Holladay v. Islamic Republic of Iran

• Court: District Court, District of Columbia
• Decided: September 23, 2019
• Docket: Civil Action No. 2017-0915
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

JOSHUA L. HOLLADAY, et al.,

Plaintiffs,

v. Civil Action No. 17-915 (RDM)

ISLAMIC REPUBLIC OF IRAN, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs—over fifty individuals, including American soldiers, who were injured or

killed in forty-three separate terrorist attacks that took place in Iraq between December 17, 2003

and November 20, 2009, and over seventy of their family members—bring this civil action

pursuant to the Foreign Sovereign Immunities Act, §§ 1602–1611 (“FSIA”), against six

defendants: the Islamic Republic of Iran (“Iran”), its Islamic Revolutionary Guard Corps

(“IRGC”), the Iranian Ministry of Intelligence and Security (“MOIS”), Bank Markazi Jomhouri

Islami Iran (“Bank Markazi”), Bank Melli Iran (“Bank Melli”), and the National Iranian Oil

Company (“NIOC”).1 See Dkt. 16 at 1–3, 20–38, 116–99 (Am. Compl.). Although the

allegations contained in the two-hundred-page complaint are sweeping, the motion currently

before the Court poses a narrow question: Have Plaintiffs satisfied the FSIA’s service-of-

process requirements? See Dkt. 68 at 3. For reasons explained below, the Court concludes that

Plaintiffs have done so as to some but not all defendants.

1 Plaintiffs also brought suit against a seventh Defendant, Melli Bank PLC, but later voluntarily dismissed their claims against that defendant pursuant to Federal Rule of Civil Procedure 41(a). See Dkt. 70; Minute Order (Oct. 9, 2019). I. LEGAL STANDARD

As explained in more detail below, the key question at issue here—whether Plaintiffs

have properly served each defendant—turns on two inquiries. First, the Court must categorize

each defendant to determine whether it must be served under § 1608(a) or § 1608(b). Although

these provisions are similar in many ways, they also differ in important respects, with each

imposing unique demands. Second, after deciding which provision governs as to each defendant,

the Court must determine whether Plaintiffs’ attempts to effectuate service satisfied the

applicable requirements. Determining the answers to both questions requires the Court to weigh

the evidence Plaintiffs have produced in support of their motion. Doing so raises the question as

to the proper burden of proof Plaintiffs must satisfy. The D.C. Circuit has opined that a court

adjudicating an FSIA case against an absent defendant must “satisfy itself that it has personal

jurisdiction.” Mwani v. Osama Bin Laden, 417 F.3d 1, 6 (D.C. Cir. 2005). Under the FSIA,

moreover, service of process is a key component of personal jurisdiction. See Foremost-

McKesson v. Islamic Republic of Iran, 905 F.2d 438, 442 (D.C. Cir. 1990) (citing 28 U.S.C.

§ 1330(b)). “In the absence of an evidentiary hearing,” plaintiffs may satisfy their burden of

satisfying personal jurisdiction by making a “prima facie showing” based on “their pleadings”

and “bolstered by such affidavits and other written materials as they can otherwise obtain.”

Mwani, 417 F.3d at 7 (internal citation and quotation omitted). “The Court must, therefore,

satisfy itself Plaintiffs have made a “prima facie showing” that they properly effected service

with respect to each defendant.

II. ANALYSIS

Section 1608 governs service of process under the FSIA and provides separate paths that

plaintiffs must follow depending on the nature of the entity being served. See 28 U.S.C. § 1608.

2 If plaintiffs seek to serve a “foreign state,” they must comply with the requirement set out in

§ 1608(a), and, if they seek to serve an “agency or instrumentality of a foreign state,” they must

comply with the requirements of § 1608(b). See Howe v. Embassy of Italy, 68 F. Supp. 3d 26, 31

(D.D.C. 2014). The D.C. Circuit has offered the following guidance for determining which path

applies: “if the core functions of the entity are governmental, it is considered the foreign state

itself; if commercial, the entity is an agency or instrumentality of the foreign state.” Roeder v.

