WESLEY, Circuit Judge:
Plaintiffs-Appellees ("Plaintiffs") are direct or indirect victims of terrorist acts linked to the Islamic Republic of Iran ("Iran"), against which they hold unsatisfied money judgments. Plaintiffs contend that they are entitled to enforce these judgments against Defendants-Appellants Alavi Foundation and 650 Fifth Avenue Company (together, "Defendants"),
This appeal requires us to determine whether Defendants qualify, as a matter of law, as the "foreign state" of Iran or an "agency or instrumentality" thereof, such that Defendants' properties may be turned over to help satisfy Plaintiffs' judgments against Iran under the FSIA. We are also called upon to determine whether, under the TRIA, (1) Defendants qualify, as a matter of law, as Iran or an "agency or instrumentality" thereof insofar as Iran is a "foreign state designated as a state sponsor of terrorism," and (2) Defendants' properties are "blocked assets" that may be turned over to help satisfy Plaintiffs' judgments against Iran.
We conclude that Defendants in this case do not equate to the "foreign state" of Iran for purposes of the FSIA or the TRIA. We further conclude that Defendants cannot be deemed "agencies or instrumentalities" of Iran under the FSIA, but that Defendants' status as "agencies or instrumentalities" of Iran under the TRIA and their properties' status as "blocked assets" under that statute is not foreclosed as a matter of law. Nevertheless, we identify questions of fact that prevent either of these TRIA questions from being decided on summary judgment. Accordingly, we vacate the summary judgment award in favor of Plaintiffs and remand for further proceedings consistent with this opinion.
"We of course view the record in the light most favorable to [the Defendants], who [are] appealing from an adverse grant of summary judgment." Lombard v. Booz-Allen & Hamilton, Inc., 280 F.3d 209, 211 (2d Cir. 2002); accord Cortes v. MTA New York City Transit, 802 F.3d 226, 228 (2d Cir. 2015).
The background facts of this case are provided in detail in an accompanying
The Alavi Foundation ("Alavi" or "the Foundation") traces its origins to 1973, when the Shah of Iran, Mohammad Reza Pahlavi, incorporated the eponymous Pahlavi Foundation as a New York not-for-profit corporation, and endowed it with several million dollars. Following the 1979 Iranian Revolution, the Ayatollah Khomeini ordered the formation of the Bonyad Mostazafan, an entity charged with managing property expropriated by the revolutionary government, and the Pahlavi Foundation was renamed the Mostazafan Foundation of New York. The Foundation took on its present name in 1992.
650 Fifth Avenue Company ("650 Fifth Ave. Co." or "the Partnership") is a partnership created under New York law in 1989 as part of a plan to relieve Alavi of tax obligations that it incurred as a result of the mortgages Bank Melli held on the Building. Specifically, Alavi, together with the Government of Iran, the Bonyad Mostazafan, and Bank Melli, agreed to a plan whereby Bank Melli used a chain of straw companies to enter into a partnership with Alavi. Through a series of circular transactions, instead of holding mortgages on the Building, Bank Melli became a 35% (and eventually 40%) owner of 650 Fifth Ave. Co. and, thereby, a partial owner of the Building. See In re 650 Fifth Ave., 14-2027, at 14-19 (discussing details of 1989 tax transaction). Alavi owns the other 60% of 650 Fifth Ave. Co. and, until 2008, served as 650 Fifth Ave. Co.'s managing partner, administering the day-to-day affairs of the Partnership. See id. at 18-19 (describing ownership and management of Partnership). Although Assa Corporation, which was owned by Assa Company Limited (collectively, "Assa"), has always been Alavi's record partner in 650 Fifth Ave. Co., Bank Melli has owned the entities since their creation. See id. at 14-22 (explaining evidence of Bank Melli's relationship with Assa).
In addition to ample record evidence of Bank Melli's involvement with Alavi, Assa, and 650 Fifth Ave. Co., as detailed in our accompanying opinion, the record also indicates that other Iranian government entities and officials continued to exercise some control over Alavi's affairs after its creation in 1973. As relevant to this action, record evidence shows that (1) from 1982 to 1991, a Bonyad Mostazafan employee sat on Alavi's Board and provided reports about Alavi to Iran's Prime Minister or the head of the Bonyad Mostazafan every three months, see In re 650 Fifth Ave., 14-2027, at 21-22; (2) in the early 1990s, Alavi's Board composition changed "as directed by the Supreme Leader" of Iran, id.; (3) around that same time, Iran's Ambassador to the United Nations exercised a "position of responsibility" over Alavi's affairs, id.; and (4) in 2007, certain Alavi board members and Alavi's then-President, Farshid Jahedi, met with Iran's
In March 1995 — six years after 650 Fifth Ave. Co.'s formation — President Clinton issued a series of Executive Orders pursuant to the International Emergency Economic Powers Act ("IEEPA"), formally declaring the Government of Iran a threat to this nation's security and imposing broad financial sanctions. See Exec. Order No. 12,957, 60 Fed. Reg. 14615 (Mar. 15, 1995); Exec. Order No. 12,959, 60 Fed. Reg. 24757 (May 6, 1995). Those Executive Orders authorized the Secretary of the Treasury, in consultation with the Secretary of State, to promulgate rules and regulations to implement the financial sanctions.
