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Take It to the Bank

This coming week the Supreme Court will hear argument in Bank Markazi v. Peterson (briefs etc here). Here’s what I’ve previously written about the case:

Bank Markazi v. Peterson … concerns nearly $2 billion in foreign currency reserves held in Europe by the Central Bank of Iran. The plaintiffs hold default judgments against Iran and tried to seize the assets. Under ordinary legal principles (the Foreign Sovereign Immunities Act, as well as various provisions of New York’s Uniform Commercial Code), the assets can’t be attached. The plaintiffs’ lawyers, however, persuaded Congress to enact the Iran Threat Reduction and Syria Human Rights Act of 2012….

The statute’s sole purpose was to dictate a result in this one case: by its terms, it applies only to “the financial assets that are identified in and the subject of proceedings in the United States District Court for the Southern District of New York in Peterson et al. v. Islamic Republic of Iran et al., Case No. 10 Civ. 4518 (BSJ) (GWG).” The statute provides that the assets “shall be subject to execution” upon only two undisputed findings: that Bank Markazi has a beneficial interest in the assets, and that no one else does. The statute preempts any contrary provision of New York law, and it specifically provides that is applicable to no other case.

United States v. Klein (1872) holds that Congress may not prescribe a rule of decision to the courts. That seems clear, and fundamental to the separation of powers. However, it’s actually amazing how narrow the principle is: Congress may change the substantive law for pending cases. (They’ll be decided under the new law.) The Court  distinguished Klein in Robertson v. Seattle Audubon Society, (1992), where Congress had enacted a statute to resolve—i.e., ding—two environmental suits by deeming certain forest management practices to satisfy applicable requirements.

It’s exceedingly hard to have any sympathy with the Petitioners here. After all, this is Iran, and the assets are sought to satisfy judgments for victims of Iran-sponsored terrorism. (Ok: the Bank isn’t technically the government of Iran, and this all happened before the President and Secretary Kerry put these people on their best behavior. But still.) For all that Congress’s action here—and the full-throated defense a DoJ, legislators, and various amici—has me nervous. I find it very difficult to articulate any meaningful difference between this statute and a legislative act that simply says: “A shall pay B a million bucks. And the federal courts shall rule accordingly.” (Various briefs try to distinguish this case; none look persuasive.)

The Founders were well aware of this menace of “trial by legislature.” Britain offered countless examples, as did the practice in the states. And we know the Founders didn’t like it: cases and controversies are for independent Article III courts, not for Congress. But how do these general precepts cash out—what are they worth, in real life? Not a whole lot. A few examples:

We know that Congress can’t re-open final judgments. Why not? Because if an independent judiciary means anything, it must mean that its judgments can’t be subject to executive or legislative revision. A true and important point—but not one of any great practical consequence. (E.g., Congress may pass a new law that gives plaintiffs a new case.)

Federal court jurisdiction comes from Congress (except in the handful of cases where it’s mandatory). Congress can withhold it. Presumably, though, it will still want to have stuff adjudicated. So: could Congress give that business to bodies other than Article III courts and vest “the judicial power” in those bodies? General answer: yes. Except it cannot divest the “core” of the judicial power in that fashion. Ironically that “core” is said to consist of state law claims over which federal courts barely have jurisdiction. It’s a bankruptcy thing. The entire adjudicatory machinery of the administrative state is left untouched.

Bank Markazi illustrates substantially the same difficulty. The Klein case mentioned earlier is notoriously opaque. The FedCourts profession’s perennial debate about the case is on display here in rival amicus briefs, both very good: Ernie Young on the Bank’s side (with obvious misgivings); Ed Hartnett and Erwin Chemerinsky on the Respondents’. At a minimum Klein seems to say something like this: Congress can obviously withhold jurisdiction. But it can’t keep the courts open and then instruct them to do something they deem unconstitutional. Even that much isn’t entirely free from doubt, though, and there’s a never-ending debate over whether any broader principle is at stake. E.g., could Congress (as here) enact a rule of construction that well-nigh dictates the result in a handful of known, pending cases? Or does it have to change the substantive law? Did it do so here—or did it merely instruct the courts to depart from otherwise operative law in this one case?

It’s one thing to spout separation-of-powers slogans. It’s fiendishly hard to formulate operational rules, and there’s the added question of whether the Court could actually sustain those rules over time against a Congress of a different mind. The case law illustrates the point. The Court likes to pontificate about its prerogative—in overwrought moments, its supreme and exclusive authority—to “say what the law is.” But in separation-of-powers cases of this sort, the Court (at least in modern times) doesn’t like to pick fights with Congress or to lay down hard rules. Usually, it avoids the problem by torturing some statute or changing the subject. Meanwhile, murky cases like Klein are left on the books—perhaps, to be mobilized when no other choice seems feasible.