Islamic Republic of Iran, 333 F.3d 228, 234 (D.C. Cir. 2003); see also Transaero, Inc. v. La

Fuerza Aerea Boliviana, 30 F.3d 148, 149–50 (D.C. Cir. 1994) (same). “A nation’s armed

forces” or its “Ministry of Foreign Affairs,” for example, “are clearly . . . governmental,” id.,

while a state-owned commercial airline is clearly commercial, see, e.g., Seramur v. Saudi

Arabian Airlines, 934 F. Supp. 48, 51 (S.D.N.Y. 1996). Applying this approach here, the Court

finds that three of the defendants—Iran, IRGC and MOIS—are “the foreign state itself” and that

one of the defendants—Bank Melli—is an “agency or instrumentality” of Iran. With respect to

the two remaining defendants—Bank Markazi and NIOC—the Court needs additional

information to render a decision.

Starting with Iran, IRGC, and MOIS, the Court finds that all three are subject to service

under § 1608(a) as “the foreign state or [a] political subdivision” thereof. 28 U.S.C. § 1608(a).

Iran is, of course, the foreign state itself, and the “core functions” of IRGC and MOIS are

inherently governmental. See Nikbin v. Islamic Republic of Iran, 471 F. Supp. 2d 53, 59 (D.D.C.

2007) (“[B]oth MOIS and [IRGC]” must be treated as the foreign state for purposes of

§ 1608(a)); Azadeh v. Gov’t of the Islamic Republic of Iran, No. 16-1467, 2018 WL 4232913, at

*39 n.6 (D.D.C. Sept. 5, 2018) (IRGC must be treated as the foreign state itself for purposes of

§ 1608). IRGC, as a branch of the Iranian Armed Forces, performs a military function, and

3 MOIS serves as Iran’s primary intelligence agency. See Dkt. 16 at 24–30 (Am. Compl. ¶¶ 58–

88). As a result, they are both “so closely bound up with the structure of the state that they must

in all cases be considered as the ‘foreign state’ itself, rather than a separate ‘agency or

instrumentality’ of the state.” Transaero, Inc., 30 F.3d at 153.

In contrast, the core function of the Bank Melli is commercial, and it is therefore subject

to service as “an agency or instrumentality of a foreign state” under § 1608(b). As described in

the declaration of Gary Kleiman, a consultant who specializes in “global emerging economy and

financial market analysis,” and who professes familiarity with “the operations of Bank Markazi,

Bank Melli . . . , and NIOC,” Dkt. 68-19 at 1–2 (Kleiman Decl. ¶ 4), Bank Melli “engages in

wide ranging retail and wholesale activities through its domestic network of over 3000 branches

and 15 overseas branches and subsidiaries,” id. at 5 (Kleiman Decl. ¶ 13). “[T]ogether with its

subsidiaries,” Bank Melli “provides commercial banking services in Iran and internationally,”

and “its banking products and services include foreign exchange transactions; foreign currency

accounts, long-term and short-term foreign currency investment deposits . . . ; money transfer

and remittances; plastic card services; imports and exports services; foreign exchange facilities;

and imports services in industrial and commercial economic zones.” Id. at 5 (Kleiman Decl.

¶ 14). “As a result of Bank Melli[‘s] significant commercial activities,” Kleiman attests that “it

is considered in the banking industry as primarily having a commercial purpose and [as] a

competitor to other large regional banks.” Id. In short, Bank Melli functions much like a large,

privately-held bank. See Shoham v. Islamic Republic of Iran, No. 12-508, 2017 WL 2399454,

*28–29 (D.D.C. 2017) (the business of banking is commercial in nature).

The status of the two remaining defendants—Bank Markazi and NIOC—is less clear and

cannot be resolved on the current record. Kleiman attests that Bank Markazi “is the central bank

4 of Iran” tasked with setting “monetary and credit policies” and “granting loans to state

enterprises and agencies.” Dkt. 68-19 at 3 (Kleiman Decl. ¶ 8) (citation and quotation omitted).