Pursuant to that authority, the Treasury Department's Office of Foreign Assets Control ("OFAC") determined that Bank Melli was owned or controlled by the Government of Iran, and thus subjected it to, among other things, limitations on the receipt of services from U.S. financial institutions beginning June 6, 1995, except as authorized by an OFAC license. See Implementation of Executive Order No. 12959 With Respect to Iran, 60 Fed. Reg. 40881-02 (Aug. 10, 1995). OFAC also subsequently promulgated a series of Iranian Transactions Regulations ("ITRs") relevant to this action, which took effect on August 20, 1997, and which generally prohibit United States entities from conducting business with or providing services to "the Government of Iran." The "Government of Iran" is defined in the ITRs as "[t]he state and the Government of Iran, as well as any political subdivision, agency, or instrumentality thereof," "[a]ny person owned or controlled, directly or indirectly, by the foregoing," and "[a]ny person ... acting or purporting to act, directly or indirectly, for or on behalf of the foregoing." 31 C.F.R. § 560.304 (2012); see id. §§ 560.203, 560.204, 560.207, 560.208, 560.301. Alavi and 650 Fifth Ave. Co. are United States entities subject to these orders and regulations and prohibited thereby from conducting business with or providing services to Bank Melli or any other instrumentality owned or controlled by, or acting on behalf of, the Government of Iran.
In 1995, after the first of the relevant Executive Orders imposing sanctions on Iran was issued, Bank Melli formally divested its ownership of Assa. Our accompanying opinion, In re 650 Fifth Ave., 14-2027, held that there was no genuine dispute of fact that Assa was owned or controlled by the Government of Iran even after 1995. We also held, however, that a triable issue of fact exists as to whether Alavi provided services to Assa after 1995 knowing it was so owned or controlled.
In addition to conferring authority on the President to regulate and prohibit transactions to deal with threats to this nation's security, foreign policy, or economy, the IEEPA authorizes the President to block property to address such threats. See 50 U.S.C. § 1702. In 2012, President Obama, acting pursuant to the authority
OFAC periodically publishes (1) a list of "Specially Designated Nationals and Blocked Persons" ("SDN List"), and (2) since January 16, 2016, a list of persons whose property is blocked pursuant to Executive Order 13,599 because they satisfy Executive Order 13,599's definition of "Government of Iran" or "Iranian financial institution" ("Executive Order 13,599 List"). See 31 C.F.R. § 560.211, Note 1 (2016). Defendants Alavi and 650 Fifth Ave. Co. have never been named on either list. Bank Melli and Assa, however, have both been named on the SDN List: in 2007, Bank Melli was added to the SDN List pursuant to weapons of mass destruction ("WMD") nonproliferation sanctions and, in 2008, Assa was added to the SDN List based on the Treasury Department's determination that Assa was a front company for Bank Melli.
On January 16, 2016, the United States implemented the Joint Comprehensive Plan of Action ("JCPOA"), a multilateral agreement pursuant to which the United States lifted nuclear-related sanctions previously
Plaintiffs began filing these turnover actions in December 2008, shortly after the Government initiated its civil forfeiture action.
Defendants opposed Plaintiffs' proposed attachments, moving for summary judgment in this turnover action on August 17, 2013. They argued, inter alia, that the court lacked jurisdiction to hear Plaintiffs' FSIA or TRIA claims because neither Defendant meets the definition of a "foreign state" or an "agency or instrumentality" of a foreign state under the FSIA, and, further, as to the TRIA claim, that Defendants' assets have not been seized or frozen by the United States. The District Court denied Defendants' summary judgment motion.
In an Opinion and Order,
We review de novo a district court's legal conclusions under the FSIA, including whether a foreign state or its property is or is not shielded by immunity. See Walters v. Indus. & Commercial Bank of China, Ltd., 651 F.3d 280, 286 (2d Cir. 2011). "We accord deferential review to a district court ruling on a petition for an order of attachment or execution under the FSIA, and we will reverse only for abuse of discretion." Id. at 285-86. A district court abuses its discretion "if it applies legal standards incorrectly, relies on clearly erroneous findings of fact, or proceeds on the basis of an erroneous view of the applicable law." Id. at 286 (internal quotation marks omitted).
The FSIA provides the exclusive basis for obtaining subject matter jurisdiction over a foreign state. See 28 U.S.C. § 1604 et seq.; Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). It states that foreign states "shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter." 28 U.S.C. § 1604; see Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993).
In the underlying actions giving rise to Plaintiffs' money judgments, district courts exercised subject matter jurisdiction over Iran pursuant to the Act's terrorism exception,
In addition to conferring a presumption of jurisdictional immunity on foreign sovereigns, the FSIA presumes attachment and execution immunity over a foreign sovereign's property. See Walters, 651 F.3d at 287-88. Thus, where a valid judgment has been entered against a foreign state, the foreign state's United States property is immune from attachment and execution unless a statutory exception applies. See 28 U.S.C. § 1609.
The District Court found three attachment exceptions applicable to Defendants: two under the FSIA, see §§ 1610(a)(7), 1610(g), and one under § 201 of the TRIA, codified as a note to § 1610 of the FSIA. Each provides instances where a foreign sovereign's property is attachable to satisfy terrorism-related judgments. Here, we address the first two exceptions for attachment and execution of a foreign state's property, FSIA §§ 1610(a)(7), 1610(g); below, we address the applicability of § 201 of the TRIA.
Section 1610(g) strips FSIA attachment immunity from the property of a "foreign state" or of its "agency or instrumentality" if the underlying judgment was entered under § 1605A's terrorism exception. Section 1610(a)(7) does the same with particular reference to property "used for a commercial activity in the United States," where the underlying judgment was entered under either § 1605A or its predecessor. Id. § 1610(a)(7). Whether these exceptions afford attachment jurisdiction over Plaintiffs' turnover claims thus turns on the threshold question of whether Defendants may be deemed a "foreign state" or an "agency or instrumentality" of a foreign state under the FSIA.
