Legal Trends: LIBERTAD Title III Civil Lawsuits Explained
On April 17, 2019, President Trump effectively constituted the presumed U.S. embargo against Cuba.
By allowing Title III waivers to expire in the Cuban Liberty and Democratic Solidarity Act (alias. LIBERTAD or Helms-Burton Act), President Trump paved a path for U.S. plaintiffs to sue the Cuban Government, foreign businesses and third parties for compensation for use of expropriated properties on the island.
American courts will very shortly hear LIBERTAD Title III civil claims against alien defendants that directly or indirectly trade in Cuba, a course of action the United States Justice Department has never taken on since President Bill Clinton signed the Helms-Burton Act into law in 1996.
Legal hurdles concerning judgment recovery and jurisdiction are in the horizon, and countries such as the European Union (EU) have already objected to President Trump’s resolution, asserting the United States federal courts hold no power to impose legal remedies on foreign business that conduct commerce with Cuba.
Still, American law firms are now preparing for the storm of LIBERTAD civil lawsuit filings about to take place despite the obstacles ahead.
To fully understand how this legal trend caught fire, we must set the clock back sixty years to when the United States unofficially introduced an American trade embargo against Cuba.
How Did The U.S. Embargo Against Cuba Lead to the LIBERTAD Act?
Before Fidel Castro seized power in Cuba, the island’s political scene embraced capitalism.
U.S. citizens and businesses then purchased good titles to Cuban land, farms and buildings to facilitate their trade endeavors with the Cuban Government, but everything changed after the Cuban revolution occurred.
Post-Revolution Property Seizures in Cuba
Fidel Castro began taking private property in Cuba belonging to Americans in January 1959.
United States citizens residing and working in Cuba fled the island after Cuban political agendas changed overnight from a capitalistic culture to a socialist dictatorship.
For political reasons and afterward to reinforce Cuba’s socialist economy, Fidel Castro abruptly expropriated commercial and residential properties in every island district, port and rural area.
The thousands of American citizens who lost their homes, business and farmland reasonably believed they were leaving Cuba with good property titles and never intended to abandon their assets for government sequestrate.
These property owners further assert they evacuated the island with good faith intentions of returning to Cuba as soon as political tensions calmed in the region.
Castro Criminalizes Island Fleeing
Fidel Castro afterward denounced island fleeing as criminal acts and enacted executive proclamations that declared the Cuban Government possessed constitutional rights to make claims and take possession of any property left behind by island fleers, unmindful of the proprietor’s citizenship, their prior deed claims or their legal reasoning for abandoning their assets.
Castro’s nationalization of U.S. assets sparked a government interest in implementing a trade embargo against Cuba; hence, since the early 60s, every U.S. President has executed an unofficial Cuban trade blockade via issuance of executive order.
Presidential Executive Orders
President Kennedy’s executive order of 1962 narrowly defined Cuban trade restrictions in the United States through the suspension of all imports, even if the exporter produced the Cuban good off the island. The President further asked Congress to modify existing laws that would withhold U.S. aid to countries that traded with Cuba.
A second executive order in 1963 similarly prohibited American businesses from exporting goods to Cuba except for certain food and medicine.
The U.S. embargo forced Cuba to turn to the Soviet Union for commercial trading. Such a move likewise drove Castro and the entire Cuban economy to become absolutely dependent on a communist partner.
President Kennedy later imposed travel restrictions for Americans visiting Cuba via executive order in response to Castro allowing the Soviets to install nuclear weapons on the island. Kennedy’s executive order further froze all Cuban assets in the United States and reinforced existing laws to establish an administrative embargo that would last for fifteen years.
Lax and Reinstatement of the Cuban Embargo
In 1977, President Jimmy Carter did not renew Kennedy’s executive order banning travel to the island; this allowed U.S. citizens and business to buy and sell dollars in Cuba legally. However, President Reagan fully restored the U.S. trade embargo in 1982 with few exceptions.
After the Soviet Union collapsed in the 90s, the Cuban economy plummeted. Cuba’s external trade deficit swelled to nearly ninety percent without Russian commerce, and its GDP tanked thirty percent between 1989 and 1993.
