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Argument preview: A serious constitutional dilemma


Next week, on January 13, the Supreme Court will explore ways to work itself out of a constitutional dilemma: showing respect for Congress’s lawmaking powers, especially when it seeks to punish acts of terrorism, or respect for the independence of the courts to decide cases without political interference.  That is what is essentially at stake in Bank Markazi v. Peterson — a modern test of the meaning of a Civil War precedent on separation of constitutional powers.

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Bank Markazi is, of course, the Central Bank of Iran, a major agency in that government and one that, in most situations, would have legal immunity from being sued in the United States.  But lower courts denied that immunity, and the bank has taken to the Supreme Court its plea to nullify a lower-court ruling that it must turn over about $1.75 billion in bank assets located in this country.   The assets would go to American victims, or their families, of terrorism in the Middle East.

The Court, in deciding this case, is not likely to reopen its 1872 precedent in United States v. Klein, but it will have to clarify when the Klein decision prohibits Congress from taking steps to settle a pending court case in favor of those who sued.  In short, if Congress passes a law favoring one side in a pending lawsuit, how much must it leave for the courts to do to avoid a finding that it intruded unconstitutionally?

Two lower courts — a federal trial judge in New York City and the U.S. Court of Appeals for the Second Circuit — have ruled that a 2012 law passed by Congress should not be struck down because it left the trial judge with enough to do judicially to complete the case.  Although that law specifically named the assets in dispute in a specific court case, and dictated who should get them, the lower courts found that the law stopped short of violating the Klein precedent.  Along the way, they refused to give legal immunity to Bank Markazi.

The Klein decision is one of the federal judiciary’s sturdiest barriers to politicization of those courts.  There, the Court struck down a law passed by Congress directing the courts to treat pardons of Confederate sympathizers as conclusive proof that they were disloyal during the Civil War, and thus they and their heirs were not eligible to recover property confiscated during the war.  The Court said flatly that Congress has no power, under the Constitution, to prescribe how a court must decide a case or legal issue.

What may have a significant impact on this case is that the Court appeared to have pared down the Klein precedent, at least to a degree, in its 1992 decision in Robertson v. Seattle Audubon Society.  The Court upheld a law seeking to resolve two pending environmental lawsuits challenging logging in the Pacific Northwest.  It specified that, if the forests at issue in the case were managed under new terms laid out in the new law, that would satisfy the legal requirements that had been the basis for the lawsuit.  After the U.S. Court of Appeals for the Ninth Circuit struck down that law, the Justices reversed the decision, finding that the law only modified substantive law, and did not compel a specific outcome.

The Second Circuit had relied heavily upon the Audubon Society ruling in upholding the 2012 law controlling the distribution of the Iranian bank assets.  The law was formally titled the Iran Threat Reduction and Syria Human Rights Act of 2012.

On the other side of the case is a Virginia woman, Deborah Peterson, who filed a wrongful death lawsuit on behalf of the estate of her brother, Lance Corporal James C. Knipple of Alexandria, Va.  He was twenty years old when he was killed in 1983 in the terrorist bombing of the U.S. Marine barracks in Beirut, Lebanon.  He was one of 241 Americans who died in that attack; dozens more were wounded.

The Peterson case was soon joined by survivors of families of victims of the 1996 bombing of the Khobar Towers in Saudi Arabia, which killed nineteen U.S. servicemen and wounded hundreds more, and representatives of victims of other terrorist acts — bombings, an assassination, and a kidnapping.

Each of the claims asserted that the Iranian government was responsible for the terrorism, and the lawsuits were based upon a law passed by Congress to withdraw the legal immunity in U.S. courts of foreign governments who sponsored acts of terrorism.  Iran refused to enter the case to defend itself, leading to judgments for the families running into the billions of dollars.

When the Iranian government refused to pay, the lawyers for the families went to court to seek the assets of Bank Markazi.  The lawsuits claimed that the bank held interests in entitlements to bonds held at an Italian bank, which held interests in a Luxembourg bank, which in turn held assets in an account at Citibank in New York City — the end of the entitlement chain.  Those assets were said to be worth about $1.75 billion.

In June 2010, lawsuits were filed against that string of banks, including Iran’s central bank, seeking to claim the assets at Citibank.   The bank claimed that the assets did not belong to it but, even if they did, the bank itself was immune under U.S. law as an arm of a foreign government.  The bank also relied on a treaty of amity between Iran and the U.S. government.

Turning for a time from the courts to Congress, the families who had sued persuaded Congress to pass the 2012 law to allow them to seize the Bank Markazi assets.  The act directly names those assets in those lawsuits, citing the docket number for the collected cases, and it made those assets subject to court judgment to award them.  It declared that it would not apply to any other proceeding.