The FSIA does not define "foreign state" except to state that it "includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b)." 28 U.S.C. § 1603(a). Our Court has long construed "foreign state" as used in the FSIA to mean an entity bearing the "attributes of statehood," which include a defined territory and population, self-governance and foreign relations, and the capacity to wage war and to enter into international agreements. Morgan Guaranty Tr. Co. of N.Y. v. Republic of Palau ("Morgan Guaranty"),
The Supreme Court has cited these traditional sovereign characteristics in concluding that Somalia's former prime minister could not be sued as a "foreign state" under the FSIA in a suit brought by Somali victims of governmental abuse in the 1980s. Samantar v. Yousuf, 560 U.S. 305, 308, 314-15, 130 S.Ct. 2278, 176 L.Ed.2d 1047 (2010). The Court traced the history of sovereign immunity from the common law through the enactment of the FSIA, analyzed the text and legislative history of the statute, and concluded that the FSIA codified a "restrictive theory of sovereign immunity," with "[t]he term `foreign state' on its face indicat[ing] a body politic that governs a particular territory." Id. at 314, 130 S.Ct. 2278 (citing RESTATEMENT (SECOND) OF FOREIGN RELATIONS LAW OF THE UNITED STATES § 4 (1964-1965)). Following this controlling precedent here, we conclude that Defendants, a New York-registered foundation and similarly registered partnership, themselves bear none of the attributes of statehood and, thus, cannot be equated to the foreign state of Iran.
In concluding otherwise, the District Court relied on Executive Order 13,599, which defines the "Government of Iran" to include "any person owned or controlled by, or acting for or on behalf of, the Government of Iran." Exec. Order 13,599. Similarly, the ITRs' "General Definitions" subchapter defines the "Government of Iran" to include "[a]ny person to the extent that such person is, or has been, since the effective date, acting or purporting to act, directly or indirectly, for or on behalf of the [Government of Iran]." 31 C.F.R. § 560.304. This reliance on Executive Branch definitions to construe "foreign state" under the FSIA raises several concerns.
First, Morgan Guaranty did not bless the use of just any "other sources" in divining the meaning of "foreign state." 924 F.2d at 1243. In Morgan Guaranty, we looked specifically to international law in identifying the "attributes of statehood" that define a "foreign state." Id. at 1243-44. Morgan Guaranty did not invite courts to substitute other sources for the ones it employed and thereby to reach a different conclusion from the one dictated by that case in construing the identical statutory term.
Second, Executive Order 13,599 expressly states that its expansive definition of the Government of Iran is "[f]or the purpose of this order." Exec. Order 13,599. The Order and its implementing ITRs were designed principally to further the United States' sanctioning regime against Iran. See 31 C.F.R. § 560.304. Nowhere do those sources purport to supplement the FSIA's definition of a foreign state. Thus, we conclude
This conclusion is consistent with a principal purpose of the FSIA, namely, "to transfer the determination of sovereign immunity from the executive branch to the judicial branch, thereby reducing the foreign policy implications of immunity determinations and assuring litigants that these often crucial decisions are made on purely legal grounds and under procedures that insure due process." H.R. Rep. No. 94-1487, at *7 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6606; see also Samantar, 560 U.S. at 323 n. 19, 130 S.Ct. 2278 (noting that the State Department "sought and supported the elimination of its role with respect to claims against foreign states and their agencies or instrumentalities").
In borrowing from Executive Branch definitions of Iran, the District Court erroneously reasoned that the key question here is not whether Iran is a foreign state (it certainly is), but "whether the [D]efendants have acted in such a manner as to render them, too, equivalent to Iran." In re 650 Fifth Ave. Private Action, 2014 WL 1516328, at *11. That miscast the relevant inquiry for determining if a defendant satisfies the definition of "foreign state" under the FSIA, which asks whether that defendant itself possesses of the attributes of statehood long established in international law.
Samantar illustrates this seemingly semantic but enormously substantive distinction. Somalia, like Iran, is certainly a "foreign state," but in considering whether Somalia's former prime minister was a "foreign state" under the FSIA, the Supreme Court did not ask, as the District Court did here, "whether the defendant[]... acted in such a manner as to render [him] ... equivalent to [the state]." Id. Indeed, the Supreme Court expressly rejected an argument urging that line of inquiry. See Samantar, 560 U.S. at 318-19, 130 S.Ct. 2278. Instead, the Court's inquiry turned on whether the defendant bore traditional attributes of statehood (or otherwise qualified as a subdivision, agency, or instrumentality) — not on whether the defendant acted sufficiently on behalf of the foreign state. Id.
In sum, we conclude that a "foreign state" under the FSIA is not properly defined by reference to an Executive Order authorizing broad sanctions on a particular country. Rather, it is defined according to established constructions of the term. Because there is no question here that Defendants lack the traditional attributes of statehood, they are not themselves "foreign states."
The FSIA does, however, reach beyond the international law understanding of foreign states to the extent it includes within that term, for FSIA purposes, a foreign state's agents or instrumentalities. See 28 U.S.C. § 1603(a) (stating that "`foreign state' ... includes ... an agency or instrumentality" thereof). The FSIA defines "agency or instrumentality" as follows:
28 U.S.C. § 1603(b). All three statutory elements must be satisfied to render an entity an agency or instrumentality under the FSIA. Because jurisdiction "depends upon the state of things at the time ... the action [is] brought," Dole Food Co. v. Patrickson, 538 U.S. 468, 478, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003) (internal quotation marks omitted), an entity's agency or instrumentality status under the FSIA "is determined at the time of the filing of the complaint," id. at 480, 123 S.Ct. 1655, and not necessarily "as of the time an alleged tort or other actionable wrong occurred," id. at 471, 123 S.Ct. 1655.
Defendants argue that the District Court erred in its alternative ruling that, as a matter of law, they each "fall within the definition of an `agency or instrumentality of a foreign state' under 28 U.S.C. § 1603(b), and in turn constitute a `foreign state' itself within the meaning of the FSIA." In re 650 Fifth Ave. Private Action, 2014 WL 1516328, at *13. Defendants do not dispute that they are "separate legal person[s], corporate or otherwise," from Iran and thus that they meet the first prong for FSIA agency or instrumentality status under § 1603(b)(1). They do argue, however, that they are not "organ[s]" of, or majority owned by, Iran under § 1603(b)(2), and that they are U.S. citizens exempted from FSIA agency or instrumentality status under § 1603(b)(3). Because we agree with the latter argument, we need not address the former.
