such foreign state while acting within the scope of his or her office, employment or agency
...” for which a terrorist party is not immune under 1605(a)(7) of the FSIA; and (2) assets
subject to execution or attachment are actually “blocked.” Pub, L. No. 107-297, Title IL, §
201(a), 116 Stat. 2337 (2002); 28 U.S.C.A. § 1610 note.

There is no dispute as to whether the Plaintiffs satisfy the first requirement.
Therefore, this Court must determine whether the Defendants’ assets are in fact considered
“blocked.” The Plaintiffs argue that the condominiums are “blocked assets” within the
meaning of the TRIA, and have not been used “exclusively for diplomatic purposes.” The
government, on the other hand, argues that the condominiums can not be attached because
they are being used exclusively for diplomatic purposes.

On November 14, 1979, pursuant to the International Emergency Economic Powers
Act (IEEPA), 50 U.S.C. § 1701 et seq., President Carter issued Executive Order 12170
blocking Iranian assets in the United States. Exec. Order No. 12,170, 44 FR 65729 (1979),
reprinted in 50 U.S.C.A. § 1701 note. Iran was permitted to continue occupying its embassy,
consulates, and diplomatic residences. United States’ Motion to Quash Writs of Attachment,
Ex. A, Declaration of Francis X. Taylor, at { 5.

On April 7, 1980, President Jimmy Carter, pursuant to his constitutional authority to
conduct foreign affairs, severed diplomatic relations with Iran and stated that the Secretary
of State had informed the Government of Iran that its Embassy and consulates in the United

States were to cease their activities immediately, and that all Iranian diplomatic and consular

19



G. TERRORISM RISK INSURANCE ACT OF 2002

The Plaintiffs seek the Chicago condominiums pursuant to section 201 of the TRIA.
With the enactment of section 201, it is now easier for victims to collect on judgments
against Iran, a state that sponsors terrorism. Section 201 is called “Satisfaction of Judgments
from Blocked Assets of Terrorists, Terrorist Organizations, and State Sponsors of
Terrorism.” Pub. L. No. 107-297, Title II, 116 Stat. 2337 (2002); 28 U.S.C.A. § 1610 note.

The TRIA was designed to “provide a new, powerful disincentive for any foreign
government to continue sponsoring terrorist attacks on Americans.” 148 Cong. Rec. $11524,
$11527 (2002) (statement of Senator Harkin), The TRIA removes barriers to the attachment
of blocked assets by severely limiting the availability of the presidential waiver to protect
blocked assets. Pub. L. No. 107-297, Title II § 201(b), 116 stat. 2337 (2002); 28 U.S.C.A.
§ 1610 note. Prior to the TRIA, legislation permitted the President to exercise a blanket
waiver to protect blocked assets. Under the new TRIA, a blanket waiver is no longer allowed
since the President is now required to make “an asset-by-asset” determination that “a waiver
is necessary in the national security interest.” Pub. L. No. 107-297, Title H § 201(b)(1), 116
Stat. 2337 (2002); 28 U.S.C.A. § 1610 note. Moreover, the TRIA contains specific
exceptions to the presidential waiver authority. Jd. at § 201(b)(2). A Conference Report on
the bill explains that the new Act “eliminates the effect of any [previous] presidential waiver
... making clear that all such judgments are enforceable” against blocked assets. 148 Cong.

Rec. H8722-06, H8728 (Nov. 13, 2002).

13



section 1610(f) of the FSIA to permit the attachment of foreign mission property used for
non-diplomatic purposes such as rental property, as well as rental proceeds)).

It appears clear that Congress’ enactment of the TRIA was designed to answer the
problem presented in Flatow. During the Senate’s consideration of Title II of the TRIA, the
Congressional Budget Office (“CBO”) prepared a report that made it clear that the intent of
the bill was to subject the blocked assets of state sponsors of terrorism to attachment and
execution, including the properties falling within the scope of the Vienna Conventions.
Terrorism Victim’s Access to Compensation Act of 2002: Congressional Budget Office Cost
Estimate, at 3 (Aug. 28, 2002). According to the Office of Foreign Missions Assets Control,
the “blocked assets of Iran are primarily properties associated with their former diplomatic
mission to the United States” and because that property has recently been used for non-
diplomatic purposes, the “exception to the waiver [in section 201(b)(2)] would weaken the
President’s ability to protect it from court judgments.” Jd. This Court finds that the
condominiums in question are blocked assets because they are not used exclusively for
diplomatic purposes.

Cc. BECAUSE PLAINTIFFS’ ELECTED TO RECEIVE PAYMENT UNDER

THE VICTIMS OF TRAFFICKING AND VIOLENCE PROTECTION ACT

OF 2000, THE WRIT OF ATTACHMENT AND MOTION FOR A

TURNOVER ORDER MAY BE MOOT.

The Plaintiffs have applied for payment pursuant to section 2002 of the VIVPA. The

Office of Foreign Assets Control has determined that each Plaintiff in this case is eligible for

payment. According to the government, however, the plaintiffs are required to relinquish all

23



properties. See United States v. Central Corp. of Illinois, No. 87 C 5072, 1987 U.S. Dist.
LEXIS 10770, at *5 (N.D. Ill. Nov. 13, 1987) (finding that the government of Iran is the
owner of the condominiums).

