DocketNumber: Case No. 11-cv-05807-CRB
Citation Numbers: 360 F. Supp. 3d 972
Judges: Breyer
Filed Date: 12/19/2018
Status: Precedential
Modified Date: 7/25/2022
In this case, four groups of judgment creditors ("Plaintiffs" or "Judgment Creditors") who hold judgments against Iran seek to recover $ 17.6 million in assets ("the Blocked Assets") held by Third Party Plaintiffs Visa and Franklin. Although the assets are "due and owing to" Bank Melli, an Iranian instrumentality, they are blocked by executive orders issued by the President and regulations issued by the Department of the Treasury, Office of Foreign Assets Control ("OFAC"). The time has come for summary judgment. As the Court indicated at the motion hearing, it now GRANTS Plaintiffs' Motion for Summary Judgment (dkt. 172), and GRANTS Bank Melli's Motion to Stay (dkt. 180).
I. BACKGROUND
A. The Judgment Creditors
The Judgment Creditors are United States citizens, or representatives of their estates, who hold unsatisfied money judgments against Iran for injuries sustained in multiple terror attacks carried out with Iran's material support and assistance. See Acosta v. Islamic Republic of Iran,
*974Estate of Heiser v. Islamic Republic of Iran,
The Acostas' judgment is for $ 50,172,000.00; the Bennetts' judgment is for $ 12,904,548.00; the Greenbaums' judgment is for $ 19,879,023.00; and the Heisers' judgment is for $ 286,089,966.00. Mechling Decl. Ex. E. (dkt. 172-6) at 2-4.
B. Bank Melli
Bank Melli, Iran's largest financial institution, is wholly owned by Iran. Bennett,
1. EO 13,382
On June 28, 2005, acting pursuant to, inter alia, the authority vested in him by the International Emergency Economic Powers Act ("IEEPA"), Pub. L. No. 95-223, § 202,
On January 16, 2016, Bank Melli's Executive Order 13,382 designation was removed. See Changes to Sanctions Lists Administered by the Office of Foreign Assets Control on Implementation Day Under the Joint Comprehensive Plan of Action,
2. EO 13,599
On February 5, 2012, acting pursuant to the authority vested in him by, inter alia, IEEPA, President Obama issued Executive Order 13,599, which blocked "[a]ll *975property and interests in property of the Government of Iran, including the Central Bank of Iran, that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person." Blocking Property of the Government of Iran and Iranian Financial Institutions,
On January 16, 2016, the same day Bank Melli's Executive Order 13,382 designation was removed, OFAC published a "list of persons identified by OFAC as meeting the definition of the term Government of Iran or the term Iranian financial institution as set forth in, respectively, sections 560.304 and 560.321 of the ITSR." Office of Foreign Assets Control, List of Persons Identified as Blocked Solely Pursuant to Executive Order 13,599 at 1 (Aug. 15, 2018), available at https://www.treasury.gov/ofac/downloads/13599/13599list.pdf (hereinafter "13599 List"). OFAC identified Bank Melli on the 13599 List as an entity meeting the definition of Government of Iran.
3. EO 13,244
In addition, on November 5, 2018, the United States announced that it had added Bank Melli to the Specially Designated Nationals and Blocked Persons List ("SDN List"), designating it a Specially Designated Global Terrorist ("SDGT"). See Mechling Reply Decl. Ex. A (dkt. 184-2) at 2-3 & Ex. B (dkt. 184-3) at 3. President Bush issued Executive Order 13244 pursuant to, inter alia, IEEPA; that Order blocks all property of foreign persons designated as an SDGT. See Executive Order 13224,
C. The Blocked Assets
On April 15, 1991, Bank Melli applied to Visa International Service Association ("Visa International") to become a principal member in Visa International's "common bank card and/or travelers cheque program." Bailey Decl. Ex. 1 (dkt. 172-13). As part of the application, Bank Melli entered into a Membership Agreement with Visa International.
In or about April 1995, OFAC "informed Visa that, owing to sanctions imposed against [Iran], Visa could no longer accept transactions acquired by Bank Melli." Bailey *976Decl. ¶ 8. On July 4, 1995, Visa International informed Bank Melli that, because Bank Melli's accounts at Bank of New York had been frozen, Visa International transferred funds due to Bank Melli "to a separate settlement account." Bailey Decl. Ex. 3 (dkt. 172-15); Bailey Decl. ¶ 8. "Shortly thereafter, all ... transactions [acquired by Bank Melli] ceased, leaving certain sums owing to Bank Melli's settlement account." Bailey Decl. ¶ 8. On March 15, 1996, "Visa International invested the $ 2,570,465.26 then due and owing to Bank Melli in securities issued by the Institutional Fiduciary Trust."
