Levin

Supreme Court Urged To Free Iranian Cash Held By JPMorgan

By Kevin Penton
(Law360)

The U.S. Supreme Court has been urged to review a case brought against JPMorgan Chase by a former CNN journalist held hostage in Lebanon during the 1980s so it can correct the Second Circuit’s alleged error in affirming a decision not to order the release of $3.18 million in funds tied to Iran.

The high court should clarify that the Second Circuit erred by affirming the Southern District of New York’s determination that money in a frozen account held by JPMorgan Chase Bank NA should not be transferred to Jeremy Levin to partly satisfy a $28.8 million judgment against Iran that the former CNN Beirut bureau chief secured in 2008, according to the Tuesday petition for certiorari.

While the money in the account was flagged because of its ties to Bank Saderat Iran — a bank based in Tehran, Iran — JP Morgan argued that it cannot release the funds to Levin and his wife, Lucille Levin, because the entity that actually transferred the money was Lloyds Bank PLC, a correspondent bank for Saderat, according to the Second Circuit’s October opinion.

The Supreme Court should close the loophole created by the Second Circuit in its decision, which the Levins assert allows terrorists to effectively funnel and launder money through U.S. banks as long as the entity that deals with a U.S. bank is not considered a terrorist.

“This court should grant certiorari to clarify the rules of ownership of property where the means of transmittal of blocked funds of a sanctioned party and originator of funds is by [electronic funds transfer], under [the Terrorism Risk Insurance Act], the [Foreign Sovereign Immunities Act], and federal common law,” the petition reads.

Jeremy Levin was kidnapped in 1984 by individuals with alleged ties to Iran, according to court documents. He escaped from captivity approximately one year later, according to the documents.

“New York banks want to hold onto funds no matter where they come from or where they are going,” said Suzelle Smith, an attorney representing the Levins, in a statement. “This is the reason JPMorgan is fighting to deny the Levins’ access to the blocked assets, so the monies stay in the bank. It doesn’t matter to the banks that this is money laundering by terrorists.”

Counsel for JPMorgan could not be reached for comment on Thursday.

The Levins are represented by Suzelle M. Smith and Don Howarth of Howarth & Smith.

JPMorgan was represented in the Second Circuit by Steven B. Feigenbaum of Katsky Korins LLP.

The case is Levin et al. v. JPMorgan Chase Bank NA, case number unavailable, before the U.S. Supreme Court.

Family Blasts Gov't, Creditors In Iran-Owned Tower Spat

By Natalie Rodriguez
(Law360, New York)

A family seeking to intervene in a suit over assets from the sale of Iran's interest in a Manhattan tower blasted the U.S. government and existing judgment creditors on Friday, alleging they wrongfully tried to get around forfeiture case rules, and asked the court to set a deadline for any further opposition.

In a response supporting their motion to intervene, Jeremy Levin, who was kidnapped in 1984 by terrorists allegedly funded by Iran, and Lucille Levin urged U.S. District Judge Katherine B. Forrest to allow them an opportunity to take a piece of forfeited funds from the sale of 650 Fifth Ave. The family blasted creditors that have already entered into a settlement for the funds and the federal government over allegedly shirking rules regarding forfeiture cases.

“[T]hey seek to avoid those rules and procedures by a private agreement, which eliminates the participation of other victims of Iranian terrorism with identical claims, will not give notice to other victims, and will not allow all claimants to petition for a pro rata share of the forfeiture fund,” the Levins said in a motion.

The family holds a $28.8 million judgment against Iran from a 2009 Washington, D.C., case.

Further, the Levins rebuffed the settling creditors’ arguments that the court does not have jurisdiction to allow the Levins in due to an appeal. The family, however said they would join the appeal and that they do not seek to challenge the terms of the order being appealed.

Separately, the Levins also asked the judge to order any further opposition to be filed within five days. “We do not know of any other parties that will file a response, but in order to bring this to closure, we ask that the court issue a scheduling order,” the letter said.

In February, U.S. Department of Justice attorneys argued that the Levin’s motion to intervene should be denied for untimeliness, the potential prejudice to current plaintiffs and failure to show a legally protectable interest.

The government also blasted the Levins’ argument that it had failed to properly notify them that they were potential claimants to the suit.

It argued under the Levins’ interpretation, the government would have had to assume the outcome of a Terrorism Risk Insurance Act litigation question that did not exist when the government filed its action in the 650 Fifth Ave. case. Further, it noted that the published notice allowed vigilant parties with an interest to intervene and that more than a dozen judgment creditor claimants were able to do so.

Several others with judgments against Iran have been attempting to carve out a place in the case. In February, the judge blocked Amir Reza Oveissi, whose grandfather was an Iranian general killed during the 1979 Iranian revolution, from consolidating his Washington, DC., case — which has a $307.5 million claim against Iran — with the New York case.

Judge Forrest contended that the consolidation would be unfair to the current plaintiff-claimants who have a settlement agreement to distribute funds from the property’s sale on a pro rata basis.

The Levins are represented by Suzelle M. Smith and Don Howarth of Howarth & Smith.

The U.S. Government is represented by United States Attorney for the Southern District of New York Preet Bharara and Assistant United States Attorneys Michael D. Lockard, Martin S. Bell and Carolina A. Fornos.

The case is In re: 650 Fifth Avenue and Related Properties, case number 1:08-cv-10934-KBF, in the U.S. District Court for the Southern District of New York.

Justice Delayed: Terrorism Victims Fight For Redress

By Natalie Rodriguez
(Law360)

jerusalem-bombing-w-caption2.jpg

Gregg Salzman still feels the pain from where the shrapnel sliced into his face.

