JONES DAY TALKS®: Helms-Burton Matters Move Forward in 2020
Since the Trump Administration lifted the suspension of Title III of the Helms-Burton Act in May 2019, thereby allowing U.S. citizens to sue companies profiting from assets in Cuba seized under the Castro regime, high-profile corporations in several industries are facing—or are potentially facing—significant legal action. Jones Day partners Rick Puente and Chris Pace review recent developments and talk about what affected parties and stakeholders should watch for in 2020.
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Read the full transcript below:
Dave Dalton:
Passed by the US Congress in 1996, Title III of the Helms-Burton Act allows US nationals to bring suit against any party who traffics in property that was confiscated by the Cuban government during the Castro regime. Every US president has suspended this private right of action since the Act's inception in 1996. However, as of May 2019, the Trump administration is no longer suspending Title III. We've talked previously with Jones Day's Rick Puente and Chris Pace about how this impacts companies conducting or considering conducting business in Cuba. And they're here today with an update. I'm Dave Dalton, you're listening to Jones Day Talks.
Dave Dalton:
Miami-based Jones Day partner Rick Puente has tried cases on behalf of major financial institutions and global corporate entities in federal and state courts and before international arbitration tribunals. Many of Rick's matters have involved parallel proceedings in civil and common law jurisdictions in the US, Latin America and Europe. And partner Chris Pace, also based in Miami, represents clients in commercial disputes, trade secrets and unfair competition cases, money-laundering and other criminal investigations of prosecutions, and federal antitrust and RICO actions. Chris has tried and prevailed in more than 20 cases and has orally argued and prevailed in more than 25 appeals. He's a former assistant US attorney for the southern district of Florida, and he served as a law clerk to Supreme Court Justice Anthony M. Kennedy. Rick, Chris, thanks for being here today.
Chris Pace:
Our pleasure to be here, Dave.
Rick Puente:
Thanks Dave.
Dave Dalton:
Hey, Chris. Let's start with this. Again it's been a while since we've talked, I think it was September of last year, for listeners who need a quick refresher or crash course, tell us what the Helms-Burton Act is and why it's taken on some elevation and relevancy over the last year and a half or so.
Chris Pace:
Sure. The Helms-Burton Act has several parts to it. The main part that's been in effect for a while, essentially codifying the US embargo for Cuba. But there's a provision in Helms-Burton, this is a law that was passed in 1996. There's a provision in there that has never been effective until 2019. And it allows for lawsuits by people who had property confiscated by the Castro regime to bring lawsuits against companies or individuals who are using that property presently, today. As I said, it was a 20-some-odd-year period when you could not bring that kind of a lawsuit. It suddenly came into existence in 2019, and a number of lawsuits were filed focused, as you might expect, on those parts of the Cuban economy - hotels, cruise lines, cruise travel. airline travel, banks - the more notable parts of the Cuban economy. And the interesting element to it was that when the law was passed originally, it was probably envisioned that these lawsuits would be brought against foreign companies. The reality has been almost all the lawsuits have been brought against the United States companies.
Dave Dalton:
Okay. Certainly a very interesting development. So it probably has broader impact than a lot of us would have originally envisioned. All right. Let's pick up where we left off last fall. Rick, tell us about some recent case developments, what's happened. And 2020 has been a strange year to say the least. So a lot of these things continue to move along, but they get overshadowed. Tell us what's been happening case wise regarding Helms-Burton actions.
Rick Puente:
Sure, Dave. As you said, 2020 has been quite the curve ball for many of us and really for the world. And Helms-Burton has certainly, these Helms-Burton cases have not been spared. We've seen some interesting developments in addition to what we spoke about back in the fall. We've seen some international companies that were named in these lawsuits, including some hotel companies in Spain, that have raised the anti-blocking statutes that we had previously mentioned. And those anti-blocking statutes essentially were passed back in 1990, '96 or '97 to counter the Helms-Burton Act. They had not been used because as Chris stated, the Helms-Burton Act had been suspended for so long. And what we've seen now is with the anti-blocking statutes, the defendants that have been to the extent they've been served properly, because that's another issue, whether they've been served properly.
Rick Puente:
Two of the defendants that have been named - one is a Spanish company and another one is a French company - one of them, the Spanish company, has gone to the European commission for permission on whether or not they can defend your interest in the case. And the reason they have passed for permission is because the anti-blocking statutes have some very severe penalties. If you comply with a foreign court in connection with the Helms-Burton Act. So one of the defendants, what they did is they asked for a stay of the case while they seek that permission before the European commission. So that is a very interesting development since last time we spoke.
