United States v. Assa Co., Docket No. 17-3658

• Decision Date: 09 August 2019
• Docket Number: August Term 2018,Docket No. 17-3658
• Citation: 934 F.3d 185
• Parties: UNITED STATES of America, Renay Frym, Stuart E. Hersh, Abraham Mendelson, Daniel Miller, Elena Rozenman, Noam Rozenman, Tzvi Rozenman, Deborah Rubin, Jenny Rubin, Daniel Miller, Carlos Acosta, Maria Acosta, Tova Ettinger, Irving Franklin, Bnorman Kahane, Ethel J. Griffin, Plaintiffs-Appellees, Carlos Acosta, et al., Claimants-Appellees, v. ASSA CO. LTD., Assa Corporation, Defendants-Appellants, All Right, Title, and Interest of Assa Corporation, et al., Defendants-in-rem.
• Court: U.S. Court of Appeals — Second Circuit

934 F.3d 185

UNITED STATES of America, Renay Frym, Stuart E. Hersh, Abraham Mendelson, Daniel Miller, Elena Rozenman, Noam Rozenman, Tzvi Rozenman, Deborah Rubin, Jenny Rubin, Daniel Miller, Carlos Acosta, Maria Acosta, Tova Ettinger, Irving Franklin, Bnorman Kahane, Ethel J. Griffin, Plaintiffs-Appellees,Carlos Acosta, et al., Claimants-Appellees,

v. ASSA CO. LTD., Assa Corporation, Defendants-Appellants,All Right, Title, and Interest of Assa Corporation, et al., Defendants-in-rem.

Docket No. 17-3658

August Term 2018

United States Court of Appeals, Second Circuit.

Argued: May 1, 2019

Decided: August 9, 2019

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 & Asher LLP, New York, NY, on the brief), for Defendants-Appellants.

DANIEL M. TRACER, Assistant United States Attorney (Michael D. Lockard, Daniel B. Tehrani, Assistant United States Attorneys, on the brief), for Geoffrey S. Berman, United States Attorney for the Southern District of New York, New York, NY.

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

WESLEY, Circuit Judge:

In 2013, the United States District Court for the Southern District of New York (Forrest, J. ) ordered via summary judgment the forfeiture of certain property interests held by the Alavi Foundation, 650 Fifth Avenue Company, and Defendants-Appellants Assa Co. Ltd. and Assa Corporation (collectively, "Assa"). Three years later, we vacated the judgment as it pertained to Alavi and 650 Fifth Ave. Co. because, among other things, the district court had sua sponte rejected their statute-of-limitations defense without providing them notice or an opportunity to respond. In re 650 Fifth Ave. & Related Props. , 830 F.3d 66, 75 (2d Cir. 2016). Although these errors also applied to Assa, the judgment against it was unaffected because Assa did not appeal at that time. Id. at 86 n.17.

After further proceedings not involving Assa, the judgment became final and Assa appealed. In addition to challenging the sua sponte denial of its statute-of-limitations defense, Assa argues that the district court lacked subject matter jurisdiction because, in its view, a foreign state’s property is immune from in rem civil-forfeiture suits under the Foreign Sovereign Immunities Act ("FSIA"). Assa also argues that the district court abused its discretion by denying its motion to stay the proceeding and through various discovery orders.

The district court had subject matter jurisdiction. However, for substantially the same reasons we stated three years ago as to Alavi and 650 Fifth Ave. Co., the court abused its discretion by deciding the statute-of-limitations issue without providing Assa notice and an opportunity to respond. An accompanying summary order explains why we find no abuse of discretion in the court’s denial of Assa’s motion to stay or in its various challenged discovery orders.

We affirm in part, vacate in part, and remand for further proceedings consistent with this opinion.

BACKGROUND¹

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. Assa Co. Ltd. was originally owned by Harter Holdings Ltd., which Bank Melli acquired in 1993. In 1995, Bank Melli transferred Harter to Davood Shakeri and Fatemeh Aghamiri. The parties dispute whether Bank Melli, which is owned and controlled by the Government of Iran, continued to control Assa after 1995, the year the relevant economic sanctions against Iran took effect.²

This action began in 2008, when the Government filed a complaint in the United States District Court for the Southern District of New York (Holwell, J. ) seeking the forfeiture of property belonging to Assa and Bank Melli under 18 U.S.C. § 981(a)(1). The centerpiece of this property is 650 Fifth Avenue, a 36-story skyscraper in Midtown Manhattan featuring retail and office space. The Government alleged that the property was traceable to violations of the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. § 1701 et seq. , and to money-laundering transactions in violation of 18 U.S.C. §§ 1956 and 1957. The premise of these allegations was that Assa and Bank Melli are owned and controlled by the Government of Iran and provided services to Iran in violation of the Iranian Transactions Regulations. See, e.g. , 31 C.F.R. § 560.204. In November 2009, the Government amended its forfeiture complaint to add certain property interests of Alavi and 650 Fifth Ave. Co.

