Beer v. Islamic Republic of Iran

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

)
HARRY BEER, et al., )
)
Plaintiffs, )
)
v. ) 08-cv-1807 (RCL)
)
ISLAMIC REPUBLIC OF IRAN, et al., )
)
Defendants. )
)

MEMORANDUM OPINION

I. INTRODUCTION AND BACKGROUND

This action arises out of the June 11, 2003 suicide bombing of a bus in Jerusalem, Israel

by members of the terrorist organization Hamas. 1 The attack killed 17 individuals, including

Alan Beer, a United States citizen living in Israel at the time. Plaintiffs, who include Mr. Beer’s

estate, his mother and his siblings, brought suit under the state-sponsored terrorism exception to

the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1605A, alleging that defendants

Islamic Republic of Iran (“Iran”) and the Iranian Ministry of Information and Security (“MOIS”)

provided financial and material support to Hamas, and are thus liable for the death of Mr. Beer.

They seek $150 million in compensatory damages and $300 million in punitive damages.

Complaint 8, Oct. 17, 2008 [3]. The Court has already determined that defendants are “liable for

the death of Alan Beer, which resulted from the tragic suicide bombing of Egged bus 14A in

Jerusalem on June 11, 2003.” Beer v. Islamic Republic of Iran, ___ F. Supp. 2d __, __, No. 08

Civ. 1807, 2010 U.S. Dist. LEXIS 129953, at * 43 (D.D.C. Dec. 9, 2010) (“Beer II”).

1
References to “Hamas” are to “Harakat al-Muqawama al-Islamiyya, the jihadist Palestinian militia”
generally known by that name. Sisso v. Islamic Republic of Iran, 448 F. Supp. 2d 76, 79 (D.D.C. 2006).
 This is not the first action brought by plaintiffs against these defendants. In Beer v.

Islamic Republic of Iran, 574 F. Supp. 2d 1 (D.D.C. 2008) (“Beer I”), these same plaintiffs

successfully pursued claims against Iran and MOIS under the former state-sponsored terrorism

exception, which was codified at 28 U.S.C. § 1605(a)(7). In that case, this Court held that

defendants were liable under state-law theories of wrongful death, infliction of conscious pain

and suffering, and intentional infliction of emotional distress. Beer I, 574 F. Supp. 2d at 11–12.

The Beer I Court awarded plaintiffs compensatory damages totaling $13 million, id. at 13–14,

and denied plaintiffs’ request for a punitive award. Id. at 14. 2

Because plaintiffs previously received compensatory damages, this Court has already

rejected plaintiffs’ request for such an award in this case, holding that

[p]laintiffs who obtained compensatory damages from a suit
brought pursuant to former § 1605(a)(7)—including those before
the Court in this case—may not obtain additional compensatory
relief as a remedy to the federal cause of action in § 1605A where
that subsequent suit arises out of the same terrorist act.

Beer II, ___ F. Supp. 2d at __, 2010 U.S. Dist. LEXIS 129953 at *43–46. However, punitive

damages are available under the current state-sponsored terrorism exception, 28 U.S.C. §

1605A(c), and thus plaintiffs may recover such damages here. 3 Though a procedure for the

calculation of punitive damages is well-established in FSIA jurisprudence, the Court in Beer II

expressed, for the first time, concern as to whether this traditional method remains appropriate in

light of recent Supreme Court decisions calling for increased restraint and heightened review of

punitive damages. ___ F. Supp. 2d at __, 2010 U.S. Dist. LEXIS 129953 at *46–53. After

articulating these concerns, the Beer II Court announced that it would “await[] plaintiffs’ view as
2
Under the prior state-sponsored terrorism exception, “punitive damages were not available against foreign
states.” Beer I, 574 F. Supp. 2d at 14.
3
Principles of finality would normally bar a second suit against defendants for the same events. However,
when Congress passed the current state-sponsored terrorism exception it also created a provision that permits
plaintiffs with existing suits to bring subsequent actions under the new exception. In re Islamic Republic of Iran
Terrorism Litig., 659 F. Supp. 2d 31, 65 (D.D.C. 2009).

2
to the appropriate punitive measures” in this case. Id. In response, plaintiffs submitted a brief in

which they argue that “the amount of punitive damages requested . . . passes Constitutional

muster,” because defendants’ conduct was “without a doubt highly reprehensible.”

Memorandum Regarding Punitive Damages 4, Jan. 10, 2011 [28] (“Ps.’ Br.”). Plaintiffs also

emphasize that their request “is based on a specific methodology formulated by an expert . . . and

adopted by this Court” that is “carefully designed to deter Iran from future misconduct.” Id. at 5.

For the reasons set forth below, the Court holds that the long-standing method for calculating

punitive damages in terrorism-related suits under the FSIA should continue to govern suits under

§ 1605A, and awards punitive damages as appropriate under that framework.

