United States District Court, S.D. New York
OPINION & ORDER
KATHERINE B. FORREST, District Judge.
This Opinion resolves five pending motions: (1) a summary judgment motion filed by several judgment creditor groups against defendants Assa Corp. and Assa Co. Ltd. (collectively "Assa"), the Alavi Foundation ("Alavi" or "the Foundation"), and 650 Fifth Avenue Company ("650 Fifth Ave. Co.") (ECF No. 869); (2) a summary judgment motion filed by the judgment creditors against Alavi to turn over seven properties and three bank accounts held solely in Alavi's name (ECF No. 950); (3) a summary judgment motion filed by the Government against Alavi to forfeit its interest in the seven Alavi-only properties (ECF No. 956); (4) a summary judgment motion filed by the government against Alavi to forfeit its interest in the three Alavi-only bank accounts (ECF No. 1075); and (5) a petition filed by Alavi pursuant to 18 U.S.C. § 983(g) (ECF No. 1019).
First, the Greenbaum, Acosta, Beer, Kirschenbaum, Heiser, Havlish, Peterson, and Rubin judgment creditor groups have moved for summary judgment to turn over the building located at 650 Fifth Avenue, New York, New York ("the Building") and associated bank accounts-the assets at issue in the Court's Opinion & Order of September 16, 2013 (the "September 2013 Opinion")-under the Terrorism Risk Insurance Act of 2002, Pub. L. No. 107-297, 116 Stat. 2322 ("TRIA"), and the Foreign Sovereign Immunity Act ("FSIA"), 28 U.S.C. §§ 1330, 1602-11. (ECF No. 869.) That motion became fully briefed on October 11, 2013. (ECF Nos. 879, 938, 969.)
The judgment creditor plaintiffs have also filed a supplemental motion for summary judgment to turn over the seven properties and the three bank accounts owned in Alavi's name only, which the Court severed in the September 2013 Opinion, pursuant to TRIA and the FSIA. (ECF No. 950.) That motion became fully briefed on October 23, 2013. (ECF Nos. 977, 996.) On October 7, 2013, the Hegna judgment creditors filed a memorandum arguing that they are also entitled to turnover of all property owned by the defendants for largely the same reasons as those stated in the judgment creditors' motion. (ECF Nos. 954, 955.)
The Government has also filed a motion for summary judgment with respect to the same seven Alavi-only properties, seeking to forfeit the properties as traceable to violations of the International Emergency Economic Powers Act ("IEEPA") and traceable to property involved in money laundering. (ECF No. 956.) That motion became fully briefed on October 23, 2013. (ECF Nos. 979, 998.) The Government has also filed a motion for summary judgment to forfeit the three Alavi bank accounts. (ECF No. 1075.) That motion became fully briefed on January 29, 2014. (ECF No. 1086.)
For the following reasons, the Court GRANTS all four motions for summary judgment filed by the Government and the judgment creditors, and DENIES Alavi's petition pursuant to 18 U.S.C. § 983(g).
A. Factual Background
The Court assumes familiarity with the facts underlying this action, particularly the facts described in the September 16 Opinion. See In re 650 Fifth Ave. & Related Props., No. 08 Civ. 10934 (KBF), 2013 WL 5178677, at *6-16 (S.D.N.Y. Sept. 16, 2013) ("September 2013 Opinion"). The Court recites here only certain facts relevant to resolving the instant motions.
1. Facts Relevant to the Building at 650 Fifth Avenue
In 1973, Shah Mohammad Reza Pahlavi formed the Pahlavi Foundation as a New York not-for-profit corporation. (Corrected Local Rule 56.1 Statement of Undisputed Facts ("Gov't 56.1 I") ¶ 1; McReynolds Decl. Ex. 1, ECF No. 687.) At the Shah's direction, the Central Bank of Iran, Bank Markazi, loaned the Pahlavi Foundation approximately $42 million in order to acquire 650 Fifth Avenue, New York, New York, and to construct the Building on the property. (Gov't 56.1 ¶ 2; McReynolds Decl. Exs. 2, 3; Am. Compl. ¶ 24; Alavi Ans. ¶ 24.) Bank Markazi loaned the $42 million through Bank Melli Iran, a bank wholly owned by the Iranian government, which in turn loaned the funds to the Foundation. (Gov't 56.1 I ¶ 3; McReynolds Decl. Ex. 3; Am. Compl. ¶ 24; Alavi Ans. ¶ 24.)
