Sakab Saudi Holding Company v. Aljabri ( 2023 )

United States Court of Appeals
For the First Circuit
No. 22-1052
SAKAB SAUDI HOLDING COMPANY,
Plaintiff, Appellant,
v.
SAAD KHALID S. ALJABRI; KHALID SAAD KHALID ALJABRI; MOHAMMED
SAAD KH ALJABRI; NEW EAST (US) INC.; NEW EAST 804 805 LLC; and
NEW EAST BACK BAY LLC,
Defendants, Appellees,
UNITED STATES,
Intervenor, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Gelpí, Howard, and Thompson,
Circuit Judges.
Michael J. Gottlieb, with whom M. Annie Houghton-Larsen and
Wilkie Farr & Gallagher LLP were on brief, for appellant.
Ian H. Gershengorn, with whom Lindsay C. Harrison, Jenner &
Block LLP, R. Robert Popeo, Scott C. Ford, and Mintz Levin Cohn
Ferris Glovsky and Popeo, P.C. were on brief, for appellees Saad
Khalid S. Aljabri and Khalid Saad Khalid Aljabri.
Faith E. Gay, Caitlin Halligan, Selendy Gay Elsberg PLLC,
Kevin P. Martin, Jaime A. Santos, and Goodwin Procter LLP on brief
for appellees Mohammed Saad Kh Aljabri, New East (US) Inc., New
East 804 805 LLC, and New East Back Bay LLC.
Lewis S. Yelin, Attorney, Appellate Staff, U.S. Department of
Justice, with whom Brian M. Boynton, Principal Deputy Assistant
Attorney General, Rachael S. Rollins, United States Attorney, and
H. Thompson Byron III, Attorney, Appellate Staff, U.S. Department
of Justice, were on brief, for intervenor-appellee United States.
January 27, 2023
THOMPSON, Circuit Judge. We are called upon today to
examine when ordinary legal procedures must yield to extraordinary
ones for the greater good. In this case, a foreign
counterterrorism corporation (our appellant) filed suit and sought
an order freezing certain Massachusetts assets based on its
allegations that a former government official perpetrated a
massive fraud when he misappropriated billions of dollars from the
corporation. The defendants to that suit (appellees here) seek to
tell a very different tale in defense of these allegations: The
funds were received lawfully in connection with clandestine
counterterrorism and national security operations that sometimes
were undertaken alongside the United States government. But to
prove their story, the appellees say they'd need to divulge United
States state secrets. Enter stage right: The United States
government stepped in, asserted the state secrets privilege, and
successfully got that information and, with it, a great deal of
other information excluded from the case. And while the appellant
insists the case can proceed nonetheless, and that it should be
awarded the preliminary relief it seeks notwithstanding the
exclusion of the privileged materials, the appellees are just as
insistent the case cannot be litigated and thus obligates dismissal
because they cannot fairly defend themselves without relying on
the privileged materials.
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The district court concluded it could not tackle the
necessary inquiries to examine the claims and defenses or award
the preliminary equitable relief the appellant sought without
weighing the privileged information and risking disclosure of
state secrets. Consequently, the district court determined the
case could not be adjudicated and dismissed the suit.
As we explain below, we affirm.
BACKGROUND
The facts and procedural history of this matter are
something of a global affair. Bear with us as we tell the story
that paves the way to the issues presented for our appellate
review.
Players, Places, Suits, and Proceedings
The appellant is Sakab Saudi Holding Company ("Sakab"),
an entity that bills itself as a creation of the Kingdom of Saudi
Arabia ("KSA") that "perform[s] anti-terrorism activities in the
public interest" and is funded by the KSA's Ministry of Finance.
And the appellees are Saad Khalid S. Aljabri ("Aljabri"), a former
high-ranking KSA government official who was engaged in
counterterrorism and intelligence work, and his sons, Khalid Saad
Khalid Aljabri and Mohammed Saad Kh Aljabri (we'll refer to Aljabri
and his sons as "the Aljabris"). Together, the Aljabris are
managers or directors of New East (US) Inc., New East 804 805 LLC,
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and New East Back Bay LLC (collectively, "New East" and, all
together with the Aljabris, "Appellees," who filed a joint brief).
The case now before us has its genesis in Canada, where
Aljabri lives and where, on January 22, 2021, Sakab sued Appellees
(and some others not involved in the instant matter). In Ontario
Superior Court, Sakab alleged, inter alia, that Aljabri defrauded
Sakab of billions of dollars, having used a variety of unauthorized
payments and transfers to do so. Sakab supported its allegations
with a dense forensic accounting report. Sakab immediately and
successfully sought an interlocutory order freezing the Aljabris'
assets worldwide (a Mareva injunction, see Grupo Mexicano de
Desarollo v. Alliance Bond Fund, Inc., 527 U.S. 308, 327-29
(1999)), and the Canadian court also appointed a receiver for
certain assets. Litigation in Ontario is ongoing.
Sakab then looked southward to Massachusetts, filing a
March 24, 2021 state court complaint "to give effect to" the
Ontario court's freezing and receivership orders relative to the
Aljabris' Massachusetts properties. The ten-count complaint
offers state law claims for breach of fiduciary duty (Count I),
fraud (Count II), fraudulent misrepresentation (Count III), fraud
by omission (Count IV), conversion (Count V), conspiracy (Count
VI), aiding and abetting (Count VII), unjust enrichment (Count
VIII), fraudulent transfer (Count IX) and alter ego/piercing
corporate veil (Count X). In it, Sakab alleges, as it did in
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Ontario, that Aljabri perpetrated a massive fraud on it, "us[ing]
Sakab as a vehicle to distribute funds that had been allocated for
anti-terrorism activities . . . to himself" and others -- specific
to Massachusetts, the complaint alleges the proceeds of this
fraudulent scheme were used to acquire $29 million worth of
Massachusetts properties. And Sakab says those fraudulently
obtained funds have since been distributed to various companies,
including New East, and also have been used to purchase real estate
in Massachusetts and beyond. So, Sakab says, the complaint was
filed "to preserve the fruit of the Fraudulent Scheme now located
in Massachusetts that is subject to the Ontario Orders." Sakab
also filed motions for the preliminary attachment of properties in
Massachusetts, memoranda of lis pendens, and a motion to stay the
proceedings pending the outcome in the Ontario case.
Appellees swiftly removed the action to Massachusetts
federal district court, citing the case's implication of federal
interests. In so doing, Appellees denied any fraudulent wrongdoing
by Aljabri, insisting the funds in question were lawfully received.
According to Appellees, Aljabri, in his capacity as a government
official under former Saudi Crown Prince Mohammed bin Nayef, helped
the Saudi government establish Sakab with "the primary purpose of
funding and undertaking clandestine and sensitive operations in
partnership with the United States Government." Adjudicating
Sakab's claims, Appellees said, would require the district court
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to consider whether certain of Aljabri's activities, like "covert
counterterrorism operations in partnership with the United States
Government, constituted fraud, breach of fiduciary duty, or
conversion under the law of Saudi Arabia." As a direct result,
the district court would need to examine the financing of
"sensitive programs operated in partnership" with U.S.
intelligence agencies. Thus, knowing the district court would
have to scrutinize "a partnership between the government of Saudi
Arabia and the intelligence and national security agencies of the
United States Government" to assess the claims and defenses in the
case, Appellees told the court the suit clearly raised "substantial
federal issues."