The United States raises two issues in its motion to quash the writs of attachment: (1)
whether the TRIA overrides any immunity from execution under the Vienna Conventions,
FSIA, or the Foreign Missions Act (“FMA”), and (2) whether the Iranian diplomatic and
consular properties in the custody of the Department of State are collectable under TRIA
section 201(a) because they are “blocked assets.”

It. LEGISLATIVE BACKGROUND

Before analyzing the issues at hand, an understanding of congressional efforts to
eliminate the ambiguity surrounding the application of foreign sovereign immunity is helpful
in putting this case in proper context. Therefore, this Court will review relevant treaties,
legislation, and circumstances before analyzing the issues before the Court.

A. VIENNA CONVENTIONS

The Vienna Convention on Diplomatic Relations (“VCDR”) was signed on June 29,
1961 by the United States. The parties to the Vienna Convention recognized that an
“international convention on diplomatic intercourse” would “contribute to the development
of friendly relations among nations, irrespective of their differing constitutional and social
systems.” Vienna Convention on Diplomatic Relations and Optional Protocol on Disputes,

Apr. 18, 1961, 23 U.S.T. 3227, T.LA.S. No. 7502. Additionally, the parties to the Vienna



officials had been declared persona non grata and were to leave the United States by
midnight of the following day. Id. 6. By diplomatic note dated April 7, 1980, the Secretary
of State informed the Embassy of Iran that on April 8, 1980, the Embassy and consulates
would be closed and sealed, except to the extent that the Department may authorize any
particular use of such premises by a protecting power. Jd. {1 7, 8. The United States is
currently leasing, or has in the past leased, all but one of the thirteen Iranian diplomatic
properties within the custody of the Department of State. Id. § 14-27
Although the condominiums in dispute have been designated blocked assets under
Executive Order 12170, this Court must look at the definition given to the term “blocked
asset” in the TRIA:
(A) any asset seized or frozen by the United States under section 5(b)
of the Trading With the Enemy Act (50 U.S.C. App. 5(b)) or under sections
202 and 203 of the International Emergency Economic Powers Act (50 U.S.C.
1701; 1702); and
(B) does not include property that—
(i) is subject to a license issued by the United States Government
for final payment, transfer, or disposition by or to a person subject to
the jurisdiction of the United States in connection with a transaction for
which the issuance of such license has been specifically required by
statute other than the International Emergency Economic Powers Act
(50 U.S.C. 1701 et seq.) or the United Nations Participation Act of
1945 (22 U.S.C. 287 et seq.); or
(ii) in the case of property subject to the Vienna Convention on
Diplomatic Relations or the Vienna Convention on Consular Relations,

or that enjoys equivalent privileges and immunities under the law of the
United States, is being used exclusively for diplomatic or consular

purposes.

20



Any objections to this Report and Recommendation must be filed with the Clerk of the Court
within ten (10) days of receipt of this notice. Failure to file objections within the specified
time waives the right to appeal the Magistrate Judge’s Report and Recommendation. See
Fed. R. Civ. P. 72(b); 28 U.S.C. 636(b)(1)(B); Lorentzen v. Anderson Pest Control, 64 F.3d
327, 329 (7th Cir. 1995); The Provident Bank v. Manor Steel Corp., 882 F.2d 258 (7th Cir.

1989).
Copies mailed to:

Michael A. Snyder

James J. Kupka

CONKLIN, MURPHY, CONKLIN & SNYDER
53 West Jackson Blvd., Suite 1150
Chicago, Illinois 60604

Attorneys for Plaintiffs

26

Thomas P. Walsh

Chief of the Civil Division

OFFICE OF THE UNITED STATES ATTORNEY
219 South Dearborn Street

Suite 500

Chicago, IL 60604

Jennifer Paisner

U.S. DEPARTMENT OF JUSTICE

Civil Division, Federal Programs Branch
20 Massachusetts Avenue, N.W.

Room 6108

Washington, D.C. 20530

Attorneys for the United States


Title II were enacted simultaneously. Furthermore, despite the government’s argument that
the property is being rented as a means of preservation, it concedes in its brief that the rental
proceeds have been designated by Congress for payment to certain individuals pursuant to
the VIVPA. Moreover, the government acknowledges that to the extent these funds are so
designated, they are not being preserved for a diplomatic purpose.

In addition, the primary rule of statutory interpretation is that words used in statutes
must be given their ordinary and plain meaning. Zeigler Coal Co. v. Director, Office of
Workers’ Comp. Programs, 326 F.3d 894, 900 (7th Cir. 2003). The dictionary defines
“exclusive” as, “[rJelating to or marked by exclusion . . . [nJot shared with others . . .
[iJndependent or single: sole... .” WEBSTER’S II NEW RIVERSIDE UNIV. DICTIONARY 450
(1994). Accordingly, the Court finds that to be excluded from the definition of blocked
assets, the property must be used solely for diplomatic purposes.

Finally, a court may look to the legislative history when interpreting the meaning of
a statute and Congress’ intent. United States v. Markgraf, 736 F.2d 1179, 1182 (7th Cir.
1984). In Flatow v. Islamic Republic of Iran, the court denied the plaintiffs attempt to attach
Iranian diplomatic and consular properties, noting that until Congress decides to enact a law
that authorizes the attachments of property used for diplomatic purposes, the district court
lacks the proper means to assist the plaintiff. 76 F. Supp. 2d 16, 27-28 (1999) (citing Bill to
Modify the Enforcement of Certain Anti-Terrorism Judgments, and for Other Purposes, S.