In 1979, Ayatollah Ruhollah Khomeini ordered the formation of the Bonyad Mostazafan to manage property controlled by the revolutionary government. (Gov't 56.1 I ¶ 6; Lockard Decl. Ex. 1, at 1-3, ECF No. 686.) In 1980, the Pahlavi Foundation was renamed the "Mostazafan Foundation of New York" ("MFNY"). (Gov't 56.1 I ¶¶ 10-11; McReynolds Decl. Ex. 13.)
In July 1987, the Iranian Deputy Prime Minister and then-head of the Bonyad Mostazafan, Tahmasb Mazaheri, reported to the Prime Minister of Iran, Mir-Hussein Mousavi, about a tax situation relating to income generated by the Building. (Gov't 56.1 I ¶ 19; McReynolds Supp. Decl. Ex. 1.) Mazaheri discussed a potential solution to the tax issue with the Director General of Bank Melli, Majid Ghasemi, who promised to assist. (Gov't 56.1 I ¶ 21; McReynolds Supp. Decl. Ex. 1.) This solution called for the creation of an entity in New York that would own the Building and take responsibility for a Bank Melli loan, ultimately causing a transfer of $45 million to the "Islamic Republic of Iran Central Bank." (Gov't 56.1 I ¶ 20; McReynolds Supp. Decl. Ex. 1.) Mazaheri stated that this solution would "surely be beneficial to the Islamic Republic." (Gov't 56.1 I ¶ 21; McReynolds Supp. Decl. Ex. 1.)
In March 1989, Seyed Mohammad Badr Taleh, then the Managing Director of the Mostazafan Foundation of New York MFNY, proposed to Mazaheri that the MFNY lease the Building's retail space in order to avoid the tax. (Gov't 56.1 I ¶ 27; McReynolds Decl. Ex. 29.)
In May 1989, the MFNY, the Bonyad Mostazafan, and Bank Melli met in Iran to finalize an agreement for a partnership between Bank Melli Iran and the Foundation in New York. (Gov't 56.1 I ¶ 28; McReynolds Supp. Decl. Ex. 4.) At the meeting, it was decided that "Bank Melli Iran" would partner with "the New York Foundation." (Gov't 56.1 I ¶ 29; McReynolds Supp. Decl. Ex. 4.) To do so, Bank Melli Iran would create "two companies in Jersey Island, " and one of those companies would "become partners with the New York Foundation via the other company." (Id.) It was also determined that "all proceedings should be made with the presence of an agent from Bank Melli Iran." (Id.)
In July 1989, the Mostazafan Foundation entered into an agreement with Assa to form a partnership called the 650 Fifth Avenue Company. (McReynolds Decl. Ex. 37.) In August 1989, Issa Shahsavar Khojasteh, an assistant director for the Bonyad Mostazafan, wrote to Mohammed Bagherian, then head of the Bonyad Mostazafan, to request that Bagherian "endorse the partnership" between Assa, which he stated "belongs to Bank Melli, " and MFNY. (Gov't 56.1 I ¶ 30; McReynolds Decl. Ex. 31.)
The partnership between Assa Corporation and the Mostazafan Foundation was formed in October 1989. (Gov't 56.1 I ¶ 32; McReynolds Decl. Ex. 37.) In November 1989, Badr Taleh wrote to the General Director of Bank Melli to report that Assa Corp. was a partner in the ownership of the Building and that this arrangement would exempt Bank Melli from millions of dollars in taxes. (Gov't 56.1 I ¶ 34; McReynolds Decl. Ex. 111.) He also expressed his thanks to Mohammad Behdadfar, a member of Bank Melli's board, and to Mohammad Karjooravary, the president of Bank Melli's New York branch, because they had "truly done whatever possible to safeguard the interests of the Islamic Republic." (Id.)
In February 1990, Karjooravary described the 650 Fifth Ave. Co. partnership as intended to resolve tax issues related to the Building: he stated that the tax issue had been solved through the "efforts of the Foundation and bank officials in Tehran and New York." (Gov't 56.1 I ¶ 37; McReynolds Decl. Ex. 32.) A September 1990 telex describes a transfer of Assa (referred to as the "mother company") from indirect ownership by Bank Melli officials to ownership by Bank Melli itself. (McReynolds Decl. Ex. 109.)
