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Title III Suits under the Helms-Burton Act

UPDATE: Florida Courts rule OFAC license not enough to dismiss case

Note: This is an update to our general briefing on Title III suits under the Helms-Burton Act. For our original briefing, which contains more detailed information, please see here.

Title III of the Helms-Burton Act (the “Act”)[1] allows US nationals to bring suit against a party who “traffics” in property that was confiscated from them by the Cuban government. The definition of “traffics” is very broad and potentially includes any activity that benefits commercially from the confiscated property; however, the Act carves out several activities as exempt from claims, including “transactions and uses of property incident to lawful travel to Cuba, to the extent… necessary to the conduct of such travel.” This exemption is of particular interest to companies in the travel and hospitality industries that currently do business in Cuba, particularly those that rely on a license from the Office of Foreign Assets Control (“OFAC”) to do business in Cuba and can therefore argue that they are operating within the law. However, in two recent decisions before two different judges in the Southern District of Florida, Garcia-Bengochea v. Carnival Corporation[2] and Havana Docks Corporation v. Carnival Corporation,[3] the Courts found that while the “use of property incident to lawful travel” is indeed an affirmative defense to a claim of trafficking, doing business under an OFAC license is not sufficient to grant a motion to dismiss based on that defense.

In both cases, the plaintiffs brought a suit under Title III, claiming ownership rights to piers that are allegedly used by Carnival to embark and disembark passengers. Carnival moved to dismiss arguing that its use of each pier is incident to lawful travel and pointed the Courts to the general OFAC license for travel-related services.[4] Carnival also argued that the carve-out in the statute relating to use incident to lawful travel is an element of a claim under Title III, and so failure to plead this exemption in the negative should be fatal to a complaint. The judges in both cases disagreed. First, they found that the exemption for “use incident to lawful travel” is an affirmative defense and so need not be pled; second, they found that, as an affirmative defense, the standard for dismissing a claim based on the carve-out required that the defense be “apparent on the face” of the complaint. Since the OFAC license was evidence provided by the defendant and not part of the complaints, the Courts rejected the motions to dismiss. As such, the Courts also declined to reach the issues of whether an OFAC license, on its own, is sufficient to defeat a claim under Title III of the Helms-Burton Act, and how stringently to interpret “necessary to the conduct of such travel,” stating that these issues could be addressed at a later stage.

This development will be particularly worrisome for companies that do business in Cuba under an OFAC license, as it means that they may not be able to use these licenses to end their cases at the motion to dismiss stage and therefore avoid discovery. Given that Title III claims will likely be quite fact-intensive and require a thorough examination of both a defendant’s use of the property and verification of the plaintiff’s ownership, discovery may well be a drawn-out and painful process. On the other hand, the plaintiffs Garcia-Bengochea and Havana Docks Corporation appear to be emboldened by these wins: in the 24 hours after the first decision, they brought five new Helms-Burton cases against other cruise lines.

[1] Pub. L. No. 104-114, 110 Stat. 785 (1996) (codified at 22 U.S.C. §§ 6021-91).
[2] Garcia-Bengochea v. Carnival Corporation, No. 1:19-cv-21725, 2019 WL 4015576 (S.D. Fla. Aug. 26, 2019).
[3] Havana Docks Corporation v. Carnival Corporation, No. 1:19-cv-21724 (S.D. Fla. August 28, 2019), ECF No. 47.
[4] The license can be found at 31 C.F.R. § 515.572(a)(1).