1 4B5TTERA Argument 1 UNITED STATES DISTRICT COURT 1 SOUTHERN DISTRICT OF NEW YORK 2 ------------------------------x 2 3 IN RE: 4 TERRORIST ATTACKS 03 MD 1570 (RCC) 5 ON SEPTEMBER 11, 2001 6 ------------------------------x 6 New York, N.Y. 7 November 5, 2004 7 11:00 a.m. 8 8 Before: 9 9 HON. RICHARD CONWAY CASEY, 10 10 District Judge 11 11 APPEARANCES 12 12 KREINDLER & KREINDLER 13 Attorneys for Ashton Plaintiffs 13 BY: JAMES P. KREINDLER 14 14 HANLY CONROY BIERSTEIN & SHERIDAN, LLP 15 Attorneys for Burnett Plaintiffs 15 BY: ANDREA BIERSTEIN 16 16 DICKSTEIN SHAPIRO MORIN & OSHINSKY 17 Attorneys for Cantor Fitzgerald and Port Authority 17 Plaintiffs 18 BY: JONATHAN M. GOODMAN 18 STACEY SAIONTZ 19 RICHARD FIELDS 20 COZEN O'CONNOR 20 Attorneys for Federal Insurance and Vigilant 21 Insurance Plaintiffs 21 BY: STEPHEN A. COZEN 22 ELLIOT R. FELDMAN 22 SEAN P. CARTER 23 MARK T. MULLEN 23 24 JERRY S. GOLDMAN & ASSOCIATES 24 Attorneys for O'Neill Plaintiffs 25 BY: JERRY S. GOLDMAN 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 2 4B5TTERA Argument 1 WHITE & CASE 1 Attorneys for Defendant Al Rajhi 2 Banking & Investment Corp. 2 BY: NICOLE E. ERB 3 3 PATTON BOGGS 4 Attorneys for Defendant National Commercial Bank 4 BY: RONALD S. LIEBMAN 5 5 KELLOGG, HUBER, HANSEN, TODD & EVANS 6 Attorneys for Defendant Kingdom of Saudi Arabia 6 BY: MICHAEL K. KELLOGG 7 DAVID C. FREDERICK 7 PAUL B. MATEY 8 8 BAKER BOTTS 9 Attorneys for Defendants HRH Prince Sultan Abdulaziz 9 Al-Saud and HRH Prince Salman Bin Abdulaziz Al-Saud 10 BY: CASEY COOPER 10 11 BRYAN CAVE, LLP 11 Attorneys for Defendant Prince Naif bin Abdulazia Al-Saud 12 BY: JAMES M. COLE 12 13 CURTIS, MALLET-PREVOST, COLT & MOSLE, LLP 13 Attorneys for Defendants HRH Prince Abdullah Al Faisal Bin 14 Abdulaziz Al Saud, Alfaisaliah Group, Faisal Group Holding 14 Co. and Mohammed Bin Abdulrahman Al Ariefy 15 BY: DARIA M. CIAPUTA 15 16 DUTTON & DUTTON 16 Attorneys for Kingdom of Saudi Arabia and HRN Prince 17 Bandar bin Sultan 17 18 19 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 3 4B5TTERA Argument 1 (Case called) 2 THE COURT: Good morning to you all. 3 All right. Mr. Kellogg will be arguing this motion? 4 PROSECUTOR: I will, your Honor. 5 THE COURT: All right. Baseball season being over, I 6 guess we'll have to switch to some other term, but until I 7 think of it, you're at the plate. 8 MR. KELLOGG: Thank you, your Honor. 9 I represent this morning the Kingdom of Saudi Arabia, 10 and I'm appearing not on behalf of any of instrumentalities of 11 the Kingdom or any officials of the Kingdom, but the sovereign 12 nation itself, which has been named in several of the many 13 complaints consolidated before your Honor regarding the 9/11 14 attacks. 15 There are also several other nations that have been 16 named in some of those complaints, they include Iran, Iraq, 17 Syria and the Sudan. Those four that I just mentioned are all 18 or were recognized enemies of the United States. They were all 19 and still all are on the State Department's list of designated 20 state sponsors of terrorism. 21 Saudi Arabia, I would stress, is not on that list. 22 Saudi Arabia is a recognized ally of the United States in the 23 war against terrorism, and Saudi Arabia is itself a frequent 24 target of attacks by Al Qaeda and has been since 1996 when 25 Osama bin Laden issued a fatwa calling for the overthrow of the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 4 4B5TTERA Argument 1 existing government in the Kingdom of Saudi Arabia. 2 None of that, however, has kept the Kingdom from being 3 named as a defendant here. And the allegations raised against 4 the Kingdom are particularly serious. The plaintiffs claim 5 that the Kingdom of Saudi Arabia deliberately funded Al Qaeda 6 with the knowledge and intent that Al Qaeda would use those 7 funds to attack the United States. 8 The funding that is alleged is indirect. It was 9 supposedly funneled to charities allegedly controlled by the 10 Kingdom, but the purpose and intent of the funds are plainly 11 alleged in the complaint. I quote from Section 402 of the 12 Federal Insurance complaint, in which they say the Kingdom of 13 Saudi Arabia knew and intended that the funding and support 14 funneled to Al Qaeda through the charities would be used to 15 attack US interests. They further alleged that the 9/11 16 attacks were, and I quote here from paragraph 425, a direct 17 intended and foreseeable product of the Kingdom of Saudi 18 Arabia's participation in Al Qaeda's jihadist campaign. In 19 their view then, the September 11 attacks were the equivalent 20 of a deliberate act of war by the Kingdom of Saudi Arabia 21 against the United States. 22 Now in our Constitution we have a process for dealing 23 with acts of war by foreign nations. It is set forth in 24 Articles I and II of the Constitution, and the responsibility 25 for that response lies exclusively with the legislative and SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 5 4B5TTERA Argument 1 executive branches of our government. And with respect to 2 nations that sponsor terrorism, which is a new and particularly 3 horrific form of war, Congress has already acted and made 4 special provisions that when the State Department designates a 5 nation as a sponsor of terrorism, severe sanctions governing 6 trade and assistance automatically go into place. 7 Furthermore, the President of United States has 8 military options in response to such actions, but these are 9 all, the designation of the state as a sponsor of terrorism and 10 the taking of military options, those are all permitted by our 11 Constitution to the executive branch, which has exclusive 12 authority over foreign affairs. Now the Federal Insurance 13 plaintiffs are nonetheless asking this Court to include the 14 sovereign nation, a long time and recognized ally of the United 15 States, committed an act of war against our nation. 16 I feel compelled to point out that the factual premise 17 of their allegations has already been decisively rejected by 18 the September 11 Commission, after a thorough investigation and 19 with complete access to intelligence materials, they said, and 20 I quote, we have found no evidence that Saudi Arabia had 21 anything to do with funding the September 11 acts. 22 I do not, however, ask this Court to rely upon that 23 factual finding, because there are purely legal grounds on 24 which this complaint must be dismissed as against the Kingdom. 