The Southern District of New York has become the latest U.S. federal court to consider the knowledge requirement under Title III of the Helms-Burton Act. The Act provides for a private right of action for U.S. nationals whose property was confiscated by the Cuban government against persons that have allegedly trafficked in such property. In Sucesores de Con Carlos Nunez Y Dona Pura Galvez v. Société Générale, No. 20-CV-851 (KMW), 2021 WL 6065758 (S.D.N.Y. Dec. 22, 2021), the Court ruled that the text of Title III requires that a plaintiff prove that, at the time a defendant trafficked in confiscated property, it knew or had reason to know that the Cuban government had confiscated the property in question.
This decision joins similar rulings from the District of Delaware, Northern District of Texas, and Southern District of Florida. These decisions may create a potentially significant barrier to Helms-Burton claims as plaintiffs may struggle to show defendants had reason to know of confiscations of property by the Cuban government that occurred decades ago, particularly where a defendant does not deal directly with the confiscated property. Further, each of these decisions—with the exception of one decision from the Southern District of Florida—has held that a plaintiff must make specific allegations of knowledge in order to state a claim, making survival of a motion to dismiss much more difficult. A Court of Appeals has not yet considered the Helms-Burton Act’s knowledge requirement.
- The Southern District of New York has joined other U.S. federal district courts in holding that to state a claim under the Helms-Burton Act, a plaintiff must make specific allegations that a defendant knew or had reason to know that property at issue had been confiscated by the Cuban government.
- This knowledge requirement may be a potentially significant hurdle to a claim under the Helms-Burton Act and provide a defense for defendants who ceased trafficking in the property in question upon or before receipt of a claim notice from a plaintiff under the Act. This defense may be limited, however, where a defendant deals directly with the confiscated property or where it is common knowledge that the property was confiscated.
- Potential plaintiffs will likely need to evaluate whether they can allege facts that show the defendants knew or had reason to know, at the time of the alleged trafficking, that the property in question had been confiscated by the Cuban government. In the alternative, plaintiffs will likely need to gather evidence that a defendant continued the alleged trafficking after receipt of a notice of claim under the Act and include specific allegations of that post-notice trafficking in their complaint.
The Helms-Burton Act and Its Knowledge Requirement
Title III of the Helms-Burton Act allows U.S. nationals to bring suit against a party who “traffics” in property that was confiscated from them (or their ancestors) by the Cuban government. This right of action was suspended until May 2, 2019. Since then, plaintiffs have filed over 40 cases targeting a wide variety of industries, including hotels, shipping, airlines, hydrocarbons, and banking.
The Act’s definition of “trafficking” is very broad and potentially includes any activity that benefits commercially from property confiscated by the Cuban government. This creates significant uncertainty for some companies doing business in Cuba or with Cuban entities regarding whether they may be vulnerable to a claim, especially given the vast number of properties confiscated by the Cuban government since 1960. (U.S. nationals have registered over eight thousand claims for expropriation of their property by the Cuban government with U.S. authorities, and many more unregistered claims are thought to exist).
Fortunately for such companies, several U.S. District Courts, including the District of Delaware, the Southern District of Texas, the Southern District of Florida, and now the Southern District of New York, have interpreted the Helms-Burton Act to require plaintiffs to prove that defendants “knew or had reason to know” that the property in question was confiscated at the time the alleged trafficking occurred. Further, with the exception of the Southern District of Florida, these courts have been consistent in holding that specific allegations of knowledge must be made at the pleading stage, which creates a significant barrier to survival of a motion to dismiss.
The Southern District of Florida, where plaintiffs have filed many Helms-Burton Act claims, has issued conflicting decisions on this point. Consistent with other District Courts, one case, Gonzalez v. Amazon.com, required specific allegations of knowledge in order for a complaint to survive a motion to dismiss. In another case, Garcia-Bengochea v. Norwegian Cruise Line Holdings, the Court held that under Federal Rule of Civil Procedure 9(b), it is sufficient for a plaintiff to make generalized allegations that the defendant knew of the confiscation.