He further attests that the bank “sets and supports sector credit directives where agriculture,

manufacturing and mining, and construction and housing accounted for over half the total in

recent years,” id., and that, in 1960, Bank Markazi assumed certain responsibilities (“note issue,

supervisory and government account operation”) “previously conducted by Bank Melli,” id. at 4

(Kleiman Decl. ¶ 11). Based on the Kleiman declaration, some—and perhaps much—of what

Bank Markazi does is plainly governmental in nature. Monetary policy, for example, is one of

the key tools that governments use to influence their nation’s economy. Nor can the Court

conclude, on the existing record, that Bank Markazi acts in a commercial manner when it “loans”

funds to “state enterprises and agencies.” Moreover, even if some of the functions that Bank

Markazi performs are commercial in nature, the current record does not provide a basis for the

Court to decide whether the bank’s governmental or commercial activities predominate.

Although it appears more likely that NIOC’s core functions are commercial—as opposed

to governmental—the record is, again, incomplete. The Kleiman declaration acknowledges that

NIOC performs “dual” functions, some governmental and others commercial. Id. at 6 (Kleiman

Decl. ¶ 17). The declaration provides some information regarding NIOC’s commercial activity,

including, most notably, that NIOC “engages in the exploration and production of oil and natural

gas resources.” Id. at 7 (Kleiman Decl. ¶ 22). It provides very little information, however, about

the extent of NIOC’s governmental activity beyond the conclusory assertion that it “has been an

instrument of government” and that “NIOC’s Board Chair” also serves as the Minister of

Petroleum and, in that role, performs “public administration responsibility[ies.]” Id. (Kleiman

Decl. ¶¶ 17–18). Without a better understanding of NIOC’s governmental responsibilities, and

5 an understanding of how those responsibilities compare to the company’s commercial activities,

the Court cannot determine whether NIOC is subject to service under § 1608(a) (as a foreign

state or political subdivision) or under § 1608(b) (as an agency or instrumentality of a foreign

state).

In light of the above, the Court will (1) determine whether Iran, IRGC, and MOIS have

been properly served under § 1608(a); (2) determine whether Bank Melli has been properly

served under § 1608(b); and (3) deny Plaintiffs’ motion for a determination that they have

effectively served Bank Markazi and NIOC as premature, pending the Court’s receipt of

additional information regarding the status of Bank Markazi and NIOC. The Court further notes

that to the extent either of those entities should be treated as a foreign state or political

subdivision of a foreign state, Plaintiffs will need to do more to effect service and that, to the

extent they are treated as agency or instrumentality of a foreign state, the Court may require

additional information about the delivery and return of the documents served pursuant to

§ 1608(B)(3)(B).

A. Service on Iran, MOIS, and IRGC pursuant to § 1608(a)

As explained above, service on a foreign state or political subdivision is governed by

§ 1608(a), which “prescribes four methods of service, in descending order of preference. Ben-

Rafael v. Islamic Republic of Iran, 540 F. Supp. 2d 39, 52 (D.D.C. 2008). Plaintiffs must

attempt service by the first method (or determine that it is unavailable) before proceeding to the

second method, and so on.” Id. Specifically, a party may serve a foreign state:

(1) by delivery of a copy of the summons and complaint in accordance with any special arrangement for service between the plaintiff and the foreign state or political subdivision; or

6 (2) if no special arrangement exists, by delivery of a copy of the summons and complaint in accordance with an applicable international convention on service of judicial documents; or

(3) if service cannot be made under paragraphs (1) or (2), by sending a copy of the summons and complaint and a notice of suit, together with a translation of each into the official language of the foreign state, by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the head of the ministry of foreign affairs of the foreign state concerned, or

(4) if service cannot be made within 30 days under paragraph (3), by sending two copies of the summons and complaint and a notice of suit, together with a translation of each into the official language of the foreign state, by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the Secretary of State in Washington, District of Columbia, to the attention of the Director of Special Consular Services—and the Secretary shall transmit one copy of the papers through diplomatic channels to the foreign state and shall send to the clerk of the court a certified copy of the diplomatic note indicating when the papers were transmitted.

