Opinion ID: 152931
Heading Depth: 1
Heading Rank: 4

Heading: Sudan Accountability and Divestment Act of 2007

Text: The amendments to the ICA with which we are principally concerned in this appeal came in 2007 in response to the crisis in Darfur, Sudan. That year, Congress imposed economic sanctions on two Sudanese government officials and thirty-one Sudanese companies as a result of their involvement with the genocide in Darfur. S.Rep. No. 110-213, at 2, 2007 U.S.C.C.A.N. 817, 818 (2007). Those sanctions barred the subject companies from doing business within the United States financial system or with United States companies, and prohibited United States citizens from doing business with the Sudanese companies. Id. In addition to the sanctions imposed by the federal government, several states enacted measures restricting their agencies' economic transactions with firms that do business with, or in, Sudan. Id. They were joined in their efforts by many colleges and universities, large cities, non-profit organizations, and numerous pension and mutual funds. Id. at 2-3, 2007 U.S.C.C.A.N. at 819. To facilitate the efforts of state and local governments and private asset fund managers to divest from companies involved in four specific business sectors in Sudan, Congress enacted the SADA in 2007. Id. at 1, 4. Congress sought to allow such divestment to reduce the financial or reputational risk associated with investments in a country subject to international sanctions. Id. at 1-2, 2007 U.S.C.C.A.N. at 817-18; see also id. at 6-7. With respect to private divestment, § 4 of the SADA, entitled Safe Harbor for Changes of Investment Policies by Asset Managers, amended § 13 of the ICA by adding a new subsection (c). Pub.L. No. 110-174, § 4(a), 121 Stat. 2519-20(codified as amended at 15 U.S.C. § 80a-13(c)). Subsection (c) expressly barred any kind of civil, criminal, or administrative action against an investment company to challenge the company's divestment from the securities of companies conducting the affected business operations in Sudan. Id. It stated: (c) Limitation on actions (1) In general Notwithstanding any other provision of Federal or State law, no person may bring any civil, criminal, or administrative action against any registered investment company, or any employee, officer, director, or investment adviser thereof, based solely upon the investment company divesting from, or avoiding investing in, securities issued by persons that the investment company determines, using credible information that is available to the public, conduct or have direct investments in business operations in Sudan described in section 3(d) of the Sudan Accountability and Divestment Act of 2007. (2) Applicability (A) Actions for breaches of fiduciary duties Paragraph (1) does not prevent a person from bringing an action based on a breach of a fiduciary duty owed to that person with respect to a divestment or non-investment decision, other than as described in paragraph (1). (B) Disclosures Paragraph (1) shall not apply to a registered investment company, or any employee, officer, director, or investment adviser thereof, unless the investment company makes disclosures in accordance with regulations prescribed by the Commission. (3) Person defined For purposes of this subsection the term person includes the Federal Government and any State or political subdivision of a State. Id. (emphasis added). The report from the Senate Committee on Banking, Housing, and Urban Affairs explained that the purpose of § 13(c) was to provide[ ] a `safe harbor' for those divestment decisions made in accordance with the[SADA]. S.Rep. No. 110-213, at 7, 2007 U.S.C.C.A.N. at 823. In July 2010, months after this appeal was argued and more than two years after the investments that led to the filing of the complaint, Congress enacted the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010(Iran Act), Pub.L. No. 111-195, 124 Stat. 1312 (2010). As relevant to this appeal, the Iran Act amended ICA § 13(c)(1) to add a safe harbor for investment companies divesting from certain investments in Iran, and rewrote § 13(c)(2)(A) to say: Nothing in [§ 13(c)(1)] shall be construed to create, imply, diminish, change, or affect in any way whether or not a private right of action exists under [§ 13(a)] or any other provision of [the ICA]. Id. §§ 203(a), 205(b)(1), 124 Stat. at 1343, 1345. Congress specified that the amendment to § 13(c)(2)(A) shall apply as if included in the [SADA]. Id. § 205(b)(2), 124 Stat. at 1345. The Conference Report for the Iran Act stated that this amendment was designed to clarify that Congress did not intend, in the [SADA], to imply the creation of a new private right of action under the [ICA]. H.R.Rep. No. 111-512, at 67, 2010 U.S.C.C.A.N. 682, 703 (2010).