Sakab moved in April 2021 to send the case back to state
court, arguing that the only point of the Massachusetts case was
"to obtain prejudgment relief on the basis of comity to the Ontario
Orders . . . and then to stay the Massachusetts Action." A few
weeks later, the United States government noticed its potential
participation in the action, and on August 3, 2021, the government,
without taking any position on the merits of the case, formally
moved to intervene -- a move Appellees supported but Sakab opposed.
Mindful that any further briefing would run the risk of revealing
state secrets, the government also moved to stay briefing on the
motion to remand.
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About a week later, Aljabri filed an answer to the
Massachusetts complaint in which he not only denied the ten counts
against him, but also asserted affirmative defenses and raised
counterclaims against Sakab.1 Throughout his filing, Aljabri
acknowledged his receipt of funds from Sakab, but insisted they
were lawfully received, and any off-the-book transactions were
off-the-book simply because of the transactions' covert purposes
and necessarily secretive nature. He raised the specter of his
inability to effectively litigate the case -- to prove his defenses
and counterclaims -- without relying on information he believed
would be deemed privileged (and thus unavailable to him in the
litigation).
The Privilege Assertion
On August 23, 2021, Avril Haines, the Director of
National Intelligence ("the Director"), asserted the state secrets
privilege and a statutory privilege pursuant to 50 U.S.C.
§ 3024(i)(1) "to protect certain classified national security
information . . . at risk of disclosure" in the Sakab case. Indeed,
1 The answer laid out eighteen affirmative defenses,
including, for example: failure to state a claim; statute of
limitations problems; waiver; laches; estoppel; and immunity. The
answer also asserted three counterclaims against Sakab. Those
counterclaims sought: 1) declaratory judgment that the allegedly
fraudulent transactions were actually legal; 2) declaratory
judgment that Sakab is not entitled to enforce the Mareva
injunctive relief in Massachusetts; and 3) judgment against Sakab
for abuse of civil process.
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having reviewed the matter, the Director, "as head of the [U.S.
Intelligence Community]," explained that such disclosure
"reasonably could be expected to cause serious, and in some cases
exceptionally grave, damage to the national security of the United
States and, accordingly, that this information must be protected
and excluded from use in this case."
Couching her assertion of the privilege "[i]n general
and unclassified terms," the Director broadly asserted the state
secrets and statutory privileges as to
information concerning sources, methods, capabilities,
activities, or interests of the [U.S. Intelligence
Community], as well as information that might tend to
reveal or disclose the identities of U.S. Government
employees, affiliates, or offices with whom one or more
of the parties or the Kingdom of Saudi Arabia may have
had certain interactions and the disclosure of which
would be damaging to U.S. national security interests.
This description, the Director explained, was "intended to
specifically include information known to [Aljabri] about such
matters that he seeks to introduce or disclose in this action,
whether through documents, testimony, affidavits, or declarations,
as part of his response and defense to pending claims and motions."
But because "the complete factual basis for [this]
privilege assertion [could not] be set forth on the public record
without revealing the very information that [the Director was
seeking] to protect and without risking the very harm to U.S.
national security that [the Director sought] to prevent," the
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government submitted for the district court's in camera, ex parte
review classified declarations regarding the claim of state
secrets. The declarations, according to the Director, "further
describe the categories of information over which [she was]
asserting privilege and explain that the unauthorized disclosure
of this classified information, in this litigation or otherwise,
reasonably could be expected to result in serious, and in some
cases exceptionally grave, damage to our national security."
"[S]uch harms," she wrote, "include the disclosure of information
that would enable foreign adversaries to evade, undercut, negate,
or otherwise impede critical national security and foreign policy
objectives of the United States." The Director requested that the
court "take all necessary steps to protect" the "classified and
privileged intelligence information" she had just described.
As the district court would later note, those
declarations -- their contents, who swore them, and so on --
"cannot be described in greater detail without risking public
disclosure of the highly classified information contained
therein." Sakab Saudi Holding Co. v. Aljabri, No. 21-10529-NMG,
2021 WL 8999588, at *2 (D. Mass. Oct. 26, 2021) [hereinafter Sakab
I]. Having also reviewed the declarations,2 this court agrees and
will say no more by way of description.
2The classified record was made available to us by the
government for our in camera, ex parte review.
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On the basis of the Director's declaration and the
classified declarations, the government asked the district court
to accept the privilege assertion and excise the privileged
information from the Sakab case. In doing so, the government took
"no position on whether [the] invocation of privilege should result
in the dismissal of any aspect of this lawsuit."
The Proposed Protective Order
In the days following the Director's assertion of the
privilege, and still without taking any position on the merits of
the case, the government on August 27, 2021 moved for a protective
order "to establish procedures to protect against the risk of
disclosure in further proceedings" by, inter alia, requiring all
proposed filings be run by the government prior to submission to
the court. Appellees opposed the protective order request, urging
that the "exclusion of the extraordinarily broad category of
information" would prove "insurmountab[ly] challeng[ing] to"
Appellees' ability to prove their defenses. So Appellees requested
that the district court modify the proposed protective order to
allow Appellees to explain "why the case should be dismissed." In
particular, echoing some of the statements made in their answer
and counterclaims, Appellees urged that the big question in the
case was whether Aljabri received money from Sakab fraudulently or
legally, and getting to the bottom of that would necessitate an
"examination of the programs and operations [Aljabri] was
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compensated for leading or overseeing, how those programs and
operations were funded, [and] why the funding in some cases may
have been especially opaque." According to Appellees, it was
inescapable that any litigation stemming from these issues would
require scrutiny of privileged materials, to wit, "information
concerning . . . activities, or interests of the [U.S. Intelligence
Community]."
But the government opposed Appellees' requested
adjustments to the proposed order, asserting that any motion to
dismiss that contained privileged information would simply be too
"harmful to the national security interests of the United States."
And, the government posited, if the privilege assertion was valid
-- resulting in the exclusion of the privileged materials --
Appellees would then be able to argue, "without actually using
th[e] privileged information in [a] motion," that the privileged
information was needed to prove their defense.
Sakab responded by moving for what it styled as a
procedural order, seeking to shepherd for review its motions for
prejudgment attachment, lis pendens, and a subsequent stay of the
case pending the outcome of the Ontario action. According to
Sakab, there would be no need for privileged information and no
risk to national security interests if the district court would
simply grant Sakab preliminary relief on the basis of comity to
Ontario's court orders.
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Initial jockeying complete, it was time for the district
court to weigh in.
District Court Rulings
All told, the pending motions and issues ripe for the
district court's resolution come October 2021 were these: whether
the government should be allowed to intervene; if permitted to
intervene, whether the government's privilege assertion was a
valid one; and whether the matter should be remanded to state
court, as Sakab requested.
In fielding these queries, the district court: granted
the government's motion to intervene, finding the government's
"interest in preventing the disclosure of state secrets [was]
obvious and uncontested," see id. at *2-3; concluded the assertion
of privilege was valid, see id. at *3; and, in light of the clear
"embedded" federal issues, declined to remand to state court, see
id. at *5-7.3
The court did something else, too. It directed Sakab to
show cause as to why the case shouldn't be dismissed "in light of
the accepted assertion of the state secrets privilege," which
rendered Appellees unable to "fairly defend themselves" against
the allegations of fraud without resorting to the off-limits
privileged information.4 Id. at *4.