II. LEGAL STANDARD

A. The Standard Method for Calculating Punitive Damages in FSIA Cases

When Congress passed the FSIA, it was clear that the state-sponsored terrorism exception

rendered foreign states subject to suit in the United States for acts of terrorism. However, the

original Act left several questions, including what sorts of damages were available to plaintiffs,

unanswered. In re Islamic Republic of Iran Terrorism Litig., 659 F. Supp. 2d 31, 43 (D.D.C.

2009) (“In re Terrorism Litig.”). In an effort to resolve these issues, Congress enacted Pub. L.

104-208, § 589, 110, 110 Stat. 3009-1, 3007-172 (1996) (codified at § 1605 note), which is

commonly known as the “Flatow Amendment.” This provision, among other things, specified

that “money damages [in FSIA suits] may include economic damages, solatium, pain, and

suffering, and punitive damages,” id. (emphasis added), and thus provided the basis for the

earliest judgments awarding punitive damages under the FSIA.

In Flatow v. Islamic Republic of Iran, 999 F. Supp. 1 (D.D.C. 1998), this Court issued the

first opinion finding Iran liable under the state-sponsored terrorism exception. In re Terrorism

3
Litig., 659 F. Supp. 2d at 44. That opinion included a substantial discussion on the best method

for calculating punitive damages in state-sponsored terrorism cases. See generally Flatow, 999

F. Supp. at 32–34. Relying on “traditional principles of tort law and analogous opinions under

the Alien Tort Claims Act . . . and the Torture Victim Protection Act . . . for guidance,” id. at 32,

this Court identified four factors relevant to the assessment of punitive damages: “(1) the nature

of the [defendant’s] act . . .; (2) the circumstances of its planning; (3) defendants’ economic

status with regard to the ability of defendants to pay; and (4) the basis upon which a court might

determine the amount of an award reasonably sufficient to deter like conduct in the future.” Id.

at 33. The Court also received testimony from Dr. Patrick Clawson, a well-known expert on

international terrorism and Iranian affairs, 4 who explained that Iran’s annual expenditures on

international terrorism were approximately $75 million and opined that “a factor of three times

[Iran’s] annual expenditure for terrorist activities would be the minimum amount which would

affect the conduct of . . . Iran.” Id. at 34. Drawing from the four-factor test and Dr. Clawson’s

expert testimony, the Flatow Court adopted a process for calculating punitive damages in which

a FSIA court multiplies a defendant’s financial support for international terrorism (then $75

million) by a pre-determined multiplier (generally between 3 and 5) (the “Flatow Method”). Id.

This Court explained that the resulting award—$225 million in Flatow—best serves the societal

interests in punishment and deterrence that warrant imposition of punitive sanctions. Id.

While a number of FSIA courts subsequently assessed punitive damages using the Flatow

Method, such awards were brought to a screeching halt by the D.C. Circuit in Cicippio-Puleo v.

Islamic Republic of Iran, in which it held that “neither section 1605(a)(7) nor the Flatow

Amendment, separately or together, establishes a cause of action against foreign state sponsors

4
See Beer II, ___ F. Supp. 2d at __, 2010 U.S. Dist. LEXIS 129953 at *4 (collecting cases in which Dr.
Clawson is described as “an expert on Iranian affairs and international terrorism”).

4
of terrorism.” 353 F.3d 1024, 1027 (D.C. Cir. 2004). The Cicippio-Puleo decision thus reduced

the prior state-sponsored terrorism exception to a jurisdictional “pass-through” and forced future

plaintiffs to look to other sources of law—primarily state tort law—to identify legal bases for

their suits. See, e.g., Rimkus v. Islamic Republic of Iran, 575 F. Supp. 2d 181, 197–98 (D.D.C.

2008) (awarding damages for intentional infliction of emotional distress under Missouri law)

(“Rimkus I”); Beer I, 574 F. Supp. 2d at 11–14 (awarding damages for wrongful death and

conscious pain and suffering under Ohio law); Haim v. Islamic Republic of Iran, 425 F. Supp. 2d

56, 69–75 (D.D.C. 2006) (awarding damages for assault and battery under D.C. law). “Another

consequence of the Cicippio-Puleo decision was that the Flatow Amendment could not serve as

an independent basis for punitive damage awards” against foreign states. In re Terrorism Litig.,

659 F. Supp. 2d at 48. Thus, while courts continued to award substantial compensatory relief to

plaintiffs, they had to repeatedly deny those plaintiffs’ requests for punitive damages. See, e.g.,

Rimkus I, 575 F. Supp. 2d at 198 (“As a general rule, punitive damages are not available against

foreign states.”); Beer I, 574 F. Supp. 2d at 14 (holding punitive damages unavailable under §

1605(a)(7)); Haim, 425 F. Supp. 2d at 71 (same).