1796, § 1(3)(A), 106th Congress (1999) (proposed but rejected bill that would have amended

22



06, H8728 (Nov. 13, 2002) (conference report); see also 148 Cong. Rec. $11524, $11528
(Nov. 19, 2002) (remarks of Sen. Harkin) (“Title II operates to strip a terrorist state of its
immunity from execution or attachment in aid of execution by making the blocked assets of
that terrorist state . . . available for attachment and/or execution. . . .”). Moreover, by
including the phrase “seized by the United States” in section 201(d)(2)(A), it was Congress’
intent to “include within the definition of ‘blocked asset’ any asset of a terrorist party that is
held by the United States. This is intended as an explicit waiver of any principle of law
under which the United States might not be subject to service and enforcement of any judicial
order or process relating to execution of judgments, or attachments in aid of such execution,
in connection with terrorist party assets that happen to be held by the United States.” See 148
Cong. Rec. 11524, $11528-29 (Nov. 19, 2002). Furthermore, the House of Representatives
Conference Report accompanying H.R. 3210 on November 13, 2002 states:

It is the intent of the Conferees that Section 201 establish that such judgments

are to be enforced. Section 201 builds upon and extends the principles in

section 1610(f)(1) of the Foreign Sovereign Immunities Act (28 U.S.C. §

1610(£)(1)), authorizes the enforcement of judgments against any terrorist

organizations and eliminates the effect of any Presidential waiver issued prior

to the date of enactment purporting to bar or restrict enforcement of such

judgments, thereby making clear that all such judgments are enforceable
against any assets or property under any authorities referenced in Section

1610(f)(1).
H.R. Conr. Rep. No. 107-779, at 27 (2002).
It is conceivable that Iran would be entitled to immunity from execution under the

provisions of the VCDR, Apr. 18, 1961, 23 U.S.T. 3227, T.I.A.S. No. 7502; the FMA, 22

17



obtain a judgment against Iran and the MOIS.
E. AMENDMENTS TO THE AEDPA

As a result of the AEDPA, several suits were filed against Iran pursuant to the
exception in §1605(a)(7) of the FSIA. Donna M. Balducci, Note, American Taxpayers Bear
the Burden of Beating Iraq in the Courtroom, 31 Hofstra L. Rev. 819, 829-33 (2003)
(discussing the exception and listing cases against Iran). Because Iran did not actively
defend these actions, default judgments were entered. Jd. Plaintiffs from these earlier suits
sought to satisfy the judgments against certain properties and other assets owned by Iran
which were within the United States. The Clinton administration opposed these efforts.
Flatow v. Islamic Republic of Iran, 76 F. Supp. 2d 16, 19 (D.D.C. 1999). In Flatow, an
attempt was made to attach the Iranian embassy located in Washington D.C., as well as the
accrued proceeds from the rental of those properties after diplomatic relations were broken.
Id. The District Court for the District of Columbia quashed the writs of attachment regarding
the real property at issue because the property did not fall within the definition of commercial
activity under the FSIA, and thus remained immune from attachment. Jd. at 23.

In 1998, Congress again amended the FSIA to provide that any property of a terrorist
state frozen pursuant to Trading with the Enemy Act (“TWEA”) or the International
Emergency Economic Powers Act (“IEEPA”) and any diplomatic property of such a state
could be subject to execution or attachment in aid of a judgment against the state. General

Govt. Appropriations Act of 1999, Pub. L. No. 105-277, § 117, 112 Stat. 2681 (1998)



and efficient operation in the United States of foreign missions and public international
organizations and official missions to such organizations . . . and to require their observance
of corresponding obligations in accordance with intemational law.” 22 U.S.C. § 4301.

The FMA stipulates that “[i]f a foreign mission has ceased conducting diplomatic,
consular, and other governmental activities in the United States and has not designated a
protecting power or other agent approved by the Secretary to be responsible for the property
of that foreign mission, the Secretary— (1) until the designation of a protecting power or other
agent approved by the Secretary, may protect and preserve any property of that foreign
mission. ...” 22 U.S.C. § 4305(c)(1).

The FMA also prohibits the attachment of or execution upon such mission property
being held by the Department of State. 22 U.S.C. § 4308(f). Specifically, it provides that
“[a]ssets of or under the control of the Office of Foreign Missions, wherever situated, which
are used by or held for the use of a foreign mission shall not be subject to attachment,
execution, injunction, or similar process, whether intermediate or final.” Id.

C. FOREIGN SOVEREIGN IMMUNITIES ACT

In 1976 Congress enacted the Foreign Sovereign Immunities Act (“FSIA”). 28 U.S.C.
§§ 1602-1611. The FSIA states the general principle that “a foreign state shall be immune
from the jurisdiction of the courts of the United States and of the States.” 28 U.S.C. § 1604.
In order to obtain jurisdiction over a foreign state defendant in a United States court, a

plaintiff could bring suit only under one of several enumerated exceptions listed in the FSIA.



Convention had in mind, “the purposes and principles of the Charter of the United Nations
concerning the sovereign equality of States, the maintenance of international peace and
security, and the promotion of friendly relations among nations. . . .” Id.