Bank Markazi offers plenty of opportunities to steer clear of the cosmic issues (e.g., the mysteries and peculiarities of foreign sovereign immunity law). Considering how much could go wrong here, avoidance might not be a bad outcome.

Reader Discussion

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on January 08, 2016 at 11:25:50 am

Are we not in an era in which Rules of Policy are deemed (judicially) valid to delineate relationships?

Rules of Policy encompass legislation (and its excrescences).

Are the Foreign Sovereign Immunities Act, as well as various provisions of New York’s Uniform Commercial Code anything more than Rules of Policy, which delineate relationships?

If we are to have Rules of Policy that delineate relationships, what are the "limiting principles" for that delineation?

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Image of R Richard Schweitzer
R Richard Schweitzer
on January 09, 2016 at 13:23:43 pm

Someone educate me. Why don't the principles proscribing bills of attainder apply here?

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z9z99
on January 09, 2016 at 15:40:18 pm

For the record, I disagree with Hartnett and Chemerinski in their amicus brief. Their citation of Plaut v. Spendthrift Farms undermines their argument. Plaut cited <United States v. Lovett which contains the statements

They stand for the proposition that legislative acts, no matter what their form, that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial are bills of attainder prohibited by the Constitution.

(emphasis added unless I screwed up the html)

and

The fact that the punishment is inflicted through the instrumentality of an Act specifically cutting off the pay of certain named individuals found guilty of disloyalty, makes it no less galling or effective than if it had been done by an Act which designated the conduct as criminal.

.

A key distinction then is whether the result of Congressional action can be interpreted as punitive. So what is the presumptions? Is the effect of an act of Congress presumed to be non-punitive until proven otherwise, or do due process concerns require the presumption to go the other way? (cf. Justice Roberts construing a "fine" as a "tax" to save legislation that is otherwise unconsititutional).

Similarly, the amici's reliance on footnote 9 in Plaut is unconvincing. The text before the footnote contains the statements

In point of fact, § 27A(b) does not "single out" any defendant for adverse treatment (or any plaintiff for favorable treatment). Rather, it identifies a class of actions (those filed pre-Lampf, timely under applicable state law, but dismissed as time barred post-Lampf ) which embraces many plaintiffs and defendants, the precise number and identities of whom we even now do not know.

and

To be sure, the class of actions identified by § 27A(b) could have been more expansive (e. g., all actions that were or could have been filed pre-Lampf ) and the provision could have been written to have prospective as well as retroactive effect (e. g., "all post-Lampf dismissed actions, plus all future actions under Rule 10b-5, shall be timely if brought within 30 years of the injury").

So it appears that valid legislation at least must have the possibility to apply to "a class," even if the class at the time of consideration consists of only one type of action, or one person. An exclusive class, that can never affect more than a single named individual is not really a class and violates the rationale of the prohibition against bills of attainder.

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z9z99
on January 09, 2016 at 15:55:59 pm

Correct me if I err, but there WAS a judicial determination (albeit by default judgment) of the obligation involved.

The legislation appears to attend to the issue of means for enforcement of the judgment.

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Image of R Richard Schweitzer
R Richard Schweitzer
on January 09, 2016 at 16:14:16 pm

R,

The legislation appears to attend to the issue of means for enforcement of the judgment.

True. But why make a distinction that only applies in a single case, and does this fact affect the validity of the legislation?

What is the difference in principle between these two statements?:

The fact that the punishment is inflicted through the instrumentality of an Act specifically cutting off the pay of certain named individuals found guilty of disloyalty, makes it no less galling or effective than if it had been done by an Act which designated the conduct as criminal.

.And

The fact that the punishment is inflicted through the instrumentality of an Act specifically abrogating the protection of the Foreign Sovereign Immunities Act for named individuals found liable for certain acts makes it no less galling or effective than if it had been done by an Act which designated the conduct as criminal.

.

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z9z99
on January 09, 2016 at 16:18:11 pm

The legislation appears to attend to the issue of means for enforcement of the judgment.

True. But why make a distinction that only applies in a single case, and does this fact affect the validity of the legislation?

What is the difference in principle between these two statements?:

The fact that the punishment is inflicted through the instrumentality of an Act specifically cutting off the pay of certain named individuals found guilty of disloyalty, makes it no less galling or effective than if it had been done by an Act which designated the conduct as criminal.

.And

The fact that the punishment is inflicted through the instrumentality of an Act specifically abrogating the protection of the Foreign Sovereign Immunities Act for named individuals found liable for certain acts makes it no less galling or effective than if it had been done by an Act which designated the conduct as criminal.

