                             UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF COLUMBIA -


DEBORAH D. PETERSON, et al.,                         )
                                                     )
               Plaintiffs,                           )
                                                     )       Civil Action No. 01-2094 (RCL)
                       v.                            )
                                                     )
ISLAMIC REPUBLIC OF IRAN, et al,                     )
                                                     )
               Defendants.                           )


                                 MEMORANDUM OPINION

   I.      INTRODUCTION

   For over fifteen years now, this Court has presided over a consolidated action brought by nearly

one thousand plaintiffs against the Islamic Republic of Iran (Iran) under the state sponsor of

terrorism exception to the Foreign Sovereign Immunities Act (FSIA). On May 30, 2003, this Court

entered a default judgment as to liability against the defendants and ordered claims for the amounts

of damages be submitted to special masters. Those special masters issued almost two hundred

reports and recommendations that this Court considered in determining the compensatory and

punitive damages. On December 7, 2007, this Court entered a default judgment in favor of

plaintiffs for more than $2 billion. The special masters now seek payment.

   Before this Court are plaintiffs' Motion [ECF No. 534] for Order Authorizing Payment of

Funds for Compensation of Special Masters of this Court; the Response [ECF No. 557] of Special

Masters Loraine Ray and Karen Kruger to Plaintiffs' Motion for Order Authorizing Payment of

Funds for Compensation of Special Master of this Court ("Response of Special Masters Ray and

Kruger"); and Plaintiffs' Reply [ECF No. 558] to Response of Special Masters Loraine Ray and
    Karen Kruger. For the reasons discussed below, this Court will DENY the motion and DENY the

additional relief sought in the Response of Special Masters Ray and Kruger.

       II.    BACKGROUND

       On October 23, 1983, suicide bombers from Hezbollah, with the help of Iran, murdered 241

American servicemen. Plaintiffs here consist of family members of the 241 servicemen who

perished, as well as administrators of the estates of the servicemen, the servicemen's legal heirs,

and injured survivors of that attack. Plaintiffs brought this action in October 2001 under the

Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1605(a)(7). 1 Given the nearly one

thousand claimants seeking redress and the commensurately large number of claims, this Court

appointed no fewer than 16 special masters. See ECF Nos. 30-39 (appointing John Swanson, John

Camey, Veta Carney, Karen J. Kruger, Paul G. Griffin, Susan Meek, Howard P. Rives, Francis B.

Fennessey, David L. Broom and Loraine A. Ray), and ECF Nos. 42-46 (appointing Kenneth M.

Trombly, Jeffrey A. Manheimer, Christopher A. Byrne, Philip M. Saeta, and Colin M. Dunham).

Their task was to "undertake a very thorough, painstaking review of all the relevant testimony,

medical evidence, economic reports, and other evidence in order to make clear, accurate

recommendations" to the court relating to the damages suffered by each plaintiff. In re Islamic

Republic of Iran Terrorism Litigation, 659 F. Supp. 2d 31, 110 (D.D.C. 2009). In keeping with

their mandate, the special masters undertook "to review hundreds, if not thousands of documents,

including economic reports and deposition testimony"-work which "demand[ed] great attention

to detail and [was] extraordinarily time-consuming." Id.




1
 While this case was pending, Congress repealed and replaced many of the provisions of FSIA as a part of the 2008
National Defense Appropriations Act for Fiscal Year 2008 (NDAA). Critically, this replaced the original state sponsor
of terrorism exception-28 U.S.C. § 1605(a)(7)-with the current exception: 28 U.S.C. § 1605A. See Pub.L. No. 110-
181, § 1083, 122 Stat. 3, 338-44. The effects of this change were extensively covered by this Court in In re Islamic
Republic ofIran Terrorism Litig., 659 F. Supp. 2d 31 (D.D.C. 2009) and are relevant to the discussion below.

