Sack, Circuit Judge:
In this litigation, judgment creditors of the Islamic Republic of Iran ("Iran") attempt to execute on $1.68 billion in bond proceeds allegedly owned by Iran's central bank. The Supreme Court has instructed that in an execution proceeding concerning a foreign sovereign's assets, any defense predicated on foreign sovereign immunity must rise or fall on the text of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602 et seq. See Republic of Argentina v. NML Capital, Ltd., ___ U.S. ___, 134 S.Ct. 2250, 2256, 189 L.Ed.2d 234 (2014). In the same decision, the Court explicitly abrogated decades of pre-existing sovereign immunity common law in light of its background understanding that most courts lack jurisdiction to reach extraterritorial assets in any event. See id. at 2257. But that is not so in New York.
The plaintiffs-appellants, judgment creditors of Iran and Iran's Ministry of Intelligence and Security ("MOIS"), obtained federal-court judgments against Iran and MOIS awarding the plaintiffs billions of dollars in compensatory damages. They now seek to enforce their judgments in part by executing on $1.68 billion in bond proceeds allegedly owned by Bank Markazi ("Markazi"), Iran's central bank. The plaintiffs allege that those bond proceeds were processed by and through a global chain of banks, specifically by Clearstream Banking, S.A. ("Clearstream") through JPMorgan Chase Bank, N.A. ("JPMorgan"), in the name of Banca UBAE, S.p.A. ("UBAE"), on behalf of Markazi (collectively, "the defendants" or "the defendant banks"). The plaintiffs further allege that the bond proceeds are denominated as United States dollars ("USD") and held in cash in Clearstream's account at JPMorgan in New York City, rendering the assets subject to this Court's jurisdiction and a turnover order.
The defendant banks respond that there is no cash to turn over: The bond proceeds are in fact recorded as book entries made in Clearstream's Luxembourg offices and reflected as a positive account balance showing a right to payment owed by Clearstream to Markazi through UBAE. The defendants argue that this fact is fatal to the plaintiffs' turnover claims because federal courts lack jurisdiction to order the turnover of a foreign sovereign's extraterritorial assets. Lastly, the defendants posit that the plaintiffs released their non-turnover claims in separate settlement agreements reached between several of the plaintiffs, on the one hand, and Clearstream or UBAE, on the other.
In a single order, the district court (Katherine B. Forrest, Judge) granted the defendants' motions to dismiss and for partial summary judgment in favor of the defendants on all claims in dispute. We affirm that decision in part, vacate it in part, and remand for further proceedings.
The plaintiffs-appellants are, or represent persons who have been adjudicated in a federal court to be, victims of Iranian-sponsored terrorism. They obtained judgments from the United States District Court for the District of Columbia against Iran and MOIS pursuant to §§ 1605(a)(7) and 1605A of the FSIA, and were awarded a total of approximately $3.8 billion in compensatory damages. Confidential Appendix ("C.A."
The plaintiffs contend that through a series of fraudulent transactions, these banks managed to process billions of dollars in bond proceeds ultimately owed to Markazi. According to the plaintiffs, the fruit of those transactions is a pool of cash traceable to the Markazi-owned bond proceeds and held by Clearstream at JPMorgan in New York City. Because much of this dispute turns on the nature and location of the bond proceeds, we review the processing of those assets, and previous attempts to obtain turnover of similar assets, in some detail.
Like many large financial institutions, Markazi invests in foreign sovereign bonds. Id. at 701. Many of the bonds purchased by Markazi were issued pursuant to prospectuses that require the purchaser
In 1994, Markazi opened a direct account with Clearstream in Luxembourg. Id. at 117-18. Thereafter, Clearstream received bond payments into its New York-based JPMorgan correspondent account on behalf of Markazi; Clearstream then credited Markazi's account in Luxembourg with a corresponding right to payment. In 2008, apparently because of increasing scrutiny of Iranian financial transactions, Markazi stopped processing its bond proceeds through Clearstream directly and instead began doing so through an intermediary bank: UBAE. Id. at 699-700. In January 2008, UBAE opened a customer account with Clearstream in Luxembourg — account number 13061. Id. at 118-19. Shortly thereafter, Markazi arranged for Clearstream to transfer the Markazi account balance at Clearstream in Luxembourg to the UBAE account. Id. at 118, 434.
Clearstream continued to receive bond proceeds in New York on behalf of Markazi, but pursuant to the terms of the documentation directing the Markazi account transfer, Clearstream credited UBAE account number 13061 with a corresponding right to payment. Id. at 701. In June 2008, apparently due to increasing attention, Clearstream notified UBAE that it had blocked UBAE account number 13061 and transferred the balance of that account to a "sundry blocked account" — account number 13675. Id. at 683-84. That account, which remains blocked, is at the center of the present dispute.
Clearstream has previously been the focus of an attempt by judgment creditors of Iran to obtain turnover of Markazi-linked assets. See generally Peterson v. Islamic Republic of Iran, No. 10-cv-4518-KBF, 2013 WL 1155576, 2013 U.S. Dist. LEXIS 40470 (S.D.N.Y. Mar. 13, 2013) ("Peterson I"), aff'd, 758 F.3d 185 (2d Cir. 2014). Many, but not all, of the plaintiffs in the case at bar attempted in an earlier litigation to enforce part of their judgments by executing against approximately $2 billion in Markazi-owned bond proceeds allegedly held by Clearstream at Citibank in New York City. See C.A. at 671. Those plaintiffs successfully obtained a judgment from the United States District Court for the Southern District of New York (Katherine B. Forrest, Judge) ordering the turnover of $1.75 billion in cash denominated in USD and held in New York City by Clearstream at Citibank on behalf of Markazi and UBAE. Peterson I, 2013 WL 1155576, at *2, *35, 2013 U.S. Dist. LEXIS 40470. The district court's decision in that case did not address the plaintiffs' related fraudulent-conveyance claims concerning an additional $250 million in bond proceeds allegedly transferred by Markazi and UBAE to UBAE's customer account at Clearstream in Luxembourg. See id. at *3-4, *28 n.14, 2013 U.S. Dist. LEXIS 40470, at *46-48, *117 n.15.
While Markazi unsuccessfully appealed the district court's turnover order in Peterson I,
Of relevance here, the Clearstream settlement agreement released Clearstream from "any and all past, present or future claims or causes of action ... whether direct or indirect" relating to:
Id. at 903.
The Clearstream settlement agreement did, however, reserve the following claims to the Peterson I plaintiffs:
Id. at 905 (emphasis omitted).
The UBAE settlement agreement similarly released UBAE and its "beneficiaries" from "any and all liability, claims, causes of action, suits, judgments, costs, expenses, attorneys' fees, or other incidental or consequential damages of any kind, whether known or unknown, arising out of or related to the Plaintiffs' Direct Claims against UBAE," except for those specifically listed in the agreement. Id. at 1648. The agreement defined "Plaintiffs' Direct Claims" as those brought in Peterson I "for damages against UBAE with regard to certain assets transferred prior to the initiation of the [t]urnover [a]ction and valued at approximately $250,000,000.00 ... including, but not limited to, claims for
The UBAE settlement agreement also contained a carve-out provision by which the "[p]laintiffs agree[d] that any future claim against UBAE for the Remaining Assets shall be limited to turnover only"; the plaintiffs "waive[d] all other claims against UBAE for any damages regarding the Remaining Assets whether arising in contract, tort, equity, or otherwise." Id. at 1648. The agreement defined "Remaining Assets" as "assets [that] remain in an account at Clearstream[] [in] a UBAE customer account, that are beneficially owned by Bank Markazi." Id. at 1647.
