Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-01-07149/USCOURTS-caDC-01-07149-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

---

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 01-7101 September Term, 2002

Filed On: October 17, 2002

Stephen M. Flatow,

Individually and as Administrator of the

Estate of Alisa Michelle Flatow, deceased,

Appellant

v.

Islamic Republic of Iran,

The Ministry of Foreign Affairs, et al.,

Appellees

Consolidated with

No. 01-7149

Appeals from the United States District Court

for the District of Columbia

(No. 97cv00396)

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 1 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Before: Edwards, Henderson, and Rogers, Circuit Judges.

O R D E R

It is ORDERED, by the Court, sua sponte, that the

opinion filed herein on October 8, 2002 is amended as follows:

On page 2, revise the last sentence of the first paragraph to

read:

We affirm the district court's interpretation ... and the

order limiting the subpoena and the corresponding protective

order.

On page 8, add a footnote at the end of the first full

paragraph to read:

The district court also issued a protective order that Flatow

does not challenge, requesting only that the scope of the

order be coextensive with the scope of relinquishment of

attachment rights under the Victims Act s 2002. Appellant's

Br. At 6, 34.

On page 11, revise the last sentence of the last paragraph

to read:

We affirm the district court's interpretation of "regulated"

Iranian property under IEEPA and the order limiting the

subpoena to this legal interpretation and the corresponding

protective order.

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

BY:

Michael C. McGrail

Deputy Clerk

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 6, 2002 Decided October 8, 2002

No. 01-7101

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 2 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Stephen M. Flatow,

Individually and as Administrator of the

Estate of Alisa Michelle Flatow, deceased,

Appellant

v.

Islamic Republic of Iran,

The Ministry of Foreign Affairs, et al.,

Appellees

Consolidated with

No. 01-7149

Appeals from the United States District Court

for the District of Columbia

(No. 97cv00396)

Steven R. Perles argued the cause for appellant. With him

on the brief was Thomas Fortune Fay.

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 3 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

H. Thomas Byron III, Attorney, U.S. Department of Justice, argued the cause for appellee United States. With him

on the brief were Roscoe C. Howard, Jr., U.S. Attorney, and

Douglas Letter, Litigation Counsel, U.S. Department of Justice.

Before: Edwards, Henderson, and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge: This is an appeal from an order

denying a motion to compel payment of post-judgment interest by the United States Treasury Department, and narrowing the scope of a third-party subpoena under Federal Rule

of Civil Procedure 45. See Flatow v. Islamic Republic of

Iran, 196 F.R.D. 203 (D.D.C. 2000). We dismiss the appeal of

the claim for post-judgment interest for lack of jurisdiction,

and vacate the district court's opinion on that issue, because

the district court lacked jurisdiction to entertain a claim

against a nonparty. We affirm the district court's interpretation of "regulated" Iranian property under the International

Emergency Economic Powers Act ("IEEPA"), 50 U.S.C.

ss 1701-02, and the order limiting the subpoena and the

corresponding protective order.

I.

Stephen M. Flatow obtained a default judgment for more

than $225 million in compensatory and punitive damages

awards in a tort action that he filed against the government of

Iran and several of its officials pursuant to the Foreign

Sovereign Immunities Act ("FSIA"), 28 U.S.C. s 1605(a)(7).

See Flatow v. Islamic Republic of Iran, 999 F. Supp. 1, 5

(D.D.C. 1998). Flatow's attempts to collect the judgment

were unsuccessful.1 Subsequently, on October 28, 2000, the

Victims of Trafficking and Violence Protection Act of 2000,

Pub. L. No. 106-386, 114 Stat. 1464 (2000) ("Victims Protec-

__________

1 See Flatow v. Islamic Republic of Iran, 76 F. Supp. 2d 28

(D.D.C. 1999); Flatow v. Islamic Republic of Iran, 76 F. Supp. 2d

16 (D.D.C. 1999); Flatow v. Islamic Republic of Iran, 74 F. Supp.

2d 18 (D.D.C. 1999).

