Levin v. Islamic Republic Iran

523 F.Supp.3d 14

Jeremy LEVIN and Dr. Lucille Levin, Plaintiffs,

v.ISLAMIC REPUBLIC OF IRAN, et al., Defendants.

James Owens, et al., Plaintiffs,

v.Republic of Sudan, et al., Defendants.

Judith Abasi Mwila, et al., Plaintiffs,

v.Islamic Republic of Iran, et al., Defendants.

Rizwan Khaliq, et al., Plaintiffs,

v.Republic of Sudan, et al., Defendants.

Civil Action No. 05-2494 (JEB)

Civil Action No. 21-126 (JEB)

Civil Action No. 21-127 (JEB)

Civil Action No. 21-128 (JEB)

United States District Court, District of Columbia.

Signed March 4, 2021

Suzelle M. Smith, Jennifer C. Davis, Howarth & Smith, Los Angeles, CA, for Plaintiffs.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

Plaintiffs in these consolidated cases have obtained nearly $1 billion in judgments against Iran in connection with terrorist incidents. Given the lack of certain countries’ assets in the United States that these and other victims could attach, Congress established the United States Victims of State Sponsored Terrorism Fund, which pays claimants a share of their recoveries. While waiting their turn, Plaintiffs here have seized on a novel idea: they seek to recover $10 million in separate funds that Wells Fargo Bank has blocked in connection with an Iranian front company's attempted purchase of a petroleum tanker. Having already been granted writs of attachment by courts in this district, several Plaintiffs now move for final orders of condemnation and recovery against the funds, which Wells Fargo still retains.

These Plaintiffs are not the only ones with their eyes on this prize. Three weeks before the first group filed their writs (in cases then pending before other judges), the United States initiated a separate forfeiture action against the funds. In fact, Plaintiffs learned of the existence of the funds as a result of that suit and the subsequent publicity. In the forfeiture case, which was assigned to this Court, the Government seeks to recover the money and deposit it in the Victims Fund, thereby maintaining the orderly and equitable process for compensating all claimants holding judgments against state sponsors of terrorism. Hoping to preserve its ability to obtain clean title in its forfeiture action, the Government intervened in the above-captioned cases and moved to quash Plaintiffs’ writs of attachment. Now presiding over those cases, this Court concludes that Plaintiffs’ writs cannot stand because Iran does not have an attachable property interest in the funds. The Court will accordingly grant the Government's Motions to Quash and deny Plaintiffs’ condemnation Motions.

I. Background

A. Factual Background

1. Plaintiffs’ Judgments

Although there are many individual Plaintiffs with unsatisfied judgments against Iran represented here, the four cases addressed by this Opinion can be grouped into two buckets. First, Plaintiffs’ claim in Levin, No. 05-2494, stems from the 1984 kidnapping and torture of Jeremy Levin by the Iran-backed terrorist group Hezbollah. See No. 05-2494, ECF No. 23 (Levin Report and Recommendation). Although these Plaintiffs have collected a portion of their judgment amounts, they are still owed over $15 million including post-judgment interest. Id., ECF No. 34-2 (Levin Mot. for Writ of Attachment) at 4.

Second, Plaintiffs in Nos. 21-126, 21-127, and 21-128 (the Owens Plaintiffs) are those injured and killed by al Qaeda's 1998 suicide bombings of U.S. embassies in Kenya and Tanzania. In 2011, Judge John D. Bates of this district found Iran liable for their damages because it had "provided material aid and support to al Qaeda." Owens v. Republic of Sudan, 826 F. Supp. 2d 128, 135 (D.D.C. 2011). He eventually entered judgments against Iran totaling nearly $1 billion. See Judgment, Owens, No. 01-2244 (D.D.C. Mar. 28, 2014), ECF No. 301; Judgment, Mwila v. Islamic Republic of Iran, 33 F.Supp.3d 36 (D.D.C. 2014), ECF No. 88; Judgment, Khaliq v. Republic of Sudan, 33 F.Supp.3d 29 (D.D.C. 2014), ECF No. 40. Those judgments remain entirely unpaid.

2. The Blocked Funds

The story of how the funds at issue here arrived on the scene and came to be blocked at Wells Fargo is set out in the affidavits and verified complaint submitted by the Government in its forfeiture action. See United States v. $2,340,000.00 Associated With Petroleum Tanker Nautic, No. 20-1139. Plaintiffs in our four cases do not challenge this account.