On December 30, 2013, the plaintiffs filed a complaint in the United States District Court for the Southern District of New York alleging that Clearstream held an additional $2.5 billion in Markazi-owned bond proceeds not at issue in Peterson I. See id. at 3, 28. On April 25, 2014, the plaintiffs filed an amended complaint specifically alleging that UBAE's "blocked sundry account" at Clearstream reflected a balance of approximately $1.68 billion, and that Clearstream held a corresponding amount of cash at JPMorgan in New York City. Id. at 687. The amended complaint named Iran, Clearstream, JPMorgan, Markazi, and UBAE as defendants, seeking: (1) declaratory relief identifying Markazi as the beneficial owner of the assets at issue, id. at 720-21; (2) rescission of fraudulent conveyances under New York Debtor and Creditor Law ("DCL") §§ 273a, 276(a), against Iran, Markazi, Clearstream, and UBAE, id. at 721-25; (3) turnover of the $1.68 billion in assets at issue under New York Civil Practice Law and Rules ("C.P.L.R.") §§ 5225, 5227 and § 201(a) of the Terrorism Risk Insurance Act ("TRIA"), against Clearstream, Iran, JPMorgan, Markazi, and UBAE, id. at 725-27; (4) rescission of fraudulent conveyances under DCL §§ 273-a, 276, 278 and common law, against Clearstream and Markazi, id. at 728-29; and (5) unspecified equitable relief against each defendant, id. at 729.
On April 9, 2014, the district court (Katherine B. Forrest, Judge) granted an ex parte application for an order directing the clerk of the district court to issue a writ of execution with respect to any Markazi-owned property in the possession of JPMorgan. Id. at 104-05. The district court thereafter held a hearing to address the defendants' argument that the writ was improper because the Clearstream correspondent account at JPMorgan contains "nothing ... except cash, and the cash turns over in billions of dollars every day, so there's no possibility the cash in the account can be identified to any defendant," including Markazi. Id. at 792. The district court thereupon vacated the order issuing the writ. Id. at 793, 800.
The plaintiffs moved to reinstate the order and the defendants responded with various motions seeking dismissal of the amended complaint. Clearstream moved to dismiss on the ground that the assets were located in Luxembourg, and therefore immune from execution under the FSIA. Clearstream also argued that the plaintiffs released all non-turnover claims against Clearstream under their settlement agreement. Markazi moved to dismiss on similar jurisdictional grounds. JPMorgan moved for partial summary judgment on the plaintiffs' turnover claims on the ground that it possessed no assets owned by Markazi. Finally, UBAE moved to dismiss for want of subject-matter jurisdiction, and for partial summary judgment on the plaintiffs' non-turnover claims on the ground
The parties' motions were accompanied by a voluminous record.
Clearstream also submitted evidence concerning its JPMorgan correspondent account. For example, it produced a chart documenting its account balance at JPMorgan for each day in October 2012, during which the Clearstream correspondent account balance did not exceed $817,959,813.65, and was frequently negative. Id. at 1957. Clearstream also submitted a declaration executed by Mathias Papenfuß, then Head of Operations for Clearstream, id. at 1972, who stated: "Each business day Clearstream uses U.S. dollars deposited in the JPMorgan [a]ccount to pay its current U.S. dollar obligations. Each business day, approximately $7-9 billion flows into the JPMorgan [a]ccount, and each business day a roughly equivalent sum flows out." Id. at 1973. Papenfuß explained that "[t]he obligations credited to Clearstream by JPMorgan are booked as assets of Clearstream on Clearstream's balance sheet pursuant to applicable Luxembourg banking law and accounting rules." Id. "When Clearstream receives a payment in the JPMorgan [a]ccount on its own security entitlements, Clearstream credits the account of any customers in Luxembourg holding security entitlements against Clearstream relating to a security with the same [identification number]." Id. at 1974. Papenfuß corroborated Jonckheere's statement that "[n]o transfer of cash [was] made," adding that "Clearstream does not hold funds in the JPMorgan [a]ccount in relation to specific U.S. dollar obligations to specific customers." Id. Papenfuß concluded that "Clearstream never issued instructions to JPMorgan to transfer any funds received in the JPMorgan [a]ccount to the [Clearstream account in Luxembourg], and no such transfers occurred." Id. at 1976.
On September 19, 2014, the district court heard arguments on the defendants' motions, focusing in particular on the nature and location of the assets at issue. See Joint Appendix ("J.A."
On February 20, 2015, the district court issued a single opinion and order granting the defendants' various motions to dismiss and for partial summary judgment on all claims in dispute. Peterson v. Islamic Republic of Iran, No. 13-cv-9195-KBF, 2015 WL 731221, 2015 U.S. Dist. LEXIS 20640 (S.D.N.Y. Feb. 20, 2015) ("Peterson II") (construing each motion as one "for dismissal"). The district court first dismissed the plaintiffs' non-turnover claims against Clearstream, UBAE, and Markazi on the ground that those claims had been released by the Clearstream and UBAE settlement agreements. Id. at *6, 2015 U.S. Dist. LEXIS 20640, at *18-19 (dismissing the non-turnover claims against Clearstream); id. at *9, 2015 U.S. Dist. LEXIS 20640, at *28-30 (dismissing the non-turnover claims against UBAE); id. at *10, 2015 U.S. Dist. LEXIS 20640, at *30-31 (dismissing the non-turnover claims against Markazi as a "beneficiary" of UBAE under the UBAE settlement).
The district court also dismissed the plaintiffs' turnover claims on jurisdictional grounds, having found that the assets at issue are not in the United States:
Id. at *6, 2015 U.S. Dist. LEXIS 20640, at *20. That finding sufficed to require dismissal
The plaintiffs appealed. With respect to the non-turnover claims, they argue that the Clearstream and UBAE settlement agreements: (1) do not apply to many of the plaintiffs, including several who were not party to Peterson I, Pls.' Br. at 23; and, in any event, (2) did not release the non-turnover claims against Clearstream, UBAE, or Markazi, id. at 24-33. With respect to the turnover claims, the plaintiffs argue that the court has subject-matter jurisdiction because the assets at issue are (1) cash holdings located in New York, id. at 47-51; and (2) therefore subject to turnover under the TRIA, id. at 35-36, and the FSIA, id. at 61-66. The plaintiffs argue in the alternative that even assets "located abroad" may be subject to turnover pursuant to the court's exercise of in personam jurisdiction over the holder of the assets. Id. at 55.
With respect to the non-turnover claims, the district court granted Clearstream's motion to dismiss and UBAE's motion for partial summary judgment on the ground that the Clearstream and UBAE settlement agreements released those claims. "We review a district court's interpretation of a contract de novo." Seabury Constr. Corp. v. Jeffrey Chain Corp., 289 F.3d 63, 67 (2d Cir. 2002).