3 On appeal, Sakab does not contest any of these conclusions.
4 The district court also held under advisement the
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Sakab did not dispute the district court's conclusion
that the assertion of privilege was valid. Rather, in its November
9, 2021 show-cause filing, Sakab argued that the district court
could award Sakab the relief it wanted -- a prejudgment attachment
and lis pendens as to the Massachusetts properties, plus the stay
-- without any need to evaluate the privileged materials or even
litigate the case on its merits. Sakab pointed to comity to the
Ontario litigation's orders to carry its burden to get that
prejudgment-attachment relief, requesting an opportunity to brief
the notion further. Sakab also asserted that it would be premature
to dismiss the case when Appellees hadn't shown any deprivation of
a valid defense, nor had they shown the privileged information was
necessary for a "valid" defense (according to Sakab, a defense
that is "meritorious" or "dispositive"). In Sakab's telling, to
determine that a defense is "valid," a court must conduct an
"appropriately tailored in camera review" of the excluded
privileged information, and that didn't happen here. On top of
all of this, Sakab asseverated, Appellees had been able to raise
some substantive defenses in the Ontario litigation without
resorting to privileged information, so surely the same could be
achieved here.
government's protective-order motion "pending consideration of
[Sakab]'s show cause pleading." Sakab I, 2021 WL 8999588, at *7.
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Many of these arguments were repeated and probed at a
hearing before the district court. After the hearing, the district
court accepted Sakab's supplemental papers wherein Sakab argued
for a lis pendens to encumber the subject properties, which Sakab
urged it was entitled to and would avoid any risk of disclosing
privileged materials. Appellees responded that a lis pendens was
not an option as a matter of law and, regardless, wouldn't even
avoid litigation on the merits.
The district court dismissed the case. See Sakab Saudi
Holding Co. v. Aljabri, 578 F. Supp. 3d 140, 143 (D. Mass. 2021)
[hereinafter Sakab II]. The district court was not persuaded by
Sakab's contention that the court could grant Sakab a prejudgment
attachment order without evaluating the merits of Sakab's claims
against Appellees and, by the same token, the merits of Appellees'
listed defenses. Id. at 144. Observing that Rule 64(a) of the
Federal Rules of Civil Procedure permits a court to enter an order
seizing property to cover a potential judgment when that remedy is
authorized by state law, id. at 143-44, the district court then
explained that Massachusetts law makes "[a] showing of reasonable
likelihood of success on the merits . . . a prerequisite for
attachment," id. at 144 (citation omitted). From there, the
district court concluded Sakab couldn't establish a reasonable
likelihood of success by relying on the Ontario court's interim
order. Id. Instead, Sakab needed to establish a reasonable
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likelihood of success on its fraud and other claims in the
Massachusetts action -- but it could not do so unless the court
considered the excluded privileged information. Id.And the district court next explained that it could not
avoid adjudicating the merits of Sakab's case by entering a lis
pendens notice and staying the action.5 Id. at 145. A lis pendens
notice "provides notice that property is the subject of a pending
action" and "is derivative of the underlying claims," but "the
underlying proceeding to which the lis pendens would refer consists
of ten claims which the Court has determined must be dismissed."
Id.Because the district court determined it could not grant
Sakab its requested relief, id. at 144, 146, and having already
determined Appellees could not fairly defend themselves on the
merits without relying on the privileged information, Sakab I,
2021 WL 8999588, at *4; see also Sakab II, 578 F. Supp. 3d at 143,
the court dismissed the case, Sakab II, 578 F. Supp. 3d at 146.6
5 The district court construed Sakab's post-hearing
supplemental memorandum of law as a motion to record a lis pendens.
See Sakab II, 578 F. Supp. 3d at 145 n.1.
6The district court also noted that, since the "privileged
material is similarly pertinent to Aljabri's first counterclaim
it, too," had to be dismissed; but the court didn't reach "the
merits of [Appellees'] two remaining counterclaims which [it]
dismissed without prejudice." Sakab II, 578 F. Supp. 3d at 143.
To close the matter out, the court also denied as moot the
government's motion for a protective order. Id. at 145-46.
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Sakab timely appealed, challenging the dismissal and rejections of
its preliminary relief requests.
DISCUSSION
The stage set, we proceed to our de novo review of the
district court's legal determinations concerning the effect of a
successful assertion of the state secrets privilege. See Mohamed
v. Jeppesen Dataplan, Inc., 614 F.3d 1070, 1077 (9th Cir. 2010)
(en banc); El-Masri v. United States, 479 F.3d 296, 302 (4th Cir.
2007). It is well established that "we may affirm the dismissal
of a complaint 'on any basis available in the record.'" Yan v.
ReWalk Robotics Ltd., 973 F.3d 22, 30 (1st Cir. 2020) (quoting
Lemelson v. U.S. Bank Nat'l Ass'n, 721 F.3d 18, 21 (1st Cir.
2013)); see also Williams v. United States, 858 F.3d 708, 714 (1st
Cir. 2017) ("As always, we are also free to affirm on any basis
apparent in the record, even if it would require ruling on
arguments not reached by the district court or even presented to
us on appeal.") (internal quotations and brackets omitted).
There is a tripartite inquiry courts must undertake when
a state secrets question arises: first, make sure that the
government has followed the proper procedure in making a formal
claim of privilege; then, figure out whether the information
purportedly covered by the privilege assertion does in fact qualify
as privileged; and finally, sort out how -- if at all -- the case
should proceed given the successful assertion of the state secrets
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privilege. See Wikimedia Found. v. Nat'l Sec. Agency/Cent. Sec.
Serv., 14 F.4th 276, 302 (4th Cir. 2021) [hereinafter Wikimedia]
(first citing El-Masri, 470 F.3d at 304; and then United States v.
Reynolds, 345 U.S. 1, 10 (1953)), petition for cert. filed, No.
22-190 (U.S. Aug. 26, 2022).
In the instant matter, there is no debate about the first
two components of this inquiry. Rather, the critical question
here is all about that final query: whether this matter should
proceed in light of the privilege claim. Id.Sakab says of course its suit can proceed
notwithstanding the privilege assertion, offering a variety of
arguments in its effort to persuade us we should resuscitate the
case, or at least grant it prejudgment attachment, a lis pendens
recording, and a subsequent stay of the case (because, as Sakab
has maintained all along, these forms of preliminary relief don't
even turn on an ability to actually litigate the case in
Massachusetts). But before we lay out and drill down on Sakab's
contentions, because the outcome of the appeal substantially
depends on the overall viability of the underlying suit, we must
start by answering this overarching question: Given the assertion
of the state secrets privilege, can litigation of this suit
proceed?
The answer is no. To explain why, we will first explore
the foundational standards and precedent that inform our analysis,
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then use that to assess the functional, sweeping consequences of
the government's assertion of privilege on this case. Along the
way, we'll probe why each of Sakab's various proffers falls short
of persuading us that dismissal is not required. Then we'll
explain why Sakab has not demonstrated that it is entitled to any
preliminary relief.
State Secrets: Guiding Principles
Many of the Government's efforts to protect our national
security are well known. It publicly acknowledges the
size of our military, the location of our military bases,
and the names of our ambassadors to Moscow and Peking.
But protecting our national security sometimes requires
keeping information about our military, intelligence,
and diplomatic efforts secret.
Gen. Dynamics Corp. v. United States, 563 U.S. 478, 484 (2011).
The state secrets privilege, "an evidentiary rule
'bas[ed] in the common law of evidence,'" Wikimedia, 14 F.4th at
294 (quoting El-Masri, 479 F.3d at 304), "permits the Government
to prevent disclosure of information when that disclosure would
harm national security interests," United States v. Zubaydah, 142
S. Ct. 959, 967 (2022).7 Indeed, as the high Court has said, "the
privilege applies where 'there is a reasonable danger that
compulsion of the evidence will expose military matters which, in
7 For more on the state secrets doctrine's policy points and
an explanation of its evidentiary roots, the curious reader should
consult in full Reynolds, 345 U.S. at 6-7, which has been described
as the case that "established the doctrine in its modern form,"
El-Masri, 479 F.3d at 302.