In early 2008, Congress moved to reverse this trend through amendments to the FSIA

enacted as part of the National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-

181, § 1083, 122 Stat. 3. 338–44 (2008) (“NDAA”). These Amendments struck § 1605(a)(7)

and replaced it with the current state-sponsored terrorism exception, which is codified at 28

U.S.C. § 1605A. Among numerous changes to the law, § 1605A now “provides for the recovery

of punitive damages in suits based on acts of terrorism.” Rimkus v. Islamic Republic of Iran, 750

F. Supp. 2d 163, 167 (D.D.C. 2010) (citing 28 U.S.C. § 1605A(c)). Over the past three years,

FSIA courts have resumed awarding punitive damages pursuant to this statute—a trend aided by

5
the NDAA’s provision for retroactive application of § 1605A. See NDAA § 1083(c)(2)–(3)

(permitting retroactive application of § 1605A to cases concluded under prior exception).

In awarding damages following passage of the NDAA, courts have generally identified

the Flatow Method as the procedure that best serves the retribution and deterrence interests that

Congress sought to promote in enacting the 2008 Amendments. See In re Terrorism Litig., 659

F. Supp. 2d at 61 (holding that, post-NDAA, courts “reaffirm[] the principles first articulated in

Flatow with respect to awards of punitive damages” under FSIA). Just as it was prior to

Cicippio-Puleo, current judicial assessments of punitive damages in state-sponsored terrorism

cases involve two figures: the amount that a foreign state annually provides in support of

terrorist activities, known as the multiplicand, and the multiplier that FSIA courts deem

necessary to deter future conduct. As seen in one recent case: “[T]he Court chooses to take the

mean of the range’s two extremes ($50 million and $150 million) and multiply it ($100 million)

by three. The result, as an award of $300 million, appears fitting.” Heiser v. Islamic Republic of

Iran, 659 F. Supp. 2d 20, 30 (D.D.C. 2009) (“Heiser II”); see also, e.g., Brewer v. Islamic

Republic of Iran, 664 F. Supp. 2d 43, 58–59 (D.D.C. 2009) (multiplying $100 million times 3 to

award $300 million in punitive damages). Thus, today the Flatow Method is “well settled case

law on the methodology by which punitive-damage awards in FSIA cases are calculated.”

Valore v. Islamic Republic of Iran, 700 F. Supp. 2d 52, 90 (D.D.C. 2010).

B. Recent Supreme Court Jurisprudence on Punitive Damages

Outside the limited arena covered by federal statutes, development of the law of punitive

damages has historically been left to the States, whose legislatures and courts have passed laws

and developed principles concerning such sanctions. See BMW of N. Am., Inc. v. Gore, 517 U.S.

559, 568 (1998) (“States necessarily have considerable flexibility in determining the level of

6
punitive damages that they will allow in different classes of cases and in any particular case.”)

(“Gore”). Recently, however, the Supreme Court has begun to scrutinize punitive awards with

increasing intensity, and has articulated several principles derived from both the Due Process

Clause—which forbids awards that are “grossly excessive,” id.—and general notions of fairness.

As the Gore Court explained: “Elementary notions of fairness . . . dictate that a person receive

fair notice not only of the conduct that will subject him to punishment, but also the severity of

the penalty that” may be imposed. Id. at 574. The Supreme Court has identified three

“guideposts” for analyzing whether these basic requirements are met: (1) “the degree of

reprehensibility of the” defendant’s act; (2) “the disparity between the harm or potential harm

suffered . . . and [the] punitive award;” and (3) the difference between the punitive award and

“the civil penalties authorized or imposed in comparable cases.” Id. at 574–75.

The concerns expressed in Gore are not merely problems of a constitutional dimension,

however, as the Supreme Court recently made clear in Exxon Shipping Co. v. Baker, 554 U.S.

471 (2008). That case presented the Court with a challenge to a punitive award that “differ[ed]

from due process review because the case ar[ose] under federal maritime jurisdiction.” Id. at

501. As the Exxon Court explained, the objections to the purportedly excessive punitive damage

awards in that case “go[] to our understanding of the place of punishment in modern civil law

and reasonable standards of process in administering punitive law.” Id. at 490. In response, the

Supreme Court imported into the field of maritime law many of the principles concerning

punitive damages that it originally developed as matters of Due Process. See generally id. at

508–13. Together with its Due Process formulations, the Supreme Court’s recent jurisprudence

has produced a method for evaluating punitive damage awards in which reviewing courts

examine the ratio between punitive damages and compensatory damages to determine whether

7
the sanctions are improperly excessive or arbitrary. Beer II, ___ F. Supp. 2d at __, 2010 U.S.

Dist. LEXIS 129953 at *47–48.