As to the turnover claims, "[w]e accord deferential review to a district court ruling on a petition for an order of attachment or execution under the FSIA." Walters v. Indus. & Commercial Bank of China, Ltd., 651 F.3d 280, 285 (2d Cir. 2011). "We review de novo legal conclusions denying [or granting] FSIA immunity to a foreign sovereign or its property," and factual findings for "abuse of discretion." NML Capital, Ltd. v. Republic of Argentina, 680 F.3d 254, 256-57 (2d Cir. 2012). "A district court is said to have abused its discretion if it has," inter alia, "made a clearly erroneous assessment of the evidence." Id. at 257 (internal quotation marks omitted).
The district court concluded that the Clearstream settlement agreement and the UBAE settlement agreement released the plaintiffs' non-turnover claims, including the fraudulent-conveyance claims, brought against those banks.
Before turning to the substance of the settlement agreements, however, we address first the plaintiffs' argument that many of them, including several who were not plaintiffs in Peterson I, did not agree to the Clearstream or UBAE settlement agreements and are therefore not bound by their provisions. See Pls.' Br. at 23 (arguing with respect to Clearstream); Pls.' Reply at 13-14 (arguing with respect to UBAE). Noting that this argument was not timely raised, the district court dismissed it on the ground that ninety-three percent of the Peterson I plaintiffs had agreed to the Clearstream settlement agreement and that figure surpassed "the percentage ... needed ... in order for the [Clearstream] settlement [agreement] to become effective" and binding on all of the
As an initial matter, the district court correctly observed that the plaintiffs belatedly raised this issue. See id., 2015 U.S. Dist. LEXIS 20640, at *25-26. Only after argument on the parties' motions did plaintiffs' counsel notify the district court by letter that not all of the Peterson II plaintiffs were parties to Peterson I, or therefore, the resultant Clearstream settlement agreement. J.A. at 154. Moreover, the plaintiffs' letter noted that many of the Peterson II plaintiffs who were Peterson I plaintiffs had not yet assented to the terms of the Clearstream settlement agreement. Id.
"An argument raised for the first time on appeal is typically forfeited." Katel Ltd. Liab. Co. v. AT & T Corp., 607 F.3d 60, 68 (2d Cir. 2010). This rule applies even if a party ultimately presents an issue to the district court in an untimely manner, after briefing and argument on the merits is complete. See Corsair Special Situations Funds, L.P. v. Nat'l Res., 595 Fed. Appx. 40, 43 (2d Cir. 2014) (summary order).
Nonetheless, "[t]he general rule that an appellate court will not consider an issue raised for the first time on appeal is not an absolute bar." Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C.V. v. Pemex-Exploración y Producción, 832 F.3d 92, 101 n.3 (2d Cir. 2016) (internal quotation marks omitted). Instead, a forfeited argument "may be reviewed for plain error." United States v. Gore, 154 F.3d 34, 41 (2d Cir. 1998). "To establish plain error, the [plaintiffs] must establish (1) error (2) that is plain and (3) affects substantial rights." United States v. Villafuerte, 502 F.3d 204, 209 (2d Cir. 2007). Then, "[i]f the error meets these initial requirements, we ... must consider whether to exercise our discretion to correct it, which is appropriate only if the error seriously affected the fairness, integrity, or public reputation of the judicial proceedings." Id. (internal quotation marks omitted).
We must first determine whether the plaintiffs in fact forfeited, rather than waived, their argument concerning applicability of the Clearstream settlement agreement. "[F]orfeiture is the failure to make a timely assertion of a right[;] waiver is the `intentional relinquishment or abandonment of a known right.'" United States v. Olano, 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993) (quoting Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 82 S.Ct. 1461 (1938)). The distinction is meaningful because a waived argument is ordinarily reviewed only "to avoid a manifest injustice," In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 133 (2d Cir. 2008), whereas, as noted, a forfeited argument "may be reviewed for plain error," Gore, 154 F.3d at 41.
We think that the plaintiffs forfeited, not waived, their argument. Nothing in the record or briefing suggests that plaintiffs "intentional[ly] relinquish[ed]," as opposed to mistakenly omitted, their argument. See Olano, 507 U.S. at 733, 113 S.Ct. 1770.
The district court did not plainly err with respect to those plaintiffs who were parties to Peterson I. As noted, the district court found that ninety-three percent of the Peterson I plaintiffs had agreed to the terms of the Clearstream settlement agreement, and that no Peterson I plaintiff had refused to sign. Peterson II, 2015 WL 731221, at *8, 2015 U.S. Dist. LEXIS 20640. The Clearstream settlement agreement plainly states that it "shall [be] effective" upon the agreement of "at least 80%" of the Peterson I plaintiffs. C.A. at 904-05. The plaintiffs' sole rebuttal is that the Clearstream settlement agreement "does not bind [non-signatory] [p]laintiffs." Pls.' Reply at 11 (citing C.A. at 902). We find nothing in the part of the record cited by the plaintiffs to support their assertion. Because the plaintiffs have not advanced any other rebuttals, or pointed us to other parts of the record, we cannot say that the district court committed an error "that is plain" with respect to this forfeited argument. Villafuerte, 502 F.3d at 209.
The district court did plainly err, however, with respect to those plaintiffs who were not parties to Peterson I. The plaintiffs argued, albeit belatedly, that several plaintiffs in this case were not parties to Peterson I, or therefore, the resultant Clearstream settlement agreement. J.A. at 154. The part of the district court's decision concerning the applicability of the Clearstream settlement agreement did not address this issue. See Peterson II, 2015 WL 731221, at *8, 2015 U.S. Dist. LEXIS 20640 (addressing only non-signatory Peterson I plaintiffs). The application of the Clearstream settlement to these non-party plaintiffs was plainly an error affecting those plaintiffs' substantial rights. See Villafuerte, 502 F.3d at 209. Moreover, it would "seriously affect[] the fairness" of judicial proceedings, id. (internal quotation marks omitted), were we to sanction an order errantly, and without apparent reason, binding several plaintiffs to a settlement agreement that arose from litigation to which they were not party. Accordingly, we vacate that part of the district court's order applying the Clearstream settlement agreement to the Peterson II plaintiffs who were not also plaintiffs in Peterson I.
Our plain-error review does not extend, however, to the plaintiffs' argument, made for the first time in reply, that many of the plaintiffs, including those who were not party to Peterson I, should be similarly excused from the reach of the UBAE settlement agreement. See Pls.' Reply at 13. This argument was never raised before the district court, even belatedly, see J.A. at 154 (addressing only the Clearstream settlement agreement), nor was it directly raised in the plaintiffs' opening appellate brief, see Pls.' Br. at 23 (same). The preceding analysis aside, "[w]e will not consider an argument raised for the first time in a reply brief." United States v. Yousef, 327 F.3d 56, 115 (2d Cir. 2003).
