Bennett v. Franklin Resources, Inc., Case No. 11-cv-05807-CRB
| Citation | 360 F.Supp.3d 972 |
| Decision Date | 19 December 2018 |
| Docket Number | Case No. 11-cv-05807-CRB |
| Court | U.S. District Court — Northern District of California |
| Parties | Michael BENNETT, et al., Plaintiffs, v. FRANKLIN RESOURCES, INC., et al., Defendants. |
Curtis C. Mechling, Pro Hac Vice, Stroock & Stroock & LaVan LLP, New York, NY, Dale K. Cathell, David Benjamin Misler, DLA Piper LLP, Baltimore, MD, Frank Thomas Pepler, DLA Piper LLP, San Francisco, CA, Jane Carol Norman, Bond & Norman, Washington, DC, for Plaintiffs.
Bruce H. Jackson, Irene V. Gutierrez, Ethan Allen Hunt Miller, Anne M. Kelts, Baker & McKenzie LLP, San Francisco, CA, for Defendants.
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION FOR STAY
In this case, four groups of judgment creditors ("Plaintiffs" or "Judgment Creditors") who hold judgments against Iran seek to recover $ 17.6 million in assets ("the Blocked Assets") held by Third Party Plaintiffs Visa and Franklin. Although the assets are "due and owing to" Bank Melli, an Iranian instrumentality, they are blocked by executive orders issued by the President and regulations issued by the Department of the Treasury, Office of Foreign Assets Control ("OFAC"). The time has come for summary judgment. As the Court indicated at the motion hearing, it now GRANTS Plaintiffs' Motion for Summary Judgment (dkt. 172), and GRANTS Bank Melli's Motion to Stay (dkt. 180).
The Judgment Creditors are United States citizens, or representatives of their estates, who hold unsatisfied money judgments against Iran for injuries sustained in multiple terror attacks carried out with Iran's material support and assistance. See Acosta v. Islamic Republic of Iran, 574 F.Supp.2d 15 (D.D.C. 2008) ; Estate of Heiser v. Islamic Republic of Iran, 466 F.Supp.2d 229 (D.D.C. 2006) ; Greenbaum v. Islamic Republic of Iran, 451 F.Supp.2d 90 (D.D.C. 2006) ; Bennett v. Islamic Republic of Iran, 507 F.Supp.2d 117 (D.D.C. 2007). Their judgments are based on claims against Iran for which Iran was not immune under section 1605A and/or section 1605(a)(7) of the Foreign Sovereign Immunities Act of 1976 ("FSIA"), Pub. L. No. 94-583, 90 Stat. 2891 (); Bennett v. Islamic Republic of Iran, 825 F.3d 949, 955 (9th Cir. 2016) ().
The Acostas' judgment is for $ 50,172,000.00; the Bennetts' judgment is for $ 12,904,548.00; the Greenbaums' judgment is for $ 19,879,023.00; and the Heisers' judgment is for $ 286,089,966.00. Mechling Decl. Ex. E. (dkt. 172-6) at 2–4.1 Their combined judgments total $ 369,045,537.00. The Judgment Creditors have collected approximately $ 195,900,000.00 in partial satisfaction of their judgments. See Mechling Decl. (dkt. 172) ¶ 10; Norman Decl. (dkt. 172-10) ¶ 7; Kremen Decl. ¶ 9. Their unpaid compensatory damage judgments therefore far exceed the value of the Blocked Assets.
Bank Melli, Iran's largest financial institution, is wholly owned by Iran. Bennett, 825 F.3d at 957 ; Mechling Decl. Ex. D (dkt. 172-5) ¶ 7. On August 10, 1995, OFAC recognized this, issuing a notice that Bank Melli "and all [its] offices worldwide" are "owned or controlled by the Government of Iran." Implementation of Executive Order No. 12,959 With Respect to Iran, 60 Fed. Reg. 40,881, 40,884 (Aug. 10, 1995).
On June 28, 2005, acting pursuant to, inter alia, the authority vested in him by the International Emergency Economic Powers Act ("IEEPA"), Pub. L. No. 95-223, § 202, 91 Stat. 1626 (), President Bush issued Executive Order 13,382. EO 13,382 blocked all property located in the United States owned by any entity "determined by the Secretary of State, in consultation with the Secretary of Treasury, the Attorney General, and other relevant agencies, to have engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery." Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters, 70 Fed. Reg. 38,567, 38,567, § 1 (June 28, 2005). On October 25, 2007, Bank Melli was designated an entity "whose property and interests in property are blocked pursuant to Executive Order 13382." Additional Designation of Entities Pursuant to Executive Order 13,382, 72 Fed. Reg. 62,520, 62,521 (Nov. 5, 2007).
On January 16, 2016, Bank Melli's Executive Order 13,382 designation was removed. See Changes to Sanctions Lists Administered by the Office of Foreign Assets Control on Implementation Day Under the Joint Comprehensive Plan of Action, 81 Fed. Reg. 13,562, 13,562, 13,564 (Mar. 14, 2016).