In May 1991, Badr Taleh wrote a letter to the Ayatollah stating that Ambassador Kamal Kharrazi had told him that henceforth the Ambassador-not the Bonyad Mostazafan-would oversee the Foundation. (Gov't 56.1 I ¶ 63; McReynolds Decl. Ex. 80.) Badr Taleh also wrote, "[T]he Supreme Leader has made this decision with discernment, unique insight, and a thorough knowledge of all pertaining aspects." (Gov't 56.1 I ¶ 64; McReynolds Decl. Ex. 80.) Also that month, three of the Foundation's board members wrote to the Ayatollah that they would resign pursuant to instructions conveyed to them by Haj Mohsen Rafighdoost of the Bonyad Mostazafan, a representative of the Ayatollah. (Gov't 56.1 I ¶ 60; McReynolds Decl. Ex. 76.) That letter also stated that the "Foundation's interests... in truth belong[ed] to the people of Iran." (Id.)
In the 1990s, individuals with judgments against the Government of Iran filed civil lawsuits against the MFNY and the Bonyad Mostazafan. (Gov't 56.1 I ¶ 72; McReynolds Decl. Ex. 62.)
By August 1992, the MFNY had been renamed the "Alavi Foundation of New York." (Gov't 56.1 I ¶ 41; McReynolds Decl. Ex. 83.)
In December 1993, Bank Melli's Overseas Network Supervisory Department ("ONSD") expressed concern to the head of Bank Melli's New York office that an Assa director's affiliation with Bank Melli might be discovered. (Gov't 56.1 I ¶ 45; McReynolds Decl. Ex. 38.) The letter asked for an inquiry into whether "Mr. Naghshineh-the Assa Corp. New York Director whose affiliation with the Bank could easily be proven-could be replaced with another individual whose affiliation with the Bank could not be easily proven." (Id.)
From approximately 1996 to 2008, one employee, Mohammed Hassan Dehghani Tafti, represented Assa in the United States. (Gov't 56.1 I ¶ 53.) Tafti and Bank Melli officials exchanged emails in 2005 discussing the residence of the two purported then-owners of Assa Co. Ltd., Davood Shakeri and Fatemeh Aghamiri, residents of Iran. (Id. ¶ 54; McReynolds Decl. Exs. 44-49.)
From 1989 through 2008, when this action was filed, Alavi played an active and critical role in managing the Partnership and the Building, acting as the Managing Partner and overseeing all of the Partnership and Building's finances. (Gov't 56.1 I ¶ 85; McReynolds Decl. Exs. 37, 107.) The 1989 Partnership Agreement required the Foundation to administer the "day-to-day business and affairs of the Partnership" and stated that Alavi had the authority to execute instruments on behalf of and to bind the Partnership. (McReynolds Decl. Ex. 37.)
Between 1996 and 2008, the Building generated approximately $228, 217, 798 in gross rents for 650 Fifth Ave. Co. (Gov't Local Rule 56.1 Statement of Undisputed Facts ("Gov't 56.1 II") ¶ 1, ECF No. 958.) During those years, Alavi received over $50, 000, 000 in income from the Building through 650 Fifth Ave. Co. partnership distributions, and approximately $63, 461, 181 in gross income. (Id. ¶¶ 2-3.) Those partnership distributions do not include management fees that the partnership reimbursed to the Foundation.
Approximately 89% of all of Alavi's revenue was derived exclusively from rental income from the 650 Fifth Avenue Building. (Id.) The Alavi Foundation used these funds to pay for its activities, including paying for improvements to its real estate and other related expenses, such as property taxes. (Id.)
2. Facts Relevant to the Seven Alavi-Only Real Properties
Alavi owns seven other real properties at issue: one each in Houston, Texas ("the Texas property"); Queens, New York ("the New York property" or "the Queens property"), and Carmichael, California ("the California property"); and two each in Virginia ("the Virginia properties") and Maryland ("the Maryland properties"). (Am. Compl. 3-4; see generally Judgment Creditor Pls.' Local Rule 56.1 Statement of Undisputed Facts ("Judgment Creditors 56.1") ¶¶ 1-55, ECF No. 953.)
Five of Alavi's real properties-the Texas, New York, California, and Maryland properties-are leased pursuant to usage agreements that are, according to their terms, "deemed to be... contract[s]" to house educational and religious organizations. (Id. ¶¶ 1, 2, 9, 10, 13, 25, 27, 34, 37.)
