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Fourth Circuit affirms quashing of writs of attachment against Iran under newly enacted Terrorism Risk Insurance Act (TRIA) because plaintiffs had already accepted compensation under Victims Protection Act (VPA).

In December 1984, members of Hezbollah murdered Charles Hegna, an employee of the U.S. Agency for International Development (USAID), during their hijacking of a Kuwaiti airliner over the Gulf of Oman. This terrorist organization has links to the Islamic Republic of Iran. Congress later amended the Foreign Sovereign Immunities Act (FSIA) to permit victims of terrorism to sue countries that the U. S. State Department has designated state sponsors of terrorism. See 28 U.S.C. Section 1605(a)(7). This enabled Hegna's family (plaintiffs) to bring suit in April 2000 against Iran and the Iranian Ministry of Information and Security (MOIS). Iran did not respond, and the Hegnas obtained a default judgment totaling $375 million.

The plaintiffs tried to enforce the judgments against Iran under Section 201(a) of the newly enacted Terrorism Risk Insurance Act of 2002 (TRIA) [Pub.L. No. 107-297, Section 201(a), 116 Stat. 2322, 2337, codified at 28 U.S.C. Section 1610 note]. They asked for two writs of attachment to execute on two Iranian-owned properties in Bethesda, Maryland.

The Maryland District Court issued the writs of attachment, and the U.S. marshal levied on the properties in May 2003. Because of severed diplomatic relations between the U.S. and Iran, however, those properties are now in the possession of the U.S. government.

The government moved to quash the writs of attachment. They argued that, because the writs did not aim at "blocked assets" as defined in TRIA Section 201(d)(2), the properties were not subject to attachment. Before the Court had ruled, however, the plaintiffs accepted a pro-rata payment under the Victims of Trafficking and Violence Protection Act of 2000 (VPA) [Pub.L. No. 106-386, Section 2002, 114 Stat. 1464, 1541] of more than $8 million. By this action, plaintiffs arguably relinquished all their rights and claims to punitive damages, as well as all rights to execute on property that is at issue in claims against the U.S. before an international tribunal.

The District Court quashed the writs and the plaintiffs noted an appeal. The U.S. Court of Appeals for the Fourth Circuit affirms, but on different grounds. By accepting compensatory payment under the VPA, the Court rules that the plaintiffs had indeed given up any rights to compensation under TRIA. "Congress has devised two avenues by which individuals like the Hegnas successful plaintiffs in suits brought under section 1605(a)(7)'s exception to sovereign immunity may satisfy their judgments against state sponsors of terrorism."

"First, Congress has subjected an increasingly broad class of property owned by these nations in the United States to execution and attachment in aid of execution. Congress' latest effort in this regard is embodied in section 201(a) of the TRIA, 28 U.S.C. Section 1610 note."

"Section 201(a) states in part: 'Notwithstanding any other provision of law, ... in every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism, or for which a terrorist party is not immune under section 1605(a)(7) of title 28, the blocked assets of that terrorist party ... shall be subject to execution or attachment in aid of execution in order to satisfy such judgment ...' ..."

"Second, in the Victims Protection Act, Congress directed the Secretary of the Treasury to make direct payments to certain judgment creditors of Iran and Cuba from funds belonging to those nations but being held by the United States government. See Victims Protection Act Section 2002. As first enacted, the group of individuals eligible to receive these payments under the Act was relatively small and, with five specific exceptions, did not include individuals, such as the Hegnas, who obtained their judgments after July 20, 2000. ..."

"Payments under the Act were not designed merely to supplement the plaintiffs' recoveries of their judgments, but rather to replace them. The initial payments authorized by the VPA were equal to the amount of compensatory damages awarded in judgments, and the VPA required the recipients of those payments to relinquish both their 'rights and claims' to compensatory damages and, depending on the size of the payment the recipient elected to receive, either the rights to punitive damages or their rights 'to execute against or attach' certain properties owned by Iran or Cuba ..." [Slip op. 4-6]

Section 201( c) of TRIA amended the VPA by (1) expanding the group of eligible judgment holders to include persons who filed suit against Iran before October 28, 2000, and (2) directing the distribution of remaining funds to qualified judgment holders on a pro-rata basis. Because the pro-rata payments were likely substantially smaller than the court-awarded compensatory damages, the recipients no longer had to relinquish their rights to enforce compensatory damages, only their "rights and claims" to punitive damages and their rights to execute against property that is at issue in claims against the U.S. before an international claims tribunal.

Assuming, without deciding, that the two Bethesda properties are "blocked assets" and thus subject to execution and attachment, the Court finds that the plaintiffs have forfeited their rights to execute on those properties. "By their receipt of payment from the United States treasury, the Hegnas relinquished 'all rights to execute against or attach' certain properties. ... These rights include not only the rights that the Hegnas had already exercised at the time of relinquishment, the rights to obtain a writ of attachment on judgment and to have a marshal levy against the property under that writ, but also rights of 'execution' that the Hegnas had not yet exercised, such as the rights to proceed under that writ of attachment on judgment and, eventually, to have the property sold by the marshals and to receive the proceeds of that sale. ... Thus, while the marshal's levy on the Bethesda properties represented an important step in the Hegnas' execution of those properties, it did not exhaust the Hegnas' bundle of rights 'to execute against' the properties because it did not complete the sale of the properties in satisfaction of the Hegnas' judgment." [Slip op. 13-14]

State law applies to determine whether at the time of relinquishment further execution against the properties was necessary to satisfy the plaintiffs' judgment. Under Maryland law, the Hegnas would have had to secure a judgment of condemnation absolute or a writ of execution on the properties. If the Bethesda properties are within the scope of the relinquishment and if the Hegnas have received a sufficient payment from the Treasury, the Court must approve the quashing of the writs of attachment.

As for the first aspect, the properties are clearly within the scope of the relinquishment. In 1982, Iran had filed claims against the U.S. in the Iran-U.S. Claims Tribunal, alleging that the U.S. had breached its obligations under the Algiers Declarations by failing to grant Iran custody of its U. S. diplomatic and consular properties. This claim is still pending and includes the two Bethesda properties. As for the second prong, the plaintiffs have received the amount of compensation they are entitled to under Section 2002(d)(1) of the VPA and in so doing, had surrendered their TRIA rights.

Citation: Hegna v. The Islamic Republic of Iran, No. 03-2159 (4th Cir. July 14, 2004); The Daily Record (Baltimore, Maryland), "Victim's law blocks levy," (July 15, 2004).
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Publication:International Law Update
Date:Jul 1, 2004
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