MR. JEREMY LEVIN and DR. LUCILLE LEVIN, Plaintiffs,
THE BANK OF NEW YORK MELLON, JPMORGAN CHASE & CO., JPMORGAN CHASE BANK, N.A., SOCIÉTÉ GÉNÉRALE, and CITIBANK, N.A., Defendants. THE BANK OF NEW YORK MELLON, JPMORGAN CHASE & CO., JPMORGAN CHASE BANK, N.A., SOCIÉTÉ GÉNÉRALE, and CITIBANK, N.A., Third-Party Plaintiffs,
STEVEN M. GREENBAUM, et al., Third-Party Defendants. THE BANK OF NEW YORK MELLON, JPMORGAN CHASE & CO., JPMORGAN CHASE BANK, N.A., SOCIÉTÉ GÉNÉRALE, and CITIBANK, N.A., Third-Party Plaintiffs,
ESTATE OF MICHAEL HEISER, et al., Third-Party Defendants. THE BANK OF NEW YORK MELLON, JPMORGAN CHASE & CO., JPMORGAN CHASE BANK, N.A., SOCIÉTÉ GÉNÉRALE, and CITIBANK, N.A., Third-Party Plaintiffs,
CARLOS ACCOSTA, et al., Third-Party Defendants.
OPINION & ORDER
ROBERT P. PATTERSON, Jr., District Judge.
On August 29, 2012, Plaintiffs Jeremy Levin and Dr. Lucille Levin (the "Levin Plaintiffs" or the "Levins") and third-party Defendants Steven M. Greenbaum, et al. (the "Greenbaum Judgment Creditors"), Carlos Accosta, et al. (the "Accosta Judgment Creditors"), and the Estate of Michael Heiser, et al. (the "Heiser Judgment Creditors") (collectively the "Judgment Creditors") filed a joint motion for partial summary judgment on their claims for turnover of certain blocked assets among those that this Court has designated as the Phase Two Blocked Assets. (Judgment Creditors' Joint Mot. for Partial Summ. J. ("Phase Two Motion"), ECF No. 763.) These assets are currently held by the Defendants Bank of New York Mellon ("BNYM"); JPMorgan Chase & Co., JPMorgan Chase Bank (collectively, "JPMorgan"); Societe General ("SoGen"); and Citibank (collectively, the "Banks"). (Id. at 11.) JPMorgan and SoGen filed their opposition papers on October 15, 2012 ("JPMorgan Opp." and "SoGen Opp., " respectively); BNYM filed its opposition papers on October 16, 2012 ("BYNM Opp."); and Citibank filed its opposition papers on October 22, 2012 ("Citibank Opp.").
The Banks identified over two hundred commercial third-party Defendants - persons or entities with potential rights or claims to the Phase Two Blocked Assets. The Judgment Creditors served each of these potential third-party Defendants; however, only six answered the third-party complaints and claimed any interest in any of the Phase Two Blocked Assets. (See Decl. of Curtis C. Mechling in Supp. of J. Creditors' Joint Mot. for Partial Summ. J. on Claims for Turnover of Phase Two Blocked Assets ("Mechling Decl.") Exs. 24-27, Aug. 29, 2012, ECF No. 764.) Of those six commercial third-party Defendants, only one - the Central Bank of [REDACTED] ("CB") - filed a memorandum in opposition to the Judgment Creditors' summary judgment motion. (See [REDACTED] Although placed on notice by the Court, (see Letter to Sean Thornton, Office of Foreign Assets Control ("12/11/09 OFAC Ltr."); Letter to Harold Koh, Department of State ("12/11/09 State Dept. Ltr.")), the United States government has taken no position on this case nor appeared at any of the proceedings (see Tr. of June 21, 2011 H'rg ("Tr. 6/21/2011"), ECF No. 409, at 8-9; Tr. of Nov. 13, 2012 H'rg ("Tr. 11/13/12"), ECF No. 835, at 4-5).
