Court seeks U.S. views on terrorism case

The Supreme Court on Monday asked the federal government to offer its views on whether Congress acted unconstitutionally three years ago in ordering a federal court to require the surrender of assets owned by the central bank of Iran, Bank Markazi, to pay off victims of terrorism.

In other orders, the Court denied review in a case involving new voting rights restrictions in North Carolina, but its new order is likely to be overtaken by a trial in a lower federal court, scheduled for July.  The Court did not grant any new cases for review, nor did it issue any opinions on the merits, as it began a two-week recess before holding its final argument session of the Term later this month.

The Iran case (Bank Markazi v. Peterson) involves nearly $2 billion worth of bonds that Iran’s central bank owns in an account in a New York City bank.  More than 1,300 Americans have won lawsuits claiming that the government of Iran sponsored terrorist attacks throughout the Middle East, and they are seeking to collect from the only assets that may be within their reach — the interest in the bonds.

The Justice Department has no deadline to respond to the Court’s request for its views on the case.  Potentially, the case may involve some diplomatic sensitivity for the Obama administration, because it is currently engaged in delicate negotiations with Iran over nuclear arms and over the future of U.S. economic sanctions against the Iranian government.  The Justice Department will have to take a position on the bank assets case even as the relationship between the two governments continue to evolve.

The government may not submit its views to the Court for some months, perhaps not until the Court’s next Term.

The dispute over the bank’s assets arose after Iran’s government refused to pay the terrorism victims, so the victims’ lawyers went to federal court to get an order to turn over to them the funds that Bank Markazi is said to own in an account at Citibank in New York.  The central bank was the target of their claim, but other international financing institutions were also sued.

In February 2012, President Obama froze all of the Iranian government’s assets in the United States, including those of the central bank, making them potentially available to be seized.  The terrorist victims, meanwhile, had gone to Congress with a request for new legislation to help them recover their money judgments from Iranian assets.

Congress agreed, passing a law that is confined to the specific assets at Citibank, making them subject to “attachment” to at least partly satisfy the judgments against the Iranian government.  The new law gave the trial court discretion to make some decisions before ordering the turnover of the asset, but those did not long delay the federal judge in issuing an attachment order.   The judge ruled against sovereign immunity for Iran’s government, found that Congress did not exceed its authority under the Constitution, and directed that the assets be turned over.

After that ruling was upheld by the U.S. Court of Appeals for the Second Circuit, the central bank appealed to the Supreme Court.

Its main argument is that Congress went beyond its powers by specifically directing the outcome of a pending federal court case, in violation of an 1872 decision by the Supreme Court (United States v. Klein) barring Congress from directly entering a court case to dictate its outcome.  The Second Circuit, however, said the Iranian assets case was different, because Congress had left enough discretion to the federal judge, and thus did not violate the constitutional doctrine of separation of powers.

The Court’s order denying review in the North Carolina voting rights case gained some attention because the Court is in the midst of a series of challenges to new restrictions on voting that have been passed in several state legislatures.  North Carolina’s law was one of the most sweeping of any passed recently by legislature, with seven separate provisions cutting back sharply on voting rights.  (The case was North Carolina v. League of Women Voters.)

After a federal appeals court ruled last year that two of the provisions could not be enforced because the challengers were likely to succeed in getting them struck down when the case goes to trial, the Supreme Court stepped in and allowed them to be in effect for the elections last November.  The first provision at issue barred voters from registering to vote and casting their ballots on the same day, while the second barred the counting of any ballots that a voter had cast in the wrong polling place.

Over two Justices’ dissents, the Court put those back into effect last October 8.  It specified that its order would expire if it later denied review of the state’s appeal.

By denying review on Monday, the Court put back into effect the appeals court order against enforcing those two provisions.  But, because the entire case, including the other five challenged provisions, is set to go to trial in a district court in July, and because there is no election in the state for the next several months, the action on Monday may have little effect.  Everything may be sorted out, at least at the lower court level, at the coming trial.