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Mar 02, 2013, 04.02 AM IST | Source: Reuters

U.S. judge rules for Beirut bombing victims in Iranian funds case

IRAN-COURT-BEIRUT-BOMBING:U.S. judge rules for Beirut bombing victims in Iranian funds case

By Nate Raymond and Bernard Vaughan

NEW YORK (Reuters) - A U.S. judge issued a ruling favoring victims of the 1983 Beirut Marine barracks bombing who are seeking to collect $1.8 billion in Iranian funds held at Citibank.

While the full ruling by U.S. District Judge Katherine Forrest in Manhattan remains under seal, an order entered by Forrest Thursday indicated that she ruled for the plaintiffs on a motion seeking to have the funds turned over.

Lawyers for the victims' families said the order puts them one step closer to collecting the money, while at least one defendant said it was considering an appeal.

If the funds were released to the victims, it would mark a rare instance of victims of overseas attacks successfully obtaining monetary relief through the U.S. courts. Enforcement of judgments obtained against foreign nations in these cases can take years, often with little to no success.

The lawsuit in Manhattan federal court stems from attempts by family members and survivors of 241 U.S. servicemen who died during the bombing to enforce a $2.65 billion default judgment they won in 2007 against Iran. The lawsuit alleged that Iran provided material support to Hezbollah, which carried out the attack.

In 2008, the U.S. Treasury Department uncovered the money at the New York branch of Citibank, part of Citigroup Inc. The plaintiffs subsequently sued in 2010 in an effort to have the $1.8 billion go toward satisfying their judgment.

The defendants in the lawsuit include Citi; Bank Markazi, Iran's central bank; and Luxembourg-based bank Clearstream S.A., which deposited the funds at Citi and held Iranian funds in accounts in Luxembourg.

Clearstream and Rome-based Banca UBAE, which is also named as a defendant, moved to dismiss the lawsuit, as did Iran's central bank, which argued the plaintiffs couldn't sue it under the Foreign Sovereign Immunities Act of 1976. Clearstream also sought to vacate restraints placed on the account starting in 2008.

RELIEF, REASONING UNCLEAR

The plaintiffs meanwhile moved for summary judgment, seeking a court order forcing the defendants to turn over the funds in the Citi account.

Judge Forrest on Thursday granted the plaintiffs' motion for summary judgment and denied the banks' motions to dismiss the lawsuit.

It's unclear what relief, if any, Forrest ordered. The decision's exact reasoning also isn't known, as Forrest filed her written opinion under seal.

Forrest directed the parties to confer and to submit a proposed schedule by March 15 "to resolve the remainder of the case." The parties were also ordered to advise her on what parts of her opinion, if any, they believe should remain under seal.

It was unclear from the decision what information the parties might want redacted. The case is subject to a protective order in order to shield confidential information.

Lynn Smith Derbyshire, a spokeswoman for the Beirut bombing victims, hailed Judge Forrest's ruling in a statement and said her side was "almost there."

"That bombing was vile," she said. "Iran should by every measurement be made to pay for its crimes, and Judge Forrest has shown wisdom in her ruling."

Nicolas Nonnenmacher, a spokesman for Clearstream, said in an email that the bank was constrained from commenting since the case is subject to a protective order. But Clearstream "must protect assets of its customers," he said.

"In line with those obligations and its rights as owner of its account at Citibank, Clearstream may appeal this court order because of its fiduciary duty to protect assets in its custody and to protect its legal rights," he said.

Citigroup spokeswoman Molly Meiners said the bank "will continue to follow all applicable laws and orders and instructions from the court."

Andreas Frischknecht, a U.S. lawyer for Bank Markazi at law firm Chaffetz Lindsey, said in an email that he couldn't comment, noting the opinion's reasoning for now is under seal.

The case is Peterson v. Islamic Republic of Iran, U.S. District Court, Southern District of New York, 10-04518.

(Editing by Eric Walsh)

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