To qualify as an agency or instrumentality of a foreign state under the FSIA, § 1603(b)(3) states that the person or entity cannot be "a citizen of a State of the United States as defined in section 1332(c) and (e) of this title." 28 U.S.C. § 1603(b)(3). Section 1332(c) defines the citizenship of corporations (and representatives of decedents' estates). See id. § 1332(c). Section 1332(e) defines what is meant by "States." See id. § 1332(e).
In deciding that the Defendants were not "citizen[s] of a State of the United States" for purposes of § 1603(b)(3), the District Court stated that it was "mindful that the Shah incorporated the Foundation in New York in 1973, and that the partnership was created in New York." In re 650 Fifth Ave. Private Action, 2014 WL 1516328, at *13. The District Court nonetheless deemed Defendants citizens of Iran under the equitable "alter ego" principles set forth in First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba ("Bancec"), 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983), which permit courts to disregard defendants' corporate form when "`the doctrine of corporate entity... would work fraud or injustice.'" In re 650 Fifth Ave. Private Action, 2014 WL 1516328, at *13 (quoting Bancec, 462 U.S. at 629, 103 S.Ct. 2591). The court reasoned that "[t]o allow [Defendants'] corporate status as American entities to dominate their actual function as organs of Iran would violate the [fraud or injustice] principles" set forth in Bancec. Id.
As an initial matter, we note that Plaintiffs do not here challenge the District Court's conclusion that § 1603(b)(3) would ordinarily preclude Alavi, a New York-based corporation, and 650 Fifth Ave. Co., a New York-based partnership, from satisfying the FSIA's definition of agency or instrumentality. See In re 650 Fifth Ave. Private Action, 2014 WL 1516328, at *13-14. Indeed, even when moving for summary judgment before the District Court, Plaintiffs did not argue that Defendants satisfied § 1603(b)'s definition of "agencies or instrumentalities." On appeal, Plaintiffs
We conclude that Bancec cannot be so applied to § 1603(b)(3), which unambiguously exempts from FSIA agency or instrumentality status all "citizen[s] of a State of the United States as defined in section 1332(c) and (e) of this title." 28 U.S.C. § 1603(b)(3). As explained infra, Bancec's "fraud or injustice" exception is appropriately considered in entertaining challenges to the presumption of corporate separateness and alter ego status, as was the case in Bancec itself. It is not a basis for questioning corporate citizenship in the context of determining agency or instrumentality
Accordingly, because (1) Plaintiffs do not here challenge the District Court's conclusion that § 1603(b)(3) would ordinarily preclude Alavi and 650 Fifth Ave. Co., both U.S.-based entities, from satisfying the FSIA's definition of agency or instrumentality, and (2) Bancec cannot be used to disregard § 1603(b)(3)'s exemption of U.S.-citizen entities from that definition, we conclude that Defendants are statutorily disqualified as agencies or instrumentalities of Iran under FSIA §§ 1610(a)(7) and 1610(g).
The District Court also used Bancec separately to conclude that, regardless of Defendants' status as agencies or instrumentalities of Iran, they are Iran's alter egos and, therefore, jurisdiction properly lies over Defendants just as it would over Iran. See In re 650 Fifth Ave. Private Action, 2014 WL 1516328, at *12. Defendants fault the District Court's conclusion on two grounds: (1) Bancec's alter ego analysis does not permit a court to expand FSIA jurisdiction to reach entities that do not otherwise satisfy that statute's definition of "agency or instrumentality," and (2) in any event, the record evidence is insufficient to establish that Defendants are alter egos of Iran. Although we disagree with the first argument, we agree with the second and, accordingly, conclude as a matter of law that Defendants cannot be equated to the foreign state of Iran under Bancec.
In arguing that Bancec's alter ego principles cannot provide jurisdiction over an entity that does not otherwise satisfy the FSIA's agency or instrumentality definition, Defendants maintain that the issue in Bancec was whether an entity that indisputably qualified as an agency or instrumentality could be held substantively liable for the debts of a foreign state despite its separate incorporation and juridical status. In Bancec, a Cuban government-owned trade bank sued an American bank to collect an unpaid debt, and the American bank counterclaimed, asserting a right to offset the value of foreign assets that had been nationalized by the Cuban government. See Bancec, 462 U.S. at 613-15, 103 S.Ct. 2591. The Cuban bank, relying on its separate juridical status, asserted that it could not be held liable for Cuba's debts. See id. at 613, 103 S.Ct. 2591. The Supreme Court disagreed and, although recognizing the presumption that "government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such," id. at 626-27, 103 S.Ct. 2591, held that the presumption could be rebutted, and an alter ego relationship established, if (1) the instrumentality "is so extensively controlled by its owner that a relationship of principal and agent is created," or (2) the recognition of an instrumentality's separate legal status would work a "fraud or injustice," id. at 629, 103 S.Ct. 2591 (internal quotation marks omitted).
Defendants' argument that this alter ego test cannot be used to establish FSIA jurisdiction is foreclosed by U.S. Fidelity & Guaranty Co. v. Braspetro Oil Services Co., 199 F.3d 94 (2d Cir. 1999) (per curiam). There, we adopted the district court's reasoning in affirming a finding of FSIA jurisdiction over a party (Brasoil) based on Bancec's alter ego analysis. See U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., No. 97 Civ. 6124(JGK), 1999 WL 307666, at *7-11 (S.D.N.Y. May 17, 1999), aff'd, U.S. Fid. & Guar. Co. v. Braspetro Oil Servs., 199 F.3d 94 (2d Cir.
