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Aviation & General Insurance Co. Ltd. v. United States

United States Court of Appeals, Federal Circuit

February 12, 2018

AVIATION & GENERAL INSURANCE COMPANY, LTD., NEW YORK MARINE AND GENERAL INSURANCE COMPANY, CERTAIN UNDERWRITERS AT LLOYDS LONDON, AUREUS ASSET MANAGERS, LTD., RIVERSTONE INSURANCE (UK), LTD., Plaintiffs-Appellants
v.
UNITED STATES, Defendant-Appellee

         Appeals from the United States Court of Federal Claims in Nos. 1:14-cv-00687-TCW, 1:14-cv-00703-TCW, Judge Thomas C. Wheeler.

          Steven Robert Perles, Perles Law Firm, PC, Washington, DC, argued for plaintiffs-appellants. Also represented by Edward Brian MacAllister, Joshua Perles.

          Loren Misha Preheim, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Reginald T. Blades, Jr., Robert E. Kirschman, Jr., Benjamin C. Mizer.

          Before Moore, Reyna, and Stoll, Circuit Judges.

          OPINION

          Stoll, Circuit Judge

         Appellants are insurance and asset management entities that paid property damage and personal injury claims arising from two terrorist events sponsored by Libya in the 1980s. Following the suspension of Libya's sovereign immunity pursuant to the passage of the State Sponsors of Terrorism Exception to the Foreign Sovereign Immunities Act in 1996 and the National Defense Authorization Act in 2008, Appellants filed lawsuits against Libya in federal court, asserting their subrogation rights for claims paid as a result of the attacks. Those lawsuits were ultimately terminated following Congress's passage of the Libyan Claims Resolution Act in 2008, which restored Libya's sovereign immunity and implemented a Claims Settlement Agreement between the United States and Libya. Subsequently, President George W. Bush signed Executive Order No. 13, 477, which provided that any pending suit in any U.S. court filed by United States or foreign nationals relating to Libyan-sponsored terrorism shall be terminated.

         In this takings case, we must decide whether the Government's termination of Appellants' lawsuits pursuant to the Claims Settlement Agreement between the United States and Libya and its subsequent legislation and executive order constituted a compensable taking under the Fifth Amendment. For the reasons below, we hold that it does not and affirm the Court of Federal Claims.

          Background

         On November 23, 1985, EgyptAir Flight 648 was scheduled to travel from Athens, Greece to Cairo, Egypt before it was hijacked by terrorists of the Abu Nidal Organization ("ANO"). The hijacking and its aftermath resulted in the killing of passengers and the destruction of the aircraft hull. The United States Department of State determined that ANO received considerable support from the Libyan government, which provided safe haven, training, logistical assistance, and monetary support.

         In a related event, on December 21, 1988, an agent of the Libyan Intelligence Service detonated explosives concealed in the luggage compartment of Pan Am Flight 103 as it crossed Scotland. The bombing killed all 243 passengers, including Americans, 16 crewmembers, and 11 bystanders, and destroyed the aircraft. The terrorist was acting as an agent of the Libyan government, which materially supported the attack by providing intelligence agents and equipping the terrorist with explosives and the equipment needed to detonate them.

         At the time of the attacks, Libya enjoyed sovereign immunity pursuant to the Foreign Sovereign Immunities Act of 1976 ("FSIA"). See 28 U.S.C. § 1604. As a result of Libya's immunity from suit, victims were unable to pursue claims directly against Libya in United States courts. Appellants paid approximately $42 million in insurance claims resulting from the destruction of EgyptAir Flight 648 and approximately $55 million under their respective insurance contracts to the estates and families of Americans and foreign nationals killed in the Pan Am Flight 103 bombing.

         In 1996, however, Congress enacted the State Sponsors of Terrorism Exception to FSIA ("Terrorism Exception"), 28 U.S.C. § 1605(a)(7) (1996), repealed by Pub. L. 110-181, Div. A, § 1083(b)(1)(A)(iii), Jan. 28, 2008, 122 Stat. 341. The Terrorism Exception stripped sovereign immunity for "money damages . . . sought against a foreign state for personal injury or death that was caused by 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 . . . is engaged in by an official, employee, or agent of such foreign state . . . ." Id. Because the Department of State had previously designated Libya a state sponsor of terrorism as of December 29, 1979, Libya became susceptible to suit for wrongful death and personal injuries as a result of its sponsored terrorist activities, including the EgyptAir Flight 648 and Pan Am Flight 103 attacks.

