In action to enforce damage judgment against Iranian real
estate in the U.S. , Second Circuit holds that Section 201(a) of Terrorism Risk
Insurance Act (TRIA) provides subject matter jurisdiction over post‑judgment
execution and attachment against a judgment‑debtor, even when judgment did not
name Iran as defendant
Ira Weinstein, a U.S. citizen, was severely injured during a
suicide bombing in Jerusalem in February 1996. The bomber belonged to Hamas
known as terrorist organization. Weinstein later died as a result of the
injuries. His widow and his children, as well as the co‑administrator of the
estate (Plaintiffs) sued the Islamic Republic of Iran as well as several
Iranian government agencies and officials which allegedly financed Hamas
attacks. Iran failed to appear, and the U.S. District Court for the District of
Columbia entered a $183 million default judgment.
The Plaintiffs registered the judgment in the U.S. District
Court for the Eastern District of New York in 2002, and identified the
Respondent Bank Melli Iran (Bank Melli) as a possible instrumentality of Iran.
The District Court eventually determined that Bank Melli’s accounts were
unattachable.
In 2007, one of the Plaintiff‑creditors, Jennifer Weinstein
Hazi moved for the appointment of a receiver pursuant to Fed. R. Civ. P. 69 and
New York Civil Practice Law and Rules Section 5228(a), to sell certain Bank
Melli real estate in New York. Hazi argued that Bank Melli had been designated
by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) a
“proliferat[or] of weapons of mass destruction,” and so its assets were frozen.
See Executive Order 13,382 (2005). Thus, the Bank Melli real estate was subject
to attachment under the Terrorism Risk Insurance Act of 2002 (TRIA), Section
201(a), Public L. No. 107‑297, 116 Stat. 2322, 2337, 28 U.S.C. Section 1610
note.
Bank Melli moved to dismiss contending [1] that the
attachment and sale violates the U.S.‑Iran Treaty of Amity, and [2] it
constitutes a taking without just compensation. The District Court granted the
Plaintiffs’ motion for appointment of a receiver to attach the property to
satisfy the prior judgment, but stayed the matter during the pendency of this
appeal. The U.S. Court of Appeals for the Second Circuit affirms.
The Court first addresses Bank Melli’s argument that the
District Court lacked jurisdiction. “The Foreign Sovereign Immunities Act
(FSIA), 28 U.S.C. § 1602 et seq., provides the exclusive basis for subject
matter jurisdiction over all civil actions against foreign state defendants, and
therefore for a court to exercise subject matter jurisdiction over a defendant
the action must fall within one of the FSIA’s exceptions to foreign sovereign
immunity. .... In the underlying action that gave rise to the judgment on which
Plaintiff now seeks to collect, the district court exercised subject matter
jurisdiction over Iran and the other defendants under 28 U.S.C. § 1605(a)(7),
which [1] abrogates immunity for those foreign states officially designated as
state sponsors of terrorism by the Department of State [2] where the foreign
state commits a terrorist act or provides material support for the commission
of a terrorist act and the act results in the death or personal injury of a
United States citizen. ... When such an exception applies, ‘the foreign state
shall be liable in the same manner and to the same extent as a private
individual under like circumstances....’ 28 U.S.C. § 1606 ...”
“Bank Melli was not itself a defendant in the underlying
action. However, the FSIA has a separate section, Section 1609, that provides
that, where a valid judgment has been entered against a foreign sovereign,
property of that foreign state is immune from attachment and execution except
as provided in the subsequent sections, Sections 1610 and 1611. 28 U.S.C. § 1609.
Section 201(a) of the TRIA, codified as a note to Section 1610 of the FSIA,
provides as follows: ‘Notwithstanding any other provision of law, and except as
provided in subsection (b), in every case in which a person has obtained a
judgment against a terrorist party on a claim based on an act of terrorism, or
for which a terrorist party is not immune under [28 U.S.C. § 1605(a)(7)], the
blocked assets of that terrorist party (including the blocked assets of any
agency or instrumentality of that terrorist party) shall be subject to
execution or attachment in the aid of execution in order to satisfy such
judgment to the extent of any compensatory damages for which such terrorist
party has been adjudged liable.’ TRIA § 201(a), 116 Stat. at 2337 (emphasis supplied).”