The Vienna Convention requires a host country to take steps to protect the property
of diplomatic missions. Jd. at art. 22. Under Article 45(a) of the VCDR, if diplomatic
relations are broken or if a mission is permanently or temporarily recalled, “the receiving
State must, even in the case of armed conflict, respect and protect the premises of the
mission, together with its property and archives. ...” Jd. This obligation flows from Article
25 of the VCDR, which provides that “[t]he receiving State shall accord full facilities for the
performance of the functions of the mission.” Id.; see also Liberian Eastern Timber Corp.
v. Government of the Republic of Liberia, 659 F. Supp. 606, 608 (D.D.C. 1987). Likewise,
Article 27 of the Vienna Convention on Consular Relations (“WCCR”) contains the same
obligation with respect to consular premises and property. April 24, 1963, 21 U.S.T. 77,
T.I.A.S. No. 6820. The Chicago properties fall within the protection of the VCDR and
VCCR because the United States is obligated to respect and protect the premises of a foreign
mission if the mission is temporarily or permanently recalled. Jd.

B. FOREIGN MISSIONS ACT

The Office of Foreign Missions (“OFM”) was created by the 1982 Foreign Missions

Act (“FMA”), 22 U.S.C. § 4301 et seq. The policy behind the FMA was “to support the

secure and efficient operation of the United States missions abroad, to facilitate the secure


U.S.C. § 4301 et seq.; or the FSIA, 28 U.S.C. § 1602 et seg., were the Plaintiffs not
proceeding under the TRIA. See generally Hill, 2003 U.S. Dist. LEXIS 3725, at *9; Liberian
Eastern Timber Corp. v. Government of Republic of Liberia, 659 F. Supp. 606, 608 (D.D.C.
1987); But see Birch Shipping Corp. v. Embassy of the United Republic of Tanzania, 507 F.
Supp. 311, 313 (D.D.C. 1980) (holding that “mixed accounts” used for both diplomatic and
commercial purposes are not immune from execution under the FSIA). The doctrine that
laws and treaties are equal in authority and the later in time prevails in case of conflict has
been applied in several cases giving effect to a later act of Congress. See e.g. Chae Chan
Ping v. United States, 130 U.S. 581, 600 (1889); Diggs v. Shultz, 470 F.2d 461, 466-67 (D.C.
Cir. 1972) (upholding statute permitting imports contrary to United Nations Security Council
embargo on Rhodesian products); see also RESTATEMENT (THIRD) FOREIGN RELATIONS LAW
OF THE UNITED STATES § 115 (1987). Therefore, because section 201 of the TRIA is later
in time, it must be given effect.
B. THE REAL PROPERTIES ARE “BLOCKED ASSETS” UNDER THE TRIA.
In order for the Plaintiffs to be entitled to the execution or attachment of the properties
they must first satisfy two requirements set forth in section 201(a) of the TRIA: (1) the
judgment for compensatory damages that Plaintiffs seek to enforce was obtained against a
state sponsor of terrorism for actions arising out of “an act of torture, extrajudicial killing,
aircraft sabotage, hostage taking or the material support or resources . . . for such an act if

such act or provision of material support is engaged in by an official, employee, or agent of

18



In yet another 1996 amendment, the Flatow Amendment, Congress permitted awards
of both compensatory and punitive damages for personal injury or death caused by an
“official, employee, or agent of a foreign state designated as a state sponsor of terrorism” in
actions under 28 U.S.C. 1605(a)(7). Pub. L. No, 104-208, Div. A, Title I, § 101(c), 110 Stat.
3009-172; 28 U.S.C.A. § 1605 note; Roeder, 195 F. Supp. 2d at 150 n.2 (stating that although
the Flatow Amendment was codified only in a note rather than as a freestanding statutory
section, “it has been interpreted as being an ‘independent pronouncement of law’”). The
AEDPA further allows the commercial property ofa foreign state located in the United States
to be used to satisfy a judgment against that state, regardless of whether the property was
involved in the act on which the claim was based. 28 U.S.C. §§ 1610 (a)(7) and 1610 (b)(2).

The AEDPA negates sovereign immunity for foreign nations for actions arising out
of “an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision
of material support or resources . . . for such an act if such act or provision of material
support is engaged in by an official, employee, or agent of such foreign state while acting
within the scope of his or her office, employment or agency... .” 28 U.S.C. § 1605(a)(7).
Furthermore, the AEDPA provides that a court can hear a claim if the foreign nation sought
to be charged was designated a state sponsor of terrorism by the United States Department
of State at the time the act occurred. Jd. Iran was designated a state sponsor of terrorism on
January 23, 1984, by then Secretary of State George Schultz, 49 Fed. Reg. 2836-02, and has

been designated as such ever since. Thus, the AEDPA opened the doors for the Plaintiffs to


rights and “claims to punitive damages awarded” in their suit against Iran. Pub. L. 106-386,
§ 2002(a)(2)(C), 114 Stat 1541-43, (2000). The government further indicated that the
Secretary of the Treasury was ready to make payments to the Plaintiffs per their request.