Castro was therefore forced to make drastic economic reforms to attract new foreign investment and fresh capital resources.
Lawmakers Take Control
The republican-led Congress took regard to Castro’s plans and soon after wrote the Cuban Democracy Act (Torricelli Law) in 1992. This bill paved the way for legislators to make the U.S.-Cuba trade embargo an official law instead of an administrative policy upheld by presidential orders.
Congress debated the Torricelli Law for four years before delivering its cousin, the LIBERTAD Act, to President Clinton’s desk for signing and execution in 1996.
Why Did Congress Create the Helms-Burton Act?
Lawmakers wrote the Helms-Burton Act with a resolve to penalize businesses that made profits on illegally confiscated, American-owned land and buildings in Cuba without compensation to the property’s rightful owners.
LIBERTAD took four years to overcome senate filibusters but passed congress in March 1996 after a tragedy struck one month prior.
In February 1996, a Miami-based, anti-Castro, humanitarian group sent two private planes on a search and rescue mission in international waters near Cuba to assist Cuban refugees struggling to flee the island.
Consequently, Cuban fighter jets shot down the aircrafts without reason or warning as the rescuers approached the island.
This volatile incident prompted a once hesitant President Clinton to sign the LIBERTAD Act into law just six days after Congress sent the bill to the White House for consideration.
President Clinton believed the Helms-Burton law would place constraints on Cuba’s economy which would ultimately drive Castro out of office.
However, LIBERTAD would rapidly turn into a costly domestic policy to uphold and an extremely unpopular law among United States allies and humanitarian groups that would eventually claim the Act infringes on international law and state sovereignty.
What is the LIBERTAD Act?
The LIBERTAD is a distinctive anti-Castro law that holds four titles with many provisions.
Notwithstanding the Act’s anti-socialist codifications, lawmakers wrote Helms-Burton with intent “to plan for support of a transition government leading to a democratically elected government and market economy in Cuba,” according to the Act’s first four written lines.
The following information relates to how the 104th United States Congress presented the LIBERTAD Act to the public and to President Clinton in March 1996:
- Helms-Burton provides for U.S. citizens and lawful resident aliens to name the Cuban government and foreign business that trade with Cuba as defendants in civil lawsuits that seek redress for use of confiscated property worth over $50,000 in Cuba in 1959 ($427,000 in 2018 adjusted for inflation).
- The Act further empowers the U.S. courts to afford legal and equitable remedies on such claims brought by property owner plaintiffs against foreign companies or private citizen defendants that conducted business in Cuba with use of the plaintiff’s assets.
- LIBERTAD likewise provides for deportation of resident aliens (and their families), company executives and major U.S. stock holders who trade in Cuba while using property expropriated from U.S. Nationals.
- Helms-Burton further proscribes Congress and the President from recognizing any future Cuban government that has not first compensated U.S. property owners on legal claims against confiscated commercial property.
- The Act politicaly positions U.S. policy on Cuba with a resolve for the island entering a “transition government” with “democratically elected” leaders.
- LIBERTAD likewise imposes international sanctions against the Cuban Government via U.S. embargo by subjecting foreign companies that conduct business with Cuba to criminal liability in the U.S. justice system. The United States further disallows business owners and executives who violate the Helm Burton Act from entry into the country.
- Congress may also apply the above-mentioned sanctions on foreign companies that choose to trade with Cuba alone and not with the United States.
- Helms-Burton further prohibits U.S. acceptance of future Cuba governments that include Fidel or Raul Castro leadership.
- The Act serves as an explicit opposition against Cuba becoming a member of any International Financial Institution.
- LIBERTAD also bans American television broadcasting into Cuba.
What are Titles One Through Four of the Helms-Burton Act?
LIBERTAD embraces four titles that codify U.S. the embargo with Cuba; let’s examine each Title in detail.
Title I
Title One reinforces and classifies the economic embargo on the island. It first observes the sanctions against Cuba as a subsequent genre of presidential executive orders where solely the Executive Branch had the authority to extend or modify the embargo.