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the interest of national security, should not be divulged.'" Fed.
Bureau of Investigation v. Fazaga, 142 S. Ct. 1051, 1061 (2022)
(quoting Reynolds, 345 U.S. at 10); see also Gen. Dynamics Corp.,
563 U.S. at 484 (observing that the privilege serves the
"sometimes-compelling necessity of governmental secrecy" over
"military, intelligence, and diplomatic" information).
This "expansive and malleable" privilege can apply to
different types of state secrets, such as materials and information
that could, if made public, disclose our intelligence communities'
information-gathering methods and/or capabilities, impair our
country's defenses, and "disrupt[] . . . diplomatic relations with
foreign governments." Ellsberg v. Mitchell, 709 F.2d 51, 57 (D.C.
Cir. 1983). Indeed, even if a party has made a "strong showing of
necessity" for the discovery or use of such information, Reynolds,
345 U.S. at 11, the state secrets privilege still applies in the
face of "a reasonable danger" that the disclosure of the evidence
in question would harm our national-security interests, Fazaga,
142 S. Ct. at 1061 (quoting Reynolds, 345 U.S. at 10); see also
Reynolds, 345 U.S. at 11 ("[E]ven the most compelling necessity
cannot overcome the claim of privilege if the court is ultimately
satisfied that [state] secrets are at stake.").
Now, in the instant matter, as we know, the district
court concluded the government's privilege assertion was properly
interposed as a matter of procedure, and the information it covered
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was indeed privileged. Sakab I, 2021 WL 8999588, at *3 ("[T]he
government's assertion of the state secrets privilege is
procedurally proper and validly taken."). That conclusion had the
effect of completely excising the privileged material from the
case. See Wikimedia, 14 F.4th at 302-03 (explaining that, "[o]nce
a court determines that certain facts are state secrets, they are
'absolutely protected from disclosure,'" and there can be "no
attempt . . . to balance the need for secrecy of the privileged
information against a party's need for the information's
disclosure'" (quoting El-Masri, 479 F.3d at 306)); Al-Haramain
Islamic, Inc. v. Bush, 507 F.3d 1190, 1204 (9th Cir. 2007)
(reasoning that "[t]he effect of the government's successful
invocation of privilege 'is simply that the evidence is
unavailable, as though a witness had died'" (quoting Ellsberg, 709
F.2d at 64)).
As mentioned above, this is where that pivotal final
part of the tripartite inquiry kicks in: What happens to a case
in the wake of a successful assertion of the state secrets
privilege? Well, "[i]f a proceeding involving state secrets can
be fairly litigated without resort to the privileged information,
it may continue." Wikimedia, 14 F.4th at 303 (quoting El-Masri,
479 F.3d at 306). But "if 'any attempt to proceed will threaten
disclosure of the privileged matters,'" id. (quoting El-Masri, 479
F.3d at 306 (cleaned up)) -- if "the circumstances make clear that
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privileged information will be so central to the litigation that
any attempt to proceed will threaten that information's
disclosure," El-Masri, 479 F.3d at 308, and "maintenance of [the]
suit" would risk disclosure, Mohamed, 614 F.3d at 1077, 1089(quoting Totten v. United States, 92 U.S. 105, 107 (1875)) -- then
dismissal is not only appropriate, but necessary, El-Masri, 479
F.3d at 308. Indeed, "[t]he Supreme Court has recognized that
some matters are so pervaded by state secrets as to be incapable
of judicial resolution once the privilege has been invoked." El-
Masri, 479 F.3d at 306 (citing Totten, 92 U.S. at 107; Reynolds,
345 U.S. at 11 n.26).
Some situations that have required dismissal include
those where: "the very subject matter of the action" (an espionage
agreement being the oft-cited illustration) is a "matter of state
secret," Reynolds, 345 U.S. at 11 n.26; a plaintiff cannot prove
the prima facie elements of a claim without the use of privileged
evidence; even supposing a plaintiff can make out a prima facie
case without resort to privileged information, "the defendants
could not properly defend themselves without using privileged
evidence"; and any "further litigation would present an
unjustifiable risk of disclosure," Wikimedia, 14 F.4th at 303
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(quoting Abilt v. Central Intelligence Agency, 848 F.3d 305, 313-
14 (4th Cir. 2017)).8
With these foundational guideposts laid out, "cognizant
of the delicate balance to be struck in applying the state secrets
doctrine," El-Masri, 479 F.3d at 308, we turn to our review.
Dismissal as a Consequence of the
State Secrets Privilege Assertion
Our de novo review confirms that the district court was
correct: Litigation of this case cannot proceed in the wake of
the government's assertion of the state secrets privilege, and
thus dismissal was necessary. Sakab urges otherwise, and we'll
get to that, but as an initial matter, it is apparent to us that
the privileged information is so central to this case that any
8 The El-Masri court elaborated:
Although Totten has come to primarily represent a
somewhat narrower principle -- a categorical bar on
actions to enforce secret contracts for espionage -- it
rested . . . on the proposition that a cause cannot be
maintained if its trial would inevitably lead to the
disclosure of privileged information. See 92 U.S. at
107. And in Reynolds, while concluding that dismissal
was unnecessary because the privileged information was
peripheral to the plaintiffs' action, the Court made
clear that where state secrets form the very subject
matter of a court proceeding, as in Totten, dismissal at
the pleading stage -- "without ever reaching the
question of evidence" -- is appropriate. See 345 U.S.
at 11 n.26.
479 F.3d at 306.
- 23 -
attempt to proceed with litigation of the suit would unduly risk
disclosure and thereby compromise our national security. We
explain, parrying Sakab's unavailing arguments and rejoinders as
we go.9
9 As a threshold matter, Sakab takes aim at the district
court's "rush to dismiss this action," deploying the "extreme
remedy" of sua sponte dismissal. (Sakab links its sua-sponte
related grievances in part to the protective order as a readily
available alternative to dismissal, but we'll talk about the
protective order later.)
Sakab is right that no formal dispositive motion had
been docketed. To Appellees' way of thinking, and the district
court's for that matter, that was a symptom of the larger problem
presented by the privilege assertion: Appellees represented they
were unable to comprehensively buttress a motion to dismiss. See
Sakab II, 578 F. Supp. 3d at 143 (recapping that the show-cause
directive was issued "[i]n response to [Appellees'] concerns that
they cannot fairly defend themselves (or even substantiate a motion
to dismiss) without recourse to privileged material"). Based on
its own review and analysis, the district court, having gone
through the first parts of the above-described tripartite test,
Sakab I, 2021 WL 8999588, at *3-4, indicated dismissal seemed
likely, but in a thorough and notice-imbued move, the court
afforded Sakab the opportunity to explain why the case could go
forward notwithstanding that lay of the land, id. at *4. After
receiving that initial show-cause briefing, the court went
further: It heard detailed arguments from Sakab, Appellees, and
the government. It even allowed Sakab to file supplemental post-
hearing papers before ultimately dismissing the case. So while
it's true the dismissal did not flow from a dispositive motion,
this wasn't the sort of "strong medicine" sua sponte dismissal our
case law warns about. Martinez-Rivera v. Sanchez Ramos, 498 F.3d
3, 7 (1st Cir. 2007) ("The general rule is that in limited
circumstances, sua sponte dismissals of complaints under Rule
12(b)(6) are appropriate, but that such dismissals are erroneous
unless the parties have been afforded notice and an opportunity to
amend the complaint or otherwise respond.") (cleaned up). Rather,
it was the natural result of the district court's close adherence
to what the precedent demands in this sort of state secrets case,
which dictated that dismissal would be the next step if further
litigation would run afoul of the above-described principles. See
Wikimedia, 14 F.4th at 302-03.
