Weinstein v. Islamic Republic of Iran

• Decision Date: 13 January 2004
• Docket Number: No. Misc.02-237.,Misc.02-237.
• Citation: 299 F.Supp.2d 63
• Parties: Susan WEINSTEIN, individually, as Co-Administrator of the Estate of Ira William Weinstein, and as natural guardian of plaintiff David Weinstein, et al., Plaintiffs, v. The ISLAMIC REPUBLIC OF IRAN, et al., Defendants. The Bank of New York, Petitioner, v. Susan Weinstein, individually, as Co-Administrator of the Estate of Ira William Weinstein, and as natural guardian of plaintiff David Weinstein, et al., Respondents.
• Court: U.S. District Court — Eastern District of New York

Page 63

299 F.Supp.2d 63

Susan WEINSTEIN, individually, as Co-Administrator of the Estate of Ira William Weinstein, and as natural guardian of plaintiff David Weinstein, et al., Plaintiffs, v. The ISLAMIC REPUBLIC OF IRAN, et al., Defendants.

The Bank of New York, Petitioner, v. Susan Weinstein, individually, as Co-Administrator of the Estate of Ira William Weinstein, and as natural guardian of plaintiff David Weinstein, et al., Respondents.

No. Misc.02-237.

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

January 13, 2004.

Pillsbury Winthrop LLP by: Leo T. Crowley and Daniel Z. Mollin, Esqs., New York City, for Petitioner Bank of New York.

Westerman Ball Ederer Miller & Sharfstein, LLP by: Jeffrey A. Miller and Philip J. Campisi, Esqs., New York City, for Plaintiffs-Respondents.

Patterson Belnap Webb & Tyler LLP by: John D. Winter, Esq., New York City, for Respondent Bank Melli Iran.

Law Offices of Steven W. Kerekes by: Steven W. Kerekes, Esq., Beverly Hills, CA, for Respondent Bank Saderat Iran.

John D. Ashcroft, Attorney General of the United States, United States Department of Justice by: Anthony J. Coppolino, Esq., Senior Trial Counsel, Civil Division, Washington, DC, for United States.

MEMORANDUM AND ORDER

WEXLER, District Judge.

Petitioner Bank of New York ("BNY") brings this matter for determination of the respective rights of respondents in certain bank accounts maintained by BNY belonging to three of the respondents — Bank Melli Iran ("Bank Melli"), Bank Saderat Iran ("Bank Saderat"), and Bank Sepah Iran ("Bank Sepah"), all of which are Iranian banks (collectively, the "Banks"). The remaining respondents are the judgment plaintiffs in the underlying action — decedent Ira Weinstein's widow, children and the co-administrators of his estate (the "plaintiffs"). Plaintiffs assert that the assets in the Banks' BNY accounts are subject to attachment under the Terrorism Risk Insurance Act of 2002 ("TRIA") § 201 and available to satisfy plaintiffs' judgment in the underlying action against the defendants — the Islamic Republic of Iran ("Iran"), the Iranian Ministry of Information, and three senior Iranian officials (the "defendants"). The Banks argue that the assets in their BNY accounts are not subject to attachment under the TRIA.¹ The United States Department of Justice ("DOJ") submits a statement of interest in this matter, with a declaration from the director of the Office of Foreign Assets Control ("OFAC") of the United States Treasury Department ("Treasury Department"), asserting that the Banks' assets are not subject to attachment under the TRIA.

I. BACKGROUND

For purposes of this motion, the relevant background can be summarized as follows.

A. The Underlying Action and Judgment

On February 25, 1996, United States citizen and New York native Ira Weinstein was severely injured in a suicide bombing by the Hamas terrorist organization in Jerusalem, Israel. On April 13, 1996, Ira Weinstein died from those injuries.

On October 27, 2000, plaintiffs filed a civil action for wrongful death and related torts in the United States District Court for the District of Columbia against defendants under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1605(a)(7).² On February 6, 2002, the district court entered judgment in plaintiffs' favor, finding that defendants had provided tens of millions of dollars to Hamas for the execution of terrorist attacks and had trained Hamas terrorists in bomb-making and other related tactics, and holding defendants liable to plaintiffs for approximately $183.2 million, consisting of $33.2 million in compensatory damages and $150 million in punitive damages. See Weinstein v. Islamic Republic of Iran, 184 F.Supp.2d 13 (D.D.C.2002).