                                                        -2-
       In 2013, plaintiffs successfully brought an action in the United States District Court for the

Southern District ofNew York to seize Iranian assets in satisfaction of this Court's judgment. The

S.D.N.Y. court ordered the turnover of $1.75 billion in assets held by Citibank N.A., cash bonds

that Bank Markazi-the Central Bank of Iran-held in an account through an intermediary. The

court's order created a qualified settlement fund (QSF trust) and transferred the seized funds to a

trustee-the Honorable Stanley Sporkin-for the benefit of the plaintiffs. The court's order was

affirmed by both the Second Circuit2 and the United States Supreme Court. 3

       Plaintiffs now request this Court compensate the Special Masters from those funds, pursuant

to Federal Rule of Civil Procedure 53(g). But this Court has fielded requests for payment of Special

Masters before. Therefore, before addressing the merits of plaintiffs' motion and to provide

additional context, this Court briefly reviews some of the previous filings concerning the

compensation of these special masters.

               a.    Plaintiffs' First Motion Seeking Compensation for the Special Masters

       Plaintiffs' first series of motions were brought on behalf of three of the special masters. The

first two, filed on April 22, 2008, were captioned Motion [ECF No. 242] to Disburse Fund to

Special Master Ray and Motion [ECF No. 243] to Disburse Funds to Special Master Swanson.

The third, filed on May 1, 2008, was captioned Motion [ECF No. 253] to Disburse Funds to Special

Master Kruger. All three predicated their prayer for relief on 28 U.S.C. § 1605A, rather than 28

U.S.C. § 1605(a)(7). Critically,§ 1605A specifically allows courts to appoint special masters and

requires money from the Victims of Crime Fund drawn "to cover the costs of special masters

appointed." 29 U.S.C. § 1605A(e).




2
    Peterson v. Islamic Republic ofIran, 758 F.3d 185 (2014).
3
    Bank Markazi v. Peterson, 136 S.Ct. 1310 (2016).

                                                         -3-
    Plaintiffs filed their requests for payment assuming that § 1605A applied with automatic and

retroactive force to actions filed under 1605(a)(7). Rejecting plaintiffs' theory, this Court denied

plaintiffs' request on January 13, 2009 [ECF No. 430] explaining that 1605A(e) could not be

retroactively applied given: (1) the plain language of 1605A(e)(2), which limits payment to Special

Masters to cases "brought or maintained under this section [1605A]" (emphasis added), and (2)

the D.C. Circuit's ruling that: "(A] plaintiff in a case pending under§ 1605(a)(7) may not maintain

that action based upon the jurisdiction conferred by § 1605A; in order to claim the benefits of §

1605A, the plaintiff must file a new action under that new provisions." Memorandum Opinion

and Order [ECF No. 430] 2 (quoting Simon v. Republic of Iraq, 529 F.3d, 1187, 1192 (D.C. Cir.

2008)).

           b. Plaintiffs' Second Motion Seeking Payment for Special Masters

    On April 8, 2009, plaintiffs filed their second request, captioned Motion [ECF No. 435] for

Order Authorizing Payment to Special Masters of this Court ("Motion Authorizing Payment"),

seeking compensation for nine of the appointed masters. Plaintiffs grounded their second request

on Federal Rule of Civil Procedure 53(g)(2)(A)-(B), which permits a court to compensate a special

master either "by a party or parties" or "from a fund or subject matter of the action within the

court's control." Specifically, plaintiffs asked the Court to enter an order "approving payments by

the Peace Through Law Foundation, Inc. directly to the Special Masters ... in amounts acceptable

to the Court." Motion [ECF No. 435] Authorizing Payment 4. Given the absence of any

information shedding light on the Foundation's membership, its organizational structure, and the

source of funding, this Court, by Order [ECF No. 440] dated September 30, 2009, denied plaintiffs'

request, without prejudice. Rather, this Court considered the most prudent course of action was for

counsel to determine, consistent with the guidance offered in its omnibus opinion-published as



                                               -4-
In re Islamic Republic of Iran Terrorism Litigation, 659 F. Supp. 2d 31 (D.D.C. 2009)-whether

the action might qualify for retroactive treatment under§ 1605A.

              c.    Omnibus Opinion

     This Court's omnibus opinion considered the constitutional and practical implications of the

newly codified§ 1605A and its impact on Peterson and 19 other cases filed under§ 1605(a)(7).

