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Bank of New York v. Rubin

March 15, 2006

BANK OF NEW YORK, PLAINTIFF,
v.
JENNY RUBIN, DEBORAH RUBIN, DANIEL MILLER, ABRAHAM MENDELSON, STUART HERSCH, RENAY FRYM, NOAM ROZENMAN, ELENA ROZENMAN, TZVI ROZENMAN, BANK MELLI IRAN NEW YORK REPRESENTATIVE OFFICE, BANK SADERAT IRAN NEW YORK REPRESENTATIVE OFFICE, BANK SADERAT IRAN DUBAI BRANCH, BANK SEPAH IRAN NEW YORK REPRESENTATIVE OFFICE AND ARAB BANK FOR INVESTMENT AND FOREIGN TRADE, DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

Plaintiff Bank of New York brings this interpleader action to relieve itself of liability for funds it holds on behalf of several of the bank defendants. Interpleader-defendant Bank Melli moves to dismiss plaintiff's complaint on the ground that the competing claims to its funds are without merit. Since interpleader relief would be appropriate and the complaint is not properly dismissed for failure to state a claim, Bank Melli's motion is recharacterized as a motion for judgment on the pleadings for a determination of the respective rights of the interpleader defendants. That motion is granted.

BACKGROUND

A. Underlying Action

Individual defendants Jenny Rubin, Deborah Rubin, Daniel Miller, Abraham Mendelson, Stuart E. Hersch, Renay Frym, Noam Rozenman, Elena Rozenman, and Tzvi Rozenman (collectively, the "Rubin defendants") brought suit under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1601 et seq., against the Islamic Republic of Iran and other Iranian government defendants in connection with a terrorist attack at an outdoor pedestrian mall in Israel. See Rubin v. Islamic Republic of Iran, 281 F. Supp. 2d 258 (D.D.C. 2003). The District Court for the District of Columbia entered a default judgment in favor of the Rubin defendants under Section 1605(a)(7) of FSIA in an amount totaling $71.5 million in compensatory damages. Having registered the judgment in the Southern District of New York, the Rubin defendants sought to attach and execute against three accounts held by the Bank of New York on behalf of Bank Melli Iran New York, Bank Saderat Iran, and Bank Sepah Iran in their attempt to satisfy the default judgment.*fn1

Facing the possibility of multiple claims on the accounts, the Bank of New York ("BNY") filed an interpleader complaint seeking to deposit the funds with the Court for a determination as to the respective rights of the defendants. Bank Melli filed this motion to dismiss for lack of subject matter jurisdiction and failure to state a claim. Rubin defendants responded by opposing the motion to dismiss and filing a counterclaim against BNY seeking turnover of the disputed funds under New York law.*fn2

The Rubin defendants base their claim to the funds held by BNY on the Terrorism Risk Insurance Act of 2002 ("TRIA"), Pub. L. No. 107-297, 116 Stat. 2322 (2002). Section 201(a) of the TRIA authorizes the attachment of certain assets, termed "blocked assets," for victims of terrorism. The Act provides that

[n]otwithstanding any other provision of law, and except as provided in subsection (b), in every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism, or for which a terrorist party is not immune under section 1605(a)(7) of title 28, United States Code, the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of any compensatory damages for which such terrorist party has been adjudged liable.

TRIA § 201(a) (emphasis added). "Blocked assets" are in turn defined as including "any asset seized or frozen by the United States under . . . sections 202 and 203 of the International Emergency Economic Powers Act (50 U.S.C. 1701; 1702)." TRIA § 201(d)(2)(A).*fn3 Explicitly excluded from "blocked assets" is any property that[] is subject to a license issued by the United States Government for final payment, transfer, or disposition by or to a person subject to the jurisdiction of the United States in connection with a transaction for which the issuance of such license has been specifically required by statute other than the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) or the United Nations Participation Act of 1945 (22 U.S.C. 287 et seq.)[.]

TRIA § 201(d)(2)(B)(I).

B. Iranian Sanctions Programs A

cting pursuant to Sections 202 and 203 of the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 & 1702, ("IEEPA"), the President has implemented economic sanctions programs against many foreign states, including Iran. This statute grants the President broad authority to declare a national emergency and subsequently "investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit," a variety of interests and transactions involving "any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States." 50 U.S.C. § 1702(a)(1)(B).

Economic sanctions against Iran began on November 14, 1979, in response to Iran's seizure of the U.S. embassy in Tehran and the resulting hostage crisis. In an executive order, President Carter declared a national emergency and order[ed] blocked all property and interests in property of the Government of Iran, its instrumentalities and controlled entities and the Central Bank of Iran which are or become subject to the jurisdiction of the United States or which are in or come within the possession or control of persons subject to the jurisdiction of the United States.

Exec. Order No. 12,170, 44 Fed. Reg. 65,729 (Nov. 14, 1979). The President then delegated his authority under IEEPA to the Secretary of the ...


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