-Edited for sloppy HTML

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z9z99
on January 09, 2016 at 16:29:41 pm

Richard & Z:

Help me out here; Was not the judgement made against the Sovereign Government of Iran and NOT the bank.
Is not the obligation only enforceable against Iran?
If this is so, then Z's position would seem to be correct? - especially in light of the provisions (as stated above) in the Foreign Sovereign Immunities Act and New York's own Commercial Codes.

so what am I missing?

But first back to NFL playoffs!

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gabe
on January 09, 2016 at 23:08:49 pm

If we are to have Rules of Policy that delineate relationships, what are the “limiting principles” for that delineation?

Here, I'll get it started, using your terms.

First, unless the relationship affects others beyond their subjective sensibilities, the rules of the relationship should largely be left to those within the relationship.

The rules delineating the relationship should be prospectively neutral; i.e. they should not recognize class, social standing; pedigree, etc.

Enforcement and administration of the rules should not be delegated to an interested third party without the consent of the original parties to the relationship.

The rules of policy must be sufficiently clear that the results of their application are reasonably predictable.

The burdens imposed by the rules must originate with the representative authority, not the executive or judicial.

Exceptions in the applications of the rules must conform to all other limiting principles, just as a de novo rule should.

Just as authorities should refrain from imposing rules unless non-subjective interests outside the relationships are implicated, the use of force should be limited by the same principle.

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z9z99
on January 11, 2016 at 12:44:27 pm

Gabe,

The issue seems to concern - assets of the government of Iran.

Plaintiffs claim an interest in them, which appears to have been judicially confirmed.

The assets are in the possession of BM (which is probably Iran controlled - but no matter), but are beneficially "owned" by Iran; and BM asserts that two pieces of legislation (Rules of Policy) insulate those assets from any claims of others because they are "owned" by a sovereign state (not owned by BM).

Unlike LAW, Rules of Policy are subject to amendments, modifications, even recession by the creators. That was done. There are NO limiting principles.

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Image of R Richard Schweitzer
R Richard Schweitzer
on January 11, 2016 at 14:01:29 pm

z9:

Sorry to be so late in reply to your excellent summary of what the Limiting Principles **ought to be** (or "should" encompass).

That may differ from "what **are** " the Limiting Principles.

From your first element, I sense we may not be considering the same circumstances.

"First, unless the relationship affects others beyond their subjective sensibilities, the ***rules of the relationship*** should largely be left to those within the relationship."

The original query addressed Rules (of Policy) that *delineate* relationships, that is, establish the nature and "rules governing" relationships.

Your final element seems to confirm my sense of our departures:

"Just as authorities should refrain from imposing rules unless non-subjective interests outside the relationships are implicated, the use of force should be limited by the same principle."

Perhaps we can agree that Rules of Policy are established for objectives, such as a particular form of social order or even "international order" among sovereigns.

We are aware that an embodiment of authority (the "State") promulgates Rules delineating relationships for particular objectives (economic, social and political) by ** inferring** "non-subjective interests" outside those of the participants in the relationship - and coercions are ever present. ARE there any Limiting Principles (do they exist) in the quests for those objectives? If so, how are they applied?

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Image of R Richard Schweitzer
R Richard Schweitzer
on January 11, 2016 at 15:37:48 pm

Richard,

With regard to your question, I think it may clarify things to consider the concept of phenomena. If we look at Prof. McGinnis's' post on the "Last Period Problem," one may ask rather he is referring to a problem that is to be solved, or a phenomenon to be accommodated. This is analogous to classifying health concerns as diseases, (such as pneumonia or leukemia) to be cured, or "conditions" (such as high blood pressure) that must be managed lest they become diseases.

Phenomena exist independently of the preferences of humans, and are the source of unintended consequences, policy failures, and no small measure of magical thinking. So with this definition in mind, I submit that there, even in the absence of limiting principles, limiting phenomena. Among these are:

1.) That mindless rules will be followed mindlessly.

2.) That the people who are subject to rules are often smarter than the people who make the rules, and have greater incentive to exploit those rules and produce outcomes in ways unintended by the rule makers.

3.) That value is nothing more than a collection of opinions, and therefore is never more than an unfavorable circumstance away from vanishing.

4.) That not all incentives can be monetized.

5.) That there are certain structures within the human psyche that are beneficial to human functioning and survival that go in and out of political fashion, but are nonetheless beneficial to human functioning and survival.

6.) The great paradox: That it is compelling for human societies to make struggle unnecessary for survival, but impossible to make it unnecessary to flourish and thrive.

