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In Re 650 Fifth Avenue and Related Properties

March 30, 2011

IN RE 650 FIFTH AVENUE AND RELATED PROPERTIES


The opinion of the court was delivered by: Richard J. Holwell, District Judge:

MEMORANDUM OPINION AND ORDER

In this in rem forfeiture action, the United States seeks to forfeit real properties, partnership interests, and accounts owned by or under the control of claimants 650 Fifth Avenue Company, the Alavi Foundation (the "Foundation"), Assa Corp., and Assa Ltd. (together, with Assa Corp. , the "Assa Claimants"). The government alleges that these properties are the proceeds of illegal services that the claimants allegedly provided to the Islamic Republic of Iran in violation of the International Emergency Economic Powers Act ("IEEPA"); traceable to such proceeds; or involved in the laundering of such proceeds. The claimants have moved to dismiss the complaint for failure to state a claim for which relief can be granted. For the reasons set forth below, the motion is denied.

BACKGROUND

The story of this case begins in 1973 when Shah Reza Mohammad Pahlavi, then the Shah of Iran, established a non-profit charitable foundation under the laws of the State of New York. (Compl. ¶ 24.) The Shah named the foundation the Pahlavi Foundation and caused the Iranian government to loan the foundation $42 million. (Id.) The loan was made by Bank Markazi (the Central Bank of Iran) to Bank Melli Iran, a state-owned financial institution, and in turn to the Pahlavi Foundation. (Id.) The funds were used to purchase real estate at 650 Fifth Avenue in Manhattan and to construct a commercial office building on the property ("the Building"). (Id.)

In 1979, a revolution toppled the Shah, who fled Iran, and Ayatollah Ruhollah Khomeini returned from exile to take control of the Iranian government. (Id. ¶ 25.) On April 1, 1979, Khomeini proclaimed the establishment of the Islamic Republic of Iran. (Id.) During this political upheaval, the directors of the Pahlavi Foundation resigned and were replaced. (Id. ¶ 27.) And on February 25, 1980, the foundation filed an amended Certificate of Incorporation which changed the name of the Pahlavi Foundation to "The Mostazafan Foundation of New York." (Id.). The name of that foundation, which later became the Alavi Foundation (and therefore is also referred to below as the "Foundation"), referred to the Bonyad Mostazafan, an entity formed by the newly established Revolutionary Council of the Islamic Republic of Iran to manage property expropriated by the revolutionary government. (Id. ¶ 26.)

A.The Formation of the Partnership

In the years following the revolution, the Foundation ran into a problem caused by its outstanding loan from Bank Melli. The federal tax code classified rent from the Building as debt-financed income unrelated to the Foundation's charitable services on which the Foundation was required to pay taxes. (Id. ¶ 31.) In 1987, Tahmasb Mazaheri, then the Deputy Prime Minister of Iran and the head of the Bonyad Mostazafan, wrote a letter on Bonyad Mostazafan letterhead to Mir-Hossein Mousavi, then the Prime Minister of Iran, regarding "a major problem of the Mostazafan Foundation of New York, namely the debt they owe to the New York branch of Bank Melli Iran." (Id. ¶ 32.) Mazaheri asked Mosauvi to approve a plan to transfer ownership of the Building to a new legal entity owned by the Mostazafan Foundation and a to be formed European company who would pay the debt balance to Bank Melli in exchange for its ownership share. (Id.) Mazaheri reported that he had discussed the plan with the director of the Central Bank of Iran and the general director of Bank Melli. (Id.) Mazaheri wrote another letter to Mousavi later in 1987 again requesting approval for the plan and estimating that the plan would result in tax savings of $3.5 million. (Id. ¶ 33.) In a letter dated December 1, 1987 on letterhead entitled "Islamic Republic, Office of the Prime Minister," Mousavi authorized the plan proposed by Mazaheri, who forwarded the letter to the director of the Central Bank of Iran. (Id. ¶ 34.) However, for some reason not apparent from the complaint, the plan was not executed in 1987.