Turning to the substance of the settlement agreements, New York law governs our review. See C.A. at 908 (providing that the Clearstream settlement agreement shall be governed by New York law); id. at 1650-51 (providing that the UBAE settlement agreement shall be governed by New York law). Settlement agreements are "contract[s] and [their] meaning must be discerned under several cardinal principles of contractual interpretation." Brad H. v. City of New York, 17 N.Y.3d 180, 185, 951 N.E.2d 743, 746, 928 N.Y.S.2d 221
The Clearstream settlement agreement released "all past, present or future claims or causes of action ... arising out of, or relating in any way to" Clearstream "accounts numbered ... 13061 [the UBAE customer account] ... [or] 13675 [the sundry blocked account]." C.A. at 903. The settlement agreement excepted from that release "[g]arnishee [a]ctions" against Clearstream "regarding... efforts to recover any asset or property of any kind ... that is held by or in the name, or under the control, or for the benefit of, Bank Markazi or Iran ... in an action against ... Clearstream ... solely in its capacity as a garnishee." Id. at 905 (emphasis omitted). The district court properly concluded that these provisions released the plaintiffs' non-turnover claims against Clearstream.
Under New York law, a "garnishee" action is one for the "turnover" of "assets already within [the garnishee's] possession." Commonwealth of the Northern Mariana Islands v. Canadian Imperial Bank of Commerce, 21 N.Y.3d 55, 64, 990 N.E.2d 114, 120, 967 N.Y.S.2d 876 (2013). The plaintiffs' non-turnover claims, by contrast, involve more than obtaining the turnover of assets already within Clearstream's possession. For example, the plaintiffs' fraudulent-conveyance claims brought under DCL § 276 entail a showing of, inter alia, fraudulent intent. See Wall St. Assocs. v. Brodsky, 257 A.D.2d 526, 528-29, 684 N.Y.S.2d 244, 247-48 (1st Dep't 1999). The non-turnover claims brought against Clearstream therefore fall within the settlement agreement's broad release of "all" claims arising out of or relating to the Clearstream accounts at issue. C.A. at 903. The plaintiffs' argument that the release should be construed in their favor, Pls.' Br. at 22-23, 28, yields to an "explicit, unequivocal statement of a present promise to release [a party] from liability." Golden Pac. Bancorp v. FDIC, 273 F.3d 509, 515 (2d Cir. 2001) (internal quotation marks omitted); see also Vt. Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475, 807 N.E.2d 876, 879, 775 N.Y.S.2d 765 (2004).
The plaintiffs contend that the Clearstream settlement agreement released only claims relating to those "litigated in Peterson I" and "damages claims against Clearstream." Pls.' Br. at 29 (emphasis omitted). The plain language of the release provision suggests otherwise. The settlement agreement purported to release all claims "concerning" several "Covered Subjects," C.A. at 903 (emphasis omitted), a defined term that includes "any claims alleged against Clearstream by judgment creditors ... in Peterson [I]; or [] any account maintained at Clearstream ... including... accounts numbered ... 13061 [the UBAE customer account] ... [or] 13675 [the sundry blocked account]," id. (emphasis added). The plaintiffs' argument rests on the (we think mistaken) suggestion that the release of "all" claims applies only to "Peterson Direct Claims," a defined term that is distinct from "Direct Claims," also a defined term. Contrary to the plaintiffs' suggestion, only the former
The plaintiffs argue that their fraudulent-conveyance claims against Clearstream nonetheless qualify as "garnishee actions" under the settlement agreement's carve-out provision. The plaintiffs note that "judgment creditors can obtain turnover from garnishees by undoing fraudulent conveyances." Pls.' Br. at 30. Be that as it may, the relief that one can obtain from a fraudulent-conveyance action does not convert that claim into a "garnishee action," which, as previously noted, is a cause of action that seeks the turnover of assets already in the garnishee's possession. See N.Y. C.P.L.R. § 105(i) ("A `garnishee' is a person ... other than the judgment debtor who has property in his possession or custody in which a judgment debtor has an interest." (emphasis added)). Moreover, the Clearstream settlement agreement limits permissible "garnishee actions" to those in which Clearstream is named "solely in its capacity as a garnishee." C.A. at 905 (emphasis omitted).
The plaintiffs argue that this final provision encompasses their fraudulent-conveyance claims because it permits "an action in which ... Clearstream ... is named solely for the purpose of seeking an order directing that ... Clearstream ... perform an act that will have the effect of reversing a transfer between other parties that is found to have been a fraudulent transfer." Id. We disagree. The plaintiffs' fraudulent-conveyance claims against Clearstream allege more than a transfer "between other parties," including, for example, the allegation that Clearstream was an active "[c]onspirator[]" in the alleged fraudulent scheme.
We vacate, however, the district court's order granting UBAE's motion for partial summary judgment with respect to the plaintiffs' non-turnover claims brought against UBAE.
The UBAE settlement agreement "release[d] UBAE and all of its past, present and future ... beneficiaries ... from any and all liability, claims, causes of action, suits, judgments, costs, ... or other incidental or consequential damages of any kind ... arising out of or related to the [p]laintiffs' Direct Claims against UBAE." Id. at 1648. "Direct Claims" as defined in the UBAE settlement agreement includes "claims in Peterson [I] for damages against UBAE with regard to certain assets transferred ... and valued at approximately $250,000,000.00 ..., including, but not limited to, claims for fraudulent conveyance, tortious interference with the collection of a money judgment, and prima facie tort." Id. at 1646. The same provision refers to these Peterson I "Direct Claims" collectively as "the Turnover Action." Id. The UBAE settlement agreement also provides that the "[p]laintiffs agree that any future claim against UBAE for the Remaining Assets shall be limited to turnover only, and [the p]laintiffs waive all other claims against UBAE for any damages regarding the Remaining Assets." Id.
As indicated in a summary order published in tandem with this decision,
UBAE argues that under New York law, a claim seeking "turnover" is an action brought under C.P.L.R. Article 52, which provides "a procedural mechanism... rather than a ... substantive right." Mitchell v. Garrison Protective Servs., Inc., 819 F.3d 636, 640 (2d Cir. 2016) (emphases omitted). Although UBAE may be correct about the meaning of "turnover" as used in New York law, we do not think that this resolves what we conclude to be the ambiguity of that term as used by the parties in the UBAE settlement agreement. The question for us on appeal is not whether a turnover proceeding and fraudulent-conveyance claim are one and the same under New York law. It is, instead, what the parties meant by use of the word "turnover" as employed in the UBAE settlement agreement. We conclude that when the UBAE settlement agreement is viewed in its entirety, the meaning of the term is ambiguous.
We also note that, under New York law, a party may allege a fraudulent-conveyance claim within a turnover action brought under C.P.L.R. Article 52. See Gelbard v. Esses, 96 A.D.2d 573, 575, 465 N.Y.S.2d 264, 267 (N.Y. App. Div. 2d Dep't 1983) ("CPLR [§] 5225 may serve as the means to set aside a transfer made by a judgment debtor to defraud his creditors." (citation omitted)); see also Mitchell v. Lyons Prof'l Servs., Inc., 109 F.Supp.3d 555, 563 (E.D.N.Y. 2015) ("What C.P.L.R. §§ 5225 and 5227 provide, in contrast to a plenary action, is a procedural mechanism for attacking a fraudulent conveyance ..., colloquially known as `turnover proceedings.'"), aff'd sub nom. Mitchell v. Garrison Protective Servs., Inc., 819 F.3d at 640 (describing C.P.L.R. § 5225 as a "mechanism for avoiding a fraudulent transfer in New York").