Nineteen years ago, the New Jersey chiropractor was walking through a Jerusalem mall when bombs packed with nails, screws, glass and chemicals detonated. The suicide bombings by Hamas militants left him with permanent nerve damage, a perforated eardrum and burns across his body.

Gregg Salzman is still trying to collect compensatory damages. 

Gregg Salzman is still trying to collect compensatory damages. 

He still suffers constant pain and debilitating headaches from the shrapnel, which lodged itself above his upper lip.

The physical injuries, however, were only the start of his troubles, he contends.

Over the years, Salzman has relied on a battery of lawyers in the U.S., U.K and Canada to fight for judgments against Iran, which allegedly sponsored the mall attack. Here in the U.S., he was awarded $10 million in compensatory damages in 2003, but — like so many other terrorist victims — he has been unable to extract the funds from Iran more than a decade out from that win. In the meantime, he continues to work when he can, around the limitations of his injuries, as medical bills pile up.

Although there have been moments of hope that the evolving field of terrorism-victim compensation law will one day bring him some measure of justice, the seemingly never-ending process — and the courtroom setbacks he says he suffered, such as being left out of a recent $9.4 million award to other victims of the same bombing — mostly left Salzman angry and tired.

“It feels like just constantly getting knocked down,” Salzman told Law360.

Victims of Iranian-sponsored terrorism seek compensation from the sale of the office tower at 650 Fifth Ave. in New York. (Credit: M. Lebetkin)

Victims of Iranian-sponsored terrorism seek compensation from the sale of the office tower at 650 Fifth Ave. in New York. (Credit: M. Lebetkin)

Currently, he is part of a sprawling web of litigation where victims are elbowing for the chance at grabbing proceeds from the sale of Manhattan office building 650 Fifth Avenue and certain other properties allegedly owned by Iran-backed entities. That and a new $1 billion federal fund for terrorism victims offer a potential reprieve in the near future, though even these two efforts are bound up in red tape.

Salzman’s story is just one from a growing community of terrorism victims and their advocates, who are embroiled in power struggles that start at the top bureaucratic levels with government players jostling for control, and end, all too often, pitting victim against victim in courtrooms and administrative offices across the country.

Calculating the Bill

The new $1 billion fund, which was created by legislation included in the omnibus package that passed in late 2015, is being kick-started with money from the $8.97 billion deal that the Department of Justice entered into with BNP Paribas SA to settle charges that it conspired to push through a financial transaction that violated U.S. sanctions on Sudan, Iran and Cuba. The new fund also would refill its coffers with pieces of future penalties that the U.S. lobs at state sponsors of terrorism or other entities found to be connected to terrorism.

The Congressional Research Service is predicting another $1.5 billion will come into the fund over the next decade. But even with this built-in revenue stream, the fund likely won’t be able to compensate all victims fully. Currently, U.S.-based terrorism victims are owed about $12 billion in court judgments where lawyers have yet to nail down assets to cover the bill.

At least that’s the best estimate based off a running list that Washington, D.C., attorney Stuart Newberger has pinned to his office wall. The Crowell & Moring LLP partner has been at the forefront of several of the terrorism cases on that list, including a $335 million judgment that he won for victims of a 1983 Beirut embassy bombing.

His numbers echo a 2008 congressional review of lawsuits against countries alleged to have sponsored terrorism, which indicated there was $11.39 billion in outstanding awards. Of the four top terrorist states with outstanding judgments against them, Iran by far holds the largest bill, according to that review.

So when the Iran nuclear agreement that the Obama administration struck last summer didn’t include a nod to that outstanding bill, many of the victims and lawyers battling for compensation from car bombings, kidnappings and other attacks linked to Iran were upset.

“It’s not a new thing to compensate victims when bringing a country back into a community of nations,” said attorney Suzelle Smith, pointing to a 2002 reconciliation treaty with Libya over its chemical weapons program that included compensation for those in the 1988 bombing of Pan Am Flight 103. “I think it was disappointing that the government and the Obama administration didn’t … say to Iran, ‘Look, this is what you need to do to make amends.’”

Smith, who co-founded Los Angeles trial boutique Howarth & Smith and represents terrorism victims, argues that of the $100 billion in frozen assets that Iran stands to get back as part of the nuclear deal, the U.S. government should have kept $10 billion for victims.

“My clients and I are in favor [of the nuclear deal],” Smith said. “We think it’s time for Iran to come into the community of nations and act responsibly ... but that doesn’t mean acts of terrorism should be wiped away.”

For Smith, the absence of reparations in the accord is just another addition to a string of setbacks or missed opportunities in the U.S. government and courts.

Smith represents Jeremy Levin, a former CNN journalist kidnapped in 1984 in Beirut by Hezbollah terrorists linked to Iran, and his wife Lucille Levin, whose attempts to rescue him were immortalized in a 1991 made-for-TV movie. Both are in their 80s and in poor health, Smith says. And they weren’t necessarily gung-ho about entering the legal fray to look for compensation.

“It took [Jeremy Levin] about 15 years before he decided it was right to file a lawsuit against Iran and the state sponsors of terrorism,” she said. “He was conflicted about it because he’s a man that cares very much in world peace ... [but] he decided you have to stand up and condemn acts of terrorism.”

So far, though, the Levins have spent years pursuing first a $28.8 million judgment against Iran and now the payment of that judgment.

The Long Fight

For many victims, their court cases are about making a larger statement to the world that they will hold accountable those who helped terrorists. It is a motivation that has spurred many trailblazers in this litigation arena to wage decadeslong battles.

