Congress passed Title III of the Helms-Burton Act in 1996 to scare investors away from Cuba by allowing U.S. nationals to sue any persons or entities who “traffic” in property confiscated by the Castro regime.
Title III defines “traffics” expansively, to include not only engaging “in a commercial activity using or otherwise benefiting from confiscated property,” but also profiting from or even benefitting from any trafficking done by anyone else.
Title III also provides for treble damages under certain circumstances, making it a potentially formidable litigation weapon.
Presidents Clinton, Bush, and Obama all suspended Title III’s operation from 1996 to 2017. The Bush administration considered activating 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 deviated from the precedent established by its predecessors and permitted Title III to go into effect.
Our first survey of Title III cases in July 2019 noted that plaintiffs had gotten off to a slow start in filing cases under the Act.
Our second survey in March 2020 observed that most of the cases brought have been against U.S. companies rather than the foreign entities that Congress seemingly intended Title III to target.
In this update, we look at the third generation of suits that has been filed, as well as check in on the status of the first and second generations.
- Plaintiffs have filed roughly 40 suits under Title III in the two years it has been operative, including 15 new suits against a mix of U.S., European and Cuban companies operating in industries such as mining, sugar, tobacco, advertising, banking, construction, and ranching.
- Of all the suits filed so far, 17 have already been dismissed in whole, five voluntarily and 12 by court order. Courts have most frequently dismissed cases because plaintiffs failed to acquire their claim in time or because there was no personal jurisdiction. Compared to some other defenses, these time bar and personal jurisdiction issues are relatively straightforward, meaning that some of the more interesting defenses — including the scope of Title III’s broad “trafficking” definition and the effect of licenses provided by the U.S. government — remain to be litigated. Some of the plaintiffs in court-dismissed cases have subsequently amended their complaints, while seven have appealed, resulting in one Court of Appeals decision to date.
- Surprisingly, fewer than 10 cases total have entered the discovery phase of litigation, suggesting that plaintiffs are finding it tough to get past even the motion to dismiss stage.
- One recent court ruling examined how Title III interacts with the immunity of foreign sovereign defendants and concluded that although the law does not strip sovereign entities of their immunity, those entities are still subject to the same exceptions to immunity that would apply in non-Title III cases.
- Although the Biden administration has not re-suspended Title III’s operation, it is likely reviewing its Cuba policy and could theoretically decide to re-suspend the statute at any time, thereby preventing a fourth generation of suits from developing.
Third generation of Title III suits
Since our last update in March 2020, there have been 15 new cases filed under Title III. All but one are still waiting for a court decision, but it already seems clear that some of the lawsuits comprising this third generation of suits are more sophisticated than their predecessors.
First is a case brought by the heirs of Roberto Gómez Cabrera.
Before 1960, Gómez allegedly owned 21 mines located in and around the town of El Cobre in Oriente Province. The Cuban government allegedly confiscated the real and personal property of Gómez’s company, Minera Rogoca S.A. Gómez passed away in September 1969, and his claims to Minera Rogoca’s mines were inherited by his children, who in turn seem to have pooled their claims in an entity by the name of Herederos de Roberto Gómez Carbrera, LLC. Herederos sued Teck Resources Ltd. under Title III for allegedly trafficking in the confiscated mines from at least 1994 to 2009. In late April, the district court dismissed Herederos’ complaint on multiple grounds (discussed further below).
Next are three cases brought by North American Sugar Industries, Inc.
For over half a century, American Sugar allegedly owned and operated a massive sugar business in Cuba that included not only land, crops and refineries, but also a sizable transportation network, including large commercial shipping ports. This property was confiscated during the Revolution. In 1969, American Sugar used the U.S. Foreign Claims Settlement Commission process that we’ve previously discussed in order to certify the value of its expropriated assets at just over $97 million, which is the second-largest claim against the Cuban government ever certified in the United States. (By comparison, Exxon-Mobil’s claim, which we’ve previously discussed, is certified at a little less than $72 million.