Sometime during 2019, two Iranian individuals with ties to government entities created a front company known as Taif Mining Services in order to facilitate transactions otherwise barred by U.S. sanctions. See No. 21-126, ECF No. 4-2, Exh. H (Forfeiture Complaint), ¶¶ 18, 26–27. It is undisputed that Taif qualifies as an agent or instrumentality of Iran, such that judgments against Iran are enforceable against it. Id., ECF No. 4 (Owens Mot. to Quash) at 14 n.9; Terrorism Risk Insurance Act, Pub. L. No. 107-297, § 201(a), 116 Stat. 2322, 2337 (2002). Shortly after its creation, Taif, which purported to be an Omani company, was used as a shell buyer in the purchase of an oil tanker from a Greek company known as Crystal Holdings. See Forfeiture Complaint, ¶¶ 29–30. The Iranians planned to use the tanker, named the Nautic, to illicitly transport oil in coordination with Iran's state-owned oil company. Id., ¶¶ 42–45.

Taif agreed to pay Crystal Holdings for the Nautic by using a British legal and consulting firm, Holman Fenwick Willan LLP (HFW), as escrow agent. See No. 21-126, ECF No. 4-1, Exh. E (Escrow Holding and Release Agreement). On or before September 10, 2019, Taif deposited $2.34 million with HFW as a 20% down payment. Id., Exh. A (Affidavit), ¶ 49. HFW then transferred that payment to Crystal Holdings without incident. In late October, Taif deposited the balance of the purchase price — $9,983,931.91 — with HFW and instructed it to initiate another electronic funds transfer (EFT) of that amount to Crystal Holdings. Id., Exh. F (Release Instruction). That EFT was not as successful; it was blocked midstream at Wells Fargo and never made it to Crystal Holdings. See Affidavit, ¶ 53. This is the sum that all parties seek in this case.

While cash transfers appear rather simple to those of us who manage such transactions with a single keystroke, much goes on that does not meet the eye, particularly when international transfers of large amounts are involved. To understand Wells Fargo's role requires some granular detail on the general mechanics of EFTs, which the D.C. Circuit has previously provided:

An electronic funds transfer is a series of transactions by which one party, called the "originator," transfers money through the banking system to another party, called the "beneficiary." See U.C.C. § 4A-104(a). Suppose O wants to transfer $100 to B. If O and B have an account at Bank X, then the transaction is simple. O can instruct Bank X, which will debit O's account and credit B's account with $100. But suppose O has an account at Bank X, and B has an account at Bank Y. Unless Banks X and Y are members of the same lending consortium, they must involve a third "intermediary" bank with which Banks X and Y both have accounts. The transaction would proceed as follows: (1) O instructs Bank X to pay B; (2) Bank X debits O's account and forwards instructions to the intermediary bank; (3) the intermediary bank debits Bank X's account, credits Bank Y's account, and forwards instructions to Bank Y; and (4) Bank Y credits B's account. The entire process occurs rapidly through a sequence of electronic debits and credits.

Heiser v. Islamic Republic of Iran, 735 F.3d 934, 935–36 (D.C. Cir. 2013).

Here, Wells Fargo was the intermediary bank in an EFT that went as follows:

As set out in the diagram, after receiving the nearly $10 million deposit and Release Instruction from Taif, HFW set into motion the EFT of that amount to Crystal Holdings. It instructed its bank, Lloyds Bank PLC, to make a payment to Credit Suisse (Switzerland) Ltd. for the benefit of Crystal Holdings. See No. 21-126, ECF No. 4-1, Exh. D (History Transaction Listing) at 1. To accomplish that transaction, Lloyds Bank sent a payment order to Wells Fargo, an intermediary bank at which both Lloyds Bank and Credit Suisse have accounts. The payment order instructed that Wells Fargo should debit Lloyd Bank's account and credit the account of Credit Suisse. Id. Credit Suisse would then credit the account of its customer Crystal Holdings.

Best laid plans often go awry, however, particularly when they are illicit and when the U.S. Treasury Department is alerted. One week before HFW initiated the EFT, Treasury's Office of Foreign Asset Control (OFAC) notified Wells Fargo that it might be "asked to process a transaction crediting the account it maintains for Credit Suisse" for the benefit of Crystal Holdings. Id., ECF No. 5 at ECF p. 40 (Declaration of Chantale Fiebig, Exh. 1). OFAC warned that such transaction would be blocked under federal law and that Wells Fargo would be required to suspend and report it. Id. In accordance with that instruction, Wells Fargo halted the transfer after debiting the account of Lloyds Bank and prior to crediting the account of Credit Suisse. See History Transaction Listing at 1–2. Shortly thereafter, OFAC issued blocking memoranda formalizing the blocking of the funds under various sources of law including section 203 of the International Emergency Economic Powers Act, 50 U.S.C. § 1702. See No. 21-126, ECF No. 4-2, Exh. G. (Blocking Memoranda). The funds remain held at Wells Fargo.

B. Procedural History

With a glittering prize of nearly $10 million sitting in limbo, a number of claimants have attempted to seize this bauble, filing myriad lawsuits. The Court recounts the relevant procedural history of those efforts in the order of when they were commenced.

1. Forfeiture Action

On May 1, 2020, the United States filed a forfeiture action, which was assigned to this Court; its caption notwithstanding, that suit seeks to arrest both the $2.34...