Nevertheless, we conclude that there is no record evidence that Alavi and, therefore, 650 Fifth Ave. Co., of which Alavi owns 60%, is "so extensively controlled by [Iran] that a relationship of principal and agent is created." Bancec, 462 U.S. at 629, 103 S.Ct. 2591. The "touchstone inquiry for `extensive control'" is "whether the sovereign state exercise[d] significant and repeated control over the instrumentality's day-to-day operations." EM Ltd. v. Banco Central de la Republica Argentina, 800 F.3d 78, 91 (2d
Here, the record evidence cited by the District Court and Plaintiffs indicates, at most, Iran's high-level involvement in Alavi's affairs: (1) the Shah created Alavi in 1973, (2) the Bonyad Mostazafan and Bank Melli assisted Alavi in resolving its tax problem in the 1980s, (3) the Ayatollah directed the removal of certain board members, (4) Iran's Ambassador to the United Nations had some supervisory role,
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. Weinstein, 609 F.3d at 52. Section 201(a) of the TRIA sets forth these required elements:
TRIA § 201(a), Pub. L. No. 107-297, sec. 201(a), 116 Stat. 2322, 2337-40 (2012) (codified at 28 U.S.C. § 1610 note). Here, neither party disputes that there was original jurisdiction under the FSIA for the Plaintiffs' underlying judgments.
Thus, to attach Defendants' properties under the TRIA, Plaintiffs must show (1) that the Defendants are a "terrorist party" or an "agency or instrumentality of that terrorist party," and (2) that the Defendants' properties are "blocked assets." Id. For the same reasons we rejected the conclusion that Defendants "are" the foreign state of Iran for purposes of the FSIA, we reach that same conclusion insofar as the state of Iran is a designated "terrorist party" under the TRIA. We conclude, however, that insofar as the attachment jurisdiction of both statutes also reaches an "agency or instrumentality" of Iran, the FSIA's definition of that phrase in § 1603(b) does not apply to the TRIA. Therefore, our conclusion that Defendants cannot be deemed agencies or instrumentalities of Iran under the FSIA does not prevent Defendants from qualifying as agencies or instrumentalities of Iran under the TRIA. We nevertheless remand the case for further proceedings because material questions of fact preclude a summary judgment determination that (1) Defendants are, indeed, agencies or instrumentalities for TRIA purposes, and (2) their properties are "blocked assets."
Under the TRIA, three entities qualify as a "terrorist party": (1) "a terrorist," (2) "a terrorist organization (as defined in section 212(a)(3)(B)(vi) of the Immigration and Nationality Act [("INA")] (8 U.S.C. 1182(a)(3)(B)(vi)))," or (3) "a foreign state designated as a state sponsor of terrorism under section 6(j) of the Export Administration Act of 1979 (50 U.S.C. App. 2405(j)) or section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371)." TRIA § 201(d)(4). Iran is a "foreign state designated as a state sponsor of terrorism" under TRIA § 201(d)(4), making it a "terrorist party" for TRIA purposes. See Determination Pursuant to Section 6(i) of the Export Administration Act of 1979 — Iran,
The District Court held that Defendants also qualify as a "terrorist party" under the TRIA. Its reasoning was as follows: (1) Iran has been designated as a "state sponsor of terrorism" since 1984, and therefore is a "terrorist party" within the meaning of TRIA,
Section 201(a) of the TRIA confers 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. Weinstein, 609 F.3d at 50. As this Court has previously explained, this basis for subject matter jurisdiction derives from the plain language of TRIA § 201(a), which "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 49. Thus, the fact that Plaintiffs obtained their underlying judgments against Iran, not specifically against Alavi or 650 Fifth Ave. Co., does not prevent Plaintiffs from attaching Defendants' properties under the TRIA if, inter alia, Defendants qualify as agencies or instrumentalities of Iran under the TRIA.
While the FSIA defines "agency or instrumentality,"
Although both the FSIA and the TRIA permit property in the United States held by certain "agencies or instrumentalities" to be attached, under the FSIA the entity must be an "agency or instrumentality of a foreign state," 28 U.S.C. § 1603(b) (emphasis added), whereas, under the TRIA, the entity must be an "agency or instrumentality of th[e] terrorist party." TRIA § 201(a) (emphasis added). Thus, the text of the TRIA unambiguously reaches more broadly to permit the attachment of property in circumstances not covered by the FSIA or FSIA immunity. See Weinstein, 609 F.3d at 50; see also Rubin v. Islamic Republic of Iran, 709 F.3d 49, 54 (1st Cir. 2013). Specifically, unlike the FSIA, the TRIA permits attachment and execution against individual "terrorist[s]" and "terrorist organization[s]" (and their agencies and instrumentalities). TRIA § 201(d)(4). Individual terrorists and many terrorist organizations encompassed in the TRIA's definition of "terrorist party" are distinguishable from FSIA foreign states and their agencies and instrumentalities in an important respect: they can be non-state actors. See TRIA § 201(d)(4) (defining "terrorist party" to include "a terrorist," and "a terrorist organization (as defined in section 212(a)(3)(B)(vi) of the [INA] (8 U.S.C. 1182(a)(3)(B)(vi))"); see also 8 U.S.C. 1182(a)(3)(B)(vi) (section 212(a)(3)(B)(vi) of the INA, defining "terrorist organization" to encompass nonstate terrorist entities)); Ruth Calderon-Cardona v. JPMorgan Chase Bank, N.A., 867 F.Supp.2d 389, 394 (S.D.N.Y. 2011) (noting that while "terrorist" is not further defined in TRIA, term has been interpreted to require that individual be "natural person"); id. at 394 (observing that Section 212(a)(3)(b)(vi) of the INA "is aimed at non-governmental groups like al Qaeda and Hezbollah, not foreign states").
Precisely because TRIA § 201 encompasses non-state actors and, thus, reaches more broadly than the FSIA, it would contravene a plain reading of the TRIA to cabin its reach by applying the FSIA's definition of agency or instrumentality — which requires a foreign state principal. See Corley v. United States, 556 U.S. 303, 314, 129 S.Ct. 1558, 173 L.Ed.2d 443 (2009) (noting that "a statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant" (alterations and internal quotation marks omitted)).
