Doe v. JPMorgan Chase Bank, N.A., 080918 FED2, 17-759-cv

Docket Nº:17-759-cv
Opinion Judge:BARRINGTON D. PARKER, CIRCUIT JUDGE.
Party Name:John Doe, Plaintiff-Appellant, v. JPMorgan Chase Bank, N.A., Respondent-Third-Party-Petitioner-Counter-Claimant-Appellee, Deutsche Bank Trust Company Americas, Commerzbank AG, New York Branch, Respondents-Appellees.
Attorney:Orlando do Campo, Do Campo & Thorton, P.A., Miami, FL, and Brett E. von Borke, Buckner + Miles, Miami, FL, for John Doe Steven B. Feigenbaum and Gregory P. Feit, Levi Lubarsky Feigenbaum & Weiss LLP, New York, NY, for JPMorgan Chase Bank, N.A. Mark P. Gimbel, Covington & Burling LLP, New York, NY...
Judge Panel:Before: Parker, Wesley, and Chin, Circuit Judges. Denny Chin, Circuit Judge
Case Date:August 09, 2018
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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John Doe, Plaintiff-Appellant,

v.

JPMorgan Chase Bank, N.A., Respondent-Third-Party-Petitioner-Counter-Claimant-Appellee,

Deutsche Bank Trust Company Americas, Commerzbank AG, New York Branch, Respondents-Appellees. 1

No. 17-759-cv

United States Court of Appeals, Second Circuit

August 9, 2018

Argued: December 15, 2017

Appeal from the United States District Court for the Southern District of New York Laura T. Swain, District Judge, Presiding.

Judgment creditor of sanctioned foreign entities sought attachment and turnover of blocked electronic funds transfers ("EFTs") under Section 201(a) of the Terrorism Risk Insurance Act, Pub. L. No. 107-297, § 201, 116 Stat. 2322, 2337 (2002) (codified at 28 U.S.C. § 1610 note). The District Court (Swain, J.) denied the request on the grounds that a blocked EFT held at an intermediary bank is subject to execution only if the judgment debtor or its agent transmitted the EFT directly to the bank where the EFT is blocked. The judgment of the District Court is AFFIRMED.

Orlando do Campo, Do Campo & Thorton, P.A., Miami, FL, and Brett E. von Borke, Buckner + Miles, Miami, FL, for John Doe

Steven B. Feigenbaum and Gregory P. Feit, Levi Lubarsky Feigenbaum & Weiss LLP, New York, NY, for JPMorgan Chase Bank, N.A.

Mark P. Gimbel, Covington & Burling LLP, New York, NY, for Deutsche Bank Trust Company Americas

Terry Myers and Paul A. Saso, Gibbons P.C., New York, NY, for Commerzbank AG, New York Branch

Chad D. Readler, Acting Assistant Attorney General; Sharon Swingle and Benjamin M. Shultz, Department of Justice; and Peter Aronoff and Christopher Connolly, Assistant U.S. Attorneys, for Geoffrey S. Berman, U.S. Attorney for the Southern District of New York, for Amicus Curiae United States of America

Before: Parker, Wesley, and Chin, Circuit Judges.

BARRINGTON D. PARKER, CIRCUIT JUDGE.

John Doe is a judgment creditor who seeks attachment and turnover of electronic fund transfers ("EFTs") initiated by sanctioned foreign terrorist organizations which, after passing through foreign intermediary banks, were blocked and held by domestic banking institutions. See Section 201(a) of the Terrorism Risk Insurance Act ("TRIA"), Pub. L. No. 107-297, § 201, 116 Stat. 2322, 2337 (2002) (codified at 28 U.S.C. § 1610 note). Specifically, Doe applied below for turnover orders against JPMorgan Chase Bank, N.A. ("JPMorgan"), Deutsche Bank Trust Company Americas ("Deutsche Bank"), and Commerzbank AG, New York Branch ("Commerzbank"), the institutions which blocked and held the EFTs.

The United States District Court for the Southern District of New York (Swain, J.), denied the applications on the grounds that the EFTs were not the property of the originators-the terrorist organizations-but instead were the property of the intermediaries that transferred the funds to the U.S. institutions. See Doe v. Ejercito De Liberacion Nacional, No. 15-cv-8652, 2017 WL 591193 (S.D.N.Y. Feb. 14, 2017). In reaching that conclusion, the District Court relied on Calderon-Cardona v. Bank of N.Y. Mellon, 770 F.3d 993 (2d Cir. 2014) and Hausler v. JP Morgan Chase Bank, N.A., 770 F.3d 207 (2d Cir. 2014) (per curiam), in which we held that blocked wire transfers held at an intermediary bank are subject to execution under Section 201(a) only if the judgment debtor or an agency or instrumentality of the judgment debtor "transmitted the EFT directly to the bank where the EFT is held pursuant to the block." Calderon-Cardona, 770 F.3d at 1002; see also Hausler, 770 F.3d at 212. Because the record reflects that the judgment debtors did not do so, we AFFIRM.