On March 22, 1988, Habib Zobeidi Om-Jarideh, a member of the Board of Directors of the Foundation, wrote a letter on the Foundation's letterhead to Mohammad Badr Taleh, the President of the Foundation, in a renewed attempt to solve the tax problem. (Id. ¶ 36.) The letter noted that the plan advanced by Mazaheri "was presented for two reasons: 1. [t]o avoid paying an unnecessary and large amount of taxes to the US government" and "2. [t]o express our concerns about possible interference by the New York public prosecutor in the Foundation's business." (Id.) Zobeidi advised against the plan because the IRS would consider it tax evasion since "no real change has been made except the loan has been changed in name to capital, with the only result being the payment of no tax." (Id.) And on March 14, 1989, Badr wrote to Mazaheri requesting approval to enter into a long-term lease of the Building as an alternative. (Id. ¶ 37.) However, the Bonyad Mostazafan rejected this proposal and instead approved the plan originally advanced by Mazaheri.

On July 31, 1989, the Foundation entered into a written partnership agreement (the "Partnership Agreement") with Assa Corp., a corporation newly organized under the laws of the State of New York, that established a partnership called 650 Fifth Avenue Company (the "Partnership"). (Id. ¶ 41.) Pursuant to the Partnership Agreement, the Foundation agreed to contribute the Building and Assa Corp. agreed to contribute $44.8 million to the Partnership, to be used to retire the debt on the Building owed to Bank Melli. (Id. ¶ 42.) The Foundation initially took a 65% interest in the Partnership; Assa Corp. took the remaining 35% interest. The Foundation now owns a 60% interest in the Partnership and Assa Corp. owns the remaining 40% interest. (Id. ¶ 20.)

In correspondence with the New York Attorney General, the Foundation, through counsel, represented that the officers of the Partnership were Mohammad Hossein Behdadfar, Moshen Kakavand, and Peter Livingston, and that the directors were Behdadfar and Kakavand. (Id. ¶¶ 43-44.) The Foundation also represented that the sole shareholder of Assa was Assa Co. Ltd., an entity organized under the laws of Jersey, Channel Islands, United Kingdom; that Assa Ltd.'s sole beneficial owners were Behdadfar and Kakavand; and that "there were no pre-existing arrangements or understandings between any director, officer or principal of Assa Corp. and the [Mostazafan] Foundation." (Id. ¶ 44.) Badr, the President of the Mostazafan Foundation, made similar representations in a verified petition filed in New York State Supreme Court for leave to transfer the Building to the Partnership. (Id. ¶ 46.) And the Foundation, through counsel, represented to the Assistant Attorney General that "the formation of the Partnership represents an arms-length transaction between the Foundation and Assa Corp." (Id. ¶ 45.)

B.Assa Corp. and Bank Melli

The government alleges that these representations were false because contemporaneous correspondence and minutes of meetings of Bonyad Mostazafan officials show that Assa Corp. was actually controlled by Bank Melli. The government alleges that Behdadfar and Kakavand, officers and directors of the Partnership and the beneficial owners of Assa Co. Ltd., were, respectively, a Bank Melli board member and a manager of the London branch of Bank Melli. (Id. ¶ 40.) The government quotes from meeting minutes and letters signed by Bonyad Mostazafan officials that describe the Partnership as the result of "the mutual agreement between the New York Foundation and Bank Melli Iran"; a "partnership agreement between the Mostazfan Foundation of New York and Bank Melli Iran"; and "agreements between the Ministry of Finance, Bank Melli Iran, and the Bonyad Mostazafan." (Id. ¶¶ 38-39.) These documents also state that "Assa Co., which belongs to Bank Melli, is the partner of the Mostazafan Foundation" and that the Bonyad Mostazafan "decided to form a company called Assa Channel Islands which would be financed by the bank and under direction of Mr. Behdadfar and Mr. Kakavand." (Id. ¶¶ 39-40.) The government alleges that Assa Co. Ltd., and thus Assa Corp., continue to be owned by two individual shareholders, Davood Shakeri and Fatemeh Aghamiri, who are Iranian citizens and representatives of Bank Melli. (Id. ¶ 47.)

