Kirschenbaum v. Assa Corp.

• Decision Date: 09 August 2019
• Docket Number: 17-3629(Con),17-3632(Con),17-3673(Con),17-3650(Con),17-3620(Con),17-3599(Con),17-3677(Con),17-3604(Con),17-3663(Con),17-3603(Con),Docket Nos. 17-3682(L),17-3627(Con),17-3667(Con),August Term 2018,17-3687(Con),17-3642(Con),17-3638(Con)
• Citation: 934 F.3d 191
• Parties: Jason KIRSCHENBAUM, et al., Plaintiffs-Appellees, v. ASSA CORPORATION, Assa Co. Ltd., Defendants-Appellants, 650 Fifth Avenue Company, Alavi Foundation, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

934 F.3d 191

Jason KIRSCHENBAUM, et al., Plaintiffs-Appellees,

v. ASSA CORPORATION, Assa Co. Ltd., Defendants-Appellants,650 Fifth Avenue Company, Alavi Foundation, Defendants.

Docket Nos. 17-3682(L)

17-3599(Con)

17-3603(Con)

17-3604(Con)

17-3620(Con)

17-3627(Con)

17-3629(Con)

17-3632(Con)

17-3638(Con)

17-3642(Con)

17-3650(Con)

17-3663(Con)

17-3667(Con)

17-3673(Con)

17-3677(Con)

17-3687(Con)

August Term 2018

United States Court of Appeals, Second Circuit.

Argued: May 1, 2019

Decided: August 9, 2019

PATRICK N. PETROCELLI, Stroock & Stroock & Lavan LLP, New York, NY (James L. Bernard, Curtis C. Mechling, Pamela S. Takefman, Stroock & Stroock & Lavan LLP, New York, NY; Liviu Vogel, Salon Marrow Dyckman Newman & Broudy LLC, New York, NY; Timothy B. Fleming, Wiggins Childs Pantazis Fisher Goldfarb PLLC, Washington, DC; Ralph P. Dupont, Barbara J. Dupont, Dupont Law Firm LLP, Stamford, CT; Dale K. Cathell, Richard M. Kremen, DLA Piper LLP (US), Baltimore, MD; Peter R. Kolker, Zuckerman Spaeder LLP, Washington, DC; Anant Kumar, Zuckerman Spaeder LLP, New York, NY, on the brief), for Plaintiffs-Appellees.

PETER I. LIVINGSTON, Anderson Kill, P.C., New York, NY (Deborah B. Koplovitz, Anderson Kill, P.C., New York, NY; Donald F. Luke, Marjory T. Herold, Jaffe and Asher LLP, New York, NY, on the brief), for Defendants-Appellants.

Before: PARKER, WESLEY, and CHIN, Circuit Judges.

WESLEY, Circuit Judge:

Over the past few decades, hundreds of terrorism victims have obtained default judgments against the Islamic Republic of Iran in federal court. Iran has yet to satisfy these judgments, and the victims have returned to the courts seeking to execute their judgments through the attachment of Iranian assets located within the United States. Among these individuals are the hundreds of Plaintiffs-Appellees in these consolidated appeals (the "Judgment Creditors"). In the actions below, the Judgment Creditors sued Assa Corporation and Assa Co. Ltd. (collectively, "Assa"), alleging that Assa is sufficiently close to Iran that its assets are subject to attachment and execution under the Foreign Sovereign Immunities Act ("FSIA") and the Terrorism Risk Insurance Act ("TRIA"). The United States District Court for the Southern District of New York (Forrest, J. ) granted summary judgment to the Judgment Creditors on their claims under both statutes. The court ordered Assa to turn over substantial property interests, including its stake in 650 Fifth Avenue (the "Building"), a 36-story commercial skyscraper in Midtown Manhattan. See In re 650 Fifth Ave. & Related Props. , No. 08 Civ. 10934 (KBF), 2014 WL 1516328 (S.D.N.Y. Apr. 18, 2014).

On appeal, Assa argues that the district court erroneously exercised subject matter jurisdiction under both the FSIA and TRIA upon finding that it is a foreign state under the FSIA and a terrorist party under TRIA. It also argues that the court erroneously concluded that its property is subject to attachment and execution under the FSIA and TRIA.

As to both statutes, we hold that the district court has jurisdiction and that Assa’s property is subject to attachment and execution. Accordingly, we affirm.

BACKGROUND

A. The Parties

The Judgment Creditors are direct and indirect victims of terrorist attacks linked to the Islamic Republic of Iran. Kirschenbaum v. 650 Fifth Ave. & Related Props. , 830 F.3d 107, 117 (2d Cir. 2016), abrogated in part by Rubin v. Islamic Republic of Iran , ––– U.S. ––––, 138 S. Ct. 816, ––– L.Ed.2d –––– (2018). The stories giving rise to each of their claims are heart-wrenching, but the relevant fact for the purpose of these appeals is that these individuals all have unsatisfied judgments for money damages against Iran.¹

Assa Corporation is a New York corporation formed in 1989. It is wholly owned by Assa Co. Ltd., a corporation formed in Jersey, Channel Islands.² Both entities are ultimately owned and controlled by Bank Melli, which is owned by the Government of Iran. See id. at 118. Among other properties and interests spread throughout the United States, Assa owns 40% of 650 Fifth Ave. Co., a real estate partnership that owns the Building. Assa’s partner, the Alavi Foundation, owns the remaining 60%.