Background

The International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-1706, empowers the President to impose economic sanctions to respond to unusual and extraordinary international threats to the United States. 50 U.S.C. §§ 1701, 1702(a). In 2001, the President invoked that authority to authorize the Treasury Department to designate a persons as a Specifically Designated Global Terrorist ("SDGT") if the Treasury finds that the person is "owned or controlled by" a designed terrorist group; assists in, sponsors, or provides material or financial support to a terrorist group; or is "otherwise associated with" a terrorist group. See Executive Order 13, 224, 66 Fed. Reg. 49, 079 (Sept. 23, 2001) § 1(c)-(d). Executive Order 13, 224 also authorizes the Treasury to "take such actions, including the promulgation of rules and regulations . . . as may be necessary to carry out the purpose of this order." Id. § 7. Pursuant to this authority, the Department of the Treasury' Office of Foreign Asset Control ("OFAC") promulgated Global Terrorism Sanction Regulations that, among other things, require United States banks to block transactions involving SDGTs that are subject to sanctions. See 31 C.F.R. Part 594. These regulations provide that "property and interests in property" of SDGTs are "blocked" and "may not be transferred, paid, exported, withdrawn or otherwise dealt in" if the property or interest is either in the United States or comes within the possession or control of a U.S. person. Id. § 594.201(a).

Doe's motion seeking a turnover order and his brief on appeal alleged the following facts. In December 2010, OFAC identified Tajco Ltd. ("Tajco") as a SDGT. Joint App'x A-370. A few days later, Tajco originated an EFT from Arab Gambian Islamic Bank Ltd. in the amount of $120, 416 for the benefit of an account holder at the Lebanese Canadian Bank. Id. A-371. From the originating bank, the funds flowed to AHLI United Bank UK PLC ("AHLI"), an intermediary bank, which then transmitted the funds to JPMorgan, as the beneficiary bank. Id. at A-371-72. JPMorgan blocked and held the transfer because Tajco was referred to in the payment instructions of the EFT and appeared on the OFAC's list of terrorist organizations. Id. at A-371.

In April 2012, OFAC identified Grand Stores Ltd.' ("Grand Stores") Gambian location as an alias of Tajco and as a SDGT. Id. at A-370. In May 2012, Grand Stores, from its Gambian operation, originated an EFT in the amount of $400, 951.41 from Trust Bank Ltd. Id. at A-371-72. Trust Bank then wired the funds to its correspondent bank Credit Suisse AG ("Credit Suisse"), which then wired the funds to JPMorgan, as the beneficiary bank. Id. at A-371. JPMorgan blocked the transfer and held the funds because at the time of the wire transfer, Grand Stores was on the OFAC's list of SDGTs. Id. Credit Suisse and AHLI then disclaimed any interest in the blocked accounts and all remaining possible claimants other than Doe have either defaulted, or have dismissed or withdrawn any claims to the funds which have remained in the blocked accounts. Id. at A-372.

A.

Proceedings Below

This action began in June 2015 when Doe registered in the Southern District of New York a $36.8 million judgment he had obtained in the Southern District of Florida against Ejercito de Liberacion Nacional (the "ELN") and Fuerzas Armadas Revolucionarios de Colombia (the "FARC") terrorist organizations that he alleges kidnaped and tortured him in Venezuela and Colombia. In an attempt to collect on the judgment, Doe initiated a turnover proceeding and named JPMorgan as a respondent. The petition sought the turnover of funds blocked and held by JPMorgan and alleged to belong to Grand Stores and Tajco, both of which Doe alleged to be agents of the FARC. In response, JPMorgan brought an interpleader action in which it named Credit Suisse and AHLI respondents. Credit Suisse and AHLI then reached settlements with JPMorgan in which they agreed to relinquish any claims to the blocked Tajco and Grand Stores accounts and also to release JPMorgan from any liability with respect to the accounts. Doe later joined Deutsche Bank and Commerzbank in the turnover proceedings, also alleging that the blocked funds they held belonged to agents of the ELN and the FARC.

The District Court denied Doe's turnover application directed at JPMorgan. Because the parties agree that the issues raised in the JPMorgan petition were similar to those raised in the petitions against Deutsche Bank and Commerzbank, Doe requested, and the District Court agreed, to enter an order denying the petitions directed at Commerzbank and Deutsche Bank for substantially the reasons that it...

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