Under the usage agreements, the tenant organizations that occupy those five properties undertake a number of obligations that confer various financial benefits on Alavi. The tenants assume responsibility for: (1) maintaining insurance on the leased facility on behalf of themselves and Alavi; (2) paying "any taxes and assessments that may be charged or imposed" on the property; (3) maintaining and making "all major and minor repairs"; and (4) paying "utility charges for water, sewer, gas, heat, electricity, power, air conditioning, telephone and other utility services" for the Texas and California Properties." (Id. ¶¶ 3-6, 14-16, 20-22, 28-31, 38-40.) Alavi also receives the benefit of any improvements made by the tenant organizations, because any alteration shall "be and become the absolute property of [Alavi] and may not be removed by" the tenant organization. (Id. ¶¶ 7, 17, 23, 32, 41.)
Alavi leases the Virginia properties to private individuals for traditional rent payments. (Id. ¶ 46.) On its 2011 tax statement, Alavi listed Virginia Property No. 1 as a "land investment." (Id. ¶ 47.) Alavi pays tax on the Virginia properties and has obtained appraisals of their value. (Id. ¶¶ 48-55.)
Alavi purchased the New York property in April 1997 for approximately $1, 057, 485, and the property is presently valued at approximately $17, 000, 000. (Gov't 56.1 II ¶¶ 6-7.) Between March 1996 and March 2008, Alavi made improvements to the New York property totaling $5, 997, 007. (Id. ¶ 8.)
The Mostazafan Foundation, which later became Alavi, purchased the Maryland properties in the 1980s for a total of $1, 720, 000. (Id. ¶¶ 6-7.) The properties were assessed at a total of $14, 716, 700 as of July 2013. (Id. ¶¶ 12-13.) Between March 2000 and December 2008, Alavi made improvements to the Maryland properties totaling $1, 118, 112. (Id. ¶ 14.)
Alavi purchased the Texas property in 1988 for $1, 100, 000. (Id. ¶ 14.) The property was assessed at $6, 229, 834 in 2012. Between March 1996 and March 2008, the Alavi Foundation made improvements to the property totaling at least $210, 000. (Id. ¶ 17.)
Alavi purchased the Virginia properties in 1990 for a total of $1, 285, 680. (Id. ¶¶ 18-19.) The Virginia Properties are presently estimated to have a total value of $675, 000. (Id. ¶¶ 21-22.) From 2002 through 2007, Alavi paid property taxes for the Virginia properties totaling $83, 683.34. (Id. ¶ 23.) Alavi calls the Virginia property an "investment." (Alavi's Resp. to Pls.' Statement of Undisputed Facts ("Alavi Seven Properties 56.1 I") Add'l Fact 6, ECF No. 978.)
The Mostazafan Foundation, which later became Alavi, purchased the California property in 1989 for $223, 375. (Gov't 56.1 II ¶ 24.) The property is presently appraised at $212, 000. (Id. ¶ 25.) Between March 1996 and March 2008, Alavi made improvements to the California property totaling $16, 630.98. (Id. ¶ 26.)
The Foundation allows a number of religious and educational not-for-profit organizations to use its properties rent-free as part of its mission to promote and support Islamic culture and the study of Persian language, literature, and civilization in the United States. (Alavi Seven Properties 56.1 I Add'l Facts 1, 4.) The usage agreements described above between Alavi and the tenants of the Texas, New York, California, and Maryland properties provide that the organizations will only use the space in furtherance of their cultural and religious purposes. (Id. 7-16.) For example, the Islamic Institute of New York and the Razi School share the New York property. (Decl. of James L. Bernard in Supp. Judgment Creditor Pls.' Joint Supp. Mot. for Summ. J., Ex. 2, ECF No. 951.) The Anjuman-E-Haideri organization runs the Texas property, and may only use it as a mosque, as a full-time school, and as a cultural and religious center. (Id. Ex. 1.) The Islamic Education Center and the Muslim Community Center share the Maryland property and use it as a mosque. (Id. Ex. 7.) Finally, the Qoba Foundation, a religious not-for-profit organization, uses the California property. (Id. Ex. 5.)