The sole employee of Assa Corp. in the United States from 1996 through late 2008 was Mohammad Hassan Dehghani Tafti, an Iranian citizen who allegedly obtained visas to enter and work in the United States under false pretenses. (Id. ¶¶ 112-116.) The complaint quotes from e-mails sent by Tafti and received by Tafti from officials in the Overseas Network Supervisory Department (ONSD) of Bank Melli regarding Assa Corp. business. These e-mails reflect that Tafti requested information regarding Assa Corp.'s expenses, a possible sale of the Building, loan documentation, and financial statements from Bank Melli officials. (Id. ¶ 117.) The e-mails also reflect that Tafti requested that Bank Melli officials change the residence of the Assa Co. Ltd. shareholders, Shakeri and Aghamiri,to a country other than Iran. (Id.)

The complaint also quotes telexes in which officials at the office of Bank Melli in New York and the ONSD discussed the possibility of transferring ownership of Assa Corp. from Assa Co. Ltd. to Bank Melli. (Id. ¶¶ 118-119.) These telexes state that "Assa Corporation's legal issues are now being handled by" the New York Office of Bank Melli and that "Bank Melli Iran, which belongs to the Islamic Republic of Iran and is naturally not subject to current U.S. laws, is the owner of Assa Corporation through two other companies." (Id. ¶ 119.) The same telexes note "the risk of seizure of the elements connected to the Islamic Republic of Iran's assets in the United States . . . . in case of the revelation of the ownership by Assa Corporation." (Id.)

C.The Foundation and the Iranian Mission to the United Nations

Just as the complaint alleges that the Iranian government controls Assa Corp. through Bank Melli, the complaint also alleges that the Iranian government has continued to control Assa Corp.'s partner, the Foundation. The complaint quotes from a letter dated May 7, 1991 from the members of Foundation's Board of Directors to the Ayatollah Khomeini declaring their intention to comply with the Ayatollah's request for their resignations. (Id. ¶ 50.) On May 16, 1991, the Foundation held a board meeting in Zurich, Switzerland at which representatives of the Bonyad Mostazafan were also in attendance. (Id. ¶ 52.) According to the minutes from that meeting, the head of the Bonyad Mostazafan informed the board members that all but one of the members were to resign "as directed by the Supreme Leader," i.e., the Ayatollah Khomeini. (Id.) The same minutes show that the board received a report "regarding the status of the building, its office floors, and retailers" and that the "Directors very much appreciated the way in which they have executed their duties, in particular regarding the collection of $5.5 million from one of the tenants." (Id.)

After that meeting, control of the Foundation allegedly shifted from the Bonyad Mostazafan to the Iranian Mission to the United Nations. The complaint quotes from 1991 correspondence indicating that Kamal Kharrazi, then Iranian Ambassador to the United Nations, called Badr, the president of the Foundation, to inform him that Kharrazi was "directly responsible for the Foundation" and that the "Board of Directors will be just a formality." (Id. ¶ 54.) Other quoted correspondence indicates that the Ambassador was "trying to make the point that hereafter he is to be considered the Foundation's employees['] point of contact and the Foundation will operate under the Iranian Mission office," and that the Ambassador and his brother had "told almost everyone that they will be directly responsible for the Mostazafan Foundation of New York and will not only control its activities, but supervise it as well." (Id. ¶¶ 54, 58.)

The complaint also quotes from letters sent by Badr to the Ayatollah, Kharrazi and others in 1991 in which Badr warned that Kharrazi was "resorting to a channel unacceptable by the laws and regulations governing non-profit organizations in America" and that "Kharrazi's involvement posses a great danger to the Foundation." (Id. ¶¶ 55-57.) In particular, Badr warned that he "and other members of the Foundation's Board of Trustees have frequently signed affidavits addressed to American authorities . . . stating that the Foundation is independent and devoid of any connection to the Government of Iran and the Iranian Government's qualified authorities." (Id. ¶ 59.) Nevertheless, Badr agreed to abide by the instructions of the Ayatollah and resigned his post on July 7, 1991. (Id. ¶ 60.) He was replaced later that summer as President of the Foundation by Mohammad Geramian. (Id. ¶ 61.)

