CHARLES R. BREYER, District Judge.
This case involves an Iranian instrumentality that seeks to avoid payment to American victims of Iranian terrorist acts. Specifically, four groups of judgment creditors ("Plaintiffs") who hold
Bank Melli is Iran's largest financial institution. MTD at 2. Its stock is wholly owned by the Iranian government. Id. The Blocked Assets at issue in this case are "funds due and owing by contract to Bank Melli pursuant to a commercial relationship with [Visa]." Compl. ¶ 16. In 1984, the United States designated Iran a terrorist party pursuant to section 6(j) of the Export Administration Act of 1797, and, pursuant to the International Emergency Economic Powers Act, the President directed that "all property and interests in property in the United States of persons and entities listed in the order or subsequently listed are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in." Id. ¶ 17. The United States added Bank Melli to the list, freezing its assets, in October 2007, upon finding that from 2002 to 2006, Bank Melli had "facilitated numerous purchases of sensitive materials for Iran's nuclear and missile programs," "provided a range of financial services on behalf of Iran's nuclear and missile industries," and "employed deceptive banking practices to obscure its involvement from the international banking system." Id.; Fact Sheet: Designation of Iranian Entities and Individuals for Proliferation Activities and Support for Terrorism, U.S. Dep't of the Treasury Press Or. (Oct. 25, 2007), http://www.treasury.gov/press-center/press-releases/pages/hp644.aspx (hereinafter "10/25/07 Fact Sheet").
Visa and Franklin claim no ownership interest in the Blocked Assets and "only continue[] to hold them because, pursuant to OFAC regulations, the assets cannot be released to Bank Melli or to anyone else without a license from OFAC or an appropriate court order." Compl. ¶ 18.
Plaintiffs are four groups of individuals (the Bennett Plaintiffs, the Greenbaum Plaintiffs, the Acosta Plaintiffs, and the Heiser Plaintiffs) who obtained default judgments against the government of Iran. See MTD at 2. The Bennett Plaintiffs sued Iran over the July 31, 2002 bombing of a cafeteria at Hebrew University in Jerusalem. MTD at 3 n. 2. On August 30, 2007, they obtained a default judgment of almost $13 million under 28 U.S.C. § 1605(a)(7). Id. The Greenbaum Plaintiffs sued Iran over the August 9, 2001 bombing of a
On December 2, 2011, the Bennett Plaintiffs filed a complaint against Visa and Franklin, seeking to execute against the Blocked Assets in order to satisfy their judgment. Id. On February 3, 2012, Visa and Franklin filed their Third Party Complaint in the nature of an interpleader, naming as defendants Bank Melli and other third-party defendants with potential claims to the Blocked Assets. See generally Compl. Visa and Franklin subsequently deposited the assets into this Court's registry. See dkts. 88-89.
On April 26, 2012, the Clerk entered a default against Bank Melli. See dkt. 79. On June 12, 2012, however, Bank Melli entered its appearance, see dkt. 96, and on July 5, 2012, this Court entered a stipulated order vacating the default, see dkt. 109. Bank Melli then moved to dismiss the case. See generally MTD.
The Court discharged Visa and Franklin at the November 16, 2012 hearing, and heard preliminary argument on the merits of Bank Melli's motion to dismiss. The parties each filed supplemental briefs, see Bank Melli Br. (dkt. 124); Pls. Br. (dkt. 125), and then, on December 13, 2012, participated in a second and more fulsome hearing on the motion to dismiss. See Mins. (dkt. 127). The Court then took the motion under submission.
Bank Melli's motion makes four arguments for dismissal: (A) that under First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983) ("Bancec"), it cannot be held liable for Iran's debts; (B) that the statutes on which Plaintiffs rely to pursue the Blocked Assets, the Terrorism Risk Insurance Act of 2002 (TRIA), Pub. L. No. 107-297, § 201(a), 116 Stat. 2322, 2337 (hereinafter "TRIA"), and the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1610(g) (hereinafter "section 1610(g)"), do not apply retroactively; (C) that TRIA and section 1610(g) only apply where the assets at issue are "assets of" and "property of" Bank Melli, allegations that are missing here; and (D) that Federal Rule of Civil Procedure 19 requires dismissal. See generally MTD. This Order addresses each argument in turn.