Alavi also states that it made payments for each of the seven properties prior to 1995. (Alavi & 650 Fifth Ave. Co.'s Resp. to Gov't Statement of Undisputed Facts ("Alavi Seven Properties 56.1 II") Add'l Facts 2-5, ECF No. 981.) Moreover, Alavi received management fees from 650 Fifth Ave. Co. for its work managing the partnership and the Building. (Id. 6.) Those fees, which in later years were approximately $30, 000 per month, were intended to reimburse the Foundation for the time and salary expense of its employees who dedicated some of their working hours to addressing Partnership and/or Building issues. (Id.) Alavi recorded management fees as reductions in its operating expenses. (Id.)
3. Facts Relevant to the Three Alavi-Only Bank Accounts
The remainder of the Alavi-only properties at issue are three bank accounts at Sterling National Bank-a "small business account, " a "money market account, " and a "pro checking account" (referred to as the "Sterling accounts"). (See generally Am. Compl. 4-5; Judgment Creditors 56.1 ¶¶ 56-84.) Alavi used the small business account to receive at least one payment from 650 Fifth Ave. Co., to issue student loans, to disburse 401(k) and payroll payments to its employees, and to make tax payments. (Id. ¶¶ 56-65.) Alavi used the money market account to receive regular distributions of hundreds of thousands of dollars each from 650 Fifth Ave. Co. and a life insurance credit for $1.5 million. (Id. ¶¶ 66-71.) Alavi used the pro checking account to receive regular deposits, totaling at a minimum almost one million dollars, and to make at least one payment to a credit card company. (Id.) Finally, Alavi regularly transferred hundreds of thousands of dollars from the money market account into the small business checking account and the pro checking account. (Id. ¶¶ 78-84.)
According to its tax returns, 650 Fifth Ave. Co. generated $228, 217, 798 in gross rents received from its tenants at the Building. (Gov't's Local Rule 56.1 Statement of Undisputed Facts ("Gov't 56.1 III") ¶ 22, ECF No. 1017; Alavi's Response to Gov't's Statement of Undisputed Facts ("Alavi Bank Accounts 56.1") ¶ 22, ECF No. 1087.) The Alavi Foundation declared $62, 633, 722 in income from 650 Fifth Ave. Co., although the parties disagree as to whether Alavi in fact received that income, as opposed to reporting it as income. (Gov't 56.1 III ¶ 23; Alavi Bank Accounts 56.1 ¶ 23.) Between fiscal years 1996 and 2009, the Alavi Foundation reported a total of $69, 387, 242 in gross income. (Gov't 56.1 III ¶ 24; Alavi Bank Accounts 56.1 ¶ 24.) While the Government asserts that 90% of the Alavi Foundation's total income during this time was derived exclusively from rental income in the Building, Alavi disputes this, on the basis that the funds identified in Alavi's tax forms do not reflect actual funds received by the Government in a given year. (Id.) The Government also asserts that contributions, gifts, and grants amounted to only 0.24 percent of the Alavi Foundation's income, but Alavi disputes this as well. (Gov't 56.1 III ¶ 25; Alavi Bank Accounts 56.1 ¶ 25.) Rather, according to Alavi, a partner such as the Foundation is obligated to report as income its distributive share of the partnership's income for a year, regardless of whether the partner actually received any distributions from the partnership. (Id. ¶¶ 23-25.)
B. Procedural History
In 2008, the Government commenced this in rem civil forfeiture action against assets owned by Assa. (ECF No. 1.) On November 12, 2009, the Government filed a Verified Amended Complaint adding assets owned by Alavi and 650 Fifth Ave. Co. (ECF No. 51.) (The Court refers to Alavi, 650 Fifth Ave. Co., and Assa together as "defendants.")
On September 16. 2013, the Court granted summary judgment to the Government with regard to their interests in the Building and the associated bank accounts. In re 650 Fifth Ave., 2013 WL 5178677, at *32, 36. The Court found that defendants had acted on behalf of the Government of Iran in violation of regulations promulgated pursuant to the IEEPA and that Alavi knew that Assa was a front company for Bank Melli Bank Melli and Iran. (Id. at *4, 58.) The Court then severed for further proceedings the question whether the Government was entitled to summary judgment on the seven real properties and the three bank accounts held in the name of Alavi only. (Id. at *8 & n.14, 82; see also Dec. 17, 2013 Order, ECF No. 1048.)