In order to withdraw their application before pro rata section 2002 payments are
distributed, Plaintiffs were required to do so in writing by July 7, 2003. It is this Court’s
understanding that the Plaintiffs did not notify in writing their withdrawal of a Section 2002
application as required. Instead, the Plaintiffs filed a request for a temporary restraining
order seeking to restrain John W. Snow, in his capacity as Secretary of the Treasury and R.
Richard Newcomb, in his capacity as Director of the Office of Foreign Assets Control, from
taking any action on and after July 7, 2003 to compel the Plaintiffs to elect between the
remedies available to them by law to either: (1) assign their judgments in exchange for the
payments to which they are lawfully entitled, under the VIVPA, and forego their judicial
attachment remedies; or (2) to proceed with their attachment of Iranian assets in aide of
execution on their judgments in this Court, pursuant to the TRIA.

On July 15, 2003, the United States District Court for the District of Columbia denied
Plaintiffs’ motion in Edwena R. Hegna, et al. v. John W. Snow and R. Richard Newcomb,
Civil Action No. 03-1479 (HHK). Therefore, the Plaintiffs in this case may be precluded
from attaching the condominiums this Court believes they are entitled to depending upon the

final outcome of this case.

24



Ming Ondgs Form (06/97)

United States District Court, Northern District of Tlinois

Name iene jae Suzanne B. Conlon “ne tee a Sedge Morton Denlow

CASE NUMBER 02 C 8643 DATE 8/11/2003

CASE Edwena A. Hegna, et al. vs. Islamic Republic of Iran, et al.

TITLE

[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
qd) o Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion due
@) a Answer brief to motion due__. Reply to answer brief due__.
(4) a Ruling/Hearingon__—ssetfor___—aat
(5) ia) Status hearing{held/continued to] [set for/re-set for]on__—setfor___—at
(6) Oo Pretrial conference[held/continued to] [set for/re-set for]}on___setfor__—at__—.
(e) Oo Trial[set for/re-set for]on_ at
(8) Qo [Bench/Jury trial] [Hearing] held/continuedto__—_at
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) O Local Rule 41.1 OO FRCP41(a)(1) 0 FRCP41(a)(2),

ao =f [Other docket entry] Enter Report and Recommendation. It is recommended that the Court deny

the United States’ motion to quash the writs of attachment [19-1] and grant the Plaintiffs motion for a
turnover order [18-1]. It is further recommended that the turnover be stayed pending final resolution of
the District of Columbia case. All matters relating to the referral of this action having been resolved, the
case is returned to the assigned judge.

di) wv

No notices required, advised in open court.

{For further detail see order attached to the original minute order.}

No notices required.

number of notices

no 3.2 200

~ | Notices mailed by judge’s staff.

Notified counsel by telephone.

Docketing to mail notices.
Mail AO 450 form.

oa)

NOD LIINLSIO
as Wu319

oa | Copy to judge/magistrate judge.

11/2003

ret Rd LEMP CO ee
DNILZHIOC HOI OPUS — ox

Datertime received in L-UF
central Clerk's Office

courtroom
DK dcputy's
initials



Statement by President William J. Clinton upon signing H.R. 4328, 34 WEEKLY COMP.
PRES. DOC. 2108 (Nov. 2, 1998), reprinted in 1998 U.S.C.C.A.N. 576.

F._ VICTIMS OF TRAFFICKING AND VIOLENCE PROTECTION ACT OF 2000

Congress enacted the Victims of Trafficking and Violence Protection Act of 2000
(“VIVPA”), further amending the FSIA. Pub. L. No. 106-386, § 2002, 114 Stat. 1464
(2000). Section 2002 of the VTVPA directs the Secretary of the Treasury to pay portions of
previously designated judgments against terrorist states in certain amounts. Id. at § 2002(a).
In addition, section 2002 again provided for a presidential waiver, stating, “[t]he President
may waive any provision of paragraph (1) in the interest of national security.” Id. at §
2002(f)(3) (codified at 28 U.S.C. §1610(f)(3)).

Immediately after signing the legislation into law on October 28, 2000, President
Clinton exercised the substitute waiver authority granted in section 2002 and waived
“subsection (f)(1) of section 1610 of title 28, United State Code, in the interest of national
security.” Presidential Determination No. 2001-03 (Oct. 28, 2000); 65 Fed. Reg. 66483
available at2000 WL 1651614; see also DAVID M. ACKERMAN, CONGRESSIONAL RESEARCH
SERVICE, SUITS AGAINST TERRORIST STATES, Congressional Research Service, at 15 (2002).
Thus, except as otherwise provided in section 2002 regarding specific victims and previous
judgments, the inability to attach diplomatic property and blocked assets of terrorist states
to satisfy judgments was still in place.

Because the VIVPA only provided for the payment of certain judgments and only for

11



(codified at 28 U.S.C. § 1610 (f(1)). The amendment also gave the President authority to
“waive the requirements of this section in the interest of national security.” Jd. On October
21, 1998, the day this legislation was signed into law, President Clinton exercised his waiver
authority in a blanket manner? The President subsequently explained his reasons in the
signing statement for the bill as follows:

I am concerned about section 117 of the Treasury/General
Government appropriations section of the act, which amends the
Foreign Sovereign Immunities Act. If this section were to result
in attachment and execution against foreign embassy properties,
it would encroach on my authority under the Constitution to
“receive Ambassadors and other public ministers.” Moreover,
ifapplied to foreign diplomatic or consular property, section 117
would place the United States in breach of its international
treaty obligations. It would put at risk the protection we enjoy
at every embassy and consulate throughout the world by eroding
the principle that diplomatic property must be protected
regardless of bilateral relations. Absent my authority to waive
section 117's attachment provision, it would also effectively
eliminate the use of blocked assets of terrorist states in the
national security interests of the United States, including
denying an important source of leverage. In addition, section
117 could seriously affect our ability to enter into global claims
settlements that are fair to all U.S. claimants, and could result in
U.S. taxpayer liability in the event of a contrary claims tribunal
judgment. To the extent possible, I shall construe section 117
in a manner consistent with my constitutional authority and with
USS. international legal obligations, and for the above reasons,
I have exercised the waiver authority in the national security
interest of the United States.