- 24 -
As the precedent shows, when the state secrets privilege
is successfully interposed over information that is so central to
the case that any further litigation presents too much risk of
exposure of that information, the case must not go on. Here, as
Appellees argue, the privileged information (as covered in the
government's remarkably sweeping privilege assertion) forms the
basis of the factual disputes in this case, so the case cannot be
fairly litigated, and any attempt to do so would risk disclosure
of state secrets. They are correct.
Courts should dismiss a state secrets case, even at the
pleadings stage, see Fazaga, 142 S. Ct. at 1062 (observing that
"the state secrets privilege . . . sometimes authorizes district
courts to dismiss claims on the pleadings"), when "the
circumstances make clear that privileged information will be so
central to the litigation that any attempt to proceed will threaten
that information's disclosure," Abilt, 848 F.3d at 313 (quoting
El-Masri, 479 F.3d at 308); Mohamed, 614 F.3d at 1079 (cautioning
that dismissal is necessary when litigation "would present an
unacceptable risk of disclosing state secrets"); see also In re
Sealed Case, 494 F.3d 139, 153 (D.C. Cir. 2007) [hereinafter Sealed
Case] (reasoning that if "the subject matter of a case is so
sensitive that there is no way it can be litigated without risking
national secrets, then the case must be dismissed"). Critically,
"[t]he controlling inquiry is not whether the general subject
- 25 -
matter of an action can be described without resort to state
secrets. Rather, we must ascertain whether an action can be
litigated without threatening the disclosure of such state
secrets." El-Masri, 479 F.3d at 308. And "[t]hus, for purposes
of the state secrets analysis, the 'central facts' and 'very
subject matter' of an action are those facts that are essential to
prosecuting the action or defending against it." Id.Recall that the privilege assertion here covered
"information concerning sources, methods, capabilities,
activities, or interests of the [U.S. Intelligence Community],"
plus "information that might tend to reveal or disclose the
identities of U.S. Government employees, affiliates, or offices
with whom one or more of the parties or the [KSA] may have had
certain interactions and the disclosure of which would be damaging
to U.S. national security interests." This is not a narrow
interposition of privilege. Cf. Wikimedia, 14 F.4th at 282
(privilege assertion covered certain categories of information
concerning a surveillance system used by the National Security
Agency); Sealed Case, 494 F.3d at 153 (privilege was interposed
over certain portions of two internal government reports). This
privilege assertion covers a wide swath of information -- and was
"intended to specifically include information known to [Aljabri]
about such matters that he seeks to introduce or disclose in this
action, whether through documents, testimony, affidavits, or
- 26 -
declarations, as part of his response and defense to pending claims
and motions."
Now recall that the basic theory of Sakab's case is that
Aljabri misappropriated massive sums of money from Sakab, and
Appellees say the allegedly fraudulent transactions were actually
legitimate, directed by the then-leadership of the KSA and made in
connection with Aljabri's work on sensitive operations with, or at
least alongside, the U.S. Intelligence Community. So, if the case
were to proceed, the facts critical to its litigation and
adjudication would center on getting to the bottom of those
transactions and their nature. To that end, the parties would be
seeking, inter alia, evidence about Aljabri's role and
relationships with U.S. agencies, the degree of Aljabri's
authority, how he participated in the programs and operations, who
else was involved, the existence and execution of the operations
themselves, who authorized and paid for them, and who then directed
payment to or through Aljabri -- not to mention the whens, wheres,
whys, and inverses of any of these things.
All of this is suffused with sensitive information, and
discovery of any of this cannot be undertaken without risking
disclosure of information that has been swept into oblivion by the
incredibly broad privilege assertion. See, e.g., El-Masri, 479
F.3d at 309 ("Even marshalling the evidence necessary to make the
requisite showings would implicate privileged state secrets,
- 27 -
because El-Masri would need to rely on witnesses whose identities,
and evidence the very existence of which, must remain confidential
in the interest of national security."); see also Mohamed, 614
F.3d at 1087 (finding dismissal was required "because there [was]
no feasible way to litigate [the] alleged liability without
creating an unjustifiable risk of divulging state secrets");
Sterling v. Tenet, 416 F.3d 338, 347-49 (4th Cir. 2005) (affirming
dismissal at the pleading stage when the facts central to the
action's litigation consisted of state secrets, noting that "the
very methods by which evidence would be gathered in this case are
themselves problematic"). Indeed, all of this information
comprises the "central facts" of the action, i.e., "facts that are
essential to prosecuting the action or defending against it." El-
Masri, 479 F.3d at 308. The district court was right when it
observed as much. See, e.g., Sakab I, 2021 WL 8999588, at *2
(stating that "the disposition of this matter threatens
th[e government's] interest" in preventing disclosure of state
secrets, and "[n]otwithstanding [Sakab]'s request for a
disposition without consideration of the merits, the subject
matter of [this] action for fraud is [Appellees'] property and
transactions which implicate the state secrets claim asserted by
the government").
This dynamic is compounded by the fact that, as both
Appellees and the government point out, "both sides have an
- 28 -
incentive to probe up to the boundaries of state secrets" -- or
even beyond. Gen. Dynamics Corp., 563 U.S. at 487. Indeed, we're
mindful that when parties "have every incentive to probe
dangerously close to the state secrets themselves," it's possible
that "state secrets could be compromised even without direct
disclosure." Fitzgerald v. Penthouse Intl'l, Ltd., 776 F.2d 1236,
1243 & n.10 (4th Cir. 1985) ("For example, if a witness is
questioned about facts A and B, the witness testifies that fact A
is not a military secret, and the government objects to any answer
regarding fact B, by implication one might assume that fact B is
a military secret."). It is all too easy to envision discovery
and trial scenarios in which each side would press for information,
documents, or answers to questions (perhaps posed to "witnesses
with personal knowledge of relevant [state] secrets," id.) that
flirt with the boundaries of the state secrets privilege here.
With this privilege assertion being so broad, the parties would
crash into its outer limits with nearly every propounded discovery
request or deposition question, not to mention the risks of probing
things at trial.
Sakab suggests that some of this information would be
discoverable without running afoul of the privilege's bounds or
that it could be disentangled from that which is privileged. Sakab
complains that no one has even tried to litigate what, exactly,
could be litigated, so that litigation could proceed on an
- 29 -
unprivileged record. But such a feat is impossible on the facts
of a case like this, with a very broad privilege assertion and a
complaint that centers on conduct and events awash in privileged
secrecy. Even an attempt to do what Sakab is asking could risk
disclosure.10 This is the whole point. All of the pertinent
information is simply too entwined, and (emphasis ours) "any
attempt to proceed [with litigation would] threaten disclosure of
the privileged matters." Wikimedia, 14 F.4th at 303 (quoting El-
Masri, 479 F.3d at 306 (cleaned up)); see also Mohamed, 614 F.3d
at 1088; El-Masri, 479 F.3d at 308-09.
Sakab would have us fault the district court for
neglecting to isolate the privileged information from that which
is public and discoverable. But the district court was not
permitted to disentangle the information here, certainly not after
it had already deemed the privilege assertion valid (and nobody
objected to that conclusion). Remember, a district court can look
to any evidence it deems necessary when it is trying to figure out
whether the information at issue encompasses state secrets, "[b]ut
after a court makes that determination, the privileged evidence is
excised from the case," Wikimedia, 14 F.4th at 303, like a witness
died, Al-Haramain, 507 F.3d at 1204, and (emphasis ours) "not even
10 Sakab also urges, without citation, that dismissal isn't
appropriate in the face of litigation that "merely risks (rather
than requires) disclosure." Our above discussion of the precedent
amply refutes this.
