United States v. All Funds On Deposit With R.J. O'Brien & Assocs.

• Decision Date: 09 October 2013
• Docket Number: Case No. 11 C 4175,, Case No. 12 C 1346
• Citation: 982 F.Supp.2d 830
• Court: U.S. District Court — Northern District of Illinois
• Parties: United States of America, Plaintiff, v. All Funds on Deposit with R.J. O'Brien & Associates, held in the name of Bridge Investment, S.L., bearing account numbers XXX–X3931 and XXX–X1784, maintained at Harris Bank, account number XXX–171–6, Defendant. Art Insurance Company, et al., Plaintiffs, v. Al Qaeda, Defendant.

982 F.Supp.2d 830

United States of America, Plaintiff,

v.All Funds on Deposit with R.J. O'Brien & Associates, held in the name of Bridge Investment, S.L., bearing account numbers XXX–X3931 and XXX–X1784, maintained at Harris Bank, account number XXX–171–6, Defendant.

Art Insurance Company, et al., Plaintiffs,

v.Al Qaeda, Defendant.

Case No. 11 C 4175, Case No. 12 C 1346

United States District Court, N.D. Illinois, Eastern Division.

Filed October 9, 2013

Brian Hayes, Joel M. Hammerman, United States Attorney's Office, Chicago, IL, for Plaintiff United States of America.

Daniel R. Johnson, Kevin Patrick Caraher, Cozen O'Connor, Chicago, IL, Sean P. Carter, Stephen Aaron Miller, Cozen O'Connor, Philadelphia, PA, for Plaintiffs Art Insurance Company, et al.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

The United States has filed an in rem action (Case No. 11 C 4175) seeking forfeiture of about $6.7 million held in futures trading accounts. The money, the parties agree, belongs to an affiliate of the Al Qaeda terrorist organization. Several insurance companies that paid billions of dollars on their insureds' property damage claims arising from the September 11, 2001 terrorist attacks have filed verified claims to the funds and answers to the government's in rem complaint.

On March 27, 2012, the Court granted the government's motions to strike the insurance companies' claims and answers and denied a motion to intervene by thousands of personal injury claimants. United States v. All Funds on Deposit with R.J. O'Brien & Assocs., No. 11 C 4175, 2012 WL 1032904, at *1 (N.D.Ill. Mar. 27, 2012) (R.J. O'Brien I ). On September 25, 2012, the Court denied the government's motion to quash a writ of execution and a citation to discover assets issued in Case No. 12 C 1346 and granted claimants' motion to amend their claims in Case No. 11 C 4175. United States v. All Funds on Deposit with R.J. O'Brien & Assocs., 892 F.Supp.2d 1038 (N.D.Ill.2012) (R.J. O'Brien II ). Finally, on December 10, 2012, the Court denied the government's motion under 28 U.S.C. § 1292(b) to certify for interlocutory appeal certain rulings the Court made in the September 25, 2012 order. United States v. All Funds on Deposit with R.J. O'Brien & Assocs., Nos. 11 C 4175 & 12 C 1346, slip op. at 2–7 (N.D. Ill. Dec. 10, 2012) ( R.J. O'Brien III ).

Both the insurance company claimants and the United States have now moved for summary judgment. The government argues that the claimants lack standing to assert their claims to the funds and that their claims violate the government's sovereign immunity. The claimants contend that the Terrorism Risk Insurance Act of 2002 (TRIA), 116 Stat. 2322, 2337 (codified at 28 U.S.C. § 1610 note) authorizes their claim to the funds, in that it allows them priority over a government forfeiture action. For the reasons stated below, the Court denies the government's motion for summary judgment and grants the claimants' motion for summary judgment.

Background

After the terrorist attacks of September 11, 2001, insurance companies paid out billions of dollars in coverage to customers who suffered property and business losses in the attacks and their aftermath. In September 2003, several of these companies filed suit against Al Qaeda, seeking reimbursement for their losses. In September 2005, the companies moved for default judgment on their claims, which were consolidated in the District Court for the Southern District of New York as In re Terrorist Attacks, 03–MDL–1570 (S.D.N.Y. Mar. 10, 2003). The companies received an order of default in April 2006, but the court did not issue an order specifying a damages amount until December 2011. That amount was $9,351,247,965.99, which included compensatory damages for the companies over $2.5 billion. The court entered a final judgment in January 2012, and the companies registered the judgment in this district in February 2012. The registration-of-judgment matter was randomly assigned to Judge Gettleman. See Registration of Judgment Pursuant to 28 U.S.C. § 1963, Art Ins. Co. v. Al Qaeda, No. 12 C 1346 (N.D. Ill. Feb. 27, 2012).