? Presidential Determination 99-1 (Oct. 21, 1998), reprinted in 34 WEEKLY COMP.
PRES, DOC. 2088 (Oct. 26, 1998). See also DAVID M. ACKERMAN, CONGRESSIONAL
RESEARCH SERVICE, SUITS AGAINST TERRORIST STATES, Congressional Research Service
(2002), available at http://www. fpc.state.gov/documents/organization/8045.pdf (last
visited Aug. 6, 2003).

10



Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439 (1989). Prior to
1996, victims of state-sponsored terrorism had no recourse in the courts of the United States
for redress of acts committed by terrorists; such claims were barred by the FSIA and did not
fall under one of its exceptions. 28 U.S.C. §§ 1605.
D. FEDERAL ANTITERRORISM AND EFFECTIVE DEATH PENALTY ACT
The 1996 Federal Antiterrorism and Effective Death Penalty Act (‘AEDPA”) created
a specific exception to the FSLA. The AEDPA added a separate exception for certain state-
sponsored terrorist acts. Pub. L. No. 104-132, § 221(a)(1), 110 Stat. 1214 (1996) (codified
as 28 U.S.C. § 1605(a)(7)). To fall within the purview of this section, plaintiffs are required
to establish all of the following: (1) personal injury or death caused by an act of torture,
extrajudicial killing, aircraft sabotage, or hostage taking; (2) the act was either perpetrated
by a foreign state directly or by a non-state actor which receives material support or resources
from the foreign state defendant; (3) the act or provision of material support or resources is
engaged in by an agent, official, or employee of the foreign state while acting within the
scope of his or her office, agency, or employment; (4) the foreign state has been designated
as a state sponsor of terrorism; (5) if the incident occurred within the foreign state
defendant’s territory, that the plaintiff offered the defendants a reasonable opportunity to
arbitrate the matter; and (6) either the plaintiff or the victim was a United States national at
the time of the incident. 28 U.S.C. § 1605(a)(7); Roeder v. Islamic Republic of Iran, 195 F.

Supp. 2d 140, 149 (D.D.C. 2002), aff'd by 333 F.3d 228 (D.C. Cir. 2003).



Terrorism Risk Insurance Act of 2002, Pub. L. No. 107-297, Title II § 201(d)(2), 116 Stat.
2339-40 (2002); 28 U.S.C.A. § 1610 note.

Whether the condominiums may be used to satisfy the Hegnas’ judgment turns on
whether they are used exclusively for diplomatic purposes. The United States argues that an
appropriate method of “protect[ing] the property under Article 45 of the [VCDR] (and
Article 27 of the [VCCR]) is to have the property occupied and generating income needed
for maintenance and repair.” Motion to Quash Plaintiffs Writs of Attachment, at 8-9. Thus,
the argument follows that the property falls under the exclusion laid out in § 201(d)(2)(B)(ii)
because protection of the property is exclusively a diplomatic purpose.

Congress’ intent may be discovered by looking at the language, structure, subject
matter, context, and history of a statute. Boim v. Quranic Literacy Inst. and Holy Land
Found. for Relief & Dev., 291 F.3d 1000, 1009 (7th Cir. 2002). The court begins with the
language of the statute itself. U.S. v. Wagner, 29 F.3d 264, 266 (7th Cir. 1994). Although
the presidential waiver section is not at issue in this particular instance, this Court will
consider the language of the entire statute. As noted in section IV.A above, the presidential
waiver does not apply to property subject to the VCDR or the VCCR that “has been used by
the United States for any non-diplomatic purpose (including use as a rental property), or the
proceeds of such use. .. .” Terrorism Risk Insurance Act, Pub. L. No. 107-297, Title II § 201
(b)(2)(A), 16 Stat. 2337 (2002); 28 U.S.C. A. § 1610 note.

First, the Court finds it persuasive that the statute describes use as a rental property

as anon-diplomatic purpose. Second, the presidential waiver section and the remainder of

21



Il. BACKGROUND AND PROCEDURAL HISTORY

On December 4, 1984, members of Hezbollah, a terrorist organization sponsored by
the Islamic Republic of Iran, hijacked a Kuwaiti Airlines aircraft bound for Pakistan while
in international airspace over the Gulf of Oman. One of the passengers on the plane was
Charles Hegna, an American citizen employed by the United States Agency for International
Development. The terrorists ultimately forced the pilot to land at Iran’s Tehran Airport.
Shortly after the aircraft landed, the terrorists fatally shot Mr. Hegna and pushed him out the
door onto the airport tarmac.

On January 22, 2001, the United States District Court for the District of Columbia
entered a default judgment against Defendants in the amount of $42,000,000 in
compensatory damages and $333,000,000 in punitive damages. See Hegna v. Iran, Civil
Action No. 1:00 CV 00716 (D.D.C. 2001). The Plaintiffs’ attempts to collect the judgment
have been unsuccessful.