The bodies of Charles Hegna and William Stanford, who were killed by terrorists aboard an Iranian airliner, arrive home at Andrews Air Force Base in 1984. (Credit: Corbis)

The bodies of Charles Hegna and William Stanford, who were killed by terrorists aboard an Iranian airliner, arrive home at Andrews Air Force Base in 1984. (Credit: Corbis)

Case in point: Edwena Hegna. Over the last three decades, the Arizona resident’s skin has wrinkled some and she has struggled with treatments for clinical depression. She has lost a son to complications with AIDS and seen her three other children spread out across the U.S.

And through it all, she and her children have been embroiled in a fight to secure compensation for her husband’s 1984 kidnapping and murder. In early December 1984, Charles “Chuck” Hegna was a 50-year-old diplomat looking to make his way home to his family for the Christmas holiday when his commercial flight from Kuwait City to Karachi, Pakistan, was hijacked by Hezbollah terrorists who diverted the plane to Tehran.

Witnesses to the event have said in court documents that Hegna was the first to raise his hand when the militants asked Americans on board to identify themselves. He was subsequently tortured, shot in the stomach and left to die on the tarmac of an Iranian airport.

“To a reasonable degree of medical certainty, Hegna suffered extreme pain and mental anguish from his gunshot wounds from approximately 6 a.m. on Tuesday, December 4, 1984, until his death, sometime before midnight on Thursday, December 6, 1984,” according to a 2002 judgment that awarded the family $42 million in compensatory damages and $333 million in punitive damages.

The fight to get those judgments paid has taken the Hegnas and their lawyers, including the Connecticut-based Ralph DuPont, from U.S. federal courtrooms to the U.S. Claims Tribunal in The Hague.

DuPont — who came to know and represent the Hegnas because a personal friend was also killed in the same hijacking incident — says the family’s legal efforts are about more than just finding assets to tap.

“They want to get closure. They want to see Iran held responsible by the court and to do the things that the justice system requires,” DuPont said. “They will say often it’s not about the money. And it’s true, it really isn’t. Nobody would go through what these folks go through … just for the money.”

Internal Battles

Too often, the judicial system pits victims against one another in their efforts to make terrorist sponsors or other abettors pay. A prime example is the New York federal case revolving around assets forfeited from purported Iran-backed entities, the prized jewel of which is a piece of the 650 Fifth Avenue tower.

Salzman inked a deal in 2014 with federal prosecutors to get in line to nab a piece of the proceeds if the case survives a number of appeals. Both the Hegnas and Levins have also been fighting to secure a piece of the same proceeds.

The Hegnas, who have been fighting for a share since early on in the case, argue that they had a 2002 lien on all Iran-owned property in the Southern District of New York, and they are currently appealing to the Second Circuit a ruling that looks to block them out.

Last year, the Levins tried to intervene in the 650 Fifth Avenue case, arguing that it was “a miscarriage of justice” that the U.S. government had struck a deal with only a select group of terrorism victims to split up the property proceeds.

The way the 650 Fifth Avenue case has played out has placed the DOJ in the awkward position of putting some victims — those who timely responded to a published notice in the Federal Register — above those who missed the deadline.

For the Levins, the court’s decision to deny them entry into the case, which was affirmed this month by the Second Circuit, stung, since they had agreed in other cases to share assets with intervening groups because it was the fairer thing to do, according to Smith.

The American government’s first attempt to directly compensate terrorism victims through a fund also inadvertently pitted victims against one another by creating classes of victims, according to Kenneth Feinberg, the attorney who served as the “special master” of the first fund to support victims of Sept. 11.

Kenneth Feinberg was appointed to oversee the Sept. 11 Victim Compensation Fund and the victim assistance fund established in the wake of the 2013 Boston Marathon bombings. (Credit: AP)

Kenneth Feinberg was appointed to oversee the Sept. 11 Victim Compensation Fund and the victim assistance fund established in the wake of the 2013 Boston Marathon bombings. (Credit: AP)

Legislation creating the 9/11 fund passed less than a fortnight after the attacks, without any congressional hearings.

“It was enacted by Congress in a patriotic effort to rally the country and to discourage lawsuits against the airline or World Trade Center,” Feinberg said.

With no previous precedent for such a fund and only the hastily passed statute to serve as a guiding light, Feinberg had to put together a system for deciding sensitive issues, such as who would be eligible to receive the funds and how the compensation would be calculated for each recipient.

As mandated by the legislation, Feinberg turned to his experience with tort law to come up with the equations that took into account victims’ age, health and income to determine payouts.

The fund was a success in that it helped to compensate victims and their families quickly. But having wildly varying payouts also led to Feinberg personally conducting 900 hearings with victims who were asking why they got less than their next door neighbor did.

“It was very emotional, very debilitating,” Feinberg said. “If it was to be done again, I would urge Congress to provide the same amount to everybody. Don’t tie it to the tort system.”

Feinberg had a much easier time recently serving as administrator for The One Fund Boston, a fund put together entirely with private money to help the victims of the 2013 Boston Marathon bombing. There, all the double amputees got the same amount and all of the single amputees got the same amount.

“It was much easier, much more equitable,” Feinberg said.

Much of the federal legislation revolving around terrorism victim compensation, however, has tended to be pushed through without all of the nuts and bolts of the schemes being worked out, according to experts.

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When the 2010 James Zadroga 9/11 Health and Compensation Act set up a second, broader 9/11 fund to help compensate many of the first responders that got sick in the years after the attack, the appointed special master Sheila Birnbaum had to start up the operation from almost thin air.

Working from her own New York office at Quinn Emanuel Urquhart & Sullivan LLP with the help of deputy special master Debbie Greenspan, who had helped run the first victims’ compensation fund, she set about creating the fund’s infrastructure: picking personnel, crafting the methodologies for compensating victims and writing out the claims policy.

To date, the fund has processed most of the claims it has received — but there is still work to do, which Birnbaum admits will likely move forward under another special master.

