Case of the Day: Aviation & General Insurance Co. v. United States

The case of the day is Aviation & General Insurance Co. v. United States (Fed. Cl. 2015). The plaintiffs were insurance and reinsurance companies that had insured the aircraft hulls used on EgyptAir flight 648 and PanAm flight 103, two flights that were victims of terrorist attacks that, the United States determined, were sponsored by the government of Libya.

In 1996, Congress amended the FSIA to create a “state-sponsored terrorism” exception to sovereign immunity. The insurers then brought suit against Libya. But in 2008, Congress enacted the Libyan Claims Resolution Act, which allowed the government to restore Libya’s immunity. The United States and Libya entered into a claims settlement agreement, and the government, pursuant to the 2008 statute, terminated the pending lawsuits against Libya, including the insurers’ suit. The insurers had the right to seek compensation in the Foreign Claims Settlement Commission, an agency of the Department of Justice. But the insurers’ claims were unsuccessful for various reasons.

The question in today’s case is whether the government’s actions amounted to a taking of property for which the insurers are entitled to compensation under the Takings Clause of the Fifth Amendment, which provides: “nor shall private property be taken for public use, without just compensation.” The government moved to dismiss.

I’m not going to review the holding in detail, but I do want to note a few points. First, the court rejected the government’s claim that the plaintiffs’ choses in action were not property interests at all. Reviewing the Federal Circuit’s precedents, the court discerned a distinction between cases where the plaintiffs’ choses in action rested on federal statutory rights (in which case the plaintiffs could show no property right) and cases where the choses in action rested on the common law (in which cases the plaintiffs could show a property right). The court was not persuaded by the government’s contention that you acquire a property right in a tort chose of action only once a judgment enters.

Second, the court rejected the government’s argument that the case presented a non-justiciable political question. Again, the court distinguished some earlier precedents where the United States had not merely extinguished the plaintiffs’ claims, but rather settled them on the plaintiffs’ behalf, perhaps for less than the plaintiffs wished. In such cases, perhaps the plaintiff can be forced to accept a small amount, but that’s not what happened here.

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