         Following passage of the Terrorism Exception, Appellants filed suits in the United States District Court for the District of Columbia, asserting their insurance subrogation rights and seeking, inter alia, damages for the personal injury and wrongful death claims they paid under their contracts and insurance policies as a result of the EgyptAir Flight 648 and Pan Am Flight 103 attacks. See Hartford Fire Ins. Co. v. Socialist People's Libyan Arab Jamahiriya, No. 1:98-CV-03096 (D.D.C. filed Dec. 18, 1998) ("Pan Am"); Certain Underwriters at Lloyds London v. Socialist People's Libyan Arab Jamahiriya, No. 1:06-cv-00731 (D.D.C. filed Apr. 21, 2006) ("EgyptAir"). On January 28, 2008, President Bush signed the National Defense Authorization Act of 2008, Pub. L. No. 110-181, § 1083, which replaced Section 28 U.S.C. § 1605(a)(7) (the Terrorism Exception) with 28 U.S.C. § 1605A. This Section additionally allowed claims for property damage resulting from terrorism to be brought against a state sponsor of terrorism. As a result, Appellants amended their complaints, additionally asserting property damage claims against Libya pursuant to § 1605A.

         While Appellants' claims were pending, however, President Bush negotiated a settlement with Libya whereby the United States agreed to terminate all pend- ing lawsuits against Libya. In exchange, Libya paid the U.S. Government $1.5 billion to ensure payment to victims with claims against Libya. Pursuant to the settlement, Congress passed the Libyan Claims Resolution Act ("LCRA"). See Pub. L. No. 110-301, 122 Stat. 2999 (2008). Sections 5(a)(1)(A) and (B) of the LCRA provide that Libya "shall not be subject to the exceptions to immunity from jurisdiction" under the Terrorism Exception under FSIA and that any "private right of action relating to acts by a state sponsor of terrorism arising under Federal, State, or foreign law shall not apply with respect to claims against Libya . . . in any action in a Federal or State court."

         Subsequently, President Bush signed Executive Order No. 13, 477, providing further that "[a]ny pending suit in any court, domestic or foreign, by United States nationals . . . coming within the terms of Article I [of the Libya Claims Settlement Agreement] shall be terminated" and also that "[a]ny pending suit in any court in the United States by foreign nationals . . . coming within the terms of Article I [of the Libya Claims Settlement Agreement] shall be terminated." Executive Order No. 13, 477, 73 Fed. Reg. 65, 965 (Oct. 31, 2008). Pursuant to the Executive Order, the State Department referred certain U.S. nationals' claims against Libya to the Foreign Claims Settlement Commission ("Commission") that was funded by the $1.5 billion payment from Libya. The Executive Order did not direct the State Department to refer claims by foreign companies to the Commission; rather, it provided that with respect to suits by foreign nationals "[n]either the dismissal of the lawsuit, nor anything in this order, shall affect the ability of any foreign national to pursue other available remedies for claims . . . in foreign courts or through the efforts of foreign governments." Id.

         Citing the LCRA and the President's Executive Order, the Government moved to dismiss Appellants' claims for lack of subject matter jurisdiction. The district court dismissed Appellants' claims, holding that "[b]ecause the LCRA, Settlement Agreement, and Executive Order specifically and comprehensively withdraw any exception to sovereign immunity that may be provided in the FSIA with regard to [Libya's] pre-2006 support of terrorist acts, this Court lacks subject matter jurisdiction over the Libyan Defendants." Certain Underwriters at Lloyds London v. Great Socialist People's Libyan Arab Jamahiri-ya, 677 F.Supp.2d 270, 275 (D.D.C. 2010).

         Thereafter, some of the Appellants in this case submitted claims with the Commission for damages resulting from the Pan Am attack, but each claim was denied because of the Commission's "continuous nationality" jurisdictional rule requiring that claimants be U.S. nationals from the date of injury to the date of the espousal of their claims by the United States. Because of this rule, Appellants Certain Underwriters, Aviation & General, Aureus, and Riverstone did not submit claims for losses accruing from the EgyptAir Flight 648 attack because they and their insured are foreign nationals. Although Appellant New York Marine, a U.S. national, submitted a claim, the Commission concluded that it lacked jurisdiction because its insured, EgyptAir, was a foreign national. The Commission also denied claims alleging jurisdiction based on the subrogation interest of Pan Am, a U.S. corporation, because despite Pan Am's nationality, the claim belonged to a foreign national at the time it accrued.

