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Rubin v. Islamic Republic of Iran

United States Court of Appeals, Seventh Circuit

July 19, 2016

Jenny Rubin, et al., Plaintiffs-Appellants,
v.
Islamic Republic of Iran, Defendant-Appellee, and Field Museum of Natural History, et al., Respondents-Appellees.

          Argued April 23, 2015

         Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 03 C 9370 - Robert W. Gettleman, Judge.

          Before Bauer and Sykes, Circuit Judges, and Reagan, Chief District Judge. [*]

          Sykes, Circuit Judge.

         In September 1997 three Hamas suicide bombers blew themselves up on a crowded pedestrian mall in Jerusalem. Among those grievously injured were eight U.S. citizens who later joined with a handful of their close relatives to file a civil action against the Islamic Republic of Iran for its role in providing material support to the attackers. Iran was subject to suit as a state sponsor of terrorism under the terrorism exception to the Foreign Sovereign Immunities Act ("FSIA"), then codified at 28 U.S.C. § 1605(a)(7). A district judge in the District of Columbia entered a $71.5 million default judgment. Iran did not pay.

         So began more than a decade of unsuccessful litigation across the country to attach and execute on Iranian assets in order to satisfy the judgment. See Rubin v. Islamic Republic of Iran, No. Civ. A. 01-1655 (RMU), 2005 WL 670770, at *1 (D.D.C. Mar. 23, 2005), vacated, 563 F.Supp.2d 38 (D.D.C. 2008) (granting and then vacating writs of execution against two domestic bank accounts used by Iranian consulates); Rubin v. Islamic Republic of Iran, 810 F.Supp.2d 402 (D. Mass. 2011), aff'd, 709 F.3d 49 (1st Cir. 2013) (rejecting an effort to attach Iranian antiquities in the possession of various museums); Rubin v. Islamic Republic of Iran, 33 F.Supp. 3d 1003 (N.D. Ill. 2014) (same). This appeal concerns the last decision on this list.

         The plaintiffs sought to execute on four collections of ancient Persian artifacts located within the territorial jurisdiction of the Northern District of Illinois: the Persepolis Collection, the Chogha Mish Collection, and the Oriental Institute Collection, all in the possession of the University of Chicago; and the Herzfeld Collection, split between the University and Chicago's Field Museum of Natural History. The case was last here on some procedural issues early in the attachment proceeding. See Rubin v. Islamic Republic of Iran, 637 F.3d 783 (7th Cir. 2011), cert. denied, 133 S.Ct. 23 (2012). It now returns on the merits.

         A foreign state's property in the United States is immune from attachment and execution, see 28 U.S.C. § 1609, but there are a few narrow exceptions. The plaintiffs identified three possible paths to reach the artifacts: subsections (a) and (g) of 28 U.S.C. § 1610, both part of the FSIA; and section 201 of the Terrorism Risk Insurance Act of 2002 ("TRIA"), Pub. L. No. 107-297, 116 Stat. 2322 (codified at 28 U.S.C. § 1610 note), which permits holders of terrorism-related judgments to execute on assets that are "blocked" by executive order under certain international sanctions provisions. The district court entered judgment against the plaintiffs, finding no statutory basis to execute on the artifacts.

         We affirm. The assets are not blocked by existing executive order, so execution under TRIA is not available. Nor does § 1610(a) apply. That provision permits execution on a foreign state's property "used for a commercial activity in the United States." We read this exception to require commercial use by the foreign state itself, not a third party. Iran did not put the artifacts to any commercial use.

         Lastly, § 1610(g) is not itself an exception to execution immunity. Instead, it partially abrogates the so-called Bancec doctrine, which holds that a judgment against a foreign state cannot be executed on property owned by its juridically separate instrumentality. First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba ("Bancec"), 462 U.S. 611, 626–29 (1983). The Bancec rule can be overcome in two ways: The holder of a judgment against a foreign state may execute on the property of its instrumentality if the sovereign and its instrumentality are alter egos or if adherence to the rule of separateness would work an injustice. Id.