On September 29, 2010, Visa International submitted an Annual Report of Blocked Property, as required by OFAC regulations. Bailey Decl. Ex. 6 (dkt. 172-18). In that report, Visa International reported to OFAC that it had blocked Visa International Special Account 5.
As of May 9, 2012, "the total amount due and owing (but not paid to) Bank Melli, including interest and return on investment, was $ 17,648,962.76." Bailey Decl. ¶ 10. On that date, "Visa deposited the outstanding funds due and owing to Bank Melli, plus interest and any return on investment, in the Court's Registry amounting to $ 17,648,962.76." Bailey Decl. ¶ 12; Mechling Decl. Ex. C; Notice (dkt. 89). Visa and Franklin have disclaimed any interest in the funds. Compl. (dkt. 16) ¶ 4.
D. Procedural History
Visa and Franklin brought this interpleader action "to obtain a determination as to which [of the groups of judgment creditors], if any, has priority with respect to [the Blocked Assets] to satisfy their judgments or their claims."
The Judgment Creditors have moved for summary judgment "directing the turnover to the Judgment Creditors of the [Blocked Assets] deposited with the Court's Registry." See MSJ at 2. Visa and Franklin also moved for discharge and for an award of $ 324,130.60 in attorneys' fees. See Fees Mot. (dkt. 175). Bank Melli opposed both motions, see Opp'n to Fees Mot. (dkt. 181); Opp'n to MSJ (dkt. 179) and moved to stay enforcement during appeal, *977see Motion to Stay. Plaintiffs replied and opposed the Stay, see Reply re MSJ (dkts. 185, 186); and Bank Melli filed a reply in support of its Motion to Stay, see Reply re Stay (dkt. 189). The Court granted the discharge and fees motion on the papers, see Order re Discharge and Fees (dkt. 190), though stayed disbursement of the fees until after hearing the Motion to Stay, see Order re Ex Parte Mot. (dkt. 192). Accordingly, the two pending motions are the Motion for Summary Judgment and the Motion to Stay.
II. LEGAL STANDARD
A. Summary Judgment
Summary judgment is appropriate "if the movant shows 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). A fact is material if it could affect the outcome of the case under governing law. Anderson v. Liberty Lobby, Inc.,
The party moving for summary judgment bears the initial burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett,
Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and show that there is a genuine issue for trial. Anderson,
B. Stay
Pursuant to Federal Rule of Civil Procedure 62(b) (formerly 62(d)
*978III. DISCUSSION
Plaintiffs argue that Bank Melli's legal challenges have been resolved, that all of the requirements of TRIA have been satisfied, and that the time has come for the Court to enter judgment in their favor. See generally MSJ. Bank Melli opposes, arguing that the Court should deny summary judgment because (A) the Blocked Assets are not "assets of" Bank Melli; (B) the Blocked Assets are not validly blocked; (C) there are other arguments that Bank Melli would like the Supreme Court to address; and (D) even if the Court is inclined to grant summary judgment, the Court should stay enforcement pending appellate review. See generally Opp'n to MSJ; Reply re Stay. This Order addresses each argument in turn, finding persuasive only the argument for a stay.
A. "Assets of" Bank Melli
Bank Melli's first argument opposing summary judgment is that TRIA requires ownership, and that Plaintiffs have not met their burden of demonstrating ownership here, because (1) there is a dispute over the ownership of the funds; and (2) Bank Melli's intangible right to receive payment is not a property right subject to this Court's jurisdiction. See Opp'n to MSJ at 7-11. The Court rejects both points.
1. Dispute over Ownership of Funds
Bank Melli argues that the Court cannot grant summary judgment for Plaintiffs because there is a genuine factual dispute about who owns the funds in the Court's Registry. See id. at 7-8. Bank Melli argues that "TRIA permits execution only against 'blocked assets of [a] terrorist party,' " and that the "evidence produced in discovery makes clear that Visa, not Bank Melli, is the owner of the funds." Id. at 7 (citing TRIA § 201(a) ). It bolsters this argument by adding that Visa's repeated assertion that the funds are "due and owing" to Bank Melli "necessarily means that Bank Melli does not already own them." Id. at 8 (citing United States v. Rodrigues,
Bank Melli has asserted repeatedly that it owns the funds. See, e.g., Opp'n to Fees Mot. at 12 (arguing that Visa and Franklin should not be awarded legal fees from the Blocked Assets because Visa an Franklin's "legal fees ... should be borne by them-not by Bank Melli"); Opp'n to MSJ at 19 (emphasis added) (seeking stay because if Blocked Assets "in the Court's registry are distributed to the hundreds of Judgment Creditors in this case, as a practical matter Bank Melli will never be able to recover them"); Bailey Decl. Ex. 4 (emphasis added) (Bank Melli 1/25/04 letter to Visa: "our funds for acquiring transactions made by VISA cardholders in Iran from 6/6/95 till cease of operations are $ 11,587,627.02 which are held with [Visa International]."). Visa, for its part, "claims no beneficial ownership in the $ 17,648,962.76 (and any interest thereon) in the Court's Registry." See Bailey Decl. ¶ 13.
