United States District Court, S.D. New York
OPINION & ORDER
KATHERINE B. FORREST, District Judge.
On August 27, 2014, the Acosta, Beer, and Kirschenbaum Plaintiffs-Claimants (the "ABK Plaintiffs") filed a motion for partial summary judgment as to the priority of their interests in the in rem defendant properties at issue in this proceeding vis-à-vis the interest of the Hegna Plaintiffs-Claimants (the "Hegnas"). (ECF No. 1205.) The motion became fully briefed on October 9, 2014. (ECF No. 1233.)
Both the Hegnas and the ABK Plaintiffs have unsatisfied judgments against the Islamic Republic of Iran ("Iran") and the Iranian Ministry of Information and Security ("MOIS"). Both filed Notices of Pending Action under 28 U.S.C. § 1605A(g). The ABK Plaintiffs argue that they are entitled to priority vis-à-vis the Hegnas because they filed their Notices of Pending Action first. The Hegnas argue that § 1605A(g) Notices of Pending Action are not priority-creating mechanisms as between competing judgment creditors.
For the reasons set forth below, the ABK Plaintiffs' motion is DENIED.
On December 17, 2008, the U.S. Government commenced this in rem civil forfeiture action with respect to assets owned by Assa Corporation, Assa Company, Limited (together, "Assa"), and Bank Melli Iran. (ECF No. 1.) On November 12, 2009,  the Government filed a Verified Amended Complaint adding assets owned by the Alavi Foundation ("Alavi") and the 650 Fifth Avenue Company (the "650 Fifth Ave. Co."). (ECF No. 51.) The 650 Fifth Ave. Co. is a partnership between Alavi and Assa in which Alavi owns a 60% interest and Assa owns a 40% interest. The in rem defendant properties at issue in this proceeding (the "Defendant Properties") include the real property located at 650 Fifth Avenue (the "Building"), various associated bank accounts, and seven real properties held in Alavi's name only. The Defendant Properties are also the subject of consolidated proceedings by private plaintiffs to enforce money judgments against Iran and MOIS.
This Court has ruled that all of the Defendant Properties are subject to forfeiture to the Government and/or turnover to the private plaintiffs. See In re 650 Fifth Ave. & Related Props., No. 08 CIV. 10934 KBF, 2013 WL 5178677 (S.D.N.Y. Sept. 16, 2013); In re 650 Fifth Ave. & Related Props., No. 08 CIV. 10934 KBF, 2014 WL 1516328 (S.D.N.Y. Apr. 18, 2014). These rulings-which are currently on appeal to the Second Circuit-do not address the relative priority of the parties' claims to the Defendant Properties, but that issue has been largely resolved via settlement. On April 16, 2014, the Court "so ordered" a settlement agreement in which all private plaintiffs except the Hegnas (the "Settling Judgment Creditors") agreed to permit forfeiture of the Defendant Properties in exchange for the Government's promise to distribute the net proceeds of such forfeiture to the Settling Judgment Creditors pro rata based on their respective compensatory damages awards. (See Stipulation and Order of Settlement dated April 16, 2014, ECF No. 1122.) The sole unresolved issue is the relative priority of the Hegnas' interest in the Defendant Properties. The Hegnas' interest must be considered vis-à-vis the interests of the Settling Judgment Creditors and, if necessary, vis-à-vis the Government's right to forfeiture.
On May 27, 2014, the Court invited the parties to file motions as to the priority of the Hegnas' interest vis-à-vis the interests of the Settling Judgment Creditors. (See ECF No. 1150.) Only the ABK Plaintiffs filed such a motion by the Court-ordered deadline. Accordingly, the Court considers the Hegnas' claim to the Defendant Properties only in relation to that of the ABK Plaintiffs.
The facts underlying the Hegnas' claim to the Defendant Properties are described in the Court's May 15, 2014 Opinion & Order. See In re 650 Fifth Ave., 2014 WL 1998233, at *1-2. The Hegnas' claim stems from their January 22, 2002 default judgment against Iran and MOIS. The outstanding amount of this judgment-which was enrolled with this Court on November 27, 2002-is $33, 618, 878.86 in compensatory damages. On December 29, 2008, the Hegnas obtained a Writ of Execution to enforce their judgment against the personal property of the judgment debtors in this district. (See Movants' Local Rule 56.1(a) Concise Statement of Material Facts ¶ 5, ECF No. 428.) On December 30, 2008, the Hegnas delivered this Writ of Execution to the U.S. Marshals Service in this district. (Id. ¶ 6.) On March 27, 2009, the Hegnas obtained a signed order to show cause seeking turnover and sale of the Building to satisfy their judgment. In re 650 Fifth Ave., 2014 WL 1998233, at *2.
On May 15, 2014, the Court denied the Hegnas' motion for summary judgment on their claim with respect to the Building. See In re 650 Fifth Ave., 2014 WL 1998233, at *1. The Court held that the Hegnas' judgment against Iran and MOIS was insufficient to obtain an ownership interest in the Building-which was in the name of the 650 Fifth Ave. Co., not Iran or MOIS. See id. at *6.
The ABK Plaintiffs, like the Hegnas, have unsatisfied judgments against Iran and MOIS, not the 650 Fifth Ave. Co., Alavi, or Assa. These judgments- totaling $976, 922, 000.00-were obtained in 2008 and 2011, and subsequently registered with this Court pursuant to 28 U.S.C. § 1963. (See Local Rule 56.1 Statement of Undisputed Material Facts in Support of [ABK Plaintiffs'] Motion for Partial Summary Judgment as to Priority of Claims ("ABK 56.1") ¶¶ 1, 2, 8, 13, 14, 17, 22, 23, ECF No. 1209.) On December 24, 2008-one week after the Government commenced this action-the ABK Plaintiffs each filed a Notice of Pending Action ("Notice") pursuant to 28 U.S.C. § 1605A(g). (See id. ¶¶ 3, 10, 19.) Each Notice states, in relevant part:
PLEASE TAKE FURTHER NOTICE THAT pursuant to Title 28, Section 1605A Subsection (g) of the United States Code, the filing of a notice of an action pending in a United States district court in which jurisdiction is alleged under Section 1605A... shall have the effect of establishing a lien of lis pendens upon any real property or tangible personal property that is subject to attachment in aid of execution, or execution, under Title 28, Section 1610 of the United States Code, located within the judicial district in which the notice of pending action is filed, and titled in the name of any Defendant or any entity controlled by any Defendant, if such notice contains a statement listing such controlled entity.
PLEASE TAKE FURTHER NOTICE that Defendant the Islamic Republic of Iran controls the following entities, without limitation: Bank Melli, Assa Corporation, Assa Company Limited, 650 Fifth Avenue Company, and Alavi Foundation.
(Declaration of Curtis C. Mechling in Support of [ABK Plaintiffs'] Motion for Partial Summary Judgment as to Priority of Claims ("Mechling ...