Smith v. The Islamic Emirate

Background

This memorandum decision and order concerns four groups of judgment creditors in related multidistrict litigation arising from the September 11, 2001 attacks and other terrorist attacks. The creditors held judgments against the Taliban and sought turnover of funds in the name of Afghanistan’s central bank, Da Afghanistan Bank (DAB), that were being held at the Federal Reserve Bank of New York.

On February 21, 2023, the court adopted a magistrate judge’s report and recommendation and denied the creditors’ turnover motions. The court had ruled that the DAB funds were not Taliban property available to satisfy Taliban judgment debts. It also ruled that it lacked subject-matter jurisdiction under the Foreign Sovereign Immunities Act and was constitutionally restrained from deciding that the Taliban was Afghanistan’s legitimate government, which the court said would be required to attach DAB’s assets.

Motion to Stay

The judgment creditors moved to stay the February 21 decision pending appeal. A stay is a temporary pause in the effect of a court decision. Courts consider four factors: the applicant’s likelihood of success, the risk of irreparable injury without a stay, possible injury to other interested parties, and the public interest. The court described the first two factors as the most important.

The court held that the creditors had not shown a sufficient likelihood of success on appeal. It stated that it had considered their objections and arguments and agreed with the magistrate judge’s interpretation of the Terrorism Risk Insurance Act and the Executive Branch’s constitutional authority to recognize foreign governments. The court found that the creditors had not shown that they were likely to prevail on both their statutory and constitutional arguments and ultimately obtain turnover of the DAB funds.

The court also found no irreparable injury. The creditors had not had access to the DAB funds before the February 21 decision and did not have access afterward, so the status quo was unchanged. The court further found no immediate threat that the funds would be dissipated because they remained blocked under an executive order extending the national emergency concerning the humanitarian crisis in Afghanistan.

The court rejected the argument that the stay was needed to preserve the creditors’ ability to recover if the Court of Appeals ordered turnover. It noted that the February 21 decision did not address the priority of competing creditors’ attachments or the relationship between these judgment creditors and possible creditors in other proceedings.

Disposition

The court concluded that a stay could injure other interested parties by leaving the turnover issues unresolved. It also concluded that the public interest favored resolving whether the creditors had the right to take Afghanistan’s money deposited by Afghan civilians and international donors to satisfy Taliban debts. The judgment creditors’ letter motion to stay the February 21 decision was DENIED. The clerk was directed to close the related open letter motions.