“I think another five years would be a little much for me,” Birnbaum said.

The Latest Hope

Buried within the 2,009-page omnibus spending bill that the president signed into law in mid-December was the reauthorization of the 2010 James Zadroga 9/11 Health and Compensation Act, which will keep that fund currently being overseen by Birnbaum running for another five years.

And buried within that — without having been debated at any congressional hearings — was the authorization of the new $1 billion terrorism victim compensation fund, which is being funded initially by the BNP Paribas penalties. This fund should cover a broader array of victims, including Salzman, the Hegnas and the Levins.

While the new fund won’t erase all of the existing judgments, it will go a long way to ensuring that all victims with final judgments get at least something for their pain and suffering, contends Newberger, who helped lobby for and craft the legislation. It is the first fund to apply to any victims of state-sponsored terrorism.

As currently structured, the fund will make payments on a pro rata basis that will afford victims about 10 cents on the dollar — or 30 to 40 cents on the dollar if assets from certain pending cases make their way into the fund. Additional payouts from the fund will be considered only after everybody is paid their pro rata share.

“They have to wait until everybody else gets 30 cents on the dollar,” Newberger said. “Nobody moves ahead in the line, nobody moves to the back of the line.”

In some ways, the new terrorism fund legislation is also Congress’ attempt to fix problems created by previous diplomatic and legislative efforts.

For one, the new fund will offer long-barred compensation to victims of the Iranian hostage crisis, where 52 American diplomats and civilians were held captive and tortured for 444 days between 1979 and 1981. For years, many of those victims’ efforts to sue for compensation for their suffering were blocked by a provision in the Algiers Accord that freed them. As part of their release, the U.S. promised to keep any suits based on the incident from playing out in court.

Five years after their release, the hostages received about $50 for each day spent as hostages. Under the new legislation, though, they will be entitled to $4.4 million in compensation, or $10,000 for each day held in captivity.

The use of the BNP Paribas settlement for the fund is essentially a roundabout way of getting Iran to pay for some of its outstanding judgments. U.S. Sen. Johnny Isakson, R-Ga., praised the legislation in a news release on Dec. 20 — the 35th anniversary of the release of the hostages — saying, “We know it's a bittersweet day having the memory of captivity combined with joy of knowing there finally will be compensation from the Iranians.”

Additionally, the fund in some ways attempts to fix the problems with judgment recovery that have arisen since Congress enacted a terrorism exception to the Foreign Sovereign Immunities Act about two decades ago. While the exception encouraged victims to go to court and sue states such as Libya and Iran, it failed to provide a good avenue for recovering actual funds.

“I think that the problem Congress was solving was a problem Congress felt responsible for,” said Newberger, noting that judges have expressed frustration that they were given this job by Congress and they weren’t getting anywhere with the enforcement of judgments.

The new fund highlights the delicate balance of bureaucracy and diplomacy that must be reached when trying to compensate terrorism victims, according to experts.

“A fund like this creates a very difficult balance between a need and desire to compensate deserving victims of terrorism with trying to make it comprehensive, equitable, predictable and consistent with our national security interests of protecting sovereign immunity,” said John B. Bellinger III, an Arnold & Porter LLP attorney who served as the legal adviser to the Department of State during the George W. Bush administration. “The U.S. has grappled with ways to do that over the years.”

Still, some in the industry think Congress should use its fund-creating powers sparingly, given that they can all too easily leave someone behind.

“I think these programs should remain very rare. These special compensation funds should be limited in number, and should not be encouraged,” said Feinberg, arguing that “the litigation system works pretty well.”

It’s a sentiment echoed by Steven Perles, an attorney who also worked on the new fund legislation and who has represented terrorism victims in numerous high-profile court cases, including a rare handful that secured settlements and judgments.

The legislation includes a provision that will allow victims whose own cases and investigations help the DOJ impose new penalties to keep a certain percentage of those fines outright, and Perles hopes that will help “mobilize resources in the private sector to hunt dirty money.”

“This is not about compensation,” Perles said. “It’s about deterring future acts of terrorism against U.S. citizens.”

The Critics

The new fund is not without its critics, however. Touted by supporting lawmakers as a major win for victims, the legislation seemed to appear out of thin air — at least to some observers who have raised an eyebrow at the lack of hearings.

“In creating a billion-dollar fund, we’re leaving it to a very small number of people behind closed doors to have gotten this right without any consultation,” Bellinger said.

But lawyers who spent the last year and a half or so pushing for the legislation contend that the fund is fair in how it looks to dole out compensation to victims, and they note that it came together in a rare burst of bipartisan effort between both the Senate and House judiciary committees.

“There were no hearings because it moved very fast … [legislators] felt so strongly about this that they decided they were going to do it jointly and in a collaborative measure,” Newberger said.

In the quick push to roll out the new terrorism fund legislation, however, a provision was added in at the final draft stage that may leave some terrorism victims behind, critics contend.

The provision calls for fund participants to not only hold final judgments that have ridden out all possibility of appeal, but they must also hold an order showing that the foreign sovereign was served notice of the judgment.

While on the surface this provision seems to ensure that the participants are fully eligible for the fund, it may create problems for those holding judgments against Syria because the State Department is presently declining to deliver service to Damascus. This could mean that otherwise-qualified terrorism victims will be left out of the fund.

It could be fixed in a number of ways, such as the State Department starting service again, Congress passing a technical amendment, or the special master of the new fund simply waiving requirement for Syrian cases, Perles said. But it will be another hard decision that officials will have to make.

Choices

Those currently embroiled in some of the highest-profile cases on the terrorism compensation front will also need to make some tough choices regarding whether to join in on the new fund.