C. The Flatow Method in Light of Recent Jurisprudence

As the foregoing discussion highlights, an examination of the continuing viability of the

established process for calculating punitive damages first set forth in Flatow requires the Court

to confront two issues: whether the bases for the Supreme Court’s decisions are applicable in

FSIA suits and, if so, whether the Flatow Method complies with the constraints implemented by

this recent jurisprudence. This first issue in turn raises two distinct questions. First, do the

limitations on punitive damage awards articulated by the Supreme Court under the Due Process

Clause of the Fourteenth Amendment apply with equal force in this context? Second, does the

extension of these constraints to general maritime law by the Exxon Court necessitate further

extension of these same principles to FSIA suits? For the reasons set forth below, the Court

answers both questions in the negative and holds that recent Supreme Court decisions play no

role in terrorism-related FSIA suits. The Court thus concludes that the Flatow Method remains

controlling in actions brought pursuant to the state-sponsored terrorism exception. 5

1. Defendants in FSIA State-Sponsored Terrorism Cases May Not Rely
Upon Principles of Due Process to Shield Themselves from Punitive
Damage Awards

With the exception of Exxon, which is discussed infra, the Supreme Court’s recent

jurisprudence concerning punitive damages finds its genesis in individual liberty interests

inherent to notions of Due Process embodied in the Constitution. In Gore—the case in which the

Supreme Court first elevated the review of state court punitive damage awards to a constitutional

dimension—the opinion begins with one fundamental tenet: “The Due Process Clause of the

5
Because the Court concludes that the Supreme Court’s punitive damage jurisprudence has no effect on the
procedures employed by the FSIA courts, it does not reach the issue of whether the Flatow Method itself would
comply with the principles articulated in those recent decisions.

8
Fourteenth Amendment prohibits a State from imposing a ‘grossly excessive’ punishment on a

tortfeasor.” 517 U.S. at 562. From this central principle, the Court derives its three guideposts

for the review of punitive damage awards. Id. at 574–86. In this same vein, several punitive

damage principles the Supreme Court has subsequently articulated—including its concerns with

excessive or arbitrary awards, see State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416

(2003) (“The Due Process Clause of the Fourteenth Amendment prohibits the imposition of

grossly excessive or arbitrary punishments on a tortfeasor.”), its focus on the importance of

damage ratios to the proper evaluation of punitive damage awards, see id. at 425 (“[F]ew awards

exceeding a single-digit ratio between punitive and compensatory damages, to a significant

degree, will satisfy due process.”), and its concern with the adjudication of harm to non-parties

through the imposition of excessive penalties in a single case, see Philip Morris USA v. Williams,

549 U.S. 346, 353 (2007) (“[T]he Constitution’s Due Process Clause forbids a State to use a

punitive damage award to punish a defendant for injury that it inflicts upon nonparties or those

whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers

to the litigation.”)—are all explicitly drawn from the Due Process Clause.

These constitutional concerns, however, are inapplicable here. As an initial matter, FSIA

litigation arises under a federal statute and does not involve the exercise of State authority

against the defendant; as a result, the Fourteenth Amendment—upon which the Supreme Court’s

recent line of decisions all rely—is not implicated here. See SEC v. Lines Overseas Mgmt., Ltd.,

No. 04 Misc. 302, 2007 U.S. Dist. LEXIS 11753, at *8 (D.D.C. Feb. 21, 2007) (“‘It is well

established that when, as here, a federal statute provides the basis for jurisdiction, the

constitutional limits of due process derive from the Fifth, rather than the Fourteenth,

Amendment.’”) (quoting Rep. of Panama v. BCCI Holdings, 119 F.3d 935, 942 (11th Cir.

9
1997)). This is not the end of the matter, however, as suits—such as this one—brought pursuant

to the federal statute remain subject to the Fifth Amendment’s Due Process Clause, id., and it is

generally accepted that the same prohibitions against grossly excessive punitive damage awards

articulated by the Supreme Court under the Fourteenth Amendment operate with equal force

under the Fifth. See, e.g., Kunz v. DeFelice, 538 F.3d 667, 678–79 (7th Cir. 2008) (applying

Gore guideposts to punitive damage award under § 1983).

Though the Fifth Amendment supplies equal limitations on punitive damages in cases

brought under federal statutes, defendants here, as foreign sovereigns, cannot use these

constitutional constraints to shield themselves. In Price v. Socialist People’s Libyan Arab

Jamahiriya, the D.C. Circuit squarely held that “foreign states are not ‘persons’ protected by the

Fifth Amendment,” and thus cannot assert protections afforded to U.S. citizens by the Due

Process Clause. 294 F.3d 82, 96 (D.C. Cir. 2002). In that opinion, the Circuit Court articulated

several justifications in support of this conclusion. First, as a simple matter as statutory

interpretation, the Price Court observed that “in common usage, the term ‘person’ does not

include the sovereign, and statutes employing the word are ordinarily construed to exclude it.”