Congress therefore effectively eliminated this presidential power by writing the embargo into enforceable law.
LIBERTAD Title One further expresses America’s stance that other nations should not allow Cuba to join international financial institutions and that countries that do commerce with the island should forthwith remove the Cuban Government from banking networks that carry American currencies.
Subsection Ten in Title One also proscribes Cuba from joining the Organization of American States; and it blocks Cuban-made goods from entering the United States. This embargo further includes Cuban products imported from other nations, a measure that indirectly weakens the Cuban sugar industry (the island’s main export).
Title II
This section first clarifies congressional intent for creating the Helms-Burton Act, and it codifies America’s stand towards supporting a free and democratic Cuba.
Title Two further required the President to present Congress with an economic assistance plan that would help Cuba shift from socialism to a capitalist society (of which President Clinton delivered in 1997).
The code likewise empowers the President to suspend the economic embargo referenced in Title One, but only if Congress first officially recognizes the Cuban government as “in transition to democracy.”
As a condition to legislators declaring the island to be in transitional status, Cuba must previously
- take “appropriate” steps to return assets confiscated in 1959 to U.S. citizens; or,
- fairly compensate property owners for unlawfully seized property.
Title Two likewise does not authorize Congress to recognize the Cuban government as officially “in transition” as long as Fidel or Raul Castro are in power on the island.
Title III
This controversial section has recently materialized in the news under the Trump Administration. Title Three affords U.S. nationals the right to sue individuals or business that have “trafficked” their Cuban assets for profit.
The Act defines “U.S. nationals” as American companies, U.S. citizens or Cubans who were not U.S. citizens at the time Castro seized their property but have since become naturalized resident aliens.
Title Three sets the LIBERTAD lawsuit filing fees at $6,700 (2019) to make sure that only serious plaintiffs would file claims in U.S. courts.
The President further holds waiver authority under Title III to postpone civil lawsuit filings for a six-month period if he or she finds such suspension is of national interest and will help Cuba transition into a free democracy.
Such waivers likewise require the Executive Branch to provide Congress with a written explanation why the Title III interruption is of “national interest.”
Every American president since Clinton has exercised this power and has consecutively renewed Title Three lawsuit waivers before they expired
In 2019, President Trump let waivers expire, which prompted property owners to file the first-ever Title III civil lawsuit against Carnival Cruise Lines via LIBERTAD.
Title Four
Title Four mandates State Department officials to refuse visas for aliens who work for businesses that have “trafficked” confiscated property in Cuba previously claimed by U.S. nationals.
Congressional intent for Title Four serves:
- to protect property owner status;
- to support future civil lawsuits, and
- to impose further Title One sanctions against the Cuban Government.
The State Department monitors economic movement in Cuba for accessing Title IV sanctions against individuals.
Yet, as of 1996, only three business executives from the Canadian mining company, Sherritt International, have received LIBERTAD Title Four exclusion notices and prohibition from entering the United States.
Why Did President Trump Allow LIBERTAD Title III Litigation to Move Forward?
Now that we have a stronger sense of LIBERTAD coding, let’s examine Title Three closer and why President Trump’s intent to execute this code has ignited recent trends in civil litigation.
To summarize, Title III allows plaintiffs to seek legal remedies in U.S. courts on expropriated property seized by Cuba after 1959.
However, claims are only valid when plaintiffs follow these Helms-Burton requisites:
- plaintiffs must be U.S. nationals as defined by the Act;
- properties in controversy must have been worth more than $50,000 in 1959;
- defendants must have used the subject matter for commercial use;
- Cubans or diplomats cannot be dwellers on the seized property; and
- litigants must possess the means to pay the $6,700 Title Three filing fee.
Trump Allows Title III Waivers to Expire
President Trump became despondent with Cuba supporting Venezuela and the Maduro dictatorship in 2018. The following year, the President’s administration indicated the United States will let the Act’s Title III waiver extensions expire in April 2019.
As a result, and for the first time in history, U.S. nationals and American businesses may now seek civil actions against foreign citizens and companies that have trafficked their confiscated Cuban commercial properties for profit.