28 U.S.C. § 1608(a).

The first two mechanisms for effecting service are not available to Plaintiffs in this case

because there is neither a “special arrangement” that governs service between Plaintiffs and Iran

nor is Iran a “party to an ‘international convention on service of judicial documents.’” Hamen v.

Islamic Republic of Iran, No. 16-1394, 2019 WL 3753800, at *16 (D.D.C. 2019) (quoting Ben-

Rafael, 540 F. Supp. 2d at 52)). As a result, Plaintiffs correctly attempted service under

§ 1608(a)’s third paragraph. Dkt. 23. As contemplated by that paragraph, the Clerk of Court

mailed the relevant documents to Iran on November 13, 2017. Dkt. 25. On December 14, 2017,

Plaintiffs notified the Court that the mailing was returned as undeliverable. See Dkt. 29.

Given that service could not be effected under the third paragraph, Plaintiffs proceeded to

serve Iran, IRGC, and MOIS pursuant to § 1608(a)(4). That paragraph requires a plaintiff to

send two copies of the summons, complaint, and notice of suit—along with a translation of each

7 document—to the Clerk of Court, who must then provide those materials to to the Secretary of

State (attn: Director of Special Consular Services), and the Secretary must then transmit one

copy of the required materials through diplomatic channels to the foreign state. 28 U.S.C.

§ 1608(a)(4). The Department of State must then send “the Clerk of the Court a certified copy of

the diplomatic note indicating when the papers were transmitted.” Id.

On December 14, 2017, Plaintiffs provided the Clerk with the required materials and

requested service pursuant to § 1608(a)(4). See Dkt. 30. On December 19, 2017, the Clerk

mailed these materials to the State Department, Dkt. 32, and, on April 30, 2018, the State

Department sent the Clerk a certified copy of a diplomatic note from Foreign Interests Section of

the Embassy of Switzerland in Tehran, showing that the required materials commencing suit

against Iran, IRGC, and MOIS were delivered to the Iranian Ministry of Foreign Affairs. Dkt.

50. The materials were delivered with the assistance of the Swiss government because the

United States does not maintain diplomatic relations with Iran. Id.

Accordingly, the Court finds that Plaintiffs efforts to serve Iran, MOIS, and IRGC

satisfied the requirements of § 1608(a)(4).

B. Service on Bank Melli pursuant to § 1608(b)

The rules for serving an agency or instrumentality of a foreign state under § 1608(b) are

similar, but not identical, to the rules applicable to service of a foreign state or political

subdivision. Under § 1608(b), an agency or instrumentality may be served:

(1) by delivery of a copy of the summons and complaint in accordance with any special arrangement for service between the plaintiff and the agency or instrumentality; or

(2) if no special arrangement exists, by delivery of a copy of the summons and complaint either to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of

8 process in the United States; or in accordance with an applicable international convention on service of judicial documents; or

(3) if service cannot be made under paragraphs (1) or (2), and if reasonably calculated to give actual notice, by delivery of a copy of the summons and complaint, together with a translation of each into the official language of the foreign state—

(A) as directed by an authority of the foreign state or political subdivision in response to a letter rogatory or request or

(B) by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the agency or instrumentality to be served, or

(C) as directed by order of the court consistent with the law of the place where service is to be made.

28 U.S.C. § 1608(b).

As with § 1608(a), neither of the first two methods—the “special arrangement” and

“applicable international convention” mechanisms—are available in this case. This, then, leaves

the third paragraph, which provides three alternatives. Unlike the other provisions of § 1608(a)

and § 1608(b), this portion of the statute does not require the plaintiff to attempt and fail at

service under subparagraph (3)(A) before proceeding to subparagraph (3)(B). The method

employed, however, must be “reasonably calculated to give actual notice.” 28 U.S.C.

§ 1608(b)(3). Here, Plaintiffs endeavored to effect service pursuant to § 1608(b)(3)(B), which

requires a plaintiff to deliver a summons and a copy of the complaint, together with a translation

of each, to the Clerk of the Court, who must then mail the required materials to the defendant in

a “form . . . requiring a signed receipt.” Id.