Moreover, the Ninth Circuit held unambiguously at the motion to dismiss phase of the case that Bank Melli owns the funds. See Bennett,
That two Annual Reports list Visa as the "owner" of the funds does not undermine the conclusion that the Blocked Assets are Bank Melli's property. Those same reports identify the accounts as holding Bank Melli funds-explicitly in the 2010 report, and by referencing the same account name and value in the 2011 report. See Bailey Decl. Exs. 6, 7. Indeed, this Court just held, in granting discharge to Visa and Franklin, that "Bank Melli's contention that Visa is the true owner of the funds is foreclosed by the Ninth Circuit's ruling ... and by a common sense reading of the Annual Reports." See Order re Discharge and Fees at 6. Put in terms of summary judgment, there is no genuine dispute about the ownership of the funds, because a reasonable jury could not find that they belong to Visa. See Anderson,
2. Intangible Property Rights
Bank Melli next argues that even if it has a "contractual right to obtain payments from Visa and Franklin," which is a type of property that satisfies TRIA, "that would not mean that the blocked assets... are property of Bank Melli." Opp'n to MSJ at 8-9. Bank Melli asserts that this is an interpleader action relating only to the Blocked Assets-and that its "intangible property right" is beyond the jurisdiction of an interpleader. Opp'n to MSJ at 9-10 (citing, inter alia, State Farm Fire & Cas. Co. v. Tashire,
There are a few problems with this argument. As a threshold matter, the contention that Bank Melli's "contractual right to obtain payments" does "not mean that the blocked assets" are Bank Melli's property, see id. at 8-9, flies in the face of the Ninth Circuit holding to the contrary. See Bennett,
A further problem is that the State Farm case that Bank Melli relies on (the only controlling authority it cites), which held that "the fund itself is the target," was explaining that the district court could not take the occasion of an interpleader to enjoin claimants from litigating related suits in different forums. See State Farm,
Bank Melli also argues that its "intangible right to receive payment" is beyond the Court's territorial jurisdiction, because that right is located outside of the United States. Opp'n to MSJ at 10-11 (quoting Rubin v. Islamic Republic of Iran,
A Ninth Circuit case forecloses Bank Melli's territorial jurisdiction argument. In Peterson v. Islamic Republic of Iran,
B. Funds Invalidly Blocked
Bank Melli next argues that "TRIA allows execution only against 'blocked assets' " and that the funds here have not been not validly blocked. Opp'n to MSJ at 11 (quoting TRIA § 201(d)(2) ). It argues *981that EO 13,382 is no longer in effect, and that EO 13,599 violates its due process rights. Id. at 11-15. It did not respond to Plaintiffs' assertion in their Reply brief that EO 13,244 is a separate and independent ground for the Court to find the Blocked Assets blocked under TRIA. See Reply re MSJ at 14-15. The Court holds that the funds are validly blocked.
1. Executive Order 13,382 and Section 544.402
First, Plaintiffs concede that "Bank Melli's Executive Order 13,382 designation was removed," but they argue that it still has effect in this case, because of OFAC regulation
Unless otherwise specifically provided, any ... revocation of any provision in or appendix to this part or chapter or of any order, regulation, ruling, instruction, or license issued by or under the direction of the Director of the Office of Foreign Assets Control does not affect any act done or omitted, or any civil or criminal suit or proceeding commenced or pending prior to such ... revocation.
The section is not altogether clear, but it does not matter. While the JCPOA was the means by which the United States "commit[ted] to cease the application of, and to seek such legislative action as may be appropriate to terminate, or modify to effectuate the termination of, all nuclear-related sanctions," such as Bank Melli's 13,382 designation, see JCPOA annex II, §§ 4, 4.8.2 & attach. 3, available at https://www.state.gov/documents/organization/245320.pdf, it was OFAC that effectuated the revocation, see Changes to Sanctions Lists Administered by the Office of Foreign Assets Control on Implementation Day Under the Joint Comprehensive Plan of Action,
Bank Melli argues, however, that section 544.402 is "ineffective as contrary to TRIA."
Accordingly, the Blocked Assets are blocked by EO 13,382.