We recognize that where, as here, the alleged terrorist party is a foreign state designated as a state sponsor of terrorism, as opposed to an individual terrorist or non-state terrorist organization, applying the FSIA's definition of "agency or instrumentality" to the TRIA might appear less problematic. See TRIA § 201(d)(4). Just as with non-state terrorist organizations, however, state sponsors of terrorism may operate with less transparency than other sovereign countries, making application of § 1603(b)(3)'s factors unrealistic. See Stansell, 771 F.3d at 732 (noting that state-owned enterprises generally have clear ownership structures "that make[] application of § 1603(b) feasible," while "terrorist organizations ... operate in the shadows out of necessity," e.g., "a corporation organized under Florida law will almost certainly not list [a terrorist organization] as a shareholder of record" but, rather, "will operate through layers of affiliated individuals and front companies"); Exec. Order 13,599 (explaining additional steps necessary to address Iran's threat to this nation due to "deceptive practices" used by Iran and its banks to "conceal transactions of sanctioned parties"); U.S. Dep't of Treasury, Press Release, Treasury Designates Bank Melli Front Company in New York City, http://www.treasury.gov/presscenter/press-releases/Pages/hp1330.aspx (last visited July 8, 2016) (explaining "scheme to use a front company set up by Bank Melli — a known proliferator [of weapons of mass destruction] — to funnel money from the United States to Iran" in violation of sanctions (internal quotation marks omitted)).
Thus, we conclude that § 1603(b) of the FSIA does not apply selectively to foreign states designated as a state sponsor of terrorism under the TRIA. The plain language of the TRIA refers only to "the blocked assets of any agency or instrumentality of that terrorist party," and does not differentiate among the variety of entities that might qualify as a "terrorist party." See TRIA §§ 201(a), 201(d)(4). It is against the background of this statutory structure that we determine that Congress did not intend for FSIA § 1603(b) to apply selectively to the TRIA. Thus, because the FSIA definition of "agency or instrumentality" — and specifically the three requirements specified in 28 U.S.C. § 1603(b) — do not pertain to those terms in the TRIA, our conclusion that Defendants cannot be agents or instrumentalities of the "foreign state" of Iran for purposes of FSIA jurisdiction does not foreclose Defendants being agencies or instrumentalities of Iran as a designated terrorist party under the
At the same time, however, questions of fact preclude a TRIA award in Plaintiffs' favor as a matter of law. Because the terms "agency or instrumentality" are undefined under the TRIA, we construe these words according to their ordinary meanings. See, e.g., Taniguchi v. Kan Pac. Saipan, Ltd., ___ U.S. ___, 132 S.Ct. 1997, 2002, 182 L.Ed.2d 903 (2012); see also Stansell, 771 F.3d at 732 (using "plain and ordinary meaning" of "agency" and "instrumentality" in TRIA § 201). We determine the ordinary meaning of these terms in light of the statutory text of the TRIA as a whole. See Deutsche Bank Nat'l Trust Co. v. Quicken Loans Inc., 810 F.3d 861, 868 (2d Cir. 2015) ("[S]tatutory interpretation must begin with the plain language, giving all undefined terms their ordinary meaning while attempting to ascertain how a reasonable reader would understand the statutory text, considered as a whole." (alterations and internal quotation marks omitted)).
"Instrumentality" is a means through which a function of another entity is accomplished, analogous to a branch of a governing body. See Black's Law Dictionary (10th ed. 2014) (defining "instrumentality" as "a means or [a]gency through which a function of another entity is accomplished, such as a branch of a governing body"); Webster's Third New International Dictionary 1172 (1993) (defining instrumentality as "something that serves as an intermediary or agent through which one or more functions of a controlling force are carried out: a part, organ, or subsidiary branch esp. of a governing body"); OED Online, Oxford University Press, June 2016 (defining instrumentality as "[t]hat which serves or is employed for some purpose or end; a means, an agency"); Merriam-Webster Collegiate Dictionary 22 (10th ed. 1993) (defining instrumentality as a "means" or an "agency").
"Agency" is an entity acting on another's behalf or providing a particular service on another's behalf. See OED Online, Oxford University Press, June 2016 (defining agency as "[a] person or organization acting on behalf of another, or providing a particular service"); Webster's Third New International Dictionary 1172 (1993) (defining agency as "a person or thing through which power is exerted or an end is achieved"); Merriam-Webster Collegiate Dictionary 22 (10th ed. 1993) (defining agency as "a person or thing through which power is exerted or achieved"). As ordinarily understood, an entity that is an "agency" or an "instrumentality" is distinct from, even if a part of, the entity for which the agency or instrumentality is acting.
To demonstrate that Defendants are "agencies or instrumentalities" of a terrorist party under the TRIA, therefore, Plaintiffs must show that each Defendant (1) was a means through which a material function of the terrorist party is accomplished, (2) provided material services to, on behalf of, or in support of the terrorist party, or (3) was owned, controlled, or directed by the terrorist party.