Bank Melli argues first that it cannot be held liable for the debts of Iran, because, although it is an instrumentality of Iran, it is juridically distinct. See MTD at 6. No doubt, the Supreme Court held in Bancec, 462 U.S. at 626-27, 103 S.Ct. 2591, that "government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such." In addition, the Treaty of Amity between the United States and Iran states that "[c]ompanies constituted under the applicable laws" of each country
However, two statutes permit judgment creditors to execute on Blocked Assets in this context, abrogating Bancec as to terrorism-based judgments against foreign state sponsors of terrorism. Section 1610(g)
Neither of these statutes is the least bit ambiguous — both allow for attaching the blocked assets of a terrorist instrumentality.
Incidentally, the Second Circuit went on to explain that its interpretation was also supported by a floor statement by one of TRIA's sponsors.
Bank Melli next argues that, even if the statutes mean what the Court understands them to mean, they cannot be applied to this case without rendering them impermissibly retroactive. MTD at 15-17. A statute "is retroactive if it alters the legal consequences of acts completed before its effective date." Chang v. United States, 327 F.3d 911, 920 (9th Cir.2003) (citing Miller v. Florida, 482 U.S. 423, 430, 107 S.Ct. 2446, 96 L.Ed.2d 351 (1987)). To determine whether a statute is retroactive, courts apply the two-part test set out in Landgraf v. USI Film Products, 511 U.S. 244, 280, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994).
"First, courts must `determine whether Congress has expressly prescribed the statute's proper reach,'" in which case the language used by Congress controls. See Ctr. for Biological Diversity v. U.S. Dep't of Agric., 626 F.3d 1113, 1117 (9th Cir. 2010) (quoting Landgraf, 511 U.S. at 280, 114 S.Ct. 1483). The Court rejects Plaintiffs' argument that TRIA's plain language expresses Congress' intent that it apply retroactively. See Pls. Br. at 4. Plaintiffs note that Section 201 of TRIA states that it applies "in every case" in which a person "has obtained a judgment" against a terrorist party ... and renders the terrorist party's blocked assets subject to execution to the extent of any compensatory damages for which the terrorist party "has been adjudged liable." Id. While that language might support Plaintiffs' interpretation, it falls quite short of an "`unambiguous directive' or `express command' that the statute ... be applied retroactively." See Ctr. for Biological Diversity, 626 F.3d at 1118 (quoting Martin v. Hadix, 527 U.S. 343, 354, 119 S.Ct. 1998, 144 L.Ed.2d 347 (1999)).
Second, under Landgraf, "absent such express language, courts must `determine whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed.'" Id. at 1117 (quoting Landgraf, 511 U.S. at 280, 114 S.Ct. 1483). If a statute would operate retroactively at step two, it does not apply. Id. Bank Melli states, and Plaintiffs do not dispute, that at the time of the conduct underlying Plaintiffs' judgments, Bank Melli's assets could not have been seized to satisfy Iranian government debts. MTD at 15. Accordingly, Bank Melli contends, seizing Bank Melli's assets now to satisfy a judgment based on "conduct that occurred before Congress enacted [the laws] would clearly `increase [Bank Melli's] liability for past conduct.'" Id. at 16. Although this argument holds some initial appeal, the Court finds that it falters under close scrutiny, for two alternative reasons.
Bank Melli's argument depends upon a simplified narrative in which the only significant events, for example, in the case of the Bennett Plaintiffs, are: (1) the bombing at Hebrew University, in July 2002; (2) TRIA's enactment, in November 2002; and (3) the Bennett Plaintiffs' default judgment against Iran, in August 2007. Such a narrative enables Bank Melli to argue that, as a statute's retroactivity turns on "when the primary conduct at issue in the suit took place," the primary conduct at issue here is the bombing. See MTD at 16 (citing Scott v. Boos, 215 F.3d 940, 949 (9th Cir.2000)). But Bank Melli's narrative omits an additional event of great significance: the freezing of Bank Melli's assets in October 2007 in light of OFAC's findings that, from 2002 to 2006, "Bank Melli... provided a range of financial services on behalf of Iran's nuclear and missile industries." See 10/25/07 Fact Sheet.
Bank Melli responds that "later secondary conduct — even if wrongful — does not eliminate a statute's retroactive effect." Bank Melli Br. at 2. In support of this assertion, Bank Melli relies on three cases, Johnson v. United States, 529 U.S. 694, 120 S.Ct. 1795, 146 L.Ed.2d 727 (2000), Vartelas v. Holder, ___ U.S. ___, 132 S.Ct. 1479, 182 L.Ed.2d 473 (2012), and Tyson v. Holder, 670 F.3d 1015 (9th Cir. 2012). See Reply at 11; Bank Melli Br. at 2-3. None apply here.
