In its August 2016 decision in Waldman v. Palestine Liberation Organization, the U.S. Court of Appeals for the Second Circuit reversed a $655 million jury verdict against the Palestine Liberation Organization (PLO) and the Palestinian Authority (PA) for lack of personal jurisdiction.Footnote 1 The plaintiffs were individuals whose family members had been killed in terrorist attacks that took place in Jerusalem; defendants were alleged to have coordinated and carried out these attacks.Footnote 2 While the United States government took no position on the merits of the dispute, it filed a Statement of Interest in the district court “[o]n the limited issue of setting a bond amount in [the] case.”Footnote 3
Title 18 U.S.C. §2333(a) authorizes “any national of the United States injured in his or her person, property, or business by reason of an act of international terrorism” to “sue therefor in any appropriate district court of the United States” and to “recover threefold the damages he or she sustains and the cost of the suit, including attorney's fees.” The chief purposes of the provision were to give federal courts jurisdiction over certain foreign defendants and to make available the tort principle of vicarious liability in such actions.Footnote 4
The provision—part of the Antiterrorism Act of 1991 (ATA)Footnote 5 —was enacted in response to the Southern District of New York's ruling in the Klinghoffer case, which dealt with a terror attack on a cruise ship in the Mediterranean Sea.Footnote 6 Relying on admiralty jurisdiction,Footnote 7 the district court in that case had held that the U.S. plaintiffs stated a cognizable claim against the PLO.Footnote 8 Introducing the language that eventually became Section 2333(a), Senator Chuck Grassley emphasized that, while the court reached the correct result in Klinghoffer, its reliance on admiralty jurisdiction suggested potential problems for future plaintiffs who suffered harm on foreign land. “Unfortunately, victims who turn to the common law of tort or Federal statutes, find it virtually impossible to pursue their claims because of reluctant courts and numerous jurisdictional hurdles.”Footnote 9 To allow victims to recover from injuries caused by “terrorist activity … [that] occurred on land in a foreign country,”Footnote 10 Senator Grassley introduced the provision to expand federal jurisdictional in such cases. As one State Department official testified:
This bill [the ATA] … expands the Klinghoffer opinion. Whereas that opinion rested on the special nature of our admiralty laws, this bill will provide general jurisdiction to our Federal courts and a cause of action for cases in which an American has been injured by an act of terrorism overseas. This bill is a welcome addition to our arsenal against terrorists.Footnote 11
Addressing the ATA's consistency with international law, the official noted that the ATA “maintain[s] the status quo as regards sovereign States and their officials.”Footnote 12 The ATA did not authorize a plaintiff to bring a “cause of action for international terrorism … against [sovereign states]” because that would have been “inconsistent with international law.”Footnote 13
Section 2333(a) was also meant to make applicable the common law tort principle of vicarious liability and abettor liability in suits against foreign terrorism defendants. Joseph Morris, testifying as a former high-ranking attorney at the Department of Justice, explained:
American victims seeking compensation for physical, psychological, and economic injuries naturally turn to the common law of tort. American tort law in general [speaks] quite effectively to the facts and circumstances of most terrorist actions not involving acts of state by foreign governments.Footnote 14
As Morris explained,
[t]he tort law system … [attaches vicarious liability] to those who knowingly or negligently make it possible for some actor grievously to injure somebody else. As Section 2333(a) is drafted, it brings all of that tort law potential into any of these civil suits.Footnote 15
In addition to incorporating vicarious liability into the statute, Congress also designed the ATA to extend liability not only “to defendants who actually commit a tort, but also those who aid and abet in its commission.”Footnote 16
The Waldman case involved suits by multiple American families against the PLO and PA for seven terror attacks that killed or wounded plaintiffs’ family members.Footnote 17 The plaintiffs alleged that the perpetrators of the attacks were, directly or indirectly, affiliated with the PLO and/or the PA.Footnote 18 Section 2333(a) facilitated the plaintiffs’ lawsuit in two important ways. First, the plaintiffs relied on the provision's vicarious liability principle to argue that the PLO and the PA should be held liable for terror attacks because of their affiliation with the perpetrators. Second, the plaintiffs relied on the provision to give the federal court jurisdiction to hear the claim. In response, the defendants argued that the exercise of personal jurisdiction over them violated the Due Process Clause.Footnote 19
During the course of litigation, the Supreme Court substantially altered its jurisdiction jurisprudence in the Daimler and Gucci decisions, narrowing the scope of general personal jurisdiction.Footnote 20 Before Daimler, courts routinely exercised general jurisdiction over corporations that engaged in a substantial amount of business in the forum jurisdiction.Footnote 21 Daimler restricted the scope of general jurisdiction by limiting it to places where the defendants were essentially “at home”: typically the defendant's state of incorporation and its principal place of business.Footnote 22
Relying on this new precedent, the Waldman defendants moved for summary judgment on jurisdictional grounds. The district court denied the motion, reasoning that:
Under both Daimler and Gucci, the PA and PLO's continuous and systematic business and commercial contacts within the United States are sufficient to support the exercise of general jurisdiction … . [The] record is therefore insufficient to conclude that either defendant is “at home” in a particular jurisdiction other than the United States.Footnote 23
In light of the connections between the defendants and the United States, the district court ruled that this was just the type of “exceptional case” in which the Daimler Court would have found general personal jurisdiction.Footnote 24 Since the requirements for personal jurisdiction were satisfied, the district court held that it did not violate the defendants’ due process rights by hearing the case.Footnote 25 The case later went to trial, and the jury found for the plaintiffs. After the trial, the jury returned a verdict in favor of the plaintiffs for the amount of $655 million, once the calculation of actual damages was trebled per the statutory mandate.Footnote 26
