Bartlett v. Baasiri

81 F.4th 28

Robert BARTLETT et al., Plaintiffs-Appellees, v. Dr. Muhammad BAASIRI, Movant-Appellant,Jammal Trust Bank Sal, Defendant-Appellant.

No. 21-2019

August Term, 2022

United States Court of Appeals, Second Circuit

Argued: March 2, 2023

Decided: August 24, 2023

On Appeal from a Judgment of the United States District Court for the Eastern District of New York. (Carol Bagley Amon, Judge)

Michael Radine (Gary M. Osen, Dina Gielchinsky, and Aaron Schlanger, on the brief), Osen LLC, Hackensack, NJ, for Plaintiffs-Appellees.

Mark W. DeLaquil (David B. Rivkin, Jr., Elizabeth Price Foley, and Kendall E. Wangsgard, on the brief), Baker & Hostetler LLP, Washington, DC, for Movant-Appellant and Defendant-Appellant.

Lewis S. Yelin, Attorney, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC (Richard C. Visek, Acting Legal Adviser, Department of State; Brian M. Boynton, Principal Deputy Assistant Attorney General; Breon Peace, United States Attorney for the Eastern District of New York; Sharon Swingle, Attorney, Civil Division, United States Department of Justice, Washington, DC, on the brief), for Amicus Curiae United States of America.

Jay S. Auslander (Natalie Shkolnik, Michael Van Riper, on the brief), Wilk Auslander LLP, New York, NY, for Amicus Curiae Professor Joseph W. Dellapenna.

Before: Jacobs, Park, and Nardini, Circuit Judges.

William J. Nardini, Circuit Judge:

The plaintiffs in this case are American service members who were wounded, and the relatives of service members who were killed or wounded, in terrorist attacks carried out in Iraq from 2004 to 2011 by proxies of the Lebanese militant group Hezbollah. In 2019, victims and their family members sued several Lebanese banks, alleging that the banks aided and abetted the attacks by laundering money for Hezbollah.

After the plaintiffs filed suit, the United States Department of the Treasury labelled one of those banks, Jammal Trust Bank (JTB), a Specially Designated Global Terrorist. That designation prompted the Banque du Liban, Lebanon's central bank, to liquidate JTB and acquire its assets. JTB then moved to dismiss the case against it, on the ground that it was now entitled to sovereign immunity as an instrumentality of Lebanon. The district court denied the motion, holding that a defendant is entitled to foreign sovereign immunity only if it possesses such immunity at the time suit is filed. JTB appealed. We hold that immunity under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1604, may attach when a defendant becomes an instrumentality of a foreign sovereign after a suit is filed. We therefore vacate the district court's decision and remand for determination of whether JTB is such an instrumentality.

I. Background

Between 2004 and 2011, the Lebanese militant group Hezbollah armed and trained numerous proxy groups in Iraq with increasingly sophisticated roadside bombs, grenades, and rockets, which those groups used to kill and injure thousands of American soldiers. Hezbollah, which is a U.S.-designated Foreign Terrorist Organization, allegedly coordinated the attacks with Iran's Islamic Revolutionary Guard Corps, which supplied much of the weaponry.

On January 1, 2019, a group of American victims and their relatives sued eleven Lebanese banks, including JTB, in the United States District Court for the Eastern District of New York (Carol Bagley Amon, Judge) for allegedly laundering money for Hezbollah. They brought their claims under the Anti-Terrorism Act, 18 U.S.C. § 2333(a) and (d), as amended by the Justice Against Sponsors of Terrorism Act, Pub. L. No. 114-222, 130 Stat. 852 (2016), which authorizes suits against those who aid and abet acts of terrorism. The plaintiffs filed an amended complaint on August 2, 2019.

On August 29, 2019, the United States Department of the Treasury named JTB a Specially Designated Global Terrorist. The Treasury Department accused JTB of "brazenly enabling" Hezbollah's financial activities and posing a "direct threat to the integrity of the Lebanese financial system." Joint App'x at 881.

That designation ended things for JTB. Shut out of the dollar system, the bank was unable to trade with many of its counterparties or to carry out other business denominated in dollars. In September, the Banque du Liban, Lebanon's central bank, responded by freezing JTB's deposits and liquidating its operations. JTB is now undergoing liquidation under Lebanese law. Movant-Appellant Dr. Muhammad Baasiri is the central bank's liquidator.

After the Banque du Liban took over, JTB and Baasiri, acting separately from the other defendants, moved for (1) substitution of Baasiri for JTB or, in the alternative, intervention by Baasiri, and (2) dismissal, based on (a) Baasiri's asserted sovereign immunity, (b) international comity, or (c) lack of redressability as to JTB.

