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Peterson v. Islamic Republic of Iran

United States District Court, District of Columbia

December 15, 2016

DEBORAH D. PETERSON, et al., Plaintiffs,
v.
ISLAMIC REPUBLIC OF IRAN, et al., Defendants.

          MEMORANDUM OPINION

          Royce C. Lamberth United States District Judge

         I. INTRODUCTION

         For over fifteen years now, this Court has presided over a consolidated action brought by nearly one thousand plaintiffs against the Islamic Republic of Iran (Iran) under the state sponsor of terrorism exception to the Foreign Sovereign Immunities Act (FSIA). On May 30, 2003, this Court entered a default judgment as to liability against the defendants and ordered claims for the amounts of damages be submitted to special masters. Those special masters issued almost two hundred reports and recommendations that this Court considered in determining the compensatory and punitive damages. On December 7, 2007, this Court entered a default judgment in favor of plaintiffs for more than $2 billion. The special masters now seek payment.

         Before this Court are plaintiffs' Motion [ECF No. 534] for Order Authorizing Payment of Funds for Compensation of Special Masters of this Court; the Response [ECF No. 557] of Special Masters Loraine Ray and Karen Kruger to Plaintiffs' Motion for Order Authorizing Payment of Funds for Compensation of Special Master of this Court ("Response of Special Masters Ray and Kruger"); and Plaintiffs' Reply [ECF No. 558] to Response of Special Masters Loraine Ray and Karen Kruger. For the reasons discussed below, this Court will DENY the motion and DENY the additional relief sought in the Response of Special Masters Ray and Kruger.

         II. BACKGROUND

         On October 23, 1983, suicide bombers from Hezbollah, with the help of Iran, murdered 241 American servicemen. Plaintiffs here consist of family members of the 241 servicemen who perished, as well as administrators of the estates of the servicemen, the servicemen's legal heirs, and injured survivors of that attack. Plaintiffs brought this action in October 2001 under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1605(a)(7).[1] Given the nearly one thousand claimants seeking redress and the commensurately large number of claims, this Court appointed no fewer than 16 special masters. See ECF Nos. 30-39 (appointing John Swanson, John Carney, Veta Carney, Karen J. Kruger, Paul G. Griffin, Susan Meek, Howard P. Rives, Francis B. Fennessey, David L. Broom and Loraine A. Ray), and ECF Nos. 42-46 (appointing Kenneth M. Trombly, Jeffrey A. Manheimer, Christopher A. Byrne, Philip M. Saeta, and Colin M. Dunham). Their task was to "undertake a very thorough, painstaking review of all the relevant testimony, medical evidence, economic reports, and other evidence in order to make clear, accurate recommendations" to the court relating to the damages suffered by each plaintiff. In re Islamic Republic of Iran Terrorism Litigation, 659 F.Supp.2d 31, 110 (D.D.C. 2009). In keeping with their mandate, the special masters undertook "to review hundreds, if not thousands of documents, including economic reports and deposition testimony"-work which "demand[ed] great attention to detail and [was] extraordinarily time-consuming." Id.

         In 2013, plaintiffs successfully brought an action in the United States District Court for the Southern District of New York to seize Iranian assets in satisfaction of this Court's judgment. The S.D.N.Y. court ordered the turnover of $1.75 billion in assets held by Citibank N.A., cash bonds that Bank Markazi-the Central Bank of Iran-held in an account through an intermediary. The court's order created a qualified settlement fund (QSF trust) and transferred the seized funds to a trustee-the Honorable Stanley Sporkin-for the benefit of the plaintiffs. The court's order was affirmed by both the Second Circuit[2] and the United States Supreme Court.[3]

         Plaintiffs now request this Court compensate the Special Masters from those funds, pursuant to Federal Rule of Civil Procedure 53(g). But this Court has fielded requests for payment of Special Masters before. Therefore, before addressing the merits of plaintiffs' motion and to provide additional context, this Court briefly reviews some of the previous filings concerning the compensation of these special masters.

         a. Plaintiffs' First Motion Seeking Compensation for the Special Masters

         Plaintiffs' first series of motions were brought on behalf of three of the special masters. The first two, filed on April 22, 2008, were captioned Motion [ECF No. 242] to Disburse Fund to Special Master Ray and Motion [ECF No. 243] to Disburse Funds to Special Master Swanson. The third, filed on May 1, 2008, was captioned Motion [ECF No. 253] to Disburse Funds to Special Master Kruger. All three predicated their prayer for relief on 28 U.S.C. § 1605 A, rather than 28 U.S.C. § 1605(a)(7). Critically, § 1605A specifically allows courts to appoint special masters and requires money from the Victims of Crime Fund drawn "to cover the costs of special masters appointed." 29 U.S.C. § 1605A(e).