25 Under the Foreign Sovereign Immunities Act, a sovereign nation SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 6 4B5TTERA Argument 1 is immune from suit unless one of its narrow exceptions 2 applies. As noted, the allegations here are that the Kingdom, 3 through its support for certain charitable organizations, 4 provided material support and resources to the terrorists who 5 conducted the September 11 attacks. Allegations of that sort 6 are specifically covered in Section 1605(a)(7) of the SFIA, 7 which applies to the provision of material support or resources 8 for acts of extra-judicial killing, aircraft sabotage and 9 hostage taking. Such a suit can only be maintained, however, 10 if the nation in question has been designated by the State 11 Department as a sponsor of terrorism. And as I noted, it is 12 undisputed here that the Kingdom of Saudi Arabia has not been 13 so designated. 14 So the real question, your Honor, is whether the 15 plaintiffs can make an end run around the requirement of State 16 Department designation by recasting their claims against the 17 Kingdom, their recasting claims that the Kingdom provided 18 material support and resources for terrorists under one of the 19 other exceptions to the act. 20 The answer to that question, as Judge Robertson 21 concluded, should be no. Congress made a deliberate 22 legislative choice that the determination of whether a state 23 has sponsored terrorism should be entrusted to the Department 24 of State. It is a critical decision in the conduct of foreign 25 affairs with immense implications, and Congress wanted that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 7 4B5TTERA Argument 1 decision to lie in the executive branch where the Constitution 2 provides it. 3 Now plaintiffs have argued that Section (a)(7) 4 covering the acts of terrorism was only intended to cover acts 5 of terrorism committed abroad. But it is plainly not written 6 so. It covers any extra-judicial killing, aircraft sabotage 7 and hostage taking. And the point that it would apply inside 8 the United States is confirmed by additional language in that 9 provision, in particular (a)(7)(b), which specifically deals 10 and provides additional requirements when the terrorist act 11 occurs in a foreign nation. And also Section (g)(1), which 12 allows the Attorney General, when a suit against a foreign 13 nation might interfere with an ongoing criminal investigation 14 in the United States, to ask for a stay of those proceedings. 15 So it's clear that the intent of Congress, both the 16 language of the provision itself and the follow-up language, 17 that (a)(7) applies to terrorist acts committed abroad as well 18 as in the United States. And indeed, it would make no sense to 19 suggest that State Department approval is needed if the acts 20 are committed outside the territory of the United States, such 21 as the Khobar Towers attack or the attack on the S.S. Cole, but 22 not if it's inside. The political implications of such a 23 determination, the political importance of having the State 24 Department make that determination are the same whether the act 25 occurs inside or outside the United States. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 8 4B5TTERA Argument 1 Now the plaintiffs suggest that Section (a)(5), which 2 covers torts generally, could apply here. And that is wrong 3 for two reasons, your Honor. First, the Supreme Court in the 4 HSCS Laundry case has specifically held that where you have a 5 provision that is specifically applicable to a given situation, 6 but in fact doesn't apply there because of one of the 7 exceptions, that that is a deliberate choice by Congress, and 8 you cannot fall back on a more general provision to accomplish 9 the same result. 10 Now the HCSC Laundry case, there was a specific tax 11 exemption for hospital services, and it listed a number of 12 hospital services. Among those was not covered laundry 13 services. The issue in that case was whether laundry services 14 could nonetheless be covered under a more general exception for 15 non-profit activities. And the Court said, in light of 16 Congress's decision not to the include laundry services in the 17 specific provision, no exception was permitted, and plaintiffs 18 could not fall back on a more generic provision. 19 The same applies here, your Honor. We have a specific 20 provision in the statute governing the sponsorship of 21 terrorism. Congress said you could only proceed on that 22 provision if the State Department designates the state in 23 question as the sponsor of terrorism. Congress plainly did not 24 want the Court making that determination, so plaintiffs cannot 25 turn around and repackage their claims under Section (a)(5). SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 9 4B5TTERA Argument 1 Now the plaintiffs contend, well, in fact (a)(7) is 2 not a more specific provision than (a)(5), it is just different 3 because (a)(7) covers terrorism both home and abroad, so it's 4 actually a general provision in and of itself. But (a)(7) 5 specifically applies to acts of terrorism committed in the 6 United States. And there is no question that that is what is 7 at issue in this suit. 8 So the fact that Congress said such a suit cannot 9 proceed without State Department designation means that applies 10 whether they try to repackage it as a tort or not. Judge 11 Robertson in his ruling on the motion to dismiss by Prince 12 Turki and Prince Sultan concluded that (a)(7) claims cannot be 13 repackaged as torts under (a)(5). He concluded that the 14 limitation placed by Congress on claims for the provision of 15 material support and terrorism, quote, should be treated as 16 intentional, and since plaintiffs did not satisfy those 17 limitations, he dismissed the claim. 18 Now the second reason that (a)(5) does not work here, 19 your Honor, is that even if he could get over that first 20 hurdle, even if they could repackage their terrorism claims as 21 garden variety torts, the provision contains an exemption for 22 discriminatory functions. The allegations at issue here all 23 concern alleged financial and material support given by the 24 Kingdom to charities supporting Al Qaeda and to the Taliban 25 government, which at the time was the government in SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 10 4B5TTERA Argument 1 Afghanistan. 2 Now decisions of this sort aimed at foreign countries' 3 aid to charities are quintessential governmental functions that 4 cannot be second guessed in a tort suit. As the Supreme Court 5 explained in the Varig Airline case, the whole purpose of the 6 discretionary function exception is to, quote, prevent judicial 7 second guessing of legislative and administrative decisions 8 grounded in social, economic and political policy through the 9 medium of an action in tort. 10 They made the same point in the Dalehite case. They 11 said wherever there is room for policy judgment and decision, 12 there is discretion, which makes a tort suit inappropriate. 