The law ordered the trial judge to make two judgments: did Bank Markazi have title or beneficial interest in those assets, and did anyone else have a legally protected interest in them?  The judge ruled that the law displaced the existing commercial law that otherwise would have governed the outcome and made the two findings that Congress had specified.  That was the result upheld by the Second Circuit.

Moving on to the Supreme Court, Bank Markazi raised a single question: whether the 2012 law “effectively directs a particular result in a single ending case,” in violation of the separation of powers doctrine.  The Court invited the federal government to offer its views, and the Justice Department suggested that review be denied, arguing that Congress had not dictated the outcome of the case, but had merely changed the controlling law.  The brief rejected the central bank’s argument that the law left to the court merely uncontested issues that did not amount to a significant judicial assignment.

After the bank, in reply, stressed again that the law essentially had taken the case out of the hands of the courts, leaving the judge with only “makeweight findings,” the Court agreed at the opening of the last Term to rule on the bank’s constitutional claim.

Briefs on the merits

Bank Markazi’s merits brief, noting that the outcome is now worth “nearly $2 billion,” is focused on its defense of the judiciary’s independence, arguing near the beginning: “Deciding individual cases is a judicial function, not a legislative one.  If the distinction between the legislative and judicial functions means anything, Congress cannot change the law solely for one case to ensure that its favored litigant prevails.  [The 2012 law] is foreign to this nation’s constitutional tradition, and threatens the independence of the federal judiciary. . . .  It is an unprecedented incursion on the judicial power.”

By being crafted for a single, identified case, with no future impact on any other, and declaring its aim to be the assurance that “Iran is held accountable for paying the judgments” in favor of the families, the law “eliminated every defense Bank Markazi had raised,” the bank contended.

The bank noted that the Court has never upheld a statute that applied only to a single pending case.  Importantly for its defense, the bank dismissed the Audubon Society precedent on which the Second Circuit had relied by noting that the Court in that case “explicitly declined to address whether Congress could amend the law for a single pending case.”  Moreover, the bank added, the law at issue in that case did not apply the revised terms specifically to pending cases.

It also asserted that, by the time Congress passed the law, the two findings it required to be made had become “foregone conclusions” during the court proceedings.

The brief on the merits for the families and victims attempted to undercut all of the bank’s arguments based on the Klein decision, by pointing out in a footnote that the bank had not argued in lower courts that the precedent barred Congress from legislating for a “single case.”  Thus, that specific point had not been decided in the courts below, it added.

The main thrust of the families and victims was that the Court had upheld, repeatedly, laws “enacted to govern the outcome of specific, pending litigation concerning a single bridge, particular forests, or a known, closed set of specific pending lawsuits.”  The families and victims also argued that the terms of the 2012 law will apply to other cases that, since the law’s passage, have been consolidated with the “omnibus” Peterson case now at issue.  It established legal standards that the court must specifically address as they judge each specific claim, they said.

The families and victims interpreted the bank’s challenge as a request for the Court to create two new exceptions to Congress’s authority — that it cannot change a law for a single pending case and that it cannot effectively dictate the outcome of such a case.  Neither, they argued, “has any foothold in the constitutional text or structure or in this Court’s precedents.”

The Court, the families and victims concluded, need not rule on the constitutional attack on the 2012 law, because the lower court rulings in favor of the families can be upheld under “an independent ground” — another federal law generally awarding assets to victims of terrorism.

The federal government’s brief on the merits, siding with the families and victims as an amicus, said that the critical question about legislative interference with judicial power is “whether Congress has left any adjudicatory function for the courts to perform, or whether it has instead improperly directed a particular application of existing law.  That is equally true when Congress alters the legal standard governing a single pending case.”  Framed in that way, the 2012 law passes the test, the federal government said, because there was an “adjudicatory function” left to the courts: the findings that the law required the judge to make.

The federal government also suggested that the Court examine this case against the background reality that Congress has special powers to write laws dealing with the obligations of foreign, sovereign governments, and this case is a clear example.

Among a short list of amici filings in the case, Bank Markazi is supported only by a filing by scholars of federal court procedures.  The families and victims are supported by eight filings, among them one from the U.S. Senate, one from the House of Representatives, and filings by individual members of Congress, scholars of national security, federal courts, and constitutional law, and former legal advisers within the Justice Department, along with a Jewish group — Agudas Chasidei Chabad — arguing that the outcome of the case could have an impact on that group’s attempt to recover from Russia thousands of books and manuscripts seized by the Bolsheviks and thousands more pages of religious tracts seized by Nazi Germany and taken by the Soviet army at the end of World War II.


Recommended Citation: Lyle Denniston, Argument preview: A serious constitutional dilemma, SCOTUSblog (Jan. 6, 2016, 1:28 PM),