Here's the latest in a case we've been following. In Alimanestianu v. United States, No. 17-1667 (May 7, 2018), the U.S. Court of Appeals for the Federal Circuit affirmed the Court of Federal Claims' ruling rejecting takings liability for the government wiping out a money judgment in favor of terrorism victims against the Libyan government.
Libyan terrorists blew up a plane, and plaintiffs, the survivors of one of the victims, sued Libya and obtained a $1.3 billion judgment in U.S. District Court. Libya appealed and before the appeal was resolved, the U.S. government settled all claims with Libya and vacated the judgment. The settlement with Libya referred claims to a settlement commission, which awarded plaintiffs $10 million. Plaintiffs sued the U.S. for the difference.
The CFC held there was no Penn Central taking because the plaintiffs had no reasonable expectation for any recovery greater than what they got from the commission. Besides, the character of the government action is that of conducting foreign relations, and we know that in that field, the feds rule.
The Federal Circuit affirmed, concluding this was neither a per se nor a regulatory taking. First, it determined that the Supreme Court's ruling in Horne did not overrule existing cases which held in these circumstances that no taking has occurred, because unlike Horne's taking of raisins, this case does not involve a physical taking:
The Supreme Court began its analysis by noting that when the Government directly appropriates real or personal property for its own use, “such an appropriation is a per se taking that requires just compensation.” Id. at 2425–26. The Court went further, however, stating that the “physical appropriation of property [gives] rise to a per se taking, without regard to other factors.” Id. at 2427. It is this statement upon which Appellants rely. If their claims and non-final judgment constitute cognizable property, and the Government entirely appropriated that property by entering and ratifying the Libyan Claims Settlement Agreement, then Appellants argue that Horne mandates the Government pay just compensation, without any consideration of the Penn Central factors.But we have consistently held that prohibiting or espousing a litigant’s claims by restoring a foreign sovereign’s legal immunity is not a physical invasion of property. See Aviation & Gen. Ins. Co. v. United States, 882 F.3d 1088, 1097 (Fed. Cir. 2018) (“While we recognize the significant degree to which the Appellants’ rights in maintaining their lawsuits were impaired—indeed, their lawsuits were terminated—the Government’s action nonetheless was not a physical invasion of Appellants’ property rights. Rather, the Government reinstated Libya’s sovereign immunity for the common good . . . .”); Belk, 858 F.2d at 709 (“Here there was no physical invasion of property, but only the prohibition on the assertion by the appellants of their alleged damage claims . . . .”).
Slip op. at 12-13.
The court also affirmed the CFC's ruling of no Penn Central taking, concluding, like the CFC, that the character of the government action was foreign relations, and in that area, these type of actions are common. Slip op. at 14 ("Thus, the trial court correctly observed that the Government was working well within its Constitutional prerogative in conducting foreign affairs when it espoused and settled Appellants' claims.").
Finally, the plaintiffs had no distinct investment-backed expectations in their claims and (non-final) judgment. See slip op. at 14-15 (detailing the multiple factors which the court concluded should have alerted the plaintiffs that their judgment may not have been collectable). Thus, the court concluded, full recovery of the judgment was "speculative, and espousal did not interfere overall with any investment-backed expectations in Appellants' claims and non-final judgment." Slip op. at 15.
As for the economic impact factor, the court concluded that the plaintiffs were still entitled to $10 million:
As noted by the trial court, Mihai’s estate received $10 million, and each of Mihai’s children received $200,000 through the Commission, which is likely more than could have been expected had Appellants attempted to enforce any U.S. judgment themselves.
Slip op. at 15-16 (footnote omitted).