“The parties do not dispute that each of the elements of
Section 201(a) is satisfied here. Iran has been designated a terrorist party
pursuant to section 6(j) of the Export Administration Act of 1979, 50 U.S.C.
App. § 2405(j), beginning January 19, 1984, ... and therefore is a ‘terrorist
party’ as defined by TRIA § 201(d)(4), 116 Stat. at 2340. The district court in
the underlying action found jurisdiction under 28 U.S.C. § 1605(a)(7), and thus
Iran was not immune from jurisdiction in the original proceeding. ... Bank
Melli’s assets were ‘blocked’ as of October 2007, designated as such pursuant
to Executive Order 13,382 and 50 U.S.C. §§ 1701, 1702. Finally, Bank Melli
concedes that it is an instrumentality of Iran.” [Slip Op. 6‑8]
Bank Melli presents the novel response that TRIA Section
201(a) does not provide jurisdiction over an instrumentality of a sovereign
state when the instrumentality was not itself a party to the underlying tort
action. The Court disagrees. Section 201(a) clearly states that “in every case
in which a person has obtained a judgment against a terrorist party..., the
blocked assets of that terrorist party (including the blocked assets of any
agency or instrumentality of that terrorist party) shall be subject to execution
or attachment....” TRIA § 201(a) (emphasis added). If Bank Melli’s
interpretation were correct, the parenthetical language in Section 201(a) would
be superfluous because the instrumentality would itself have been a “terrorist
party” against whom the underlying judgment was issued. Therefore, it is clear
that Section 201(a) provides subject matter jurisdiction over post‑judgment
execution and attachment against a judgment‑debtor, even when held by an agency
or instrumentality which is not named in the judgment.
Bank Melli next challenges the constitutionality of TRIA as
applied to this case. The underlying judgment in this case dates from 2002.
TRIA was enacted later in 2002, and Bank Melli was designated a “proliferat[or]
of weapons of mass destruction” only years later. According to the Bank, the
court should not apply TRIA retroactively. Again the Court disagrees.
TRIA merely overruled the Supreme Court’s opinion in First
Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 627‑28
(1983) (Bancec). There the Supreme Court found that “duly created
instrumentalities of a foreign state are to be accorded a presumption of
independent status.” Id. at 627. This ruling had nothing to do with the
rendering of the judgment itself. TRIA simply renders a judgment more readily
enforceable against a related third party.
The Court then addresses Bank Melli’s arguments based on the
Treaty of Amity, Economic Relations and Consular Rights, U.S.‑Iran (August 15,
1955, 8 U.S.T. 899). Articles III and IV provide that both countries recognize
the juridical status of companies, and that property of citizens and companies
shall be protected. The intent of such treaties is to recognize the status of
companies in the signatory countries and thus put them on equal footing with
domestic companies. Such treaty provisions do not imply special protection of
any company’s assets.
After rejecting the remainder of Bank Melli’s arguments, the
Court grants the motion [1] to appoint a receiver to attach the property at
issue and [2] to sell it in partial satisfaction of the judgment against Iran.
Citation: Weinstein v. Islamic Republic of Iran, No.
09‑3034‑cv (2d Cir. June 15, 2010).
**** Mr. William B. Blanchard (“Bill Blanchard”) is a Real Estate Attorney with offices in St. Charles and Oakbrook Terrace, Illinois. Bill specializes in representing real estate clients for purchases and sales as well as home owner real estate tax assessment appeals. Mr. Blanchard is General Counsel for Gaia Title, Inc. a title insurance agency and settlement services provider. The Company is owned by real estate attorneys who demand exemplary title insurance services and accurate and efficient settlement services. As General Counsel he is responsible for title examination, commitment and policy review, escrow settlement supervision and regulatory review. - Attorney Profile: https://solomonlawguild.com/william-b-blanchard%2C-esq - Attorney News: https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7