UBAE might benefit from the plaintiffs' agreement to "release UBAE ... from ... causes of action ... related to the ... Direct Claims against UBAE." C.A. at 1648. In context, however, the meaning of "related to" is also ambiguous. It is certainly the case that both the Peterson I claims — i.e., the "Direct Claims" — and those at issue here concern related transactions, specifically, the allegedly fraudulent transfers of bond proceeds linked to Markazi. On the other hand, the plaintiffs in this litigation seek to recover proceeds related to a distinct set of bonds. Accordingly, it is not apparent to us that their fraudulent-conveyance claims here are necessarily "related to" the Peterson I Direct Claims.
Thus, although it is clear that the UBAE settlement agreement released UBAE from "any and all ... claims [or] causes of action," C.A. 1648, "for damages against UBAE with regard to [the assets at issue in Peterson I]," id. at 1646, the settlement's applicability beyond such claims is unclear. Because the question on a motion for summary judgment is "whether the contract is unambiguous with respect to the question disputed by the parties," Int'l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76, 83 (2d Cir. 2002), and "[a]n ambiguity exists where the terms of the contract could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire... agreement," Law Debenture Tr. Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458, 466 (2d Cir. 2010) (internal quotation marks omitted), the district court erred by granting UBAE's motion for partial summary judgment with respect to the plaintiffs' non-turnover claims.
UBAE argues that "[t]he definition of `Plaintiffs' Direct Claims' in the [UBAE settlement agreement] specifically includes the Peterson II fraudulent conveyance claims." UBAE Br. at 21. We disagree. The UBAE Settlement Agreement defines "Direct Claims" as those "in Peterson [I] for damages against UBAE with regard to certain assets [at issue in Peterson I] ... and valued at approximately $250,000,000.00 (the `Transferred Assets'), including, but not limited to, claims for fraudulent conveyance." C.A. at 1646. Although this provision clearly includes the Peterson I fraudulent-conveyance claims among the Peterson I "Direct Claims," it also plainly requires that those causes of action concern the assets at issue in Peterson I. The fraudulent-conveyance claims brought against UBAE in this litigation of course do not satisfy that requirement.
For the foregoing reasons, we vacate the district court's conclusion that the UBAE settlement agreement released the plaintiffs' non-turnover claims brought against UBAE and remand the case to the district court for further proceedings with respect to those claims.
The district court also determined that the UBAE settlement agreement also released the plaintiffs' non-turnover claims against Markazi. Peterson II, 2015 WL 731221, at *10, 2015 U.S. Dist. LEXIS 20640. We disagree. The UBAE settlement agreement released certain claims brought against UBAE and undefined UBAE "beneficiaries." C.A. at 1648. It made clear, however, that this release "does not impact the ability of any of the [p]arties to pursue claims against Clearstream, Citibank, Bank Markazi, [or] Iran." Id. at 1649. Whoever and whatever the parties meant to define as UBAE "beneficiaries," it seems clear that Markazi was not included.
The district court therefore erred by dismissing the plaintiffs' non-turnover claims, including the fraudulent-conveyance claims, brought against Markazi. Accordingly, we vacate that part of the district court's order and remand the case to the district court for further proceedings with respect to the plaintiffs' non-turnover claims brought against Markazi.
The plaintiffs seek to enforce their underlying judgments against Iran and MOIS by executing on $1.68 billion of Markazi-owned bond proceeds. The plaintiffs' claims seeking a turnover order to that effect rest, as an initial matter, on the nature and location of the bond proceeds. The plaintiffs contend that they are denominated as USD and held as cash in New York City at Clearstream's correspondent account at JPMorgan. The defendants argue that there is no cash; at most, Markazi owns, through UBAE, a right to payment from Clearstream in the amount of $1.68 billion as reflected on book entries located in Luxembourg. Whether the plaintiffs can obtain an order compelling one or several of the defendants to turn over the assets at issue depends first on the nature and location of the assets, and second on the court's jurisdiction for execution of those assets, whatever and wherever they are.
The plaintiffs insist that Clearstream holds the bond proceeds in New York City as cash in its correspondent account at JPMorgan. The district court disagreed, finding sufficient record evidence that the bond proceeds are not held as cash in New York City but are recorded as a right to payment in Luxembourg. Peterson II, 2015 WL 731221, at *6, 2015 U.S. Dist. LEXIS 20640 ("[JPMorgan] received proceeds relating to the [bonds], which it credited to a Clearstream account at [JPMorgan]. Whether it should have or should not have, Clearstream in turn credited amounts attributable to the [bonds] to the UBAE/Bank Markazi account in Luxembourg. The [JPMorgan] records are clear that
It is undisputed that Clearstream's correspondent account at JPMorgan was a general "operating account," C.A. at 1863, used to service transactions on behalf of many customers who are not parties to this litigation, id. at 1973-74, 2541; see also id. at 2834-35. Although Clearstream received bond proceeds into this general account, id. at 685, the account's USD holdings were not segregated by customer, id. at 2537-39. Moreover, no cash attributable to the Markazi-owned bond proceeds was transferred from Clearstream's correspondent account at JPMorgan to Markazi or UBAE. Id. at 1976. Clearstream instead used its general pool of cash to meet other obligations. Id. at 1865-66. As a result, approximately seven to nine billion dollars flowed in and out of the Clearstream correspondent account each day. Id. at 1973. Indeed, JPMorgan records show that this account frequently had a near-zero or negative end-of-day balance.
The plaintiffs' putative expert, Peter U. Vinella, attributed minuscule or negative end-of-day balances to industry-standard "[s]weeps." C.A. at 2422. Under this theory, JPMorgan commandeered the Clearstream correspondent account at the close of business, "invested [its funds] in very short-dated USD investments[,] and subsequently redeposited ... the USD [in the] JPMorgan [a]ccount the next day ..., essentially refilling the bucket." Id. (internal quotation marks omitted). Vinella opined that these sweeps "are not generally reflected on the customer's statement" so that "the funds remain in the bank account from the customer's perspective." Id. JPMorgan acknowledged that it indeed "employ[ed] an investment sweep mechanism during the 2008-2012 period that enabled it to pay overnight interest to Clearstream." Id. at 2541.
We nonetheless agree with the district court that "Vinella's argument that the money is somehow still there [does not] really work[]." J.A. at 88 (raising this concern during the September 19, 2014 argument). Even assuming that JPMorgan's sweeps used all cash holdings in the Clearstream correspondent account, JPMorgan established through bank records that "the end-of-day balances in the account that were available for overnight investment were never more than a small fraction of the $1.68 billion that make up the [assets at issue]." C.A. at 2541. In fact, the Clearstream correspondent account rarely had an end-of-day balance greater than $300 million, far short of the $1.68 billion sought by the plaintiffs. See J.A. at 80. JPMorgan may have swept all cash in the Clearstream correspondent account, but the plaintiffs have offered no evidence that those sweeps were performed specifically with Markazi's cash.
Moreover, Jonckheere, the JPMorgan account manager for Clearstream, offered an undisputed explanation for Clearstream's near-zero end-of-day account balances: "[JPMorgan] and Clearstream have an arrangement under which [JPMorgan]
Vinella separately posited that "Clearstream cannot hold or process USD in Luxembourg in any material amount." Id. at 2408. Maybe so. But it does not follow that Clearstream must be holding $1.68 billion in cash in New York City. Vinella's observation is entirely consistent with the undisputed record evidence that Clearstream received cash payments into a general pool, which was drawn down on a daily basis to service many customers' demands. Clearstream then caused a corresponding credit to be reflected in the Markazi, and later UBAE, account in Luxembourg as a right to payment equivalent to the bond proceeds that Clearstream received and processed in New York.
