17-759-cv
Doe v. JPMorgan Chase Bank, N.A.
1 In the
2 United States Court of Appeals
3 For the Second Circuit
4
5
6 August Term 2017
7
8
9 No. 17-759-cv
10
11 John Doe,
12 Plaintiff-Appellant,
13
14 v.
15
16 JPMorgan Chase Bank, N.A.,
17 Respondent-Third-Party-Petitioner-Counter-Claimant-Appellee,
18
19 Deutsche Bank Trust Company Americas, Commerzbank AG, New York Branch,
20 Respondents-Appellees.1
21
22
23 Appeal from the United States District Court
24 for the Southern District of New York
25 Laura T. Swain, District Judge, Presiding.
26 (Argued: December 15, 2017; Decided: August 9, 2018)
27
28 Before: Parker, Wesley, and Chin, Circuit Judges.
29 ________
30
31 Judgment creditor of sanctioned foreign entities sought attachment and
32 turnover of blocked electronic funds transfers (“EFTs”) under Section 201(a) of
1
The Clerk of Court is respectfully directed to amend the caption as above.
1 the Terrorism Risk Insurance Act, Pub. L. No. 107–297, § 201, 116 Stat. 2322, 2337
2 (2002) (codified at 28 U.S.C. § 1610 note). The District Court (Swain, J.) denied
3 the request on the grounds that a blocked EFT held at an intermediary bank is
4 subject to execution only if the judgment debtor or its agent transmitted the EFT
5 directly to the bank where the EFT is blocked. The judgment of the District Court
6 is AFFIRMED.
7
8 Judge Chin dissents in a separate opinion.
9 ________
10
11 ORLANDO DO CAMPO, Do Campo & Thorton, P.A., Miami, FL,
12 and BRETT E. VON BORKE, Buckner + Miles, Miami, FL, for John
13 Doe
14
15 STEVEN B. FEIGENBAUM AND GREGORY P. FEIT, Levi Lubarsky
16 Feigenbaum & Weiss LLP, New York, NY, for JPMorgan Chase
17 Bank, N.A.
18
19 MARK P. GIMBEL, Covington & Burling LLP, New York, NY, for
20 Deutsche Bank Trust Company Americas
21
22 TERRY MYERS AND PAUL A. SASO, Gibbons P.C., New York, NY,
23 for Commerzbank AG, New York Branch
24
25 CHAD D. READLER, Acting Assistant Attorney General;
26 SHARON SWINGLE AND BENJAMIN M. SHULTZ, Department of
27 Justice; and PETER ARONOFF AND CHRISTOPHER CONNOLLY,
28 Assistant U.S. Attorneys, for Geoffrey S. Berman, U.S.
29 Attorney for the Southern District of New York, for Amicus
30 Curiae United States of America
31 ________
32
33
34
2
1 BARRINGTON D. PARKER, Circuit Judge:
2 John Doe is a judgment creditor who seeks attachment and turnover of
3 electronic fund transfers (“EFTs”) initiated by sanctioned foreign terrorist
4 organizations which, after passing through foreign intermediary banks, were
5 blocked and held by domestic banking institutions. See Section 201(a) of the
6 Terrorism Risk Insurance Act (“TRIA”), Pub. L. No. 107–297, § 201, 116 Stat. 2322,
7 2337 (2002) (codified at 28 U.S.C. § 1610 note). Specifically, Doe applied below
8 for turnover orders against JPMorgan Chase Bank, N.A. (“JPMorgan”), Deutsche
9 Bank Trust Company Americas (“Deutsche Bank”), and Commerzbank AG, New
10 York Branch (“Commerzbank”), the institutions which blocked and held the
11 EFTs.
12 The United States District Court for the Southern District of New York
13 (Swain, J.), denied the applications on the grounds that the EFTs were not the
14 property of the originators—the terrorist organizations—but instead were the
15 property of the intermediaries that transferred the funds to the U.S. institutions.
16 See Doe v. Ejercito De Liberacion Nacional, No. 15-cv-8652, 2017 WL 591193
17 (S.D.N.Y. Feb. 14, 2017). In reaching that conclusion, the District Court relied on
3
1 Calderon-Cardona v. Bank of N.Y. Mellon, 770 F.3d 993 (2d Cir. 2014) and Hausler v.
2 JP Morgan Chase Bank, N.A., 770 F.3d 207 (2d Cir. 2014) (per curiam), in which we
3 held that blocked wire transfers held at an intermediary bank are subject to
4 execution under Section 201(a) only if the judgment debtor or an agency or
5 instrumentality of the judgment debtor “transmitted the EFT directly to the bank
6 where the EFT is held pursuant to the block.” Calderon-Cardona, 770 F.3d at 1002;
7 see also Hausler, 770 F.3d at 212. Because the record reflects that the judgment
8 debtors did not do so, we AFFIRM.