13 The suit in question here is an attack on the Saudi 14 government's policy of supporting Islamic charities and its 15 recognition of the Taliban government as the legitimate 16 government in Afghanistan. A recognition, I would note, that 17 was revoked well before September 11 attacks. As Judge 18 Robertson concluded, it is, quote, merely self-evident that 19 such claims are squarely covered by the discretionary function 20 exception. 21 The final point that plaintiffs try to make is they 22 attempt to invoke the commercial activities exception to FSIA 23 immunity, but the definition there simply doesn't fit. Section 24 1603(d) provides, and I quote here from the provision, the 25 commercial character of an activity shall be determined by a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 11 4B5TTERA Argument 1 reference to the nature of the course of conduct or particular 2 transaction or act rather than reference to its purpose. Judge 3 Robertson concluded in Burnett, the argument that charitable 4 contributions constitute a commercial activity is readily 5 disposed of. Plainly, he said, and I quote here, the act of 6 contributing to a foundation is not within our understanding of 7 trade and traffic or commerce. 8 As the Supreme Court explains in Saudi Arabia v 9 Nelson, whether a foreign state's actions fall within the 10 commercial activities exception only applies when the state is 11 acting in the manner of a private player in the market seeking 12 profit in the marketplace. The Second Circuit in the Letelier 13 case made precisely this point, your Honor, and drew exactly 14 the distinction between ordinary commercial activity and 15 foreign assistance or foreign aid that I am discussing. They 16 noted that Congress expected courts to look to the essential 17 nature of the acts in question, and that, and I quote here from 18 the Second Circuit in Letelier, legislative history makes clear 19 that Courts should not deem activity commercial as a whole 20 simply because certain aspects of it are commercial. 21 That, of course, is exactly what they're arguing here. 22 They're saying well, money changed hands, and that makes it 23 commercial. But Congress said and the Second Circuit said what 24 Congress intended is that you have to look at the commercial 25 nature of the activity as a whole. And what the Court in SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 12 4B5TTERA Argument 1 Letelier explained is that Congress sought to distinguish 2 between a purely commercial activity, such as a contract to 3 renovate a building for an embassy on the one hand and 4 governmental acts that might contain some commercial component 5 such as, and they used exactly this example, such as 6 participation in a foreign assistance program. Congress itself 7 used exactly that example in the legislative history of the 8 commercial activities exception. 9 So to summarize, your Honor, there's three reasons why 10 this case needs to be dismissed against the Kingdom as a matter 11 of law. On all three points, Judge Robertson's ruling agrees 12 with our analysis. So on all three points, the plaintiffs 13 would have to convince your Honor to overturn or disagree with 14 Judge Robertson's position. 15 The first is that Congress specifically provided in 16 (a)(7) four procedures for suing states who sponsor terrorism, 17 and they can't make an end run around that by calling it a 18 tort. The second is even if they could, the discretionary 19 function exception applies, which is the decision on foreign 20 aid involves issues in economic, social and political policy. 21 And the third is, as the Second Circuit said in Letelier, 22 decisions may have a commercial component, but they are not 23 commercial activities. 24 Unless the Court has questions, I'll reserve the 25 remainder of my time for rebuttal. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 13 4B5TTERA Argument 1 THE COURT: Thank you, Mr. Kellogg. 2 All right. Who will be responding? 3 MR. COZEN: Steve Cozen, your Honor. 4 If the Court please, I had intended before this 5 argument to perhaps cede some of my time, if necessary, to 6 Mr. Carter with respect to the sufficiency of the factual 7 predicates of our causation theories, if that became necessary. 8 Having now listened to the argument of the Kingdom of Saudi 9 Arabia, which pretty much follows along from the main brief and 10 reply brief that they filed, I dare say that probably is not 11 going to be necessary, because the Kingdom has posited a very 12 simplistic view of its liability. It's either 1605(a)(7) or 13 nothing. No designation, no jurisdiction. No jurisdiction, no 14 liability. 15 We disagree, your Honor. Like all other things in 16 life, it's not that simple. And I will call into question, I 17 think, as we go along, some of the rather exorbitant liberties 18 with which my colleague has taken with regard to what Judge 19 Robertson did or did not say in Burnett. It is my intent, your 20 Honor, to address the legal analysis which in our view leads to 21 the ineluctable conclusion that the Kingdom's motion for lack 22 to dismiss because of subject matter jurisdiction under the 23 FSIA is misguided, it's wrong, and should be summarily denied. 24 I start, if the Court please, with two propositions, 25 which I submit correctly state the legal principles which must SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 14 4B5TTERA Argument 1 govern your disposition of this motion. Now one proposition 2 addresses this Court's jurisdiction over the Kingdom as a 3 result of the conduct of many of the defendant charities and 4 the Kingdom's civil liability for that conduct. The second 5 addresses the Court's jurisdiction over the Kingdom as a result 6 of the conduct of government officials and employees acting 7 within the scope of their duties and the Kingdom's civil 8 liability for that conduct. 9 The first proposition, your Honor, based upon the 10 well-pled allegations of our first amended complaint, and all 11 inferences to be reasonably drawn therefrom, the conduct of the 12 charities created and controlled by the Kingdom in the 13 financing and sponsorship of international terrorism through Al 14 Qaeda and its co-conspirators, as well as the charities' 15 provision of material aid and support which aided and abetted 16 Al Qaeda's conduct directed against the United States and 17 foreseeably resulting in the events of destruction and loss of 18 life on 9/11 is attributable to the Kingdom, both for purposes 19 of establishing jurisdiction under the FSIA, and for triggering 20 the tort and commercial activity exceptions to sovereign 21 immunity based upon substantive law theories of agency and 22 vicarious liability. 