Under the law, those involved in the 650 Fifth Avenue case have three options when it comes to taking part in the fund. The same goes for those involved in a separate case in which lead plaintiff Deborah Peterson and other victims of the 1983 Beirut Marine Corps barracks bombing are pursuing $1.75 billion worth of funds owned by Bank Markazi in a Citibank NA account.

One option is to fully elect to join the fund, which would mean that the victim also agrees to pool his or her winnings in the cases with the rest of the fund. That would sweeten the pot for everyone, but it could leave a claimant with less than he or she would have gotten outside of the fund.

For those who join, the new fund will cap payments to only cover up to $20 million of compensatory damages for individuals and $35 million for families. And, depending on the number of claimants taking a slice of the funds, getting that full award may occur in pieces over time, though victims still have the right to pursue other civil litigation to try to get paid.

The caps were put in place in an effort to be fair. With $12 billion of outstanding judgments and only a little over $1 billion guaranteed to be entering the fund, “it’s just a matter of trying to get everybody something,” according to a House Judiciary aide, who declined to be named.

A second option is to opt out of the fund and gamble on a larger award in existing court cases, which may or may not come through.

Currently, the defendants in the 650 Fifth Avenue case are appealing to the Second Circuit a judgment that granted the forfeiture of their interests to the U.S. government.

The Peterson case is currently before the U.S. Supreme Court, with Bank of Markazi arguing that Congress overstepped its bounds when it crafted the 2012 Iran Threat Reduction and Syria Human Rights Act and included a provision that allowed the families of victims of the 1983 Beirut Marine Corps barracks bombing to collect on a $2 billion judgment.

There is a third path, however, that most will likely choose to take. Under a conditional payment option, the victims in these cases can be entitled to receive compensation from the fund if their respective cases flame out in a ruling that goes against the terrorism victims. But if the case goes their way, the special master can deny them entrance into the fund.

Salzman, for one, isn’t sure which road he will take.

“We won’t know [if we join the fund] until we know how many hands are in the cookie jar,” he said.

Natalie Rodriguez is a senior legal industry reporter. She has covered the 650 Fifth Avenue case since 2014. Follow Natalie on Twitter.

In State False Claim Act Case Involved Country Club’s Failure To Escheat Unclaimed Deposits, California Court Rules Defendant’s SEC Filings Are Not “Public Disclosures”

By Jonathan Tycko
(The National Law Review)

The California Court of Appeal, Second Appellate Division (an intermediate appellate court in California’s state court system) recently ruled, in an interesting qui tam case brought under the California False Claims Act (“CFCA”), that a defendant’s filings with the United States Securities and Exchange Commission (“SEC”) are not “public disclosures” within the meaning of the CFCA’s so-called “public disclosure bar.” In so doing, the Court of Appeal correctly rejected arguments by the California Attorney General and the defendant that, if accepted, would have greatly expanded the reach of the public disclosure bar, and thus frequently barred otherwise valuable qui tam lawsuits.

The case is State of California ex rel. Bartlett v. Miller, Case No. B259472. Bartlett originally brought a lawsuit against a company called ClubCorp, which operates country clubs, claiming that ClubCorp had refused to refund his $7,500 initiation deposit. Bartlett then subsequently filed an amended complaint, adding a claim under the CFCA. His CFCA claim was based upon an allegation that ClubCorp had a practice of both failing to refund such deposits unless requested to do so by the club member, while also failing to escheat the unclaimed deposits to the state. California, like most states, has an escheat law, which requires a company to turn over to the state monies held by the company that belong to someone else but that are “unclaimed.” Thus, Bartlett’s CFCA claim was based upon what is known as the “reverse false claim” provision of the CFCA, which, in essence, makes it unlawful for a company to fail to pay money to the state that the company knows is owed. (The federal False Claims Act, like most state false claims acts, has a similar “reverse false claims” provision.)

Bartlett admitted that the primary basis for his CFCA claim was information he obtained by reading certain of ClubCorp’s SEC filings. In those filings, ClubCorp stated that it had a large amount of unclaimed deposits, that those deposits might be subject to escheat, and that it was currently involved in an audit by 20 different states (not including California) in which that issue was being investigated. Those SEC filings were publicly available through an online database maintained by the SEC, known as EDGAR. In other words, Bartlett’s qui tam claim was not based on his own “insider” information, but rather was based upon information that any member of the public could have obtained if they knew where to look.

The California Attorney General moved to dismiss the qui tam claim under the CFCA’s public disclosure bar. That provision provides for dismissal of a qui tam claim that is “based upon the public disclosure of allegations or transactions . . . in an investigation, report, hearing or audit conducted by or at the request of the Senate, Assembly, auditor, or governing body of a political subdivision, or by the news media . . .” The trial court granted the motion to dismiss, and Bartlett appealed.

The Court of Appeal, in reversing, rejected two arguments made by the Attorney General and ClubCorp. First, the Court rejected the argument that the SEC filings were a “report” within the meaning of the CFCA public disclosure bar. The Court correctly read the CFCA public disclosure bar to apply only where the “report” at issue was to or by the California state government, and not to or by a federal agency. As the Court explained, “state officials may be unaware of information disclosed solely to or by the federal government; and a relator with information about a state or local fraud, even if that misconduct has been publicly disclosed in a federal forum, may still be making a valuable contribution to state or local authorities that is properly rewarded under CFCA.”

Second, the Court rejected the argument that the SEC’s online database, EDGAR, was “news media.” The question of what materials available on the internet qualify as “news media” has been an issue that courts have struggled with in recent years. (The same term—“new media”—appears in the public disclosure provision of the federal False Claims Act.) In concluding that EDGAR was not “news media,” and in rejecting contrary conclusions of certain other courts, the Court reasoned that “wherever that fuzzy line now is between news media and some other form of publicly accessible information, we have little difficulty concluding that disclosures in forms available only on the SEC’s online public database are not disclosures by the news media no matter how broadly that term is interpreted.”