In 1992, the Foundation changed its name to the Alavi Foundation. (Id. ¶ 27.) According to the complaint, however, the Foundation continued to be controlled by the Iranian Mission. The complaint alleges that Kharrazi and his successors, Seyed Mohammad Hedi Nejad Hosseinian, Ambassador from 1999 to 2002, Javad Zarif, Ambassador from 2002 to 2007, and Mohammad Khazaee, who succeeded Zarif, all attended Foundation board meetings and directed Foundation affairs. (Id. ¶¶ 63, 66-77.) The complaint alleges that these meetings took place both at a property in Queens owned by the Foundation as well as at the official residence of the Ambassador in New York.

The complaint also alleges that, at least as late as 2007, these meetings involved discussions about Foundation affairs, including the Building and the Partnership. (Id. ¶¶ 67-68.) For example, the complaint quotes from notes of a meeting between Khazaee, a former cultural attache at the Iranian Mission, a Foundation board member, and Farshi Jahedi, who replaced Geramian as President of the Foundation, that was held at the Ambassador's residence in October 2007. The notes, which are titled "Board Meeting," reflect that Khazaee gave directions regarding Foundation affairs, asked that "contact with him" be "increased," and directed that "I have to be kept informed and I have to be able to state my opinion in order for you to make a decision" as well as that "we have to be kept informed regarding the general on goings and allocations because we will be held responsible." (Id. ¶ 74.) With regard to "[t]he composition of the Board of Trustees," Khazaee said that "[w]hatever I decide should be approved and it should not be otherwise." (Id.) In addition, the notes reflect that Khazaee asked "[w]hat are you doing to safeguard the interests of the regime . . . .?" (Id.) The notes also indicate that Khazaee asked others to "[s]et aside a budget for the building and bring it up to par." (Id.)

The complaint also alleges that Zarif, the Ambassador from 2002 to 2007, directed the Foundation to settle a lawsuit against it, Assa Corp., and Assa Ltd. arising out of an alleged agreement to sell Assa Corp.'s interest in the Partnership to an entity called the Hanif Partnership. (Id. ¶¶ 78-81.) The Hanif Partnership's complaint alleged that the Foundation refused to accept any new partner because "a new partner might some day inform the Attorney General of the State of New York that Alavi was mismanaging or even wasting its assets and could seek involuntary judicial dissolution of the Alavi Foundation." (Id. ¶ 80.)

D.The Foundation, Bank Melli and the Iranian Government

Such allegations posed a risk because the Partnership allegedly had not been paying distributions to Assa Corp. The complaint quotes from minutes of an August 25, 1992 meeting in Tehran between Bank Melli officials and Garamian, the President of the Foundation and Director of the Partnership, to discuss two issues: (1) distributions that the Partnership owed to Assa Corp.; and (2) real estate taxes owed by the Partnership that Assa Corp. claimed the Foundation was responsible for paying pursuant to the Partnership Agreement. These minutes again describe a "partnership between the Foundation and the Bank" rather than between the Foundation and Assa Corp. (Id. ¶ 83.) The managing director of Bank Melli forwarded those minutes to the head of the Bonyad Mostazafan in a letter stating that "the Alavi Foundation of New York is in partnership with this Bank in the ownership of the building at 650 5th Ave., New York " and describing Bank Melli as "one of the pillars of the Islamic Republic of Iran." (Id. ¶¶ 85-86.) The letter indicated that Garamian had met with Bank Melli officials in attempt to resolve the issues regarding the distributions and taxes and requested the Bonyad Mostazafan's "firm instructions" to "resolve the partnership's mutual problems quickly."

