There has been a recent surge in lawsuits brought under the Anti-Terrorism Act (ATA), enacted in 1990 to enable persons injured by “an act of international terrorism” to bring civil suits in federal court. For more than a decade after its enactment, not a single reported case referenced the ATA’s civil suit provisions. Indeed, in 2002, the U.S. Court of Appeals for the Seventh Circuit stated that it was interpreting the ATA as a “case of first impression,” and that “[n]o court has yet considered the meaning or scope [of the civil suit provisions] and so we write upon a tabula rasa.” Boim v. Quranic Literacy Institute (Boim I), 291 F.3d 1000, 1001, 1009 (7th Cir. 2002). By contrast, there are now more than 100 reported decisions, with that number mounting daily, and the Second Circuit recently certified two questions to the New York Court of Appeals in a closely watched ATA case.
The surge in litigation results from courts, understandably sympathetic toward victims of terrorism, creatively interpreting the ATA so as to allow plaintiffs to bring lawsuits against third-party institutions seemingly unconnected to terrorist acts, especially banks and other financial institutions. As one dissent noted in a Seventh Circuit decision regarding the ATA, albeit in a slightly different context, “[t]his is judicial activism at its most plain,” motivated by “zeal to bring justice to bereaved parents.” This article analyzes the trend.
Congress enacted the ATA in response to the terrorist hijacking of the cruise ship the Achille Lauro, as well as the bombing of Pan Am Flight 103 over Lockerbie, Scotland. The victim’s family could bring suit in the United States against the Palestine Liberation Organization only because the attack occurred in navigable waters, thus allowing for federal admiralty jurisdiction. If the terrorist act had occurred on foreign soil, the victim’s family would have been unable to bring suit. The Pan Am victims’ families found many attorneys willing to sue Pan Am, but none willing to sue the actual perpetrators of the bombing. The ATA remedied the jurisdictional gap highlight by the Achille Lauro and Lockerbie tragedies by allowing victims to bring suit over terrorist attacks occurring abroad. See Boim I, 242 F.R.D. at 1010-1011.
The language of the ATA, on its face, appears to limit civil suits to actions brought against terrorist parties. The statute states: “Any national of the United States injured in his or her person, property or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States…” 18 U.S.C. §2333(a). The ATA defines international terrorism as “violent acts or acts dangerous to human life that are in violation of the criminal laws” of the United States. See 18 U.S.C. §2331.
In congressional hearings on the ATA, members of Congress and expert witnesses each agreed that the ATA targeted terrorists, and they recognized that few terrorists were located or had assets in the United States. The Deputy Legal Adviser of the Department of State testified that civil suits under the ATA would be limited to the “few terrorist organizations” that “have cash assets or property located in the United States that could be attached and used to fulfill a civil judgment.” See Statement of Alan J. Kreczko Deputy Legal Adviser on S. 2465 2 (July 25, 1990); see also H.R. Rep. No. 102-1040, at 17 (1992). Representative Edward F. Feighan, a cosponsor of the ATA, stated: “I don’t think that we’re under any illusions that, in many cases, it may be difficult to get custody of known terrorists or to identify terrorist assets held in this country.” See Antiterrorism Act of 1991: Hearing Before the Subcomm. on Intellectual Property and Judicial Administration of the Comm. on the Judiciary H. of Representatives, 102nd Cong. 13 (1991).
Non-Terrorist Third Parties
The earliest lawsuits brought against banks under the ATA were often swiftly dismissed. In Stutts v. De Dietrich Group, 03-CV-4058, 2006 WL 1867060, at *2-4 (E.D.N.Y. 2006), for example, the court dismissed the claims of a group of American soldiers who had been injured during the destruction of Iraq’s stockpiles of chemical weapons after the first Iraq war. The soldiers sued the banks that had provided letters of credit to Iraq, allegedly enabling Iraq to obtain the chemical weapons.
Quoting the ATA’s definition of “international terrorism,” the Stutts court explained: “The plain language of the ATA compels the conclusion that, by engaging in commercial banking activity, the Bank Defendants were not involved in ‘violent acts or acts dangerous to human life.’” Id. Thus, the court concluded that the banks’ conduct “does not constitute international terrorism.”