As it turns out, the California government knew about ClubCorps escheat issue several years before Bartlett filed his qui tam claim, and had been in the process of auditing ClubCorps over that issue. As the Court recognized, Bartlett’s qui tam claim did not add anything to the state’s knowledge, and did not ferret out a fraud of which the state otherwise was ignorant. Thus, from a policy perspective, Bartlett’s qui tam claim was not useful to the state, and did not serve the primary purpose of the CFCA’s qui tam provision. Admirably, the Court was not unduly influenced by that, and instead applied a correct reading of the law. Had it stretched the language of the public disclosure bar to require dismissal of Bartlett’s qui tam claim, the Court would have done significant damage to many meritorious, useful qui tam claims. So, contrary to the old adage, this was a case of bad facts making good law.

What does all of this mean for potential qui tam whistleblowers? In my opinion, this is a helpful decision in cases brought by whistleblowers who are not traditional “insiders.” Sometimes a company’s fraud on the government can be discovered by people outside the company who, because of their own unique knowledge or expertise, are able to investigate and uncover such fraud. Those “outsider” whistleblowers serve the policies behind the False Claims Act by bringing fraudulent conduct to the attention of the government, and by obtaining recoveries for the public fisc. But the public disclosure bar, which is a highly-technical provision of the statute, can trip up such outsider whistleblowers, since those whistleblowers will often rely upon information that they obtain on the internet or through other publicly-available sources. The decision in State of California ex rel Bartlett v. Miller is helpful precedent that keeps the door open to such outsider whistleblowers.

Family Lobs Appeal Over Being Barred In NYC Tower Suit

By Natalie Rodriguez
(Law360, New York)

In the latest turn in a New York federal court suit over the sale of Iran's interest in a federally seized Manhattan tower, a family that was recently denied a request to intervene in the action filed an interlocutory appeal on Tuesday, contending that they should have an equal opportunity at taking a bite out of the proceeds.

Jeremy Levin, who was kidnapped in 1984 by terrorists allegedly funded by Iran, and Lucille Levin transmitted the notice to the U.S. Court of Appeals after having a motion to intervene denied by U.S. District Judge Katherine B. Forrest. In that denial, the judge called the Levins' motion untimely and argued that the court lacked the jurisdiction to entertain the request since the case over 650 Fifth Avenue is currently on appeal before the Second Circuit and it would be wrong for the family to jump in while that appeal is pending.

The Levins, however, argue that it is wrong that 650 Fifth Avenue's existing summary judgment creditors can take a piece of the forfeited funds and that the Levins are left out because they allegedly did not get proper notice about the opportunity to join in several years ago. The Levins hold a $28.8 million judgment against the Islamic Republic of Iran, the Iranian Ministry of Information and Security and the Iranian Islamic Revolutionary Guard Corps, according to court documents.

“The seizure of Iranian funds by the government is premised on the idea that it will fairly distribute them to all victims with valid claims. The government will have to explain to the Second Circuit why it is denying the Levins, who without question are victims of Iranian terrorism, any share whatsoever of this forfeiture fund. Equals should be treated equally,” Suzelle Smith of Howarth & Smith, an attorney for the Levins, told Law360.

Judge Forrest, however, has argued that it would be wrong to let the Levins in at this stage in the suit.

“If the court grants the motion to intervene, the Levins would have standing to participate in the appeal and could disrupt the appellate proceedings, which have been ongoing for nine months,” the judge said on March 12, denying the Levins' motion.

Forrest went on to add, however, that even if the court had jurisdiction, the Levins' motion must be denied for the same reasons why she denied a similar motion by Akbir Associates LLC in 2014 — namely that the family is too late to the table given that the suit is six years in and that the court granted summary judgment to existing judgment-creditor plaintiffs about a year ago.

The judge has argued that it would be unfair to existing parties in the 650 Fifth Avenue case, who have already entered into a settlement for the funds.

In February, U.S. Department of Justice attorneys argued that the Levins' motion to intervene should be denied for untimeliness, the potential prejudice to current plaintiffs and failure to show a legally protectable interest.

The government also blasted the Levins’ argument that it had failed to properly notify them that they were potential claimants to the suit, noting that the published notice allowed vigilant parties with an interest to intervene and that more than a dozen judgment creditor claimants were able to do so.

“The Levins, like the judgment-creditor plaintiffs in this action, were entitled to notice by publication and no more,” Judge Forrest said in her March 12 order denying the motion to intervene.

The Levins are represented by Suzelle M. Smith and Don Howarth of Howarth & Smith.

The case is In re: 650 Fifth Avenue and Related Properties, case number 1:08-cv-10934-KBF, in the U.S. District Court for the Southern District of New York.

Gov’t, Court Slap Down Claimant Hopefuls in NYC Tower Suit

By Natalie Rodriguez
(Law360, New York)

The U.S. government on Wednesday blasted a family looking to intervene in a suit over the sale of Iran's interest in a Manhattan tower as being too late to the table, on the heels of a New York federal judge denying another party looking to become a claimant to the assets.

In a letter to U.S. District Judge Katherine B. Forrest, U.S. Department of Justice attorneys argued that a motion to intervene by Jeremy Levin, who was kidnapped in 1984 by terrorists allegedly funded by Iran, and Lucille Levin should be denied for untimeliness, the potential prejudice to current plaintiffs and failure to show a legally protectable interest.

The objection was filed after Judge Forrest denied on Wednesday another would-be claimant’s motion to consolidate his case with the suit over 650 Fifth Ave.