Rick Puente:
A few other developments are really related to the COVID-19 and that is the courts, because of COVID-19, have been more flexible and have granted stays in some cases because of the situation. And certainly that is just across the board, unrelated to Helms-Burton. But it certainly has an impact on how the cases are going to be prosecuted, the jurisdictional issues that come into play. Whether you have to take depositions in a foreign country is going to be an interesting issue because of COVID-19. So those are some of the interesting development.
Dave Dalton:
So logistically I don't know if this is slowing down a lot of these actions a lot, but there are factors no one could have expected a year ago when some of these cases were being considered I would think.
Rick Puente:
Well that's true. Nobody expected for the world to essentially stop, for the world economy to sort of essentially stop. And that has really made it quite challenging. The cases themselves, the statute is challenging to begin with because there's no case law prior to these lawsuits being filed in 2019, except some maybe indirect cases that have some interpretation issues that have impacted the cases. But now what we've seen is some decisions from the courts interpreting the Helms-Burton Act, interpreting some of the decisions. And I'm happy to go over some of those.
Dave Dalton:
And this has happened since we last talked?
Rick Puente:
That's right.
Dave Dalton:
Okay. Do.
Rick Puente:
Yeah. So, so one of the cases that folks have been really focusing on is the case involving Amazon. And that case, what happened was that an heir that had acquired through inheritance, through operation of inheritance, his interest in the claim filed the lawsuit and the court dismissed that lawsuit under a section of the Helms-Burton Act that says that the owner of the claim must acquire, the plaintiff must acquire ownership of the claim when Helms-Burton was enacted, which was March 12th of 1996. And that opinion, which dismissed the case with prejudice, is now going to be appealed to the 11th Circuit.
Rick Puente:
And it's a highly relevant decision because a lot of these claims may have been inherited. And the owners, individual owners in particular, many of them may have passed away because it's been suspended for so long. And now the issue is whether or not those that inherited the claim, that were not technical owners of the claim when Helms-Burton was enacted, whether they can proceed in filing a lawsuit. So that is being closely monitored. And that may lead to some inactivity on the part of some plaintiffs that may be interested in filing suit until there's clarity on that point.
Dave Dalton:
When might that appeal be heard, any idea?
Rick Puente:
That could take some time. And the notice of appeal was just filed a couple of days ago, I believe. So that may be a while.
Chris Pace:
I would think it will be, just kind of doing some rough math in my head, it's such a legal issue. There's not a complicated record to understand for the appeal. We could get a decision by the end of the year. That might be a little aggressive. It might be more likely early 2021 that we'll have a decision.
Dave Dalton:
Are there other cases pending or decisions we're waiting on? Rick, you said it very well. People are kind of waiting to see how this appeal goes and maybe there's more., Are there other decisions or matters or appeals or cases hanging out there that everybody's kind of watching and saying, let's see how this goes? I guess are there high profile matters related to Helms-Burton right now since we last talked?
Chris Pace:
This is Chris. I'm not sure how high profile we are as much as... I believe we spoke last time about the cases against the cruise lines.
Dave Dalton:
Yes, we did.
Chris Pace:
Originally they among the first filed and the original sense of them from some of the early court rulings was that they were going to move forward into discovery and that they were probably going to be the first cases that would end up being decided. Since then, it's been interesting. One of the judges has issued multiple opinions that she has openly admitted that she's kind of gone back and forth. In other words, at one point she dismissed the cases and another other point said she should have dismissed them. The cruise lines are trying actually to get an 11th Circuit appeal in those cases. Now we'll see what happens.
Chris Pace:
And the other judge has set a hearing to essentially reevaluate his position on those cases. So just because they were the initial, somebody said, we think they inspired some of the first round of lawsuits. They had passed the motion to dismiss. Plaintiff said these are good cases. Now all of a sudden those cases are getting possibly reversed or at least being pulled back. And we think that's probably discouraging right now to plaintiffs who are looking to file Helms-Burton cases.
Rick Puente:
And further touching on that point that Chris mentioned, that particular opinion impacting the cruise lines, which by the way, just for sake of clarification, there's a set of cruise line cases involving the docks in Santiago and another one involving the dock in Havana. The Havana Docks case involves a certified claim, which was issued by the foreign claim service commission. And that's the case that Chris was mentioning where the court initially denied dismissal, then granted dismissal, and then reversed her initial position, carefully zeroing in on the point that the court made in that case in her last order was it was based on a motion for reconsideration where the plaintiff said, look, your honor, we need to clarify certain facts on the record that may have not been clear to you, with respect to the certified claim.