The location of that right to payment is determined by state law. See Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70, 83 (2d Cir. 2002); see also EM Ltd. v. Republic of Argentina, 389 Fed. Appx. 38, 44 (2d Cir. 2010) (summary order) (relying on state law to determine the location of property). Under New York law, the situs of an intangible property interest, such as the right to payment relevant here, is "the location of the party of whom performance is required by the terms of the contract." ABKCO Indus., Inc. v. Apple Films, Inc., 39 N.Y.2d 670, 675, 350 N.E.2d 899, 902, 385 N.Y.S.2d 511 (1976) (noting that where an intangible property interest is represented by a negotiable instrument, the physical location of that instrument determines the location of the property interest); see also Hotel 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303, 315, 926 N.E.2d 1202, 1210, 900 N.Y.S.2d 698 (2010) ("[W]here a creditor seeks to attach a debt (an intangible form of property) solely for security purposes (i.e., the debtor is subject to the court's personal jurisdiction), the situs of the debt is wherever the debtor is present."). In this case, the right to payment is reflected as a book entry or account balance maintained in Luxembourg by Clearstream, a Luxembourg entity. Thus, the asset the plaintiffs seek — a right to payment — is located in Luxembourg.
The plaintiffs advance several rebuttals, each presuming the validity of their position that Clearstream holds a segregated pool of $1.68 billion in cash traceable to the bond proceeds in New York. For example, the plaintiffs argue that "the empty act of making book entries to a Luxembourg account without an accompanying transfer did not alter the location of the Markazi-owned assets." Pls.' Br. at 49. That is neither controversial nor surprising: There was no accompanying transfer of cash to Markazi or UBAE. For similar reasons, the plaintiffs' contention that fraudulent conveyances have no legal effect is of no moment. This argument presumes "that [the] [d]efendants moved the [b]ond [p]roceeds to Luxembourg." Id. at 51. Not so. No bond proceeds were "moved," at least not as envisaged by the plaintiffs. Rather, cash flowed into the Clearstream correspondent account at JPMorgan, which was then used to meet other customers' demands. Markazi was made whole by its interest in the recordation of an equivalent right to payment in Luxembourg.
The nature and location of the asset here — a right to payment located in Luxembourg — distinguishes this case from Peterson I, where it was "undisputed" that Clearstream held a segregated pool of "$1.75 billion in cash proceeds of the bonds... in an account at Citigroup in New York." Id. at *2, 2013 U.S. Dist. LEXIS 40470, at *42. Indeed, in Peterson I the district court specifically found that "nearly $2 billion in bond proceeds [traceable to Markazi] is sitting in an account in New York at Citibank," which the court determined was far from a "fleeting or ephemeral interest[]." Id. at *24, 2013 U.S. Dist. LEXIS 40470, at *103. Here, by contrast, there never was a traceable or segregated pool of Markazi-owned bond proceeds held as cash in Clearstream's correspondent account at JPMorgan in New York City.
We conclude that the assets at issue are, therefore, represented by a right to payment in the possession of Clearstream located in Luxembourg. Accordingly, the district court properly granted JPMorgan's motion for partial summary judgment because JPMorgan is not in possession of any assets subject to turnover. Similarly, neither Markazi nor UBAE possesses any assets subject to turnover here because the asset at issue is in fact held by Clearstream and represented as a positive account balance in a "sundry blocked account" to which neither Markazi nor UBAE has access. C.A. at 684. We therefore turn to whether the principal asset at issue, a right to payment held by Clearstream and located in Luxembourg, is subject to execution.
The district court concluded that it lacked jurisdiction to order turnover because the principal asset at issue — a right to payment recorded and held in Luxembourg — is located outside the United States and, therefore, absolutely immune from execution under the FSIA. Peterson II, 2015 WL 731221, at *10, 2015 U.S. Dist. LEXIS 20640. Although the district court's assumption was reasonable in light of many judicial decisions suggesting as much, we think it was incorrect.
Before the FSIA, foreign sovereigns were generally afforded broad immunity from the jurisdictional reach of American courts. NML Capital, 134 S.Ct. at 2255. Foreign sovereign immunity was offered as "a matter of grace and comity ... not a restriction imposed by the Constitution."
The prevailing regime changed in 1976 with the enactment of the FSIA, a "comprehensive set of legal standards governing claims of immunity in every civil action against a foreign state." Verlinden, 461 U.S. at 488, 103 S.Ct. 1962. Since its enactment, courts have held that "the FSIA provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989); see also Weinstein v. Islamic Republic of Iran, 609 F.3d 43, 47 (2d Cir. 2010) ("The [FSIA] 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." (citation omitted)).
Section 1604 of the FSIA provides in general terms for foreign sovereign immunity: "[A] foreign state shall be immune from the jurisdiction of the courts of the United States and of the States." 28 U.S.C. § 1604. The law then subjects this limit on in personam jurisdiction to several exceptions. See id. §§ 1605-07. In this case, for example, the plaintiffs obtained their judgments against Iran and MOIS pursuant to § 1605A, C.A. at 1673-75,
In addition to jurisdictional immunity, the FSIA also provides foreign sovereigns so-called "execution immunity": Section 1609 states that, generally, "the property
TRIA, Pub. L. No. 107-297, § 201(a), 116 Stat. 2322, 2337-40 (2002) (codified at 28 U.S.C. § 1610 note); see also Kirschenbaum v. 650 Fifth Ave. & Related Props., 830 F.3d 107, 131 (2d Cir. 2016) ("The TRIA provides jurisdiction for execution and attachment proceedings to satisfy a judgment for which there was original jurisdiction under the FSIA if certain statutory elements are satisfied.").
The FSIA framework of immunities and exceptions is "comprehensive," NML Capital, 134 S.Ct. at 2255-56; see also Republic of Austria v. Altmann, 541 U.S. 677, 699, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004); Verlinden, 461 U.S. at 493, 103 S.Ct. 1962, and, therefore, supersedes the "pre-existing common law" of foreign sovereign immunity, Samantar v. Yousuf, 560 U.S. 305, 313, 130 S.Ct. 2278, 176 L.Ed.2d 1047 (2010). As the Supreme Court wrote in NML Capital, "any sort of immunity defense made by a foreign sovereign in an American court must stand on the Act's text. Or it must fall." 134 S.Ct. at 2256.
Comprehensive though it may be with respect to immunities and exceptions, the FSIA does not specify "the circumstances and manner of attachment and execution proceedings." EM Ltd. v. Republic of Argentina, 473 F.3d 463, 474 n.10 (2d Cir. 2007); see also Peterson v. Islamic Republic of Iran, 627 F.3d 1117, 1130 (9th Cir. 2010) ("The FSIA does not provide methods for the enforcement of judgments against foreign states, only that those judgments may not be enforced by resort to immune property.").
In New York, that law is C.P.L.R. § 5225,
N.Y. C.P.L.R. § 5225(b).