B. Litigation History

The Judgment Creditors began filing the turnover lawsuits giving rise to these appeals in December 2008, shortly after the United States initiated a civil-forfeiture action against Assa’s property interests. Their complaints allege that Assa, through its connections to Iran, is a "foreign state" under the FSIA and a "terrorist party" under TRIA. Under both statutes, the Judgment Creditors seek to enforce their judgments against Iran through the attachment and execution of Assa’s real and financial property interests.

In 2010, the United States District Court for the Southern District of New York (Holwell, J. ) consolidated these actions for pretrial purposes. In 2012, the Southern District reassigned the cases to Judge Forrest.

In June 2013, the district court granted certain Judgment Creditors’ motions for partial summary judgment on their TRIA claims. It held that Assa’s property constituted "blocked assets" under TRIA, which meant the property was subject to attachment and execution. Soon after, the Judgment Creditors moved for summary judgment and turnover of properties belonging to Assa, Alavi, and 650 Fifth Ave. Co. on their FSIA and TRIA claims. The district court granted the motion.

Much of the summary judgment opinion focused on whether the district court had subject matter jurisdiction under the FSIA and TRIA. The court concluded on two alternative grounds that it did. First, it held that Assa could be treated as Iran itself, which suffices for jurisdiction under both statutes. See In re 650 Fifth Ave. , No. 08 Civ. 10934 (KBF), 2014 WL 1516328, at *10–11 (citing 28 U.S.C. § 1603(a) ). Second, it held that Assa is Iran’s alter ego and could therefore be treated as Iran under equitable principles outlined in First National City Bank v. Banco Para El Comercio Exterior de Cuba (Bancec ), 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983), superseded in part by statute as stated in Rubin , 138 S. Ct. 816.³ Id. at *12.

Even where a court has jurisdiction over a turnover action involving a foreign state, the FSIA makes "the property in the United States of a foreign state ... immune from attachment arrest and execution [subject to certain exceptions]." 28 U.S.C. § 1609. The court found that four attachment-immunity exceptions applied here: three in the FSIA, 28 U.S.C. §§ 1610(a)(7), 1610(b)(3), and 1610(g), and one in § 201 of TRIA, codified at 28 U.S.C. § 1610 note. In re 650 Fifth Ave. , No. 08 Civ. 10934 (KBF), 2014 WL 1516328, at *14–21.

Alavi and 650 Fifth Ave. Co.—but not Assa—moved for final judgment as to their property interests. See Kirschenbaum , 830 F.3d at 117 n.1, 122. On appeal, we vacated the judgment as it applied to those parties and remanded for further proceedings. See id. at 117.⁴ Our holding did not apply to Assa, as it did not participate in the appeal. Id. at 117 n.1.

After Alavi and 650 Fifth Ave. Co. took their cases to trial, the district court entered final judgment resolving all claims for all parties. As was its right, Assa appealed from the then-final summary judgment at that time.

DISCUSSION

"We review a district court’s grant or denial of summary judgment de novo , viewing the evidence in the light most favorable to the non-moving party." Faulkner v. Nat’l Geographic Enters. Inc. , 409 F.3d 26, 34 (2d Cir. 2005). "Summary judgment is only appropriate if, based on the pleadings and evidentiary submissions, there is no genuine material issue of fact and the moving party is entitled to judgment as a matter of law." Id.

I. The District Court Had Subject Matter Jurisdiction Under the FSIA Because Assa Is an Alter Ego of Iran.

The FSIA does not formally define the term "foreign state." Instead, it explains that a "foreign state" "includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state." 28 U.S.C. § 1603(a).

Our precedent analyzing the FSIA establishes at least four bases for finding that an entity is a "foreign state" under the statute. First, an entity can be a "foreign state" because it is an actual foreign state under the ordinary meaning of that term. See Kirschenbaum , 830 F.3d at 123. Second, an entity can be a "foreign state" if it is an alter ego of a foreign state. See id. at 129 (citing Bancec , 462 U.S. at 629, 103 S.Ct. 2591 ).⁵ Third, an entity can be a "political subdivision" of a foreign state, a term the FSIA does not define. And fourth, an entity can be an "agency or instrumentality" of a foreign state as defined in 28 U.S.C. § 1603(b).

Neither Assa Corporation nor Assa Co. Ltd. is an actual foreign state under the ordinary meaning of that term. A foreign state is "an entity bearing the ‘attributes of statehood,’ which include a defined territory and population, self-governance and foreign relations, and the capacity to wage war and enter into international agreements." Id. at 123 (quoting Morgan Guar. Tr. Co. of N.Y. v. Republic of Palau , 924 F.2d 1237, 1243–44 (2d Cir. 1991) ). The Assa entities are corporations, not sovereigns. The district court erroneously held that they were foreign states based on definitions of the "Government of Iran" taken from an executive order and federal regulations, a reading we held was erroneous in our resolution of the interlocutory appeals of Alavi and 650 Fifth Ave. Co. See id. at 123–25.

Nor is either Assa entity an "agency or instrumentality" of a foreign state as the FSIA defines that term. Under 28 U.S.C. § 1603(b)(3), an agency or instrumentality must be "neither a citizen of a State of the United States as defined in [ 28 U.S.C. §§ 1332(c) and (e) ], nor created under the laws of any third country." Assa Corporation is a citizen of a state (New York) within the meaning of § 1332(c), and Assa Co. Ltd. is incorporated under the laws of a third country ...