United States District Court, District of Columbia
DEBORAH D. PETERSON, Personal Representative of the Estate of James C. Knipple Dec. et ah Plaintiffs,
ISLAMIC REPUBLIC OF IRAN et a!., Defendants.
C. Lamberth, United States District Judge.
Court has presided over a consolidated action brought by
nearly one thousand plaintiffs against the Islamic Republic
of Iran (Iran) and the Iranian Ministry of Information and
Security (MOIS) under the state sponsor of terrorism
exception to the Foreign Sovereign Immunities Act (FSIA)
since 2001. 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. The 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 approximately $2.65 billion. The
special masters seek payment for their work. The Court now
authorizes and approves payment to the special masters in the
amounts set forth below as compensation for the services they
provided. The Court will award costs in the amount of $651,
184.45 to be taxed against the defendants.
October 23. 1983. a suicide bomber from Hezbollah detonated
thousands of pounds of explosives underneath the U.S. Marine
barracks building in Beirut. Lebanon, murdering 241 American
servicemen. Hezbollah and its agents received massive
material and technical support from the Iranian government,
and Iran was complicit in this attack. See Peterson v.
Islamic Republic of Iran, 264 F.Supp.2d 46, 54 (D.D.C.
in the actions against Iran and MOIS consisted of family
members of the 241 deceased servicemen, as well as
administrators of the estates of the servicemen, the
servicemen's legal heirs, and injured survivors of that
attack. Plaintiffs brought the suits in October 2001 under
the FSIA. Given the nearlv one thousand claimants seeking
redress and the commensliratelv large number of claims, this
Court appointed numerous 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); ECF Nos. 42-46 (appointing Kenneth M. Trombly, Jeffrey
A. Manlieimer, Christopher A. Byrne. Philip M. Saeta. and
Colin M. Dunham). Thirteen special masters performed work in
the Peterson action. 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). The special masters "review[ed] hundreds, if not
thousands of documents, including economic reports and
deposition testimony." Id. This work
"demand[ed] great attention to detail and [was]
extraordinarily time-consuming." Id.
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 turnover of S1.75
billion in assets held, by Citibank N.A. These assets were
cash bonds that Bank Markazi-the Central Bank of Iran-held in
an account with Citibank through an intermediary.
Peterson v. Islamic Republic of Iran, No. 10 CIV.
4518, 2013 WL 1155576 (S.D.N.Y. Mar. 13, 2013). The court
subsequently issued an order creating a Qualified Settlement
Fund (QSF) and transferred the seized funds to a trustee for
the benefit of the plaintiffs. The court's opinion
authorizing the seizure of the assets was affirmed by the
Second Circuit and the Supreme Court. Bank Markazi v.
Peterson, 136 S.Ct. 1310 (2016); Peterson v. Islamic
Republic of Iran, 758 F.3d 185 (2d Cir. 2014).
special masters have not yet been paid for their services and
expenses. The special masters have sought payment several
times since 2008, but this Court denied these past motions.
The Court briefly reviews the previous filings regarding
compensation for these special masters.
Motions for Compensation from the Victims of Crime
counsel filed multiple motions in 2008 for orders authorizing
payment on behalf of three special masters. The motions
predicated their prayer for relief on 28 U.S.C. § 1605A,
which allows certain court appointed special masters to be
paid through the Victims of Crime Fund, which is administered
by the Department of Justice. ECF No. 242; ECF No. 243;
see 28 U.S.C. § 1605A(e). However, the
Peterson action was filed under 28 U.S.C. §
1605(a)(7), not § 1605A. Plaintiffs had assumed that
§ 1605A, which was enacted as part of the National
Defense Authorization Act for Fiscal Year 2008 (after the
Peterson action was filed), applied with automatic
and retroactive force to actions filed under §
1605(a)(7). Pub. L. No. 110-81, § 1083, 122 Stat. 338
(2008) (codified at 28 U.S.C. § 1605A). However, this
Court denied plaintiffs' motions, reasoning 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 §
1605A. 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
provision." Mem. Op. and Order 2. ECF No. 430 (quoting
Simon v. Republic of Iraq, 529 F.3d 1187. 1192 (D.C.
First Motion for Compensation from a Private
April 2009, plaintiffs' counsel made another attempt to
obtain payment for nine special masters. This time, counsel
argued that the Court had authority under Federal Rule of
Civil Procedure 53(g)(2). Rule 53(g)(2) states that special
masters' "compensation must be paid either: (A) by a
party or parties; or (b) from a fund or subject matter of the
action within the court's control." Fed.R.Civ.P.
53(g)(2). Plaintiffs' counsel 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." Mot. for Order
Authorizing Payment to Special Masters 4, ECF No. 435.
However, counsel did not provide any information about the
Foundation's membership, its organizational structure, or
the source of the funding. The Court determined that the most
prudent course of action was not to consider plaintiffs'
proposed approach to use the private foundation to pay the
special masters but for counsel to determine whether,
consistent with the guidance offered in In re Islamic
Republic of Iran Terrorism litigation, 659 F.Supp.2d 31
(D.D.C. 2009). the action could qualify for retroactive
treatment under § 1605A. This led the Court to deny
plaintiffs' counsel's request without prejudice.