Relying on this provision, the plaintiffs seek turnover of Iran's right to payment in the amount of $1.68 billion, represented as a positive account balance and recorded on the books of Clearstream in Luxembourg. The district court concluded that this asset's location in Luxembourg is fatal to the plaintiffs' turnover claims. Peterson II, 2015 WL 731221, at *10, 2015 U.S. Dist. LEXIS 20640 ("The FSIA does not allow for attachment of property outside of the United States."). We disagree.
The FSIA does not by its terms provide execution immunity to a foreign sovereign's extraterritorial assets. See 28 U.S.C. § 1609 ("[T]he property in the United States of a foreign state shall be immune from attachment arrest and execution...." (emphasis added)). In NML Capital, the Supreme Court squarely rejected the argument that any common law execution immunity afforded to "a foreign state's extraterritorial assets" survived the enactment of the FSIA:
134 S.Ct. at 2257 (holding that § 1609 does not immunize "a foreign sovereign's extraterritorial assets" from post-judgment discovery).
The Court of Appeals accepted certification and, closely divided, "h[e]ld that a New York court with personal jurisdiction over a defendant may order him to turn over out-of-state property regardless of whether the defendant is a judgment debtor or a garnishee." Koehler v. Bank of Berm. Ltd., 12 N.Y.3d 533, 541, 911 N.E.2d 825, 831, 883 N.Y.S.2d 763 (2009). The court observed that "CPLR article 52 contains no express territorial limitation barring the entry of a turnover order that requires a garnishee to transfer money or property into New York from another state or country." Id. at 539, 883 N.Y.S.2d 763, 911 N.E.2d at 829. Turning to recent legislative amendments, the court determined that the New York State "[l]egislature intended CPLR article 52 to have extraterritorial reach." Id. The court's holding turned on the exercise of in personam jurisdiction; a court sitting in New York with personal jurisdiction over a party may order that party "to bring property into the state." Id. at 540, 883 N.Y.S.2d 763, 911 N.E.2d at 830 ("[T]he key to the reach of the turnover order is personal jurisdiction over a particular defendant.").
Following NML Capital, 134 S.Ct. at 2256-57, the FSIA appears to be no impediment to an order issued pursuant to Koehler directing Clearstream — should the court have personal jurisdiction over it — to bring the Markazi-owned asset held in Luxembourg to New York State. Section 1604's grant of jurisdictional immunity applies only to "a foreign state," which Clearstream of course is not. 28 U.S.C. § 1604. Section 1609's grant of execution immunity applies only to assets located "in the United States," which the Luxembourg right to payment is not. 28 U.S.C. § 1609. And, as noted, the Supreme Court's view set forth in NML Capital appears unequivocal: "[A]ny sort of immunity defense made by a foreign sovereign in an American court must stand on the Act's text. Or it must fall." 134 S.Ct. at 2256.
Each of the many cases cited by the defendants for the proposition that a foreign sovereign's extraterritorial assets are absolutely immune from execution were decided before the Supreme Court's decision in NML Capital, which made clear that such cases predating NML Capital are no longer binding on this discrete point. See EM Ltd. v. Republic of Argentina, 695 F.3d 201, 208 (2d Cir. 2012) ("We recognize that a district court sitting in Manhattan does not have the power to attach Argentinian property in foreign countries."); Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120, 130 (2d Cir. 2009) ("[T]he property that is subject to attachment and execution must be property in the United States of a foreign state...." (internal quotation marks omitted)). Following NML Capital, this body of former case law is of no help to the defendants. As the Supreme Court instructed, "even if [the defendants] were right about the scope of the common-law
NML Capital and Koehler do not, however, affect our long-standing view that "[t]he FSIA provides the exclusive basis for obtaining subject matter jurisdiction over a foreign state." Kirschenbaum, 830 F.3d at 122 (emphasis added); see also NML Capital, 134 S.Ct. at 2256-58 (concerning execution jurisdiction). Here, though, the putative exercise of in personam jurisdiction concerns Clearstream — the party in possession of the asset at issue — which is not itself a sovereign and therefore does not possess sovereign immunity.
Nonetheless, NML Capital and Koehler, when combined, do authorize a court sitting in New York with personal jurisdiction over a non-sovereign third party to recall to New York extraterritorial assets owned by a foreign sovereign. Had Koehler arisen in the context of an exercise of in personam jurisdiction over a foreign sovereign — it did not — the FSIA's grant of jurisdictional immunity would supersede contrary state law. See Peterson, 627 F.3d at 1130 (applying state law "insofar as it does not conflict with the FSIA"). As it was decided, however, Koehler does not appear to us to be inconsistent with the FSIA as interpreted by the Supreme Court in NML Capital.
At least one of our sister circuits has, without considering the issue in any detail, suggested the contrary conclusion: that even after NML Capital, a foreign sovereign's extraterritorial assets remain absolutely immune from execution. In Rubin v. Islamic Republic of Iran, 830 F.3d 470 (7th Cir. 2016), the Seventh Circuit remarked that before a foreign sovereign's assets are "even potentially subject to attachment and execution," it must be shown that the assets are "within the territorial jurisdiction of the district court." Id. at 475 (citing NML Capital, 134 S.Ct. at 2257 ("Our courts generally lack authority in the first place to execute against property in other countries....")). The Seventh Circuit's comment is unavailing to the defendants here. As an initial matter, it is not evident that an exercise of in personam jurisdiction over a non-sovereign pursuant to Koehler is inconsistent with the Seventh Circuit's statement concerning the exercise of "territorial jurisdiction" in the context of an in rem proceeding. Id.; see also Rubin v. Islamic Republic of Iran, 33 F.Supp.3d 1003, 1006 (N.D. Ill. 2014) ("Plaintiffs now seek to collect on [judgments against Iran] by attaching alleged assets of Iran...." (emphasis added)), aff'd, 830 F.3d 470 (7th Cir. 2016), cert. granted, ___ U.S. ___, 137 S.Ct. 2326, 198 L.Ed.2d 754 (2017).
Moreover, we do not understand the Supreme Court's observation that "[o]ur courts generally lack authority in the first place to execute against property in other countries," NML Capital, 134 S.Ct. at 2257, to foreclose that possibility.
We think that the Supreme Court's decision in NML Capital counsels in favor of part of the reasoning suggested by the Ninth Circuit's decision in Peterson, 627 F.3d 1117, itself a pre-NML Capital case. There, judgment creditors of Iran sought to execute against "Iran's rights to payment from CMA CGM," a French shipping company indebted to Iran. Id. at 1121. The Ninth Circuit held that the right to payment was not "property in the United States" within the meaning of § 1610(a) and was, therefore, "immune from execution." Id. at 1130. The court appeared to reach that conclusion based on the FSIA itself, see id. (citing 28 U.S.C. § 1610(a)), which reasoning, as explained, was vitiated by NML Capital.
