Thursday, February 28, 2013

First Circuit Rules in Favor of MFA and Harvard in Rubin v. Iran

The First Circuit Court of Appeals on February 27, 2013 decided in favor of the Museum of Fine Arts, Boston (MFA) and Harvard’s museums in the case of Rubin v. Iran.

The case involves victims of a 1997 Iranian-backed terrorist bombing who seek to satisfy a multi-million dollar default court judgment awarded to them in 2003. Since 2005 the Rubin plaintiffs have argued that approximately 2000 reliefs, sculptures, and other archaeological objects located at the MFA and Harvard are the property of Iran that can be seized.  The cultural institutions have been contesting that claim, and yesterday the First Circuit agreed.

The appeals court decision extended its sympathies to the the plaintiffs, saying “we are mindful of the incident that gave rise to the judgment here and the difficulty the plaintiffs are having collecting on that judgment ….”  But the justices upheld “the general rule … that foreign sovereign property in the United States is immune from attachment and execution” because of the Foreign Sovereign Immunity Act (FSIA). 28 U.S.C. § 1609.

The appeals court acknowledged that the Terrorism Risk Insurance Act of 2002 (TRIA) “carves out a narrow exception to that rule, applicable only to ‘blocked assets,’” but wrote that “the plaintiffs have failed to demonstrate that any of the antiquities in the Museums' possession fall within that exception.”
Photo credit: Persepolis by Mira Pavlakovic
The MFA and Harvard argued in the lower federal district court that Iran does not own the cultural objects. Even if they were owned by Iran, the MFA and Harvard maintained that the FSIA makes the objects immune from attachment.

The Rubin plaintiffs countered that “(1) the Museums did not have standing to assert sovereign immunity on behalf of Iran; (2) even if they did, the ‘commercial use’ exception to immunity under the FSIA would apply …; and (3) in any event, the plaintiffs could reach the antiquities under … the Terrorism Risk Insurance Act of 2002 (TRIA), …  which permits the attachment of certain ‘blocked assets of [a] terrorist party.’” In other words, the plaintiffs argued (1) that only Iran itself, not a third party, could claim in court that the archaeological objects at the MFA and Harvard were immune from attachment; (2) that the FSIA made an exception to the rule that foreign property in the U.S. is immune from attachment when that property is used commercially; and (3) that TRIA made an exception to the FSIA rule because “blocked assets” owned by Iran could be seized.

[Sidebar: “Blocked assets” mean property that has been seized or frozen by the U.S. government under the Trading With the Enemy Act or under the International Emergency Economic Powers Act. TRIA allows seizure of blocked assets to satisfy a court judgment “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 [the FSIA] ….” Of special note is that Iranian “blocked assets” are those under the Iranian Assets Control Regulations (the U.S. Treasury’s Office of Foreign Assets Controls (OFAC) sanctions against Iran) that are uncontested assets, meaning that there is no dispute about whether Iran holds title.]

The federal district court ruled that FSIA's “commercial use” exception did not apply to the case, but that TRIA would apply if the Rubin plaintiffs proved that Iran owned the antiquities in the possession of the MFA and Harvard.

The lower court then transferred three issues to the appeals court for review: the issue of standing, the applicability of TRIA, and the FSIA’s “commercial use” exception.  But the First Circuit appeals court sent the case back to the district court, explaining that it would hear the matter only after the district court decided who owned the cultural objects.  Once the district court in Boston found that the Rubin plaintiffs failed to show that Iran owned the property, the court of appeals accepted the case.

The litigants then submitted arguments to the First Circuit, summarized by Wednesday’s appeals court’s decision:

“The plaintiffs’ main argument on appeal is that TRIA preempts state property law, and, when read in conjunction with certain Treasury Department regulations, gives the plaintiffs (in their words) the right to levy against ‘any interest of Iran, even if that interest is less than a full ownership interest.’ They further claim that Iran has an interest in the antiquities under Iranian law that is sufficient to make them attachable under TRIA.

“The Museums, for their part, counter that TRIA does not displace the traditional rule that a judgment creditor may execute only against assets that a judgment debtor owns, and that the district court was correct in concluding that Iranian law does not vest title to the antiquities in Iran. However, the Museums also challenge the district court's finding that the antiquities qualify as ‘blocked assets’ within the meaning of TRIA—a prerequisite for that statute to apply. See TRIA § 201(a). Finally, the Museums urge us to find that, even if Iran owns the antiquities and they are theoretically attachable under TRIA, the plaintiffs' claim is barred under Massachusetts law by the three-year statute of limitations and the Museums' adverse possession of the objects.”

[Sidebar: The MFA and Harvard asserted that they could legally claim title to the cultural objects—if Iran did, in fact, own them—by claiming adverse possession. Adverse possession is the process of dispossessing another of their property legally, and without compensation, through hostile, open, notorious, exclusive, and continuous possession.]

“Also before us is the position of the United States Department of the Treasury's Office of Foreign Assets Control (OFAC), which is responsible for administering and enforcing economic and trade sanctions, including promulgating the regulations at issue here. The United States has filed an amicus brief articulating OFAC's views regarding two aspects of this case. First, OFAC urges us to find that TRIA authorizes the attachment only of those assets that are owned by the relevant terrorist party. Second, providing its own interpretation of the Treasury Department regulations, OFAC argues that the antiquities are not ‘contested’ within the meaning of those regulations, which, if correct, would make TRIA inapplicable here.”

Notwithstanding the complex legal issues briefed by the parties and, at times, the peculiar oral argument made before the three justice panel, the appeals court simply held:

“Because we agree with OFAC that the antiquities are not ‘contested,’ and thus conclude that they cannot qualify as ‘blocked assets’ under TRIA, we need not reach the broader questions of whether TRIA preempts state law, what kind of ownership interest suffices for an asset to be attachable under TRIA, whether Iranian law vests title to these antiquities in Iran, or whether the plaintiffs' claims are foreclosed by the Massachusetts statute of limitations or the adverse possession doctrine.”

The court went on to write, “We therefore defer to OFAC's reasonable position that an asset can be ‘contested’ for purposes of [Iranian Assets Control Regulations] only if Iran itself has claimed an interest in the asset … Iran has never made such a claim with regard to the antiquities in the Museums' possession. Thus, even if we assume that those antiquities qualify as ‘assets of’ Iran under section 201(a) of TRIA, they would be ‘uncontested’ assets that were unblocked in 1981 … Because the plaintiffs have relied on no other authority to support their claim that the antiquities are ‘blocked’ within the meaning of TRIA, we conclude that the antiquities are not attachable under [TRIA].”

The First Circuit’s decision may be appealed by the Rubin plaintiffs to the U.S. Supreme Court. Meanwhile, trial preparations continue in the federal district court in Chicago. That case, involving the plaintiffs' efforts to attach ancient Iranian artifacts located at Chicago's Field Museum and the University of Chicago, was restarted after the U.S. Supreme Court in June 2012 declined to hear the Rubin plaintiffs' appeal of the Seventh Circuit's ruling against them.

This post is researched, written, and published on the blog Cultural Heritage Lawyer Rick St. Hilaire at Text copyrighted 2012 by Ricardo A. St. Hilaire, Attorney & Counselor at Law, PLLC. Any unauthorized reproduction or retransmission of this post is prohibited. CONTACT: