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Weinstein v. Bank of New York

June 15, 2010

SUSAN WEINSTEIN, INDIVIDUALLY AS CO-ADMINISTRATOR OF THE ESTATE OF IRA WILLIAM WEINSTEIN, AND AS NATURAL GUARDIAN OF PLAINTIFF DAVID WEINSTEIN, JEFFREY A. MILLER, AS CO-ADMINISTRATOR OF THE ESTATE OF IRA WILLIAM WEINSTEIN, JOSEPH WEINSTEIN, JENNIFER WEINSTEIN, HAZI & DAVID WEINSTEIN, JENNIFER WEINSTEIN HAZI, PLAINTIFFS-APPELLEES,
v.
BANK OF NEW YORK, PLAINTIFF
v.
ISLAMIC REPUBLIC OF IRAN, IRANIAN MINISTRY OF INFORMATION AND SECURITY, AYATOLLAH ALI HOSEINI KHAMENEI, ALI AKBAR HASHEMI-RAFSANJANI, ALI FALLAHIAN-KHUZESTANI, DEFENDANTS,
BANK MELLI IRAN NEW YORK REPRESENTATIVE OFFICE, RESPONDENT-APPELLANT,
v.
BANK SADERAT IRAN, NEW YORK REPRESENTATIVE OFFICE, BANK SEPAH IRAN, NEW YORK REPRESENTATIVE OFFICE RESPONDENTS,



SYLLABUS BY THE COURT

Appeal by respondent Bank Melli Iran from a ruling of the United States District Court for the Eastern District of New York (Leonard D. Wexler, Judge) granting plaintiff's motion for appointment of receiver to attach respondent's property in satisfaction of a prior judgment.

Affirmed.

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

Argued: February 17, 2010

Before: KEARSE and HALL, Circuit Judges, and RAKOFF, District Judge.*fn1

On February 25, 1996, Ira Weinstein, a United States citizen and resident of New York, was severely injured during a suicide bombing in Jerusalem organized by the terrorist organization Hamas. On April 13, 1996, Weinstein died from those injuries. See Weinstein v. Islamic Rep. of Iran, 184 F. Supp. 2d 13, 16-17 (D.D.C. 2002). On October 27, 2000, his widow, another administrator of his estate, and his children brought suit for wrongful death and other torts against the Islamic Republic of Iran ("Iran"), the Iranian Ministry of Information and Security, and three Iranian officials, alleging that these defendants had provided substantial monetary support for Hamas's terrorist attacks. See id. at 21-22. After defendants failed to appear, the district court determined that the plaintiffs had established their "claim or right to relief by evidence satisfactory to the court," 28 U.S.C. § 1608(e), and entered default judgment for plaintiffs in the amount of approximately $183,200,000. See id. at 16, 22-26.

Plaintiffs registered the judgment in the U.S. District Court for the Eastern District of New York on October 8, 2002, and served an information subpoena on Bank of New York that eventually led to the identification of respondent Bank Melli Iran ("Bank Melli") as a possible instrumentality of the Iranian state. See Weinstein v. Islamic Rep. of Iran, 299 F. Supp. 2d 63, 64-65 (E.D.N.Y. 2004). The district court found it unnecessary to determine whether Bank Belli was an "agency or instrumentality" for purposes of the TRIA because the court determined that Bank Melli's accounts at the Bank of New York were unattachable. Id. at 74-76. However, on October 31, 2007, one of the plaintiff-judgment creditors, Jennifer Weinstein Hazi ("Hazi"), filed a motion in the Eastern District proceeding, seeking appointment of a receiver (pursuant to Rule 69 of the Federal Rules of Civil Procedure and Section 5228(a) of the New York Civil Practice Law and Rules), to sell real property owned by respondent Bank Melli in Forest Hills, Queens, which plaintiff sought to attach and sell in partial satisfaction of the judgment against the defendants. Hazi argued that the Forest Hills property was now subject to attachment pursuant to the Terrorism Risk Insurance Act of 2002 ("TRIA"), § 201(a), Pub. L. No. 107-297, 116 Stat. 2322, 2337, codified at 28 U.S.C. § 1610 note, because on October 25, 2007, Bank Melli had been designated by the United States Department of Treasury, Office of Foreign Assets Control ("OFAC") as a "proliferat[or] of weapons of mass destruction," and its assets had been frozen. See Executive Order 13,382, 70 Fed. Reg. 38,567 (June 28, 2005).*fn2