In Johnson, 529 U.S. at 697-98, 120 S.Ct. 1795, Congress had enacted a statute authorizing a court to impose an additional term of supervised release if a defendant violated conditions of his initial release; the defendant had been convicted before Congress enacted the statute, but he violated the conditions of his release after Congress enacted the statute. Johnson appealed his sentence, arguing that applying the new statute to him violated the Ex Post Facto Clause. Id. at 698, 120 S.Ct. 1795. The Sixth Circuit found that the application of the statute was not retroactive, because it punished Johnson's violations of the conditions of supervised release, which occurred after the statute was amended. Id. at 698-99, 120 S.Ct. 1795. The Supreme Court disagreed, concluding that the "postrevocation penalties relate to the original offense," and that "to sentence Johnson to a further term of supervised release under [the statute] would be to apply this section retroactively." Id. at 701, 120 S.Ct. 1795.
Importantly, the Court's conclusion in Johnson was driven by "the serious constitutional questions that would be raised by construing revocation and reimprisonment as punishment for the violation of the conditions of supervised release." Id. at 700, 120 S.Ct. 1795. The Court noted that conduct violating supervised release need not be criminal and need only be found by a judge under a preponderance of the evidence standard; in addition, where the conduct is criminal, it could form the basis for a separate prosecution, which would trigger double jeopardy concerns. Id. It is for those reasons that the Court "attribute[d] postrevocation penalties to the original conviction." Id. at 701, 120 S.Ct. 1795. None of those reasons are present here: proof beyond a reasonable doubt, double jeopardy, and the myriad of weighty constitutional issues that surround criminal sentencing have no bearing on this civil matter.
Vartelas and Tyson, though not criminal cases, are similarly inapposite.
In Vartelas, 132 S.Ct. at 1485, a legal permanent resident had pled guilty to conspiracy to make or possess counterfeit securities in 1994, for which he received a short sentence. He traveled regularly thereafter to visit his aging parents in Greece, but in 2003, he was stopped upon his return and an immigration officer classified him as an alien seeking admission under the Illegal Immigration Reform and
In so holding, the Court drew a sharp distinction between cases in which the subsequent act was illegal and/or dangerous, and those in which the subsequent act was "innocent." See id. at 1489-90. Thus it distinguished Racketeer Influenced and Corrupt Organizations Act (RICO) prosecutions that encompassed pre-enactment conduct, because "those prosecutions depended on criminal activity ... occurring after the provision's effective date," as opposed to IIRIRA, which does not. Id. at 1489. And it distinguished Fernandez-Vargas v. Gonzales, 548 U.S. 30, 126 S.Ct. 2422, 165 L.Ed.2d 323 (2006), in which the Court held that an IIRIRA provision, providing that an alien who reenters the country after having been removed can be removed again under the same removal order, could be applied to an alien who returned illegally before IIRIRA's enactment. Id. The Court explained that it was an "`alien's choice to continue his illegal presence ... after the effective date of the new la[w],'" and "`not a past act that he is helpless to undo'" that subjected him to the new law. Id. (quoting Fernandez-Vargas, 548 U.S. at 44, 126 S.Ct. 2422). The Court contrasted the alien in Fernandez-Vargas with Vartelas, whom it "several times stressed, engaged in no criminal activity after IIRIRA's passage." Id. (emphasis added). The Court likewise distinguished cases dealing with laws that prevent felons from possessing firearms, laws that prevent persons convicted of sex crimes against minors from working in jobs involving contact with minors, and laws that prevent a person who has been adjudicated as mentally defective from possessing guns; those laws "target a present danger," while "[t]he act of flying to Greece" did not make Vartelas "hazardous." Id.; id. n. 7. Deeming Vartelas's travel and return "innocent" acts that "involved no criminal infraction," the Court concluded that applying IIRIRA to bar Vartelas from traveling abroad "rested not on any continuing criminal activity, but on a single crime committed years before IIRIRA's enactment." Id. at 1490. Bank Melli cannot argue that its assistance in Iran's nuclear proliferation efforts is either an "innocent act," akin to visiting one's elderly parents in Greece, or something Bank Melli was "helpless to undo." The Court's concerns in Vartelas are absent here.
