Kirschenbaum v. 650 Fifth Ave. & Related Props.

257 F.Supp.3d 463

KIRSCHENBAUM, et al., Plaintiffs,

v.650 FIFTH AVENUE and Related Properties, Defendants.

09-cv-165 (KBF)

09-cv-166 (KBF)

09-cv-553 (KBF)

09-cv-564 (KBF)

10-cv-1627 (KBF)

11-cv-3761 (KBF)

12-mc-19 (KBF)

12-mc-20 (KBF)

12-mc-21 (KBF)

12-mc-22 (KBF)

13-mc-71 (KBF)

13-cv-1825 (KBF)

13-cv-1848 (KBF).

United States District Court, S.D. New York.

Signed June 29, 2017

Anna Elizabeth Arreola, Harry A. Chernoff, Sharon Cohen Levin, U.S. Attorney's Office, Brett J. Broadwater, Shawn Patrick Naunton, Zuckerman, Spaeder LLP, Robert Joseph Tolchin, New York, NY, Eric James Snyder, Kobre & Kim, LLP, Peter R. Kolker, Zuckerman, Spaeder, Goldstein, Washington, DC, for Plaintiffs.

Deborah Beth Koplovitz, Rosen Livingston & Cholst LLP, Peter I. Livingston, Rose & Livingston, Bension Daniel De Funis, Donald F. Luke, Jaffe & Asher LLP, New York, NY, Laina C. Lopez, Thomas G. Corcoran, Jr., Berliner, Corcoran & Rowe, LLP, Washington, DC, for Defendants.

OPINION & ORDER

KATHERINE B. FORREST, District Judge:

Before the Court are a number of separate actions (the "Judgment Creditor actions" or "turnover actions") brought by judgment creditors ("Judgment Creditors") of the Government of the Islamic Republic of Iran (the "Government of Iran"). The Judgment Creditors seek to enforce their judgments against property owned by defendants the Alavi Foundation ("Alavi" or the "New York Foundation")¹ and the entity of which it is the managing partner, 650 Fifth Avenue Company (the "650 Fifth Ave. Co." or the "Partnership"). Plaintiffs assert that both entities are the agencies, instrumentalities, or alter egos of Iran.² Each Judgment Creditor action asserts claims under one or both of § 201(a) of the Terrorism Risk Insurance Act ("TRIA"), 28 U.S.C. § 1610 note, or § 1610(b)(3) of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1610(b)(3). The actions were coordinated for pre-trial and trial purposes. After lengthy and highly contentious discovery, a trip to the Second Circuit and back, and most recently a bench trial, the matter is now ready for final disposition. For the reasons set forth below, the Court concludes that the Judgment Creditors are entitled to a determination in their favor on both claims.³

I. JURISDICTION

There are two separate bases for this Court's subject matter jurisdiction. All Judgment Creditors assert claims pursuant to TRIA. As the Second Circuit noted in Kirschenbaum v. 650 Fifth Avenue & Related Properties, § 201(a) of TRIA provides "an independent basis for subject matter jurisdiction over post-judgment execution and attachment proceedings against property held in the hands of an agency or instrumentality of the terrorist party, even if the agency or instrumentality is not itself named in the judgment." 830 F.3d 107, 132 (2d Cir. 2016). TRIA § 201(a) "clearly differentiates between the party that is the subject of the underlying judgment itself, which can be any terrorist party (here, Iran), and parties whose blocked assets are subject to execution or attachment, which can include not only the terrorist party but also 'any agency or instrumentality of that terrorist party.' " Id. at 132 (quoting Weinstein v. Islamic Republic of Iran, 609 F.3d 43, 49 (2d Cir. 2010) ).

FSIA § 1610(b) provides a separate basis for jurisdiction for all Judgment Creditor actions (except those brought by the Greenbaum and Peterson plaintiffs, who did not assert such a claim). In September 2014, this Court granted summary judgment on, inter alia, plaintiffs' FSIA claims under § 1610(a)(7) and § 1610(g). (ECF No. 1125.)⁴ In 2016, the Second Circuit vacated that decision. Kirschenbaum, 830 F.3d at 122–30. That vacatur left untouched plaintiffs' FSIA claims pursuant to § 1610(b)(3) —a section under which they had asserted claims but had not moved for summary judgment, and to which the appeal did not relate. This Court's May 4, 2017 decision addresses this procedural issue in some detail. (ECF No. 1649.) Indeed, while each Judgment Creditor asserting FSIA claims in a complaint had alleged one pursuant to § 1610(b)(3),⁵ plaintiffs' 2013 memorandum in support of summary judgment explicitly stated that the motion was not brought with respect to that provision. (ECF No. 871 at 13 n.13; see also ECF No. 1125 at 44 n.20.) Accordingly, as discussed more fully in this Court's May 4, 2017 decision, the § 1610(b) claims remain live and are resolved herein.