23 The second proposition, your Honor, is that based upon 24 those same well-pled allegations, the conduct of government 25 officials, particularly in controlling the operations of the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 15 4B5TTERA Argument 1 charities, in connection with the financing and sponsorship of 2 international terrorism and the provision of material aid and 3 support which aided and abetted Al Qaeda through such vehicles 4 to direct such acts of terror against the United States, 5 foreseeably resulting in the events of 9/11, is attributable to 6 the Kingdom both for purposes of jurisdiction under the FSIA 7 and for triggering the tort and commercial activity exceptions 8 to sovereign immunity based upon the substantive law of 9 respondeat superior. 10 Now your Honor, in articulating for the Court the 11 analytical syllogism which proves correctly these two 12 propositions, I am not unmindful of several things. First, 13 while our Supreme Court has made it abundantly clear that we 14 need not fact plead, nor come forward with proof nominations, 15 like in Germany, in order to meet our initial burdens with 16 respect to jurisdiction and the statement of claim upon which 17 relief can be granted, Rule 11 places upon us a good faith 18 obligation, which we have taken seriously in marshalling the 19 facts we have pled. 20 We have also taken seriously the admonition of Judge 21 Robertson in Burnett that no one should use the litigation 22 privilege to make serious allegations without factual support. 23 Just as we have taken comfort in the instruction of the Supreme 24 Court in Nelson and in Lennon that our District Courts are 25 bound for purposes of assessing jurisdiction under the FSIA by SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 16 4B5TTERA Argument 1 the well-pled allegations of our over 600 paragraph complaint 2 and the reasonable inferences to be drawn therefrom. Second, 3 your Honor, we are also mindful that government cannot act 4 except through people or entities, both for purposes of 5 jurisdiction and liability. 6 The question is really whether the tortious conduct of 7 those people or entities is imputable or attributable to the 8 government. It is the same question, whether we're dealing 9 with individuals or tyrannical enemies, although it seems 10 perfectly clear that government officials acting in their 11 official capacity rendering the government liable for their 12 torsion acts based upon principles of respondeat superior, and 13 my colleagues have been kind enough to admit and concede that 14 on page 11 of their brief. 15 Finally, sir, while a rather easily rebuttable 16 presumption of separateness exists as to agencies and 17 instrumentalities of foreign states, based upon both legal and 18 equitable principals, it is not at all clear that such a 19 presumption is at all applicable to an organ of a foreign state 20 under Section 1603(b)(2) of the FSIA, regardless of its 21 particularly political nature. 22 I would simply note, your Honor, that the Kingdom has 23 come forward with no assertion, and again this morning, with no 24 assertion nor any evidence nor attempt to elicit evidence to 25 counter the notion that none of the defendant charities, whose SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 17 4B5TTERA Argument 1 conduct we allege was attributable to the Kingdom, were formed 2 in such a way as to insulate them from civil liability. And I 3 would submit, sir, that in the absence of allegations to 4 support a presumption of separateness, this Court has the right 5 to assume that the conduct of the charities is imputable to the 6 Kingdom. 7 Now very briefly, sir, I would like to just take a 8 look at, in kind of a parenthetical way, the basic factual 9 predicates for our position. Paragraph 72 to 74, 9/11 was the 10 direct and intended and foreseeable product of a larger global 11 conspiracy of international terrorism. The conspiracy included 12 the provision of material support and resources for Al Qaeda, 13 and absent such support, Al Qaeda would not have been able to 14 conceive, plan or carry out that attack. 15 Paragraph 79, we make specific allegations with regard 16 to the charities, Islamic charities under the control of the 17 Kingdom of Saudi Arabia played a singularly important role in 18 Al Qaeda's development and pursuit of its perverse ambitions. 19 It served as the primary vehicle for raising, laundering, 20 distributing funds on behalf of Al Qaeda from its inception. 21 It provided arms, false travel documentation, physical assets 22 and logistical support for Al Qaeda. Senior members of Al 23 Qaeda served as senior representatives of the charities. 24 Facilities of the charities, including branch offices, served 25 as safe houses for Al Qaeda operatives and bases for planning SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 18 4B5TTERA Argument 1 and launching operations. Charities were fully integrated 2 components of Al Qaeda's structure. That is paragraph 79. 3 In a whole series of paragraphs, your Honor, with 4 great specificity we allege that the MWL, Moslem World League, 5 BIL, WRO, WAMY, Al Hariman, the Saudi High Commission, the 6 Saudi Red Crescent Society and repeated trusts are either 7 agencies, instrumentalities or organs created by the Kingdom to 8 carry out governmental purposes and were totally controlled by 9 the Kingdom. In paragraph 399 we assert that the Kingdom 10 established, funded, managed, maintained, directed, controlled 11 charities which served as a vehicle for raising, laundering and 12 distributing funds on behalf of Al Qaeda. 13 We further allege in 408 and 409 that the Kingdom 14 provided the infrastructure for Al Qaeda, without which it 15 would not have been able to pull off 9/11. And as to the 16 members of the royal family and those individual defendants 17 about whom your Honor has heard lots of argument before, and 18 I'm certainly not going to repeat it here today, Prince Sultan, 19 Turki and Suolemann, we set forth in paragraphs 426 to 464 that 20 they knew and intended, among other things, that contributions 21 that they made and that others made, including contributions 22 from the Kingdom would be used to fund international terrorism 23 directed against the United States, and that they supplied 24 support which flowed largely through the Supreme Counsel of the 25 Islamic Affairs in which Sultan and Ali and Turki held official SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 19 4B5TTERA Argument 1 positions. 