(Id. ¶ 87.) In other correspondence regarding the dispute between Assa Corp. and the Foundation regarding real estate taxes, Bank Melli officials asked "should the two sides of the partnership -- which are the organs of the Islamic Republic of Iran -- claim that due to the other sides's unfamiliarity with local laws, try to take advantage of the other side and . . . impose a financial burden on the other party?" (Id. ¶ 88.)

E.The Foundation's Alleged Concealment

The complaint alleges that the Foundation concealed these alleged connections with the Iranian government to shield itself from lawsuits brought by judgment creditors of the Islamic Republic of Iran. In 1992, Norman Gabay filed a lawsuit against the Bonyad Mostazafan and the Foundation for damages from the alleged expropriation by the Iranian government of businesses he owned. See Gabay v. Mostazafan Found. of Iran, 968 F. Supp. 895 (S.D.N.Y. 1997). The complaint quotes from correspondence in which Garamian asked the Bonyad Mostazafan for guidance regarding the lawsuit, which in his view required "the denial of any relationship as well as financial and administrative relations between the government of Iran and Mostazafan . . . ." (Id. ¶ 106.) Geramian submitted an affidavit in which he affirmed that "[t]he New York Foundation conducts no business with the Government of Iran or the Mostazafan Foundation of Iran" and "has never been the agent or instrumentality of the Government of Iran or the Mostazafan Foundation of Iran." (Id. ¶ 103.) Geramian repeated that denial at his deposition, and, at another deposition, a board member whom the complaint alleges had resigned along with Badr in 1991 at the behest of the Ayatollah denied that he ever received instructions from "any person or entity in Iran." (Id. ¶¶ 104-105.) The court dismissed the action for lack of subject matter jurisdiction because "the facts developed by Gabay d[id] not show that the [Mostazafan] Foundation exercised control over the day-to-day activities of the New York Foundation." Gabay, 968 F. Supp. at 899.

The complaint alleges that the Foundation submitted the same affidavits and deposition testimony in an attachment action to execute a judgment entered against Iran in a wrongful death suit by the father of a woman killed by a terrorist attack in Gaza. (Id. ¶ 108.) That suit was also dismissed because the "Plaintiff [could not] establish that the Foundation was an agent, alter ego, or instrumentality of the Iranian Government" where the Foundation "submitted proof by affidavit that the Directors are elected by the Foundation itself," that "the Foundation files its own tax returns . . . . that it is funded through the rental income that it receives from the interest it has in its building located in New York City," that "the Foundation has its own bank accounts," and that "it hires its own employees and that none of these employees are agents, officers, or employees of the Iranian Government as well." See Flatow v. Islamic Republic of Iran, 67 F. Supp. 2d 535, 542-43 (D. Md. 1998).

F.The Partnership and the Building

The complaint alleges that the Foundation is the managing partner of the Partnership and that Geramian, the President of the Foundation from 1992 through 2007, also served as Director of the Partnership.The government alleges that, in its capacity as managing partner, "[t]he Alavi Foundation has played a critical role in managing the Building, acting as the Building's managing partner and overseeing all of the Building's finances." (Id. ¶ 98.) Indeed, the Partnership Agreement provides that "the Foundation shall have the obligation of administering the day-to-day business and affairs of the Partnership . . . ." (Id. ¶ 96.) The Partnership Agreement further provides that the "Foundation shall have the authority to make the following decisions and take the following actions without obtaining the prior written consent of any other Partner:

(i) the execution of any lease of space in the Building having a rentable area of less than twenty-five thousand (25,000) square fee[t] of rentable floor area and a term of less than five (5) years . . . .

(ii) contracting with vendors of supplies and services required in the ordinary course of business of the Partnership and payment of all sums due therefor, provided that such contract does not provide for the payment, per annum, of an amount in excess of [$100,000] . . . .

(iii) payment of all taxes that are due; and

(iv) prosecuting, defending and/or resolving by settlement all disputes provided that such litigation and/or settlement would not require payment by the Partnership of consideration reasonably valued at more than [$100,000] . . . . (Id.) The complaint alleges that, pursuant to this authority, the Foundation managed the Building on behalf of the Partnership until December 1997, and that from that time through the present, two real estate management companies have managed the Building, ostensibly through agreements with the Partnership that were signed by the Geramian,the President of the Foundation and Director of the Partnership. (Id. ¶ 97.)

