Florida Judge Sets Aside Historic Helms-Burton Verdict

More big news in the hot new topic in transnational litigation: the Helms-Burton Act. A Florida district court has set aside the historic $120 million jury verdict awarded to a Cuban-American plaintiff against hotel booking services. The judge held that the plaintiffs offered insufficient evidence that the defendants had “knowingly” “traffic[ked]” in confiscated property.

Background

The case, Echevarria v. Expedia, pits an American national of Cuban descent against four corporate entities that offered hotel bookings on a Cuban island. The plaintiff, Mario Echavarria, introduced evidence at trial showing that he had inherited a property interest in the island, Cayo Coco, and that this property interest was confiscated by the Cuban government. The jury agreed and the judge upheld these findings. The plaintiff further contended that the defendants – by facilitating the purchase of hotel rooms on the island – had trafficked in his confiscated property, allowing him to recover under the Helms-Burton Act.

Also known as the Cuban Liberty and Democratic Solidary Act, or “LIBERTAD,” the Helms-Burton Act (“Act”) went into law in 1996. Codified at 22 U.S.C. § 6082, the Act creates a private right of action for United States nationals against “any person that . . . traffics in property which was confiscated by the Cuban government on or after January 1, 1959.” The definition of “traffics” under the statute is quite broad. It includes engaging in a “commercial activity using or otherwise benefitting from” the confiscated property, but it also requires that the defendant does so “knowingly and intentionally.”

The Echevarria jury found that the defendants had trafficked in confiscated property within the meaning of the statute. It also assessed treble damages against each defendant for a total award of $120 million. It was the first jury verdict for a plaintiff under Helms-Burton’s private cause of action.

Mens Rea

After the jury rendered its verdict, the Eleventh Circuit issued an unpublished opinion in Del Valle v. Trivago GmbH. Although Del Valle is not binding on the district court because it is unpublished, the case carefully considered the Helms-Burton mens rea requirement. The Eleventh Circuit reasoned that “knowingly” means with knowledge or having “reason to know.”  Having “reason to know” is satisfied if defendants “recklessly disregard the fact that properties in which they are trafficking would belong to U.S. nationals if they had not been confiscated by the Cuban government.”  Thus, in Del Valle the defendants must have known or had reason to know they were trafficking in the plaintiff’s confiscated property to meet this standard. The cease-and-desist letters sent to the defendants in that case were insufficient to put the defendants on notice that they were trafficking in confiscated property, so the mens rea requirement was not satisfied.

Relying heavily on the Del Valle opinion, Judge Morena held in Echevarria that the plaintiff’s cease-and-desist notices were adequate to support a finding that the defendant’s subsequent conduct met the statute’s mens rea requirement. The notices specifically identified the property as confiscated, identified Echevarria as having an ownership interest in the property, and threatened litigation. So far so good for the plaintiffs. But those letters went out to the defendants in 2019. For all of the conduct before 2019, the mens rea requirement was not satisfied.  Following the reasoning of Del Valle, the judge concluded that the companies’ general knowledge of the Helms-Burton Act was insufficient.  In particular, evidence about the publicity around the Helms-Burton Act and President Clinton’s signing statement, as well as evidence showing that the defendants’ employees were aware of the Act, that the employees knew that all private real property in Cuba had been confiscated by the Communist Cuban government, and that the employees believed that the hotels in question were built on confiscated property was all deemed insufficient. Specific notice of the particular property and its rightful ownership by a US national was necessary.

For three of the defendants (Orbitz, LLC; Hotels.com, L.P.; and Hotels.com GP, LLC), the court noted that they had not offered any bookings on Cayo Coco after the plaintiff served cease and desist notices. One of them, Hotels.com, allowed customers to stay at hotels on the island if they booked hotel rooms on the site before the defendant received a cease-and-desist notice. The court held that they could only be held liable for rooms booked after receipt of the notice. Booking the rooms, not the actual hotel stays, was the conduct that arguably constituted trafficking. Because the record showed no acts of trafficking occurring after defendants received notice, there was insufficient evidence for any jury to find them liable.

Trafficking

The judge also set aside the jury verdict against the fourth defendant, Expedia Group, Inc., a holding company. The plaintiff argued that the evidence presented to the jury was sufficient to show that Expedia Group, Inc. “engage[d] in a commercial activity using or otherwise benefiting from confiscated property,” through the conduct of a non-party subsidiary, Expedia-WA. The evidence cited included the creation of a “reason-for-travel” dropdown menu, procurement of a license from the United States Office of Foreign Asset Control to conduct business in Cuba, the leasing of Miami office space for its “Cuba team,” and communications with hotels in Cuba about business strategy. Expedia Group also benefited from the booking facilitated by its subsidiaries. This conduct, the district court held, did not constitute “trafficking” under the statute, and there was also no basis upon which to hold the parent corporation responsible for the conduct of its subsidiaries.

Conclusion

For readers keeping score at home, Helms-Burton plaintiffs have been on a winning streak. But these two cases are certainly a setback. Taken together, Del Valle and Echavarria set a very high bar for plaintiffs seeking relief under the Act.  You can bet on an appeal in Echavarria arguing that the Eleventh Circuit should not adopt the Del Valle reasoning and should instead apply a mens rea test that is easier to satisfy.  Because the Del Valle opinion was not published, it is not binding, and a subsequent court of appeals panel may choose not to follow it. Either way, expect more developments in the world of Helms-Burton litigation.