Id. Second, the D.C. Circuit stressed the incongruence that would arise if courts were to extend

basic Due Process protections to foreign sovereigns when the States of the Union themselves are

forbidden from asserting such rights under the Fifth Amendment. Id. It also reasoned that

because the Constitution explicitly places limits upon the power that the States can exert against

the federal government, were it to extend Due Process protections to foreign states it would be

granting powers to sovereign entities that go beyond those possessed by the States. Id. at 97.

Finally, the D.C. Circuit explained that “[r]elations between nations in the international

community are seldom governed by the domestic law of one state or the other,” noting that

10
“legal disputes between the United States and foreign governments are not mediated through the

Constitution.” Id. For all these reasons, the Circuit Court concluded that foreign state

defendants in terrorism-related suits under the FSIA may not raise objections grounded in the

Due Process Clause of the Fifth Amendment.

Though Price addressed foreign states and not other foreign entities, see 294 F.3d at 99–

100 (“We express no view as to whether other entities that fall within the FSIA’s definition of

‘foreign state’ . . . could yet be considered persons under the Due Process Clause.”), the D.C.

Circuit returned to the issue in TMR Energy Ltd. v. St. Prop. Fund of Ukraine, in which it held

that where a foreign state “exert[s] sufficient control over [an entity] to make it an agent of the

State, then there is no reason to extend to [that entity] a constitutional right that is denied to the

sovereign itself.” 411 F.3d 296, 301 (D.C. Cir. 2005); see GSS Grp., Ltd. v. Nat’l Port Auth.,

No. 09 Civ. 1322, 2011 U.S. Dist. LEXIS 33617, at *9 (D.D.C. Mar. 30, 2011) (“[A] foreign

instrumentality . . . may nevertheless be so closely associated with the foreign sovereign that the

two are legally indistinguishable, with the result that the instrumentality, as part of the foreign

government, is not a ‘person’ entitled to due process protections”). To determine if an entity is

sufficiently intertwined so as to be considered the sovereign, the TMR Energy Court drew a

distinction between entities that perform “classic government functions” and those that operate

“in the field of commerce,” explaining that only the former are considered the foreign state for

constitutional purposes. 411 F.3d at 300–02. Courts subsequently applying this test have

consistently found that MOIS constitutes the foreign state and is thus unworthy of Due Process

protections. See Murphy v. Islamic Republic of Iran, 740 F. Supp. 2d 51, 68 (D.D.C. 2010)

(holding that “[i]t is clear . . . that Iran has plenary control of MOIS” and thus MOIS is “not a

person entitled to Fifth Amendment” protections); see also Valore, 700 F. Supp. 2d at 71 (same).

11
 The opinions in Price, TMR Energy and their progeny focus on questions of Due Process

inherent to a court’s assertion of jurisdiction; however, the rationales for denying constitutional

safeguards to foreign entities set forth in those decisions are equally applicable to any Due

Process problems raised by the imposition of punitive damage awards. Whether the issue is the

assertion of jurisdiction or potentially-excessive punitive damages, the key concern implicated is

the right to personal liberty enshrined in the Due Process Clause. See Gore, 517 U.S. at 587

(explaining that constitutional problems posed by excessive punitive damage awards “arise[] out

of the basic unfairness of depriving citizens of life, liberty, or property, through the application . .

. of arbitrary coercion”); Price, 294 F.3d at 95 (“[T]he liberty interest protected by the Due

Process Clause shields the defendant from the burden of litigating in [a distant] forum.”). And in

weighing this liberty interest in Price, the D.C. Circuit concluded that “foreign nations are

external to the constitutional compact” and thus incapable of asserting that interest, which is

reserved for citizens of the United States. Id. at 97. The D.C. Circuit’s holding thus leads the

Court to the same conclusion as the Circuit Court with respect to personal jurisdiction—any

constraints on punitive damages that may be found in the Fifth Amendment cannot be relied

upon by a foreign sovereign. As in Price, foreign states need not be granted constitutional

protections to shield them from the imposition of harsh or unsound financial sanctions—“[i]f

they believe that they have suffered harm by virtue of [imposition of such an award], foreign

states have available to them a panoply of mechanisms in the international arena through which

to seek vindication or redress.” Id. at 98. The Court will not cross the constitutional Rubicon to

extend Due Process protections against punitive damage awards to foreign states here, as such an

act would undermine both international and domestic law by extending citizen’s safeguards to

foreign powers in the face of a clear determination by the Legislative and Executive branches

12
that foreign sovereigns and their instrumentalities—where engaged in terrorism—should be

subject to such punitive sanctions. See id. at 98–99 (“Conferring on [the foreign state] the due

process trump that it seeks against the authority of the United States is thus not only textually

and structurally unsound, but it would distort the very notion of ‘liberty’ that underlies the Due

Process Clause.”). Quite simply, “a foreign State lies outside the structure of the Union,” id. at

96, and the Court sees no justification for extending the protections for “persons” provided by

that structure to foreign powers such as Iran and MOIS.