- 30 -
the court may look at such material in camera" after that,
Wikimedia, 14 F.4th at 303 (collecting cases). So at this
juncture, the evidence cannot be evaluated ex parte and in camera
to disentangle it. See Sterling, 416 F.3d at 348, 349 (explaining
that a court is "neither authorized nor qualified to inquire
further" into privileged matters -- "even in camera").
And in any event, even if some non-privileged evidence
could have been extracted for use in litigation, recall that
litigants must be able to do more than just discuss a case in
general terms -- they need to have access to the information
necessary to actually litigate the case. See El-Masri, 479 F.3d
at 310; see also, e.g., Wikimedia, 14 F.4th at 303-04 (observing
that "'it would be a mockery of justice . . .' to permit Wikimedia
to substantiate its claims by presenting its half of the evidence
to the factfinder as if it were the whole" (quoting Sealed Case,
494 F.3d at 148)). Whether some facts can be set forth without
revealing state secrets -- and perhaps that has been the case to
some extent here -- isn't our inquiry.11 The point is that the
11Sakab maintains that litigation is possible here because
Appellees have been "freely litigating" in the Ontario matter
without reference to confidential information. We have a few
issues with this argument and its premise, though. For one thing,
it's not at all clear that Appellees have been able to do as much
as they'd like by way of defense in that suit or otherwise
meaningfully and fully litigating it since the same state-secrets
obstacle presents in Canada. The attendant barriers to litigation
presented here appear to be in play there too. Our appellate
record suggests the Ontario case has not proceeded to discovery
- 31 -
essential factual questions central to the resolution of this case
can't be fairly litigated without unduly threatening disclosure of
state secrets. See El-Masri, 479 F.3d at 308.
Related to its "disentangle the secret materials"
proposition, Sakab urges that the government's proposed protective
order was a perfectly viable alternative to dismissal. According
to Sakab, the district court should have just safeguarded the
sensitive materials using the government-approved protective order
and proceeded with litigation from there.12
yet, and, just as they've argued here, Appellees have argued in
Canada that the case shouldn't proceed because of state secrets.
In fact, last we knew, Canada's Federal Court had undertaken
proceedings to determine whether Appellees' evidence is
privileged, the outcome of which will impact the course of the
Ontario litigation. The parties appear to be in a holding pattern
while that process plays out.
Moreover, it's somewhat beside the point that Appellees
may or may not be saying "more" or enough to defend in Canada, as
Sakab asserts; the inquiry we're presented with is whether the
case can be litigated here. Our government's privilege assertion
is in full force and effect in the matter before us, and that's
what everyone (us included) is up against here.
12On the topic of the protective order, Sakab posits that the
government advised against dismissal as premature and "propos[ed]
to move forward with the litigation" of Sakab's case under the
proposed protective order. The record before us is clear: The
government did not advise against dismissal, and in floating its
proposed protective order, it took no position on the propriety of
dismissal. Both below and before this court, the government has
consistently taken no position on whether the successful privilege
assertion means the case should be dismissed (or on the impact of
the privilege on the preliminary relief Sakab seeks, for that
matter). And we decline to read into what Sakab calls "the
[g]overnment's measured forbearance" and intuit that, by not
affirmatively recommending dismissal as it does (Sakab says) "more
- 32 -
Our response to this suggestion echoes what has already
been carefully elucidated by the Ninth Circuit:
Our conclusion [that further litigation poses an
unacceptable risk of disclosure of state secrets] holds
no matter what protective procedures the district court
might employ. Adversarial litigation, including
pretrial discovery of documents and witnesses and the
presentation of documents and testimony at trial, is
inherently complex and unpredictable. Although district
courts are well equipped to wall off isolated secrets
from disclosure, the challenge is exponentially greater
in exceptional cases like this one, where the relevant
secrets are difficult or impossible to isolate and even
efforts to define a boundary between privileged and
unprivileged evidence would risk disclosure by
implication. In these rare circumstances, the risk of
disclosure that further proceedings would create cannot
be averted through the use of devices such as protective
orders or restrictions on testimony.
Mohamed, 614 F.3d at 1089. So it is here.13
often than not," the government nonetheless is staking out some
sort of position on this or that it proves the government's belief
error was committed. Indeed, as the government pointed out at
oral argument, the U.S. doesn't need to support dismissal in order
to protect state secrets, particularly where the United States
isn't a party to this suit between private parties.
13 We reject Sakab's characterization of the risk-of-
disclosure precedent as not justifying dismissal -- that the case
law limits us to three situations in which dismissal is required
(the very subject matter was a state secret, plaintiffs can't show
a prima facie case, defendants can't properly defend) and the
concept of any attempt to proceed risking disclosure is in essence
just "a different label" for the first type of scenario (the very
subject of litigation is a state secret). Not so.
The standard is that dismissal is required when any
attempt to proceed would risk or require disclosure of privileged
information -- and the case law bears out examples of circumstances
in which dismissal would protect against that risk (like when a
plaintiff cannot prove the prima facie elements of a claim without
the use of privileged evidence, or a defendant can't properly
- 33 -
Bottom line: "[S]ome matters are so pervaded by state
secrets as to be incapable of judicial resolution once the
privilege has been invoked," El-Masri, 479 F.3d at 306, and this
is one such matter. "[T]he circumstances make clear that
privileged information [is] so central to the litigation that any
attempt to proceed will threaten that information's disclosure."
Id. at 308; see also Wikimedia, 14 F.4th at 303; Mohamed, 614 F.3d
at 1077, 1089 (quoting Totten, 92 U.S. at 107); Sterling, 416 F.3d
at 347-49; Fitzgerald, 776 F.2d at 1243.14
Before we move along, a few final words. We recognize
that the successful assertion of the state secrets privilege can
defend without using that information). It's our job to examine
the nature of the privileged information and its centrality to the
anticipated litigation as a whole, then weigh the risk of
disclosure if that litigation proceeds. It's clear to us that
this case runs this risk for the many reasons described above.
Our conclusion that, from all the circumstances, privileged
14
information will be so central to the litigation that any attempt
to proceed will threaten the information's disclosure means we
need not specifically address the availability-of-defenses
quarrel. We do note, though, that it's clear on the facts of this
case the issues are linked (emphases ours): "Circumstances in
which any valid defense would require resort to privileged
materials are those in which 'state secrets are so central to [the]
proceeding that it cannot be litigated without threatening their
disclosure.'" Wikimedia, 14 F.4th at 304 (quoting El-Masri, 479
F.3d at 308). See also Gen. Dynamics Corp., 563 U.S. at 486("Where liability depends upon the validity of a [certain] defense,
and when full litigation of that defense would inevitably lead to
the disclosure of" state secrets, neither party can obtain judicial
relief. (cleaned up)); id. ("It is claims and defenses together
that establish the justification, or lack of justification, for
judicial relief.").
- 34 -
result in a harsh outcome for litigants who want a case to proceed.