Rick Puente:
And that was with respect to the length of a leasehold interest involving the dock. Because initially when the court granted dismissal, the court understood that leasehold interest expired in let's say in 2004. When in reality that leasehold interest was for 99 years. And the court said because it was essentially a fact that it was not clear, now it's an issue that it was clear. And in fact that leasehold interest is enough, because it's an ownership in a claim as opposed to an interest in the actual property itself. Which is more of a technical issue, right? But it's an important issue that may be heard on appeal because the defendants, the cruise lines, have asked the court for permission to file an interlocutory appeal on the 11th Circuit, which may or may not be granted.
Dave Dalton:
As I'm listening to you talk, Rick, I'm thinking has any industry had a worse year than the leisure cruise industry? Between the virus and these Helms-Burton suits? I mean, good grief. What a tough time for that little industry, right?
Chris Pace:
Well, it's the travel industry as a whole really, when you think about it. I mean, obviously COVID 19 is the far greater element of all of that. I'm not even going to pretend they're similar. But certainly the Cuban travel industry, when you combine Helms-Burton, COVID-19, and to another extent, sanctions against Venezuela and their impact on the Cuban economy, it's a very tough time to be in the travel business to and from Cuba right now.
Dave Dalton:
I bet. You were kind enough to provide me with some notes before we started this conversation and I had something here that said personal jurisdiction issues in terms of how they relate here. And this is probably an awkward segue, but it sounds like something we needed to cover. Rick, how does that factor into all this?
Rick Puente:
Sure, Dave, that's a very important point because one of the issues right before the courts even consider the case is whether or not there is actual personal jurisdiction. Subject matter jurisdiction deals with the statute itself, and the courts are finding that they have subject matter jurisdiction. But personal jurisdiction, whether they're sufficient ties, for instance, to south Florida, with respect to what's occurring in Cuba, if it's a specific jurisdiction case. That really becomes a relevant point. So if you have a foreign defendant, let's say that has no ties to Florida and they're being sued in a south Florida federal court, how does that court have personal jurisdiction over them? And actually one of the cases was dismissed against the booking entities for these hotels, because essentially the court found that the plaintiff had not established any facts to support ties to Florida, merely having a reservation on a website, being accessible to Florida users was not enough. And so that's a very important technical point among the others that you have to cross.
Rick Puente:
So that has certainly been an important issue. And another kind of important issue that has occurred since we last spoke back in the fall is the issue of Title IV, which is part of the Helms-Burton Act. As Chris stated, it's divided into various sections. Title IV is the section that basically allows the US government to preclude or block foreign nationals from entering into the United States because of business activities in Cuba. And for the first time we saw that coming into effect in February of this year, when the CEO of Melia, according to Reuters and other media sources, was precluded from entering the United States based on Title IV based on Melia's activities in Cuba. So that was an interesting development.
Dave Dalton:
Again, it happened right before the world kind of changed. That's an interesting story. Rick, that doesn't happen a lot or does it? Something like that? We say a CEO or an executive of sorts, because if I'm understanding this correctly, had dealings in Cuba, well, frankly, then we don't want you here. Is that, am I oversimplifying here? That sounds like a huge deal.
Rick Puente:
It is. And Dave that's based on the actual wording of the statute. That has a little history as well, because there was a case against Melia in the Spanish courts relating to a confiscated property in Cuba, but it was filed under the Spanish civil code and by the Cuban American family that owned the successor company, which is actually a US entity that sued Melia under an unjust enrichment theory in Palma de Mallorca, where Melia is based. And the history is that that family apparently had used Title IV as leverage before, because Title III was suspended, had used Title IV as leverage against Melia, but that never worked. So they went ahead with the unjust enrichment claim in the Spanish courts. That case was initially dismissed by the first level court, but then on appeal, which is another interesting development, in April this year it was reversed.
Rick Puente:
The appellate court found that there was jurisdiction under the Spanish civil code to hear the case for unjust enrichment. And so whether in February action related to that CEO somehow got into the US hands and was a reason for the usage of Title IV against that CEO from entering the United States, we don't know. We don't know those details. But it's certainly related to Melia's operations of hotels in Cuba. And it also shows the Trump administration's strong stance on Cuba. As you may recall, the last time we had a new national security advisor appointed, Robert O'Brien. And Mr. O'Brien, I have not heard him speak directly on Cuba, but indirectly he has, by saying with respect to Venezuela in the press, he said Cuba needs to stop meddling in Venezuelan affairs. And as you know, Dave, the United States recognizes Juan Guaido as the president of Venezuela, not the current one that's in place. So it's an interesting dynamic that we have.