Following that decision, the Greenbaum, Acosta, Beer, Kirschenbaum, Heiser, Havlish, Peterson, and Rubin judgment creditor plaintiffs filed two motions for summary judgment arguing that they are entitled to turnover of all property owned by the defendants, including the Building at 650 Fifth Avenue and the associated bank accounts at issue in the September 16 Opinion, as well as the seven properties and three bank accounts held in Alavi's name only that were severed by the September 16 Opinion. (ECF Nos. 869, 950.) Those motions became fully briefed on October 11, 2013. (ECF Nos. 879, 938, 969, 977, 996.) On October 7, 2013, the Hegna judgment creditors filed a memorandum and accompanying letter arguing that they are also entitled to turnover of all property owned by the defendants pursuant to the FSIA for the reasons stated in the judgment creditors' motion, as well as for other reasons. (ECF Nos. 954, 955.)
The Government also filed motions for summary judgment seeking to forfeit the same seven Alavi-only real properties and three Alavi-only bank accounts as traceable to proceeds of IEEPA violations and traceable to property involved in money laundering. (ECF Nos. 956, 1075.) Those motions became fully briefed on January 29, 2014. (ECF Nos. 979, 998, 1086.)
Alavi also filed a petition pursuant to 18 U.S.C. § 983(g) arguing that forfeiture of the entire building at 650 Fifth Ave. would be unconstitutionally disproportionate. That motion became fully briefed on December 19, 2013. (ECF Nos. 1044, 1055.)
II. STANDARD OF REVIEW
Summary judgment may not be granted unless a movant shows, based on admissible evidence in the record before the Court, "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party bears the burden of demonstrating "the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986). On summary judgment, the Court must "construe all evidence in the light most favorable to the nonmoving party, drawing all inferences and resolving all ambiguities in its favor." Dickerson v. Napolitano , 604 F.3d 732, 740 (2d Cir. 2010).
Once the moving party has asserted facts showing that the nonmoving party's claims cannot be sustained, the opposing party must set out specific facts showing a genuine issue of material fact for trial. Price v. Cushman & Wakefield, Inc. , 808 F.Supp.2d 670, 685 (S.D.N.Y. 2011); see also Wright v. Goord , 554 F.3d 255, 266 (2d Cir. 2009). "[A] party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment, " because "[m]ere conclusory allegations or denials... cannot by themselves create a genuine issue of material fact where none would otherwise exist." Hicks v. Baines , 593 F.3d 159, 166 (2d Cir. 2010) (citations omitted); see also Price , 808 F.Supp.2d at 685 ("In seeking to show that there is a genuine issue of material fact for trial, the non-moving party cannot rely on mere allegations, denials, conjectures or conclusory statements, but must present affirmative and specific evidence showing that there is a genuine issue for trial.").
Only disputes relating to material facts-i.e., "facts that might affect the outcome of the suit under the governing law"-will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 586 (1986) (stating that the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts"). The Court should not accept evidence presented by the nonmoving party that is so "blatantly contradicted by the record... that no reasonable jury could believe it." Scott v. Harris , 550 U.S. 372, 380 (2007); see also Zellner v. Summerlin , 494 F.3d 344, 371 (2d Cir. 2007) ("Incontrovertible evidence relied on by the moving party... should be credited by the court on [a summary judgment] motion if it so utterly discredits the opposing party's version that no reasonable juror could fail to believe the version advanced by the moving party.").
A. The Judgment Creditor Plaintiffs' Motions for Summary Judgment
The undisputed facts show that defendants Assa, Alavi, and 650 Fifth Ave. Co. "are" the Government of Iran within the meaning of TRIA and the FSIA, thus subjecting defendants and the properties at issue to the jurisdiction of this Court. Furthermore, the seven real properties and three bank accounts are used for commercial activity and are not immune from execution pursuant to the terms of TRIA and § 1610(a)(7) of the FSIA. The judgment creditor plaintiffs are therefore entitled to summary judgment on all of their turnover claims.
1. Jurisdiction Under the FSIA and TRIA
Sections 1604 and 1605 of the FSIA establish the framework for determining whether a court may exercise jurisdiction over a foreign state or its agencies or instrumentalities. See Republic of Argentina v. Weltover, Inc. , 504 U.S. 607, 610-11 (1992). Under the FSIA, a "foreign state shall be immune from the jurisdiction of the Courts of the United States" unless one of several statutorily defined exceptions applies. 28 U.S.C. § 1604.