All District Courts agree, however, that when a defendant receives notice of a claim under the Helms-Burton Act, the defendant gains the required knowledge. As a result, it may be challenging for defendants to raise their lack of knowledge as a defense against claims of trafficking for the period after the defendant received the notice.
No Court of Appeals has addressed the standard for knowledge under the Act.
Sucesores de Con Carlos Nunez v. Société Générale
In the case at hand, the plaintiffs alleged that they were the successors to the rightful owners of Banco Nuñez, a private bank that was nationalized by the Cuban government in 1960 and incorporated into the Cuban government bank, Banco Nacional de Cuba (“BNC”). The plaintiffs further alleged that Société Générale and BNP Paribas provided loans and U.S. dollar bank accounts to BNC, which allegedly constituted “trafficking” under the Helms-Burton Act.
In their motion to dismiss, Société Générale and BNP Paribas argued that the plaintiffs’ allegations did not meet the knowledge requirement because the defendants did not know or have reason to know that they were trafficking in confiscated property at the time of the alleged trafficking. The plaintiffs countered that, among other things, BNC’s seizure of Banco Nuñez was public, and that it is plausible that the defendants knew or had reason to know of the confiscations by virtue of doing business in Cuba.
The District Court sided with Société Générale and BNP Paribas, ruling that “it would be anomalous” to find that “a company has reason to know the consequences of a foreign law from forty years earlier that was relevant to its industry but never applicable to the company itself.” Absent specific allegations that the defendants had reason to know of the confiscation of Banco Nuñez, the Court ruled the plaintiffs could not meet the knowledge requirement. The Court granted the plaintiffs permission to replead, however, noting that the knowledge requirement can be fulfilled by making specific allegations that the defendants continued to traffic in confiscated property after receiving notices of the plaintiffs’ Helms-Burton Act claims.
The knowledge requirement gives defendants a potentially significant tool for resisting Helms-Burton Act claims. This tool will be particularly useful in jurisdictions such as the Southern District of New York, where, to survive a motion to dismiss, the plaintiffs must make specific allegations that at the time a defendant trafficked in confiscated property the defendant knew or had reason to know that the Cuban government had confiscated the property in question.
The knowledge requirement also places increased importance on a defendant’s response to a notice of claim under the Act. All courts agree such a notice gives defendant knowledge of the confiscation, and as a result, to make an effective knowledge defense, defendants should carefully consider whether to take immediate steps to halt any alleged trafficking in the property in question on receipt of such a notice.
 See, e.g., Glen v. Trip Advisor LLC, 529 F. Supp. 3d 316, 332 (D. Del. 2021); Glen v. Am. Airlines, Inc., No. 4:20-CV-482-A, 2020 WL 4464665, at *6 (N.D. Tex. Aug. 3, 2020), vacated on other grounds, 7 F.4th 331 (5th Cir. 2021).
 See Gonzalez v. Amazon.com, No. 19-23988-CIV, 2020 WL 1169125, at *2 (S.D. Fla. Mar. 11, 2020), affirmed on other grounds, Gonzalez v. Amazon.com, 835 F. App’x 1011, 1012 (11th Cir. 2021).
 See Garcia-Bengochea v. Norwegian Cruise Line Holdings, No. 1:19-CV-23593-JLK, 2020 WL 5028209, at *2 (S.D. Fla. Aug. 25, 2020).
 Two appellate courts have declined to visit the issue, instead basing their decisions on other questions presented on appeal. See Gonzalez v. Amazon.com, 835 F. App’x 1011, 1012 (11th Cir. 2021); Glen v. Am. Airlines, 7 F.4th 331, 336 (5th Cir. 2021).
 Sucesores de Con Carlos, 2021 WL 6065758 at *1–2.
 Id. (emphasis in original).