For the reasons stated below, the Judgment Creditors' motion for partial summary judgment on their claims for turnover of the Phase Two Blocked Assets is granted.
The Court assumes familiarity with the factual and procedural history discussed in its March 4, 2011 Opinion and Order (the "Phase One Opinion") recognizing the Judgment Creditors' priority interest in the Phase One Assets and granting turnover of those assets. See Levin I , 2011 WL 812032, at *1-21. In brief summary, the Judgment Creditors each hold a valid, unsatisfied judgment against the Islamic Republic of Iran ("Iran"), awarded pursuant to either § 1605(a)(7) or § 1605A of the Foreign Sovereign Immunities Act ("FSIA") and registered in this District. Id . Seeking satisfaction of these judgments, the Judgment Creditors claim that they are entitled to turnover of certain assets held by the Banks and blocked by the United States government's Office of Foreign Asset Control ("OFAC") pursuant to various blocking regulations.
In its Phase One Opinion, the Court held that "the record demonstrates that the judgment [debtor], Iran, or its agencies or instrumentalities have an interest in" the Phase One deposit accounts and electronic fund transfers ("EFTs") blocked by OFAC and held at the Banks. Id. at *18, *21. Accordingly, the Court concluded, based on its reading of the Terrorism Risk Insurance Act ("TRIA"), FSIA § 1610(f)(1)(A), and the applicable sanctions regulations, that the Phase One Blocked Assets were subject to attachment and execution by certain Judgment Creditors in partial satisfaction of their outstanding judgments against Iran. Id. at *21. Though the Levin Judgment Creditors filed notice of appeal of the Court's Phase One Opinion, the appeal was never briefed and the parties withdrew their appeal shortly thereafter. (See Notice of Appeal, ECF No. 332; Order Granting Mot. to Withdraw Appeal, Aug. 10, 2011, ECF No. 415.)
The Court now turns to the Judgment Creditors' claim for turnover of the Phase Two Blocked Assets, which are identified in the declaration of Curtis Mechling, Esq., counsel for the Greenbaum and Accosta Judgment Creditors. (See Mechling Decl., Exs. 24-27.) Like the Phase One Blocked Assets, the Phase Two Blocked Assets held by the Banks consist of assets held at the Banks and blocked by OFAC. The Banks disclaim any interest in these assets but nevertheless raise issues concerning the Judgment Creditors' legal entitlement to turnover.
II. LEGAL STANDARD
Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party holds the initial burden of demonstrating that there is no genuine issue of material fact. F.D.I.C. v. Great American Ins. Co. , 607 F.3d 288, 292 (2d Cir. 2010). When the moving party has met this initial burden, the opposing party must set forth specific facts showing that there is a genuine issue for trial, and cannot rest on mere allegations or denials of the facts asserted by the movant. Davis v. State of New York , 316 F.3d 93, 100 (2d Cir. 2002). The Court must "view the evidence in the light most favorable to the non-moving party, and may grant summary judgment only when no reasonable trier of fact could find in favor of the non-moving party." Allen v. Coughlin , 64 F.3d 77, 79 (2d Cir. 1995).
A. Whether the Phase Two Assets Are Subject to Attachment and Turnover
Under the law of the case doctrine, where "a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case." Pepper v. United States , 131 S.Ct. 1229, 1250 (2011); see also Scottish Air Int'l, Inc. v. British Caledonian Group, PLC , 152 F.R.D. 18, 24-25 (S.D.N.Y. 1993) (stating that such prior decisions on a legal issue create "binding precedent"). Courts should only revisit prior rulings in a case if there are "cogent" or compelling' reasons" for doing so, such as "an intervening change in law, availability of new evidence, or the need to correct a clear error or prevent manifest injustice.'" Johnson v. Holder , 564 F.3d 95, 99-100 (2d Cir. 2009).