In a prior Opinion & Order, the Court denied defendants' motion to dismiss for lack of subject matter jurisdiction. In re 650 Fifth Ave. , 881 F.Supp.2d 533, 550 (S.D.N.Y. 2012) ("the July 2012 Opinion"). Accepting the facts alleged as true for the purposes of the motion to dismiss, the Court found the complaint to plausibly allege subject matter jurisdiction pursuant to the FSIA. First, plaintiffs had alleged sufficient facts to show that defendants "were" Iran on three grounds: pursuant to Treasury regulations and an Executive Order; under an "alter ego" theory; and as "agencies or instrumentalities" of Iran. See id. at 550-53. The Court then found that plaintiffs had alleged sufficient facts-because they sought turnover of assets to fulfill judgments in actions premised upon terrorist acts-to show that they met the requirements of § 1605A of the FSIA and section 201(d) of TRIA. See id. at 553 (citing 28 U.S.C. §§ 1605A, 1610(f)(1)). No facts proffered in connection with the parties' briefing on summary judgment raise a triable issue as to that determination.
2. Exceptions From Immunity From Execution Under the FSIA and TRIA
The Court now returns to the question of jurisdiction in the context of immunity from attachment or execution. Sections 1609 and 1610 describe when a court may exercise jurisdiction over an action for the execution of property. "[F]ederal courts lack subject matter jurisdiction over enforcement proceedings against the property of a foreign state unless a statutory exception to immunity applies.... In the context of an enforcement proceeding, § 1609 renders the property in the United States of a foreign state immune from execution or attachment, including garnishment, unless §§ 1610-11 provide otherwise." Weininger v. Castro , 462 F.Supp.2d 457, 467-68, 479 (S.D.N.Y. 2006). In this case, four exceptions apply: section 201 of TRIA, and §§ 1610(a)(7), 1610(g), and 1610(b) of the FSIA.
3. The Definitions of "Foreign State" and "Iran"
Before consulting each of those four provisions, the Court deals with a threshold question common to the three FSIA exceptions to immunity: whether the assets here owned by Assa, Alavi, and 650 Fifth Ave. Co. are "property... of a foreign state" within the meaning of those provisions. For the following reasons, they are indeed property of the foreign state of Iran.
a. Assa, Alavi, and 650 Fifth Ave. Co.'s Actions on Behalf of Iran
The fact that the Government of Iran wholly owns and controls Bank Melli is undisputed. (See Alavi & 650 Fifth Ave. Co.'s Resp. to Gov't's Statement ¶ 92, ECF No. 769.)
In the September 2013 Opinion, the Court found no issue of material fact as to whether Assa performed services for and acts on behalf of Bank Melli, and therefore for and on behalf of Iran. See In re 650 Fifth Ave., 2013 WL 5178677, at *23-24. For example, Assa acted as a front for Bank Melli to conceal the Bank's 40% ownership of 650 Fifth Ave. Co. by replacing a director affiliated with Bank Melli with others "whose affiliation with the Bank could not be easily proven, " and by transferring direct management of Assa's interests to indirect management through Mohammad Hassan Dehghani Tafti. (Gov't 56.1 I ¶¶ 45, 53.) Assa also managed the Bank's concealed interest in the Building, by managing "Bank Melli and therefore Iran's minority ownership in the assets at issue." In re 650 Fifth Ave., 2013 WL 5178677, at *23. Finally, Assa was a partner in an ownership structure for the Building that was designed to exempt Bank Melli from millions of dollars in taxes. (Gov't 56.1 I ¶ 34.)
Likewise, there is no issue of material fact as to whether Alavi performed services on behalf of Bank Melli and therefore on behalf of Iran. For example, Alavi acted as a managing partner of 650 Fifth Ave. Co. since its inception, in which position it provided partnership and building management services to Assa-and consequently to Iran. (See McReynolds Decl. Ex. 37, at 7-8, 21.) Alavi administered the day-to-day business of 650 Fifth Ave. Co. and exercised decision-making authority on Assa's behalf pursuant to the terms of their Partnership Agreement. (Gov't 56.1 I ¶¶ 85-88.) Alavi acted in this capacity with the knowledge that Assa was in fact a front for Bank Melli-having been present at the birth of Assa and having participated in the plan to create Assa to act on behalf of the Bank. (Gov't 56.1 I ¶ 30.) See In re 650 Fifth Ave., 2013 WL 5178677, at *14 (explaining that Alavi "knew that Assa was controlled by Iran at the outset and retained this knowledge until the ...