In its broadest strokes, this Court, as a matter of first impression, examined the constitutionality of

NDAA § 1083, which authorized individuals who had obtained finaljudgments under§ 1605(a)(7)

of the FSIA to file new actions under § 1605A if they are related to currently pending actions. In

re Islamic Republic of Iran Terrorism Litigation, 659 F. Supp. 2d 31 (D.D.C. 2009). Following a

painstaking analysis, the Court held that § 1083(c)(2) did not require the reopening of final

judgments, in contravention of Article III of the Constitution, because the newly created federal

cause of action "allow[s] for new actions that simply were not available" before the enactment of

1605A. Id. at 77. The Court also examined NDAA § 1083(c)(3)(B), holding that it did not run

afoul of established constitutional principles. Id. at 86. Concluding that both provisions under

NDAA § 1083 survived scrutiny, the Court explained that either provided a potential conduit for

plaintiffs wishing to pursue remedies previously unavailable under 1605(a)(7), such as punitive

damages or special master fees. Thus, while not automatically retroactive, § I 083( c)(2) allowed

prior actions to proceed under§ 1605A under certain circumstances, 4 and § 1083(c)(3) allowed

plaintiffs to file a related action under§ 1605A, even ifit was arising out of the same act or incident

that was litigated under§ 1605(a)(7). 5



4
  The plaintiff must demonstrate the prior action was: (I) relied on § I 605(a)(7) or the Flatow Amendment as creating
a cause of action, (2) has been adversely affected on the grounds that either or both of those provisions failed to create
a cause of action against the state, and (3) as of the date of the enactment of the 2008 NOAA, the case was before the
court in any form, including on appeal or motion under Rule 60(b) of the Federal Rules of Civil Procedure.
5
  NOAA § 1083(c)(3)(B) waived the defenses ofres judicata, collateral estoppel, and statutes oflimitations for refiled
or related actions.

                                                          -5-
    Under NDAA § 1083(c)(2), this Court advised that plaintiffs could avail themselves of 28

U.S.C. § 1605A by filing a motion to alter or amend judgment under Rule 59(e) or a motion

seeking relief from judgment under Rule 60(b). Under NDAA § 1083(c), plaintiffs could dismiss

actions filed under 28 U.S.C. § 1605(a)(7) and refile under 28 U.S.C. § 1605A. In the context of

special masters, this Court has noted that "assuming the procedures in § 1083(c) are complied

with, or assuming that there is some way for plaintiffs to overcome the procedural deficiencies in

their cases by way of Rule 60(b) motion, or otherwise, this Court sees no reason why it would not

have authority to issue an order directing that the special masters receive payment from the Victims

of Crime Fund." In re Islamic Republic of Iran Terrorism Litigation, 659 F. Supp. 2d 31, 112

(D.D.C. 2009)

    But regarding the Peterson case, this Court observed that, notwithstanding its status as

"essentially the lead action of the cases filed based on the Beirut attack," id. at 101, the Peterson

plaintiffs "never filed a motion pursuant to § 1083(c)(2) and they have not filed a new action under

§ 1083." Id. at 101. This Court did not foreclose plaintiffs from seeking relief under 1605A,

reasoning that "at least some of these apparent failures to qualify actions under § 1605A are due

to misunderstanding or misapplication of the statutory language within§ 1083." Id. at 108. Rather,

the Court invited Peterson counsel to examine other cases such as Bonk v. Islamic Republic of

Iran, (08--cv-1273) or Valore v. Islamic Republic ofIran, (03-cv-1959), in considering whether to

file an amended complaint under§ 1605A. Id. at 101. The Court further suggested that plaintiffs

seeking reconsideration under Rule 59(e), id., at 94, or Rule 60(b) might succeed provided certain

statutory conditions were met. Id. at 100, 107. The Peterson plaintiffs did not avail themselves of

either suggestion.




                                                -6-
            d. Plaintiffs' Third Motion Seeking Payment for Special Masters

    Almost three years later, on July 19, 2012, plaintiffs tendered their third request for special

master fees. In a filing captioned, Motion [ECF No. 474] for Order Authorizing Deposit of Funds

into the Registry of the Court for Compensation of Special Masters of this Court, plaintiffs asked

the court (1) to authorize the Peace Through Law Foundation (the "Foundation") to deposit

$500,000 into the registry of the United States District Court from which the Court could direct

payments to the special masters, and (2) that the Court impose those fees on defendants Iran and

the Ministry of Information and Security of the Islamic Republic of Iran.