2. Exxon Does Not Require Alteration of the Flatow Method

The second question relevant to this inquiry is whether the Supreme Court’s extension of

its articulated framework for evaluating punitive damages from Due Process to general maritime

law requires FSIA courts to reevaluate the established Flatow Method in cases brought under the

state-sponsored terrorism exception. Based on the discussion below, the Court holds, for three

reasons, that the Exxon decision does not undermine the traditional procedure.

a. The Holding in Exxon is Limited

While the Supreme Court in Exxon first ventured out of the constitutional realm in

reviewing punitive damage assessments, it did so in limited fashion and over an area of law

which has been specially committed to the discretion of the judiciary. The legal landscape in

which the Exxon Court operated—maritime law—“falls within a federal court’s jurisdiction to

decide in the manner of a common law court, subject to the authority of Congress to legislate

otherwise if it disagrees.” Exxon, 554 U.S. at 490. The federal judiciary’s special role as the

overseers of maritime law is deeply rooted and traces its origins to the beginning of our

constitutional republic: “Article III, § 2, cl. 1 (3d provision) of the Constitution and section 9 of

the Act of September 24, 1789, have from the beginning been the sources of jurisdiction in

13
litigation based upon federal maritime law.” Romero v. Int’l Terminal Operating Co., 358 U.S.

354, 360 (1959). Historically, the federal courts have been called upon to fashion rules of law

sui generis to govern admiralty disputes, see Fitzgerald v. U.S Lines Co., 374 U.S. 16, 20–21

(1963) (“This Court has long recognized its power and responsibility in this area [of admiralty

law] and has exercised that power where necessary to do so.”), and thus maritime has been an

area of law in which the judiciary has operated almost exclusively. Romero, 358 U.S. at 369. In

this unique legal context, the Supreme Court in Exxon was left without any legislative or

executive guidance through statute or regulation, and thus was obligated to fashion governing

principles without consideration of other legal contexts. See id. at 502 (“[W]e are examining the

verdict in the exercise of federal maritime common law authority, which precedes and should

obviate any application [of other sources of law.]”).

Rules articulated in the context of maritime law are not necessarily applicable to non-

admiralty proceedings. The Supreme Court has observed that the implications of changes or

evolution in maritime law are generally limited to Article III and do not require equivalent

adjustments to the federal common law. Romero, 358 U.S. at 373. And this inherent limitation

to admiralty-law decisions is of even greater importance when interpreting and applying federal

statutes—in the face of legislation enacted by Congress, the federal judiciary is simply not

imbued with the same authority it possesses in its unique role as the purveyor of maritime law.

See Exxon, 554 U.S. at 502 (emphasizing courts’ special authority “as a source of judge-made

law in the absence of statute”). Indeed, the Exxon Court itself acknowledged the crucial

distinction between its specialized function in the creation of rules governing admiralty disputes

and its traditional role in applying many federal statutes. See id. at 511 (“Federal treble-damages

statutes govern areas far afield from maritime concerns . . . ; the relevance of the governing rules

14
in patent or trademark cases, say, is doubtful at best.”). And at least one federal court, relying on

this distinction, has declined to extend the holding of Exxon to cases brought under the federal

Title VII statute. Pickett v. Sheridan Health Care Ctr., 610 F.3d 434, 447 (7th Cir. 2010). Thus,

mindful of the special context in which Exxon was articulated, the Court is not prepared to affect

a sea-change in the law governing the assessment of punitive damages under federal statutes or

federal common law generally. See Valore, 700 F. Supp. 2d at 90 n.17 (noting that Supreme

Court in Exxon “explicitly limited its holding” to facts and context of that case).

b. Congress Re-Affirmed the Established Procedure

An independent justification for adhering to the Flatow Method is that Congress did not

see fit to alter or otherwise question that procedure when enacting the NDAA. At the time the

2008 Amendments were passed, the Supreme Court had issued its highly-publicized opinions in

Gore, State Farm, and Philip Morris, and was hearing arguments in Exxon to much fanfare. At

the same time, the method for calculating punitive damages under the state-sponsored terrorism

exception had been long-settled. Shortly after the decision in Flatow, numerous courts in this

district came to rely upon the procedure established in that case. In Anderson v. Islamic Republic

of Iran, for example, Judge Jackson, after observing that “[i]t is never a simple task to calibrate

an award of punitive damages,” turned to the Flatow Method and the testimony of Dr. Clawson

to conclude that “an award of thrice the . . . maximum annual budget for terrorist activities, or

$300 million, is the closest approximation that [the Court] can make to an appropriate award.”

