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United States to Allow U.S. Nationals to Sue Companies Alleged to be Trafficking in Property Confiscated by the Cuban Government

Alert
04.17.2019
By Roy Goldberg

Twenty-three years after Title III of the Helms-Burton Act was enacted and immediately "shelved" by President Clinton, the United States government is reportedly on the verge of permitting U.S. nationals to sue companies that purportedly are "trafficking" in property confiscated by the Cuban government when or after Fidel Castro rose to power in the island nation. According to a Reuters report on April 16, 2019, the "Trump administration will allow lawsuits in U.S. courts for the first time against foreign" and some U.S. "companies in communist-ruled Cuba that use properties confiscated from Cuban Americans and other U.S. citizens during the" Cuban revolution. Some commentators have predicted that this new development could result in the filing of as many as 200,000 lawsuits in the U.S. This new development may be welcome news for many U.S. companies that currently own the rights to property seized by the Cuban government in or around 1960. However, it also may negatively impact companies that do business in Cuba, and other companies that find the federal court system inundated with the new lawsuits. The new development also will be controversial outside the U.S.

Title III of the Helms-Burton Act, also known as the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, titled "Liability for Trafficking in Confiscated Property Claimed by United States Nationals," authorizes U.S. citizens to file suit in federal district court against companies and individuals to recover damages relating to the use of commercial property confiscated by the Cuban government. Under the administration's new approach, U.S. nationals will be authorized to file a civil suit in the U.S. district court, likely in a district either where the plaintiff resides or the defendant does business: (1) alleging that the defendant has trafficked or is trafficking in property confiscated by the Cuban government for which the plaintiff has a claim; and (2) seeking three-times that amount of damages alleged caused by the confiscation of the property. The purpose of Title III is in part to discourage persons and companies from engaging in commercial transactions involving confiscated property, and in so doing to deny the Cuban regime the capital generated by such ventures and deter the exploitation of property confiscated from U.S. nationals. Using the lawsuit to impose a punitive (treble) damages award is supposed to pursue that objective. Notably, a full implementation of the law may affect companies that obtained licenses under the Obama administration to do business with Cuba.

Potential Liability Under the Act

The act provides that "any person that . . . traffics in property which was confiscated by the Cuban Government on or after January 1, 1959, shall be liable to any United States national who owns the claim to such property for money damages . . . ." 22 U.S.C. § 6082(a)(1)(A). A person "traffics" in property if that person "knowingly and intentionally sells, transfers, distributes, dispenses, brokers, manages, or otherwise disposes of confiscated property, or purchases, leases, receives, possesses, obtains control of, manages, uses, or otherwise acquires an interest in confiscated property; engages in commercial activity using such property; or causes, directs, participates in, or profits from, trafficking . . . through another person," without the authorization of any United States national who holds a claim to the property. "Knowingly" means "with knowledge of or having reason to know." The term "property" means "any property (including patents, copyrights, trademarks, and other forms of intellectual property), whether real, personal, or mixed, and any present, future, or contingent right, security, or other interest therein, including any leasehold interest." However, it does not include real property used for residential purposes unless, as of 1996: (1) the claim to the property was held by a U.S. national and the claim was certified under title V of the International Claims Settlement Act of 1949; or (2) the property was occupied by an official of the Cuban Government or the ruling political party in Cuba.

Potential for Treble Damages

If a defendant traffics in confiscated property for which a U.S. national owns a claim that was certified by the U.S. Foreign Claims Settlement Commission, the defendant may be liable for treble damages if, at least 30 days before the civil case was filed, or the defendant was joined as a party in the case, the plaintiff provided written notice to the defendant of the claim (by certified mail or delivered in person), whereby the notice provided: (1) a statement of intention to file the case or join the person as a defendant, plus (2) the reasons of suing the defendant with regard to the property; and (3) a demand that the unlawful trafficking in the claimant's property cease immediately.

Potential Civil Cases

The process of the civil case would commence with the filing of a complaint and summons in federal district court by a "United States national" who alleges that the defendant has trafficked in property confiscated by the Cuban government for which the plaintiff has a claim.

  1. The amount of the claim needs to be at least $50,000 (not including trebling). This can be based on a current valuation of the property.
  2. The plaintiff must be a "United States national," which means "any United States citizen or any other legal entity which is organized under U.S. law and has its principal place of business in the U.S. Persons who were not U.S. citizens at the time their property in Cuba was confiscated but who subsequently became U.S. citizens are included within the definition of a U.S. national."
  3. The property needs to have been "confiscated" by the Cuban government. "Confiscation" means the "nationalization, expropriation, or other seizure by foreign governmental authority of ownership or control of property after January 1, 1959—(i) without the property having been returned or adequate and effective compensation provided; or (ii) without the claim to the property having been settlement pursuant to an international claims settlement agreement or other mutually accepted settlement procedure . . . ."
  4. The plaintiff needs to prove the basis for claiming an interest in the confiscated property.
  5. The defendant needs to have been "trafficking" in the confiscated property.
  6. The damages applicable to the "trafficking" need to be established, whether by reason of a certified claim or otherwise.

Practical Pointers

  • A U.S. national, which includes companies incorporated or based in the United States that own the rights to claims for property confiscated by the Cuban government (including having purchased the rights or acquired an entity that once possessed the property rights or the right to a claim against the Cuban government), may believe that it is incumbent on the entity to pursue a civil action under the act. However, they should also consider the fact that Canada and the European Union have enacted "blocking" laws that may authorize the defendant companies to turn around and sue the plaintiffs in the foreign jurisdictions. It therefore makes sense to fully explore the legal environment worldwide before deciding on a course of action.
  • Companies doing business with Cuba may want to conduct an audit of the property they use in Cuba to determine the possibility that a U.S. national may claim that use of the property constitutes trafficking in property confiscated by the Cuban government.
  • Companies that may be sued should consider preparing and disseminating "litigation holds" to preserve electronic and hard copy information and documents relating to such property, as it may be sought in discovery in a civil case under the act. Such companies also should be on the look out for (1) the 30 day written notice that a U.S. national would need to provide before filing suit (or joining the company as a defendant) and seeking treble damages, and (2) formal or substituted service of the complaint once filed in a federal district court.
  • There is an exemption from the definition of "trafficking" under the act that could be relevant to the case, depending on the nature of the defendant's operations. The term "traffics" in the act expressly does not include "transactions and uses of property incident to lawful travel to Cuba, to the extent such transactions and uses of property are necessary to the conduct of such travel." 22 U.S.C. § 6023(B)(iii).

    If you have any questions regarding the new development with the potential for civil lawsuits filed under Title III of the Helms-Burton Act please contact Roy Goldberg in our Washington, DC office or the Stinson contact with whom you regularly work.

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