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 4 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

tion Act") became law, affording certain victims of terrorists'

acts an opportunity to recover funds from the United States

to satisfy their outstanding judgments.2 One month later, on

November 28, 2000, Flatow applied for such funds, electing

100% recovery of the amount of compensatory damages

plus post-judgment interest. See Victims Protection Act,

s 2002(a)(1)(B). His application was approved, and on January 4, 2001, the Treasury Department transferred to Flatow

more than $26 million, representing the compensatory damages award and post-judgment interest on that portion of the

judgment. As a condition of receiving funds from the United

States, Flatow was required under s 2002(a)(2)(D) of the

Victims Protection Act to relinquish "all rights to execute

against or attach property that is ... subject to section

1610(f)(1)(A) of title 28, United States Code."3

__________

2 The Victims Protection Act offered two options for payment.

As relevant here, s 2002(a)(1) of the statute provides:

Subject to subsections (b) and (c), the Secretary of the

Treasury shall pay each person described in paragraph (2), at

the person's election--

(A) 110 percent of compensatory damages awarded by judgment of a court on a claim or claims brought by the person

under section 1605(a)(7) of title 28, United States Code, plus

amounts necessary to pay post-judgment interest under section

1961 of such title ... [or]

(B) 100 percent of the compensatory damages awarded by

judgment of a court on a claim or claims brought by the person

under section 1605(a)(7) of title 28, United States Code, plus

amounts necessary to pay post-judgment interest, as provided

in section 1961 of such title....

Section 2002(a)(2)(C) provides that a person electing to receive

payment for 110% of compensatory damages, "relinquishes all

rights and claims to punitive damages awarded in connection with

such claim or claims."

3 Section 2002(a)(2)(D) provides that a person receiving payment for 100% of compensatory damages,

relinquishes all rights to execute against or attach property

that is at issue in claims against the United States before an

Both the scope of Flatow's election of payment and the

scope of his relinquishment of the right to attach Iranian

assets are at issue. Flatow contends that the district court

erred in interpreting the Victims Protection Act first, by

denying his motion to compel payment of post-judgment

interest on the punitive damages award, which we address in

Part II, and second, by narrowing his subpoena because he

would be unable to attach Iranian property that is regulated

by the United States, which we address in Part III.

II.

Flatow contends that the district court ignored the plain

language of s 2002(a)(1)(B) of the Victims Protection Act in

denying his motion to compel the Treasury Department to

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 5 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

pay post-judgment interest on his punitive damages award.

__________

international tribunal, that is the subject of awards rendered by

such tribunal, or that is subject to section 1610(f)(1)(A) of title

28, United States Code.

By Notice published in the Federal Register on November 22,

2000 to "Persons Who Hold Certain Categories of Judgments

Against Cuba or Iran," the Office of Foreign Assets Control in the

Treasury Department ("OFAC") explained that an applicant who

elects the 100% option is barred from seeking to attach "virtually all

Iranian ... assets within the jurisdiction of the United States." 65

Fed. Reg. 70382, 70384. The Notice stated that the Victims Protection Act required relinquishment of rights to attach or execute

against property subject to 28 U.S.C. s 1610(f)(1)(A), which "applies

to 'any property with respect to which financial transactions are

prohibited or regulated pursuant to ... the International Emergency Economic Powers Act (50 U.S.C. 1701-1702) (IEEPA), or any

other proclamation, order, regulation, or license issued pursuant

thereto.' " Id. (quoting 28 U.S.C. s 1610(f)(1)(A)). The Notice

explained, as well, the comprehensive sanctions programs against

Iran under IEEPA, such that "virtually every transaction involving

Iranian ... property within the jurisdiction of the United States is

either 'prohibited' or 'regulated,' i.e., permitted only by a general

license in regulations promulgated by" OFAC, or by a "specific

license issued by OFAC." Id.

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 6 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

We do not reach the merits of this contention for lack of

jurisdiction.

The United States filed a Statement of Interest in the

district court on July 23, 1998, in light of Flatow's writs of

attachment on three parcels of real estate in the District of

Columbia that were diplomatic properties of Iran and that

had been held in the custody of the State Department since

1980. The Statement explained that it was submitted solely

to protect the United States' interests and to advise the court

of its legal obligations with respect to the writs under United

States law and international agreements. For example, the

Statement argued that the rental of diplomatic residences did

not make them commercial properties, and that s 1610(b) is

inapplicable because Flatow is seeking attachment of "property in the United States of a foreign state," which is defined in

s 1610(a). The Statement sought vacation of the attachments

and quashing of the accompanying writs.4 The Statement

further stated that the United States was not appearing on

behalf of Iran and "expressly condemns the acts that brought

about the judgment in this case."