2 So your Honor, we have more than met the requirements 3 of Rule 8 and Rule 11 and set forth specific factual 4 allegations which must be taken as true for purposes of this 5 motion, and as to which my opponent makes no quarrel, and 6 which, if proven, bring our claims within the exceptions to 7 FSIA immunity set forth in 1605(a)(5) and 1605(a)(2). Since 8 the Kingdom does not really contest these facts, choosing 9 instead to argue the legal propositions, which I believe are 10 unsupported by the cases, the simplistic approach that 11 1605(a)(7) is the beginning and end of your inquiry, I think 12 they have not adequately challenged the accuracy of any of our 13 factual allegations, and the matter may be disposed of without 14 resorting to discovery or an evidentiary hearing. 15 Of course, your Honor, should you conclude that there 16 are some factual allegations which somehow have been called 17 into issue, we welcome the opportunity for discovery and 18 evidentiary hearing, which the case law gives us, particularly 19 Foremost, McKesson and Weiss and others. 20 Now if we look at the status of the charities, your 21 Honor, these charities are clearly agencies, instrumentalities 22 or at the very least organs of the Kingdom. And it can hardly 23 be contested, based upon the facts that we have alleged, that 24 that is the case. Thus, jurisdiction over them, under 25 1603(b)(2) is apparent. The only question is whether their SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 20 4B5TTERA Argument 1 conduct is attributable to the Kingdom for both jurisdictional 2 purposes, i.e., does it fit within an exception, and if so, the 3 Kingdom is subject to that jurisdiction in this Court and may 4 be civilly liable for such tortious conduct under principles of 5 vicarious liability. 6 Now organ status, your Honor, under the USS case, 7 which is a case that I argued in the Third Circuit, the EIE 8 Guam case, the Killen case, is subject to a broad test that is 9 not mechanically applied as to have a broad reach and is 10 dependant upon satisfaction of most, if not all of several 11 factors; how was it created, the purpose of its activities, the 12 supervision by the government, the government's financial 13 support, employment practices, privileges under Saudi law. 14 On a fair assessment, your Honor, of each of those 15 factors, the defendant charities are all organs of the Kingdom. 16 Particularly when one looks to the nature and extent and the 17 control over those charities by the Kingdom. The bottom line 18 test is that an organ, to be an agency or instrumentality, must 19 operate at the time of the alleged wrong in furtherance of a 20 public activity. Was it created for a public purpose and is 21 there a requisite degree of control? That seems to be 22 uncontested here. 23 I submit, your Honor, all of these factors clearly 24 apply here. Muslim World League, Saudi High Commission, Saudi 25 Joint, Red Crescent all were founded by the government pursuant SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 21 4B5TTERA Argument 1 to a royal decree of decision of the Counsel of Ministers. If 2 your Honor please, subsequent to argument we would be happy to 3 submit to you a chart which traces their founding and their 4 creation, where it is in the record. WAMY, IRO, Rabita Trust 5 and BIF are all subsidiaries of the Muslim World League all 6 with the approval of the Kingdom. The purpose, based upon all 7 of the testimony and reports that we have cited, was to promote 8 the interest of the Kingdom around the world. And in fact 9 counsel, not today, but in the previous occasion before this 10 Court conceded that these were in fact the purpose of the 11 Kingdom and the charities. 12 Supervision. The Supreme Counsel for Islamic Affairs 13 determines which charities receive funding from the government 14 and where that funding, both public and private, goes. The 15 Kingdom oversees the operations through the Ministry of Islamic 16 Affairs. The ministry is responsible for the promulgation of 17 not only the money, but the philosophy, and there is a complete 18 identity of interest in between the ministry and the charities. 19 Now Hariman officials have represented that they 20 operated under the supervision of the Saudi Ministry of Islamic 21 affairs which reports to the board of directors, the senior 22 management personnel, and the charities operate from the Office 23 of Islamic Affairs in Saudi embassies. I refer your Honor to 24 the testimony of Al-Asabi, which is paper 13 of our brief, 25 which I don't think could possibly be clearer. He said the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 22 4B5TTERA Argument 1 Muslim World League, which is the mother of IRO, is a fully 2 funded government organization. In other words, I work for the 3 government of Saudi Arabia. And he went on, I'm an employee of 4 the government, et cetera. 5 You look at their employment practices, clearly all 6 government directed. Obligations and principles. Well, in 7 1994 there was a ban against the collection of funds for 8 charitable purposes absent official permission. The charities 9 were funded by the government, controlled by the government. 10 Then we get, your Honor, to the equitable principles, 11 which the Supreme Court told us in Bank Ec. need to be 12 followed. So that the Kingdom cannot avoid the liability 13 created by conduct even as to some dissolved charity. So 14 they're all organs, at the very least. 15 That leads us to attribution. A study of the case 16 law, your Honor, particularly Bank Ec., Foremost, McKesson and 17 most recently Kilbourne, teach us that the degree of government 18 control and relationship necessary for jurisdictional purposes 19 is probably more stringent than that necessary to establish 20 vicarious liability for the acts of an agent. The only 21 question is whether to give credence to the easily rebuttable 22 presumption of separateness for tyrannical enemies. 23 The retribution cases, while analyzed in this case, 24 would say no. While Bank Ec. dealt with a slightly different 25 problem than that before us today, the Supreme Court has SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 23 4B5TTERA Argument 1 instructed the FSIA was not intended to affect substantive law 2 determining liability of foreign states or its 3 instrumentalities. The FSIA was not intended to affect that 4 substantive law as it relates to the attribution issue for any 5 purpose. The FSIA does not control attribution questions of 6 liability, but its policies, such as what constitutes an organ 7 and how much control do you need, certainly, certainly give 8 guidance to the resolution of that question. 