American Sugar claims that one of its confiscated shipping ports, Puerto Carupano, was used by the defendants to deliver equipment to the nearby Herradura Wind Farm Project, the largest wind power project in Cuba. Specifically, American Sugar claims that two Chinese companies — Xinjiang Goldwind Science & Technology, Co. and Goldwind International Holdings (HK) Ltd. — transported their wind turbines and related equipment through the port on the way to the wind farm project. American Sugar further claims that this shipment was carried in vessels chartered and operated by BBC Chartering USA, LLC and BBC Chartering Singapore PTE Ltd., and that DSV Air & Sea Inc. provided additional transportation and logistical services. American Sugar has now sued all five companies, alleging that they “trafficked” within the meaning of Title III by using its confiscated port to transport the necessary equipment for the wind farm project or by profiting from that transportation.
In response, one of the defendants claims that the whole suit is actually a case of mistaken identity. American Sugar sued the U.S. subsidiary of DSV based on the use of that company’s Standard Carrier Alpha Code for one of the relevant shipments through Florida. But DSV US claims that the use of that code was a “clerical error,” and that in reality DSV US had no relevant contact with the shipments.
American Sugar has demanded and received jurisdictional discovery, both to plumb that question and to investigate the jurisdictional bases for the other defendants’ motions to dismiss.
Meanwhile, American Sugar has also filed two duplicative, protective actions in New Jersey and Texas against DSV and BBC Chartering USA, respectively, in case the primary court in Florida decides to dismiss the case for lack of personal jurisdiction.
The fifth new case involves tobacco.
Led by Luis Manuel Rodríguez, the plaintiffs are a group of family members who allegedly inherited a 90% interest in Ramón Rodríguez e Hijos Sociedad en Comandita (RRHSC), the owner and operator of the former Partagás cigarette factory building in Havana. Castro’s regime allegedly confiscated the RRHSC Property in 1961 as part of its takeover of the tobacco industry, and the building is now allegedly being used to manufacture, store and ship Cuban cigars. The Rodríguez plaintiffs have sued two sets of defendants: first, two tobacco companies, Imperial Brands PLC and Corporación Habanos S.A., that allegedly used the RRHSC Property to produce and ship millions of hand-rolled cigars; and second, three marketing agencies, WPP PLC, Young & Rubicam LLC, and BCW LLC, that were allegedly hired by Imperial Brands to market and publicize the cigars produced at the confiscated property. Somewhat surprisingly, the Cuban defendant in this case — Corporación Habanos — has appeared to defend itself, continuing a trend of Cuban participation in these suits that was first started in the case brought by Exxon Mobil.
The sixth new case is brought by 21 U.S. citizens and four estates that seem to mostly be the descendants of a group of five individuals who once owned the Compañía Azucarera Soledad, S.A., a closely held corporation that was engaged in sugar operations, cattle raising and dairy farming in the Province of Las Villas.
On August 6, 1960, the Cuban government allegedly confiscated Soledad and all its assets, including a sugar mill, more than 27,000 acres of prime land, and 31 miles of narrow-gauge railroad with steam locomotives. The plaintiffs have now sued LafargeHolcim Ltd. and a mix of related corporations for allegedly investing in the “Carlos Marx” cement plant that sits on the confiscated land. LafargeHolcim have settled the complaint.
Plaintiff Osvaldo N. Soto brought the seventh suit, claiming that Soto is an heir to the waterfront Copacabana Hotel in Havana that was confiscated by Castro in 1961. Since that time, the Cuban Government has allegedly exploited and benefitted from the property along with Be Live Hotels S.L. But the suit is not against either the Cuban government or Be Live Hotels; instead, following the model of the class action suits we discussed last time, it targets Booking.com B.V. and Booking Holdings Inc. for allegedly trafficking in the confiscated hotel by promoting it online. The Booking defendants have filed a motion to dismiss, but the case took an unexpected turn in mid-January when Soto passed away. His son, Eduardo, has moved to substitute himself as the personal representative of the elder Soto’s estate, but the Booking defendants have opposed that motion on the grounds that a claim under Title III is extinguished upon the claimant’s death because the statute is penal in purpose.
The district court has yet to rule on the question.