As managing partner, the Foundation allegedly directed ownership distributions of rent earned from the Building to itself and to Assa Corp. (Id. ¶ 100.) The Foundation also directed the Partnership to pay the Foundation tens of thousands of dollars in management fees, some of which was used to pay for the salaries of the Foundation's officers. (Id.) And the Foundation's federal tax returns show that the Partnership paid the Foundation for expenses. (Id. ¶ 99.)

G.Defendant Properties

The government seeks to forfeit the Building as well as the Foundation's and Assa Corp.'s interests in the Partnership. The government also seeks to forfeit (1) accounts held in the name of the Partnership (the "Partnership Accounts"); (2) accounts held in the name of the Foundation (the "Foundation Accounts"); (3) accounts held in the name of Assa Corp. (the "Assa Accounts"); and (4) seven other real properties owned by the Foundation (the "Other Real Properties").

1.Partnership Accounts

The government seeks to forfeit two accounts owned by the Partnership used to pay distributions to the Foundation and to Assa Corp. as well as for maintenance and other expenses on the Building. (Id. ¶¶ 130, 133.) The government alleges that "[t]he only source of funds in the Partnership Accounts is income from the Building." (Id.)

2.Foundation Accounts

The government seeks to forfeit three accounts held in the name of the Foundation. The government alleges that "the vast majority of the Alavi Foundation's income has consisted of proceeds of the Building" and alleges that the Foundation earned $38.9 million from the Building from 1999 through 2007 as compared with only $3.8 million from other sources such as one of the Other Real Properties, "dividends and capital gains on investments, [and] interest on savings and temporary cash investments." (Id. ¶¶ 125-126.)

3.Assa Accounts

The government seeks to forfeit three accounts held in the name of Assa Corp. whose only signatory was Tafti, Assa Corp.'s only employee. (Id. ¶ 120.) The government alleges that the Partnership deposited funds into these Assa Accounts and that Tafti drew on funds in the accounts to pay income taxes and to transfer funds to Assa Co. Ltd. (Id. ¶¶ 121-123.)

4.Other Real Properties

The government also seeks to forfeit Other Real Properties owned by the Foundation: (1) a property located in Houston, Texas acquired in 1998; (2) a property located in Queens, New York, part of which was acquired in 1991 and the remainder of which was acquired in 1997; (3) a property located in Carmichael, California acquired in 1989; (4) a property located in Catharpin, Virginia acquired in 1990; (5) another property in Catharpin, Virginia acquired at the same time; (6) a property in Rockville, Maryland acquired in 1981; and (7) another property in Rockville, Maryland acquired in 1984. (Id. ¶¶ 1, 134-141.) The government alleges that the Foundation has spent millions of dollars in improvements on these properties. (Id. ¶¶ 134-143.)

H.Procedural History

The government filed the original verified complaint [1] in this action on December 17, 2008. That complaint sought to forfeit only assets owned or controlled by Assa Corp. and Assa Co. Ltd. who moved [32] to dismiss the original complaint on July 10, 2009. While that motion was pending, the government filed an amended complaint [51] on November 16, 2009. The Court issued an order [50] that the amended complaint rendered the Assa Claimants' motion moot but that their notices of claim would be deemed sufficient with respect to the amended complaint. The Foundation and the Partnership filed notices [54, 56] of claim on December 17, 2009. On March 1, 2010, the Foundation and Assa each moved [75, 78] to dismiss the amended complaint.

In the meantime, numerous judgment creditors of Iran filed claims to the defendant properties on the ground that the claimants are agents or instrumentalities of the Iranian government. In a case management order [103] dated March 16, 2010, the Court consolidated and stayed these actions pending disposition of the instant motions to dismiss.