         Appellants then filed complaints in the Court of Federal Claims, alleging that the Government took their property without just compensation in violation of the Fifth Amendment. Specifically, Appellants alleged that "the United States took the property of [Appellants] in the form of their legally cognizable Foreign Sovereign Immunities Act claims against [Libya]" for its role in the destruction of EgyptAir Flight 648 and the Pan Am Flight 103 attack. J.A. 983 ¶¶ 1-2. Appellants further alleged that "[t]he United States' actions in furtherance of restoring 'normal' relations with Libya directly resulted in the taking of Plaintiffs' judicially cognizable claims against Libya" and that "[t]he United States has deprived [Appellants] of their property, the lawsuits against Libya, without any remedy in either federal court or the [Commission]." J.A. 983-984 ¶¶ 1-2, 998 ¶ 58.

         The Government initially moved to dismiss for failure to state a claim and on the ground that the case involved a nonjusticiable political question-namely, the President's authority to settle their claims with Libya. The Court of Federal Claims denied the Government's motion, reasoning that Appellants do not question the President's authority to conduct foreign relations, but rather seek compensation for their terminated claims and the United States' decision to exclude them from the settlement proceeds. See Aviation & Gen. Ins. Co. v. United States, 121 Fed.Cl. 357, 366 (2015) ("Motion to Dismiss Order").

         After concluding that Appellants' claims did not present a nonjusticiable political question, the Court of Federal Claims granted summary judgment in the Government's favor. See Aviation & Gen. Ins. Co. v. United States, 127 Fed.Cl. 316 (2016) ("Summary Judgment Order"). The court determined that, while Appellants had a property interest in their lawsuits against Libya, no taking had occurred under the factors set forth in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). See Summary Judgment Order, 127 Fed.Cl. at 319 (citing Penn Central, 438 U.S. at 124). Specifically, the court found that Appellants "cannot claim an investment-backed expectation free of government involvement nor can they characterize the Government's action as novel or unexpected" because Presidents have a longstanding practice of settling and espousing claims against foreign sovereigns. Id. at 319-20. The court also emphasized the speculative nature of Appellants' economic injury, explaining that "it is skeptical that Plaintiffs would have been able to collect on [any] judgment" against Libya. Id. at 320. The court concluded that, as a result, "the [Appellants'] economic injury is not one that fairness and justice require be shifted to the public at large." Id.

         Appellants appeal. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

         Discussion

         We review the Court of Federal Claims' grant of summary judgment de novo, see Northwest Title Agency, Inc. v. United States, 855 F.3d 1344, 1347 (Fed. Cir. 2017) (citing TEG-Paradigm Envtl., Inc. v. United States, 465 F.3d 1329, 1336 (Fed. Cir. 2006)), applying the same standard as the trial court, Palahnuk v. United States, 475 F.3d 1380, 1382 (Fed. Cir. 2007). Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Northwest, 855 F.3d at 1347 (citing Castle v. United States, 301 F.3d 1328, 1336 (Fed. Cir. 2002)). We also review the Court of Federal Claims' decision on justiciability de novo. See Glass v. United States, 258 F.3d 1349, 1355 (Fed. Cir. 2001).

         I.

         We first address the justiciability of Appellants' claims.[1] In their complaints, Appellants alleged that "the United States took the property of [Appellants] in the form of their legally cognizable . . . claims against the government of Libya" for its role in the EgyptAir Flight 648 and Pan Am Flight 103 terrorist attacks and that they were "deprived . . . of their property, the lawsuit[s] against Libya, without any remedy in either federal court or the Foreign Claims Settlement Commission." J.A. 970 ¶ 1, 979 ¶ 39, 983 ¶ 1, 998 ¶ 58 (emphases added). During the litigation below and on appeal, however, Appellants shifted their argument, asserting that they "do not allege that the sale of their claims to Libya was a taking, but are challenging [the Government's] decision to exclude them from the distribution of [the Libya Claims Settlement Agreement] proceeds." Appellants' Br. 26. Appellants' arguments are thus twofold: (1) they had a property right in their lawsuits against Libya, which the Government took without just compensation, and (2) they were entitled to proceeds under the Libya Claims Settlement Agreement.

         The Government argues that both of these arguments present a nonjusticiable political question as Appellants "attempt to second-guess the President's authority to settle [their] claims . . . ." Appellee's Br. 53. Specifically, the Government argues that (1) "[t]he President's authority for the settlement agreement with Libya . . . is a quintessential example of the exercise of the President's broad constitutional powers in foreign affairs" that this court cannot address; and (2) Appellants "challenge[] the Executive Branch's implementation of the settlement with Libya-that is, the decision not to make provision for them under that settlement, " which would require judicial inquiry into the President's enforcement of the settlement agreement with Libya. Id. at 53, 54. We hold that the question of whether a Fifth Amendment taking of Appellants' alleged property right in their lawsuits occurred presents a justiciable claim, but the question of whether Appellants were entitled to proceeds from the Libya Claims Settlement Agreement presents a nonjusticiable political question.