Id. at 111-13.
Second Motion for Compensation from a Private
counsel did not attempt to qualify the case for retroactive
treatment under § 1605A. Instead, in July 2012, counsel
made another attempt to secure payment from the Peace Through
Law Foundation. Mot. for Order Authorizing Deposit of Funds
into Registry of the Ct. for Compensation of Special Masters
of this Ct., ECF No. 474. Specifically, plaintiffs'
counsel requested that the Court authorize the Foundation to
deposit money into the Court's registry from which the
Court could direct payment to the special masters.
Id. Plaintiffs' counsel also requested that the
Court impose the costs on defendants. Id.
August 2012, this Court ordered plaintiffs to file (1) a
memorandum disclosing the membership structure of the
Foundation as well as its source of funds and (2) a
memorandum addressing the legal basis for the Court's
authority to distribute these funds to the special masters
and whether these payments may be levied against the
defendants pursuant to the FSIA. Order, ECF No. 475. After
plaintiffs filed this information, the Court denied
plaintiffs' motion to allow Foundation funds to be
channeled through the Court's registry to pay the special
masters because the Foundation was "a corporation that
is controlled and entirely funded by plaintiffs' counsel,
Mr. Thomas Fortune Fay and his firm Fay Kaplan Law, PA."
Order, ECF No. 489. The Court determined that "having
the special masters compensated indirectly by plaintiffs'
counsel via this Foundation might cast doubt on the fairness
of the procedures in this case," id. at 1-2,
and that 'if the Court were to allow plaintiffs'
counsel to now pay the special masters in this case, the
appearance of impropriety would be too great."
Motion for Compensation from the Qualified Settlement
2016, plaintiffs' counsel made their fourth attempt to
obtain payment for the special masters. Counsel sought to
have the Court exercise its authority under Rule 53(g) to
authorize payment for the special masters from the QSF and
enter judgment for costs pursuant to Rules 53(a) and 54(b) in
that amount against Iran and MOIS in favor of the
Peterson action plaintiffs.
Forrest's order directing turnover of blocked assets
noted that the QSF was "created for the benefit'* of
the Peterson plaintiffs, and required a court order
authorizing distribution "in accordance with the terms
of the Plaintiffs' agreement concerning the distribution
of those funds." Peterson v. Islamic Republic of
Iran, No. 10-cv-4518, 2013 U.S. Dist. LEXIS 188219, at
*55, 59 (S.D.N.Y. July 9, 2013). The order establishing the
QSF stated that the trustee was to administer the QSF
"in accordance with: (i) the terms of the Fund
Agreement, (ii) the terms of this Order and any subsequent
Orders issued by this Court . . . ." Order Approving
Qualified Settlement Fund, Peterson v. Islamic Republic
of Iran, ECF No. 460 (S.D.N.Y.July 9, 2013) (No.
10-cv-4518) [hereinafter S.D.N.Y. ECF No. 460]. The Fund
Agreement declared the fund was created for the benefit of
the Peterson plaintiffs, "and such other
persons, entity or entities ... to whom the Court directs
that distributions shall be made." Agreement for the
Peterson § 468B Fund Pursuant to 26 U.S.C. § 468B
at ¶ 2.1, Peterson v. Islamic Republic of Iran,
ECF No. 461 (S.D.N.Y. July 9, 2013) (No. l0-cv-4518)
[hereinafter Fund Agreement, S.D.N.Y. ECF No. 461]. The Fund
Agreement makes no specific mention of funds to be allocated
to compensate special masters. Further, at the time
plaintiffs' counsel made this attempt to obtain payment
for the special masters from the QSF, the district court in
the S.D.N.Y. had not issued any order authorizing the
distribution of funds to the special masters. Therefore, this
Court declined to supersede the terms of the S.D.N.Y. order
approving the QSF, and the Fund Agreement itself, to impose
non-negotiated terms and conditions on plaintiffs and
plaintiffs' counsel. Peterson v. Islamic Republic of
Iran, 224 F.Supp.3d 17, 26 (D.D.C. 2016).
addition, two special masters sought to require
plaintiffs' counsel to pay for the special masters'
fees and expenses as a tax or sanction. These special masters
argued that sanctions against plaintiffs' counsel were
proper because counsel had not taken steps to qualify the
Peterson action for retroactive treatment under
§ 1605A or to move for reconsideration of this
Court's prior rulings. Peterson v. Islamic Republic
of Iran, 224 F.Supp.3d 17, 24 (D.D.C. 2016). This Court
rejected this argument because it found that plaintiffs'
counsel had not acted in bad faith, vexatiously, wantonly, or
for oppressive reasons at any time. Id. at 27. This
Court also declined to tax costs on plaintiffs" counsel
because the Court "considered] defendant Iran
responsible, and re fuse [d] to set new [compensation] terms
which impose the costs of the special masters upon
plaintiffs' counsel.'" Mat 28.