Eighth is a case with familiar defendants, claims and even attorneys. The plaintiffs are the alleged heirs of the owners of Banco Pujol, a Cuban bank founded in 1893 that grew to become the seventh-largest-in-assets Cuban-owned bank on the island. Banco Pujol’s ascent ended abruptly in late 1960 when it was confiscated and consolidated into the state-controlled Banco Nacional de Cuba. The plaintiffs are now suing French banks Société Générale S.A. (SocGen) and BNP Paribas, S.A., alleging that they trafficked in the confiscated bank property by helping the Banco Nacional clear payments through New York. If that sounds familiar, that is because both the defendants and the general claims mirror a case we discussed last time against SocGen by the heirs of Banco Nuñez; the heirs in both cases are also represented by the same law firm, so we may see the cases move in tandem going forward (though they are not formally related).
Cases nine through twelve involve plaintiff Odette Blanco de Fernández, along with the estates of her deceased siblings as well as their living offspring. The plaintiffs allege that Blanco de Fernández and her siblings owned Marítima Mariel SA, a Cuban company with a 70-year concession to develop docks, warehouses and port facilities on Mariel Bay, Cuba. They further allege that Blanco de Fernández and her siblings owned two sugar companies, Central San Ramón and Compañia Azucarera Mariel S.A., which among other things had title to extensive land holdings (approximately 11,000 acres) southeast, south and west of Mariel Bay. Castro’s regime allegedly confiscated all three companies and their assets in late 1960 and subsequently incorporated the confiscated property into the Zona Especial de Desarollo Mariel (the Mariel Special Economic Zone), designed to attract investment into the area. Starting in or around 2009, the Cuban government allegedly worked with various non-Cuban corporate partners to rebuild the Port of Mariel and construct a container terminal in the Zona Especial. The plaintiffs allege that the Zona Especial’s container terminal subsumes the confiscated 70-year concession rights and encompasses the confiscated land holdings.
As noted, these plaintiffs have brought four suits: the first against Seaboard Marine Ltd., the second against A.P. Moller-Maersk A/S and affiliated companies, and the third and fourth against Crowley Maritime Corp. and affiliated companies. (The plaintiffs voluntarily dismissed the first Crowley suit the same day they filed the second Crowley suit, so there are now only three live cases, one against each defendant.
Third to last is another mining-related case. Hilda M. Castañedo Escalón is the personal representative of two estates, which allegedly own claims to a large lead and zinc mining operation seized by the Castro regime in 1960. The plaintiffs have sued three members of what they call the “Trafigura Mining Group,” which they allege established a joint venture called EMINCAR with Cuban state-owned entity Geominera to operate the confiscated mine. The plaintiffs have also brought a civil conspiracy claim.
King Ranch Inc. has filed the penultimate Title III case. The complaint alleges that King Ranch, a Texas-based corporation, had a 50% ownership interest in a cattle ranch and associated land that was confiscated by the Castro regime. Cuba’s government now allegedly uses the property for, among other purposes, a tourist attraction (called Rancho King) and charcoal production. King Ranch has filed suit against nine different Cuban companies, making this the third live case involving Cuban entities. None of the Cuban defendants has yet entered an appearance in the case, but it is still early.
Finally, our last case was filed Sunday, May 2, on the two-year anniversary of Title III’s implementation. Francisco Industries, Inc., the plaintiff, claims to have owned a thriving international sugar business prior to the Cuban government’s confiscation; that business was subsequently certified for $53.4 million. Francisco Industries alleges that ASR Group International, Inc., another sugar company, has trafficked in its former property by purchasing sugar produced from the confiscated fields and shipping it out through a confiscated port. ASR Group has yet to respond, but both parties will surely be following the factually similar cases brought by American Sugar.
First wave of dismissals
Last year one of us (John Bellinger) told Cuba Standard that “judges in Title III cases are slowly feeling their way.”
Since then, the confidence of the courts has picked up, and that confidence has, by and large, been bad news for Title III plaintiffs. Our last update in March 2020 reviewed 21 cases that had not been voluntarily dismissed. Since then, courts have dismissed more than half of those cases on one of two theories.