         "The nonjusticiability of a political question is primarily a function of the separation of powers." Baker v. Carr, 369 U.S. 186, 210 (1962). Although distinct from jurisdiction, the political question doctrine bars our review of issues implicating questions committed to coordinate political departments. See Roth v. United States, 378 F.3d 1371, 1385 (Fed. Cir. 2004) ("Even if a court possesses jurisdiction to hear a claim, when that claim presents a nonjusticiable controversy, the court may nevertheless be prevented from asserting its jurisdiction.").

         The Supreme Court has articulated various formulations of what constitutes a political question depending on the circumstances of the case and what may "identify it as essentially a function of the separation of powers." Baker, 369 U.S. at 217. As the Court explained in Baker:

Prominent on the surface of any case held to involve a political question is found a textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving it; or the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion; or the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government; or an unusual need for unquestioning adherence to a political decision already made; or the potentiality of embarrassment from multifarious pronouncements by various departments on one question.

Id.

         The claims in Appellants' complaints regarding the Government's termination of their lawsuits against Libya state a justiciable takings claim. These claims do not cause us to question the terms of the Libya Claims Settlement Agreement itself, whether the President had authority to enter the settlement, or whether the President should have made provision for Appellants in the distribution of its proceeds. Rather, these claims require us to examine whether, under the Fifth Amendment, a taking occurred by the Government's espousal of Appellants' claims and termination of their lawsuits by reinstating Libya's sovereign immunity. This is a legal question for which we have judicially discoverable and manageable standards for resolution. See id.

         We hold, however, that to the extent Appellants seek judicial review of the President's decision to exclude them from the settlement's proceeds, Appellants raise a nonjusticiable political question. We have identified similar questions as nonjusticiable political questions. In Belk v. United States, 858 F.2d 706, 710 (Fed. Cir. 1988), we addressed claims brought by the released victims of the Iranian hostage crisis. The United States had settled their claims by signing agreements (the Algiers Accords) with Iran. See id. at 707. The victims sued the Government, alleging a taking in violation of the Fifth Amendment and seeking the full amount of damages they would have recovered against Iran had their claims not been settled. Id. There, we found the case presented a nonjusticiable question because the appellants questioned whether the President should have sought better terms in the settlement agreement. We held that "[t]he determination whether and upon what terms to settle the dispute with Iran . . . necessarily was for the President to make in his foreign relations role." Id. at 710. We concluded that the appellants' claims were not appropriate for judicial resolution because "judicial inquiry into whether the President could have extracted a more favorable settlement would seriously interfere with the President's ability to conduct foreign relations." Id.

         We hold that Appellants' claims directed to their exclusion from the distribution of proceeds arising from the Libya Claims Settlement Agreement present a similar nonjusticiable political question. As Appellants concede, see Appellants' Reply Br. 26, foreign relations and settlements to resolve foreign conflicts are soundly committed to the President's discretion. See Oetjen v. Cent. Leather Co., 246 U.S. 297, 302 (1918) ("The conduct of the foreign relations of our government is committed by the Constitution to the executive and legislative-'the political'- departments of the government . . . ." (citation omitted)). It follows that the President had complete discretion and authority to implement the settlement with Libya and to decide to whom the settlement funds would be distributed. Appellants' argument that they should have been included in the distribution of settlement funds questions the President's policy decision to exclude them. The President's policy decision regarding the settlement proceeds is not a determination for judicial resolution. It is a question '"of a kind clearly for nonjudicial discretion, ' and there are no 'judicially discoverable and manageable standards' for reviewing such a Presidential decision." Belk, 858 F.2d at 710 (quoting Baker, 369 U.S. at 217). "The Judiciary is particularly ill suited to make such decisions, as 'courts are fundamentally underequipped to formulate national policies or develop standards for matters not legal in nature.'" Japan Whaling Ass'n v. Am. Cetacean Soc'y, 478 U.S. 221, 230 (1986). Thus, we do not reach Appellants' arguments regarding their exclusion from the settlement proceeds. We only address their alleged claims that termination of their lawsuits against Libya constituted a taking under the Fifth Amendment.

         II.

         The Fifth Amendment states that private property shall not be taken "for public use, without just compensation." U.S. Const. amend. V. To state a claim for a taking, Appellants must establish that they had a cognizable property interest and that their property was taken by the United States for a public purpose. Acceptance Ins. Cos. v. United States, 583 F.3d 849, 854 (Fed. Cir. 2009). We assume, without deciding, that Appellants' lawsuits against Libya constituted a cognizable property interest for purposes of a takings ...


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