9 BACKGROUND
10 The International Emergency Economic Powers Act, 50 U.S.C. §§
11 1701–1706, empowers the President to impose economic sanctions to respond to
12 unusual and extraordinary international threats to the United States. 50 U.S.C. §§
13 1701, 1702(a). In 2001, the President invoked that authority to authorize the
14 Treasury Department to designate a persons as a Specifically Designated Global
15 Terrorist (“SDGT”) if the Treasury finds that the person is “owned or controlled
16 by” a designed terrorist group; assists in, sponsors, or provides material or
17 financial support to a terrorist group; or is “otherwise associated with” a terrorist
4
1 group. See Executive Order 13,224, 66 Fed. Reg. 49,079 (Sept. 23, 2001) § 1(c)–(d).
2 Executive Order 13,224 also authorizes the Treasury to “take such actions,
3 including the promulgation of rules and regulations . . . as may be necessary to
4 carry out the purpose of this order.” Id. § 7. Pursuant to this authority, the
5 Department of the Treasury’ Office of Foreign Asset Control (“OFAC”)
6 promulgated Global Terrorism Sanction Regulations that, among other things,
7 require United States banks to block transactions involving SDGTs that are
8 subject to sanctions. See 31 C.F.R. Part 594. These regulations provide that
9 “property and interests in property” of SDGTs are “blocked” and “may not be
10 transferred, paid, exported, withdrawn or otherwise dealt in” if the property or
11 interest is either in the United States or comes within the possession or control of
12 a U.S. person. Id. § 594.201(a).
13 Doe’s motion seeking a turnover order and his brief on appeal alleged the
14 following facts. In December 2010, OFAC identified Tajco Ltd. (“Tajco”) as a
15 SDGT. Joint App’x A-370. A few days later, Tajco originated an EFT from Arab
16 Gambian Islamic Bank Ltd. in the amount of $120,416 for the benefit of an
17 account holder at the Lebanese Canadian Bank. Id. A-371. From the originating
5
1 bank, the funds flowed to AHLI United Bank UK PLC (“AHLI”), an intermediary
2 bank, which then transmitted the funds to JPMorgan, as the beneficiary bank. Id.
3 at A-371–72. JPMorgan blocked and held the transfer because Tajco was referred
4 to in the payment instructions of the EFT and appeared on the OFAC’s list of
5 terrorist organizations. Id. at A-371.
6 In April 2012, OFAC identified Grand Stores Ltd.’ (“Grand Stores”)
7 Gambian location as an alias of Tajco and as a SDGT. Id. at A-370. In May 2012,
8 Grand Stores, from its Gambian operation, originated an EFT in the amount of
9 $400,951.41 from Trust Bank Ltd. Id. at A-371–72. Trust Bank then wired the
10 funds to its correspondent bank Credit Suisse AG (“Credit Suisse”), which then
11 wired the funds to JPMorgan, as the beneficiary bank. Id. at A-371. JPMorgan
12 blocked the transfer and held the funds because at the time of the wire transfer,
13 Grand Stores was on the OFAC’s list of SDGTs. Id. Credit Suisse and AHLI then
14 disclaimed any interest in the blocked accounts and all remaining possible
15 claimants other than Doe have either defaulted, or have dismissed or withdrawn
16 any claims to the funds which have remained in the blocked accounts. Id. at A-
17 372.
6
1 A. Proceedings Below
2 This action began in June 2015 when Doe registered in the Southern
3 District of New York a $36.8 million judgment he had obtained in the Southern
4 District of Florida against Ejercito de Liberacion Nacional (the “ELN”) and
5 Fuerzas Armadas Revolucionarios de Colombia (the “FARC”) terrorist
6 organizations that he alleges kidnaped and tortured him in Venezuela and
7 Colombia. In an attempt to collect on the judgment, Doe initiated a turnover
8 proceeding and named JPMorgan as a respondent. The petition sought the
9 turnover of funds blocked and held by JPMorgan and alleged to belong to Grand
10 Stores and Tajco, both of which Doe alleged to be agents of the FARC. In
11 response, JPMorgan brought an interpleader action in which it named Credit
12 Suisse and AHLI respondents. Credit Suisse and AHLI then reached settlements
13 with JPMorgan in which they agreed to relinquish any claims to the blocked
14 Tajco and Grand Stores accounts and also to release JPMorgan from any liability
15 with respect to the accounts. Doe later joined Deutsche Bank and Commerzbank
16 in the turnover proceedings, also alleging that the blocked funds they held
17 belonged to agents of the ELN and the FARC.