First, almost half of all suits pending at that time have been dismissed by a question of statutory standing. Title III states that “[i]n the case of property confiscated before March 12, 1996, a United States national may not bring an action under [the Act] . . . unless such national acquires ownership of the claim before March 12, 1996.”
Courts have universally adopted that straightforward reading. One of the first cases to go was Daniel A. Gonzalez’s suit against Amazon and Susshi International, which the district court dismissed because Gonzalez had not alleged that he acquired the relevant claim before the relevant date.
Courts have used this same reasoning to dismiss two of Javier García-Bengochea’s three suits against cruise lines, as well as all three of Robert Glen’s suits against travel companies, credit card companies, and American Airlines, respectively.
Courts have likewise used the same reasoning to dismiss three out of the five class action suits brought by a group of individual plaintiffs against Expedia and other travel companies, although the plaintiffs in these three cases have since filed amended complaints.
Second, courts have also dismissed several suits for lack of “personal jurisdiction,” or a court’s ability to exercise power over a particular defendant. Generally speaking, a court has personal jurisdiction over a defendant only when that defendant has sufficient contact with the state in which the court sits. In late May, a court dismissed one of the Title III class actions brought against Expedia and other travel companies because the court determined that the travel companies’ connections to the forum state — Florida — were minimal.
Instead, the plaintiffs had merely alleged that the companies maintained websites accessible in Florida. But the court held that “merely having a website accessible in Florida is not sufficient” for personal jurisdiction.
That ruling is currently on appeal.A court also dismissed Marlene Cueto Iglesias and her co-plaintiff’s suit against French alcohol manufacturer Pernod Ricard on the same ground.
Finally, as noted, the district court recently dismissed Herederos’ case against the mining firm Teck Resources. According to the court, Herederos fell afoul of both grounds for dismissal just discussed: Herederos had not acquired its claims until after the 1996 deadline, and the court did not have personal jurisdiction over Teck Resources, a Canadian firm.
Status of the surviving cases
Of the remaining 10 cases covered in our last update, half have entered the discovery phase of litigation and half are either on ice or waiting for a court ruling.
One batch of cases easily qualifies as the most remarkable comeback story of any Title III case to date. As readers may remember, Havana Docks Corporation sued Carnival Cruise Line for trafficking in its confiscated property, the Havana Cruise Port Terminal. Carnival moved to dismiss the case because Havana Docks’ only interest in the property was a concession that would have expired in 2004, more than a decade before the alleged trafficking began. At first, the district court ruled against Carnival, and Havana Docks followed up its victory by filing three more suits against MSC Cruises, Norwegian Cruise Line Holdings, and Royal Caribbean Cruises. But in the MSC Cruises case, the same judge changed her mind and held that Havana Docks could not bring a claim after all because its concession had expired before the trafficking allegedly began. The court therefore dismissed the cases against MSC Cruises and Norwegian Cruise Line Holdings, and we suggested in March 2020 that Havana Docks’ other two cases were poised to follow.
Incredibly, however, the district judge then reversed herself yet again, granting Havana Docks’ motion for reconsideration and ruling that the cases should not have been dismissed.
One other case, Exxon Mobil’s suit against three Cuban state-owned companies, has just survived a motion to dismiss and entered jurisdictional discovery, as discussed in the next section.
Last but not least, the remaining five cases are currently in a holding pattern.
- First, the district court has stayed Maria Dolores Canto Martí’s suit against Iberostar Hoteles y Apartamentos S.L. while the Spanish hotel chain seeks permission from the European Commission to defend the suit.
- Two other cases — José Ramón López Regueiro’s suit against American Airlines and LATAM, and the last remaining class action against Expedia — are stayed on account of the coronavirus.
- García-Bengochea’s last remaining suit against Norwegian Cruise Line Holdings is stayed pending his appeal of his two dismissed cases.
- Finally, the Banco Nuñez heirs have amended their complaint to add new individual co-plaintiffs; to voluntarily dismiss some of the original defendant banks; and to add a new defendant bank, B.N.P. Paribas S.A., alongside original defendant Société Générale S.A. Now the heirs’ suit is also awaiting a decision on a fully briefed motion to dismiss.
