Foley v. Union De Banques Arabes et Françaises

683 F.Supp.3d 375

Virginia FOLEY, et al., Plaintiffs, v. UNION DE BANQUES ARABES ET FRANÇAISES, Defendant.

22-cv-1682 (ER)

United States District Court, S.D. New York

Signed July 20, 2023

Jason William Myatt, Robert L. Weigel, Gibson, Dunn & Crutcher, LLP, New York, NY, for Plaintiffs.

Benjamin S. Kaminetzky, Craig Thomas Cagney, Davis Polk & Wardwell LLP, New York, NY, for Defendant.

OPINION & ORDER

Ramos, District Judge:

Plaintiffs—thirty victims and family members of victims of acts of terrorism sponsored by the Syrian Arab Republic ("Syria"), all of whom have obtained final judgments against Syria for damages-bring this suit against Union de Banques Arabes et Françaises ("UBAF") for allegedly working with Syria to evade U.S. sanctions and thereby prevent Plaintiffs from executing on Syrian assets to satisfy Plaintiffs' judgments. Doc. 1 ("Compl."). Plaintiffs bring claims for constructive and actual fraudulent conveyance under New York law (N.Y. Debt. & Cred. L. § 273-a and § 276, respectively), as well as for turnover under both New York (CPLR § 5225) and federal law (Terrorism Risk Insurance Act ("TRIA"), 28 U.S.C. § 1610 note). Id.

Before the Court is UBAF's motion to dismiss Plaintiffs' complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6). Doc. 20. For the following reasons, UBAF's motion is GRANTED in part and DENIED in part.

I. BACKGROUND

A. Plaintiffs and the Underlying Actions Against Syria

Since 1979, the U.S. Department of State has continuously designated Syria a state sponsor of terrorism for its support of Hamas, al-Qaeda in Iraq ("AQI"), and other terrorist and militant organizations. Compl. ¶ 3. Syria has provided material support to AQI's terrorist activities, including by providing safe haven, weaponry, financial support, and apparent impunity. Id. ¶¶ 23-24. Syria is also alleged to have provided material support and encouragement to AQI and Hamas to carry out bombings. Id. ¶¶ 30, 35.

1. Roth v. Islamic Republic of Iran, No. 11-cv-1377 (D.D.C.)

In August 2001, Hamas detonated a bomb at a Sbarro restaurant in Jerusalem, Israel, which killed 15 people and injured 130 people. Id. ¶¶ 34, 36. Among those killed in the Jerusalem bombing was 15 year-old Malka Roth. Id. ¶ 36.

The estate and family of Roth (Estate of Malka Chana Roth, Frimet Roth, Pesia Roth, Rivka Roth Rappaport, Zvi Nehemia Roth, Shaya Elazar Roth, and Pinchas Moshe Roth) filed suit¹ against Syria, the Syrian Air Force Intelligence, Iran, and the Iranian Ministry of Information and Security in the D.C. District Court on July 28, 2011, pursuant to 28 U.S.C. § 1605A of the Foreign Sovereign Immunities Act ("FSIA"). Id. ¶ 37. The Roth plaintiffs were unable to serve the Syrian defendants until July 2, 2017.² Id. ¶ 38.

By September 28, 2017, the Syrian defendants had not responded, and the clerk of court entered a certificate of default against them. Id. The Roth plaintiffs moved for default judgment, and the D.C. District Court granted default judgment against the Syrian defendants on September 28, 2018, holding Syria jointly and severally liable for $18,691,019 in compensatory damages, and $56,073,057 in punitive damages. Id. ¶¶ 38-39. Syria was served with notice of the judgment on April 9, 2019. Id. ¶ 39. It has not made any payments on the judgment, which remains unsatisfied. Id. ¶ 40.

2. Foley v. Syrian Arab Republic, No. 11-cv-699 (D.D.C.)

On October 28, 2002, AQI shot and killed Laurence Foley, an agent with the United States Agency for International Development assigned to Amman, Jordan. Id. ¶ 19. On April 9, 2004, AQI abducted, tortured, and executed Staff Sergeant Keith Mathew Maupin after ambushing his convoy west of Baghdad, Iraq. Id. ¶ 20. On June 16, 2006, AQI abducted Private First Class Kristian Menchaca while he manned his observation post in Iraq and thereafter tortured and killed him. Id. ¶ 21.

The estates and families of Foley (Estate of Laurence Michael Foley, Virginia Foley, Megan Foley, Jeremie Foley Robenolt, and Laurence Michael Foley, Jr.); Maupin (Estate of Keith Matthew Maupin, Carolyn J. Maupin, and Keith Maupin); and Menchaca (Estate of Kristian Menchaca, Christina Menchaca, Pedro Menchaca, Maria Guadalupe Vasquez, and Julio Cesar Vasquez Menchaca) filed suit³ against Syria, the Syrian Military Intelligence, President Bashar al-Assad, and General Asif Shawkat in the D.C. District Court on April 8, 2011, pursuant to § 1605A of the FSIA. Id. ¶ 22. The Foley plaintiffs served defendants on January 22, 2015. Id.