Moreover, Tyson is analogous to Vartelas. In Tyson, 670 F.3d at 1017, a lawful permanent resident was convicted in 1980 of importing heroin, following her consent to a bench trial with stipulated facts and testimony. Twenty-four years later, she left the United States and was denied reentry. Id. She sought a waiver of inadmissibility under former § 212(c), which had been repealed in 1996. Id. In so doing, she relied on INS v. St. Cyr., 533 U.S. 289, 121 S.Ct. 2271, 150 L.Ed.2d 347 (2001), in which the Supreme Court had held that § 212(c) relief remained available to aliens who entered plea bargains with the expectation
Tyson turned on an a lawful permanent resident's settled expectations about the impact of a criminal conviction. See id. at 1021-22. In light of St. Cyr., it is no surprise that the court found it unfair to prevent Tyson from applying for a § 212(c) waiver. And, consistent with Vartelas, it is no surprise that the court would not wish to add to the consequences of Tyson's original conviction by denying her re-entry based only on the innocuous act of travel. See id. at 1021 (identifying the only two consequences of Tyson's stipulated facts trial in 1980).
All three of Bank Melli's cases therefore involve, and reject, attempts to attach extra penalties to an individual's original criminal conviction based on subsequent innocuous or non-criminal behavior. That is not this case. This case involves, instead: (1) terrorist act(s) by the government of Iran; (2) the enactment of TRIA, which did not make Bank Melli's assets subject to attachment for Iranian debts, but should have put Bank Melli on notice of that possibility; and (3) default judgment(s) against Iran; followed by (4) Bank Melli's support for Iran's nuclear and missile industries; and (5) this government's resulting decision to freeze Bank Melli's assets. There is no original criminal conviction against Bank Melli. Bank Melli's assets are subject to attachment in this case because of Bank Melli's own actions, post-TRIA, in supporting Iran's nuclear and missile industries. Those actions are not innocuous or harmless. Accordingly, the Court rejects Bank Melli's retroactivity argument.
In the alternative, Bank Melli's retroactivity argument fails because Bank Melli misconstrues what TRIA does. Bank Melli argues that Plaintiffs seek to use TRIA to make it liable for something for which it was not liable pre-TRIA. MTD at 15. In both motion hearings and in its supplemental briefing, Bank Melli has maintained that liability and collectability are interchangeable concepts; that is, that collecting money from Bank Melli in connection with Iran's actions is the equivalent of holding Bank Melli liable for Iran's actions. See, e.g., Bank Melli Br. at 3-4 (citing snippets from various cases using terms like "liability for a money judgment"). The Court disagrees. This case is not about holding Bank Melli liable for Iran's actions, it is simply about collecting money from Iran, wherever that money can be found.
Neither TRIA nor section 1610(g) speak of shifting liability from a terrorist party to its instrumentality. Both speak of attaching an instrumentality's assets in aid of executing a judgment against a terrorist party. See section 1610(g) (stating that "the property of an ... instrumentality of such a state ... is subject to attachment in aid of execution, and execution, upon that judgment"); TRIA (stating that "(... the
Bank Melli's argument to the contrary presupposes that Bancec, 462 U.S. at 626-27, 103 S.Ct. 2591, which held that "government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such," stands for an immutable principle of law. But Congress created the presumption of separateness in the first place, see Bancec, 462 U.S. at 627, 103 S.Ct. 2591 (in enacting FSIA, "Congress clearly expressed its intention that duly created instrumentalities of a foreign state are to be accorded a presumption of independent status"), and it had the power to revoke that presumption. As discussed above, Congress revoked that presumption in this context through TRIA and section 1610(g). See Estate of Heiser v. Islamic Rep. of Iran, 807 F.Supp.2d 9, 15 (D.D.C. 2011) (section 1610(g) abrogates Bancec in the context of terrorism-related judgments); Weinstein, 609 F.3d at 51 (TRIA overrides presumption of separateness in Bancec).
Thus in Weinstein, 609 F.3d at 50, where (as here) plaintiffs sought to recover assets from Bank Melli to satisfy a judgment against Iran, the Second Circuit rejected Bank Melli's argument
Bank Melli also urges dismissal because, it argues, it does not actually own the Blocked Assets. See MTD at 18-20.
No matter. As Plaintiffs note in their briefing, Federal Rule of Civil Procedure 69 provides that enforcement proceedings in federal courts are governed by the law of the state in which the Court sits, although a federal statute governs if applicable. Pls.' Opp'n to MTD at 19; Fed. R.Civ.P. 69(a)(1). The Ninth Circuit explained in Peterson, 627 F.3d at 1130, that "[t]he 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.... Therefore, California law on the enforcement of judgments applies to this suit insofar as it does not conflict with the FSIA."
