()

A federal appeals court on Wednesday affirmed a decision ordering nearly $2 billion held in frozen New York bank accounts to be handed over to claimants who sued Iran over its role in multiple acts of terrorism. Iran had appealed the decision last fall.

The ruling by the U.S. Court of Appeals for the Second Circuit paves the way for the largest single recovery of sovereign assets by victims of state-sponsored terrorism to date, according to a lawyer for the plaintiffs. More than 1,200 victims of terrorism or their surviving families stand to share in the funds, which amount to roughly $1.9 billion including interest. The money has been frozen for years in New York while ownership of the assets—and the right of the victims to seize them under a panoply of U.S. terror laws—was exhaustively litigated.

“I’m elated, both for my clients and for the team of lawyers who have invested a significant proportion of their lives and careers to this case,” said Liviu Vogel of New York’s Salon Marrow Dyckman Newman & Broudy, one of the claimants’ lawyers. “But I’m especially happy for my clients, who have seen their day in court, and their judgments have now been affirmed in a substantial way.”

The underlying case, Peterson v. Iran, was filed by lawyers Steven Perles and Thomas Fortune Fay back in 2001 on behalf of 812 victims or victims’ relatives in the 1983 Marine barracks bombing in Beirut. The plaintiffs won a $2.65 billion default judgment in 2007, but since then they haven’t collected a penny. In 2011, the Peterson claimants teamed up with hundreds of other U.S. terror victims holding their own terror-related judgments to push for the frozen bank assets.

Under New York state law, judgment creditors have a right to require a bank to freeze assets pending a court evaluation of their claims. It fell to Vogel to prove that accounts held by Citibank in New York in the name of an international securities intermediary, Clearstream Banking S.A., were actually owned by Iran’s state-run Bank Markazi.

Last July, U.S. District Judge Katherine Forrest in Manhattan ruled that the assets could be used to satisfy the victims’ judgments under three separate anti-terror laws. She ordered the funds placed in a trust pending Iran’s and Clearstream’s appeals. Clearstream settled with the plaintiffs earlier this year, while Iran appealed.

James Bonner of Stone Bonner & Rocco handled the Second Circuit appeal for all the terror claimants. Andreas Frischknecht of Chaffetz Lindsey made the case for Iran. Frischknecht didn’t respond to an emailed request for comment at press time, but Vogel told us the decision leaves Iran and its lawyers with few remaining options. Given the political and financial ramifications of the decision, Iran is likely to seek a rehearing. Vogel predicted the petition would fail, however, noting that the Second Circuit grants rehearings less frequently than other circuit courts. (U.S. District Judge Jose Cabranes, who was designated to sit on the panel in the Peterson appeal, explained that reluctance in a May 27 decision in an unrelated case.) Iran may also petition the U.S. Supreme Court to hear the case.

In any case, Vogel said he’s hopeful that recovery for the plaintiffs is now just months away. “We anticipate that our clients will be free and clear to collect their judgment,” he said.

Meanwhile, another $500 million to $700 million in assets may soon be recovered by the same plaintiffs coalition in a different Iranian asset forfeiture case. Last fall, in a case originally brought by the U.S. Attorney’s Office in Manhattan and subsequently joined by the plaintiffs, Judge Forrest ruled that a Manhattan office tower could be confiscated for “concealing Iranian assets” in violation of U.S. sanctions. She issued a final order in April that assets must be turned over to the claimants. That decision has also been appealed, this time by a group of claimants who are holding out for a larger share of the assets.