LEGAL STANDARD

Motions to dismiss in rem forfeiture actions are governed by Federal Rule of Civil Procedure 12(b) and Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. When considering a motion to dismiss under Rule 12(b)(6), the Court will "consider the legal sufficiency of the complaint, taking its factual allegations to be true and drawing all reasonable inferences in the plaintiff's favor." Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009). "'[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss,' and "determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009)).

Under Rule G(2)(f), a forfeiture complaint must "state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial." The Second Circuit has noted that "[t]hese standards are more stringent than the general pleading requirements set forth in the Federal Rules of Civil Procedure . . . ." United States v. Daccarett, 6 F.3d 37, 47 (2d Cir. 1993). See also 12 C. Alan Wright, A. Miller, and R. Marcus, Fed. Prac. & Proc. Civ. § 3242 (2d ed.)("[The Rule] requires a more particularized complaint than is demanded in civil actions generally . . . . Apparently this requirement for added specifics is thought appropriate because of the drastic nature of those remedies. Thus, it fortifies the procedural-due-process protections against improper use of these remedies.").

Nevertheless, "the complaint need not allege facts sufficient to show that specific property is tainted, but facts sufficient to support a reasonable belief that the government can demonstrate probable cause for finding the property tainted." Daccarett, 6 F.3d at

47. The complaint "must state the circumstances from which the claim arises with such particularity that the defendant or claimant will be able, without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading." See Supp. R. E(2)(a) for Admiralty or Maritime Cl. and Asset Forfeiture Actions. Cf. Supp. R. G(2)(f), Adv. Comm. Note.

Under the Supplemental Rules, "[n]o complaint may be dismissed on the ground that the Government did not have adequate evidence at the time the complaint was filed to establish the forfeitability of the property." 18 U.S.C. § 983(a)(3)(D); see also Supp. R. G(8)(b) (same). And "[o]nce the government establishes that there is probable cause to believe that a nexus exists between the seized property and the predicate illegal activity, the burden shifts to the claimant to show by a preponderance of the evidence (1) that the defendant property was not in fact used unlawfully, or (2) that the predicate illegal activity was committed without the knowledge of the owner-claimant, that is, that the claimant is an innocent owner." United States v. Funds Held in the Name or for the Benefit of Wetterer, 210 F.3d 96, 104 (2d Cir. 2000) (internal citation and quotation marks omitted).

DISCUSSION

A.Political Question

The first issue in this case is whether the case is justiciable. The Assa Claimants contend that, because the government has represented that it intends to use any properties in this action to compensate private plaintiffs with default judgments against Iran, the action presents a non-justiciable political question.

The Supreme Court has instructed courts determining whether a case presents a non-justiciable political question to consider whether the case involves the following: a textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving it; or the impossibility of deciding without an initial policy determination of a kind clearly for non-judicial discretion; or the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government; or an unusual need for unquestioning adherence to a political decision already made; or the potentiality of embarrassment from multifarious pronouncements by various departments on one question.

Baker v. Carr, 369 U.S. 186, 217 (1962). "Unless one of these formulations is inextricable from the case at bar, there should be no dismissal for non-justiciability on the ground of a political question's presence." Id. None of these factors is present here.

The Second Circuit has described the first Baker factor as "the dominant consideration in any political question inquiry." Lamont v. Woods, 948 F.2d 825, 831 (2d Cir. 1991). The Assa Claimants invoke the Victims of Trafficking and Violence Protection Act ("VPA"), P.L. 106-386, 114 Stat. 1541-1543 (2000), as amended by the Terrorism Risk Insurance Act ("TRIA"), P.L. 107-297 (2002); President Carter's decision to nullify attachments of private litigants against Iran; and "the long history of governmental action compensating our own citizens in this county for wrongs done them by foreign governments abroad." (Assa Br. at 35-36(quoting Sardino v. Fed. Reserve Bank of New York, 361 F.2d 106, 112 (2d Cir. 1966)).) The Assa Claimants argue that these events demonstrate that "[i]t is the prerogative of Congress and/or the Executive- not the judiciary-to determine whether, as a matter of U.S. policy, to create a compensation fund to settle the claims of U.S. citizens against a foreign government."