II. PROPERTY AT ISSUE

The property at issue includes:⁶

1. The real property at 650 Fifth Avenue in New York, New York in 650 Fifth Ave. Co.'s name, which was built in the late 1970s;

2. The New York Foundation's interest in the 650 Fifth Ave. Co.;

3. The real property at 2313 South Voss Road in Houston, Texas in the New York Foundation's name, which was acquired in 1988;

4. The real property at 55–11 Queens Boulevard in Queens, New York in the New York Foundation's name, which was acquired in 1991 and 1997;

5. The real property at 4836 Marconi Avenue in Carmichael, California in the New York Foundation's name, which was acquired in 1989;

6. The currently undeveloped real property at 4204 and 4300 Aldie Road in Catharpin, Virginia in the New York Foundation's name, which was acquired in 1990; and

7. The real property at 7917 Montrose Road and 8100 Jeb Stuart Road in Rockville, Maryland in the New York Foundation's name, which was acquired in 1981 and 1984.

In addition, plaintiffs seek to attach and execute on three bank accounts at Sterling National Bank held in the New York Foundation's name.⁷

Together, the property and bank accounts at issue in this action are referred to as the "Subject Properties."

III. PLAINTIFFS' CLAIMS

A chart setting forth the relevant Judgment Creditors' claims is attached as Appendix A to this Opinion. Following submission of this chart to the Court by the Judgment Creditors, (ECF No. 1811–1), defendants lodged three objections to the information included: (1) that the Hegna Judgment Creditors, who filed a show-cause order rather than a complaint, have not initiated a civil action against defendants in accordance with the Federal Rules of Civil Procedure;⁸ (2) that the Heiser Judgment Creditors have not brought an FSIA § 1610(b) claim; and (3) that because the two Greenbaum Judgment Creditor actions stem from the same underlying complaint, Case No. 09–cv–564 (which Assa Corporation ("Assa Corp.") removed from state court on January 21, 2009) should be dismissed. (See ECF No. 1831.)

The third objection has been resolved. The Greenbaum plaintiffs filed a consent motion to consolidate the two Greenbaum cases on June 21, 2017, thus mooting defendants' objection. (See ECF No. 1873.) The Court granted the motion on June 22, 2017. (ECF No. 1876.) Regarding the second objection, the Heiser Judgment Creditors responded to defendants' letter on June 16, 2017, arguing that their complaint refers to FSIA § 1610 generally in several paragraphs, that they have repeatedly asserted FSIA § 1610(b) claims since their action was filed four years ago, and that defendants have repeatedly acknowledged those claims. (ECF No. 1851.) The Court agrees that the Heiser Judgment Creditors have asserted a § 1610(b) claim.

The issue regarding the Hegna Judgment Creditors' action is unique.⁹ The Hegna plaintiffs commenced a proceeding by way of an order to show cause on March 27, 2009. That show-cause proceeding—resolved as part of this Opinion & Order—seeks overlapping relief with the other Judgment Creditors and on the same bases. In 2009, there was some initial back and forth before the then-presiding judge, the Honorable Richard J. Holwell, as to whether the Hegnas should be required to file a formal complaint. By order dated April 16, 2009, Judge Holwell concluded a complaint was unnecessary. (ECF No. 15 ("After further review of the Hegna plaintiffs' submissions, the Court sees no need for a complaint to be filed....").) Notably, the nature of the relief sought in Hegna plaintiffs' initial and amended orders to show cause parallels that sought by the other Judgment Creditors. (See SCO; SCO Mem., ECF No. 431–18; SCO Aff., ECF No. 431–19; Am. SCO.)¹⁰

The record shows no further discussion or motion practice regarding this issue, and the Hegnas' order to show cause has remained on the docket unresolved. At all times—and for years—the Hegnas participated actively in the litigation alongside the other Judgment Creditors: They were active in discovery, spoke at many conferences (often raising individual points), appealed various rulings, and participated in the bench trial. In short, while the Federal Rules of Civil Procedure require actions to be commenced with a summons and complaint, it would be manifestly unjust to deny that the Hegnas have a viable claim entitling them to the same relief as the other Judgment Creditors (no more, no less). And there is no doubt that the other Judgment Creditors as well as defendants have long been on notice of the Hegnas' claims.

As the relief is ultimately the same for both the TRIA and FSIA § 1610(b) claims, there is no distinction between the relief to which any Judgment Creditor is entitled based on whether such plaintiff alleged one or both claims.

IV. PROCEDURAL HISTORY

In 2014, the Court granted summary judgment to the Judgment Creditors and ordered the turnover of defendants' assets. (ECF No. 1125.) Defendants appealed, and, on July 20, 2016, the Second Circuit Court of Appeals reversed and remanded.¹¹ Kirschenbaum, 830 F.3d at 117, 141–42.

Following the Second Circuit's decision, the issues that remain to be decided are whether the Judgment Creditors are entitled to enforce their unsatisfied judgments against the Subject Properties pursuant to TRIA § 201(a) and FSIA § 1610(b)(3).¹²

A. The Trial

The Judgment Creditors' claims were tried to the bench simultaneously with a jury trial in the Government's civil-forfeiture action that began on May 30, 2017. The evidentiary record closed on June 22, 2017, and closing arguments in these turnover actions...