In the letter, the government blasted the Levins’ argument that it had failed to properly notify them that they were potential claimants to the suit. The family holds a $28.8 million judgment against Iran from a 2009 Washington, D.C., case.

“The government provided notice to such reasonably ascertainable potential claimants … But the law contains no support for the proposition that the government must provide direct notice to any entity that may have a potential judgment against Iran, which itself was not even a potential claimant with a clear stake in the action at the time of its inception,” the U.S. government said.

It argued under the Levins’ interpretation, the government would have had to assume the outcome of a Terrorism Risk Insurance Act litigation question that did not exist when the government filed its action in the 650 Fifth Ave. case. Further, it noted that the published notice allowed vigilant parties with an interest to intervene and that more than a dozen judgment creditor claimants were able to do so.

“The government takes seriously the tragic circumstances that led to the Levins’ judgment against the government of Iran, and the frustration that holders of such judgments often encounter in getting those judgments enforced. The recognition of such sympathetic factors does not, however, excuse an untimely bid for an easy judgment, at the expense of other litigants — including other victims of terrorism — who actually acted timely in vindicating their interests,” the government said in its letter.

The Levins have argued, though, that it would be a “miscarriage of justice” to allow other judgment creditors in a similar position to be paid out from the asset sale, while their judgment is left unfulfilled.

On Wednesday, however, the court also leaned on similar arguments in blocking Amir Reza Oveissi, whose grandfather was an Iranian general killed during the 1979 Iranian revolution, from consolidating his Washington, DC., case — which has a $307.5 million claim against Iran — with the New York case.

Judge Forrest contended that the consolidation would be unfair to the current plaintiff-claimants who have a settlement agreement to distribute funds from the property’s sale on a pro rata basis.

“Consolidation would complicate the current settlement agreement between the judgment-creditor plaintiffs and the government … Consolidation at this stage would also undermine plaintiffs’ extensive efforts over several years, including significant discovery, preparation for trial, and ultimately winning summary judgment in their favor,” the order said.

Oveissi had offered to agree to be bound by certain stipulations if he was let in on the case, including not seeking to reopen discovery in the long-running New York suit and being bound by a decision from the U.S. Court of Appeals for the Second Circuit, as well as any further appeal.

"Allowing Mr. Oveissi to participate in the distribution of the forfeited assets would have only had a negligible impact on the amounts received by the other terrorist victims, and it was very disappointing that the court did not allow Mr. Oveissi to participate in that distribution. The outcome of this case will favor some terrorist victims over others, and that is disappointing," James W. Spertus of Spertus Landes & Umhofer LLP, an attorney for Oveissi, told Law360.

He added that the outcome would have made sense if the property was privately located by the plaintiffs, but since the government located and forfeited it, more should have been done to more equally protect citizens' rights.

Oveissi is represented by James W. Spertus of Spertus Landes & Umhofer LLP.

The Levins are represented by Suzelle M. Smith and Don Howarth of Howarth & Smith.

The U.S. Government is represented by United States Attorney for the Southern District of New York Preet Bharara and Assistant United States Attorneys Michael D. Lockard, Martin S. Bell and Carolina A. Fornos.

The case is In re: 650 Fifth Avenue and Related Properties, case number 1:08-cv-10934-KBF, in the U.S. District Court for the Southern District of New York.

Family Asks For Spot In Iran-Held NYC Tower Dispute

By Natalie Rodriguez
(Law360, New York)

The family of a terrorist hostage victim who holds a $28.8 million judgment against Iran asked a New York federal court on Wednesday to be let in on a lien priority dispute related to the sale of Iran's interests in a Manhattan tower.

Jeremy Levin, who was kidnapped in 1984 by terrorists allegedly funded by Iran, and Lucille Levin motioned to intervene in the case, arguing that a 2009 Washington, D.C., district court judgment that was registered in New York late last year allows them a spot at the table with other creditors looking to score a piece of the stake sale proceeds.

“It would be a miscarriage of justice to allow the other judgment creditors in the same position as the Levins to recover all of the assets from this action, while the Levins’ judgment is left unsatisfied,” the family argued in a memorandum supporting their motion.

The Levins contend they were informed about the seizure of 650 Fifth Ave. through media reports and were wrongfully not put on notice as potential claimants by the U.S. government. They blasted a 2014 settlement agreement with certain judgment creditors in the New York case that would essentially distribute all the net proceeds of the sale of the building after litigation expenses and sales costs are taken out.

“Thus, the Levins are in the position of having relied upon the rules and upon the representations of the U.S. government in claiming their rights as victims, but having been cut out of any recovery with no due process at all. The court should therefore grant the Levins’ motion to intervene and allow the Levins to pursue their claim to some of the funds in the civil forfeiture action,” the family said in its memorandum.

The Levins are not the only family looking to carve out a spot in the case. The Hegnas, the family of a U.S. diplomat killed by Iranian terrorists, have been fighting for a piece of the proceeds for several years and recently urged the court to consider new evidence that the family contends is sufficient to warrant the renewal of a real property docketing lien, according to court documents. The Hegnas currently have an outstanding motion for partial summary judgment as to the enforcement priority in the long-running case.

With that motion pending, the Levins contend their motion to intervene causes no prejudice to the current litigation parties by delaying the case further and argue that their motion should take less than a month to resolve.

Other plaintiff-claimants, however, have been pushing a motion for summary judgment against the Hegnas’ claimed lien on 650 Fifth Ave.

The Levins are represented by Suzelle M. Smith and Don Howarth of Howarth & Smith.

The case is In re: 650 Fifth Avenue and Related Properties, case number 1:08-cv-10934-KBF, in the U.S. District Court for the Southern District of New York.