President Trump further announced the United States would:
- halt Cuba’s access to dollar-denominated transactions carried out in international financial institutions;
- limit previously allowed tourism and business travel to the island;
- place restraints on money values sent from the United States to family members living in Cuba; and
- deny visas to alien traffickers who exploit confiscated property in Cuba.
Title III Waiver Effective Date
As mentioned above, Presidents Clinton, Bush and Obama consistently imposed consecutive statutory waivers, every six months to suspend civil lawsuit filings against Cuban traffickers.
President Trump’s waiver expiration announced on April 17th became effective on May 2, 2019; this is the date when the US Government effectively lifted the suspension and when the Federal Courts permitted US nationals to file their lawsuits.
How Do Law Firms Tackle Helms-Burton Title III Civil Claims?
Lawyers seeking to file LIBERTAD civil complaints must carefully scrutinize their client’s circumstances to discover if they hold a valid prima facie Title III lawsuit.
Plaintiffs and Defendants
Plaintiffs are persons or business organizations that held or now holds present, future, or executory interest in real property of which the Cuban Government confiscated and passed on to individuals or business entities for “trafficking purposes.
LIBERTAD narrowly defines defendants as natural persons, entities, agencies or instrumentalities of foreign states that knowingly and willfully “traffic” a plaintiff’s confiscated property.
Trafficking Defined
Trafficking under the Act is the possession, selling, assigning, trading, controlling, brokering, leasing, managing or holding of acquired interest of property confiscated in Cuba after 1959, of which is presently or was subsequently:
- used for commercial activity;
- receiving benefits from commercial activity; or
- engaging in direct or indirect trafficking by third parties for profit.
Breadth
Unlike larceny, conversion and embezzlement where the tortious act and the property in controversy are tangentially tied, trafficking activity under LIBERTAD is excessively broad.
It encompasses both direct economic activity on expropriated properties and also indirect trafficking by defendants conducting business with other defendants who use the profits from seized properties for trading.
Example: Title III plaintiffs may name persons or entities as trafficker defendants if they sell goods to another who used money earned on confiscated property to pay for the trade.
Exemptions
Some trafficking defendants are exempt from civil liability under the Helms-Burton Act.
Trafficking does not apply to natural persons or business entities who directly or indirectly use confiscated property:
- to provide international telecommunications services on or to the island;
- to offer lawful travel to and from Cuba; and,
- to reside and to exploit for non-commercial purposes (this exemption only applies to Cuba citizens or aliens who have no affiliation with the Cuban Government or its ruling political party).
Civil Liability
LIBERTAD empowers the U.S. Justice Department and the federal courts to impose serious financial consequences on defendants found liable under Title III.
Title III plaintiffs may plead general damages under the statute and calculate their special damages by assessing the confiscated property’s present value or by appraising the subject matter’s market value when seized with interest added.
Special damage pleadings under Title III may further include court costs and attorney fees along with treble damages for claims that are pre-certified by the Department of Justice’s Foreign Claims Settlement Commission (FCSC).
Title III plaintiffs may also plead non-certified FCSC treble damages if litigants serve defendants with an advance notice of their legal claim and said defendants continue to engage in “trafficking” for more than 30 days after service.
What Legal Hurdles Do LIBERTAD Plaintiffs Face?
Statute of Limitation Hurdles
Title III plaintiffs must overcome statute of limitation constraints before imputing liability on defendants who have discontinued trafficking activity.
Although U.S. nationals may sue at any time while defendants profit on their expropriated properties, litigants may only file legal claims up to two years after the trafficking defendant has ceased to conduct business on the property in controversy.
The twenty-four-month statute of limitations starts ticking as soon as the trafficking stops, putting pressure on law firms to identify and name their defendants promptly and gather liability evidence quickly.
Because most foreign defendants reside abroad, the Act’s Title III statute of limitations further places burdens on lawyers
- process serving lawsuits;
- conducting discovery; and
- establishing personal jurisdiction in federal court.
Constitutional scholars likewise question whether the Supreme Court should first scrutinize Title III for vagueness and address sovereignty concerns before Title III plaintiffs are allowed to file lawsuits.