On February 5, 2012, acting pursuant to the authority vested in him by, inter alia, IEEPA, President Obama issued Executive Order 13,599, which blocked "[a]ll property and interests in property of the Government of Iran, including the Central Bank of Iran, that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person." Blocking Property of the Government of Iran and Iranian Financial Institutions, 77 Fed. Reg. 6659, 6659, § 1(a) (Feb. 5, 2012). EO 13,599 defines "Government of Iran" to "mean[ ] the Government of Iran, any political subdivision, agency, or instrumentality thereof, including the Central Bank of Iran, and any person owned or controlled by, or acting for or on behalf of, the Government of Iran." Id. at 6660, § 7(d). OFAC then promulgated the Iranian Transactions and Sanctions Regulations ("ITSRs") pursuant to IEEPA in order to implement the EO. See Iranian Transactions Regulations, 77 Fed. Reg. 64,664 (Oct. 22, 2012) ; 31 C.F.R. Part 560. The ITSRs similarly both define "Government of Iran" and block its property. See 31 C.F.R. §§ 560.211(a), 560.304(a) – (c).
On January 16, 2016, the same day Bank Melli's Executive Order 13,382 designation was removed, OFAC published a "list of persons identified by OFAC as meeting the definition of the term Government of Iran or the term Iranian financial institution as set forth in, respectively, sections 560.304 and 560.321 of the ITSR." Office of Foreign Assets Control, List of Persons Identified as Blocked Solely Pursuant to Executive Order 13,599 at 1 (Aug. 15, 2018), available at https://www.treasury.gov/ofac/downloads/13599/13599list.pdf (hereinafter "13599 List"). OFAC identified Bank Melli on the 13599 List as an entity meeting the definition of Government of Iran. Id. at 5. EO 13,599 is self-executing: "[t]he property and interests in property falling within the definition of the terms Government of Iran and Iranian financial institutions are blocked pursuant to this section regardless of whether the names of such persons are" identified on the EO 13599 List. See 31 C.F.R. § 560.211 Note 1.
In addition, on November 5, 2018, the United States announced that it had added Bank Melli to the Specially Designated Nationals and Blocked Persons List ("SDN List"), designating it a Specially Designated Global Terrorist ("SDGT"). See Mechling Reply Decl. Ex. A (dkt. 184-2) at 2–3 & Ex. B (dkt. 184-3) at 3. President Bush issued Executive Order 13244 pursuant to, inter alia, IEEPA; that Order blocks all property of foreign persons designated as an SDGT. See Executive Order 13224, 66 Fed. Reg. 49,079, 49, 079 (Sept. 23, 2001) ; see also 31 C.F.R. § 594.201, 594.310.
On April 15, 1991, Bank Melli applied to Visa International Service Association ("Visa International") to become a principal member in Visa International's "common bank card and/or travelers cheque program." Bailey Decl. Ex. 1 (dkt. 172-13). As part of the application, Bank Melli entered into a Membership Agreement with Visa International. Id. Visa is a corporation organized under the laws of the State of Delaware with a principal place of business in Foster City, California. Bailey Decl. (dkt. 172-12) ¶ 3. Bank Melli admits that "it is or was a party to an agreement with Visa or a Visa affiliate pursuant to which Bank Melli agreed to accept Visa cards in Iran through its branches in that country, and that certain amounts are due and owing to Bank Melli pursuant to that agreement." Mechling Decl. Ex. D.
In or about April 1995, OFAC "informed Visa that, owing to sanctions imposed against [Iran], Visa could no longer accept transactions acquired by Bank Melli." Bailey Decl. ¶ 8. On July 4, 1995, Visa International informed Bank Melli that, because Bank Melli's accounts at Bank of New York had been frozen, Visa International transferred funds due to Bank Melli "to a separate settlement account." Bailey Decl. Ex. 3 (dkt. 172-15); Bailey Decl. ¶ 8. "Shortly thereafter, all ... transactions [acquired by Bank Melli] ceased, leaving certain sums owing to Bank Melli's settlement account." Bailey Decl. ¶ 8. On March 15, 1996, "Visa International invested the $ 2,570,465.26 then due and owing to Bank Melli in securities issued by the Institutional Fiduciary Trust." Id. ¶ 9. Subsequently, "[a]dditional funds due and owing to Bank Melli were invested in securities issued by the Institutional Fiduciary Trust up until January 9, 1998." Id. ¶ 10. Bank Melli wrote to Visa on January 25, 2004, stating, "our funds for acquiring transactions made by VISA cardholders in Iran from 6/6/95 till cease of operations are $ 11,587,627.02 which are held with [Visa International]." Bailey Decl. Ex. 4 (dkt. 172-16) (emphasis added). Visa International held the funds in an account named Visa International Special Account 5. Bailey Decl. ¶ 11.
On September 29, 2010, Visa International submitted an Annual Report of Blocked Property, as required by OFAC regulations. Bailey Decl. Ex. 6 (dkt. 172-18). In that report, Visa International reported to OFAC that it had blocked Visa...
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