Wednesday, 16 January 2013

Judge Fines Russia More Than $18 Million Per Year Over Chabad Books

The TMZ has the exclusive – although it clearly knows nothing about the background or any of the surrounding issues. (Much more background here.)

…As to whether sanctions would be likely to “coerce compliance” with this Court’s 2010 order, see Bilzerian, 613 F. Supp. 2d at 70, the Court notes that the initial threat of contempt sanctions apparently prompted defendants’ lawyers to meet face-to-face with Chabad’s lawyers to negotiate for the first time since dropping out of the case. See Pl.’s Response 8.

The United States protests that any such award would not only fail to “achiev[e] its intended purpose,” but would also “damage” its efforts towards “promoting resolution of the dispute between Chabad and Russia over the Collection.” U.S. Statement 10. Noting that “the United States has engaged in high-level diplomatic efforts with Russia to secure the transfer of the Collection,” and insisting that it is “committed to continuing these efforts which . . . require perseverance and consistency,” the United States complains that sanctions would be “counter- productive.” U.S. Statement 13.
The Court is not convinced. “Although [courts] often give consideration to the government’s assertion that a legal action involves sensitive diplomatic considerations, [courts] only defer to these views if reasonably and specifically explained.” FG Hemisphere, 637 F.3d at 380 (citing Republic of Austria v. Altmann, 541 U.S. 677, 702 (2004)).    The United States fails to meet this standard. Defendants have steadily resisted all legal and diplomatic efforts to compel them to return the collection for at least two decades, see Chabad I, 466 F. Supp. 2d at 13-14 (detailing a history of diplomatic and legal efforts dating to 1991), and though the United States may indeed be “committed to continuing these efforts,” it provides neither any information regarding its future plans, nor any other reason to believe that its new efforts will be more likely to succeed than past failures.

The United States’ claim that sanctions would “risk damage to significant foreign policy interests” is similarly unconvincing. It states that an order “that purports to dispose of tangible property held by another state in the latter state’s territory” constitutes “a departure from accepted rules of public international law,” and therefore “would risk significant criticism from the international community,” as well as “undermine the United States’ own interests in avoiding similar measures being imposed against it.” U.S. Statement 11-12. But, here again, the United States has conflated a court’s issuing of contempt sanctions with execution or enforcement of an award by, for instance, attaching tangible property. See FG Hemisphere, 637 F.3d at 377. In issuing contempt sanctions against a foreign sovereign in favor of a plaintiff, this Court does not “purport[] to dispose of tangible property held by [that] state in the latter state’s territory” and so such an award cannot damage the United States’ asserted interest in adhering to “accepted rules of public international law.”

The United States also alludes to its interest in reversing Russia’s moratorium on “all loans of Russian cultural treasures to exhibitors in the United States” which, it states, was begun “in response to what Russia perceived to be threats from Chabad to seek attachment of the loaned items.” U.S. Statement 13 n.9. But, as the Court explained previously, the fears purportedly motivating Russia’s moratorium were legally unfounded, as such items would be immune under federal law from attachment. Chabad III, 798 F. Supp. 2d at 270-71 (citing 22 U.S.C. § 2459). Moreover, any lingering Russian anxieties about Chabad’s ability to attach these items should have been put to rest by this Court’s July 26, 2011 Order which, at Chabad’s request, incorporated an express prohibition on the attachment of such cultural treasures. ECF No. 101. That the moratorium on art loans remained in effect even after this order was issued undermines the United States’ characterization and suggests that other motives are at play. The Court finds that the United States fails to “reasonably and specifically explain” the connection between the proposed sanctions and its ability to negotiate a resolution to the moratorium. FG Hemisphere, 637 F.3d at 380.

Accordingly, the Court concludes that contempt sanctions are appropriate.

C.    Amount

It remains to be decided what size award would be best calibrated to “coerce compliance” with the 2010 Order. See Bilzerian, 613 F. Supp. 2d at 70. Defendant Russia is one of the world’s largest economies.3    The sanction imposed on the Democratic Republic of Congo, a much smaller and weaker economy,4 and upheld in FG Hemisphere was “$5,000 per week, doubling every four weeks until reaching a maximum of $80,000 per week.” FG Hemisphere, 637 F.3d at 376. In United States v. Philip Morris USA Inc., the court found that civil contempt sanctions in the amount of $25,000 per day against a tobacco company with annual profits of approximately $190,000,000 were warranted. 287 F. Supp. 2d 5, 15 (D.D.C. 2003).

Guided by these precedents, the Court will issue civil contempt sanctions in the amount of $50,000 per day until defendants comply with this Court’s July 30, 2010 Order. ECF No. 80. III.


Chabad’s motion for civil contempt sanctions will be GRANTED, and the Court will issue an Order with this Opinion, entering contempt sanctions against all defendants in the amount of $50,000 per day until defendant complies with the July 30, 2010 Order.
Signed by Royce C. Lamberth, Chief Judge, on January 16, 2013.
The entire memorandum as a PDF file:
Download Judge orders fines v Russia in Chabad books case official document 1-16-2013

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