On January 21, 2003, Plaintiffs obtained writs of attachment from this Court attaching
two parcels of real property owned by Iran, located in Chicago, Illinois. The two properties
are commonly known as Units 3511 and 3512 at 155 N. Harbor Drive, Chicago, Illinois
60601 (“condominiums”). The condominiums were leased by the State Department’s Office
of Foreign Missions (“OFM”) to private citizens. At oral argument, the government stated
that the condominiums are currently vacant. The United States seeks to quash the writs of

attachment against the condominiums because they are Iranian diplomatic and consular


The TRIA was overwhelmingly enacted on November 19, 2002° and signed into law
by President George W. Bush on November 26, 2002. The White House invited Plaintiff
Edwena Hegna, Charles Hegna’s widow, to be at President Bush’s side for the signing
ceremony.®

The TRIA was specifically intended “to deal comprehensively with the problem of
enforcement of judgments rendered on behalf of victims of terrorism in any court of
competent jurisdiction by enabling them to satisfy such judgments through the attachment
of blocked assets of terrorist parties.” 148 Cong. Rec. H8722-06, H8728 (Nov. 13, 2002).
The purpose of section 201 was “to provide justice to terrorist victims, to hold terrorist states
accountable for their crimes and to deter them from perpetrating acts of terrorism against
American citizens in the future.” Hill y. Republic of Iraq, No. 1:99 CV 03346, 2003 U.S.
Dist. LEXIS 3725, at *8 (D.D.C. March 11, 2003) (citing 148 Cong. Rec. $11527 (Nov. 19,
2002) (remarks of Senator Harkin); 148 Cong. Rec. $5510 (June 13, 2002) (remarks of
Senator Allen); 148 Cong. Rec. H6134 (Sept. 10, 2002) (remarks of Congressman Fosella

and Congressman Cannon)).

5 On November 19, 2002 the TRIA passed based on vote counts of 86 YEAs, 11
NAYs, and 3 Not Voting. United States Senate Roll Call Votes 107th Congress - 2nd
Session available at http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_
cfin.cfm?congress=107&session=2&vote=00252 (last visited Aug. 5, 2003).

® Joel Nowbray, Justice, Finally: Congress Helps American Victims of Terror Get
Past the State Department, National Review Online, Nov. 26, 2002, available at
http://www.nationalreview.com/mowbray/mowbray 1 12602.asp (last visited Aug. 6,
2003).

14



(B) The proceeds of any sale or transfer for value to a third party of any asset
subject to the Vienna Convention on Diplomatic Relations or the Vienna Convention
on Consular Relations.

Pub. L. No. 107-297, Title II, § 201, 16 Stat. 2337; 28 U.S.C.A. § 1610 note.

The Plaintiffs also contend that the more recently enacted TRIA abrogates the scope
of the Vienna Convention, the FSIA, and the FMA. Contrary to the United States’ assertion
that the TRIA does not apply, by its plain terms, the TRIA overrides any immunity from
execution that blocked Iranian property might otherwise have under these laws by beginning,
“Notwithstanding any other provision of law...” Pub. L. No. 107-297, Title II, § 201(a),
16 Stat. 2337; 28 U.S.C.A. § 1610 note; Hill, 2003 U.S. Dist. LEXIS 3725, at *10
(recognizing that the phraseology is unambiguous and means that the Act “effectively
supersedes all previous laws”).

Furthermore, the TRIA overrides any immunity from execution that blocked Iranian
property might otherwise enjoy under the Vienna Convention, the FSIA, or the FMA based
upon TRIA’s legislative history. See Roeder v. Islamic Republic of Iran, 195 F. Supp. 2d
140, 169-70 (D.D.C. 2002) (noting that if one possible reading of an ambiguous statute and
a previously-enacted international agreement conflict a court must inquire into Congress’
intent with respect to the abrogation of the international agreement prior to giving force to
the statute); Weinberger v. Rossi, 456 U.S. 25, 32 (1982). Indeed, any contrary construction
of the TRIA would frustrate the statutory objective of ensuring that judgments rendered

against terrorist states based upon terrorist acts “are to be enforced.” 148 Cong. Rec. H8722-

16


Jurisdiction was predicated upon the state-sponsored terrorism exception of the Foreign
Sovereign Immunities Act (“FSIA”). 28 U.S.C.A. § 1605(a)(7).

The case is currently before the Court on Plaintiffs’ writs of attachment upon two
parcels of Chicago real estate owned by Iran and their motion for a turnover order of these
properties. The United States has intervened to quash the writs of attachment.' The United
States contends that the specific properties identified by the Plaintiffs’ writs are Iranian
consular properties, and are not subject to attachment. Additionally, the United States argues
that these properties are used exclusively for diplomatic purposes and are not considered
“blocked assets” under section 201 of the Terrorism Risk Insurance Act (“TRIA”), Pub. L.
No. 107-297, Title II, § 201(d), 116 Stat. 2337 (2002); 28 U.S.C.A. § 1610 note, and are
therefore not subject to attachment. Lastly, the United States claims that the real properties
are exempt from writs of attachment under pre-TRIA authority.