Here, in interpreting TRIA and the FSIA to dictate that all of the Phase One Blocked Assets - including blocked EFTs held by intermediary banks - were subject to attachment and turnover, the Court's Phase One Opinion held that
It is plainly the intention of TRIA and the FSIA to make blocked assets available to plaintiffs.... The nature and wording of TRIA... indicate[s] that Congress intended all blocked assets to be available for attachment by victims of terror. [... ] TRIA and the FSIA employ language subjecting any blocked assets to attachment in these circumstances.
Levin , 2011 WL 812032, at *18 (emphasis in original). As such, the Court determined that TRIA § 201 and FSIA § 1610(f)(1)(A) preempt contrary provisions in Article 4 of the Uniform Commercial Code ("UCC"), which would prevent a judgment creditor from executing on funds involved in wire transfers that have been initiated but not completed. Id . (citing Hausler v. JPMorgan Chase Bank, N.A. , 740 F.Supp.2d 525 (S.D.N.Y. 2010) ("Hausler I")); also compare TRIA § 201 and FSIA § 1610(f)(1)(A) with UCC § 4A-502.
The Phase Two Blocked Assets are of the same types as the Phase One Blocked Assets, and none of the relevant laws have been amended in the time since the Phase One Opinion was issued. As such, the law of the case doctrine suggests that the Court should similarly find that all of the Phase Two Blocked Assets are subject to attachment and turnover, including funds involved in wire transfers that were blocked before they reached the beneficiary's bank, provided that third parties have not asserted a cognizable interest in the blocked assets. See Pepper , 131 S.Ct. at 1250.
Nevertheless, the Banks argue that the Court should reconsider the holding of its Phase One Opinion with respect to the proceeds of blocked wire transfers held by intermediary banks in light of the Supreme Court's subsequent decision in Board of Tr. of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc. , 131 S.Ct. 2188 (2011) ("Stanford"), and applications of that decision by other district courts in Calderon-Cardona v. JPMorgan Chase Bank, N.A. , 867 F.Supp.2d 389 (S.D.N.Y. 2011), appeal docketed, No. 12-75 (2d Cir. Jan. 10, 2012), and Estate of Heiser v. Islamic Republic of Iran , 885 F.Supp.2d 429 (D.D.C. 2012), appeal docketed, No. 12-7101 (D.C. Cir. Oct. 5, 2012). But see also Hausler v. JPMorgan Chase Bank, N.A. , 845 F.Supp.2d 553 (S.D.N.Y. 2012) ("Hausler II"), appeal docketed, No. 12-1264 (2d Cir. Mar. 20, 2012).
The Court will first address whether blocked EFTs held by intermediary banks are subject to execution. The Court will then turn to whether the Phase Two Blocked Assets share a sufficient nexus with Iran to be subject to attachment and turnover.
i. Blocked Wire Transfers Held by Intermediary Banks Are Subject to Attachment and Turnover
1. Stanford and District Court Applications of Stanford
After this Court issued its Phase One Opinion, the Supreme Court decided Stanford, a patent law case that addressed, in part, the statutory interpretation of the word "of" within the context of ownership of patent rights. See 131 S.Ct. at 2193. Following the Stanford decision, several district court opinions have discussed its holding with respect to TRIA, of which three merit discussion at some length: Judge Denise L. Cote's opinion in Calderon-Cardona , 867 F.Supp.2d 389; Judge Victor Marrero's opinion in Hausler II , 845 F.Supp.2d 553; and Judge Royce C. Lamberth's opinion in Heiser , 885 F.Supp.2d 429.
