Iran central bank takes Beirut bombing case to U.S. Supreme Court

WASHINGTON (Reuters) - The Republican-led Congress and President Barack Obama’s administration, often at odds over Iran policy, are urging the U.S. Supreme Court to let the families of Americans killed in the 1983 bombing of a U.S. Marine Corps barracks in Beirut and other attacks collect nearly $2 billion in frozen Iranian funds.

The Supreme Court on Wednesday will hear arguments in an appeal by the Iranian central bank, Bank Markazi, to reverse a 2014 lower-court ruling that said the money should be handed over to plaintiffs representing hundreds of Americans killed or injured in attacks blamed on Iran. They won a $2.65 billion judgment against Iran in U.S. federal court in 2007.

The money is currently held in New York in a trust account at Citibank, part of Citigroup Inc.

At issue before the justices is whether Congress violated the separation of powers principle enshrined in the U.S. Constitution by passing a 2012 law that specified the funds held in the trust account go toward paying off the judgment.

Bank Markazi contends the legislative branch of the U.S. government improperly sought to dictate the outcome of a specific case handled by the judiciary branch.

The families accused Iran of providing material support to Hezbollah, the Iran-backed Shi’ite Islamist political and military group responsible for the 1983 truck bomb attack at the Marine compound in Beirut that killed 241 U.S. servicemen. They are also seeking compensation on behalf those killed or injured in other attacks they linked to Iran, including the 1996 Khobar Towers truck bombing in Saudi Arabia that killed 19 U.S. service members.

The lead plaintiff in the case is Deborah Peterson, who originally sued in 2001 on behalf of the estate of her brother, Marine Lance Corporal James Knipple, who was killed at age 20 in the Beirut bombing.

The high court’s action comes at a delicate time in U.S.-Iranian relations. The United States and five other world powers reached a deal with Iran last July to lift certain American, European Union and U.N. sanctions in exchange for Iran accepting limits on its nuclear program.

Congressional Republicans strongly opposed the nuclear agreement championed by Obama.

In the Supreme Court case, the Obama administration, the Senate and a legal group representing leaders of the House of Representatives all filed court papers backing the plaintiffs.

The unity shown by the White House and Congress might normally carry significant weight with the justices, said Erwin Chemerinsky, dean of the University of California, Irvine School of Law. But because the case raises a question of the relationship between Congress and the courts, it could have “less effect than in other contexts,” he said.

A ruling is due by the end of June.

Reporting by Lawrence Hurley; Editing by Will Dunham