9 So as the Supreme Court did, we would throw out and 10 warn against epithets and instead adopt the rigorous analysis. 11 Here we have control, creation by government, funding by 12 government, purpose of carrying out government policies and no 13 countervailing proposed facts that charities were structured so 14 as to have some limited liability because of the chosen form of 15 tyrannical enemy. I suggest to the Court that under Bank Ec. 16 and equitable principals of Bank Ec., it is clear that the 17 Kingdom must be liable for the acts of its organs, both for 18 jurisdictional purposes and for substantive purposes. 19 Now seven years later, in a different circumstance, 20 the DC Circuit decided Foremost, McKesson, in fact our 21 opponents cite Foremost, McKesson for a totally different 22 proposition. They ignore the most important proposition, they 23 ignore it because their whole case rises and falls on their 24 particular characterization, unsupported by any legislative 25 history and unsupported by any illogical reading of the statute SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 24 4B5TTERA Argument 1 that 1605(a)(7) is the be all and end all of the manner in 2 which they could possibly be liable. 3 But Foremost, McKesson did teach us a few things. It 4 did not indulge in the organ analysis because it didn't to, but 5 in applying the same test that we now apply to the organ issue, 6 the Court remanded for discovery an evidentiary hearing on 7 agency relationship the subject matter jurisdiction and 8 liability questions. The bottom line the Court said was that a 9 foreign state is responsible for the actions of a commercial 10 entity if it exercises the degree of control necessary to 11 create the agency relationship. 12 So let's fast forward, sir. 14 years later we have 13 the Kilbourne case. That's the one where the American was 14 murdered in Libya after being bought by an organ of the Libyan 15 government. Kilbourne clearly supports the conclusion that if 16 an entity is an organ for FSIA purposes, it probably is an 17 agent for vicarious liability purposes. The Court there said 18 any concerns about reaching too far to charge foreign states 19 with the attenuated impact of their financial activities are 20 better addressed as questions of substantive law. In other 21 words, sir, coming from perhaps one old trial lawyer to 22 another, if there is jurisdiction, let the merits decide the 23 issues of causation at a trial. That's what we're supposed to 24 do in our system. 25 So the facts pleaded established organ status and SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 25 4B5TTERA Argument 1 agency relationship necessary to sustain subject matter 2 jurisdiction, and if the exceptions to 1605(a)(2) and 3 1605(a)(5) apply to the alleged conduct, there is jurisdiction 4 over the Kingdom. The Kingdom, by the way, as to the 5 individuals, does not the dispute, as I say, the imposition of 6 respondeat superior liability upon a foreign state for the acts 7 of their officials. 8 Therefore, if federal claims fall into the exceptions, 9 the FSIA immunity, this Court may exercise jurisdiction over 10 the Kingdom predicated not upon some limited notion that if you 11 commit a certain kind of act that's mentioned in (a)(7), only 12 if you're a designated state sponsor is there jurisdiction over 13 you, that should be summarily rejected, but rather predicated 14 upon the conduct of the charities and the officials. 15 So I would like to simply take a look very briefly at 16 the tort exception under 1605(a)(5). What's the tort? There's 17 lots of statutory provisions we can cite to and lots of tort 18 law we can cite, but basically we're talking about the 19 participation in the global conspiracy to conduct terrorist 20 attacks against the United States and cause property damage and 21 loss of life. And 9/11 was the natural, probable and 22 foreseeable, if not intended, result of that. 23 So what does the Kingdom say? Well, the Kingdom says 24 1605(a)(5), the tortious activity exception not only applies to 25 traffic accidents, simple stuff, that there's no causal link SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 26 4B5TTERA Argument 1 between the conduct and the injury, that the entire tort has to 2 occur in United States and that (a)(7) trumps (a)(5), and even 3 if it didn't, there's a discretionary function exclusion in A5. 4 Much of this has been argued previously, so I'm going to 5 incorporate that, but let me make the following comments. 6 As to the simple tort issue, Letelier and Robinson 7 make it clear that the plain language of FSIA does not limit 8 the act to simple torts. And the Loftover case makes it even 9 more abundantly clear that it's not a question of what Congress 10 intended to do when they started or what they would have 11 wanted, but rather what did they enact? So you go and you read 12 the simple language of 1605(a)(5) and it couldn't be more 13 clear. A valid tort claim against individual officials and 14 charities, they didn't crash the planes, but they were part of 15 a conspiracy to commit a tort and aid and abet in its 16 commission. 17 And the teaching of the Second Circuit in the Lumbard 18 case in the Halverson case couldn't be more clear. If you 19 participate in a conspiracy to commit a tort, if you implicitly 20 agree with others, known or unknown, unlawfully participate or 21 participate in an unlawful act, injury is caused by that act, 22 and the act is done in furtherance of the scheme. Or 23 alternatively, in terms of concerted action in aiding and 24 abetting there is civil liability where you aid and abet a 25 wrongful act that causes injury, the defendant is aware of the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 27 4B5TTERA Argument 1 overall illegal scheme when it provides assistance and it 2 knowingly provides assistance. 3 I would submit, sir, that we have adequately pled the 4 causes of action in tort and we have adequately pled causation. 5 The basic rule is the victims of terrorism are entitled to 6 recover from the knowing financiers and sponsors of terrorism 7 and do not need to demonstrate some direct involvement in the 8 specific event in order to do so. If my colleague, sir, would 9 have his way, if he would have his way, those of us sitting in 10 this courtroom today could be bombed to death or kidnapped by 11 intelligence agents of the Kingdom of Saudi Arabia and that 12 would not trigger jurisdiction over the Kingdom under the FSIA. 13 Why? Because it's not designated. Well, designation doesn't 14 tell us anything. Lots and lots of different reasons why 15 people are or are not designated. 