2. Executive Order 13,599
Second, Plaintiffs contend that EO 13,599 also operates to block the funds at issue here. See MSJ at 11-12. The same day that Bank Melli's EO 13,382 designation was removed, OFAC identified Bank Melli on the EO 13,599 List as an entity whose property was blocked. See
Plaintiffs demonstrate that the applicable blocking provision here, blocking "property and interests in property of the Government of Iran," is actually not the blocking provision that Congress mandated. See Reply re MSJ at 10 (citing EO 13599, 77 Fed. Reg. at 6660, § 7(d); 22 U.S.C. § 8513a(c) ("The President shall ... block and prohibit all transactions in all property and interests in property of an Iranian financial institution.") ). This does away with Bank Melli's discretion argument. Moreover, it appears that various entities did make findings specific to Bank Melli. See id. at 10-11 (collecting quotations from Congress, Secretary of Treasury, President Obama). Even the language cited above reflects that Bank Melli's 13,599 designation is based on OFAC's previous determination that Bank Melli continued to meet the definition of "Government of Iran" or "Iranian financial institution." See
Accordingly, the Blocked Assets are blocked by EO 13,599.
3. Executive Order 13,224
Third, Plaintiffs also assert that the very recent EO 13,224 blocks the assets in this case. See Reply re MSJ at 14-15. This is also true. See Mechling Reply Decl. Ex. A (dkt. 184-2) at 2 ("Bank Melli is being designated pursuant to E.O. 13224 for assisting in, sponsoring, or providing financial, material, or technological support for, or financial or other services to or in support of, the IRGC-QF, which was previously designated pursuant to E.O. 13224 on October 25, 2007."); 66 F.R. 49079 (blocking "all property and interests in property of the following persons ..." in light of "grave acts of terrorism ... constitut[ing] an unusual and extraordinary threat"). EO 13,224 is therefore a third independent basis for finding that the Blocked Assets are validly blocked.
C. Other Reasons
Bank Melli next argues that there are numerous arguments it could make for why the Court should deny summary judgment, but that the Ninth Circuit has already rejected those arguments. See Opp'n to MSJ at 15-17. "Bank Melli acknowledges that this Court is bound by the Ninth Circuit's decision."
Because Plaintiffs have satisfied the requirements of TRIA, and because Bank Melli's arguments are unpersuasive, the *983Court GRANTS summary judgment for Plaintiffs.
D. Stay of Enforcement
Lastly, Bank Melli asks the Court to stay any enforcement or execution until after appellate and Supreme Court review. See Mot. to Stay at 17-20. Bank Melli argues that it is entitled to a stay as a matter of right, and, in the alternative, that the Court should grant a discretionary stay.
The Court does not grant a discretionary stay, nor would it. But Bank Melli is entitled to a stay as a matter of right. Rule 62(b) states that "[a]t any time after judgment is entered, a party may obtain a stay by providing a bond or other security. The stay takes effect when the court approves the bond or other security and remains in effect for the time specified in the bond or other security." When a litigant complies with that rule by appealing "and post[ing] a supersedeas bond with the district court, it [is] entitled to a stay as a matter of right." See Masto,
Bank Melli argues that "the funds already deposited in the Court's registry satisfy [the Rule's] bond requirement." Mot. to Stay at 17 (citing Rachel v. Banana Republic, Inc.,
But the Rule does not actually require that the party seeking a stay be, or claim to be, the "owner" of the contested funds. See Fed. R. Civ. P. 62(b). What is important is that the funds deposited with the Court be sufficient to protect Plaintiffs from loss while the execution is stayed. See Rachel,
*984IV. CONCLUSION
For the foregoing reasons, the Court GRANTS the Motion for Summary Judgment and GRANTS the Motion to Stay.
IT IS SO ORDERED.
The Judgment Creditors have also been awarded punitive damages in the amount of $ 600,000,000.00 in aggregate. Mechling Decl. (dkt. 172-1) ¶ 8; Kremen Decl. (dkt. 172-7) ¶ 7.
See Fed. R. Civ. P. advisory committee note to 2018 amendment ("Subdivisions (a), (b), (c), and (d) of former Rule 62 are reorganized.... Subdivision 62(b) carries forward in modified form the supersedeas bond provisions of former Rule 62(d).").
The Court already rejected this authority at the motion to dismiss phase, ruling that these cases "support[ ] the uncontroversial point that having an interest in property is not necessarily the same thing as owning property." See Order Denying MTD at 14.
At the motion hearing, the Court raised the question of Plaintiffs' fees on appeal. However, in the absence of an applicable fee-shifting statute, Bank Melli need not deposit additional funds to cover such fees.