Jurisdiction and Recovery Obstacles
Some advocates believe Title Three’s definition of “trafficking” is inherently ambiguous and they ask whether the American courts hold sufficient subject matter and personal jurisdiction over trafficking defendants to enforce legal remedies in foreign countries.
Plaintiffs may therefore face recovery barriers in circumstances where foreign trafficking defendants lack assets in the United States to attack. Further, enforcing Title III judgments may be implausible in regions that possess adverse multi-jurisdiction blocking statutes.
Example: A plaintiff obtains a Title III judgment against a defendant trafficker who only owns assets in Turkey. As a member of the European Union (EU), the economic resources of this defendant are protected by EU blocking statutes that expressly state any “judgment” from a “court” or “administrative authority” regarding the Helms-Burton Act “shall not be recognized or be enforceable.” This particular plaintiff would therefore face many obstacles in recovering money from the defendant.
Countersuit Hurdles
Helms-Burton Title III lawsuits may further give rise to defendants filing countersuits in their jurisdictions or with the World Trade Organization (WTO) to nullify favorable judgments against them.
On April 20, 2019, one day after President Trump announced his decision to allow Title III waivers to expire, EU government leaders declared the Union would support its citizen’s right to file LIBERTAD countersuits with the WTO and would block auspicious judgments via enforcement of the “EU Blocking Statute.”
Beyond the obstruction powers discussed in the example above, the EU Blocking Statute further allows EU companies to recover general, special and punitive damages in EU courts against U.S. plaintiffs that attempt to enforce Title III judgments against them.
Canada and Mexico have also allied with the EU on blocking LIBERTAD judgment against its citizens and businesses. In 2019, the Canadian government threatened to sue the United States via the WTO if America sought to attack Canadian assets, and Mexico echoed Canada’s response one week later.
How Many Title III Lawsuits Exist Today?
Law firms are now preparing for the massive LIBERTAD civil filings soon to take place. Most civil attorneys believe defendant Title III exemptions are in the minority, given that the FCSC has certified thousands of claims already.
As of May 2019, the FCSC has vetted over 15,000 Helms-Burton Title III civil complaints and has pre-certified over 7,000 legal actions for plaintiffs seeking redress for property confiscated by the Cuban Government.
A U.S. State Department briefing in March 2019 cited both certified and uncertified FCSC claim data when estimating “the total potential Title III claims could number as high as 200,000 this year alone.”
Top law firms are now soliciting representation from pre-certified FCSC plaintiffs and are investigating foreign companies that are currently conducting business or have formerly conducted business in Cuba within the last two years.
Lawyers are further targeting third-party LIBERTAD Title III defendants, such as Carnival Cruise Lines, a corporation that indirectly benefited from Cuban traffickers as defined in the Act.
Potential LIBERTAD plaintiffs who believe they hold valid Title Three claims should seek professional counsel before the statute of limitations runs on their cases.
Your attorney will investigate your evidence and inform you if you hold a valid prima facie Helms-Burton civil claim in a jurisdiction where judgment against a Title III trafficking defendant is collectable.
How Can American and Foreign Companies Reduce Title III Risk and Liability?
After President Trump’s LIBERTAD announcement, foreign advocates around the globe have encouraged their commercial clients to rethink their Title III liability and to measure any found risk against enforceable civil judgments against them.
Businesses that trade with Cuba and keep inventory on the island should scrutinize their property titles to determine if a U.S. national previously owned the land or building that holds their goods.
Foreign companies should further consider the direct and indirect commercial Cuban trade they engage in and determine if the actors in such commerce had exchanged or received profits gained on properties expropriated by the Cuban Government.
American firms should likewise contract expert Helms-Burton advocates to access their indirect trafficking Title III exposure with third-party foreign commerce players.
Corporate lawyers working for companies that hold American assets and trade with Cuba should further advise their Boards that Title III judgments against them:
- may cutoff much-needed access to international financial institutions;
- can cause drops in sales from bad publicity; and
- may sever ties with business partners who would be afraid that a LIBERTAD plaintiff would name them as a third party trafficker in a Title III lawsuit.