    This Court once again observed that "[f]or some unknown reasons, plaintiffs never attempted

to qualify this case for retroactive treatment under 28 U.S.C. § 1605A; therefore the special masters

never qualified under§ 1605A(e)(2) for payment from the Victims of Crime Fund." Order [ECF

No. 475-1] 2. On August 8, 2012, this Court ordered plaintiffs to file both (1) a memorandum

disclosing the membership structure of the Foundation as well as its source of funds and (2) a

memorandum addressing the legal basis for the Court's authority to distribute these funds to the

special masters and whether these payments may be levied against the defendants pursuant to the

FSIA. Id

    On September 10, 2012, plaintiffs complied and filed their Memorandum [ECF No. 477] of

Plaintiffs in Response to Order of Court Entered August 9, 2012 Regarding Authority of Court

and Taxation of Costs. Plaintiffs argued that the Court's power to tax defendants arose from the

general powers inherent in courts pursuant to Rule 53(g)(2)(B)-powers, they urged, which should

be liberally exercised in light of Iran's wholesale endorsement of terrorist activities. Information

concerning the membership structure of the Foundation and its source of funding was filed

separately, under seal.



                                                -7-
       On February 21, 2013, this Court denied Plaintiffs' Motion to channel Foundation funds

through the court registry on the grounds that the Foundation's status as "a corporation that is

controlled and entirely funded by plaintiffs' counsel, Mr. Thomas Fortune Fay and his firm Fay

Kaplan Law, PA," created an impermissible "appearance of impropriety." Order [ECF No. 489]

1-2.

             e. Plaintiffs' Fourth Motion Seeking Payment for Special Masters

   Rebuffed in their attempts to apply 1605A retroactively automatically without first triggering

NDAA §§ 1083(c)(2) or (3) and having failed to convince the Court to funnel funds, directly or

indirectly, through counsel's wholly-owned and controlled Foundation, the Peterson plaintiffs

filed the instant motion. Plaintiffs now ask this Court to exercise its authority under Rule 53(g) to

impose the costs of Special Master fees on the defendants-this time by directing that payments

be made from the QSF trust intended to compensate plaintiffs and their counsel. Motion [ECF

No. 534] for Order Authorizing Payment of Funds for Compensation of Special Master of this

Court 2.

   On September 21, 2016, two of the special masters filed a Response [ECF No. 557] of Special

Masters Loraine Ray and Karen Kruger to Plaintiffs' Motion for Order Authorizing Payment of

Funds for Compensation of Special Master of this Court ("Response of Special Masters Ray and

Kruger"). Special Masters Ray and Kruger urge this Court to deny plaintiffs' motion and, instead,

"impose a tax or sanction on Plaintiffs' counsel directly, requiring counsel directly to pay for the

reasonable, special masters' fees and costs." Response of Special Masters Ray and Kruger 2-3.

   In support, the special masters argue that sanctions are properly levied against Peterson

counsel due to their failure to avail themselves of relief under Section 1083 either by refiling a

new action under 1605A or seeking reconsideration under Rules 59(e) or 60(b). They maintain



                                                - 8-
that counsel's indifference to the Court's numerous remonstrations in the Omnibus Opinion,

reflect a "conscious, intentional decision," rising to the level of "bad faith." Id. at 13. They further

argue that these "abusive litigation practices," coupled with the '"failure to prosecute' their clients'

claims," compel the imposition of sanctions pursuant to the court's "inherent authority." Id.

(quoting Roadway Express, Inc. v. Piper, 447 U.S. 752, 764-5 (1980)).