         Plaintiffs filed their requests for payment assuming that § 1605 A applied with automatic and retroactive force to actions filed under 1605(a)(7). Rejecting plaintiffs' theory, this Court denied plaintiffs' request on January 13, 2009 [ECF No. 430] explaining that 1605A(e) could not be retroactively applied given: (1) the plain language of 1605A(e)(2), which limits payment to Special Masters to cases "brought or maintained under this section [1605A]" (emphasis added), and (2) the D.C. Circuit's ruling that: "[A] plaintiff in a case pending under § 1605(a)(7) may not maintain that action based upon the jurisdiction conferred by § 1605 A; in order to claim the benefits of § 1605 A, the plaintiff must file a new action under that new provisions." Memorandum Opinion and Order [ECF No. 430] 2 (quoting Simon v. Republic of Iraq, 529 F.3d, 1187, 1192 (D.C. Cir. 2008)).

         b. Plaintiffs' Second Motion Seeking Payment for Special Masters

         On April 8, 2009, plaintiffs filed their second request, captioned Motion [ECF No. 435] for Order Authorizing Payment to Special Masters of this Court ("Motion Authorizing Payment"), seeking compensation for nine of the appointed masters. Plaintiffs grounded their second request on Federal Rule of Civil Procedure 53(g)(2)(A)-(B), which permits a court to compensate a special master either "by a party or parties" or "from a fund or subject matter of the action within the court's control." Specifically, plaintiffs asked the Court to enter an order "approving payments by the Peace Through Law Foundation, Inc. directly to the Special Masters ... in amounts acceptable to the Court." Motion [ECF No. 435] Authorizing Payment 4. Given the absence of any information shedding light on the Foundation's membership, its organizational structure, and the source of funding, this Court, by Order [ECF No. 440] dated September 30, 2009, denied plaintiffs' request, without prejudice. Rather, this Court considered the most prudent course of action was for counsel to determine, consistent with the guidance offered in its omnibus opinion-published as In re Islamic Republic of Iran Terrorism Litigation, 659 F.Supp.2d 31 (D.D.C. 2009)-whether the action might qualify for retroactive treatment under § 1605 A.

         c. Omnibus Opinion

         This Court's omnibus opinion considered the constitutional and practical implications of the newly codified § 1605 A and its impact on Peterson and 19 other cases filed under § 1605(a)(7). In its broadest strokes, this Court, as a matter of first impression, examined the constitutionality of NDAA § 1083, which authorized individuals who had obtained final judgments under § 1605(a)(7) of the FSIA to file new actions under § 1605 A if they are related to currently pending actions. In re Islamic Republic of Iran Terrorism Litigation, 659 F.Supp.2d 31 (D.D.C. 2009). Following a painstaking analysis, the Court held that § 1083(c)(2) did not require the reopening of final judgments, in contravention of Article III of the Constitution, because the newly created federal cause of action "allow[s] for new actions that simply were not available" before the enactment of 1605A. Id. at 77. The Court also examined NDAA § 1083(c)(3)(B), holding that it did not run afoul of established constitutional principles. Id. at 86. Concluding that both provisions under NDAA § 1083 survived scrutiny, the Court explained that either provided a potential conduit for plaintiffs wishing to pursue remedies previously unavailable under 1605(a)(7), such as punitive damages or special master fees. Thus, while not automatically retroactive, § 1083(c)(2) allowed prior actions to proceed under § 1605A under certain circumstances, [4] and § 1083(c)(3) allowed plaintiffs to file a related action under § 1605A, even if it was arising out of the same act or incident that was litigated under § 1605(a)(7).[5]

         Under NDAA § 1083(c)(2), this Court advised that plaintiffs could avail themselves of 28 U.S.C. § 1605A by filing a motion to alter or amend judgment under Rule 59(e) or a motion seeking relief from judgment under Rule 60(b). Under NDAA § 1083(c), plaintiffs could dismiss actions filed under 28 U.S.C. § 1605(a)(7) and refile under 28 U.S.C. § 1605A. In the context of special masters, this Court has noted that "assuming the procedures in § 1083(c) are complied with, or assuming that there is some way for plaintiffs to overcome the procedural deficiencies in their cases by way of Rule 60(b) motion, or otherwise, this Court sees no reason why it would not have authority to issue an order directing that the special masters receive payment from the Victims of Crime Fund." In re Islamic Republic of Iran Terrorism Litigation, 659 F.Supp.2d 31, 112 (D.D.C. 2009)

         But regarding the Peterson case, this Court observed that, notwithstanding its status as "essentially the lead action of the cases filed based on the Beirut attack, " id. at 101, the Peterson plaintiffs "never filed a motion pursuant to § 1083(c)(2) and they have not filed a new action under § 1083." Id. at 101. This Court did not foreclose plaintiffs from seeking relief under 1605A, reasoning that "at least some of these apparent failures to qualify actions under § 1605 A are due to misunderstanding or misapplication of the statutory language within § 1083." Id. at 108. Rather, the Court invited Peterson counsel to examine other cases such as Bonk v. Islamic Republic of Iran, (08-cv-1273) or Valore v. Islamic Republic of Iran, (03-cv-1959), in considering whether to file an amended complaint under § 1605 A. Id. at 101. The Court further suggested that plaintiffs seeking reconsideration under Rule 59(e), id., at 94, or Rule 60(b) might succeed provided certain statutory conditions were met. Id. at 100, 107. The Peterson plaintiffs did not avail themselves of either suggestion.

         d. Plaintiffs' Third Motion Seeking Payment for Special Masters

         Almost three years later, on July 19, 2012, plaintiffs tendered their third request for special master fees. In a filing captioned, Motion [ECF No. 474] for Order Authorizing Deposit of Funds into the Registry of the Court for Compensation of Special Masters of this Court, plaintiffs asked the court (1) to authorize the Peace Through Law Foundation (the "Foundation") to deposit $500, 000 into the registry of the United States District Court from which the Court could direct payments to the special masters, and (2) ...


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