In response, Flatow filed a motion to compel payment by

the Treasury Department of post-judgment interest on the

punitive damages portion of his judgment against Iran. The

United States, in turn, argued that Flatow could not convert

litigation regarding his Rule 45 subpoena into a proceeding

involving an unrelated claim for monetary relief under

s 2002(2) of the Victims Protection Act against a non-party,

__________

4 The Statement of Interest asserted that the three properties

are (1) immune from attachment under the Foreign Missions Act,

22 U.S.C. ss 4301-4316, and the FSIA, 28 U.S.C. ss 1602-1611; (2)

"blocked" under Executive Order 12170, 44 Fed. Reg. 65729 (Nov.

15, 1979), issued pursuant to IEEPA, 50 U.S.C. ss 1701-1706; (3)

subject to ongoing proceedings between Iran and the United States

in the Iran-U.S. Claims Tribunal; and (4) that attachment would

interfere with the ability of the United States to discharge its

obligations under the Vienna Convention on Diplomatic Relations,

T.I.A.S. No. 7502, 23 U.S.T. 3227 (1964), and jeopardize important

foreign policy interests of the United States.

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 7 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

and alternatively, that the United States had not waived its

sovereign immunity to suits of this sort in the district court.

The district court did not address the United States' objection to its jurisdiction, ruling instead that Flatow had waived

his right to recover interest on his punitive damages award.

Flatow v. Islamic Republic of Iran, 201 F.R.D. 5, 11 (D.D.C.

2001). This was error because the court lacked jurisdiction to

hear or decide the merits of Flatow's motion to compel a

nonparty.

"The principle that courts lacking jurisdiction over litigants

cannot adjudicate their rights is elementary...." In re

Sealed Case, 141 F.3d 337, 341 (D.C. Cir. 1998). The Federal

Rules of Civil Procedure provide that "[t]here shall be one

form of action to be known as 'civil action' " and such an

action shall be commenced by filing a complaint with the

court, with related service, answer, and motions obligations

thereafter. See Fed. R. Civ. P. 2, 3, 4, 7(a); see also 1

Moore's Federal Practice ss 3.02[2], 3-7 (3d ed. 2000).

Under Federal Rule of Civil Procedure 10(a), the names of all

parties must appear in the complaint filed in the district

court. As in Peralta v. U.S. Attorney's Office, 136 F.3d 169

(D.C. Cir. 1998), "the district court lost track of the identity of

the 'defendant' in this litigation." Id. at 171.

Flatow never named the United States or any agency or

officer of the federal government as a defendant in his tort

action against Iran under the FSIA. He does not claim to

have served the United States or the Treasury Department

with a summons, much less to have made a demand on the

Treasury Department for post-judgment interest on his punitive damages award prior to filing his motion to compel

payment. Nor did Flatow amend his complaint to add the

United States as a party, and the district court docket does

not indicate that the United States was added as a party

through joinder or intervention.

Furthermore, even if the filing of the Statement were

viewed as an appearance by the United States, see 28 U.S.C.

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 8 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

s 517,5 it clearly was a limited appearance, focusing on the

attachments and not the merits of the underlying tort action.

In addition, the United States presented a jurisdictional

objection to Flatow's motion to compel. See Fed. R. Civ. P.

12(b); see also Chase v. Pan-Pacific Broad. Inc., 750 F.2d

131 (D.C. Cir. 1984). Cf. Land v. Dollar, 188 F.2d 629, 632

(D.C. Cir. 1951). Neither could the filing of the Statement of

Interest suffice to make the United States a de facto intervenor, assuming the validity of that concept, for the United

States was not present throughout every stage of the proceedings, its interests were not synonymous with those of the

named Iranian defendants, and it did not behave as a party in

the district court. See Peralta, 136 F.3d at 174. Under the

circumstances, the United States took no action that subjected it to the general jurisdiction of the district court. See Dry

Clime Lamp Corp. v. Edwards, 389 F.2d 590, 596-97 (5th Cir.

1968); McQuillen v. Nat'l Cash Register Co., 112 F.2d 877,

881-82 (4th Cir. 1940); Salmon Falls Mfg. Co. v. Midland

Tire & Rubber Co., 285 F. 214, 217-18 (6th Cir. 1922); Grable

v. Killits, 282 F. 185, 194 (6th Cir. 1922).