    Plaintiffs oppose the special masters' prayer for sanctions, arguing that (1) the request betrays

a skewed interpretation of Omnibus Opinion, (2) that the request betrays an ignorance of the

procedural difficulties and the risks inherent in vacating the prior judgment and filing an amended

complaint, and (3) that the request misunderstands the impact any attendant delays would have

had on the security of the Iranian assets. Plaintiffs' Reply [ECF No. 558] to Response of Special

Masters Ray and Kruger 3. Plaintiffs further maintain that a request for sanctions cannot lie as

Plaintiffs' counsel have disobeyed neither the Federal Rules of Civil Procedure, this Court's

orders, nor any duty owed the Peterson plaintiffs. Id. at 8. They conclude by observing that "Ray

and Kruger cannot point to any duty owed to them by counsel for Plaintiffs which would be

equivalent to the duties owed to the clients." Id.

   III.    LEGAL STANDARDS

   In actions brought under 28 U.S.C. § 1605A, courts may appoint special masters to hear

damages claims and may compensate the special masters with pursuant to § 1605A(e). No such

provision exists for actions brought under 28 U.S.C. § 1605(a)(7).

   More generally, the Federal Rules of Civil Procedure provides rules governing the appointment

and compensation of special masters in other cases. Rule 53(g) states that, before or after judgment,

"the court must fix the master's compensation on the basis and terms stated in the appointing order,

but the court may set a new basis and terms after giving notice and an opportunity to be heard."



                                                 -9-
Fed. R. Civ. P. 53(g). The compensation must be paid either (1) by the parties or (2) from a fund

within the court's control. Id When allocating the payments to the parties, the Court must consider:

"the nature and amount of the controversy, the parties' means, and the extent to which any party

is more responsible than other parties for the reference to a master." Id Thus, the district court

enjoys broad discretion to allocate the master's fees as it thinks best under the circumstances of the

case. See Airdv. Ford Motor Co., 86 F.3d 216, 220 (D.C. Cir. 1996), amended (Aug. 12, 1996).

    The district court has broad discretion to "tax as costs" the"[ c]ompensation of court appointed

experts." See 28 U.S.C. § 1920(6). Insofar as special masters are court appointed experts under

subsection (6), the court has the statutory authority to tax costs directly from counsel, at the courts

discretion. "The taxing of the cost of a special master [under 28 U.S.C. § 1920] against a

nonprevailing party is clearly within a district court's discretion and no factual showing of

necessity is required." Studiengese/lschaft Kahle mbH v. Eastman Kodak Co., 713 F.2d 128, 134

(5th Cir. 1983).

    The Court also has an inherent power to sanction counsel, which "must be exercised with

restraint and discretion. Roadway Express, Inc. v. Piper, 447 U.S. 752, 766 (1980). This power "is

not a broad reservoir of power, ready at an imperial hand." Chambers v. NASCO, Inc., 501 U.S.

32, 42 (1991) (quotingNASCO, Inc. v. Calcasieu Television & Radio, Inc., 894 F.2d 696, 702 (5th

Cir. 1990)). Rather, this limited power stems from the need to make the courts function. Id

Sanctions therefore require special justification, and the authority to sanction bad-faith litigation

practices can be exercised only when necessary to preserve the authority of the court. Id. at 64.

   IV.     ANALYSIS

   At the outset, it should be noted that, notwithstanding the special masters' caption of the

sanctions request as a "response" to plaintiffs' fourth motion for fees, their filing constitutes an



                                                - 10 -
affirmative request that this court levy sanctions in the form of costs and interest against Peterson

counsel. Courts "must determine the proper characterization of a motion by the nature of the relief

sought;'' and not by its heading or legend. United States v. Palmer, 296 F.3d 1135, 1145 (D.C. Cir.

2002). Because Special Masters Ray and Kruger seek the separate relief of monetary charges

imposed upon plaintiffs' counsel, this Court construes the response as a motion for sanctions.

Therefore, this Court considers two motions: one for payment of special masters and one for

sanctions against plaintiffs. The Court will consider them separately.

    A. Plaintiff's motion fails because the QSF Trust is for the benefit of the Peterson
       plaintiffs, and not the special masters.

    Plaintiffs argue that this Court has the discretion to order payments to the special masters

pursuant to Rule 53(g), which provides for the imposition of special masters costs upon a party.