Stanford itself did not interpret TRIA, but rather answered the question of whether the Bayh-Dole Act "displaces the norm" that the rights to an invention generally belong to the inventor in patent cases. Stanford , 131 S.Ct. at 2192. To answer that question, the Court interpreted the phrase "invention of the contractor." Id. at 2193. Stanford University argued that this phrase was most naturally read "to include all inventions made by the contractor's employees with the aid of federal funding, " a reading that would have entitled Stanford, as the employer, to rights over the patent at issue. Id. at 2196. The Court found Stanford's reading "plausible enough in the abstract, " but went on to note that "patent law has always been different, " and that, in patent law, the Court has rejected the idea that employment is sufficient to vest title to an employee's invention in the employer. Id. at 2196-7. Reading the Bayh-Dole Act against this backdrop, the Court went on to explain that "the use of the word of' denotes ownership" (internal citations omitted), and interpreted the statute to vest title to the patent in the employee rather than in his employer. Id. at 2196.
Subsequently, the Calderon-Cardona Court addressed the question of whether EFTs in which the Democratic Republic of North Korea and its main intelligence agency, the Cabinet General Intelligence Bureau, had an interest that could be attached by terrorism victims pursuant to TRIA § 201(a). 867 F.Supp.2d at 389. Though it disposed of the case by determining that North Korea was not a "terrorist party" as defined by TRIA, see id. at 394-95, the Calderon-Cardona Court nevertheless went further and determined that TRIA did not preempt state law definitions of property ownership, id. at 401. To reach this conclusion regarding the preemptive force of TRIA, it cited Stanford for the proposition that "the use of the word of' denotes ownership." Id. at 399 (citing Stanford , 131 S.Ct. at 2196). Finding no definition of "property" or "property ownership" in TRIA, the court looked not to OFAC blocking regulations, but rather to state law. Id. at 400.
By contrast, the Hausler II Court found that TRIA preempted state property law, reaffirming its previous ruling, Hausler v. JPMorgan Chase Bank, N.A. , 740 F.Supp.2d 525 (S.D.N.Y. 2010) ("Hausler I"). In so holding, it emphasized "the Supreme Court's focus on the pertinent statutory context in Stanford." Hausler II , 845 F.Supp.2d at 569. Looking at TRIA within its statutory context, the Hausler II Court first found that TRIA must be read in a way that harmonizes the statute with OFAC regulations, in that case, the Cuban Assets Control Regulations ("CACRs"). The "CACRs broadly define the range of Cuban property interests subject to being blocked under OFAC's direction, and the TRIA expressly makes those blocked assets available for attachment and execution to satisfy certain judgments." Id. at 562.
Second, the Hausler II Court held that TRIA represented "Congress's recognition that federal law must provide the substantive rules governing the recovery of terrorism related judgments." Id. at 563. Third, it held that the use of state property law to dictate the range of assets executable under the TRIA would lead to divergent outcomes depending on where the physical site of the blocking of EFTs was located, and could lead to a system that could be easily manipulated by intermediary banks, "who appear unconstrained in determining where to locate the accounts created when they block an EFT." Id . Finally, the Hausler II Court held that the interpretation preferred by the garnishee banks would mean that assets could be blocked by OFAC, but then could not be reached by terrorism victims for the enforcement of judgments, "frustrat[ing the] core objective" of TRIA, to satisfy judgments held by victims of terror. Id. at 564.
Finally, the Heiser Court opinion in the District Court of the District of Columbia, addressed the question of whether Iran had an ownership interest in blocked EFTs sufficient to permit judgment creditors to attach those assets. 885 F.Supp.2d at 429. The Court found that Congress intended for the federal government to control the disposition of assets of state sponsors of terror, and that therefore federal law preempted state law. Id. at 444-45. However, the Heiser Court did not look to the OFAC regulations to determine what ownership interest was required, relying, in part, on a governmental statement of interest submitted to that court. See id. at 441 (noting the government's argument that OFAC blocked assets are used for purposes other than attachment, including as a negotiating tool between nations, and that therefore the scope of attachment under TRIA should not be read coextensively with OFAC blocking regulations); (see also Statement of Interest of the U.S. at 12, Estate of Heiser v. Islamic Republic of Iran , 00 CV 2329 ...