Dave Dalton:
Oh definitely. In fact, I kind of thought we'd wrap up talking about, I mean, it's an election year, right? A a very unusual election here at that. We talked previously about the Trump's administration's views toward Cuba and so forth. Are there other things to watch that might be newsworthy or crop up between here in November, relative to Helms-Burton, Cuba, the election. It's quite the story and we probably don't know even 2% of it, but what do you guys see coming?
Rick Puente:
Well, Dave, I think they're going to continue with a strong policy towards Cuba and Venezuela. The Trump administration has been pretty consistent in its foreign policy initiatives with respect to Venezuela and Cuba. Florida is an important state. There's a lot of Cuban Americans and Venezuelans here. I expect for him to continue with that strong stance. I don't foresee any change there. If anything, we're going to see more of the same with respect to Cuba and Venezuela.
Chris Pace:
We've seen actually upticks on both fronts. There was recently OFAC license that was ended for Marriott to operate hotels in Cuba. There's new restrictions on money transfers to folks in Cuba. There's ongoing increases in restrictions to Venezuela. And as Rick said, there definitely ties between how the US government is approaching Cuba and how it's approaching Venezuela. In an election year with Florida being such a pivotal state, we're going to see an increase in that. The one thing I haven't seen, it may have occurred but I haven't seen it yet, is I'm not sure that a democratic candidate, Vice President Biden has said or has addressed the Cuba policy more specifically. In the past he actually has been fairly in support of sanctions against Cuba and in regime change in Cuba. So it might be in this election that both the candidates take the position that we need to continue and keep up the pressure on Cuba.
Dave Dalton:
Very interesting and great insight there, Chris. Great insight. Let's wrap it up with this. This kind of my go-to question for situations like this. What are clients worried about right now? Or what are they asking you about right now pertaining to this whole dynamic and situation?
Rick Puente:
Dave, certainly the COVID 19 has thrown a real curve ball and that's really particularly if you're in the travel industry, that's a big factor. So a lot of the attention is focused there. But because these cases have such a significant impact on international law issues, right? The conduct of a corporation in a foreign country could be the subject of a law in the United States that makes them potentially liable in a federal court for their conduct in foreign soil is certainly something that's a big concern, right? Normally you see these types of cases in international arbitration settings, where there's a treaty, for instance, between countries, a bilateral investment treaty. The country takes expropriation or confiscation action and under the treaty that the countries have agreed to that dispute through one investor, state arbitration. Here, there is no treaty. It's just a law that passed on by Congress, signed into law by the president. And now all of a sudden you have a lawsuit in a US federal court conduct occurring extra-territorially. So that's a big concern.
Chris Pace:
Yeah. I would break it down just a little bit more simply, which is, I think at this point what we're seeing with clients is the question of, does it make sense, right? If your burdens have increased across the board and you're evaluating your businesses and your business lines, you start asking the question of whether the extra costs associated with operating in Cuba are worth it. I think, for example, with the travel industry, most of these travel components - if you're talking airlines, you're talking hotel chains, you're talking travel agencies, ticket brokers - they operate across the world, they can provide you travel anywhere. So how much is it worth them to go through the extra hurdles of having to deal with Cuba?
Chris Pace:
And I think until we're through the pandemic, we won't really know. Flights right now to Cuba are virtually at a standstill. When they're opened up again, are we going to see the old traffic or are we going to see a substantial decrease in traffic because some of these travel companies are going to say, it's just not worth it. I'm going to focus on getting travelers to Europe or getting travelers to Canada, or some place other than Cuba. Time will tell.
Dave Dalton:
It certainly will. Fascinating subject. I like it every time I talk to you guys about this. In fact, let's make sure we do this again. I'll put a note down for early fall before the election. Now obviously if something pops before then we'll be in touch regarding all of this. But let's make sure we talk late summer/early fall and kind of get an update and see what's happened with some of the matters moving through the courts. Maybe something happens with the Amazon appeal we were talking about earlier, who knows, but let's make sure we stay in touch.
Rick Puente:
You got it. Thanks Dave.
Chris Pace:
Good talking to you Dave.
Dave Dalton:
Thanks, you guys. It's always great. Thanks. Take care.
Dave Dalton:
You can find contact information for Rick Puente and Chris Pace at jonesday.com. While you're there, visit the firm's insights page for publications, videos, more podcasts, blogs, and newsletters. You can subscribe to Jones Day Talks and Apple podcasts and wherever else good podcasts are found. As always, we thank you for listening. I'm Dave Dalton. We'll talk to you next time.
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