Plaintiffs argue that the special masters should be paid out of the QSF trust, which consists of

assets seized from defendant Iran. Plaintiffs further cite to S.D.N.Y. District Judge Katherine B.

Forrest's July 9, 2013 opinion, which directed the distribution of $1.9 billion in      ~ssets   held by

Citibank, N.A. to the QSF trust. That order noted that the trust was "created for the benefit" of the

Peterson plaintiffs, and required a court order authorizing distribution "in accordance with the

terms of the Plaintiffs agreement concerning the distribution of those funds." Peterson v. Islamic

Republic of Iran, No. 10-cv-4518 (KBF), 2013 U.S. Dist. LEXIS 188219, at *55, 59 (S.D.N.Y.

July 9, 2013). The agreement itself notes that the fund was created for the benefit of the Peterson

plaintiffs, "and such other persons, entity or entities ... to whom the Court directs that distributions

shall be made." Agreement for the Peterson§ 48B Fund Pursuant to 26 U.S.C. § 468B,                if 2.1,
Peterson v. Islamic Republic of Iran, No. 10-cv-4518 (KBF) (S.D.N.Y. July 9, 2013), ECF No.

461 (the "Agreement").




                                                 - 11 -
    The Agreement provides for the appointment of a Trustee to "pay or apply such part (or all) of

the assets of the Fund in partial satisfaction of the claims of Plaintiffs against Defendants for

compensatory damages, and to pay attorney's fees, costs and liens, in accordance with the executed

Cooperation Agreement and the agreements between the Plaintiffs and their respective attorneys."

Agreement,   if 3 .1.3. The Agreement further provides that: "The Fund shall terminate upon the
Fund's compliance with any court order that may be issued ... or upon the fully payment of funds

in accordance with the terms of section 3.1.3 hereof, and the payment from the assets of the Fund

of all amounts necessary to compensate the Fund Trustee and its professional agents for unpaid

services and costs of administration in accordance with the terms of section 3 .1.2 hereof."

Agreement, if 3.3.

   In short, the Agreement contemplates that monies held in the QSF trust are to be earmarked:

(1) for the compensatory damages of the plaintiffs; (2) for the payment of attorney's fees in

accordance with the various agreements between counsel, inter se, and between counsel and

plaintiffs; (3) to compensate the Trustee and his assistants for their time and expenses; and (4) to

pay any fees on the account into which funds are deposited or taxes which may be incurred. The

Agreement makes no mention of funds to be allocated to compensate special masters. Indeed, any

such disbursement would likely constitute an "alteration" requiring "an instrument in writing

executed by the Fund Trustee and approved by the Court." Agreement, if 3.4.

   Plaintiffs' request that the Court order that the special masters be paid from the QSF trust is

tantamount to asking this Court to unilaterally supersede the terms of the S.D.N.Y. order, and the

Agreement itself, to impose non-negotiated terms and conditions on plaintiffs and plaintiffs'

counsel. Given the express terms of the Agreement, and the ability of the parties here to amend

the Agreement to allow for payment of special masters, the Court declines intervene.



                                              - 12 -
    B. There is no basis warranting the imposition of sanctions against plaintiffs' counsel.

    Special Masters Ray and Kruger argue that this Court should instead require plaintiffs' counsel

to compensate the special masters as a consequence of failing to file under 28 U.S.C. § 1605A.

The masters cite this Court's inherent authority, as well as the broad discretion under Federal Rule

53(g) and 28 U.S.C. § 1920. However, this Court finds no basis in the record warranting the

imposition of such sanctions.

    i.      Imposing sanctions under this Court's inherent authority would be improper.

