On June 14, 2016, in Bennett v. Bank Melli, the US Court of Appeals for the Ninth Circuit issued an amended opinion and joined the US Courts of Appeals for the Second and Seventh Circuits in clarifying exceptions to sovereign immunity under the Foreign Sovereign Immunities Act of 1976 (FSIA) and Terrorism Risk Insurance Act of 2002 (TRIA) ( (9th Cir. 2016)).

Several groups of US citizens sued the Islamic Republic of Iran for damages arising from deaths and injuries suffered in terrorist attacks Iran sponsored and obtained final money judgments totaling nearly $1 billion. In an effort to collect on these judgments, one group of plaintiffs sued Visa Inc. and Franklin Resources, seeking to attach and execute against the assets they collectively owed to Bank Melli, Iran's national bank. The US had previously blocked Bank Melli's assets in the US. Visa and Franklin responded by filing an interpleader action, naming as defendants Bank Melli and other judgment creditors, and seeking a determination of the rights to the blocked assets owed to Bank Melli.

Bank Melli appeared in the action and moved to dismiss the claims against it, arguing that the creditors could not execute on the assets because:

The district court denied the motion to dismiss and Bank Melli filed an interlocutory appeal.

The FSIA establishes a default rule that foreign states are immune from suit in US courts. The general rule of sovereign immunity is subject to several exceptions, including when the US officially designates the foreign state a sponsor of terrorism and the foreign state is sued for personal injury or death caused by various terrorist acts. (28 U.S.C. §§ 1605A.) The US has designated Iran a terrorist party.

The sovereign state's property is also immune from attachment and execution under the FSIA. However, the US Supreme Court has held that the sovereign's instrumentalities were presumptively not liable for the debts of their sovereigns (see First National City Bank v. Banco Para el Comercio Exterior de Cuba (Bancec), 462 U.S. 611, 620-21 (1983)). Federal courts later described five Bancec factors that should be considered in determining whether an instrumentality in question was in fact an alter ego of the sovereign and could be held liable.

In an effort to help plaintiffs harmed by terrorist activities enforce judgments against Iran, Congress enacted the TRIA, which provided a basis for attachment of blocked assets of any agency or instrumentality of a terrorist party for the satisfaction of compensatory damages for which the terrorist party has been held liable.

Most recently, in 2008, Congress amended the FSIA by adding Section 1610(g)(1), which allows for attachment of and execution against property held by a foreign terrorist state's instrumentality even if it is a separate juridical entity, regardless of the Bancec factors.

The Ninth Circuit affirmed the district court's denial of Bank Melli's motion to dismiss on two separate grounds:

The Ninth Circuit rejected Bank Melli's argument that liability cannot apply retroactively, as the terrorist acts underlying the judgments occurred before the TRIA was enacted and Section 1610(g) was added to FSIA. The court explained that those statutes do not impose new liability on Iran, but simply allow additional methods of collection. The court also clarified that, while the general principle is that a law that increases substantive liability for past conduct does not operate retroactively, in cases of sovereign immunity, there is a presumption in favor of retroactivity.

Finally, the Ninth Circuit disposed of Bank Melli's argument that the blocked assets owed to it were not its property. Under California law, a court may order a judgment debtor to assign a judgment creditor a right to payments that are due or will become due, even if the right is conditioned on future developments, so the assets owed to Bank Melli may be assigned to judgment creditors.