Hausler v. JPMorgan Chase Bank, N.A.

• Decision Date: 22 February 2012
• Docket Number: No. 09 Civ. 10289 (VM).,09 Civ. 10289 (VM).
• Citation: 845 F.Supp.2d 553
• Parties: Jeannette HAUSLER, Petitioner, v. JPMORGAN CHASE BANK, N.A., Citibank, N.A., UBS AG, The Royal Bank of Scotland, N.V., and Bank of America, N.A., Respondents.
• Court: U.S. District Court — Southern District of New York

845 F.Supp.2d 553

Jeannette HAUSLER, Petitioner,

v.JPMORGAN CHASE BANK, N.A., Citibank, N.A., UBS AG, The Royal Bank of Scotland, N.V., and Bank of America, N.A., Respondents.

No. 09 Civ. 10289 (VM).

United States District Court,

S.D. New York.

Feb. 22, 2012.

Alfonso J. Perez, Rasco Reininger Perez & Esquenazi, Karen Oiivia-Marie Stewart, Roberto Martinez, Colson, Hicks & Eidson, Coral Gables, FL, Daniel Feist Schreck, Law Offices of G. Oliver Koppell & Assoc., James Wilson Perkins, Greenberg Traurig, LLP, New York, NY, for Petitioner.

James Loran Kerr, Lauren Brooke Schorr, Thomas Matthew Noone, Davis Polk & Wardwell L.L.P., James Wilson Perkins, Greenberg Traurig, LLP, New York, NY, for Respondents.

DECISION AND ORDER

VICTOR MARRERO, District Judge.

Petitioner Jeannette Hausler (“Hausler” or “Petitioner”) brings this action as the successor and personal representative of the Estate of Robert Otis Fuller (“Fuller”) pursuant to § 201(a) of the Terrorism Risk Insurance Act of 2002 (the “TRIA”), 28 U.S.C. § 1610 note, to execute a default judgment entered by a Florida state court (the “Florida Judgment”). The Florida Judgment held the Republic of Cuba, Fidel and Raul Castro, and the Cuban Revolutionary Armed Services (collectively, the “Judgment Debtors”) liable for the torture and extrajudicial killing of Fuller. To enforce the Florida Judgment in this Court, Hausler has brought several turnover petitions against JPMorgan Chase Bank, N.A., Citibank, N.A., UBS AG, The Royal Bank of Scotland, N.V. (f/k/a ABN AMRO Bank, N.V.), and Bank of America, N.A. (collectively, “Respondents” or “Garnishee Banks”). At issue here are two of those turnover petitions—Petitions I and III—in which Hausler seeks to execute upon accounts created and maintained by Respondents as repositories for sums blocked in the course of electronic fund transfers (“EFTs”) involving the Judgment Debtors or their agencies or instrumentalities (the “Blocked Funds”).

On September 13, 2010, the Court issued a Decision and Order, which found that the TRIA preempts state property law and renders assets frozen from blocked EFTs subject to attachment and execution. See generally Hausler v. JP Morgan Chase Bank, N.A., 740 F.Supp.2d 525 (S.D.N.Y.2010) (the “September 2010 Decision”). The September 2010 Decision also expressly endorsed the Respondents' use of interpleader to include in this action any other entities or individuals that might assert competing claims to the Blocked Funds. Id. at 541–42. Though familiarity with the September 2010 Decision is presumed, the Court will begin by briefly outlining the parties before it and the posture of this litigation.

I. BACKGROUND¹

A. PETITIONER

The Florida Judgment, recognized by the United States District Court for the Southern District of Florida and given full faith and credit by this Court on September 26, 2008, arose from what the Florida Judgment held to be the extrajudicial killing and torture of Fuller by the Judgment Debtors in the aftermath of the Cuban revolution.

In this action, Hausler, acting on her own behalf and as representative of her deceased brother Fuller, seeks to enforce the Florida Judgment for compensatory damages by requesting the turnover of various assets held in the United States by the Garnishee Banks, financial institutions that are in possession of funds blocked or frozen pursuant to the Cuban Asset Control Regulations (the “CACRs”), 31 C.F.R. Part 515, issued and administered by the United States Treasury Department's Office of Foreign Assets Control (“OFAC”).²

B. GARNISHEE BANKS

Each of the Garnishee Banks served as the intermediary for the EFTs described in Petitioner's turnover petitions. In the case of each EFT, the Garnishee Bank, in accordance with the CACRs and OFAC instructions, blocked the transmission of funds after determining that the Judgment Debtors or their agencies or instrumentalities were involved in the EFT at issue. Specifically, the Garnishee Banks blocked the EFTs after determining that certain Cuban banks were involved in the transactions. Those banks are Banco Nacional de Cuba, Banco Financiero Internacional, S.A., Banco Popular de Ahorro and Banco Internacional de Comercio S.A. (collectively, the “Cuban Banks”). Also in accordance with the CACRs, the Garnishee Banks placed the proceeds of the blocked EFTs into interest-bearing accounts, where the Blocked Funds remain to this day.