         Section 1610(g) lifts the Bancec rule for holders of terrorism-related judgments, allowing attachment in aid of execution "as provided in this section" without regard to the presumption of separateness-that is, without the requirement of establishing alter-ego status or showing an injustice. The phrase "as provided in this section" refers to the immunity exceptions found elsewhere in § 1610, one of which must apply to overcome execution immunity. So although subsection (g) substantially eases the enforcement process for terrorism victims by removing the Bancec barrier, it is not a freestanding terrorism exception to execution immunity.

         I. Background

         The artifacts at issue here arrived in the United States over a 60-year timespan beginning in the 1930s. In 1937 Iran loaned the Persepolis Collection-roughly 30, 000 clay tablets and fragments containing some of the oldest writings in the world-to the University of Chicago's Oriental Institute for research, translation, and cataloguing. In 1945 the Field Museum purchased a collection of approximately 1, 200 prehistoric artifacts from Dr. Ernst Herzfeld, a German archaeologist active in Persia in the early 20th century (the Herzfeld Collection). In the 1960s Iran excavated clay seal impressions from the ancient Chogha Mish settlement and loaned them to the University's Oriental Institute for academic study (the Chogha Mish Collection). Most items in this collection were returned to Iran in 1970, but the University has since located some objects previously missing from the collection. In the 1980s and 1990s, the Oriental Institute received several small donations of Persian artifacts from Iran and other donors. These artifacts are not really a discrete collection, but the parties refer to them as the "Oriental Institute Collection, " so we'll do the same.

         The plaintiffs are American victims of a suicide-bomb attack carried out by Hamas in Jerusalem on September 4, 1997, with material support from Iran. In 2003 the survivors and their close family members filed suit against Iran in federal court in the District of Columbia, proceeding under the terrorism exception to jurisdictional sovereign immunity, then codified at § 1605(a)(7) of the FSIA. (In January 2008 Congress repealed § 1605(a)(7) and enacted a new terrorism exception to jurisdictional sovereign immunity codified at 28 U.S.C. § 1605A. See National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-181, § 1083, 122 Stat. 3, 338–44.)

         The plaintiffs won a $71.5 million default judgment, see Campuzano v. Islamic Republic of Iran, 281 F.Supp.2d 258 (D.D.C. 2003), and quickly commenced enforcement actions around the country in an effort to collect. As relevant here, the plaintiffs registered the judgment in the Northern District of Illinois, initiating attachment proceedings for the purpose of executing on the four collections then in the possession of the University and the Field Museum.[1] (We'll refer to the University and the Field Museum collectively as "the Museums" unless the context requires otherwise.)

         Significant procedural battles ensued. We resolved these disputes in our earlier opinion and need not repeat that litigation history. See Rubin, 637 F.3d at 786–89. For present purposes it's enough to note that the plaintiffs initially proposed two possible ways to overcome Iran's execution immunity. First, they invoked § 1610(a), the "commercial activity" exception to execution immunity. Second, they pointed to TRIA, which permits execution on the blocked assets of a state sponsor of terrorism (or its agency or instrumentality) to satisfy a judgment obtained under the terrorism exception to jurisdictional sovereign immunity.

         After we sent the case back to the district court, the parties engaged in discovery on the four collections, and Iran and the Museums moved for summary judgment. The district judge granted the motion. First, he rejected the plaintiffs' claim that the artifacts are subject to execution under § 1610(a). The judge read this exception as limited to property used for a commercial activity by the foreign state itself. Because Iran hadn't used the artifacts for commercial activity, the judge held that § 1610(a) does not apply.

         The judge also held that because the assets in question are not blocked-i.e., frozen-by any current executive order, execution under TRIA is likewise unavailable.

         Finally, in their response to the summary-judgment motion, the plaintiffs identified a third possible path to reach the artifacts: § 1610(g), which they argued is an independent exception to execution immunity available to victims of state-sponsored terrorism. The judge rejected this argument too, concluding that subsection (g) abrogates the Bancec rule for terrorism-related judgments but is not a freestanding terrorism exception to execution immunity.