On February 21, 2008, Bank Melli moved to dismiss the proceeding against it and to stay the appointment of a receiver pending resolution of its motion to dismiss. In its motion to dismiss, Bank Melli argued, inter alia, that attachment and sale of the Forest Hills property would violate the Treaty of Amity between the United States and Iran, that attachment and sale would constitute a taking not for a public purpose and without just compensation in violation of the Takings Clause of both the Fifth Amendment of the United States Constitution and Article IV.2 of the Treaty of Amity, and that the blocking of its assets violated the so-called "Algiers Accords" and thus attachment and sale would constitute a further violation of the Accords. On June 5, 2009, after receiving submissions from both Hazi and Bank Melli,*fn3 the district court (Wexler, Judge) denied Bank Melli's motion to dismiss and granted Hazi's motion to appoint a receiver, but stayed the proceedings pending this appeal.

DISCUSSION

A. JURISDICTION

On this appeal, Bank Melli argues for the first time that the district court lacked ancillary jurisdiction to entertain Hazi's motion to appoint a receiver. According to Bank Melli, Hazi's motion was not simply a proceeding to collect on a debtor's assets, but rather "an independent controversy with a new party in an effort to shift liability," Epperson v. Entm't Express, Inc., 242 F.3d 100, 106 (2d Cir. 2001); see also Peacock v. Thomas, 516 U.S. 349, 357 (1996), for which TRIA § 201(a) did not provide an independent source of jurisdiction. Although not raised below, subject matter jurisdiction may be raised at any point, Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 576 (2004); Cave v. E. Meadow Union Free Sch. Dist., 514 F.3d 240, 250 (2d Cir. 2008), and so the Court must address this threshold matter.*fn4

The Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq., provides the exclusive basis for subject matter jurisdiction over all civil actions against foreign state defendants, and therefore for a court to exercise subject matter jurisdiction over a defendant the action must fall within one of the FSIA's exceptions to foreign sovereign immunity. See, e.g., Saudi Arabia v. Nelson, 507 U.S. 349, 351 (1993); Argentine Rep. v. Amerada Hess Shipping Corp., 488 U.S. 428, 434-35 (1989); Verlinden B.V. v. Cent. Bank of Nig., 461 U.S. 480, 493 (1983). In the underlying action that gave rise to the judgment on which plaintiff now seeks to collect, the district court exercised subject matter jurisdiction over Iran and the other defendants under 28 U.S.C. § 1605(a)(7), which abrogates immunity for those foreign states officially designated as state sponsors of terrorism by the Department of State where the foreign state commits a terrorist act or provides material support for the commission of a terrorist act and the act results in the death or personal injury of a United States citizen.*fn5 See Weinstein, 184 F. Supp. 2d at 20-21. When such an exception applies, "the foreign state shall be liable in the same manner and to the same extent as a private individual under like circumstances . . . ."

28 U.S.C. § 1606; see also Verlinden, 461 U.S. at 488-89. Bank Melli was not itself a defendant in the underlying action. However, the FSIA has a separate section, Section 1609, that provides that where a valid judgment has been entered against a foreign sovereign, property of that foreign state is immune from attachment and execution except as provided in the subsequent sections, Sections 1610 and 1611. 28 U.S.C. § 1609. Section 201(a) of the TRIA, codified as a note to Section 1610 of the FSIA, provides as follows:

Notwithstanding 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 on an act of terrorism, or for which a terrorist party is not immune under [28 U.S.C. ยง 1605(a)(7)], 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 the aid of execution in ...


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