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FLATOW v. ISLAMIC REPUBLIC OF IRAN

November 15, 1999

STEPHEN M. FLATOW, PLAINTIFF
v.
ISLAMIC REPUBLIC OF IRAN, THE IRANIAN MINISTRY OF INFORMATION & SECURITY, AYATOLLAH ALI HOSEINIE KHAMENEI, ALI AKBAR HASHEMI-RAFSANJANI, ALI FALLAHIAN-KHUZESTANI, AND JOHN DOES 1-99, DEFENDANTS.



The opinion of the court was delivered by: Lamberth, District Judge.

MEMORANDUM OPINION

The United States moves to quash the writ of attachment entered by the Clerk of this Court on November 18, 1998, which purports to attach "all credits held by the United States to the benefit of the Islamic Republic of Iran," including U.S. Treasury funds owed to Iran in accordance with an award of the Iran-United States Claims Tribunal, Seeking these funds to satisfy part of his prior judgment against Iran, Plaintiff Stephen Flatow maintains that certain amendments to the Foreign Sovereign Immunities Act waive the United States' sovereign immunity with respect to U.S. funds owed to judgment debtors. 28 U.S.C. § 1610(f)(1)(A) & § 1610(a)(7) (Supp. 1999). Because this Court finds that Congress has not clearly and unequivocally waived the United States' sovereign immunity, the Court GRANTS the United States's Motion to Quash the Writ of Attachment. This order, however, is stayed, for ten days, to provide plaintiff the opportunity to seek a further stay from the Court of Appeals.

I. Factual and Procedural Background

In April 1995, Alisa Flatow, Plaintiff Stephen Flatow's 20-year-old daughter, was killed in a terrorist bombing of a tourist bus in Israel. The terrorist group responsible for the suicide bombing mission, the Shaqaqi faction of the Palestine Islamic Jihad, is funded exclusively by the Islamic Republic of Iran ("Iran"). See Flatow v. The Islamic Republic of Iran, 999 F. Supp. 1, 6-9 (D.D.C. 1998).

A year after Alisa Flatow's murder, Congress amended the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602-1611 (1994 & Supp. 1999) ("FSIA"), by enacting the Antiterrorism and Effective Death Penalty Act of 1996, which lifts the sovereign immunity of foreign states that commit acts of terrorism or provide material support for terrorism. Pub.I., No. 104-132, Title II, § 221(a), (April 24, 1996), 110 Stat. 1241, codified at 28 U.S.C. § 1605 (1996 & Supp. 1999). In addition, Congress created a federal cause of action for personal injury or death and provided, inter alia, that punitive damages would be available in actions brought under the state-sponsored terrorism exception. 28 U.S.C. § 1605(a)(7) (1996 & Supp. 1999). This particular amendment became known as the "Flatow Amendment." Flatow, 999 F. Supp. at 12.

Pursuant to these newly enacted provisions, Flatow filed a wrongful death action against Iran, its Ministry of Information & Security, and various government officials. See Flatow, 999 F. Supp. at 8-10. Iran failed to appear. Accordingly, after an evidentiary hearing in which the plaintiff "establishe[d] his claim or right to relief by evidence . . . satisfactory to the Court," 28 U.S.C. § 1608(e), this Court entered a default judgment against Iran, finding Iran and its codefendants jointly and severally liable for loss of accretions, compensatory damages, solatium and $225,000,000.00 in punitive damages. See Flatow, 999 F. Supp. at 5.

Attempting to execute this judgment, plaintiff filed a writ of attachment on November 18, 1998 against certain U.S. Treasury funds owed to Iran. Specifically, plaintiff sought attachment of $5,042,481.65 plus interest in the Treasury Judgment Fund, which was awarded to Iran by the Iran-U.S. Claims Tribunal ("Tribunal"). See Islamic Republic of Iran v. United States, Case No. A/27, AWD No. 586-A27-FT, (Iran-United States Claims Tribunal June 5, 1998).

In opposing the United States' motion to quash the writ of attachment, plaintiff contends that these U.S. Treasury funds, which are earmarked for payment of the Tribunal award, represent the property of Iran. See Iranian Assets Control Regulations, 31 C.F.R. § 535.311 (1999) (recognizing, inter alia. debt, indebtedness and judgments as property). As such, plaintiff maintains that these funds are subject to attachment pursuant to the Foreign Sovereign Immunities Act. 28 U.S.C. § 1610(f)(1)(A) & (a)(1)(7) (1998). More specifically, he claims that because he is a judgment-creditor of Iran, he is entitled to these funds as partial satisfaction of his March 11, 1998 judgment.

Needless to say, the United States does not share plaintiff's characterization of these U.S. Treasury funds as "Iranian property." Rather, the United States maintains that attachment of the funds constitutes a suit against the United States, which is barred by the doctrine of sovereign immunity. Buchanan v. Alexander, 45 U.S. (4 How.) 20, 21, 11 L.Ed. 857 (1846).