The parties cross-moved for summary judgment at the close of discovery. The district court (Forrest, J. )³ granted summary judgment to the Government, ordering that Assa, Alavi, and 650 Fifth Ave. Co. forfeit most of the property interests cited in the amended complaint. In re 650 Fifth Ave. & Related Props. , No. 08 Civ. 10934 (KBF), 2013 WL 5178677, at *3 & n.14 (S.D.N.Y. Sept. 16, 2013) ; see also In re 650 Fifth Ave. & Related Props. , No. 08 Civ. 10934 (KBF), 2014 WL 1516328, at *1 (S.D.N.Y. Apr. 18, 2014) (ordering forfeiture of additional Alavi property interests). Although no party had briefed the issue of whether the Government’s action was timely filed within the relevant statute-of-limitations period, see 19 U.S.C. § 1621, the district court considered and rejected that defense sua sponte . Id. at *36.

After additional proceedings, Alavi and 650 Fifth Ave. Co.—but not Assa—moved for final judgment under Federal Rule of Civil Procedure 54(b) as to their property interests. See In re 650 Fifth Ave. , 830 F.3d at 86. The district court granted this motion, enabling those parties to appeal. Id. We vacated the summary judgment with respect to Alavi and 650 Fifth Ave. Co. Among other things, we held that the court violated Rule 56(f) by sua sponte disposing of their statute-of-limitations defense. Id. at 75. As Assa was not a party to the appeal, we left the judgment—which was not yet final—undisturbed as it applied to Assa. Id. at 86 n.17.

In 2017, 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 at that time.

DISCUSSION

Assa raises four challenges to the district court’s orders. This opinion addresses two of them: subject matter jurisdiction, and the district court’s sua sponte denial of Assa’s statute-of-limitations defense.

I. The District Court Had Subject Matter Jurisdiction, and the FSIA’s Immunity Regime Does Not Foreclose In Rem Civil-Forfeiture Suits Against Property Belonging to a Foreign State.

Federal district courts have limited subject matter jurisdiction. See, e.g. , Exxon Mobil Corp. v. Allapattah Servs., Inc. , 545 U.S. 546, 552, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005). They may not adjudicate a case or controversy unless authorized by both Article III of the United States Constitution and a federal jurisdictional statute. Id. A party may challenge subject matter jurisdiction at any time. See, e.g. , Capron v. Van Noorden , 6 U.S. 2 Cranch 126, 126–27, 2 L.Ed. 229 (1804).

The district court had jurisdiction under Article III, both because the United States is a party and the action arises under federal law. See U.S. Const. art. III, § 2, cl. 1. The issue is whether it had statutory jurisdiction.

The Government cited two jurisdictional statutes in its complaint that appear to authorize jurisdiction. Under 28 U.S.C. § 1345, district courts have jurisdiction over any suit commenced by the United States. And under 28 U.S.C. § 1355, district courts have jurisdiction over civil-forfeiture proceedings arising under federal law.

Assa does not dispute that these statutes appear to apply. Instead, it argues that the FSIA displaces them and that we must look to its separate jurisdictional requirements. Under the FSIA, Assa contends that it is immune from in rem civil-forfeiture suits.

The gateway into the FSIA’s immunity regime is the phrase "foreign state." The FSIA’s jurisdictional provision, 28 U.S.C. § 1330(a), states that district courts "shall have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity." Id. (emphasis added). The FSIA’s immunity provision, 28 U.S.C. § 1604, adds that subject to certain exceptions, "a foreign state shall be immune from [federal and state] jurisdiction." Id. (emphasis added). Section 1603(a) explains that a "foreign state ... includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state," with the latter category roughly referring to certain legal persons controlled by foreign governments. 28 U.S.C. § 1603(a) – (b).

If the defendant is a foreign state, the lawsuit must go through the FSIA gateway. In Argentine Republic v. Amerada Hess Shipping Corporation , the Supreme Court held that "the FSIA [is] the sole basis for obtaining jurisdiction over a foreign state in our courts." 488 U.S. 428, 434, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989).⁴ However, if the defendant is not a foreign state, the gateway closes: § 1330(a) does not authorize jurisdiction, and § 1604 does not confer immunity. Courts must look to other statutory bases for jurisdiction.

Assa’s argument is as follows. The premise of the Government’s civil-forfeiture allegation is that Assa is a foreign state under the FSIA because Iran owns or controls it through Bank Melli. See In re 650 Fifth Ave. , No. 08 Civ. 10934 (KBF), 2013 WL 5178677, at *22. Granting this premise for the sake of argument, Assa counters that the assumption opens the FSIA gateway, as a suit against a foreign state’s property is a suit against a foreign state. Because Assa contends that none of the FSIA’s immunity exceptions allow federal courts to hear in rem suits against a foreign state’s property, it...