B. The Restraining Notices

On October 10, 2002, plaintiffs registered and filed their judgment in this district and served an information subpoena with a restraining notice on BNY to aid in the enforcement of the judgment. The October restraining notice sought information about, and required BNY to restrain, the accounts of Iran and any instrumentality of Iran maintained at BNY. Pursuant to this notice, BNY identified and restrained three accounts, one held by each of the Banks. BNY notified the Banks of its action by letter and requested that they contact legal counsel.

The Banks purportedly threatened legal action against BNY if the restraints were not removed. In response, BNY released the restraints on the accounts. Plaintiffs contend they were never notified of the communications between BNY and the Banks, of the existence of the subject accounts, or of BNY's decision to lift the restraints without court order. In addition, plaintiffs assert that BNY never responded to plaintiffs' October 10 information subpoena.

On November 27, 2002, plaintiffs served a second information subpoena and restraining notice on BNY, following the November 26, 2002 passage of the TRIA, Pub.L. No. 107-297, § 201(a), 116 Stat. 2322 (Nov. 26, 2002). The restraining notice was similar in nature to the October restraining notice, differing only with respect to references to the TRIA. BNY again restrained the Banks' accounts and notified plaintiffs of its action, identifying the accounts and their balances as of December 3, 2002. In this respect, the account balances were approximately $203,500 for Bank Melli; $6,500 for Bank Saderat; and $19,000 for Bank Sepah. After correspondence between plaintiffs and BNY, plaintiffs served another information subpoena on BNY, and BNY provided a response indicating that the account balances as of December 13, 2002 were approximately $149,900 for Bank Melli; $5,400 for Bank Saderat; and $12,100 for Bank Sepah. According to plaintiffs, BNY acknowledged that all balance decreases between December 3rd and December 13th would be replaced.

C. The TRIA and Iranian Sanctions Programs

Section 201(a) of Title II of the TRIA provides:

Notwithstanding any other provision of law, and except as provided in subsection (b), in every case in which a person has obtained a judgment against a terrorist party on a claim based on an act of terrorism, or for which a terrorist party is not immune under section 1605(a)(7) of title 28, United States Code, the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in the aid of execution in order to satisfy such judgment to the extent of any compensatory damages for which such terrorist party has been adjudged liable.

TRIA § 201(a), 116 Stat. at 2337. The TRIA defines a "blocked asset" as "any asset seized or frozen by the United States under section 5(b) of the Trading With the Enemy Act (50 U.S.C.App. 5(b)) or under sections 202 and 203 of the International Emergency Economic Powers Act (50 U.S.C. 1701; 1702)." Id. § 201(d)(2)(A), 116 Stat. at 2339.

As for the referenced provision of the Trading With the Enemy Act, 50 U.S.C.App. § 5(b), the parties agree that it does not apply to Iran; therefore, it does not apply to this matter.

On the other hand, §§ 202 and 203 of the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. §§ 1701 and 1702, do apply to Iran. These sections grant the President of the United States inter alia, broad authority to regulate foreign assets in appropriate circumstances:

(a)(1) At the times and to the extent specified in section 1701 of this title, the President may, under such regulations as he may prescribe, by means of instructions, licenses, or otherwise —

(A) investigate, regulate, or prohibit —

(i) any transactions in foreign exchange,

(ii) transfers of credit or payments between, by, through, or to any banking institution, to the extent that such transfers or payments involve any interest of any foreign country or a national thereof,

(iii) the importing or exporting of currency or securities,

by any person, or with respect to any property, subject to the jurisdiction of the United States;

(B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States ....

50 U.S.C. § 1702(a)(1)(A), (B); see also id. § 1701(b) ("The authorities granted to the President by section 1702 of this title may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose.").

In 1979, President Carter exercised the authority granted in the IEEPA against Iran. In this respect, on November 14, 1979, President Carter issued Executive Order ("EO") 12170 pursuant to the authority provided in the IEEPA, 50 U.S.C. § 1701 et seq., in response to Iran's seizure of the U.S. Embassy in Tehran, Iran and the resulting hostage crisis. In EO 12170, the President directed:

I hereby order blocked all property and interests in property of the Government of Iran, its instrumentalities and controlled entities and the Central Bank of Iran which are or become subject to the jurisdiction of the United States or which are in or come within the possession or control of persons subject to the jurisdiction of the United States.

EO 12170, 44 Fed.Reg. 65,729 (Nov. 14, 1979). The President also ordered the Secretary of the Treasury Department to carry out the provisions of the order. Id.

In response, the Treasury Department, through the OFAC, issued the Iranian Assets Control Regulations ("IACR"), 45 Fed.Reg. 24,432, (Apr. 9 1980), codified at 31 C.F.R. Part 535. IACR § 535.201,...