Title III’s application to sovereign entities
One of the biggest question marks hovering over Title III has been whether it waives the immunity of foreign sovereign defendants. On the one hand, foreign states are presumptively immune from suit in the United States under the Foreign Sovereign Immunities Act (FSIA), and Title III does not expressly waive that Act’s grant of foreign sovereign immunity. On the other hand, Title III does create a right of action against any “person” that traffics in confiscated property, including “any agency or instrumentality of a foreign state.” Some have argued that this language suggests that Congress intended Title III to apply to foreign states regardless of their immunity.
On April 20, the DC district court held in the Exxon Mobil case that Title III does not waive foreign sovereign immunity but that Title III suits may fall within one of the FSIA’s exceptions to immunity. As readers may recall, Exxon has alleged that Cuba expropriated one of its subsidiaries (Esso Standard Oil, S.A., also known as Essosa), and that Cuba’s state oil company, Unión CubaPetróleo (CUPET), now operates Essosa’s refinery, plants, terminals, and other infrastructure.
Exxon further alleges that CUPET works with another Cuban state-owned entity, Corporación CIMEX S.A. (CIMEX), to operate more than 300 service stations across the island where Cubans can buy gas and a variety of consumer goods, as well as accept remittances from abroad.
Some of these stations were built on land belonging to Essosa, and Exxon therefore sued both CUPET and CIMEX under Title III for continuing to run these stores.
Exxon also sued a third Cuban company, Corporación CIMEX S.A. (Panama), which it alleges is merely the alter ego of CIMEX.
Exxon had argued that Title III waives the immunity of these foreign sovereign defendants through language that provides that “[e]xcept as provided in this subchapter, the provisions of Title 28 . . . apply to actions under this section.”
For Exxon, that clause means that Title 28 — which includes the FSIA — applies to Title III suits unless it conflicts with Title III. Exxon reasoned that Congress created just such a conflict when it defined “person” under Title III to include “any agency or instrumentality of a foreign state,” and that immunity under the FSIA was therefore waived.
Judge Amit P. Mehta disagreed. He explained that “Exxon’s argument boils down to a contention that Title III’s private right of action conflicts with the FSIA and therefore the private right of action waives sovereign immunity.”
But the problem with this argument is “that private rights of action and exceptions to sovereign immunity are two entirely different species.” Congress does not create a private right of action whenever it waives sovereign immunity; conversely, Congress does not waive sovereign immunity whenever it creates a private right of action. The two are unrelated, and there is thus no conflict left to be resolved by the “except as provided in this subchapter” clause. Judge Mehta also explained that if Congress had intended to depart from the FSIA, “it would have done so explicitly.”
Other parts of Title III expressly refer to the FSIA, showing that Congress knew both of the statute’s existence and how to depart from it. By comparison, it seemed unlikely that Congress had “cavalierly jettisoned” foreign sovereign immunity simply by inserting the clause “[e]xcept as provided in this subchapter.”
But that was not the end of the matter. Even though Title III did not waive the defendants’ immunity under the FSIA, the FSIA itself sets out several exceptions to foreign sovereign immunity. Judge Mehta next considered whether Exxon’s case fell into any of those exceptions.
First, he held that the court had jurisdiction over CIMEX under the “commercial activities exception” of the FSIA.
As relevant here, that exception provides that a foreign state — including its agencies and instrumentalities, like the state-owned corporations at issue here — “shall not be immune from the jurisdiction of the courts of the United States in any case . . . in which the action is based . . . upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.” Judge Mehta agreed with Exxon that its case was “based upon” the commercial activities of the defendants, namely, their participation in the global oil market, their operation of service stations, and their processing of remittances through those stations. Judge Mehta also agreed with Exxon that CIMEX’s operation of service stations had a “direct effect” in the United States because those stations processed remittances sent by U.S. citizens through Western Union and because those stations sold products imported by a third entity from the United States.
Judge Mehta was less persuaded by Exxon’s other arguments under the commercial activities exception, and he held that Exxon had thus far failed to establish the court’s jurisdiction over CUPET or CIMEX (Panama).