The Stutts court also noted that the ATA imposes a proximate cause requirement, namely that the injuries occurred “by reason of an act of international terrorism.” The court asserted that issuing letters of credit to manufacturers did not proximately cause the plaintiffs’ injuries, nor was it reasonably foreseeable that the letters of credit would be used specifically for manufacturing chemical weapons. Id. at *2-3.
Sympathy for Victims
The recent surge in civil actions brought under the ATA appears to be driven by courts permitting suits against seemingly innocent third parties. This may be an instance “of the adage that ‘bad facts make bad law.’” See Haig v. Agee, 453 U.S. 280, 319 (1981). As Justice Wendell Holmes wrote a century ago, the reason “hard cases make bad law” is because an emotional case “appeals to the feelings and distorts the judgment.” Northern Securities v. United States, 193 U.S. 197, 400 (1904) (Holmes, J., dissenting).
The Seventh Circuit’s decision in Boim v. Holy Land Foundation for Relief and Development (Boim III), 549 F.3d 685, 690 (7th Cir. 2008) (en banc) has been widely relied upon by courts in expanding the scope of the ATA. In Boim III, the plaintiffs, whose son had been killed in Israel by Hamas, sued several non-profit organizations in the United States that allegedly donated to Hamas. The key issue was whether the donations gave rise to claims under the ATA.
The majority in Boim III held that the ATA did not impose secondary liability on donors or supporters of terrorism. However, the majority found an “alternative and more promising ground for finding donors” liable under the ATA, namely, imposing primary liability through “a chain of incorporations by reference” via several different statutory provisions. Boim III, 549 F.3d at 690. With respect to the first link in the chain—how the donations could be considered “acts dangerous to human life,” as required by the ATA—the majority devoted a single sentence to the analysis, stating that the act of giving money to Hamas is akin to “giving a loaded gun to a child (which also is not a violent act), [but which] is an ‘act dangerous to human life.’” Id.
Upon that single sentence much recent case law has been premised. However, while an admirable rhetorical flourish, the analogy is strained. Money, unlike a gun, is not by its nature a dangerous object. Indeed, the United States as amicus curiae in Boim III expressly rejected the idea that providing money constituted a “violent act or an act dangerous to human life.”
In the context of banks that provide routine commercial services to its customers, the analogy is even more strained. A more apt analogy would be to say that a bank that transfers money to an organization that ends up using it in an evil way is akin to passing along money to a person who unexpectedly buys a gun and shoots people. Or, to flip the analogy, forcing a bank to pay damages for terrorist acts simply because terrorists received fund transfers through the bank is akin to forcing a bank to pay damages for a shooting just because the killer bought the gun with money withdrawn from the bank.
Accusing Banks of Terrorism
Nevertheless, other courts soon followed Boim III’s treatment of donations as “acts dangerous to human life.” In Stansell v. BGP, 09 Civ. 2501, 2011 WL 1296881 (M.D. Fla. March 31, 2011), the U.S. District Court in Florida adopted Boim III’s analogy of providing funds to a terrorist organization with providing a loaded gun to a child, concluding that, although transferring funds “may not be violent, it is clearly dangerous to human life.”
Other courts expanded Boim III’s reasoning beyond the realm of conscious payments or donations to include even the routine processing of wire transfers by third-party financial institutions. Emblematic of the seemingly extreme results caused by this interpretation is the statement in a recent federal district court decision that “plaintiffs have sufficiently alleged that defendant [bank] UBS committed acts of international terrorism” for processing three wire transfers totaling $25,000, including a wire transfer from an organization that, at the time, was not even on the restricted list of the Office of Foreign Assets Control. Goldberg v. UBS, 660 F.Supp.2d 410, 427 (E.D.N.Y. 2009).
The courts that have allowed claims to proceed against financial institutions often focus upon the difficulties victims of terrorism would otherwise face in trying to collect damages. In Strauss v. Credit Lyonnais, 2006 WL 2862704, *18 (E.D.N.Y. 2006), the court wrote: “Because money is fungible, it is not generally possible to say that a particular dollar caused a particular act or paid for a particular gun. If plaintiffs were required to make such a showing, 2333(a) enforcement would be [so] difficult that the stated purpose would be eviscerated.”