Further, insofar as Plaintiffs contend that Alavi itself was sufficiently owned, controlled, or directed by Iran to render it an agency or instrumentality of a terrorist party under the TRIA, questions of fact exist as to whether Alavi was so owned, controlled, or directed at the time Plaintiffs' complaints were filed. See Dole Food Co., 538 U.S. at 480, 123 S.Ct. 1655. Although there is record evidence that Iran created Alavi in 1973, supervised its Board in the 1980s and 1990s, and controlled its affairs to a certain extent around that same time, the only recent record evidence of Iran's control is a 2007 meeting between Alavi board members, Alavi's then-President Farshid Jahedi, and Iran's Ambassador to the United Nations, Mohammad Khazaee, at which Plaintiffs contend Khazaee instructed Jahedi with respect to Alavi's management. A set of notes dated October 5, 2007, purportedly from that meeting, however, are too ambiguous to support a matter-of-law conclusion that Iran controlled Alavi at that time. See In re 650 Fifth Ave., 14-2027, at 27-28 (explaining that authorship of notes is unknown and speaker referenced therein is unclear). Moreover, in urging that Iran does not control Alavi, Defendants highlight, among other things, the testimony of Abbas Mirakhor, an Alavi board member from 1991 through 2005, who maintained that Alavi's decisions were made by its Board and President without interference by Iran, see App'x 5705-07; the declaration of Hanieh Safakamal, Alavi's financial manager since April 2000, who stated that Alavi managed its own assets and chose its own employees, see App'x at 6565-66; and
To attach Defendants' properties under the TRIA, Plaintiffs must also show that the Defendants' properties are "blocked assets." See TRIA § 201(a). The TRIA defines "blocked asset" as "any asset seized or frozen by the United States under section 5(b) of the Trading With the Enemy Act [("TWEA")] (50 U.S.C. App. 5(b)) or under sections 202 and 203 of the [IEEPA] (50 U.S.C. 1701; 1702)." TRIA § 201(d)(2)(A). Both blocking regimes "authorize the President to freeze the assets of foreign enemy states and their agencies and instrumentalities" in order to "put control of foreign assets in the hands of the President so that he may dispose of them in the manner that best furthers the United States' foreign-relations and national-security interests." Bank Markazi v. Peterson, ___ U.S. ___, 136 S.Ct. 1310, 1318, 194 L.Ed.2d 463 (2016) (alterations and internal quotation marks omitted).
Defendants argue that their assets are not blocked as required for TRIA attachment because Defendants have not been added to the SDN List and the United States does not have a possessory interest in their assets.
First, the relevant Executive Order and implementing ITRs undermine the argument that an entity's assets qualify as "blocked assets" only if that entity is on the SDN List or Executive Order 13,599 List. As discussed supra, in Executive Order 13,599, President Obama ordered that, under the authority conferred on him by the IEEPA, "[a]ll property and interests in property of the Government of Iran, including the Central Bank of Iran, that are in the United States ... are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in." Exec. Order 13,599 (emphasis added); see 31 C.F.R. § 560.211 (implementing blocking order).
The Supreme Court's recent decision in Bank Markazi v. Peterson, ___ U.S. ___, 136 S.Ct. 1310, 1317, 194 L.Ed.2d 463 (2016), supports the conclusion that Executive Order 13,599 blocks the U.S. property of any entity falling within the ambit of that order, without regard to whether the property holder has been added to the SDN List or Executive Order 13,599 List. In explaining that the Central Bank of Iran's properties are "blocked assets" under the TRIA, the Court did not rely on the bank's SDN status or its inclusion on the Executive Order 13,599 List but, rather, explained that the President invoked his IEEPA authority in Executive Order 13,599 and "block[ed] `[a]ll property and interests in property of any Iranian financial institution, including the Central Bank of Iran, that are in the United States.'" 136 S.Ct. at 1318 (quoting Exec. Order 13,599); see also id. at 1320 n. 10 (explaining that Executive Order 13,599 "blocked the assets and thereby opened the door to execution under the TRIA"). Bank Markazi further explained that "[t]o place beyond dispute the availability of some of the
Given that Executive Order 13,599 blocks all U.S. property of "the Government of Iran, including the Central Bank of Iran," the Supreme Court's explanation also pertains to entities satisfying the definition of the "Government of Iran." Moreover, the Court's reference to "Executive Order No. 13599-blocked assets" evinces its understanding of Executive Order 13,599 as in and of itself blocking assets for purposes of the TRIA. See id.
Nor are we persuaded by Defendants' argument that, even assuming Executive Order 13,599 blocks all property belonging to the "Government of Iran," that does not render that property blocked within the meaning of TRIA because it is not "seized or frozen by the United States" pursuant to the IEEPA. In so arguing, Defendants rely on Smith v. Federal Reserve Bank of New York, 346 F.3d 264 (2d Cir. 2003), in which we explained that, for purposes of the TRIA, "[t]o seize or freeze assets transfers possessory interest in the property." Id. at 272 (emphasis in original).
As an initial matter, we agree with Defendants that the District Court erred in concluding that Defendants' assets were "seized or frozen" within the meaning of the TRIA because "the Court-appointed Monitor and Interim Trustee," who has control over Defendants' properties, had obtained a "possessory interest" in those properties. In re 650 Fifth Ave. Private Action, 2014 WL 1516328, at *15. As relevant here, the plain text of the TRIA permits attachment of assets "seized or frozen by the United States ... under sections 202 and 203 of the [IEEPA]." TRIA § 201(d)(2)(A). It does not "reach those funds which the government has been given authorization to control through another means." United States v. Holy Land Found. for Relief & Dev., 722 F.3d 677, 685 (5th Cir. 2013).
We nevertheless conclude that, pursuant to Executive Order 13,599, the United States has acquired a "possessory interest" in Defendants' properties. That Order prohibits transferring or otherwise dealing in property within the United States that belongs to the "Government of Iran" as defined therein, and further authorizes the Secretary of the Treasury to promulgate necessary regulations to carry out those prohibitions, see Exec. Order 13,599, thus providing the government with sufficient control of such property to be recognized as a possessory interest, see Black's Law Dictionary 1284 (9th ed. 2009) (defining "possessory interest" as "right to control property, including the right to exclude others, by a person who is not necessarily the owner"). Smith, 346 F.3d at 271-72, supports this conclusion. In Smith, we concluded that certain judgment creditors could not rely on the TRIA to attach previously blocked Iraqi assets because they were no longer "blocked assets" due to President George W. Bush's March 20, 2003 confiscation order. See id. at 271-72. The Iraqi assets at issue were "froze[n]" when President George H.W. Bush issued Executive Order 12,722, which ordered that "`[a]ll property and interests in property of the Government of Iraq ... are hereby blocked,'" id. at 268 (quoting Exec. Order No. 12,722, 55 Fed. Reg. 31803 (Aug. 2, 1990)). The assets were then confiscated pursuant to President George W. Bush's March 20, 2003 confiscation order, which "confiscated and vested in the Department of the Treasury" "[a]ll blocked funds held in the United States in accounts in the name of the Government of Iraq," Exec. Order No. 13,290, 68 Fed. Reg. 14306, 14307 (Mar. 20, 2003). Viewed in this context, Smith's statement that there was "no dispute that the Iraqi Assets at issue were `blocked funds' within the meaning of TRIA § 201(a) at the time the President issued the confiscation Order," 346 F.3d at 269, is properly understood to mean that, pursuant to Executive Order 12,722, the assets were blocked until a President ordered their confiscation, not that blocking was effected by the confiscation order. Smith thus supports the conclusion that Executive Order 13,599, which uses blocking language similar to Executive Order 12,722, freezes all U.S. property belonging to the Government of Iran.