Consequently, the Rule 45 subpoena modification proceeding could not provide a substitute for a properly initiated civil

action seeking particular relief, as authorized by statute. The

district court, therefore, was without jurisdiction to hear or

decide the question raised by Flatow's motion, and the district court's opinion on the merits of his claim should be

vacated.

III.

On June 5, 1998, Flatow served a third-party subpoena on

the Treasury Department, pursuant to Federal Rule of Civil

Procedure 45, to produce "[a]ll documents of any type or

description pertaining to any assets which any of the named

defendants ... have or ever had or ... asserted or alleged

__________

5 Under 28 U.S.C. s 517, the United States may appear in any

court of the United States "to attend to the interests of the United

States in a suit pending in a court of the United States, or in a court

of a State, or to attend to any other interest of the United States."

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 9 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

any interest, claim, ownership right or security interest" in as

well as assets in the custody or control of the defendants, or

that constituted " 'blocked assets' of the ... defendants."

Although the Department objected that the subpoena was

overly broad and unduly burdensome, the district court largely rejected that challenge and ordered the Department to

comply with the subpoena. See Flatow, 196 F.R.D. 203. In

early 2001, however, the Department moved for modification

of the subpoena based on Flatow's relinquishment of certain

attachment rights under s 2002(a)(2)(D) of the Victims Protection Act, and also requested that certain offices within the

Department be protected against further discovery under the

subpoena.

The district court ruled that the subpoena was overbroad in

violation of Rule 45. See Flatow, 201 F.R.D. at 8. The court

reasoned that because Flatow relinquished his right to execute or attach various types of Iranian property under his

s 2002(a)(1)(B) election, information about such property was

irrelevant to his goal of collecting punitive damages. Id.

The court rejected Flatow's argument that the Department

had a mandatory duty to assist the court in locating Iranian

assets under s 1610(f)(2)(A) (as amended by s 2002(f) of the

Victims Protection Act) because s 2002(a)(2)(D) of the Victims Protection Act prohibited Flatow from attaching some of

those very assets. Id. at 9. The court also rejected Flatow's

argument that the property enumerated in s 2002(a)(2)(D)

does not include Iranian commercial property or property not

within the custodial control of the United States. Id. The

court accordingly modified the subpoena, quoting

s 2002(a)(2)(D), so as not to require the production of information relating to "property that is at issue in claims against

the United States before an international tribunal, that is the

subject of awards rendered by such tribunal, or that is

subject to section 1610(f)(1)(A) of Title 28, United States

Code." Id.6

In his brief Flatow contends that the district court incorrectly interpreted the scope of his relinquishment of attachment rights under the Victims Protection Act to include

Iranian commercial assets within the United States that are

outside the custodial control of the Treasury Department and

____________

6 The district court also issued a protective order that Flatow does

not challenge, requesting only that the scope of the order be coextensive

with the scope of relinquishment of attachment rights under the Victims

Act s 2002. Appellant's Br. at 6, 34.

of no governmental interest to the United States. He maintains that the district court's interpretation destroys Congress's intent to provide claimants a meaningful chance to

satisfy punitive damage awards. Specifically, Flatow contends that his relinquishment of attachment rights did not

destroy his right to attach two categories of Iranian

government-controlled commercial property: (1) assets that

may not leave the United States without a license, over which

Iran continues to enjoy unregulated, domestic, commercial

control, and (2) assets within the pre-approved exceptions to

the federal blocking program.

At oral argument, however, the parties clarified that the

sole legal issue presented with regard to the subpoena is

whether Flatow's election under s 2002(a)(2)(D) of the Victims Protection Act required a relinquishment of Iranian

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 10 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

property that is licensed by the federal government. On de

novo review, see In re Sealed Case, 146 F.3d 881, 883 (D.C.

Cir. 1998), we hold that the district court properly interpreted

"regulated" Iranian property under the IEEPA and appropriately limited the scope of the subpoena pursuant to that

interpretation. Because Flatow has conceded that the scope

of the subpoena is not otherwise at issue, we need not address

any abuse of discretion challenges to the district court's

order.