California law treats the Blocked Assets as subject to execution. In California, all property of a judgment debtor, regardless of the type of interest, is subject to enforcement of a money judgment. See Cal. Civ.Proc.Code §§ 680.310 ("`Property' includes real and personal property and any interest therein."), 695.010(a) ("Except as otherwise provided by law, all property of the judgment debtor is subject to enforcement of a money judgment."), 699.710 (all property subject to enforcement of money judgment also subject to levy). This includes property of a judgment debtor that is held by a third party. See id. § 708.210 ("If a third person has possession or control of property in which the judgment debtor has an interest or is indebted to the judgment debtor, the judgment creditor may bring an action against the third person"). Thus, in Peterson, 627 F.3d at 1130-31 (quoting Cal.Civ.Proc.Code § 708.510(a)), the court noted 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, whether or not the right is conditioned on future developments.'"
Here, there is no dispute that Bank Melli has a 100% beneficial interest in the Blocked Assets, and that the Blocked Assets
Finally, Bank Melli argues that it is a required party that cannot be joined due to its sovereign immunity. MTD at 20-22. Bank Melli's argument relies almost entirely on Republic of Philippines v. Pimentel, 553 U.S. 851, 128 S.Ct. 2180, 171 L.Ed.2d 131 (2008). Pimentel, 553 U.S. at 854-58, 128 S.Ct. 2180, involved an interpleader action in which human rights victims who had obtained a judgment against Ferdinand Marcos sought to attach property held by a bank. Two of the entities in the suit, the Republic of the Philippines and the Philippine Presidential Commission on Good Governance ("the Commission"), invoked sovereign immunity, and were dismissed; however, the district court allowed the action to proceed. Id. The Ninth Circuit held that dismissal of the interpleader suit was not necessary because, although the Philippines and the Commission were "necessary parties" under Rule 19, their claim had so little merit that the interpleader action could proceed without them. Id. at 860, 128 S.Ct. 2180. The Supreme Court reversed, explaining that the Court of Appeals had not given the necessary weight to the absent entities' assertion of sovereign immunity: "where sovereign immunity is asserted, and the claims of the sovereign are not frivolous, dismissal of the action must be ordered where there is a potential for injury to the interests of the absent sovereign." Id. at 864-67, 128 S.Ct. 2180. Bank Melli argues that, as in Pimentel, it is a foreign sovereign not amenable to suit,
Bank Melli assumes that it is a required party. It is not. Bank Melli is a mere instrumentality of Iran, and as such its presence is not central to this case. That conclusion is supported by Estate of Heiser, 807 F.Supp.2d at 12, in which victims of state-sponsored terrorism sought to direct Sprint to turn over funds owed to the Telecommunication Infrastructure Company of Iran ("TIC"), an instrumentality of Iran. Sprint argued that it should be permitted to interplead TIC into the proceeding. Id. at 23. The court explained that "Congress did not [intend] to require service of garnishment writs on agencies or instrumentalities of foreign states responsible for acts of state-sponsored terrorism" and that, accordingly, "TIC [was] not a necessary party to [the] action under applicable law."
This case is therefore distinguishable from Pimentel, where there was no dispute that the Philippines and the Commission were required parties. See 553 U.S. at 863, 128 S.Ct. 2180 ("[t]he application of subdivision (a) of Rule 19 is not contested"). The dispute in Pimentel centered on Rule 19(b), "whether the action may proceed without the Republic and the Commission, given that the Rule requires them to be parties." Id. at 864, 128 S.Ct. 2180. Because this Court finds that Bank Melli is not a required party, it need not reach Rule 19(b), and the question of whether Bank Melli can be joined. The Court notes, however, that, unlike in Pimentel, 553 U.S. at 865, 128 S.Ct. 2180, where "[i]mmunity ... [was] uncontested," here there are two applicable statutory exceptions to immunity, which alleviate any concerns about prejudice to Bank Melli or about the adequacy of a judgment rendered in Bank Melli's absence. See TRIA; section 1610(g); see also Weinstein, 609 F.3d at 50 ("[W]e find it clear beyond cavil that Section 201(a) of the TRIA provides courts with subject matter jurisdiction over postjudgment execution and attachment proceedings against property held in the hands of an instrumentality of the judgment-debtor, even if the instrumentality is not itself named in the judgment."). Bank Melli's response, that the exceptions to immunity pertain to the property, and not to Bank Melli, see Bank Melli Br. at 7, only reinforces the Court's conclusion that the statutory scheme is not about Bank Melli's liability, but about Plaintiffs' ability to collect from Iran. This case could proceed without Bank Melli.
Because Bank Melli is not a required party that cannot be joined under Rule 19, the Court rejects this argument for dismissal as well.
For the foregoing reasons, the Court DENIES Bank Melli's Motion to
Fed.R.Civ.P. 19(a)-(b).