90 F. Supp. 2d 107, 114 (D.D.C. 2000). In a similar manner, the district court in Eisenfeld v.

Islamic Republic of Iran relied explicitly on Flatow to determine that “a total award of punitive

damages equal to three times Iran’s annual expenditure in 1996 on terrorism—$300 million—

will serve to deter future attacks.” 172 F. Supp. 2d 1, 9 (D.D.C. 2000). Indeed, a litany of cases

15
throughout this period applied the Flatow Method. See Mousa v. Islamic Republic of Iran, 238

F. Supp. 2d 1, 13 (D.D.C. 2001) (awarding $120 million); Weinstein v. Islamic Republic of Iran,

184 F. Supp. 2d 13, 25–26 (D.D.C. 2002) (awarding $150 million); Hill v. Republic of Iraq, 175

F. Supp. 2d 36, 48 (D.D.C. 2001) (awarding $300 million); Wagner v. Islamic Republic of Iran,

172 F. Supp. 2d 128 (D.D.C. 2001) (awarding $300 million); Jenco v. Islamic Republic of Iran,

154 F. Supp. 2d 27, 39–40 (D.D.C. 2001) (awarding $300 million); Sutherland v. Islamic

Republic of Iran, 151 F. Supp. 2d 27, 53 (D.D.C. 2001) (awarding $300 million); Elahi v.

Islamic Republic of Iran, 124 F. Supp. 2d 97, 114 (D.D.C. 2000) (awarding $300 million).

“Courts ‘generally presume that Congress is knowledgeable about existing law pertinent

to the legislation it enacts.’” Ark. Dairy Coop. Ass’n v. Dep’t of Agriculture, 573 F.3d 815, 829

(D.C. Cir. 2009) (quoting Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 184–85 (1988)). For

example, in Partolo v. Johanns, the district court held that Congress, in reenacting a law creating

an aid program for farmers with lost crops using language identical to that in the original statute,

implicitly adopted the manner in which the program had been run by the managing agency. No.

04 Civ. 1462, 2010 U.S. Dist. LEXIS 43071, at *103–04 (D.D.C. June 11, 2006); see also id.

(“[W]hen Congress enacted the 2001/2002 CLDAP, explicitly in identical form to the 2000

CLDAP statute and without any indication of disapproval of the Secretary’s earlier law . . . it

effectively endorsed the Secretary’s existing administration and interpretation.”). In reaching

this conclusion, the Partolo Court noted that “it is well established that Congress is presumed to

have knowledge of judicial and administrative interpretations when it re-enacts the earlier laws

without change.” Id. at *102–03 (citing Barhart v. Walton, 535 U.S. 212, 220 (2002)).

Here, the decisions of this Court and many others adopting the Flatow Method were

based on the Flatow Amendment, which provided that money damages in state-sponsored

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terrorism suits could “include economic damages, solatium, pain and suffering, and punitive

damages.” Flatow Amendment § 589. Had Congress been concerned that this established

procedure was in conflict with the Supreme Court’s recently-articulated constraints on punitive

damage awards, it could easily have easily imposed statutory protections against excessive

awards in § 1605A by, inter alia, directing punitive sanctions to take the form of treble

damages—as it often has—or instructing that any punitive damage award must be consistent

with the guideposts articulated by the Supreme Court in Gore and its progeny. Instead, Congress

chose to once again permit an award of punitive damages in state-sponsored terrorism suits by

employing the very same language that it had used in the Flatow Amendment. See 28 U.S.C. §

1605A (“[D]amages may include economic damages, solatium, pain and suffering, and punitive

damages.”). This choice of language in § 1605A is a clear indication that Congress sought to

return FSIA proceedings—at least with respect to punitive damages—to the period prior to the

Cicippio-Puleo decision, when courts generally adhered to the Flatow Method.

Indeed, the presumption that Congress acted with knowledge of the Flatow framework is

even stronger here, as there is no question that, in passing the NDAA, it was made aware of the

history of punitive damages in terrorism-related FSIA cases. This Court has previously observed

that when considering the 2008 Amendments, members of Congress were provided with a

Congressional Research Service report informing them that, to date, judgments totaling nearly

$10 billion had accumulated against Iran and its instrumentalities for involvement in terrorist

atrocities. In re Terrorism Litig., 659 F. Supp. 2d 31, 58 (D.D.C. 2009). And armed with this

information, one of the explicit purposes in passing the NDAA was to abrogate the D.C.

Circuit’s decision in Cicippio-Puleo and reinstitute FSIA plaintiffs’ ability to seek punitive

damages in actions against foreign states brought pursuant to the state-sponsored terrorism

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exception. See Heiser II, 659 F. Supp. 2d at 23 (observing that Ҥ 1605A abrogates Cicippio-

Puleo . . . and provides that punitive damages may be awarded in [FSIA] actions”). This goal

included the replacement of the regime relying on 50 states’ laws to govern FSIA actions with a

uniform set of rules—such as those concerning punitive damages developed in Flatow—under §

1605A. Id. at 24–25. Based on this history, the Court holds that Congress, by drawing directly

upon the language of the Flatow Amendment while well-aware of the established Flatow

Method, implicitly approved the reinstitution of that traditional procedure after concluding that it

best serves societal interests in punishment and deterrence.