16 Now my opponent I think wants to raise actor, state 17 and justability issues, but he hasn't mentioned it in his brief 18 or argued it today, so I'm not going to argue it either. But 19 on the tort theory, sir, given the 1996 and 1998 fatwa to kill 20 Americans from Osama bin Ladin, it's impossible to say this 21 tort wasn't the result of this conspiratorial concerted action, 22 the aiding and abetting was not foreseeable. 23 Now I think, sir, it's absolutely clear that 24 1605(a)(5), 1605(a)(7) are totally mutually exclusive. (A)(7) 25 creates exterritorial jurisdiction for certain specific types SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 28 4B5TTERA Argument 1 of torts, all of which fall under the broader umbrella of 2 (a)(5) when they occur in the United States. The example that 3 I just gave you I think is the clearest one. And by the way, 4 (a)(7) specifically excludes property damage, so it could not 5 possibly have been meant to affect the broader catch all for 6 tortious conduct under (a)(5). 7 The sponsorship of terrorism, by the way, Judge, in my 8 book, and I'm just a poor kid from South Philly, that ain't a 9 discretionary function. The discretionary function exclusion, 10 if your Honor recalls, derives from the Federal Tort Claims 11 Act. But what do you look at? You look at the nature of the 12 conduct, not just whether or not involves some judgment. I 13 couldn't believe one the cases that they cited, the Dalehite 14 case, a real old case where a sugar company has a vessel in 15 port and it exploded, and the Supreme Court decided that some 16 of the actions that they took in developing policies for how 17 they would load and unload were within the discretionary 18 function exclusion. 19 I say if you decide that you're going to support 20 people who are going to kill Americans, that's not the kind of 21 discretion that is covered under that subsection of (a)(5). 22 You look at the conduct, not just whether or not it involves 23 some judgment, whether it was well motivated judgment or poorly 24 motivated judgment. And it surely doesn't apply, as the case 25 law makes clear, to illegal, malevolent, extraordinary conduct. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 29 4B5TTERA Argument 1 It is the nature of the act, not the motivation of the actor 2 that governs the discretionary function exclusion under the 3 Berkowitz case. 4 Now the commercial activity exception. Without saying 5 so, I think what Mr. Kellogg is suggesting is that unless 6 you're running a dairy, an oil refinery, a mom and pop grocery, 7 it's not a commercial activity of a foreign state, and you 8 don't even reach the question of whether they operated 9 somewhere else and had a direct effect on the US. Well, guess 10 what? Money laundering is a commercial activity. It's as 11 commercial an activity as you can get. It's part of commerce. 12 The Goodwin case recognizes that. And government reports and 13 intelligence analyses confirm that Saudi charities served as Al 14 Qaeda's vehicles for hiding the source and distribution of 15 funds with respect to money laundering. 16 Your Honor, my time is almost up -- 17 THE COURT: I think it was up some time ago. 18 MR. COZEN: My recollection is I had 30 minutes, so -- 19 but you're being very kind, if you don't mind. 20 THE COURT: Finish it up. 21 MR. COZEN: Thank you. I'll indulge your Honor's 22 kindness for a few more seconds. 23 One, in direct response to Mr. Kellogg, the 24 proposition that a non-designated foreign state cannot be 25 liable, directly or indirectly, for its tortious conduct is SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 30 4B5TTERA Argument 1 unsupportable by legislative history, by case law. Two, 2 whether it's a deliberate act of war declared to be so or not 3 is irrelevant. Three, you cannot reason that because we have 4 not designated you, there is no civil liability as a result of 5 attribution from those who you control. We don't ask this 6 Court to decide, by the way, the ultimate issue, as my opponent 7 does, not now, only after a trial on the merits, which is what 8 we're entitled to. 9 By the way, Judge Robertson never addressed the issue 10 of the end run question. I'll go back and read the opinion, 11 but I read it many times, he never addressed that issue. Nor 12 did he address the discretionary function exclusion, as my 13 opponent has argued it here today. There is not a repackaging 14 of anything. I think we demonstrated to the Court that 15 1605(a)(5) stands on its own is and not trumped by 1605(a)(7). 16 Your Honor, I leave you with the final thought, and 17 that thought is this: As the Court said in the Halverson case, 18 tort law is not at this juncture sufficiently well-developed or 19 refined to provide immediate answers to all the serious 20 questions of legal responsibility and corrective justice. It 21 has to be worked over to produce answers to questions raised by 22 cases such as this. 23 Now we've seen an evolution of tort theory to meet 24 20th Century phenomena in areas such as product liability, 25 liability arising out of the use of the internet. There is no SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 31 4B5TTERA Argument 1 reason to believe that we cannot adopt tort law to new uses in 2 circumstances of the sort presented here. This case is 3 obviously only a beginning probe into tort theory as they apply 4 to newly emerging notions of economic justice for victims of 5 crime. 6 In a larger sense, Judge, this case will help to 7 determine not simply whether the Kingdom's litigation unit 8 exists, but whether we can adapt our law to scenarios of 9 conspiratorial conduct conducted in clandestine ways, almost 10 always secretly, in which defendants provide material aid and 11 support to murderers, to terrorists, no matter how you 12 characterize them, and a remedy is required. Are our notions 13 of foreseeability and proximate cause and the evidence 14 sufficient to determine such notions flexible enough to deal 15 with those questions? I say they are, your Honor, I think we 16 ought to find out, and we'll do that as soon as you deny this 17 rather spurious motion to dismiss. 18 Thank you, sir. 19 THE COURT: Thank you, Mr. Cozen. 20 Mr. Kellogg, are you going to reply? 21 MR. KELLOGG: Yes, your Honor. I believe I have 22 slightly over ten minutes reserved to my time, but I do not 23 plan to take that much time. I will be more brief. 