The district court's modification of the subpoena repeats

the language of s 2002(a)(2)(D) of the Victims Protection Act,

which refers to 28 U.S.C. s 1610(f)(1)(A). Section

1610(f)(1)(A) provides that:

Notwithstanding any other provision of law ... and

except as provided in subparagraph (B), any property

with respect to which financial transactions are prohibited or regulated pursuant to section 5(b) of the Trading

with the Enemy Act (50 U.S.C. App 5(b)), section 620(a)

of the Foreign Assistance Act of 1961 (22 U.S.C.

s 2370(a)), sections 202 and 203 of the International

Emergency Economic Powers Act (50 U.S.C. 1701-1702),

or any other proclamation, order, regulation, or license

issued pursuant thereto, shall be subject to execution or

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 11 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

attachment in aid of execution of any judgment relating

to a claim for which a foreign state ... claiming such

property is not immune under section 1605(a)(7).

28 U.S.C. s 1610(f)(1)(A) (emphasis added).

The scope of Flatow's relinquishment of attachment rights

pursuant to s 1610(f)(1)(A) turns then on the meaning of the

phrase "transactions [that] are prohibited or regulated" under

IEEPA. A brief discussion of regulations promulgated pursuant to IEEPA makes clear that the district court properly

narrowed the subpoena to exclude Iranian property subject to

license by the federal government.

Acting pursuant to IEEPA's national emergency powers,

President Carter, in response to the Iranian hostage crisis,

declared a national emergency on November 14, 1979, and

issued a series of Executive Orders that, among other things,

blocked the removal or transfer of all Iranian property subject to U.S. jurisdiction. See Dames & Moore v. Regan, 453

U.S. 654, 663 (1981). The President authorized the Treasury

Department to promulgate regulations carrying out the blocking order. Id. Consequently, the Department's Office of

Foreign Asset Control ("OFAC") administers two regulatory

programs involving Iranian property: the Iranian Assets

Control Regulations ("IACR") and the Iranian Transactions

Regulations ("ITR"). See 31 C.F.R. Pts. 530, 560 (1980).

The IACR broadly prohibits unauthorized transactions involving property in which Iran has any interest. 31 C.F.R.

s 535.201. Such property may not be transferred, paid,

exported, withdrawn, or otherwise dealt in except as provided

by OFAC. Id. Unless authorized by a license issued by

OFAC, any transaction within the terms of the IACR is

prohibited. 31 C.F.R. s 535.101. Pursuant to the Algiers

Accords, the Treasury Department established a general

license that authorized post-1981 transactions "in which Iran

or an Iranian entity has an interest." 31 C.F.R. s 535.579.

The second regulatory program, the ITR, confirms the broad

reach of OFAC's Iranian sanctions programs by establishing

controls on Iranian trade, investments, and services. See 31

C.F.R. Pt. 560. However, the ITR does not apply to certain

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 12 of 13
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

categories of transactions, such as personal communications,

donations of particular humanitarian articles, and informational materials. 50 U.S.C. s 1702(b); 31 C.F.R. s 560.210.

As under the IACR, there is a general prohibition under the

ITR of unauthorized transactions, coupled with specific licenses permitting certain kinds of transactions. 31 C.F.R.

ss 560.505-560.535.

The fact that a transaction is authorized by an OFAC

license confirms that it is "regulated" by IEEPA and by

regulations or licenses issued pursuant thereto. Cf. Regan v.

Wald, 468 U.S. 222, 233-34 (1984). By the plain terms of the

Treasury Department's regulations, the IACR establishes

that virtually all property subject to the jurisdiction of the

United States in which Iran has any interest is either prohibited or subject to a license of the United States. 31 C.F.R.

s 535.101. Flatow's contention that the district court should

have held that the government was collaterally estopped from

claiming in its Notice of November 22, 2000, supra note 3,

that he cannot attach licensed Iranian property was first

raised in his reply brief, and thus we do not address it. See,

e.g., Steel Joist Inst. v. OSHA, 287 F.3d 1165, 1166 (D.C. Cir.

2002).

Accordingly, we dismiss Flatow's contention that he is

entitled to post-judgment interest on his punitive damages

award for lack of jurisdiction and vacate the district court's

opinion on that issue. We affirm the district court's interpretation of "regulated" Iranian property under IEEPA and the

order limiting the subpoena to this legal interpretation and the

corresponding protective order.

USCA Case #01-7149 Document #706577 Filed: 10/08/2002 Page 13 of 13