         Finding no statutory basis to execute on the artifacts, the judge entered judgment for Iran and the Museums. The plaintiffs appealed, reprising all three arguments.

         II. Discussion

         A. Which Artifacts Remain at Issue?

         Our first task is to identify which of the four collections is even potentially subject to attachment and execution at this juncture. Two basic criteria apply: (1) the artifacts must be owned by Iran, and (2) the artifacts must be within the territorial jurisdiction of the district court. See Republic of Argentina v. NML Capital, Ltd., 134 S.Ct. 2250, 2257 (2014) ("Our courts generally lack authority in the first place to execute against property in other countries … .") (citation omitted); see also Autotech Techs. LP v. Integral Research & Dev. Corp., 499 F.3d 737, 750 (7th Cir. 2007) ("The FSIA did not purport to authorize execution against a foreign sovereign's property, or that of its instrumentality, wherever that property is located around the world. We would need some hint from Congress before we felt justified in adopting such a breathtaking assertion of extraterritorial jurisdiction.").

         There's no dispute that the Persepolis Collection is owned by Iran and is in the physical possession of the University. The three other collections, however, are outside the reach of this proceeding for reasons relating to their present location or the absence of Iranian ownership.

         As we've just explained, when the district court entered judgment, the University had possession of remnants of the Chogha Mish Collection. But intervening developments have placed these artifacts beyond the grasp of the federal courts. After filing their notice of appeal, the plaintiffs asked us to stay the district court's judgment pending appeal. We denied the motion. The State Department then informed the University that the United States was obligated to return the Chogha Mish artifacts to Iran. The University, in turn, notified us that it would return the Chogha Mish artifacts to Iran within 45 days unless the court ordered otherwise. We did not order otherwise. So the University delivered the artifacts to Iran's National Museum in Tehran and filed notice with the court that Iran received and accepted them. Accordingly, the Chogha Mish Collection is no longer within the territorial jurisdiction of the district court.

         The Herzfeld and the Oriental Institute Collections remain within the court's territorial jurisdiction, but they are not Iranian property. The plaintiffs have tried to cast doubt on the legitimacy of their removal from Iran, arguing that Dr. Herzfeld is regarded by some in the academic community as a plunderer and that the artifacts in these collections are covered by Iran's National Heritage Protection Act of 1930, which gives the government of Iran an option to exercise control over certain antiquities unearthed in the country. The Museums, on the other hand, maintain that they were bona fide purchasers or recipients of these collections; the plaintiffs have not meaningfully contested this point.

         We don't need to resolve any questions about the provenance of the Herzfeld and Oriental Institute Collections or explore the circumstances under which the Museums acquired them. As the plaintiffs concede, Iran has expressly disclaimed any legal interest in the two collections, and the district judge found that no evidence supports Iranian ownership of these artifacts. The plaintiffs have not given us any reason to disturb this ruling, and we see none ourselves.

         Because the Chogha Mish Collection is no longer within the territorial jurisdiction of the district court and Iran has disclaimed ownership of the Herzfeld and Oriental Institute Collections, we confine our merits review to the Persepolis Collection.

         B. Statutory Framework

         We traced the history of the foreign sovereign immunity doctrine and the enactment of the FSIA in our earlier opinion. See Rubin, 637 F.3d at 792–94. A brief repetition is helpful to a proper understanding of the statutory-interpretation questions presented here.

         Foreign sovereign immunity "is a matter of grace and comity on the part of the United States, " and for much of our nation's history was left to the discretion of the Executive Branch. Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 486 (1983). As such, federal courts "consistently … deferred to the decisions of the political branches-in particular, those of the Executive Branch-on whether to take jurisdiction over actions against foreign sovereigns and their instrumentalities." Id. Under the common-law doctrine, a diplomatic representative of the foreign state would request a "suggestion of immunity" from the State Department, and if the State Department obliged, the court would surrender jurisdiction without further inquiry; absent a suggestion of immunity, the court would decide the immunity question itself based on policies established by the State Department. Rubin, 637 F.3d at 793. Either way, "[t]he process … entailed substantial judicial deference to the Executive Branch." Id.

