Harrison v. Republic of Sudan, No. 14-121-cv (2d Cir. Sept. 23, 2015) [click for opinion]

The Republic of Sudan (“Sudan”) appealed three orders that required respondent banks holding Sudanese assets to turnover funds, pursuant to the Terrorism Risk Insurance Act of 2002 (“TRIA”), 28 U.S.C. § 1610, in order to satisfy an underlying default judgment obtained by Plaintiffs against Sudan. Sudan contended that service of process did not comply with the Foreign Sovereign Immunities Act (the “FSIA”), 28 U.S.C. §§13301602 et seq. and that the district court had erred by attaching frozen assets of Sudan without authorization from the Office of Foreign Assets Control (“OFAC”) or an independent Statement of Interest from the Department of Justice (“DOJ”). The Second Circuit rejected both of these arguments and upheld the lower court’s orders.

This case originates from the October 12, 2000 bombing of the U.S.S. Cole in Yemen, which killed 17 U.S. Navy sailors and wounded 42 more. Some of the injured and their spouses brought suit against Sudan in the U.S. District Court for the District of Columbia under the terrorism exception to the FSIA, alleging that al Qaeda was responsible for the attack and that Sudan had provided material support to al Qaeda. The Clerk of Court sent Plaintiffs’ summons and complaint via registered mail to Sudan’s Minister of Foreign Affairs at the Sudanese Embassy in Washington, D.C. The D.C. district court eventually entered a default judgment against Sudan in the amount of $314,705,896. The Clerk of Court subsequently sent the order, judgment, and memorandum opinion to Sudan’s Minister of Foreign Affairs via the Sudanese Embassy in Washington, but Sudan failed to appear or contest the judgment. Plaintiffs thereafter registered the D.C. district court’s judgment in New York, where several banks held Sudanese assets frozen pursuant to the Sudan Sanctions Regulations. The U.S. District Court for the Southern District of New York (“SDNY”) ultimately issued three orders pursuant to the TRIA requiring the banks to turnover blocked Sudanese funds to satisfy the judgment. Plaintiffs again served notice to the Minister of Foreign Affairs via the Sudanese Embassy in Washington. It was only after the SDNY entered these three turnover orders that Sudan finally appeared in the case and timely appealed.

On appeal, Sudan asserted that service of process on the Sudanese Minister of Foreign Affairs via the Sudanese Embassy did not comply with the FSIA requirement that service be sent “to the head of the ministry of foreign affairs,” arguing that Plaintiffs should have sent notice directly to the Ministry of Foreign Affairs in Sudan’s capital, Khartoum. The Second Circuit disagreed, reasoning that although the FSIA identifies a specific person that must be served, it is silent as to any specific location where the mailing must be addressed, and a mailing addressed to the minister at the embassy could reasonably be expected to result in delivery to the right person. The court distinguished service on a minister of foreign affairs viaor care of an embassy from service on an embassy generally, the latter being improper service under the FSIA. The court also determined that as a matter of policy Plaintiffs’ method of service was more reliable than the method advocated by Sudan. The Second Circuit explained that direct mailing to the foreign country must rely on a foreign postal service or commercial carrier, while mail addressed to an embassy can be forwarded by diplomatic pouch, which is accorded heightened protection under international law. As such, the court concluded that Plaintiffs had complied with the FSIA service requirements.

Sudan also asserted that the lower court’s turnover orders were improper because Plaintiffs had not procured either an OFAC license—which is normally required for a plaintiff to attach a foreign state’s frozen assets—or a case-specific DOJ Statement of Interest that no OFAC license was necessary. The Second Circuit rejected this argument as well, holding that once a court determines that blocked assets are subject to the TRIA, those funds may be distributed without a license from OFAC. The court reasoned that the DOJ had previously issued multiple Statements of Interest to this effect in prior cases and that Sudan had offered no authority requiring a court to seek a new Statement of Interest in every case where that issue arose.

Laura Kelly of the Chicago office contributed to this summary.