24 I am frankly puzzled, your Honor, by much of the 25 argument given today. As I noted when I stood up, I'm SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 32 4B5TTERA Argument 1 appearing on behalf of the Kingdom of Saudi Arabia, not 2 instrumentalities, not charities. All of the instrumentalities 3 and charities that Mr. Cozen mentioned are named defendants in 4 his case, and they'll of course provide their own vigorous 5 defense to the claims as to their conduct. Some of those 6 charities or organizations are in fact governmental 7 organizations, such as the Saudi High Commission and the Saudi 8 Red Crescent, and they raised FSIA defenses of their own. 9 Others, such as the Muslim World League and World Assembly of 10 Muslim Youth are what are called NGOs, non-government 11 organizations, and they are presenting defenses of their own 12 based on personal jurisdiction. 13 I frankly consider the status of those entities, which 14 will be worked out in the context of the suit against them, to 15 be irrelevant to the question at issue before the Court today, 16 which is whether the Kingdom of Saudi Arabia itself can be 17 named. The allegations are that the Kingdom provided support 18 to these charities. Whether you say that the charities 19 themselves are also agents of the government doesn't really 20 make a difference to the fundamental nature of those 21 allegations or to the legal arguments that I made to the Court 22 on three legal grounds on which the case has to be dismissed. 23 Now we certainly dispute many of the allegations made 24 by the Federal Insurance plaintiffs, but that's not the issue 25 today. The issue is a threshold matter. There are legal SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 33 4B5TTERA Argument 1 ground on which the case must be dismissed and the legal 2 grounds on which I focus today and want to focus my rebuttal. 3 The first of those legal grounds is that, as I noted, 4 the Kingdom has not been designated as a sponsor of terrorism. 5 Mr. Cozen says designation doesn't mean anything. Well, in 6 fact, it means everything. Under Section (a)(7) of the FSIA, 7 Congress made a judgment that it's up to the State Department 8 to take the incredibly important foreign policy step of 9 designating a nation as a sponsor of terrorism, of deciding 10 that a foreign nation has essentially committed an act of war 11 against the United States, and that Congressional judgment has 12 to be honored. (A)(7) is a specific provision governing the 13 acts in question. 14 Mr. Cozen did not dispute they were talking about the 15 sponsorship of terrorism, which is specifically covered by 16 Section (a)(7). And I find absolutely puzzling his claim that 17 Judge Robertson did not deal with that issue. He specifically 18 did at 292 F. Supp. 2d at page 20, in which he said that the 19 decision of Congress and claims for the material support of 20 terrorism should come under (a)(7) and require designation was 21 intentional, and he threw out the claims of Prince Sultan and 22 Turki specifically on the grounds that you can't make an end 23 run around (a)(5). On that point, Mr. Cozen is simply wrong. 24 The second ground that we have is, even if you could 25 do (a)(5), the discretionary function exception precludes it. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 34 4B5TTERA Argument 1 What the case law, and indeed the language of discretionary 2 function exception itself states, is that it's a discretionary 3 function, even if the function is abused, even if the conduct 4 is horrible, even if it's horrific. If it involves a measure 5 of foreign policy, political, social, economic judgment by a 6 foreign nation, it is protected from suit. 7 And there are other ways that the United States 8 government can respond if it believes that a foreign nation has 9 committed an act of war against it. And it's not under the 10 guise of a tort suit. A tort suit was not the response to 11 Pearl Harbor, it is not the response to September 11. Insofar 12 as any allegations that specific nations were involved in it, 13 that's a judgment for the federal government to make, not for 14 the courts. 15 Now the final point, again, I should note Judge 16 Robertson accepted specifically that argument in the context of 17 the claims against Prince Turki. The claims there were that he 18 was essentially trying to buy off the Taliban to prevent -- and 19 Al Qaeda via the Taliban, to prevent them from attacking the 20 Kingdom. And Judge Robertson said that kind of conduct is 21 squarely covered by the discretionary function exception, and 22 states throughout history have been making judgments perhaps of 23 dubious morality to buy off threats from Persia by the Athenian 24 states, by the Barbarian tribes by Rome. Throughout history 25 states have made dubious moral judgments that are SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 35 4B5TTERA Argument 1 quintessential political judgments made by governments not 2 subject to second guessing under the discretionary function 3 exception. As Judge Robertson said, it's nearly self-evident 4 that it applies here. 5 The final point has to do with the commercial 6 activities exception. Again, I don't think Mr. Cozen has an 7 adequate response to the Letelier case from the Second Circuit 8 which specifically cited foreign aid and assistance programs as 9 being not within the ambit of commercial activities. The 10 entire activity has to be commercial. And trying to 11 recharacterize the donations to charities as some form of money 12 laundering, first of all makes very little sense, but in the 13 second event, money laundering is not a commercial activity 14 within the meaning of this. The Second Circuit in the Letelier 15 case and the Supreme Court in the Nelson case made clear that 16 criminal activity is not an activity by which private parties 17 engaged in traffic or commerce, and thus is not a commercial 18 activity within the meaning of the FSIA. 19 Your Honor, I make those three legal points. We do 20 not, despite the repeated assertions of Mr. Cozen, concede 21 anything with respect to the ludicrous and overblown 22 allegations that they have made in their complaint. We firmly 23 believe in the innocence of the Kingdom and its 24 instrumentalities in all respects, but we don't even need to go 25 there. There's no need for a discovery, this case should be SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 36 4B5TTERA Argument 1 thrown out at the door on these threshold legal issues. 2 Thank you, your Honor. 3 THE COURT: Counsel, thank you very much. Court will 4 reserve decision. 5 Court will stand in recess. 6 o0o 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300