See, e.g., Sealed Case, 494 F.3d at 148 ("As Judge Learned Hand
observed, a claim of the state secrets privilege will often impose
a grievous hardship, for it may deprive parties . . . of power to
assert their rights or to defend themselves. That is a consequence
of any evidentiary privilege." (cleaned up)); Fitzgerald, 776 F.2d
at 1238 n.3 ("When the state secrets privilege is validly asserted,
the result is unfairness to individual litigants -- through the
loss of important evidence or dismissal of a case -- in order to
protect a greater public value."). In this matter, the specific
reasons for the government's assertion of the state secrets
privilege were explained in the classified declarations we
mentioned many pages ago. Those declarations provide detailed
descriptions of the nature of the information that our Executive
wants to protect, and they also explain why disclosure would
threaten our national security. The declarations decisively
inform and support our conclusion today. We can appreciate the
frustration of not being in the know when it comes to some of the
specific (classified) reasons supporting dismissal here. Sakab
voices concerns about "graymail tactics" being used by Appellees
(or, as a policy matter, by any defendants who happen to have
knowledge of state secrets) to thwart litigation against them by
harnessing or weaponizing state secrets that aren't actually at
issue to secure a dismissal. Perhaps these concerns are
- 35 -
understandable in the abstract, but they are misplaced: The
requisite layers of review and scrutiny we've already described in
detail provide protection against that type of strategic
gamesmanship and prevent attempts to abuse state secrets, and here,
that review and scrutiny counsel our outcome.
Having answered the threshold "can the case proceed"
question in the negative, we now must answer this question:
Notwithstanding the fact that the case can't be litigated and must
be dismissed as a result of the assertion of the state secrets
privilege, is Sakab nevertheless entitled to the preliminary
relief it seeks?
Preliminary Relief
Before the district court, Sakab sought a few types of
preliminary relief: prejudgment attachment; a recording of lis
pendens; and a stay of the Massachusetts case pending the outcome
of the Ontario action.
Pursuant to our above analysis, litigation of the case
can't proceed, and the complaint must be dismissed. But Sakab
says that doesn't necessarily mean it isn't entitled to some
preliminary equitable relief. Truth be told, Sakab has represented
throughout the Massachusetts case that it doesn't even want to
pursue litigation here -- it just wants to encumber the subject
Massachusetts properties and to then secure a stay of the action
pending a final judgment in Ontario, where it plans to litigate
- 36 -
the merits. And in Sakab's telling, we need not pull at the state-
secrets thread or consider the merits of Sakab's complaint to
provide it with preliminary relief. Like the district court, we
are not persuaded.
Prejudgment Attachment
Sakab argues the district court's handling of the
prejudgment attachment relief issue was both premature and
substantively wrong. Given the nature and posture of this case,
we disagree with Sakab's contentions.
As a threshold matter, Sakab says any disposition of the
prejudgment attachment was premature because there was no pending
motion for that relief. But the district court clearly understood
that requested relief to be before it. And rightly so. Not only
did Sakab reiterate its interest in and affirmatively argue the
prejudgment attachment issue to the district court in its various
papers and at the November 2021 show-cause hearing, but also the
record reflects that Sakab had a pending motion (with memorandum
of law in support and proposed findings) for prejudgment attachment
in state court, meaning it was transferred with the record to the
district court. See L.R., D. Mass. 81.1 (providing for filing of
state court record upon removal). The issue of prejudgment
attachment was squarely presented to the district court. And in
any event, as we'll explain, the district court's point was that
- 37 -
any such motion would be untenable for the reasons it offered. So
let's get into that.
According to Rule 64(a) of the Federal Rules of Civil
Procedure, which incorporates state law to determine the
availability of a prejudgment attachment of property, a court may
grant every remedy, under the law of the state where the court is
located, that "provides for seizing a person or property to secure
satisfaction of the potential judgment." Fed. R. Civ. P. 64(a);
Grupo Mexicano, 527 U.S. at 330-31. In Massachusetts, Rule 4.1 of
the Rules of Civil Procedure, along with chapter 223, section 42
of Massachusetts General Laws, direct the availability of
prejudgment attachment. Rule 4.1(a) instructs that, "[s]ubsequent
to the commencement of any action under these rules, real estate,
goods and chattels and other property may, in the manner and to
the extent provided by law, but subject to the requirements of
this rule, be attached and held to satisfy the judgment for damages
and costs which the plaintiff may recover." Mass. R. Civ. P.
4.1(a). Before ordering a prejudgment attachment, a court must
first find that "there is a reasonable likelihood that the
plaintiff will recover judgment, including interest and costs, in
an amount equal to or greater than the amount of the attachment
over and above any liability insurance shown by the defendant to
be available to satisfy the judgment." Mass. R. Civ. P. 4.1(c);
see also Mass. Gen. Laws ch. 223, § 42 (2022) (providing (with
- 38 -
exceptions not relevant to this case) that all real property "may
be attached upon a writ of attachment in any action in which the
debt or damages are recoverable, and may be held as security to
satisfy such judgment as the plaintiff may recover").
The district court reasoned that Sakab could not make
the prerequisite showing of a reasonable likelihood of success on
the merits without implicating state secrets. See Sakab II, 578
F. Supp. 3d at 144. And the district court declined to "rule as
an exercise of comity with respect to the interlocutory decisions
of the Ontario" court that Sakab "has satisfied the reasonable
likelihood standard," particularly when Sakab could not point to
examples of a federal court doing what Sakab was seeking. Id.
Indeed, as the district court explained, "Rule 64 limits the
available prejudgment remedies to those which 'secure satisfaction
of the potential judgment,'" id. (quoting and emphasizing Fed. R.
Civ. P. 64), while "Rule 4.1 likewise limits prejudgment relief to
that which can be 'held to satisfy the judgment . . . which the
plaintiff may recover,'" id. (quoting and emphasizing Mass. R.
Civ. P. 4.1(a)). Each of these rules talk about "the" (not "a")
judgment (if there is one) obtained in the action before that
court, and they do not "contemplate that the likelihood of success
in another, foreign action can justify prejudgment attachment in
the action at hand." Sakab II, 578 F. Supp. 3d at 144.
- 39 -
And, as the district court observed, section 42 stymies
Sakab's argument with a one-two punch:
[F]irst, in prescribing attachment in actions in which
the debt or damages are demonstrably recoverable, which
is not this case, and second, in designating attachment
as security to satisfy "such judgment as the plaintiff
may recover", a phrase which read in context gives no
indication of encompassing judgments recovered in other,
foreign jurisdictions.
Id. (quoting ch. 223, § 42).
This is all correct. Despite Sakab's efforts to
demonstrate otherwise,15 Massachusetts' law and Rule 4.1 are clear
and do not require any mental gymnastics given the posture of this
case: This attachment relief is available only upon a finding of
reasonable likelihood of success. That likelihood of success could
not be shown in this case for all the state-secrets reasons much
15 For example, Sakab writes that the district court
"mistakenly assumed that the prejudgment attachment on the basis
of comity would secure a potential Ontario judgment," apparently
suggesting that Sakab wanted an adjudication of its Massachusetts
case. This is difficult to square with Sakab's representations
below that the district court didn't need to "consider the
underlying evidence of the parties' claims and defenses" in the
Massachusetts case because the court could just accord comity to
the Ontario court's rulings. But it's clear to us the focus by
Sakab was and is on using the Ontario Mareva injunction to secure
preliminary relief in Massachusetts. If the name of Sakab's game
had been to secure relief in Massachusetts based on the
Massachusetts state law complaint, it would have needed to show a
likelihood of success on that complaint. For the same reasons
we've explained and continue to explicate, that merits inquiry
could not be assessed because of the assertion of the state secrets
privilege.