Elsewhere, in 2005, an individual named Mohammad Qasim al Ghamdi took control of a commodities futures trading account at R.J. O'Brien & Associates (RJO), a Chicago company. The account had been opened two years earlier in the name of Bridge Investment, S.L. By September 2005, the account contained about $26.7 million, but that amount fell to $6.7 million by May 2006. Although Al Ghamdi controlled the account, the funds belonged to Muhammad Abdallah Abdan Al Ghamdi, a member of Al Qaeda also known as Abu Al Tayyeb. As the parties now agree, Al Qaeda had a beneficial interest in these funds. Bridge Investments opened a second account at RJO in November 2006.

In June 2006, shortly after the funds had dwindled to the $6.7 million mark, Saudi Arabian authorities arrested Al Tayyeb. It is undisputed that he was considering terrorist attacks against the Saudi and American targets. In June 2007, the United States Department of the Treasury's Office of Foreign Assets Control (OFAC) blocked the two RJO accounts in question. OFAC's authority derived from Executive Order 13224 of September 23, 2011, 31 C.F.R. 594 (the Global Terrorism Sanctions Regulations), and 50 U.S.C. § 1701, also known as the International Emergency Economic Powers Act (IEEPA). Four years later, on June 19, 2011, the United States filed a verified complaint in this Court for forfeiture of the funds, an action in rem under 18 U.S.C. § 981(a)(1)(G)(i) and (iv), the civil forfeiture statute.

On June 21, 2011, the Chicago Tribune published an article about the government's decision to block the RJO/Al Ghamdi accounts. The article served as the first notice about the funds for the insurance companies that had obtained the order of default against Al Qaeda in the Southern District of New York. In August 2011, the insurance companies filed verified claims to the RJO/Al Ghamdi funds in the government's forfeiture action. In December, the government moved to strike the claims and answers of the insurance company claimants, and the claimants moved to amend them. At the same time, several thousand individuals asserting personal injury and wrongful death claims arising from the September 11, 2001 attacks moved to intervene in the case.

This Court's order of March 27, 2012 granted the government's motions to strike and denied the personal injury claimants' motion to intervene. The Court did not decide whether the insurance company claimants had constitutional standing, but it granted the government's motion to strike and denied the insurance claimants' motion to amend their claims because they lacked statutory and prudential standing. R.J. O'Brien I, 2012 WL 1032904, at *3–7. Because these claimants were unsecured creditors, the Court concluded that they did not qualify as “innocent owners” under 18 U.S.C. § 983(d). As a result, they were outside the zone of interests that the civil forfeiture statute protects and thus could not establish prudential standing. Id. at *5–6. The Court then evaluated the claimants' statutory standing. It cited their status as general unsecured creditors who lacked an interest in the specific funds at issue, preventing them from properly stating such an interest under the civil forfeiturerules, specifically Fed. R. Civ. P., Supp. R. G(5)(a)(i)(B). Id. at *6–7. For the same reason, the Court decided that the personal injury claimants could not meet the requirements of the forfeiture statute. Id. at *6. Finally, the Court denied the insurance claimants' request to amend their claims on the ground that they lacked statutory and prudential standing. The Court noted in particular that the claimants had not served citations to discover assets, which would have created a lien on, and established an interest in, the disputed funds. Id. at *8;see also735 ILCS 5/2–1402(a), (m). The Court denied the personal injury claimants' motion to intervene for similar reasons. Id. at *7.

As indicated earlier, the claimants registered their judgment in this district on February 27, 2012, and the matter was assigned to Judge Gettleman. They filed a praecipe for a writ of execution in that matter on March 13, 2012 and filed a notice of citation to discover assets on April 6. Four days later, Judge Gettleman ordered issuance of a writ of execution. On April 12, 2012, during a status hearing in the civil forfeiture case, the parties made a joint oral motion seeking a finding that the forfeiture and judgment enforcement matters were related cases under the relevant Local Rule and transfer of the enforcement matter to the undersigned judge. The Court orally granted the motion and followed that up with a written request to the Executive Committee to transfer the case. The judgment enforcement matter was reassigned on April 13, 2012. Since that time, the proceedings in the two cases have been almost entirely intertwined.

In September 2012, five months after the claimants had obtained their writ of execution, this Court denied the government's motion to quash the writ and granted the claimants' motion to amend their claims to reflect the entry of final judgment in the New York litigation. R.J. O'Brien II, 892 F.Supp.2d at 1041. The Court found that the language of § 201(a) of the TRIA authorized any claimed intrusion upon sovereign immunity resulting from the claimants' entry into the case. Id. at 1043–45. That statute's language similarly overrode the doctrines of prior exclusive jurisdiction and in custodia legis, the Court found; those doctrines also did not apply because the insurance companies' enforcement proceeding had been transferred to this Court. Id. at 1045–46.

The Court also rejected the government's challenges to the claimants' standing to assert their motion to amend on constitutional, statutory, and prudential grounds. The claimants had Article III standing at the time t...