(Assa Br. at 35.) Yet none of this demonstrates "a textually demonstrable constitutional commitment" to the political branches. Baker, 369 U.S. at 217 (emphasis added).

Moreover, "the existence of judicially discoverable and manageable standards further undermines the claim that such suits relate to matters that are constitutionally committed to another branch." Kadic v. Karadzic, 70 F.3d 232, 249 (2d Cir. 1995). There is hardly "a lack of judicially discoverable and manageable standards" for interpreting the statutes the government seeks to enforce. The parties have extensively litigated the application of terms in the forfeiture statutes that are regularly applied and interpreted by the federal courts. These are "clear and well-settled rules on which the district court can easily rely . . . ." Klinghoffer v. S.N.C. Achille Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 937 F.2d 44, 49 (2d Cir. 1991) (finding that "common law of tort" provided "judicially discoverable and manageable standards" in an action against the Palestine Liberation Organization). Indeed, for just that reason, another court in this district has found justiciable civil forfeiture proceedings against property of a foreign state. See United States v. Portrait of Wally, A Painting by Egon Schiele, No. 99 Civ. 9940, 2002 WL 553532, at *11 (S.D.N.Y. Apr. 12, 2002)("The issues to be resolved in the instant case include whether the Leopold owns a painting under Austrian law and whether the Leopold violated United States law in transporting that painting into the United States and thereby subjected the painting to civil forfeiture . . . . Determining the standards to resolve such a claim . . . is within the court's competence.")

Nor is this a case where the Court has been asked to make "an initial policy determination of a kind clearly for non-judicial discretion", such as whether one government has succeeded another, see 767 Third Ave. Assocs. v. Consulate Gen. of Socialist Fed. Republic of Yugoslavia, 218F.3d 152, 161 (2d Cir. 2000); Can v. United States, 14 F.3d 160, 163 (2d Cir. 1994), or whether Congress has properly authorized military action, see Berk v. Laird, 429 F.2d 302, 305 (2d Cir. 1970). Indeed, in Portrait of Wally, a civil forfeiture proceeding to recover a painting allegedly stolen by the Nazis that was owned by an Austrian national museum and loaned to the Museum of Modern Art ("MOMA"), this court found that "there [wa]s no impermissible policy determination to be made, nor any intrusion on or lack of respect for a decision already made, or yet to be made, that would engage the remainder of the Baker factors." 2002 WL 553532, at *11. That was because, even though various Austrian laws and treaties signed by the United States provided for mechanisms to recover stolen art, "the Austrian restitution systems ha[ve] never been found to be the exclusive mechanism for the recovery of Holocaust property, and the United States has never committed such claims to the Austrian government." Id. at *11 (citation omitted). Cf. Alperin v. Vatican Bank, 410 F.3d 532, 555 (9th Cir. 2005) ("The Property Claims focus on the extent to which the Holocaust Survivors were wrongfully deprived of personal property and the value of such property that was transferred to the Vatican Bank. Adjudicating these discrete issues will not require the court to make pronouncements on foreign policy or otherwise trigger the third Baker test.").

It is just so here. The Assa Claimants argue that "a compensation fund created as a result of this lawsuit also does not respect the determination of Congress and the President that private plaintiffs must, if they wish to obtain compensation from the U.S. Government, follow the guidelines of the VPA." (Assa Br. at 38.) But it is hard to see why this case presents any lack of respect for the executive branch when it is the executive branch that is seeking forfeiture. See Kadic, 70 F.3d at 250 (finding "no concern that interference with important governmental interests warrants rejection of appellants' claims" where the executive branch disclaimed such concerns). Nor would adjudication of this matter evince any lack of respect for the legislative branch. Congress enacted the VPA and the TRIA against the background of the IEEPA and the forfeiture statutes at issue here. Nothing in those statutes did anything to limit the United States' civil forfeiture authority. On the contrary, the TRIA provided that "[n]othing in this subsection shall bar, or require delay in, enforcement of any judgment to which this subsection applies under any procedure or against assets otherwise available under this section or under ...


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