Flatow v. Islamic Republic of Iran, Civ.A. AW-98-4152.

• Decision Date: 07 September 1999
• Docket Number: No. Civ.A. AW-98-4152.,No. Misc. 98-285.,Civ.A. AW-98-4152.,Misc. 98-285.
• Citation: 67 F.Supp.2d 535
• Parties: Stephen M. FLATOW Plaintiff, v. THE ISLAMIC REPUBLIC OF IRAN, et al., Defendants.
• Court: U.S. District Court — District of Maryland

67 F.Supp.2d 535

Stephen M. FLATOW Plaintiff, v. THE ISLAMIC REPUBLIC OF IRAN, et al., Defendants.

No. Civ.A. AW-98-4152.

No. Misc. 98-285.

United States District Court, D. Maryland.

September 7, 1999.

COPYRIGHT MATERIAL OMITTED

Thomas F. Fay and Steven R. Perles, Washington, DC, for plaintiff Stephen M. Flatow.

Patrick J. Attridge, Rockville, MD, John D. Winter, New York City, for movant the Alavi Foundation.

MEMORANDUM OPINION

WILLIAMS, District Judge.

I

Currently pending before the Court are Movant Alavi Foundation's Motions to Release Properties From Levy, to Quash Writs of Execution, and to Enjoin Plaintiff from Issuing Future Writs Against the Foundation's Property. A hearing was held on these motions. In ruling on the motions, the Court has considered the briefs of the parties, the arguments of counsel at the hearing in open court, and the entire record. For the reasons that will follow, the Court will grant the motions.

II

Plaintiff, Stephen M. Flatow, has initiated numerous proceedings to attach and execute a judgment against the assets of the Islamic Republic of Iran ("Iranian Government") pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C.A. Section 1610(a)(7) and (f) (West Supp.1999) ("FSIA"). This judgment was entered in the United States District Court for the District of Columbia and was registered in this District on July 16, 1998.

Plaintiff's daughter, Alisa Flatow, was killed on April 9, 1995 in the Gaza Strip when a terrorist bomb exploded. On April 24, 1996, Congress enacted amendments to the FSIA as part of the Antiterrorism and Effective Death Penalty Act, which granted subject matter jurisdiction over a claim brought against a foreign state:

for personal injury or death that caused by an act or torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources ... for such an act if such act or provision of material support is engaged in by an official, employee or agent of such foreign state while acting within the scope of his or her office, employment, or agency ...

Pub.L. No. 104-132, § 221, 110 Stat. 1214. (codified at 28 U.S.C. § 1605(a)(7)). Relying on these amendments, Plaintiff filed a Complaint for wrongful death and other related causes of action against the Iranian Government, the Iranian Ministry of Information and Security, Ayatollah Ali Hoseini Khamenei, then-President Ali Akbar Hashemi-Rafsanjani, and then-Intelligence Minister Ali Fallahian Khuzestani. On March 3, 1998, Plaintiff obtained a default judgment against the Defendants, and United States District Judge Royce C. Lamberth entered judgment in favor of the Plaintiff in an amount exceeding $247,000,000.¹

Plaintiff then began to initiate enforcement proceedings throughout the country against assets that he claims are owned by the Iranian Government. The instant proceeding includes property located at (1) 8100 Jeb Stuart Road, Rockville, Montgomery County, Md. 20854, (2) 7917 Montrose Road, Rockville, Montgomery County, Md. 20850 and (3) 12010 Seven Locks Road, Potomac, Montgomery County, Md. 20854.² Plaintiff served writs of execution upon these properties on November 9, 1998.

The Movant, the Alavi Foundation ("Foundation"), which was not named as a party to the underlying litigation, is the owner of record of these properties. The Foundation now moves pursuant to Md. Rule 2-643 (1999) to release the property in question from the levy, to quash the writs of execution issued on the property, and to enjoin the Plaintiff from issuing future writs against the Foundation's property.

III

Under Maryland law, as a general rule, a judgment creditor may not levy against a third-party's property in order to satisfy a money judgment against a judgment debtor. See Eastern Shore Bldg. & Loan Corp. v. Bank of Somerset, 253 Md. 525, 253 A.2d 367, 369 (1969) ("[T]he lien of the judgment only attaches to the interest in land owned or held by the judgment debtor, himself, and is subject to the limitations, legal or equitable, to which that interest is subject at the time of the entry of the judgment.") In order to levy against a third-party's property, the judgment creditor must prove that the property of a third-party can be seized because: (1) the third-party is an agent, alter ego, or instrumentality of the judgment debtor; (2) the third-party is a garnishee of the judgment debtor; or (3) there was a conveyance of property between the judgment debtor and the third-party which was motivated by the intent to defrauding creditors. See First Nat'l 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"); Parkville Fed. Sav. Bank v. Maryland Nat'l Bank, 343 Md. 412, 681 A.2d 521 (1996); Frain v. Perry, 92 Md.App. 605, 609 A.2d 379 (Md.1992). Plaintiff, the judgment creditor in this case, cannot meet any of these narrowly defined bases for levying a third-party's property.³

