Eleventh Circuit Reverses Helms-Burton Judgments
October 30, 2024
On October 22, 2024, the U.S. Court of Appeals for the Eleventh Circuit overturned judgments of more than $100 million each against four U.S.-based cruise lines under the 1996 Helms-Burton Act. The decision is another example of just how difficult it has been for plaintiffs to recover under the act since President Trump allowed suits to move forward in 2019.
Title III of Helms-Burton created a civil remedy for U.S. nationals to sue any person who “traffics” in property confiscated by Cuba for damages in an amount three times the value of the property. Havana Docks once had a 99-year concession to operate port facilities at Havana, which Cuba expropriated in 1960. The defendants—Royal Caribbean Cruises, Norwegian Cruise Line Holdings, Carnival Corporation, and MSC Cruises—allegedly trafficked in that property by using some of those facilities from 2016 to 2019. The problem is that Havana Docks’ concession would have expired in 2004, well before the cruise lines’ use of the facilities. On that basis, the court of appeals held that the defendants had not trafficked in confiscated property for purposes of the act.
Havana Docks’ Nationality
As a preliminary matter, the Eleventh Circuit had to decide whether Havana Docks qualified as a U.S. national entitled to sue under Helms-Burton. The act defines “United States national” as “any United States citizen” or “any other legal entity which is organized under the laws of the United States, or of any State, the District of Columbia, or any commonwealth, territory, or possession of the United States, and which has its principal place of business in the United States.”
Writing for the majority, Judge Adalberto Jordan focused on the second definition. Havana Docks was incorporated in Delaware in 1917, so there was no question that it met the first part of that definition. But the defendants argued that the company was now directed from the United Kingdom and therefore did not have its principal place of business in the United States.
To determine a company’s principal place of business under Helms-Burton, the Eleventh Circuit majority borrowed the “nerve center” test that the Supreme Court adopted for diversity jurisdiction in Hertz Corp. v. Friend (2010). Havana Docks no longer has any substantive operations; its only activities are maintaining its corporate existence and managing its expropriation claims. Those activities were performed by an unpaid director from Lexington, Kentucky, where Havana Docks has its only corporate address. Although the company’s president lives in London and has the power to direct decisions, the court reasoned that the nerve center test “focuses on the actual management of a company and not theoretical possibilities,” making Kentucky the company’s principal place of business.
Trafficking
This brought the Eleventh Circuit to the question whether the cruise lines were liable for trafficking in property expropriated by Cuba. In 1960, Cuba expropriated Havana Docks’ rights in the concession. That concession was originally granted to another company in 1905 and transferred to Havana Docks in 1928. Prior to the expropriation, the concessionaires built piers and other port facilities, but these would revert to Cuba at the end of the concession in 2004.
Like many U.S. nationals whose property was expropriated, Havana Docks filed a claim with the U.S. Foreign Claims Settlement Commission (FCSC). In 1971, the Commission certified its claim for around $9 million, with interest to accrue at 6% from the time of expropriation until Cuba agreed to a settlement, which it has never done.
Title III of Helms-Burton 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.” Judge Jordan reasoned that the cruise lines did not traffic in property confiscated by the Cuban government by using the port facilities between 2016 and 2019 because when the “concession expired in 2004, any property interest that Havana Docks had by virtue of that concession ended.” Congress did not intend, he reasoned, “to convert property interests which were temporally limited at the time of their confiscation into fee simple interests in perpetuity such that the holders of such limited interests could assert trafficking claims through what Buzz Lightyear called ‘infinity and beyond.’”
Neither did the FCSC’s certification of Havana Docks’ claim extend its property interest. Helms-Burton provides that certification of a claim provides conclusive proof of ownership. “But Title III’s conclusive presumption of Havana Docks’ ownership interest at some point in the past does not speak to the nature of the interest today,” Judge Jordan reasoned. “Nor does it tell us whether trafficking in the concession can occur beyond its scheduled end date in 2004.”
Thus, the court reversed the judgments based on use of the port facilities between 2016 and 2019. Havana Docks also alleged that Carnival trafficked in its confiscated property from 1996 to 2001 through interests in two other companies. Because the district court did not separately address these claims, the court of appeals remanded them for further consideration.
Although Chief Judge William Pryor joined Judge Jordan’s opinion, Judge Andrew Brasher dissented. In his view, Havana Docks met the statutory requirements because its property “was confiscated” and it “owns the claim to such property.” But this reading ignores the present-tense word “traffics.” Havana Docks’ right to use the facilities until 2004 was unquestionably confiscated, and Havana Docks owns a claim to that, time-limited, property right. But the cruise lines use of the port facilities after 2004 cannot constitute trafficking in property confiscated from Havana Docks because it had no right to use the facilities after that date.
Judge Brasher also argued that Havana Docks had property interests in the piers and other facilities that the concessionaires built. But, as noted above, under the terms of the concession, these were to revert to Cuba in 2004 when the concession ended. Finally, he argued that the majority’s reading nullifies Congress’s inclusion of patents in Helms-Burton, since such patents would similarly have expired. That is a fair point, although as Judge Jordan pointed out, this case involved no patent rights.
Helms-Burton’s Dilemma
The stakes were high in Havana Docks, as one can see by glancing at the lawyers who represented the parties on appeal. The Eleventh Circuit’s decision represents a major set-back for plaintiffs.
Helms-Burton has not worked out as Congress intended. As Ingrid Brunk and I have previously noted, Congress’s aim in 1996 was to discourage foreign companies from investing in Cuba by threatening them with liability for trafficking in confiscated property. But Helms-Burton allows the President to suspend Title III’s cause of action, which every President did until 2019. Since then, claims have been filed against foreign companies, but these have been dismissed for lack of personal jurisdiction because the Supreme Court has tightened the rules on general jurisdiction since 1996.
Claims have now focused on U.S. companies like the cruise lines in Havana Docks. These companies were not allowed to do business in Cuba when Helms-Burton was passed because of the U.S. embargo. This means that such claims will tend to focus on later conduct. But Havana Docks shows that these claims may also be limited if the U.S. national’s property rights expired by the time the “trafficking” occurred.
Other claims have faced obstacles such as foreign sovereign immunity. No doubt litigation under Helms-Burton will continue. But recovery is proving more difficult than Congress likely expected.