c. Terrorism-Related FSIA Cases Involve Unique Circumstances

Finally, beyond the distinguishable legal contexts in which recent Supreme Court

jurisprudence arises and the legislative history of the NDAA, there are important policy

justifications for adhering to the Flatow Method. Terrorism, along with atrocities such as

genocide, occupies a unique place in the pantheon of human conduct as an activity devoid of

value that observes no respect for life and no hint of compassion. It is an “insidious and

murderous evil,” In re Terrorism Litig., 659 F. Supp. 2d at 136, that embraces “cruel and

inhuman activities,” Nikbin v. Islamic Republic of Iran, 517 F. Supp. 2d 416, 425 (D.D.C. 2007),

and results in harms “among the most heinous the Court can fathom.” Valore, 700 F. Supp. 2d at

88. In the context of punitive damages, this Court has previously explained that the particularly

malicious and evil nature of state-sponsored terrorism obviates the need for strict attention to the

punitive-to-compensatory ratio that recent Supreme Court guidance might otherwise require. See

id. at 90 n.17 (“Those harboring a deep-seeded and malicious hatred of the United States who

intentionally commit terroristic murder of American[s] . . . deserve to be punished at . . . ratio[s]

significantly higher [than discussed in Exxon and the like].”). And this Court has expressed

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concern that significant deviations from the Flatow Method in these cases could have the

disastrous and perverse consequence of undermining prior efforts at deterrence. See Heiser II,

659 F. Supp. 2d at 30–31 (“Were the Court to award an amount [of punitive damages] less than

any of those declared in prior cases, the U.S. . . . would risk seeming to Iran less concerned about

Iranian terrorism.”) (quotations omitted).

By contrast, the Supreme Court in Exxon addressed excessive punitive sanctions out of

concern that such awards “exceed[] the bounds justified by the punitive damages goal of

deterring reckless (or worse) behavior.” 554 U.S. at 490. And in importing Due Process

principles into maritime law, the Exxon Court emphasized that “[r]eckless conduct is not

intentional or malicious, nor is it necessarily callous toward the risk of harming others, as

opposed to unheedful of it.” Id. at 493. In light of this context, the Court finds it beyond the

pale that the Supreme Court would countenance similar restrictions on the institution of punitive

sanctions in response to acts of terrorism that impose a sentence of death or horrific physical and

psychological injury on victims, a lifetime of unimaginable grief on loved ones, and

immeasurable sorrow on the whole of humanity.

* * *

For all the reasons set forth above, the Court holds that the Flatow Method for the

calculation of punitive damage awards in FSIA cases should continue to govern cases arising

from the atrocities of state-sponsored terrorism.

III. APPLICATION

Having determined that the Flatow Method remains in force under § 1605A, the Court

now turns to the application of this established procedure to calculate punitive damages in this

case. As set forth above, see supra Section II.A, this process requires the Court to identify two

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numbers: the annual amount of money provided by defendants in support of international

terrorism, and an appropriate multiplier. As to the former input, plaintiffs make no attempt to

provide any new evidence concerning defendants’ support for terrorism, and instead point the

Court to the “typically adopted . . . figure[] of $100 million in annual expenditures” found in

earlier cases. Ps.’ Br. at 3. Given the lack of new evidence, the Court will take judicial notice of

Dr. Clawson’s expert testimony in Heiser II that Iran’s support for terrorism is somewhere

between $50 and $150 million annually, and will adopt the mid-range estimate—$100 million.

As to the appropriate multiplier, plaintiffs urge the Court to adhere to its standard choice of 3,

id., and the Court sees no reason to abandon this traditional magnitude. Thus, in the interest of

deterring future terrorist attacks, and consistent with established procedures, the Court will award

$300 million in punitive damages, to be dispersed in proportion to each plaintiff’s share of the

compensatory award.

IV. CONCLUSION

Punitive damages serve a societal interest in punishing wrongdoers and preventing

similar heinous conduct in the future. In recent cases, however, the Supreme Court has

recognized that these justifications are often countered—and thus constrained—by other

interests, such as an individual’s right to expect consistent and non-excessive punishments

(embodied by the Supreme Court’s Due Process jurisprudence), or the Court’s responsibility to

fill the gaps in an area of law in which it is the sole authority (embodied by the Exxon decision in

the field of maritime law.) These interests, however, are not implicated in the FSIA context, and

courts therefore should continue to adhere to methods designed to impose optimal sanctions

when faced with actors deliberately undertaking some of the most evil and inhuman acts

imaginable. The Court thus holds that its established approach to assessing punitive awards in

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state-sponsored terrorism cases under the FSIA should remain in place, and expresses hope that

the sanction it issues today will play a measurable role in changing the conduct of Iran—and

other supporters of international terrorism—in the future.

A separate Order and Judgment consistent with these findings shall issue this date.

Signed by Royce C. Lamberth, Chief Judge, on May 19, 2011.

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