    The special masters are correct that it is within this Court's prerogative to impose sanctions on

a party for certain contumacious behavior. On that score, courts have the inherent authority to

sanction "the willful disobedience of a court order, and to sanction a party who has acted in bad

faith, vexatiously, wantonly, or for oppressive reasons" and to impose sanctions against attorneys

and their clients. Marx v. General Revenue Corp., 133 S. Ct. 1166, 1175 (2013) (citing Chambers

v. NASCO, Inc., 501 U.S. 32, 45-46 (1991)). Similarly, under Rule 16(f)(2), "the district court is

specifically authorized to impose ... expenses, including attorney's fees, caused by unjustified

failure to comply with discovery orders or pretrial orders." Pou/is v. State Farm Fire & Cas. Co.,

747 F.2d 863, 869 (3d Cir. 1984). Even when confronted with conduct "sanctionable under the

Rules [that] was intertwined within conduct that only the inherent power could address,"

Chambers v. NASCO, Inc., 501U.S.32, 51 (1991), the Court is not limited to applying the pertinent

rules or statutes "containing sanctioning provisions to discrete occurrences" before asserting its

inherent authority to sanction the litigant's entire course of conduct. Id.

   This court's authority to impose sanctions is not, however, without limits. Because "inherent

powers are shielded from direct democratic controls, they must be exercised with restraint and

discretion." Shepherdv. American Broadcasting Companies, Inc., 62 F.3d 1469, 1475 (D.C. Cir.



                                                - 13 -
1995). For inherent power sanctions that are fundamentally penal, such as dismissals and default

judgments, contempt orders, awards of attorneys' fees, and the imposition of fines, a district court

must find clear and convincing evidence of misconduct. Id. at 1478.

    Before determining whether there is clear and convincing evidence of misconduct here, this

Court makes some prefatory observations. First, it is highly questionable whether special masters

Ray and Kruger possess the requisite standing to seek disgorgement from the Peterson attorney's

fee award. Both are quasi-judicial officers appointed pursuant to Rule 53. Their sole allegiance

is to the Court. The special masters enjoy no formal relationship with the Peterson plaintiffs and

counsel owes them no particular duty of care beyond assisting them in their endeavors. Second, it

can be argued that were federal courts intended to use Rule 53 as a vehicle to compensate special

masters appointed under the FSIA, there would have been no need for Congress, in revoking

1605(a)(7), to have enacted 1605A(e) and provide for compensation from Victims of Crime Fund.

Indeed, it can be further argued that compensating special masters in these circumstances under

Rule 53 may yield the untenable result of rendering 1605A(e) superfluous. See Zeigler Coal Co.

v. Kleppe, 536 F.2d 398, 409 (D.C. Cir. 1976) ("[A] statute should not be construed in such a way

as to render certain provisions superfluous or insignificant.") (citing 2A D. Sands, SUTHERLAND

STATUTORY INTERPRETATION§ 46.06 (Rev.3d ed. 1973)).

   The Court need not reach these issues, however, as it finds that plaintiffs' counsel, at no time,

acted in bad faith, vexatiously, wantonly, or for oppressive reasons. As stated, the special masters

advance the position that counsel's failure to follow the guidelines suggested by the court in the

Omnibus Opinion was a "calculated" decision brought in "bad faith" and in derogation of court

injunction. Their argument is without support, and certainly does not pass the clear and convincing

standard for the punitive relief sought.



                                               - 14 -
    At no time did this Court in its Omnibus Opinion order plaintiffs with litigation pending under

the FSIA either to dismiss those actions rooted in 1605(a)(7) and re-file under. 1605A or to seek

reconsideration before this Court under Rules 59(e) and 60(b). The Court's holdings were not

demands that counsel follow a prescribed litigation strategy. Rather, the Omnibus Opinion was

"intended to serve a case management function in light of the significant changes in the law relating

to these civil suits against Iran." In re Islamic Republic ofIran Terrorism Litigation, 659 F. Supp.

2d at 38. Commensurate with that function, the Court advised plaintiffs that Sections 1083(c)(2)

and (c)(3) of the NDAA could provide vehicles for plaintiffs wishing to secure the additional relief

afforded by 1605A. Id. at 71. On that score, this Court expressly cautioned counsel seeking to re-

file new claims to proceed with care. Id. at 107. It further admonished those plaintiffs seeking

reconsideration under Rules 59(e) and 60(b) of the need to adhere to the "60 day window of

opportunity." Id. at 108. This Court empathizes with plaintiffs for whom the deadline for filing

had passed, given "the lack of clarity with respect to the statutory language," id. at 94, which was

"compounded by a lack of decisional law that might have otherwise aided counsel in their efforts."

Id. at 108. But that lack of clarity may explain counsel's hesitance.