As a preliminary matter, then, this Court must determine whether the funds at issue constitute property of the United States or Iran. As explained below, controlling authority dictates the finding that the Treasury funds are U.S. property. As such, sovereign immunity bars their attachment here, as neither the Iranian Assets Control Regulations nor the Foreign Sovereign Immunities Act contain a clear and unequivocal waiver of the United States' immunity.

II. Sovereign Immunity

Suits against the United States are barred by sovereign immunity, absent an effective waiver. Department of Army v. Blue Fox, Inc., 525 U.S. 255, 119 S.Ct. 687, 690, 142 L.Ed.2d 718 (1999) (holding that sovereign immunity barred subcontractor's equitable lien against United States); FDIC v. Meyer, 510 U.S. 471, 475, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994) (finding that "sue-and-be-sued" clause waived government agency's sovereign immunity); see also United States v. Mitchell, 463 U.S. 206, 212, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983) ("It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction."). Waiver of the federal government's sovereign immunity must be "expressed in unequivocal statutory text and cannot be implied." Blue Fox, 119 S.Ct. at 690; Lane v. Pena, 518 U.S. 187, 192, 116 S.Ct. 2092, 135 L.Ed.2d 486 (1996) ("A waiver of the Federal Government's sovereign immunity must be unequivocally expressed in statutory text."); United States v. Nordic Village, Inc., 503 U.S. 30, 33, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992) ("Waivers of the Government's sovereign immunity, to be effective, must be `unequivocally expressed.'") (quoting Mitchell, 463 U.S. at 206, 103 S.Ct. 2961). Moreover, courts must construe the scope of such waivers "strictly in favor of the sovereign." Blue Fox, 119 S.Ct. at 691; Lane, 518 U.S. at 192, 116 S.Ct. 2092; Nordic Village, 503 U.S. at 33, 112 S.Ct. 1011. Accordingly, any ambiguities in the statutory text must be resolved in favor of immunity. United States v. Williams, 514 U.S. 527, 531, 115 S.Ct. 1611, 131 L.Ed.2d 608 (1995). In sum, these rules of construction derive from the fact that sovereign immunity operates as a jurisdictional bar. As such, "the `terms of [the United States'] consent to be sued in any court define [a] court's jurisdiction to entertain the suit.'" Meyer, 510 U.S. at 475, 114 S.Ct. 996 (quoting United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941)).

Principles of sovereign immunity apply with equal force to attachments and garnishments. See Buchanan v. Alexander, 45 U.S. (4 How.) 20, 21, 11 L.Ed. 857 (1846); FHA v. Burr, 309 U.S. 242, 243, 60 S.Ct. 488, 84 L.Ed. 724 (1940); see also Neukirchen v. Wood County Head Start, Inc., 53 F.3d 809, 811 (7th Cir. 1995); Automatic Sprinkler Corp. v. Darla Envtl. Specialists, 53 F.3d 181, 182 (7th Cir. 1995); State of Arizona v. Bowsher, 935 F.2d 332, 334 (D.C.Cir. 1991); Haskins Bros. & Co. v. Morgenthau, 85 F.2d 677, 681 (App.D.C. 1936). Indeed, early Supreme Court precedent established that creditors may not attach funds held by the U.S. Treasury or its agents. Buchanan, 45 U.S. at 21, 45 U.S. 20. As the Supreme Court explained, "[s]o long as money remains in the hands of a disbursing officer, it is as much the money of the United States, as if it had not been drawn from the treasury." Id. In other words, funds held in the U.S. Treasury — even though set aside or "earmarked" for a specific purpose — remain the property of the United States until the government elects to pay them to whom they are owed. Id. ("Until paid over by the agent of the government to the person entitled to it, the fund cannot, in any legal sense, be considered a part of his effects."). Notably, the Supreme Court has recently reaffirmed the continued vitality of this precedent. See Department of the Army v. Blue Fox, Inc., 525 U.S. 255, 119 S.Ct. 687, 692, 142 L.Ed.2d 718 (1999) (Rehnquist, C.J.) (citing Buchanan). In holding that a subcontractor's lien against government funds owed to an insolvent prime contractor was barred by sovereign immunity, the Supreme Court stated that such a result "is in accord with our precedent establishing that sovereign immunity bars creditors from attaching or garnishing funds in the Treasury." Id.

Similarly, the D.C. Circuit continues to acknowledge the principle set forth in Buchanan. See State of Arizona v. Bowsher, 935 F.2d 332, 334 (D.C.Cir. 1991) (citing Buchanan). While rejecting states' claims against money owed to their citizens by the federal government, the D.C. Circuit stated that "[w]hen the United States sets aside money for the payment of specific debts, it does not thereby lose its property interest in that money." Id. To the contrary, the court of appeals determined that "[t]he money here is federal money. That various persons have claims against the United States in amounts ...


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