Daniel Fisher
Thomas
Fay knows what it means to require an act of Congress to get what he
wants. It took at least four acts of Congress for this
Washington
lawyer to get his hands on a share of almost $2 billion held in a
Citibank account in New York once controlled by Iran’s central bank.
With its
decision Wednesday upholding the constitutionality of a special law
awarding the money to more than 1,000 victims and family members of
Iran-sponsored terrorist attacks, the U.S. Supreme Court removed the
last obstacle standing in front of Fay’s clients.
The case actually involves 16 lawsuits and a number of law firms but
it was Fay who pioneered the idea of using U.S. civil litigation to hit
foreign terrorists where American lawyers always aim: in the pocketbook.
It took more than a decade of hard-fought litigation – often over the
objections of the White House and the U.S. State Dept. – and heavy
lobbying in Congress to obtain special legislation to overcome
institutional hostility toward subjecting sovereign foreign countries to
the jurisdiction of U.S. courts.
The 1983 Marine barracks bombing in Beirut: Grist for a billion-dollar lawsuit. (AP Photo/Jim Bourdier, File)
“We went after them and the U.S. government was on the other side every step of the way,” said Fay, 76, a partner with
Fay Kaplan Law along with his daughter Caragh Glenn Fay.
Congress is debating the topic again as it mulls a bipartisan bill
allowing U.S. victims to sue Saudi Arabia over its alleged complicity in
the 9/11 attacks. Most lawsuits against foreign nations are blocked by
the Foreign Sovereign Immunities Act, a 1976 statute that protects them
from civil liability over anything but purely commercial activities or
standard torts (like a foreign official running over an American with
his car in New York City). Congress has carved out several exceptions,
however, including nations determined to be state sponsors of terrorism.
Fay knows all about the process of getting exceptions, since he
prodded Congress to pass the laws that facilitated his case against Iran
and says he helped write at least one of them. The first was a 1996
amendment to the FSIA allowing U.S. victims to sue foreign state
sponsors of terrorism
. A Washington court soon cabined that law,
ruling it didn’t actually create a federal cause of action for
individuals to sue, so the lawyers pressed their claims under state law
instead.
Then Congress passed the Terrorism Risk
Insurance Act of 2002 allowing plaintiffs to attach assets of terrorist
states that had been blocked by the government. But Iran fought that in
court, winning procedural rulings such as one declaring assets held in
an intermediary bank to be the property of neither the sending party nor
the receiver.
So in 2008, at the prodding of Fay and other lawyers
representing terrorism victims, Congress created a federal cause of
action against terrorist states and provided a mechanism for exercising
judgments, which were by then piling up by the billions. It also
expanded the list of plaintiffs to include military personnel and
foreign nationals working for the U.S. military, to cover victims of the
1996 Khobar Toweras bombing in Saudi Arabia and twin al Qaeda embassy
bombings in Africa in 1998.
Iran still fought, so in 2012 Congress passed 22 U.S. C. §8772,
a law allowing plaintiffs in one consolidated case, identified by
number, to tap the Citibank account to satisfy judgments they’d won by
default against Iran.
The Supreme Court’s decision upholding that last law came over the vociferous objections of Chief Justice John Roberts, who saw it as impermissible Congressional meddling in the judicial process. But Roberts’ dissent, which was joined by Justice Sonia Sotomayor,
mystifies Fay, who notes that Congress has always had the power to
determine the jurisdiction of federal courts (except for the Supreme
Court). All §8772 did was eliminate procedural roadblocks peculiar to a
case involving a foreign sovereign that prevented his clients from
collecting on a final judgment.
Assuming the money flows as expected, some 1,500 plaintiffs
will get an average of $900,000 or so and lawyers like Fay should get
very, very rich on fees. Fay said the details of the arrangements with
the plaintiffs are confidential, but the typical contingency fee in a
civil case is 30% or more. That would mean $600 million or more in fees
flowing to the four-member Kaplan Fay firm and others including Stone Bonner & Rocco and Salon Marrow Dyckman in New York. The plaintiffs were represented at the Supreme Court by Ted Olson of Gibson Dunn & Crutcher.
“Remember, we’ve been litigating this case for 15 years,” said
Fay, a Delaware native and Rutgers Law School grad who ditched a boring
government job early in his career to become a $15-an-hour criminal
defense attorney. “Even if everybody was getting minimum wage, it’s into seven figures.”
Fay got involved in the mid-1990s after attorney Stephen Perles
represented the family of Alisa Flatow, an American killed in a 1995 bus
bombing in Israel that was financed by Iran. He hired Fay to litigate
and push legislation in Congress, resulting in the so-called Flatow
Amendment, allowing for punitive damages against state sponsors of
terror. The Flatows won $247 million against Iran in 1998, but there was
no method for collecting.
Fay then took on the case of soldiers and family members of the
victims of the 1983 bombing of a Marine barracks in Beirut, which killed
241 U.S. soldiers. The case grew to more than 1,000 claimants thanks to
U.S. tort law, which allows close family members to sue over the
psychological effects of a terrorist attack on a loved one.
Along the way Fay and his colleagues got an education in
transnational litigation. There’s a detailed procedure under the FSIA
for serving notice on a foreign government, and it’s nothing like
sending the sheriff out to knock on somebody’s door. Fay had to file a
motion with the Secretary of State, who then put the service papers in a
diplomatic pouch to Switzerland, which has diplomatic relations with
Iran.
“You’d die laughing” at the note the Swiss sent to their
counterparts in Iran, Fay said, which was full of formal greeting and
salutations before notifying them they’d been sued in a U.S. court. The
entire process, he said, might take four months. And then Iran would
refuse to show up.
U.S. District Judge Royce Lamberth found Iran liable in 2003
and ordered a $2.7 billion default judgment in September 2007. The money
was waiting for them at Citibank, $1.7 billion in bonds nominally
belonging to a Luxembourg shell company that the Treasury had blocked as
property of the central bank of Iran. (Any transaction clearing in U.S.
dollars has to travel through a bank in the U.S. eventually, giving
authorities a shot at intercepting Iranian funds.)
Actually getting the money took several more years of
litigation plus the 2012 law, which Iran challenged all the way to the
Supreme Court. It lost this week.
The Iran decision may help efforts to pass a law allowing U.S. victims of the 9/11 attacks to sue Saudi Arabia, said Jimmy Gurulé,
a professor at Notre Dame Law School who was undersecretary for
enforcement at the Treasury Dept. when the 9/11 attacks occurred and
later implemented Treasury’s global strategy to intercept terrorist
financing.
‘The surviving family members of the 9/11 attack are going to say
`Hey look what happened there. Why can’t we sue,’” said Gurulé, who once
worked on Fay’s cases and submitted an amicus brief in the Bank Markazy
litigation.
He doesn’t think that’s a bad idea, either.
“If a foreign state is vulnerable to being sued, is that going to
have a deterrent effect?” he asked. “Is that going to cause these states
to engage in greater due diligence?”
Fay acknowledges ISIS might be one side effect of lawsuits like his.
The nominally independent terrorist group could serve a shield to hide
the involvement of financiers in Saudi Arabia and elsewhere. But on
balance he’s convinced American tort law can help reduce terrorism
overseas.
For now, he’s happy to be on the “downhill slide” toward collecting against Iran.
“When we filed it I don’t know how many lawyers came up to me in
Washington and said `you’ll never get a dime out of it,’” Fay said,
laughing.
