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Terror Victims Win $2B Supreme Court Case Against Iran

By Casey C. Sullivan, Esq. on April 20, 2016 | Last updated on March 21, 2019

Victims of Iranian-sponsored terrorism won big in the Supreme Court this morning. Today, in a 6-2 ruling authored by Justice Ginsburg, the Court upheld a law giving terror victims an explicit right to collect a court judgment against Iran. That 2012 law, passed as federal courts were considering the same question, did not overstep the separation of powers between Congress and the courts, the Supreme Court ruled.

The ruling opens up a $2 billion judgment against Iran, making the money available to the more than 1,000 victims and families of victims of Iranian-sponsored terrorist attacks, including a 1983 bombing of Marine barracks in Beirut and the 1996 bombing of the Khobar Towers in Saudi Arabia.

Suing Over Terror

The case, Bank Markazi v. Peterson, began when terror victims sued Iran for backing certain terrorist attacks. The victims fall within 16 discrete groups, though the two largest attacks underlying the litigation were the 1983 Beirut bombing and the 1996 Saudi Arabia attacks. In the Beirut bombing, which occurred during the Lebanese Civil War, two truck bombs were set off outside buildings housing American Marines and French military, killing 299 people.

The second, an attack on the Khobar Towers in Saudi Arabia, destroyed an eight-story building housing U.S. Air Force personnel. Nineteen U.S. service members were killed and nearly 500 people were wounded.

That litigation led to a $1.75 billion default judgment against Iran.

Congress Acts, Before the Courts Decide

Now here's where the current case comes in. Turnover proceedings for the nearly $2 billion judgment began in 2008. As a result, $1.75 billion in bond assets owned by Bank Markazi, the Iran's Central Bank, were frozen, while parties awaited the final resolution of the proceedings.

Then in 2012, Congress passed the Iran Threat Reduction and Syria Human Rights Act. As the Supreme Court notes, the act "is an unusual statute." It designates specific assets and opens them to liability and damages judgments, referring even to the enforcement proceeding's docket number.

That sort of interference in an ongoing judicial matter, Bank Markazi argued, violated the separation of powers doctrine; Congress had impermissibly interfered with the right of the courts to dispose of the case.

Revisiting Klein, 144 Years Later

It was 1872 when the Supreme Court last found that Congress had interfered with the judicial branch by legislating a solution to a pending case. But that opinion, United States v. Klein, technically remains good law.

In Klein, the estate of V.F. Wilson, a Confederate supporter, sought restitution for confiscated property, arguing that Wilson had pledged an oath of allegiance to the Union, postbellum, receiving a pardon from President Lincoln. The courts agreed, but soon after, Congress passed a law prohibiting the use of presidential pardon to claim proceeds from seized property. That, the Supreme Court ruled, had exceeded Congress's powers, attempting to limit the pardoning power of the executive branch, and attempting to prescribe judicial outcomes.

But that Civil War era decision has languished since 1872, and in 2016 it remained unpersuasive to today's Supreme Court. Section 8722, Justice Ginsburg wrote, "does not transgress restraints placed on Congress and the Constitution." Further, "Klein does not inhibit Congress from 'amending applicable law,'" the Court explained. Rather, the statute in Klein "attempted to direct the result without altering the legal standards governing." Here, Congress has changed the legal standards, something well within its powers.

Onwards to Saudi Arabia?

The case comes just as Congress is considering further legislation targeted at state-sponsors of terror. The Justice Against Sponsors of Terrorism Act would allow victims of the September 11th, 2001, terrorist attacks on the World Trade Center and Pentagon to hold the government of Saudi Arabia liable in U.S. court.

Saudi Arabia's involvement in the September 11th attacks has long been disputed. The government denies any role in the attacks, though the 9/11 Commission left open the possibility that some Saudi officials might have played a role. President Obama has opposed the bill, and the Saudi government has vowed to sell off $750 billion in U.S. assets if it passes, which some analysts have described as an empty threat.

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