The district court granted Baasiri's motion to intervene but denied the motion to substitute and the motion to dismiss. The court concluded that JTB could not raise sovereign immunity as a defense because the liquidation process began only after the plaintiffs brought their suit. It rested that conclusion on the Supreme Court's decision in Dole Food Co. v. Patrickson, 538 U.S. 468, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003), which it read to hold that "instrumentality status [must] be determined at the time suit is filed." Special App'x at 16 (quoting Dole Food, 538 U.S. at 478, 123 S.Ct. 1655). JTB and Baasiri appealed. After oral argument, we solicited the views of the United States State Department, which submitted an amicus brief.

II. Discussion

The decisive issue in this appeal is whether JTB may raise a defense of immunity under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §§ 1602-1611, when it alleges that immunity arose after suit was filed.¹ We review the district court's resolution of this question of law de novo. A&B Alternative Mktg. Inc. v. Int'l Quality Fruit Inc., 35 F.4th 913, 915 (2d Cir. 2022); Rukoro v. Fed. Republic of Germany, 976 F.3d 218, 223 (2d Cir. 2020).

To determine the effect of the FSIA, one must know something of the system that came before it. We begin, therefore, as almost all modern discussions of foreign sovereign immunity do, with The Schooner Exchange v. McFaddon, 7 Cranch 116, 3 L.Ed. 287 (1812). In that case, Chief Justice John Marshall explained that foreign sovereigns have no inherent exemption from the power of American courts, since the "jurisdiction of the nation within its own territory is necessarily exclusive and absolute." Id. at 136. Still, he wrote, it would "degrade the dignity" of a sovereign state to have its rights adjudicated in the courts of another country, so, most countries had agreed to waive jurisdiction over foreign sovereigns. Id. at 137-40. The young United States, the Chief Justice announced, would do the same. Id. at 147.

This was a matter of "grace and comity," not power, and of "common law," not statute. Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983); Samantar v. Yousuf, 560 U.S. 305, 311, 130 S.Ct. 2278, 176 L.Ed.2d 1047 (2010). Although district courts had subject-matter jurisdiction over suits against foreign states under the Constitution and the diversity statute, they elected not to exercise it when a defendant was entitled to immunity. See Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 437 n.5, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989).

For many years, that entitlement was determined by the executive branch, not the judiciary. See Verlinden, 461 U.S. at 486-87, 103 S.Ct. 1962. In "nearly every action brought against a foreign sovereign," the State Department would submit a "suggestion of immunity" and the receiving court would surrender its jurisdiction over the case. Beierwaltes v. L'Office Federale De La Culture De La Confederation Suisse, 999 F.3d 808, 818 (2d Cir. 2021) (cleaned up).

Things started to change in 1952, when the State Department announced that it would follow the more modern "restrictive" theory of foreign sovereign immunity. Turkiye Halk Bankasi A.S. v. United States, 598 U.S. 264, 143 S. Ct. 940, 946, 215 L.Ed.2d 242 (2023). In what came to be known as the Tate Letter, the State Department explained that "the immunity of the sovereign [would be] recognized with regard to sovereign or public acts (jure imperii) of a state, but not with respect to private acts (jure gestionis)." Letter of Jack B. Tate, Acting Legal Adviser, Department of State, to Acting Attorney General Philip B. Perlman (May 19, 1952), reprinted in 26 Dep't of State Bull. 984, 984-85 (1952), and in Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 711-12, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976) (Appendix 2 to opinion of the Court).

The Tate Letter threw immunity doctrine "into some disarray." Republic of Austria v. Altmann, 541 U.S. 677, 690, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004). Although the State Department continued to file suggestions of immunity, and the courts continued to respect them, "political considerations" sometimes led the State Department to support immunity when a straightforward reading of the restrictive theory would have led it to oppose. Id. Confusing things still more, if the State Department did not step in, courts made immunity determinations by themselves, "generally by reference to prior State Department decisions." Verlinden, 461 U.S. at 487, 103 S.Ct. 1962. With two branches, having different institutional considerations, deciding who should be immune and who should not, "the governing standards were," unsurprisingly, "neither clear nor uniformly applied." Id. at 488, 103 S.Ct. 1962.

Twenty-four years after the Tate Letter, Congress brought order to the chaos. It replaced the old ad hoc system with the Foreign Sovereign Immunities Act of 1976, Pub. L. No. 94-583, 90 Stat. 2891, which provided a "comprehensive set of legal standards governing claims of immunity in every civil...