For the reasons stated herein, the Court finds that these properties are not immune
from attachment under the TRIA, and recommends that the United States’ motion to quash
the writs of attachment be denied and the Plaintiffs’ motion for a turnover order be granted.
The Court further recommends that the turnover be stayed pending final resolution ofa

companion case pending in the District of Columbia.

' The United States intervened in this suit pursuant to 28 U.S.C.A. § 517 (1991),
which provides that the United States may appear in any court in 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.”

2



V. CONCLUSION
For the reasons stated herein, it is recommended that the Court DENY the United
States’ motion to quash the writs of attachment and GRANT the Plaintiffs’ motion for
a turnover order. It is further recommended that the turnover be stayed pending final

resolution of the District of Columbia case.

Respectfully Submitted,

Marken Mantes

MORTON DENLOW
United States Magistrate Judge

Date: August 11, 2003

25



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

and THE IRANIAN MINISTRY OF
INFORMATION AND SECURITY,

EASTERN DIVISION
EDWENA A. HEGNA, individually —_)
and as executor of the Estate of ) DOCKETED
Charles Hegna deceased, CRAIG )
HEGNA, STEVEN HEGNA, LYNN) AUG 1 2 2003
HEGNA, and PAUL HEGNA, ) :
) Case No. 02 C 8643
Plaintiffs, )
y Magistrate Judge Morton Denlow
v. )
)
ISLAMIC REPUBLIC OF IRAN )
)
)
)
)

Defendants.

TO: THE HONORABLE SUZANNE B. CONLON
UNITED STATES DISTRICT JUDGE

REPORT AND RECOMMENDATION
I. INTRODUCTION
This matter concerns the efforts of Edwena A. Hegna, individually and as executor
of the estate of Charles Hegna, Craig Hegna, Steven Hegna, Lynn Marie Hegna Moore, and
Paul Hegna (“Plaintiffs”) to satisfy the $375,000,000 default judgment they obtained over
two years ago against the Islamic Republic of Iran (“Iran”) and the Iranian Ministry of

Information and Security (“MOIS”) (collectively “Defendants”) for their sponsorship of the

S

terrorist group Hezbollah, which was responsible for the murder of Charles Hegna.



certain amounts, the Act provided a political compromise for the deadlock that had
developed between the legislative and executive branches. W. Michael Reisman & Monica
Hakimi, 2001 Hugo Black Lecture: Illusion and Reality in the Compensation of Victims of
International Terrorism, 54 Ala. L. Rev. 561, 575 (2003).? With respect to the cases
provided for in the VTVPA, the Treasury was to make payments from: (1) the rental
proceeds accrued on Iran’s diplomatic and consular property; and (2) “funds not otherwise
made available in an amount not to exceed the total of the amount in the Iran Foreign
Military Sales Program account.” Pub. L. No. 106-386, § 2002(b)(2)(B), 114 Stat. 1543
(2000). Congress was made aware that when it considered the use of these rental proceeds
the conversion of the rents to satisfy judgments were a violation of the VCCR and the

VCDR.‘

3 The payment scheme was originally part of the Justice for Victims of Terrorism Act, but
was enacted as part of the VTVPA. W. Michael Reisman & Monica Hakimi, 2001 Hugo
Black Lecture: I//usion and Reality in the Compensation of Victims of International
Terrorism, 54 Ala. L. Rev 561, 576 n.79 (2003).

4 The Congressional Budget Office (“CBO”) remarked when reviewing the House version
of what became the VTVPA as follows:

The United States has a custodial responsibility under international agreements to

maintain diplomatic assets belonging to Iran; therefore, the federal government

would likely be liable to Iran for the loss of this $5 million from rental proceeds.

If those amounts are seized, CBO anticipates the United States would have to

promptly reimburse Iran for their value. H.R. Rep. No. 106-733, at 9 July 13,

2000).

12



IV. LEGAL ANALYSIS

A. THE TRIA OVERRIDES ANY IMMUNITY FROM EXECUTION UNDER
THE VIENNA CONVENTION, FSIA, OR THE FMA.

The government contends that the Vienna Convention, the FSIA, and the FMA
operate as separate bars to these attachments. The Plaintiffs, on the other hand, assert that
they are entitled to enforce their judgments against the condominiums under section 201 of
the TRIA, which provides in pertinent part:

(a) INGENERAL.—Notwithstanding any other provision of law, and except
as provided in subsection (b), 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 section 1605(a)(7) of title 28,
Unites States Code, the blocked assets of that terrorist party (including the
blocked assets of any agency or instrumentality of that terrorist party) shall be
subject to execution or attachment in aid of execution in order to satisfy such
judgment to the extent of any compensatory damages for which such terrorist
party has been adjudged liable.

(b) PRESIDENTIAL WAIVER.—

(1) IN GENERAL.—Subject to paragraph (2), upon determining on an asset-
by-asset basis that a waiver is necessary in the national security interest, the
President may waive the requirements of subsection (a) in connection with
(and prior to the enforcement of) any judicial order directing attachment in aid
of execution or execution against any property subject to the Vienna
Convention on Diplomatic Relations or the Vienna Convention on Consular
Relations.

(2) EXCEPTION.—A waiver under this subsection shall not apply to—
(A) property subject to the Vienna Convention on Diplomatic Relations or the
Vienna Convention on Consular Relations that has been used by the United States for

any non-diplomatic purpose (including use as a rental property), or the proceeds of
such use; or

15