By January 22, 2016, defendants had not responded, and the clerk of the court entered a certificate of default against them. Id. The D.C. District Court held a liability hearing on November 16 and 17, 2016 and granted default judgment as to liability on April 13, 2017. Id. A special master administered damages proceedings and issued a report and recommendation, which the court reviewed and awarded the Foley plaintiffs $109,279,469 in damages on December 21, 2017. Id. ¶ 26. Syria was served with notice of the judgment on June 20, 2018. Id. It has not made any payments on the judgment, which remains unsatisfied. Id. ¶ 27.

3. Thuneibat v. Syrian Arab Republic, No. 12-cv-20 (D.D.C.)

On November 4, 2005, AQI was responsible for suicide bombings of Radisson SAS, the Grand Hyatt, and the Days Inn hotels in Amman, Jordan, which killed 57 civilians and wounded 110 people. Id. ¶ 29. Among those killed in the Amman bombings were 9 year-old Lina Mansoor Thuneibat and 39 year-old Mousab Ahmad Khorma. Id.

The estates and family members of Thuneibat (Estate of Lina Mansoor Thuneibat, Nadira Thuneibat, Estate of Mansoor Al-Thuneibat, Omar Mansoor Thuneibat, and Muhammad Mansoor Thuneibat) and Khorma (Estate of Mousab Ahmad Khorma, Tariq Ahmad Khorma, Estate of Samira Fayez Khorma, Tatsiana Ahmad Khorma, and Zeid Ahmad Khorma) filed suit against Syria and the Syrian Military Intelligence in the D.C. District Court on January 9, 2012, pursuant to § 1605A of the FSIA and 28 U.S.C. § 1350 of the Torture Victims Protection Act of 1991. Id. ¶ 31. The Thuneibat plaintiffs successfully served defendants and filed proof of service on August 29, 2014. Id.

By December 5, 2014, defendants had not responded, and the clerk of court entered a certificate of default against them. Id. The Thuneibat plaintiffs moved for default judgment, and the D.C. District Court granted default judgment on March 1, 2016, awarding plaintiffs $347,622,009. Id. ¶¶ 31-32. Syria was served with notice of the judgment on September 22, 2016. Id. ¶ 32. It has not made any payments on the judgment, which remains unsatisfied. Id. ¶ 33.

B. Syria, UBAF, Sanctions, and the Alleged Scheme to Evade Sanctions

Under U.S. law, judgment creditors may execute on defendant debtors' assets to satisfy the creditors' judgments. See Fed. R. Civ. P. 69(a)(1) (providing that the procedure for execution to enforce a money judgment "must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies"). Plaintiffs allege that federal and New York law entitles them—as plaintiffs to Roth, Foley, and Thuneibat (together, "Plaintiffs' Underlying Actions") who have obtained money judgments—to execute on assets, held in the United States, of Syria and its agencies or instrumentalities, as well as those Syrian assets abroad held by an entity subject to the jurisdiction of New York. Compl. ¶¶ 42-49. Plaintiffs allege, however, that Syria and UBAF colluded to contravene U.S. sanctions to "intentionally obfuscate[ ] Syrian assets that were located within the United States" and prevent Plaintiffs from locating and executing on them. Id. ¶ 50.

1. The Sanctions Regime Against Syria

Since 2005, Syria has been the subject of sanctions aimed to halt its support for terrorism, hold it accountable for its role in destabilizing the region and creating international security problems, deprive it of resources needed to perpetrate violence against its citizens, and pressure the Syrian regime into a democratic transition. See id. ¶¶ 54-59. These sanctions prohibit any U.S. person from directly or indirectly providing services—including unlicensed processing banking transactions through financial institutions inside the United States—to Syria, its agencies or instrumentalities, or any entity owned or controlled by Syria. Id. ¶ 51. Thus, under the sanctions regime, transactions involving Syrian funds must be blocked when received by U.S. financial systems. Id. ¶ 61.

Moreover, the TRIA provides that plaintiffs with "a judgment against a terrorist party on a claim based upon an act of terrorism" may execute, or attach in aid of execution, "the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) . . . 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). Syria, as a designated state sponsor of terrorism, falls within the meaning of a "terrorist party." Compl. ¶ 47; see also TRIA § 201(d). Plaintiffs therefore allege they are entitled to attach and execute against Syria's blocked assets, including any Syrian funds received by U.S. financial institutions. Id. ¶¶ 48-49.

2. Syria's Evasion of U.S. Sanctions

Plaintiffs allege Syria was consequently aware that, pursuant to the U.S. sanctions regime, its funds would be blocked as soon as they were received by U.S. financial institutions. Id. ¶ 61. And Syria knew from prior litigation by victims of terrorism against it that, as soon as its assets were discovered, they could be subject to attachment and execution. Id. ¶¶ 61-62. Syria therefore set out to evade the sanctions. Id. ¶ 61. Specifically, Plaintiffs allege Syria partnered with a foreign financial institution, UBAF, to disguise its flow of assets into and out of the U.S. financial system to fraudulently avoid blocking and seizure. Id.

UBAF is a...