         Even if a court acquired jurisdiction and awarded judgment against a foreign state, "the United States gave absolute immunity to foreign sovereigns from the execution of judgments." Autotech, 499 F.3d at 749. Successful plaintiffs had to rely on voluntary payment by the foreign state. Id.

         In 1952 the State Department adopted a "restrictive" theory of foreign sovereign immunity, conferring jurisdictional immunity in cases arising out of a foreign state's "public acts" but withholding it in "cases arising out of a foreign state's strictly commercial acts." Verlinden, 461 U.S. at 487. "Under the restrictive, as opposed to the 'absolute, ' theory of foreign sovereign immunity, a state is immune from the jurisdiction of foreign courts as to its sovereign or public acts (jure imperii), but not as to those that are private or commercial in character (jure gestionis)." Saudi Arabia v. Nelson, 507 U.S. 349, 359–60 (1993). Even under this theory, however, foreign sovereign property remained absolutely immune from execution. Autotech, 499 F.3d at 749.

         The State Department's shift to the restrictive theory of jurisdictional immunity "'thr[ew] immunity determinations into some disarray, ' since 'political considerations sometimes led the Department to file suggestions of immunity in cases where immunity would not have been available.'" NML Capital, 134 S.Ct. at 2255 (brackets in original) (quoting Republic of Austria v. Altmann, 541 U.S. 677, 690 (2004)). Essentially, "sovereign immunity determinations were [being] made in two different branches, subject to a variety of factors, sometimes including diplomatic considerations. Not surprisingly, the governing standards were neither clear nor uniformly applied." Verlinden, 461 U.S. at 488.

         In 1976 Congress stepped in and enacted the FSIA, which "largely codifies the so-called 'restrictive' theory of foreign sovereign immunity first endorsed by the State Department in 1952." Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 612 (1992). The Act establishes a "comprehensive set of legal standards governing claims of immunity in every civil action against a foreign state." Verlinden, 461 U.S. at 488. "The key word … is comprehensive." NML Capital, 134 S.Ct. at 2255. "[A]ny sort of immunity defense made by a foreign sovereign in an American court must stand on the Act's text. Or. it must fall." Id. at 2256.

         The Act codifies the two common-law immunities we've just discussed-jurisdictional immunity (28 U.S.C. § 1604) and execution immunity (id. § 1609). Only the latter is at issue here. Section 1609 states that "the property in the United States of a foreign state shall be immune from attachment[, ] arrest[, ] and execution except as provided in sections 1610 and 1611 of this chapter." Accordingly, the Persepolis Collection is immune from attachment and execution unless an exception listed in § 1610 applies. (Section 1611 of Title 28 of the U.S. Code lists exceptions to the exceptions and is not implicated here.)

         The most prominent are the so-called commercial-activity exceptions found in subsections (a) and (b) of § 1610. Under § 1610(a) a person who holds a judgment against a foreign state may execute it on the foreign state's property "used for a commercial activity in the United States" if one of seven listed conditions is met. Similarly, under § 1610(b) a person who holds a judgment against a foreign state's instrumentality may execute it on "any property in the United States of [the] … instrumentality … engaged in commercial activity in the United States" if one of three listed conditions is met.

         So to summarize, at common law execution immunity was absolute, Autotech, 499 F.3d at 749, but subsections (a) and (b) of § 1610 together codify a narrower version of the restrictive theory of jurisdictional immunity for the execution of judgments, allowing successful claimants to attach and execute on foreign sovereign property "used for a commercial activity" in this country, at least in some circumstances.[2]

         The plaintiffs point to § 1610(a) and § 1610(g) as possible paths to reach the artifacts. They also rely on section 201(a) of TRIA. We turn to these arguments now.

         C. 28 U.S.C. ...


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