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


Wreckage of Pam Am Flight 103
The wreckage of Pan Am Flight 103. Credit: Air Accident Investigation Branch

The case of the day is Aviation & General Insurance Co. v. United States (Fed. Cl. 2016). I first wrote about the case in June 2015, in connection with the decision denying the government’s motion to dismiss. Here was my description from the prior post:

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 court denied the government’s motion to dismiss, rejecting the claim that the plaintiffs’ choses in action were not property that could be taken and that the question was a nonjusticiable political question. Today’s decision deals with the proceedings on summary judgment.

The court applied a “regulatory taking” analysis, the analysis used when a property owner claims that a new regulation deprives him or her of property without actually taking the property by eminent domain. A classic example might be the real estate developer who buys 5,000 square foot lot, and the town that enacts a new “low density” zoning rule that forbids building on lots less than 10,000 square feet in size. The factors to be considered in this analysis are: the character of the governmental action; the extent to which the regulation has interfered with distinct investment-backed expectations; and the economic impact of the regulation on the plaintiff.

The key fact in the court’s analysis was the plaintiffs’ lack of reasonable expectation that they could have pursued their claims against Libya. Libya, of course, was entitled to sovereign immunity from suit under the FSIA.

[T]hose who engage in international commerce must be aware that international relationships sometimes become strained, and that governments engage in a variety of activities designed to maintain a degree of international amity.” Businesses, such as Plaintiffs, that engage in international commerce are fully aware that the security of their enterprise is uniquely dependent on the maintenance of stability and good order in the relationships among nations. Where, as here, the relations between countries become strained, the possibility that the President will intervene is properly recognized as both a shared benefit and a shared risk of those who trade abroad. Our Presidents have exercised the power to settle international claims filed in U.S. courts since at least 1799.

It’s true that for a period of some years Libya did not have the benefit of that immunity. By restoring Libya’s immunity, Congress and the President were merely returning to the status quo ante. “Foreign sovereign immunity reflects current political realities and relationships and its availability, or lack thereof, generally is not something on which parties can rely in shaping their primary conduct.”

The court also focused on the economic harm to the plaintiffs. Even if the plaintiffs had a claim against Libya, collection on any judgment they may have obtained would have been speculative.

For these reasons, the court held that on the merits, the plaintiffs could not show a regulatory taking. Thus the government was entitled to summary judgment.


9 responses to “Case of the Day: Aviation & General Insurance Co. v. United States”

  1. Allan

    Good luck to the insurance company I know that the insurance company is going to lose big time.

  2. Allan

    How is the case going so far?

    1. Allan, I think the case is still on appeal.

      1. Allan

        I have been investigating this air crash since 1988 I know exactly happened if it ever got out it it could bankrupt the insurance company

        1. Well, it’s not exactly topical, but if there’s a story you’d like to tell in the comments, please feel free!

          1. Allan

            It is far too sensitive as it might bankrupt a American corporation just like it did before after a previous air crash.

              1. Allan Croft

                See the Lockerbie blog for the latest news of the third and final appeal to clear Basset’s name in the Scottish high court.

  3. Allan Croft

    Now that the U.S. government won the case now I will tell you what happened to the aircraft over lockerbie the forward right hand cargo door opened up at 31’000 feet caused by the a short circuit to the S2 switch slammed into the side of the aircraft N739PA slicing section 41 clean off .

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