9/11 families sue Saudis, Sudan for $3 trillion - Defendants accused of funding al Qaeda

By Bob Egelko
(San Francisco Chronicle)

Family members of victims of the Sept. 11 terrorist attacks look on during a Washignton news conference Thursday, Aug. 15, 2002 where it was announced that legal action would be taken against Saudi officials and institutions, charging they financed Osama bin Laden's terrorist network. From left are, Ellen Saracini, whose husband Victor was the captain of United Airlines Flight 175; Tara Bane, whose husband died at the World Trade Center; Fiona Havlish, whose husband, Don, worked on the 101st floor of the south tower; and Sara Mulligan, wife of a New York firefighter. (AP Photo/Lawrence Jackson)

Family members of victims of the Sept. 11 terrorist attacks look on during a Washignton news conference Thursday, Aug. 15, 2002 where it was announced that legal action would be taken against Saudi officials and institutions, charging they financed Osama bin Laden's terrorist network. From left are, Ellen Saracini, whose husband Victor was the captain of United Airlines Flight 175; Tara Bane, whose husband died at the World Trade Center; Fiona Havlish, whose husband, Don, worked on the 101st floor of the south tower; and Sara Mulligan, wife of a New York firefighter. (AP Photo/Lawrence Jackson)

Families of more than 600 Sept. 11 victims filed a $3 trillion lawsuit Thursday, accusing Saudi princes, foreign banks, charities and the government of Sudan of funding the terrorist network that launched the attacks.

The lead plaintiffs are the widow, sister and parents of Thomas Burnett Jr., the San Ramon executive believed to have helped fight the hijackers of San Francisco-bound United Airlines Flight 93 and forced the jetliner down in rural Pennsylvania, short of its presumed target in Washington, D.C. All 44 people aboard were killed.

"It's up to us to bankrupt the terrorists and those who finance them so they will never again have the resources to commit such atrocities," Burnett's widow, Deena, said at a news conference in Washington, where the federal lawsuit was filed.

"As my son, Tom, told his wife, Deena, from the cabin of Flight 93, 'We're going to do something,' " said Thomas E. Burnett.

The suit alleges that Osama bin Laden's al Qaeda network was heavily financed by seven international banks and eight charitable foundations, with the active promotion and support of three members of the Saudi royal family. Bin Laden is a Saudi native, and 15 of the 19 hijackers were Saudi citizens.

The suit does not accuse any of the defendants of having a direct role in the Sept. 11 attacks, or knowing about them in advance, but says they knowingly funded terrorists and must be held responsible for the consequences.

"The charitable, financial, religious and political networks that front terror -- the defendant banks, charities, financial and business institutions - - are responsible for the deaths and injuries" of last September, the suit says.

Lawsuit Looks to Lockerbie

The lawsuit is partly modeled on the action filed against Libya in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland. One lawyer in Thursday's case, Allen Gerson, helped negotiate a recent $2.7 billion settlement with the Libyan government on behalf of the families of the 270 victims.

Another precedent has resulted from a pending suit by the parents of an American-born teenager killed in a terrorist attack in Israel. The U.S. Court of Appeals in Chicago ruled recently the parents could sue Islamic charitable organizations that allegedly acted as fronts for the group blamed in the attack, Hamas.

Plaintiffs' attorneys in Thursday's suit said many of the defendants had considerable property in the United States from which damages could be collected. Some of the assets remain frozen, however, after the U.S. government declared several charities to be terrorist fronts.

The suit comes at a delicate time in U.S.-Saudi relations. In a briefing last month to a defense advisory board, a Rand analyst called Saudi Arabia an enemy of the United States. That assessment was quickly disavowed by the Saudi government and the Bush administration, both of which insisted that the two nations' ties were as strong as ever.

"We understand (the Bush administration's) concerns about the Saudis," said plaintiffs' lawyer Anne Kearse. "Our action is on behalf of our clients, to help with the war on terrorism."

The suit quoted the Rand briefing, belittled Saudi leaders' denials of connections to al Qaeda and stopped just short of accusing the Saudi government of complicity in the Sept. 11 attacks.

"Royal denials notwithstanding, Saudi money has for years been funneled to encourage radical anti-Americanism as well as to fund the al Qaeda terrorists, " the suit said. "Saudi Arabian money has financed terror while its citizens have promoted and executed it."

Royal Defendants

One Saudi prince named as a defendant, Sultan Bin Abdulaziz al Saud, has been the kingdom's defense minister since 1963. The suit quoted his denunciation of America's "Zionist and Jewish lobby" after Sept. 11 and said he had donated $6 million since 1994 to Islamic charities that finance al Qaeda, while also serving as the government's chief overseer of charitable fund raising.

Another royal defendant, Turki al-Faisal al Saud, was until a year ago the chief of the Saudi intelligence agency, which the suit described as "Osama bin Laden's nexus to the network of charities, foundations and other funding sources." The role of the third prince named in the suit, Mohammed al-Faisal al Saud, was not specified.

The suit did not name the Saudi government as a defendant but did target the government of Sudan, where two of the banks are based and where bin Laden had his headquarters from 1991 until he was expelled in 1996. Attorney Don Howarth explained that Sudan is on the U.S. State Department's list of sponsors of terrorism -- removing its immunity from terror-related damage suits -- but Saudi Arabia is not.

Attempts to reach the Saudi and Sudanese embassies in Washington for comment were unsuccessful.

The suit seeks $1 trillion on a variety of grounds for supporting or knowingly permitting terrorist activities. One claim seeks $3 trillion under a law providing triple damages for U.S. victims of international terrorism. In addition to compensation, the suit also seeks $100 trillion in punitive damages against Sudan.