But the Ninth Circuit also turned to state law as directed by Federal Rule of Civil Procedure 69(a). Id. at 1130-31 (noting that "California enforcement law authorizes a court to `order the judgment debtor to assign to the judgment creditor... all or part of a right to payment due or to become due'" (quoting Cal. Civ. Proc. Code § 708.510(a))). In particular, the Ninth Circuit relied on Philippine Export & Foreign Loan Guar. Corp. v. Chuidian, 218 Cal.App.3d 1058, 267 Cal.Rptr. 457 (6th Dist. 1990), for the proposition that "the location of a right to payment ... is the location of the debtor," Peterson, 627 F.3d at 1131 (citing Philippine Export, 218 Cal.App.3d 1058, 267 Cal.Rptr. 457). The state appellate court's decision in Philippine Export also held that California's state execution law does not apply extraterritorially. Philippine Export, 218 Cal. App. 3d at 1099, 267 Cal.Rptr. at 481. Citing that decision, the Ninth Circuit concluded that "a foreign state defendant's rights to payment from third-party debtors are assignable only if those `debtors [] reside in the United States.'" Peterson, 627 F.3d at 1131 (quoting Philippine Export, 218 Cal. App. 3d at 1099, 267 Cal. Rptr. at 481).
Although the Ninth Circuit's decision appears to have rested on its pre-NML Capital understanding of the FSIA, its decision and citation to Philippine Export suggest an alternative approach that is in step with our reconciliation of NML Capital and Koehler. Were one to except the part of the Ninth Circuit's opinion that did not survive NML Capital, the principal difference between the Ninth Circuit's decision in Peterson and our disposition of this case might be viewed as one of state law. Compare Philippine Export, 218 Cal. App. 3d at 1099, 267 Cal.Rptr. at 480 (declining to exercise extraterritorial personal jurisdiction because, under California law, "the limits which generally exist upon the right to execute ... apply in a judgment debtor proceeding such as this" (citing Cal. Civ. Proc. Code § 708.510 cmt. (West 1987) (Legislative Committee Comments, Assembly, 1982 Addition))), with Koehler, 12 N.Y.3d at 539, 883 N.Y.S.2d 763, 911
On remand, the district court should determine in the first instance whether it has personal jurisdiction over Clearstream.
Should that asset be recalled, it may, upon being produced in New York, qualify as an asset "in the United States of a foreign state" and, if so, it would be afforded execution immunity as such. 28 U.S.C. § 1609 (emphasis added). Accordingly, the district court will likely be required to determine, if and when it reaches that juncture, whether the asset that comes to be "in the United States" is subject to the execution-immunity exceptions relied on by the plaintiffs, 28 U.S.C. § 1610(a)(7), (g)(1); TRIA § 201(a). The defendants should, of course, be permitted to raise appropriate rebuttals at that time if they so choose.
We are cognizant of the conundrum apparently posed by NML Capital and Koehler when read in tandem. The FSIA "aimed to facilitate and depoliticize litigation against foreign states and to minimize irritations in foreign relations arising out of such litigation." Cargill Int'l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1016 (2d Cir. 1993) (internal quotation marks omitted). We are not at all sure that NML Capital when read in light of the law established by Koehler furthers that goal. But if we are correct in our analysis, any such problem is one for the Supreme Court or the political branches — not this Court — to resolve.
Moreover, we think that the two-step process called for by these cases — first recalling the asset at issue, and second, proceeding with a traditional FSIA analysis — is unlikely to open the proverbial floodgates to a wave of turnover claims seeking to execute against heretofore-unreachable extraterritorial assets. Even if those assets are in the possession of a third party over whom or which a court sitting in New York has personal jurisdiction, those assets still must not be subject to execution immunity upon being recalled to New York State. In that respect, the FSIA contains several limiting principles, such as the requirement that any asset subject to execution must have been "used for a commercial activity in the United States." 28 U.S.C. § 1610(a). Similarly, the TRIA contains its own limiting provisions, including the requirement that any asset subject to turnover be "blocked," a term of art imbued with precise meaning. TRIA § 201(a); see also Smith v. Fed. Reserve Bank of N.Y., 346 F.3d 264, 267-69 (2d Cir. 2003) (defining "blocked" in the context of the TRIA). These and other constraints have frequently proven to be barriers to execution on foreign sovereign assets. See, e.g., Calderon-Cardona v. Bank of N.Y. Mellon, 770 F.3d 993, 999 (2d Cir. 2014) (holding that attachment was unavailable under the TRIA because North Korea was not "designated as a state sponsor of terrorism under ... the Export Administration Act of 1979 ... or... the Foreign Assistance Act of 1961" at the time of judgment (internal quotation marks omitted)); Hausler v. JP Morgan Chase Bank, N.A., 770 F.3d 207, 212 (2d Cir. 2014) (per curiam) (determining that the property at issue did not qualify as the "blocked asset of" a foreign sovereign); Aurelius Capital Partners, 584 F.3d at 130-31 (holding that assets were not subject to execution under the FSIA because the assets at issue were not "used for a commercial activity," as required by the Act); Bank of N.Y. v. Rubin, 484 F.3d 149, 150 (2d Cir. 2007) (per curiam) (concluding that the assets at issue were not "blocked assets" subject to turnover under the TRIA).
Indeed, these or other limitations may ultimately prevent the plaintiffs in this case from obtaining turnover of the asset at issue, should it be recalled to New York State pursuant to an exercise of the court's in personam jurisdiction. As but one example, one of the defendants argues on appeal that the asset at issue does not qualify for the execution-immunity exceptions enumerated in 28 U.S.C. § 1610(a) because it was not "used for a commercial activity in the United States." UBAE Br. at 37-39. Whether that is so is independent of whether the asset comes to be located "in the United States." See 28 U.S.C. § 1610(a) ("The property in the United States of a foreign state, ... used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution,... if [additional specified requirements are satisfied]."). While we need not, and therefore do not, consider the applicability of these barriers at this time, we wish to make clear that the plaintiffs are by no means assured success upon remand.
To summarize, for the foregoing reasons, we conclude as follows:
Accordingly, we AFFIRM the district court's judgment in part, VACATE it in part, and REMAND for further proceedings consistent with this opinion.
The following parties are plaintiffs in this appeal: Deborah D. Peterson, personal representative of the Estate of James C. Knipple, Terry Abbott, John Robert Allman, Ronny Kent Bates, James Baynard, Jess W. Beamon, Alvin Burton Belmer, Richard D. Blankenship, John W. Blocker, Joseph John Boccia, Jr., Leon Bohannon, John Bonk, Jr., Jeffrey Joseph Boulos, John Norman Boyett, William Burley, Paul Callahan, Mecot Camara, Bradley Campus, Johnnie Ceasar, Robert Allen Conley, Charles Dennis Cook, Jolumy Len Copeland, David Cosner, Kevin Coulman, Rick Crudale, Russell Cyzick, Michael Devlin, Nathaniel Dorsey, Timothy Dunnigan, Bryan Earle, Danny R. Estes, Richard Andrew Fluegel, Michael D. Fulcher, Sean Gallagher, George Gangur, Randall Garcia, Harold Ghumm, Timothy Giblin, Michael Gorchinski, Richard Gordon, Davin M. Green, Thomas Hairston, Michael Haskell, Mark Anthony Helms, Stanley G. Hester, Donald Wayne Hildreth, Richard Holberton, Dr. John Hudson, Maurice Edward Hukill, Edward Iacovino, Jr., Paul Innocenzi, III, James Jackowski, Jeffrey Wilbur James, Nathaniel Walter Jenkins, Edward Anthony Johnston, Steven Jones, Thomas Adrian Julian, Thomas Keown, Daniel Kluck, Freas H. Kreischer, III, Keith Laise, James Langon, IV, Steven LaRiviere,