    In the final analysis, this Court recognized that a decision not to pursue relief under 1605A

may have stemmed from "strategic choices, misunderstandings of the law, tactical blunders or

omissions, or other reasons" in addition to "misunderstanding or misapplication of the statutory

language within § 1083." Id. at 108. Whether the conduct here was a strategic choice or a tactical

blunder, it certainly does not rise to the level of bad faith when set against the backdrop of a statute

the Court characterized as "hardly a model of clarity." See United States v. Wallace, 964 F.2d

1214, 1219 (D.C Cir. 1992) (holding that negligent or careless conduct "does not even reach the

lowest of the possible thresholds-be it recklessness, deliberate indifference or some other



                                                 - 15 -
measure of vexatiousness"). This Court finds that the conduct of plaintiffs' counsel does not rise

to the level of "bad faith" urged by the special masters.

    ii.    Similarly, this Court refuses to exercise its "broad discretion" in imposing a
           sanction or tax under Rule 53(g) or 28 U.S.C. § 1920.

    For the reasons discussed above, this Court finds it inappropriate to impose direct sanctions or

taxes against plaintiffs' counsel for the payment of the masters. While 28 U.S.C. § 1920 grants

this Court the broad discretion to tax the costs for the compensation of court appointed experts,

this Court is unclear whether the special masters' role here qualifies. Even if it did, however, this

Court finds it inappropriate to tax those costs on the prevailing plaintiffs or plaintiffs' counsel.

This Court declines to impose such taxations under its statutory discretion.

    Under Rule 53(g), the Court must fix the masters' compensation on the basis and terms stated

in the appointing order. Fed. R. Civ. P. 53(g)(l). Indeed, this Court's Order [ECF No. 29] and

Administrative Plan Governing Appointed Special Masters fixed the rate of compensation and

stated that "payment is contingent upon receipt of funding from public or private sources." While

the Court may set new basis and terms under certain conditions, the Court must allocate payment

after considering "the nature and amount of the controversy, the parties' means, and the extent to

which any party is more responsible than other parties for the reference to a master." Fed. R. Civ.

P. 53(g)(3). This Court considers defendant Iran responsible, and refuses to set new terms which

impose the costs of the special masters upon plaintiffs' counsel.

   Therefore, this Court declines to exercise its discretion--either under the Federal Rules of Civil

Procedure, federal statutes, or its inherent powers-in imposing sanctions or taxations on

plaintiffs' counsel for the direct payment of special masters.




                                               - 16 -
    V.     CONCLUSION

    In sum, this Court declines to exercise its discretion under Rule 53(g) to impose the costs of

the special masters upon the QSF trust, which was created for the benefit of plaintiffs and

plaintiffs' counsel. Payment to the special masters is a wholly separate matter. While this Court

has no reservations about imposing additional costs on defendant Iran, it would be improper for

this Court to diminish plaintiffs' hard-won and long overdue compensation by requiring the QSF

trust to make additional disbursements. That burden would not be borne by defendants, but by the

plaintiffs and plaintiffs' counsel. This Court, while grateful for the hard work of the special

masters, is unwilling to compensate the special masters at the expense of the plaintiffs here.

    Similarly, this Court is unable to make a finding by clear and convincing evidence that

plaintiffs' counsel committed sanctionable misconduct. There is nothing in the record indicating

their decisions were not strategic or made in the best interest of their clients. Whether those

decisions ultimately inured to the detriment of the special masters does not render them

sanctionable, per se. This Court declines to exercise its discretion in applying sanctions or

taxations directly upon counsel.

   For the foregoing reasons, the Court will DENY plaintiffs' Motion for Order Authorizing

Payment of Funds for Compensation of Special Masters of this Court and DENY the relief

requested in the Response of Special Masters Loraine Ray and Karen Kruger to Plaintiffs' Motion

for Order Authorizing Payment of Funds for Compensation of Special Master of this Court to

impose sanction on plaintiffs' counsel.

   A separate order shall issue.

                                                                     ' ~ c- ~
                                                                         Royce C. Lamberth
                                                                     United States District Judge
DATE:      )~~}'1

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