After being served with the turnover petitions aimed at these blocked EFTs, the Garnishee Banks argued that the TRIA did not permit the attachment and execution of blocked assets resulting from illegal EFTs because New York state law provides that originators and beneficiaries of EFTs do not own the subject funds while the funds are possessed by intermediary banks. The Court rejected this argument and found the Blocked Funds subject to attachment and execution under the TRIA. See September 2010 Decision at 530–39.

In light of the Court's September 2010 Decision, and without any interest of their own in the Blocked Funds, the Garnishee Banks then filed interpleader actions under Rule 22 of the Federal Rules of Civil Procedure to inoculate themselves against potential liability that might arise should entities not already before the Court claim interest in the Blocked Funds. The Garnishee Banks undertook the interpleader proceedings in recognition of the Court's discussions of that procedure in the September 2010 Decision. See September 2010 Decision at 541–42. Respondents commenced the relevant interpleader actions (the “Interpleader Petitions”) on April 21, 2010, as to Petition I, and October 29, 2010, as to Petition III.

C. ADVERSE CLAIMANT RESPONDENTS

Ultimately, several entities from various countries responded to the Interpleader Petitions and now assert claims to the Blocked Funds. Each respondent to the Interpleader Petitions alleges that it possesses an interest in the Blocked Funds that is superior to that of the Petitioner. As relevant to the motions now before the Court, the following parties responded to the Interpleader Petitions: Shanghai Pudong Development Bank Co., Ltd. (“SPDB”); Banco Bilbao Vizcaya Argentaria Panama, S.A. and Banco Bilbao Vizcaya Argentaria, S.A. (together, “BBVA”); Premuda S.p.A. (“Premuda”); Novafin Financiere, S.A. (“Novafin”); LTU Lufttransport–Unternehmen GmbH (“LTU”); Caja de Ahorros y Monte de Piedad de Madrid (“Caja Madrid”); and Estudios Mercados y Suministros, S.L. and Philips Mexicana S.A. de C.V. (“Philips Mexicana/EMS”). These entities will be referred to collectively as the “Adverse Claimant Respondents” or “ACRs.”

Each ACR presents factual circumstances which it asserts support its asserted interest in particular blocked funds. The ACRs also put forward legal arguments under New York law to support their claims to ownership of or superior interest in the funds in particular frozen accounts.

The factual patterns presented by the ACRs compose variations on a single theme: Each ACR argues that its own clerical mistakes caused the EFTs to be blocked. The facts presented by each ACR will be reviewed in brief.

On July 9, 2011, SPDB initiated an EFT, through Citibank in the United States, in which Bank of China was to be the beneficiary's bank and Eximbank was to be the ultimate beneficiary. According to SPDB's factual submissions, Citibank blocked this EFT because a non-required field in the supporting payment order contained a reference to Banco National de Cuba. Shortly after the transaction was blocked, SPDB notified Citibank that it believed the blocking was an error. Though SPDB has corresponded with Citibank regarding the status of the blocked funds, SPDB has never applied to OFAC for a license to unblock the funds.³

BBVA initiated three of the wire transfers at issue in the Petition III interpleader complaint. Each of these transactions involved Banco Financiero Internacional, S.A. (“BFI”), a Cuban bank. The first transaction, initiated in January 1996, sought to transfer funds into an account held at BFI by a Dutch company. Though BBVA agreed to execute this transfer through its Paris branch, instead, it routed the transfer through Bank of America, and stated that the beneficiary bank was BFI. Bank of America then froze the EFT pursuant to the CACRs. The second transaction, which occurred in September 2005, involved an attempted transfer from a BFI account held at BBVA's Paris branch to another BFI account held at BBVA's Panamanian branch. Rather than simply debiting and crediting those two accounts, however, BBVA routed an EFT through Citibank. The final BBVA transaction involved a similar situation: In January 2004, Banco Internacional de Comercio S.A., another Cuban bank, sought to transfer money from a BBVA Paris account to a BBVA Panama account. Instead, BBVA Paris routed the funds through Citibank in New York, where the funds were frozen pursuant to the CACRs. Since each of these transactions was blocked, BBVA has communicated with personnel at Bank of American and Citibank regarding the status of the frozen accounts. There is no indication that BBVA has ever sought an OFAC license to unblock the frozen funds in which it now asserts an interest.

On or about March 7, 2007, Permuda initiated a transfer described in the Petition III Interpleader Petition, in which it requested that Citibank transfer funds to an account at BFI held by a Cuban ship management company. Citibank blocked these funds pursuant to the CACRs. Subsequently, Permuda filed with OFAC a request for a license to unblock the funds, which OFAC denied.

On November 21, 2006, Novafin initiated an EFT to Banco Internacional de Comercio S.A. (“BICSA”), a Cuban bank. Though BICSA asked that the transfer be made in Euros—and therefore routed through Europe rather than the United States—Novafin mistakenly transferred U.S. dollars, and therefore the EFT was routed through Citibank in the United States. Citibank, accordingly, blocked the transfer...