Conflicting Rulings in Cases Brought Under the Helms-Burton Act

Wilkie D. Ferguson, Jr. U.S. Courthouse in Miami (Phillip Pessar, https://flic.kr/p/dXkb69; CC BY 2.0, https://creativecommons.org/licenses/by/2.0/) Back in June, we reported that suits brought under Title III of the Helms-Burton Act had suffered their first significant setback, but that many open questions remained. In the last two months, courts have now handed down significant rulings on the application of two other doctrines—standing and scienter —to Helms-Burton suits. Generalizing from these rulings is tricky, as they point in different directions. While some impose stricter standards for standing and scienter , others set out more relaxed requirements. But the decisions have clarified one thing: Title III’s scope will remain unsettled for a while. Readers will remember that Congress passed the Helms-Burton Act in 1996 to put pressure on the communist government in Cuba. Title III of the act was designed to scare investors away from the island by allowing U.S. nationals to sue any persons or entities who “trafficked” in property confiscated by the Castro regime. Title III defines “trafficked” expansively, to include not only engaging “in a commercial activity using or otherwise benefiting from confiscated property” but also profiting from any trafficking done by anyone else. Title III also provides for treble damages under certain circumstances. Presidents Clinton, Bush and Obama all suspended Title III’s operation from 1996 to 2017. When one of us (John Bellinger) served as legal adviser to the National Security Council and the State Department, the Bush Administration considered whether to activate Title III but concluded that the ensuing litigation would cause friction with allies and have potentially unintended consequences. However, on May 2, 2019, the Trump Administration permitted Title III to go into effect for the first time ever. Since then, roughly 30 suits have been filed, mostly against U.S. companies rather than the foreign entities that Congress seemingly intended Title III to target. Several defendants have argued strenuously that the Title III cases against them must be dismissed either because the plaintiffs do not have standing, or because the plaintiffs had failed to properly allege that the defendant companies had the necessary scienter or mental state. Courts are now starting to address those arguments, and over the last month and a half they have offered dueling sets of rulings that ultimately raise more questions than they answer. Standing One of the essential ingredients of federal court jurisdiction is standing, or the idea that a plaintiff must have a real “Case[]” or “Controvers[y]” within the meaning of the U.S. Constitution that can permit a federal court to adjudicate her claims. Standing is absent unless plaintiffs can demonstrate what the Supreme Court has called an “injury in fact”—“an invasion of a legally protected interest” that is both “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” One of the open questions in Title III suits has been whether plaintiffs have standing to sue companies and individuals who allegedly traffic in their property. Everyone agrees that plaintiffs suffered an injury in fact when the Castro regime first confiscated their properties. But whether they also suffered an injury from subsequent trafficking is less clear. Does a former owner really suffer a “concrete” injury when someone merely “benefits” or “profits” from her confiscated property? Three district courts have recently ruled on that question—and they gave conflicting answers. The first case was brought by Robert Glen, who alleges that he holds a claim to two beachfront properties located in one of Cuba’s most popular beach towns, Varadero. After the Cuban revolution, those properties were allegedly confiscated from Glen’s family and developed into four separate beachfront resorts. Glen did not sue any of those resorts, however. He instead brought a series of Title III suits against U.S. companies, including American Airlines. He claimed that American Airlines had “trafficked” in his confiscated property by facilitating the booking of rooms and other services at the four resorts through an online portal (“Book AA Hotels”), as well as by profiting from those resorts’ own trafficking. On Aug. 3, a district court in Texas dismissed Glen’s suit on several independent grounds, including that he had not shown an “injury in fact.” Glen had argued that he was injured by American Airlines’s failure to compensate him whenever it earned commissions from bookings made at the four resorts. But the court rejected that explanation, noting that American Airlines had deprived Glen neither of his confiscated property nor of the profits he might have made off that property. Instead, the airline company had “merely [done] business” with the resorts. Even if Glen had owned and operated the resorts, he would not have been entitled to any of the commissions that American Airlines might have made from facilitating the booking of rooms or other services. So the court could not see how American Airlines, even if it was trafficking in Glen’s properties under the definition of the Helms-Burton Act, had actually injured Glen. Finally, the court rejected the idea that American Airlines’s mere potential violation of Title III was enough, on its own, to constitute an injury to Glen. Just two weeks later, however, a district court in Florida went the other way. Plaintiff Iglesias Cueto alleged in her initial complaint that the Cuban Government confiscated Conac Cueto, C.I.A., a cognac company founded by her father, and then folded its physical and intellectual property into the Cuban Government Rum Company, where those assets were eventually used in the production of liquor under the Havana Club brand. Cueto sued the French liquor company Pernod Ricard, who allegedly partnered with the Castro regime to distribute the Havana Club brand. Pernod raised the issue of standing, but the district court sided with Cueto and another family member who had been subsequently added to the complaint. The court reasoned that the Cuetos’ injury was “the proceeds obtained by a third party, in this case Pernod, who allegedly... trafficked in [the] confiscated property.” Put differently, the Cuetos’ standing was “predicated on their claim that they hold an interest in the confiscated property that was the subject of dealings between [Pernod] and the Cuban Government.” Although the Cueto court’s analysis is less than clear, it seems to have essentially held that standing existed simply because the Cuetos had alleged that Pernod trafficked in their confiscated property. But that ruling dodges the hard question—how, exactly, do “the proceeds obtained by . . . Pernod” concretely injure the Cuetos? Is standing automatically present whenever “trafficking” is properly alleged? On Sept. 1, another district court in Florida offered a possible answer to those questions. Havana Docks Corp. had sued Norwegian Cruise Line Holdings, Ltd., under Title III for allowing its cruise ships to tie up at an allegedly confiscated dock. Norwegian challenged Havana Docks’s standing, but the court held that Havana Docks had successfully demonstrated an injury in fact. It explained that, pursuant to Title III, “trafficking in confiscated property is an invasion of a legally protected interest—i.e. a statutorily constructed property interest in the Subject Property, which conveys a right to prevent third-party use of the same.” The court then reasoned that, “[a]lthough a statutorily-constructed right may be insufficient to convey standing on its own,” it was sufficient where Congress created that right to address a concrete underlying harm. Here, the court noted, Congress created Title III to address the wrongful confiscation of property and the subsequent exploitation of that property by foreign investors at the expense of rightful owners. Accordingly, the “concrete underlying harm” in the case was the cruise line’s infringement on Havana Docks’s property interest. On one level, it’s not easy to square the different outcomes in these three cases. Glen held that the plaintiff lacked standing because trafficking on its own did not injure the owner of the confiscated property; Cueto (seemingly) held the opposite. Havana Docks distinguished Glen by arguing that Glen had admitted that neither the confiscation of the properties nor the resorts’ operations constituted injuries in fact. But Glen’s concessions are irrelevant to the question of standing, which is jurisdictional and must therefore be independently assessed by the court. One possible way to reconcile all three
Conflicting Rulings in Cases Brought Under the Helms-Burton Act posted first on http://realempcol.tumblr.com/rss