Indeed, the absence of a confiscation order here helps, rather than hurts, Plaintiffs' attempt to attach Defendants' properties under the TRIA. In concluding in Smith that TRIA's reference to "blocked assets" did not include confiscated assets, we distinguished seizing or freezing assets — which "transfers possessory interest in the property" — with confiscating assets — which "transfers ownership of terrorist property by vesting right, title, and interest as the President deems appropriate." 346 F.3d at 272 (emphasis in original) (discussing legislative history in which Senator Harkin stated that "assets as to which the United States claims ownership
Accordingly, because (1) President Obama specifically invoked his IEEPA authority in issuing Executive Order 13,599, and (2) that Order seizes or freezes the U.S. property of any entity satisfying the definition of "Government of Iran," (3) regardless of whether that entity is included on the SDN List or Executive Order 13,599 List, if Defendants satisfy Executive Order 13,599's definition of "Government of Iran," their assets are blocked and, therefore, subject to attachment under TRIA § 201. Nevertheless, for the same reasons we concluded that disputed questions of material fact preclude determining as a matter of law whether Defendants are agencies or instrumentalities under the TRIA, see supra at 135-37, we cannot determine as a matter of law that Defendants satisfy the definition of "Government of Iran," i.e., that they are a "political subdivision, agency, or instrumentality thereof, including ... any person owned or controlled by, or acting for or on behalf of, the Government of Iran," Exec. Order 13,599.
To summarize, we conclude as follows:
Accordingly, the only issues returning to the District Court for further proceedings are (1) Defendants' status as agencies or instrumentalities under the TRIA, and (2) whether their asserts are "blocked" under that statute. For the foregoing reasons, the judgment of the District Court is VACATED and REMANDED for further proceedings consistent with this order.
Unlike Alavi, 650 Fifth Ave. Co. is not a corporation; it is a partnership. The pertinent language of the FSIA excludes from the definition of "agency or instrumentality" an entity that is "a citizen of a State of the United States as defined in section 1332(c) and (e) of this title." 28 U.S.C. § 1603(b)(3) (emphasis added). Section 1332(c), which defines the citizenship of corporations, makes no mention of partnerships, see id. § 1332(c), and Congress has "never expanded this grant of citizenship to include artificial entities other than corporations." Americold Realty Tr. v. Conagra Foods, Inc., ___ U.S. ___, 136 S.Ct. 1012, 1015, 194 L.Ed.2d 71 (2016); see also Lincoln Prop. Co. v. Roche, 546 U.S. 81, 84 n. 1, 126 S.Ct. 606, 163 L.Ed.2d 415 (2005) (noting that "for diversity purposes, a partnership entity, unlike a corporation, does not rank as a citizen"); Chapman v. Barney, 129 U.S. 677, 682, 9 S.Ct. 426, 32 L.Ed. 800 (1889) (declining to read § 1332(c) to encompass a "mere partnership"). Section 1332(e) is also silent as to partnerships. It simply defines "States," to include United States "Territories, the District of Columbia, and the Commonwealth of Puerto Rico." 28 U.S.C. § 1332(e).
To the extent the Class Action Fairness Act ("CAFA"), Pub. L. No. 109-2, 119 Stat. 4, codified at 28 U.S.C. § 1332(d)(10), provides that "an unincorporated association shall be deemed to be a citizen of the State where it has its principal place of business and the State under whose laws it is organized," that section displaces the understanding of unincorporated-association citizenship only for purposes of the CAFA, see Ferrell v. Exp. Check Advance of SC LLC, 591 F.3d 698, 702 (4th Cir. 2010). Congress did not amend § 1603(b) to incorporate this CAFA definition. Rather, it renumbered prior § 1332(d) (defining "States") as § 1332(e) to accommodate CAFA's insertion as § 1332(d), see Pub. L. No. 109-2, § 4(a)(1), 119 Stat. 9, and — in the same legislation — amended FSIA § 1603(b)(3) to account for that renumbering. Prior to CAFA, § 1603(b)(3) excluded from its definition of "agency or instrumentality" "a citizen of a State of the United States as defined in section 1332(c) and (d) of this title." See Pub. L. No. 109-2, § 4 (b)(2), 119 Stat. 12. With the insertion of CAFA as subsection (d), Congress amended § 1603(b)(3) only by changing "(d)" to "(e)." See id.
We assume that Congress was aware of § 1603(b)(3) when it enacted CAFA's citizenship provision for unincorporated associations, and when it amended § 1603(b)(3) to note only a numbering change in § 1332. In these circumstances, we construe § 1603(b)(3) to incorporate only the § 1332(c) definition of corporations, and not to extend to partnerships. Because this argument was not pursued on appeal, however, and Plaintiffs do not here challenge the District Court's conclusion that, absent equitable principles under Bancec permitting the court to disregard Defendants' corporate form, § 1603(b)(3) precludes both Alavi and 650 Fifth Avenue from satisfying the definition of "agency or instrumentality," we assume without deciding that § 1603(b)(3) exempts both Alavi and 650 Fifth Ave. Co. from agency or instrumentality status under the FSIA.
28 U.S.C. § 1603(b).
