A year and a half of Helms-Burton claims: Where do things stand?

BY GUSTAVO J. MEMBIELA,
MARIA CASTELLANOS
AND NATALIA SAN JUAN

When the Trump administration announced its intention to enforce, for the first time, the Helms-Burton Act (“Act”), commentators predicted a deluge of suits that would dramatically change, and perhaps curtail, how business is conducted with Cuba and Cuban entities. A year and a half into the Act’s active enforcement, however, we have seen only 30+ cases filed under the Act, with the majority still in the pleadings stage. Because of the relatively low volume of cases, and even lower volume of cases that have been resolved, it is still unclear exactly what impact the Act’s enforcement will have. What follows is a primer on the Act and what we know so far about its impact on those doing business in Cuba.

The Helms-Burton Act codifies US sanctions against Cuba and, under Title III, grants US nationals with claims to property “confiscated” by the Cuban government the right to file suits in US federal courts against persons “trafficking” in such property. Under Title IV, the Act also grants the US government the authority to deny visas and exclude from the United States persons who “traffic” in property confiscated from US nationals by the Cuban government. The Act defines “trafficking” broadly—the term encompasses purchasing, receiving, using, transferring, or otherwise acquiring confiscated property, as well as engaging in commercial activity using or otherwise benefiting from confiscated property.

The Act had long gone unenforced, but in April 2019, breaking from tradition, the Trump administration announced that it would begin enforcement. As of October 5, 33 suits have been filed under Title III.

Of these suits, many have focused on a relatively small group of repeat defendants. Some companies in the airline and cruise industries have been subject to multiple suits, while others in the travel, hotel, and information technology industries have been identified as defendants in four actions, including at least one class action lawsuit. A number of the suits brought under Title III are aimed at American companies, some of which provide travel to Cuba, while others are aimed at non-US companies that operate or lease property in Cuba.

Though the courts have not yet interpreted many of the key statutory provisions of Title III, the existing case law identifies the basic pleading standards that plaintiffs must satisfy in order to withstand a motion to dismiss. Defendants have filed motions to dismiss for want of Article III standing, want of personal jurisdiction, want of subject matter jurisdiction, or failure to state a claim nearly half the time. A handful of the cases dismissed by trial courts are currently on appeal before the Eleventh Circuit.

These trial court rulings are significant because they help shape and give some predictability to the law. Though it remains to be seen whether other courts will adopt the reasoning of the following rulings and whether that reasoning will be upheld on appeal, these orders will likely have major implications for Title III lawsuits.

First, courts have held that a Helms-Burton claim must be acquired prior to March 12, 1996. In other words, foreign nationals cannot will their property claims after that date to US citizens to use as the basis of a Helms-Burton claim. This is a significant win for companies facing potential risks under Helms-Burton resulting from business interests in or with Cuba because it reduces the number of potential valid Helms-Burton claims.

In another case, the court ruled that an allegation of profiting from the use of property that was confiscated by the Cuban government is a sufficiently concrete harm for purposes of Article III standing. This ruling is significant because, if it withstands appeal, it would allow Helms-Burton plaintiffs to establish a concrete injury against companies that allegedly trade in wrongfully confiscated property, despite the injury’s origin in the Cuban government’s actions.

So far, one of the bigger challenges plaintiffs face is finding defendants over whom US courts have general jurisdiction. General jurisdiction allows a court to hear any case involving the defendant, even if there is no relationship between claim and the state in which the court is located. The Supreme Court has held that a court may exercise general jurisdiction over an out-of-state defendant only when the defendant’s contacts with the forum state are so substantial as to render them essentially at home there. Courts have already dismissed Helms-Burton claims for want of general personal jurisdiction over the defendant.

Courts have also dismissed Helms-Burton claims for want of specific jurisdiction over the defendant. Specific jurisdiction exists when a claim arises out of or sufficiently relates to a defendant’s contacts with the forum state. If a plaintiff fails to meaningfully address any issues relevant to the exercise of specific jurisdiction, a court may order dismissal on personal jurisdiction grounds. However, the court may also provide the plaintiff an opportunity to amend the complaint to better address the jurisdictional issues.

Also unknown at this time is the effect of the blocking statute.  Some cases have been stayed.

Enforcement of the Helms-Burton Act may be suspended again after the 2020 United States presidential election. Such a change, of course, would mean no more suits under Title III. Existing suits, however, would be unaffected.

Though several suits have been dismissed as a result of defendants’ jurisdictional and merits arguments, Title III plaintiffs have also achieved a handful of successes. At least three have moved into the discovery phase. Thus, multinationals doing business in Cuba should analyze whether steps are necessary to mitigate against potential lawsuits under Title III, as well as the limitations of its application. Additionally, given that the Trump administration has acted on its previous decision to actively enforce Title IV of the Helms-Burton Act, companies doing business with or in Cuba should also analyze whether steps are necessary to mitigate the effect of Title IV. This includes understanding the limitations of Title IV’s potential application, identifying commercial relationships that could be considered “trafficking,” and conducting due diligence on relationships involving connections with any business with or in Cuba.

Gustavo J. Membiela is a Miami-based partner at Hunton Andrews Kurth whose practice focuses on commercial litigation and cross-border disputes, including arbitration and investigations. Maria Castellanos and Natalia San Juan are Miami-based associates at Hunton Andrews Kurt, where they  focus on litigation.

This overview was written for Latinvex.

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