Some other courts, however, have continued to reject attempts to make international banks act as the financial guarantors of the heinous acts of terrorist groups. See, e.g., Tamam v. Fransabank, 677 F.Supp.2d 720, 728 (S.D.N.Y. 2010) (“the events giving rise to the physical injuries and deaths for which Plaintiffs seek redress are missile attacks in Israel, not fund transfers in New York”); Licci ex rel. Licci v. Lebanese Canadian Bank, 704 F.Supp.2d 403, 408 (S.D.N.Y. 2010) (similar language), certified to the New York Court of Appeals, 673 F.3d 50 (2d Cir. 2012).
One of the two ATA-related questions currently pending as certified questions to the New York Court of Appeals in the Licci case is whether jurisdiction over a bank exists under state law for injuries caused in a terrorist attack where the bank’s only relevant actions were to process wire transfers. Licci, 704 F.3d at 72. While the Second Circuit took pains to limit the certified question to the issue of jurisdiction, the Court of Appeals’ decision could impact future ATA litigation. For example, banking defendants have frequently argued that plaintiffs lack standing because injuries caused by acts of terrorism “result from the independent action of some third party not before the court”—that is, the terrorists—and therefore are not “fairly…trace[able]” to the banks’ processing of fund transfers. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (brackets and ellipses in original). If the Court of Appeals rules on the jurisdictional issue that there is an insufficient nexus between acts of terrorism and commercial banking transactions, future ATA plaintiffs may struggle to show standing, namely that injuries from terrorism are fairly traceable to commercial banking transactions.
Placing Liability Not Cost-Free
On a basic level, to interpret the ATA as allowing suits against banks for routine wire transfers violates the statute’s clear language. “It is elementary that the meaning of a statute must, in the first instance, be sought in the language in which the act is framed, and if that is plain, and if the law is within the constitutional authority of the law-making body which passed it, the sole function of the courts is to enforce it according to its terms.” Caminetti v. United States, 242 U.S. 470, 485 (1917); see also United States v. Ron Pair Enters., 489 U.S. 235, 241 (1989).
As a matter of public policy, it is no doubt wise to be hawkish against the evils of terrorism. But expanding the scope of the ATA beyond its plain statutory terms creates a parade of horribles, making it difficult, if not impossible, to draw readily identifiable lines between proper and improper conduct and creating significant financial uncertainty, while spurring much private litigation. Plus, if Congress wishes to extend the ATA to non-terrorist third parties, especially for routine commercial transactions, it should be given the opportunity to amend the ATA in that way.
But Congress may not wish to do so, and for good reason. Allowing such a broad scope to the statute could negatively affect international relations and U.S. businesses. Congress had good reason to be cautious about the range of defendants ensnared by the ATA, including the fear that other nations would allow similar claims to be brought against U.S. entities for merely processing transactions. One need only consider how a relatively repressive government might choose to force U.S. companies to compensate “victims” of local dissident groups to recognize the dangers here.
For this very reason, when Congress enacted the terrorism exception to the Foreign Sovereign Immunities Act, a provision conceptually similar to the ATA, it did so in an extremely limited manner. “While such legislation had long been sought by victims’ groups, it had been consistently resisted by the executive branch. Executive branch officials feared that the proposed amendment to FSIA might cause other nations to respond in kind…” Price v. Socialist People’s Libyan Arab Jamahirya, 294 F.3d 82, 92 (D.C. Cir. 2002). Congress’ “delicate legislative compromise” limited suits to specifically-designated terrorist states, and even then allowed those claims to proceed only under certain conditions. It seems unlikely that Congress, after such a careful compromise as to which terrorist states could be sued, would nevertheless sweepingly permit third-party financial institutions to be sued as if they were terrorists.
There is another danger with punishing banks for routine wire transfers. Currently, one of the greatest features of our banking system is that it is blind. Banks do not discriminate on the basis of race, religion, or national origin when processing a fund transfer. “Racial profiling” of fund transfers does not exist. If, however, courts agree to impose massive damages upon a bank because a wire transfer ended up in the hands of a terrorist group, it is not hard to foresee banks instituting a profiling system for funds sent to certain classes of people, including those belonging to the “wrong” religion, country, or ethnic group.
Under developing ATA jurisprudence, not only do bad facts make bad law, but bad acts also make bad law.
Lanier Saperstein is a partner and Geoffrey Sant is special counsel at the New York office of Dorsey & Whitney.