Second, the district court also considered the FSIA’s “expropriation exception,” which, as relevant here, strips foreign states of their immunity in a case “in which rights in property taken in violation of international law are in issue.”
Judge Mehta concluded that Exxon’s case did not concern “rights in property” because as a shareholder, Exxon had only “an interest in the rights of its [confiscated] subsidiary’s property,” but not rights in the property itself.
Since Cuba had not fully destroyed the value of Exxon’s shares in Essosa — indeed, according to the court, Essosa remains in operation to this day — Exxon had not successfully shown that its rights in property were “in issue” in the case.
Judge Mehta thus concluded that Exxon had established jurisdiction over only CIMEX under the commercial activities exception of the FSIA. But despite it being a “close call,” he nevertheless allowed jurisdictional discovery against the other two defendants to determine, among other things, whether their relationship with CIMEX was sufficiently close to establish the court’s jurisdiction over them as well.
On the whole, this ruling is a mixed bag for foreign sovereigns worried about ending up on the receiving end of a Title III suit. On the one hand, Judge Mehta showed persuasively why Title III does not itself waive sovereign defendants’ immunity. But his ruling on the “direct effect” prong of the FSIA’s commercial activities exception seems expansive. Courts generally agree that sovereigns have a “direct effect” inside the United States when they cause money to be sent into the country; it seems less clear why courts should also have jurisdiction over foreign sovereign defendants that did nothing more than process remittances or sell goods from the United States. Likewise, foreign sovereigns will not be pleased by Judge Mehta’s ruling on jurisdictional discovery. He acknowledged the burdens on foreign states of answering even limited discovery inquiries, but the questions he has permitted Exxon to investigate could end up proving quite intrusive.
Finally, Judge Mehta also held that Exxon Mobil had constitutional standing to bring this whole suit in the first place. Under the U.S. constitution, plaintiffs must have a real “Case” or “Controvers[y]” before a federal court may adjudicate their 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.”
The hard standing question in Title III cases is whether there is any real, “concrete” injury that plaintiffs suffer from having someone else traffic in their former property. Judge Mehta evaded that question entirely by observing that “Exxon possesses a claim from the FCSC certifying that it ‘suffered a loss in the total amount of $71,611,002.90′,” which he thought was “[q]uite plainly . . . a real and not abstract injury.”
But the expropriation of Exxon’s property is not the basis for its suit, so it is unclear why Judge Mehta thought it relevant to the standing question. Surprisingly, he seemed to recognize as much in the next paragraph of his opinion when he chastised the defendants for wrongly “characterizing Exxon’s injury as the expropriation” rather than the trafficking.
As two of us have previously noted, this is not the first time that courts have avoided grappling with the hard standing question in Title III cases, and defendants and courts alike are failing to think it through adequately.
Since the Cuban defendants are likely to appeal, we may soon have a more definitive ruling from the DC Circuit on these issues.
Closing window to file suit?
Some observers have urged President Biden to reverse President Trump’s decision and re-suspend the operation of Title III. So far at least, that has not occurred, and the Biden administration has indicated that Cuba is not a policy priority.
If the Biden Administration changes its mind, however, the Helms-Burton Act requires it to give Congress at least 15 days of notice before the suspension goes into effect.
Suits commenced before that date will not be affected by the re-suspension, so we could well see a last-minute rush of plaintiffs trying to file suits before the window for new Title III suits closes once again.
And there are good reasons for the Biden Administration to slam that window shut. Two years after the Trump Administration put Title III into operation, the Act has yet to deliver on its promise. Instead, there have been only forty-some cases filed, many of which target American companies with only indirect involvement (at best) in Cuba.
John Bellinger and Ambassador Tom Shannon co-chair Arnold & Porter’s Global Law and Public Policy practice. John Bellinger previously served as the legal adviser to the State Department from 2005 to 2009. Ambassador Tom Shannon previously served as the Assistant Secretary of State for Western Hemisphere Affairs during the same period and as Under Secretary of State for Political Affairs from 2016 to 2018. While they were at the State Department, Bellinger and Ambassador Shannon were responsible for the implementation and interpretation of Titles III and IV of the Helms-Burton Act.
© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.