The First Year of Helms Burton Lawsuits

One year ago, the Trump administration announced that, for the first time in 23 years, the President would cease to suspend Title III of the Helms-Burton Act and would instead allow U.S. nationals to sue persons and companies that “traffic” in property expropriated by the Cuban government after the start of the Cuban Revolution. Presidents Clinton, Bush, and Obama had suspended Title III from 1996-2017, because they concluded that activation of the provision would produce a flood of complex lawsuits in U.S. courts and cause diplomatic friction with close allies.

I have a short op-ed in today’s National Law Journal assessing the first year of lawsuits. Although fewer suits (only 26) have been filed than most Helms-Burton observers (including me) expected, the bigger surprise is that most of the lawsuits have targeted U.S., not foreign companies. The administration’s activation of Title III has had a boomerang effect, causing legal and financial suffering for U.S. companies that are not actually present in Cuba. I argue that the activation of Title III has not achieved the administration's goals and should be reversed. Here are excerpts from the op-ed (the full text is available here, although it is behind a paywall):

In permitting Title III lawsuits for the first time, starting on May 2, 2019, the Trump Administration aimed to pressure foreign investors out of Cuba and thereby starve the regime of resources. The Administration may also have expected to score political points by allowing Americans—especially Cuban-Americans in Florida—to sue foreign companies in U.S. courts. But the actual result has been different: the majority of defendants in the lawsuits filed so far have been U.S. companies whose activities touch Cuba only in some minor way, rather than the Cuban companies or foreign companies that now own, lease, or operate property in Cuba. Title III’s activation, in short, has been a failure and should be reversed.

The Act defines “traffic” broadly to include not only any “commercial activity using or otherwise benefiting from confiscated property” but also “profiting” from trafficking carried out by others. Moreover, Title III imposes draconian penalties for companies found liable for trafficking. Plaintiffs who are among the nearly 6000 American companies and individuals with claims certified by the Foreign Claims Settlement Commission (part of the Department of Justice) in the early 1960s may collect the amount of their certified claim, plus treble damages, interest over the last sixty years, and attorney’s fees. An estimated 200,000 additional claimants without certified claims may be eligible to file lawsuits as well. Individual Title III awards could be close to (or over) $1 billion.

Given the shiny pot of gold at the end of the Title III rainbow, it is perhaps surprising that only 26 lawsuits have been filed since the provision’s activation a year ago. But the major U.S. companies that hold the largest claims may be reluctant to sue the Cuban government (because they may seek to do business in Cuba in the future) or to sue European, Canadian, or Mexican companies (who are corporate partners and who may be able to take advantage of “blocking statutes” passed by their governments that prohibit them from complying with the Act). Smaller claimants may be deterred by the cost and length of litigating Title III lawsuits.

When it enacted Title III, Congress expected that the defendants would be non-U.S. companies, such as Cuban companies, European hotel chains, and Mexican telecommunications operators that lease or use properties expropriated from Americans in Cuba. But the reality has been far different. Of the 76 total companies named as defendants in Title III lawsuits over the last year, almost 50 have been U.S. companies, including American Airlines, Visa, Mastercard, Amazon, Travelocity, and Expedia (which is a defendant in six lawsuits).

Moreover, none of the U.S. defendants are leasing or operating property in Cuba. Some (like American Airlines) provide travel to Cuba pursuant to licenses issued by the Treasury Department, while others (such as Visa, Mastercard, and Expedia) simply provide travel or financial services to persons who travel to Cuba.

U.S. courts will now have to grapple with complex legal questions such as whether processing a credit card payment for a traveler to Cuba or landing at a Cuban airport constitutes “trafficking.” And given the broad definition of trafficking, may multiple defendants be found liable for trafficking (booking the room, processing the payment, operating the hotel) for the same Cuban property? These questions are likely to take a decade or more to resolve, perhaps ultimately by the Supreme Court.

The Trump Administration acted precipitously when it activated Title III and has ended up causing significant legal burden and expense for many U.S. companies. Creative plaintiffs are likely to file more suits. The Administration should now at least explore suspending Title III with respect to U.S. companies and companies of countries that cooperate with the United States to promote human rights in Cuba and other areas, although either action would be open to serious domestic and international legal challenges. The better course would be to re-suspend Title III entirely before the current trickle of suits becomes a flood.