- 40 -
discussed to this point -- doing so would tread too closely to the
boundaries of the privilege assertion, and too much evidence was
swept up within that assertion. There is no precedent compelling
us to forgo the touchstone merits inquiry necessary to meet Rule
4.1's requirements by relying on comity to Ontario's preliminary
injunction -- a Mareva injunction at that16 -- which provides only
that, as a typical pre-discovery, asset-freezing injunction matter
(as opposed to a final foreign judgment, which Sakab does not
have), Sakab was likely to prevail in the Ontario case -- not the
Massachusetts case.
Lis Pendens
Sakab also asked the district court to issue a lis
pendens recording and then stay the matter, and argues here that
the district court circularly rejected that request based on its
erroneous conclusion that dismissal of the case proper was required
based on the state secrets privilege. Rather, Sakab argues, the
district court should have simply issued the lis pendens, stayed
the case to preserve the Massachusetts action without any risks to
16 Global, asset-freezing Mareva orders -- "a powerful tool
for general creditors," Grupo Mexicano, 527 U.S. at 329 -- are
unavailable here in the United States, where our Supreme Court has
said "[e]ven when sitting as a court in equity, we have no
authority to craft a 'nuclear weapon' of the law like the one
advocated here," id. at 332-33. See also id. at 333 ("The debate
concerning this formidable power over debtors should be conducted
and resolved where such issues belong in our democracy: in the
Congress.").
- 41 -
national security, and awaited a final judgment in the Ontario
case. These arguments, though, do not persuade.
"Lis pendens" means "[a] pending lawsuit." Lis Pendens,
Black's Law Dictionary (11th ed. 2019); see also id. ("A notice,
recorded in the chain of title to real property, required or
permitted in some jurisdictions to warn all persons that certain
property is the subject matter of litigation, and that any
interests acquired during the pendency of the suit are subject to
its outcome."). And specifically under Massachusetts law, a
memorandum or recording of lis pendens may issue if a case's
subject matter concerns a claim of title to real property. See
Mass. Gen. Laws ch. 184, § 15(b). Indeed, a lis pendens is a tool
meant to provide recorded notice of lawsuits that impact title to
real property. See, e.g., Wolfe v. Gormally, 802 N.E.2d 64, 67-
68 (Mass. 2004) (citing and discussing evolution of ch. 184, § 15);
id. at 70 (concluding that the record title at issue should
"reflect the pendency of [an] action so as to give notice to
prospective purchasers of the contested lots that the proposed use
of those lots is subject to active legal challenge," so approval
of the memorandum of lis pendens was appropriate); Debral Realty,
Inc. v. DiChiara, 420 N.E.2d 343, 347 (Mass. 1981) ("A memorandum
of lis pendens, like an attachment of real estate, temporarily
restricts the power of a landowner to sell his or her property, by
depriving the owner of the ability to convey clear title while the
- 42 -
litigation is pending."). In explaining the history and policy
undergirding the lis pendens mechanism, the Wolfe court observed
that the lis pendens statute "thus allowed courts to retain control
over the subject matter of the litigation while the action was
pending," 802 N.E.2d at 67 (citing F.T. Talty, P.S. Talty, et al.,
Methods of Practice § 8:19 (4th ed. 2000)), "and protected
prospective buyers by enabling them to obtain 'notice of pending
litigation affecting title' through the registry of deeds, in the
same way that they searched for record encumbrances," id. (quoting
DiChiara, 420 N.E.2d at 346).
Particularly in view of this policy context, we conclude
the district court got the lis pendens issue right, too. The
district court rightly explained that a lis pendens is derivative
of the underlying claims -- it should reflect an action's pendency.
Sakab II, 578 F. Supp. 3d at 145 (citing Wolfe, 802 N.E.2d at 70).
It thus declined to issue the lis pendens here because "the
underlying proceeding to which the lis pendens would refer consists
of ten claims [(the entirety of Sakab's complaint, that is)] which
the Court has determined must be dismissed." Id.
Indeed, the point of a lis pendens is that it's linked
to litigation -- the idea being that pending litigation is what
the lis pendens is meant to warn third parties about. So, given
the circumstances of this matter -- we and the district court
having determined the suit will be dismissed -- can a lis pendens
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issue nonetheless? There is no pending Massachusetts lawsuit,
nothing over which the court should or could retain control, see
Wolfe, 802 N.E.2d at 67 (observing the lis pendens statute "allowed
courts to retain control over the subject matter of the
litigation while the action was pending"), so we think not. Sakab
calls this reasoning circular, but really it's a typical linear
sequence of legal analysis wherein one determination dictates the
outcome of the next. And like in the district court, the sequence
here ends with us rejecting Sakab's lis pendens position.
Also problematic in Sakab's lis-pendens-and-stay
asseveration: There is no Massachusetts precedent that requires
issuance of a lis pendens recording for an indefinite duration --
and not on the merits of "the underlying proceeding," ch. 184,
§ 15(b), but instead on the (as yet undetermined) merits of a
foreign proceeding. Indeed, what Sakab is after is encumbrances
of Appellees' real estate in Massachusetts, pre-foreign judgment,
and an indefinite stay of a Massachusetts case it has no intention
of trying to litigate during the pendency of the foreign suit.
Sakab is right, of course, that sometimes our courts will stay
litigation pending the outcome of parallel litigation abroad. But
the non-binding cases17 to which Sakab points us don't support what
17 Louis Vuitton N. Am., Inc. v. Schenker S.A., No. 17-CV-
7445, 2019 WL 1507792, at *1 (E.D.N.Y. Mar. 31, 2019); Pexcor Mfg.
Co., Inc. v. Uponor AB, 920 F. Supp. 2d 151, 152 (D.D.C. 2013);
Argus Media Ltd. v. Tradition Fin. Servs. Inc., No. 09 Civ.
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Sakab is trying to do here: Those cases don't involve stays sought
by the plaintiffs in U.S. suits in the wake of an order encumbering
a defendant's property, nor do they involve a U.S. court putting
a lien on property for the pendency of litigation in a foreign
forum without also entertaining a merits defense against that lien.
Stay
To be clear, the result of our prejudgment attachment
and lis pendens analyses is that Sakab is not entitled to a stay
that would hinge on or flow from either of those forms of relief.
To the extent Sakab is seeking a stay simpliciter, untethered to
any property-secured equitable relief, we likewise conclude it is
not entitled to that relief. The case is dismissed; there is
nothing to stay. And we decline to revive the case just to
indefinitely stay it while the Ontario litigation plays out. To
do so is unsupported by our precedent and runs counter to the idea
that Appellees, as defendants to this ten-count complaint,18 are
entitled to defend against it rather than being stuck in unlimited
limbo.
7966(HB), 2009 WL 5125113, at *1 (S.D.N.Y. Dec. 29, 2009);
Goldhammer v. Dunkin' Donuts, Inc., 59 F. Supp. 2d 248, 250, 256
(D. Mass. 1999); Evergreen Marine Corp. v. Welgrow Int'l Inc., 954
F. Supp. 101, 102-03 (S.D.N.Y. 1997).
18And of note, Sakab's state law complaint does not include
a claim to recognize or enforce a foreign judgment under
Massachusetts' Uniform Enforcement of Foreign Judgments Act, Mass.
Gen. Laws ch. 218, § 4A.
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In the end, Sakab has not demonstrated it is entitled at
this time to any of the preliminary relief it requested.19
CONCLUSION
For the foregoing reasons, we affirm the order of the
district court. Each side shall bear its own costs.
19That said, Sakab's toolkit is not empty. Ontario's Mareva
injunction includes the Massachusetts properties. The
comprehensive receivership order likewise lists the Massachusetts
properties, along with a Washington, D.C. property and shares in
a Canadian company. Should Sakab secure the judgment in Ontario,
nothing in today's opinion should be read to prevent it from
pursuing remedies here.
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