On October 31, 2017, Plaintiffs delivered to the Clerk of the Court the required

materials, including copies translated to Farsi, and requested that the Clerk mail the documents to

Bank Melli (as well as Bank Markazi and NIOC). See Dkt. 23. On November 13, 2017, the

Clerk filed a Certificate of Mailing, along with a copy of the DHL mailing receipt. See Dkt. 25. 9 In December 2017, Plaintiffs received notice that the package was successfully delivered to and

signed for by an agent of Bank Melli. See Dkt. 28-1. Service as to Bank Melli, therefore, is

satisfied pursuant to 28 U.S.C. § 1608(b)(3)(B).

C. Bank Markazi and NIOC

For the reasons discussed above, the Court will not decide, on the present record, whether

Plaintiffs have effected service on Bank Markazi and NIOC. In addition to the questions raised

above, however, one additional concern warrants mention and, as the Court explained to counsel

at a recent telephonic status conference, see Minute Entry for Telephone Conference (Sept. 19,

2019), may require a further evidentiary showing from Plaintiffs. In particular, unlike the

materials serviced on Bank Melli, the materials served on Bank Markazi and NIOC were mailed

back to the clerk’s office. See Dkt. 40, 42. To be sure, the record indicates that DHL

“delivered” the mailings to Bank Markazi and NIOC and that someone at each of those entities

signed for the delivery. See Dkt. 27-1 at 3 (letter from DHL indicating that the service package

was delivered to Bank Markazi and signed for by “D.S.”); Dkt. 28-1 at 3 (DHL letter indicating

that the service package was delivered to NIOC and signed for by “Norafkan”).

What is unclear from the existing record, however, is who mailed the materials back to

the Clerk’s office, whether the materials were immediately returned or (as some evidence

suggests) the materials were not returned until days after they were received, and whether—in

light of all the circumstances—service was “reasonably calculated to give actual notice” to the

defendants. 28 U.S.C. § 1608(b)(3).2 In light of the uncertainty whether Bank Markazi and

2 The Court further notes that decisions in this circuit have taken different approaches as to the question whether a signature on the receipt, alone, is sufficient to satisfy the requirements of § 1608(a)(3)’s service by “mail requiring a signed receipt” mechanism. Compare Haim v. Islamic Republic of Iran, 902 F. Supp. 2d 71, 73 (D.D.C. 2012) (concluding that service was ineffective although “someone apparently signed” for the service package), with Flatow v. 10 NIOC are subject to service under § 1608(a) or § 1608(b); uncertainty about the factual

circumstances surrounding delivery of the required materials; and uncertainty about whether a

signature, alone, is sufficient, the Court will await development of a more complete factual

record before deciding whether Plaintiffs have successfully effected service on Bank Markazi

and NIOC.

CONCLUSION

For the reasons explained above, it is hereby ORDERED that Plaintiffs’ motion for an

order finding that service of process has been effected is GRANTED in part and DENIED in

part without prejudice. Plaintiffs’ motion is GRANTED with respect to defendants Iran, IRGC,

MOIS, and Bank Melli. Plaintiffs’ motion is DENIED without prejudice as to defendants Bank

Markazi and NIOC.

SO ORDERED.

/s/ Randolph D. Moss RANDOLPH D. MOSS United States District Judge

Date: September 23, 2019

Islamic Republic of Iran, 999 F. Supp. 1, 6 n. 1 (D.D.C.1998) (holding service was effective even though the defendant returned the service package); see also 28 U.S.C. § 1608(c) (providing that service is “deemed to have been made . . . as of the date of receipt indicated in the . . . signed and returned postal receipt . . .”). Because § 1608(a)(3) is similar—though not identical—to § 1608(b)(3)(B), these cases may be relevant in the Court’s ultimate decision as to whether service was effective here as to NIOC and Bank Markazi. Given the current factual uncertainty, however, the Court need not address that question of law at this time. 11