After the jury delivered the verdict in February 2015,Footnote 27 the defendants filed a motion to stay the execution of the judgment and waive the bond requirement for appeal.Footnote 28 (While defendants must generally post a bond equivalent to the amount of the judgment plus interest and costs in order to stay the judgment during appeal,Footnote 29 the district court has discretion to reduce or even waive the bond requirement.Footnote 30 ) During the ensuing proceedings to determine the bond requirement for appeal, Deputy Secretary of State Antony Blinken attached a declaration to a U.S. Statement of Interest “respectfully [urging] the Court to carefully consider the impact of its decision on the continued viability of the PA” in light of evidence showing the PA's precarious financial situation.Footnote 31 The declaration warned that an exorbitant bond could “severely compromise the PA's ability to operate as a governmental authority,” which would “undermine several decades of U.S. foreign policy and add a new destabilizing factor to the region, compromising national security.”Footnote 32 After receiving the statement, the district court ordered the judgment to be stayed pending appeal if defendants “post[ed] a bond or deposit[ed] cash with the Clerk of the Court in the amount of $10 million before September 23, 2015, and in the amount of $1 million every thirty (30) days thereafter.”Footnote 33
The Second Circuit overturned the jury verdict because it found that the district court's exercise of personal jurisdiction violated the defendants’ due process rights. Although the Second Circuit found that “there was a statutory basis pursuant to the ATA for that service of process,”Footnote 34 it ultimately concluded that due process had been violated because the court lacked personal jurisdiction. The Second Circuit explained that the district court's conclusion “that it had general jurisdiction over the defendants” relied “on a misreading of the Supreme Court's decision in Daimler.”Footnote 35 As the court reasoned:
Pursuant to Daimler, the question becomes, where are the PA and the PLO “fairly regarded as at home”? … The overwhelming evidence shows that the defendants are “at home” in Palestine, where they govern. Palestine is the central seat of government for the PA and PLO. The PA's authority is limited to the West Bank and Gaza, and it has no independently operated offices anywhere else. All PA governmental ministries, the Palestinian president, the Parliament, and the Palestinian security services reside in Palestine.
…
The activities of the defendants’ mission in Washington, D.C.—which the district court concluded simultaneously served as an office for the PLO and the PA—were limited to maintaining an office in Washington, promoting the Palestinian cause in speeches and media appearances, and retaining a lobbying firm. These contacts with the United States do not render the PA and the PLO “essentially at home” in the United States.Footnote 36
Having concluded that “the district court could not properly exercise general personal jurisdiction over the defendants,”Footnote 37 the Second Circuit then examined whether the district court could properly exercise specific jurisdiction.
The Second Circuit rejected all the proffered grounds for specific personal jurisdiction, finding that the defendants’ actions—while “heinous”—“were not sufficiently connected to the United States to provide specific personal jurisdiction”:
There [was] no basis to conclude that the defendants participated [in the attacks] in the United States or that their liability for these acts resulted from their actions that did occur in the United States.
In short, the defendants were [held] liable [at the district court] for tortious activities that occurred outside the United States and affected United States citizens only because they were the victims of indiscriminate violence that occurred abroad … . A focus on the relationship of the defendants, the forum, and the defendants’ suit-related conduct points to the conclusion that there is no specific personal jurisdiction over the defendants for the torts in this case.Footnote 38
The court focused on three points in reaching this conclusion. First, the plaintiffs argued that the court could exercise jurisdiction under the Calder “effects test” because the defendants engaged in harmful conduct expressly aimed at the United States by supplying resources to terrorists that killed U.S. citizens in order to influence U.S. foreign policy.Footnote 39 The court rejected this argument after determining that the effects on the United States were “fortuitous” rather than the result of targeted conduct.Footnote 40 Second, the plaintiffs argued that “the defendants purposefully availed themselves of the forum by establishing a continuous presence in the United States and pressuring United States government policy by conducting terror attacks in Israel and threatening further terrorism unless Israel withdrew from Gaza and the West Bank.”Footnote 41 The court declined to find jurisdiction on this basis, since the defendants’ purposeful contacts were unrelated to the plaintiffs’ particular claims.Footnote 42 Third, the plaintiffs argued that the defendants “consented to personal jurisdiction under the ATA by appointing an agent to accept process.”Footnote 43 The court dismissed this as a separate issue from the “constitutional question of whether due process is satisfied” by the exercise of personal jurisdiction.Footnote 44
Since the U.S. courts could not constitutionally exercise general or specific jurisdiction over the foreign defendants, the Court of Appeals vacated the judgment of the district court and dismissed the case.Footnote 45
The Second Circuit's decision prompted quick reactions from the international community. Hanan Ashrawi, a member of the PLO's executive committee, remarked that the court's decision “restore[d] [her] faith in the judicial system.”Footnote 46 She thought the “American justice system proved its impartiality.”Footnote 47 Palestinian Finance Minister Shukri Bishara noted that “[t]his [was] a Palestinian victory that should not be underestimated[,] and it is a big blow to anyone who attempts to blackmail us.”Footnote 48 The reversal of the jury verdict, which Israeli Foreign Minister Avigdor Lieberman had described as a “moral victory for the State of Israel and victims of terrorism,”Footnote 49 disappointed Israeli officials. The plaintiffs’ lawyer called on Congress and the State Department to intervene to “ensure that [the plaintiffs] are compensated by the PA and PLO for these crimes. … This decision must be corrected so that these families may receive justice.”Footnote 50