Plaintiff maintains that the property of the Foundation may be levied because the Foundation "and its assets are property in the United States of [the Iranian Government] and the [FSIA] authorizes the execution against certain assets of foreign state sponsors of terrorism, including those at issue in this proceeding, in order to satisfy judgments for which they are not immune from suit under 28 U.S.C. § 1605(a)(7)." Memorandum in Opposition at 9.

However, the Alavi Foundation is a nonprofit foundation, which was duly organized under the NotForProfit Corporation Law of New York State. As such, it is a citizen of the State of New York. See 28 U.S.C. § 1332(c)(1) (1994) ("[A] corporation shall be deemed to be a citizen of any State by which it has been incorporated. ..."). Section 1603(b) of the FSIA, the law that governs the underlying case, provides that an "`agency or instrumentality of a foreign state' means any entity ... which is neither a citizen of a State of the United states as defined in section 1332(c) ... of this title ..." 28 U.S.C. § 1603(b)(3) (1994). Therefore, pursuant to the FSIA, the Foundation by definition cannot be an agent, alter ego, or instrumentality of the Iranian Government.

Even if the Foundation was not a citizen of the State of New York, pursuant to the FSIA, a separately incorporated entity is entitled to a presumption of independence from a foreign sovereign. See Banco, 462 U.S. at 629, 103 S.Ct. 2591. In order to overcome this presumption of independence, Plaintiff must show either that the Foundation is "so extensively controlled by" the Iranian Government "that a relationship of principal and agent is created" or that regarding the Foundation as a separate instrumentality would "`work fraud or injustice'" against him. Id.

The case law in this area generally holds that a principal-agent relationship has been created for the purposes of the FSIA when the foreign sovereign exercises day-to-day control over its activities. See McKesson Corp. v. Islamic Republic of Iran, 52 F.3d 346, 351-52 (D.C.Cir.1995); see also Hester Int'l Corp. v. Federal Republic of Nigeria, 879 F.2d 170, 178-80 (5th Cir.1989) (holding that an entity in which Nigeria held 100% of its stock was not an agent because there was no showing of day-to-day control); Baglab Ltd. v. Johnson Matthey Bankers Ltd., 665 F.Supp. 289, 297 (S.D.N.Y.1987) (holding that the plaintiff failed to overcome the presumption of separateness because it failed to prove that the Bank of England exercised "general control over the day-to-day activities" of an entity so that the entity could be deemed an agent). Plaintiff concedes that this is the general rule, but argues that the Court should apply a more lenient rule in the instant case. Plaintiff argues that the "courts have developed that standard under the rubric of a different provision of the FSIA — the commercial activities exception to foreign sovereign immunity — the history and purpose of which are not comparable to 28 U.S.C. § 1605(a)(7)." Memorandum in Opposition at 12.

Plaintiff contends that the purpose of the commercial activities exception is to facilitate "legitimate commercial intercourse by and among the community of nations," and to allow foreign governments the same type of access to the advantages of the corporate form that a private person would have. Id. at 14. According to Plaintiff, 28 U.S.C. Section 1605(a)(7) was "designed to prevent foreign state sponsors of terrorism from enjoying surreptitious participation in the American marketplace and legal system, the benefits of which could eventually be turned against American interests." Memorandum in Opposition at 15. Plaintiff argues that cases arising under this exception should be treated differently than those cases which arise out of commercial disputes. Plaintiff states that:

Rather than perpetuate a safe harbor for outlaws, which would be the result of a "day-to-day control" test, American courts should permit enforcement of 28 U.S.C. § 1605(a)(7) judgments against non-parties to the underlying litigation when there is evidence that a judgment debtor owns covert property interests in the United States which have been sheltered in an outwardly independent third party.

Memorandum in Opposition at 18.

The Court is not persuaded that Plaintiff's more lenient standard, which would find that an entity is an instrumentality if there is proof that the foreign sovereign has any interest in that entity, is applicable. "Congress is presumed to enact legislation with knowledge of the law, that is with the knowledge of the interpretation that courts have given the statute." United States v. Langley, 62 F.3d 602, 605 (4th Cir.1995). There is nothing in the language of the provision itself, or the legislative history that indicates that Congress intended 28 U.S.C. Section 1605(a)(7) to be interpreted differently than the other provisions of the statute. See H.R. Conf. Rep. No. 104-518, reprinted in 1996 U.S.C.C.A.N. 924. "[A]bsent a clear...