates the central concern of Landgraf: that the conduct
a defendant engaged in was innocent at the time it occurred.
Here, Iran knew it was violating the law and that it could be
liable; it just believed that the procedures that existed when
it acted would be insufficient to permit victims to collect on
their judgments. There is no permissible reliance interest in
the inadequacy of enforcement procedures. Iran assumed the
risk that the money it owed in damages based on its
sponsorship of terrorism would eventually be collected upon.
Indeed, it’s clear that the TRIA and section 1610(g) were
designed precisely to provide an avenue to recovery for
existing claimants with judgments against terrorist states. See
Estate of Heiser v. Islamic Republic of Iran, 807 F. Supp. 2d
9, 26 (D.D.C. 2011). To say that all terrorist attacks prior to
the enactment of the collection statutes cannot result in
collectible judgments finds no basis in the Supreme Court’s
retroactivity cases and runs counter to Congress’s clear intent.
4. Ownership of the Assets
Bank Melli argues that the TRIA and section 1610(g)
apply only to assets “owned” by Bank Melli and—while it
concedes it has a 100% beneficial interest in the assets held
by Visa and Franklin—it claims it doesn’t “own” them yet
because the funds have been blocked.
BENNETT V. BANK MELLI 17
But there’s more to ownership than physical possession.
The question of how to determine the funds’ ownership is
controlled by our holding in Peterson v. Islamic Republic of
Iran, 627 F.3d 1117, 1130 (9th Cir. 2010). There, we noted
that “[e]nforcement proceedings in federal district court are
governed by the law of the state in which the court sits”
unless a federal statute dictates otherwise. Id. We held that
the “FSIA does not provide methods for the enforcement of
judgments against foreign states, only that those judgments
may not be enforced by resort to immune property.” We
therefore concluded that “California law on the enforcement
of judgments applies.” Id. Finally, we noted that “California
enforcement law authorizes a court to ‘order the judgment
debtor to assign to the judgment creditor . . . all or part of a
right to payment due or to become due, whether or not the
right is conditioned on future developments.’” Id. at 1130–31
(quoting Cal. Civ. Proc. Code § 708.510(a)) (emphasis
added).
Those holdings collectively dispose of Bank Melli’s
argument here. Because the FSIA doesn’t provide a method
for enforcement, California law applies to this proceeding
and, under California law, money “owed to” Bank Melli may
be assigned to judgment creditors. The fact that Bank Melli
is not yet in physical possession of the funds is immaterial.
* * *
Bank Melli has set forth numerous creative arguments as
to why it shouldn’t be liable for Iran’s debt. But this is an
arena in which Congress has spoken with unmistakable
clarity. Section 201 of the TRIA and 28 U.S.C. § 1610(g)
permit victims of terrorism to collect money they’re owed
from instrumentalities of the state that sponsored the attacks.
18 BENNETT V. BANK MELLI
Nothing in the text of the FSIA, Rule 19 or the Supreme
Court’s retroactivity cases compels a different result. The
district court correctly denied Bank Melli’s motion to
dismiss.
AFFIRMED.