7.) That the socializing capacity of individual humans and groups of humans is limited no matter how much we may sing "Alle Menschen werden Bruder."

8.) That dependence is destructive to a great many people, and cannot be made otherwise.

9.) That people are inherently bipolar in their affections and aversions, fears and ambitions, loves and hates, risk avoidance and risk seeking, etc., etc. and this fact, and the consequences that flow from it cannot be accommodated by policy interventions that are not themselves bipolar.

10.) That satisfaction is always ephemeral; that a man's ambition is never final until he dies.

11.) That, per Schopenhauer, a man cannot want what he wants, and there is no authority that can tell him what he wants.

For starters anyway.

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z9z99
on January 11, 2016 at 18:17:05 pm

Ok - the "beneficial" ownership was the element I was missing.
And, I agrre - there are no limiting principles under such a conception of rule.

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gabe
on January 11, 2016 at 18:23:50 pm

Z:

You have outdone yourself again. Especially loved #2, with #'s 7.8 and 10 coming in a close second.

Seems to me that the limiting *principles* CAN NOT be formulated / employed until AND unless the rule makers are willing and ABLE to recognize the limiting phenomena. I submit that it serves their own vested interests to be so willfully obtuse.
Thus, the only limiting principle is that of the Circus tent: do not do anything as to so enrage the animals that they may bite!

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gabe
on January 11, 2016 at 22:28:36 pm

z9

"I submit that there [are], even in the absence of limiting principles, limiting phenomena. Among these are:"

Understanding phenomena as sensorially observed conditions, events and material matter distinct from those "conceived" of as derived by thought or intuition, each item on that list of Phenomena (proposed as limiting) would merit a bowl of walnuts and a bottle (or more) of light Madera for even the most surface of examinations - particularly into whether there are limiting or extending effects to be observed.

We probably observe in more (if not in all) cases in matters of Rules of Policy (delineating relationships) in which particular phenomena (in large measure because of the objectives of the Rules) not only do NOT limit, but extend, redirect and even pervert the Rules (not to mention their administration).

So, perhaps, those phenomena are not so much "limiting" as re-formulative.

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Image of R Richard Schweitzer
R Richard Schweitzer
on January 12, 2016 at 01:27:12 am

Richard,

Walnuts?

I would argue that,even to the extent that you are correct that the phenomena cited are "redirecting," that in itself is limiting in that it frustrates the designs of the policy makers.

Not to stray too far from Professor Greve's original post however, I would make the following observation:

The statute that is the subject of Bank Markazi case apparently was specifically limited to compensatory damages. One suspects that counsel for the Congress knew that any hint of punitive damages would make the statute a bill of attainder and void on that basis. But one must then wonder why Congress passed such an odd and pinched bill; why flirt with invalidity on the ground that it singled out a specific individual (the real party in interest against whom default judgment entered) and not codify a general principle, i.e. that The Foreign Sovereign Immunities Act shall not apply when compensation is owed as a result of state-sponsored terrorism? Why specifically limit the holding to one specific claim?

It is not hard to fathom that what dictated the Congressional course was the concept of precedent, and the "phenomenon" that the perception of precedent would have undesirable consequences. Specifically, it is not unheard of that some, rightly or wrongly accuse the United States of state-supported terrorism, but more particularly, such a general principle as described above might cause consternation in other sovereign states that have at various times been accused of state-sponsored terrorism; e.g. France, Israel, Pakistan, Syria, China, Myanmar, Argentina, Chile, Haiti, El Salvador, Serbia, Russia etc,. etc. It would not do for a curious American statute to create a precedent by which courts in other countries seize diplomatic automobiles,or state-owned aircraft, or the KFC recipe to compensate sympathetic citizens for the perceived acts of another sovereign state.

The attempt to avoid these perceptions seems misguided, and naive. It is not the limited language of the statute that would create the unwanted precedent. The alarming precedent is that such a statute could be upheld, with similar legislation repeated at the whim of Congressional mood. This precedent would provide no reassurance to other sovereign states, friend and foe alike, that promiscuous seizure and confiscation of assets is not now a part of American policy, and even more importantly, it would disquiet citizens of this country that the prohibition against bills of attainder is merely a theoretical obstacle to be overcome by artful drafting. One could imagine a politically disfavored defendant being deprived of the protection of bankruptcy law, or the government contractor's defense in a particular case. One might fear for anyone else that Congress is of the mind to sanction by depriving them case-by-case of the protection of law, withourt specifically proscribing the conduct for which they are being sanctioned.

No doubt the government of Iran is loathesome. That fact should not create potential perils for citizens of this country by turning a blind eye to principle.

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z9z99

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