7
1 The District Court denied Doe’s turnover application directed at
2 JPMorgan. Because the parties agree that the issues raised in the JPMorgan
3 petition were similar to those raised in the petitions against Deutsche Bank and
4 Commerzbank, Doe requested, and the District Court agreed, to enter an order
5 denying the petitions directed at Commerzbank and Deutsche Bank for
6 substantially the reasons that it denied the one directed at JPMorgan. Doe
7 appeals the denial of the three petitions.
8 We review de novo the threshold issue of whether EFTs are property of a
9 particular party. Hausler, 770 F.3d at 211 (quoting Calderon-Cardona, 770 F.3d at
10 1000).
11 DISCUSSION2
12 Unless a judgment creditor acquires a license from the OFAC, the creditor
13 is typically barred from attaching blocked assets. See, e.g., 31 C.F.R. §§ 594.201(a),
14 594.202(e) (providing that attachment and other similar judicial process related to
15 property blocked pursuant to the Global Terrorism Sanctions Regulations are
2
As noted, this appeal principally concerns Doe’s turnover petitions directed at JPMorgan,
Deutsche Bank, and Commerzbank. While this opinion recounts facts and engages in analysis
solely with respect to the JPMorgan petition, it disposes of the appeals of the Deutsche Bank and
Commerzbank turnover petitions, as all parties agree that they involve the same issues.
8
1 null and void). However, to assist victims of terrorism in satisfying their
2 judgments, Congress enacted TRIA in 2002. Calderon-Cardona, 770 F.3d at 998.
3 Section 201(a) of TRIA allows a plaintiff to execute a judgment on blocked assets
4 of a terrorist party, or its agency or instrumentality, to satisfy a judgment against
5 the terrorist party, where:
6 (1) a person has obtained a judgment against a terrorist party;
7 (2) the judgment is either
8 (a) for a claim based on an act of terrorism, or
9 (b) for a claim for which a terrorist party is not immune under §
10 1605(a)(7);
11 (3) the assets are “blocked assets” within the meaning of TRIA; and
12 (4) execution is sought only to the extent of any compensatory damages.3
3
Section 201(a) of TRIA provides:
(a) IN GENERAL.—Notwithstanding any other provision of law, and except as
provided in subsection (b), in every case in which a person has obtained a judgment
against a terrorist party on a claim based upon an act of terrorism, or for which a
terrorist party is not immune under section 1605(a)(7) of title 28, United States Code,
the blocked assets of that terrorist party (including the blocked assets of any agency
or instrumentality of that terrorist party) shall be subject to execution or attachment
in aid of execution in order to satisfy such judgment to the extent of any
compensatory damages for which such terrorist party has been adjudged liable.
9
1 Courts applying TRIA in the EFT context look to state law to define the
2 rights a judgment debtor has in the property a creditor seeks to reach. See
3 Calderon-Cardona, 770 F.3d at 1001. In Hausler, after analyzing what property
4 interests are attachable under New York law, we held that under Article 4A of
5 the New York Uniform Commercial Code, EFTs are neither the property of the
6 originator nor the beneficiary while briefly in the possession of an intermediary
7 bank. 770 F.3d at 212. We held that “the only entity with a property interest in
8 the stopped EFT is the entity that passed the EFT on to the bank where it
9 presently rests.” Id. (quoting Calderon-Cardona, 770 F.3d at 1002) (emphasis
10 added). This is so because “wire transfers, which include EFTs, are a unique type
11 of transaction to which ordinary rules do not necessarily apply.” Calderon-
12 Cardona, 770 F.3d at 1001 (quoting Export-Import Bank of U.S. v. Asia Pulp & Paper
13 Co., 609 F.3d 111, 118 (2d Cir. 2010)). EFTs function “as a chained series of debits
14 and credits between the originator, the originator’s bank, any intermediary
15 banks, the beneficiary’s bank, and the beneficiary[;] ‘the only party with a claim
16 against an intermediary bank is the sender to that bank.’” Id. (quoting Asia Pulp,
17 609 F.3d at 119–20). In other words, under the N.Y. UCC’s statutory scheme, “the
10
1 only entity with a property interest in an EFT while it is midstream is the entity
2 immediately preceding the bank ‘holding’ the EFT in the transaction chain.” Id.
3 at 1002.4 “It is beyond cavil that attachment will only lie against the property of
4 the debtor, and that the right to attach the property ‘is only the same as the
5 defendant’s own interest in it.’” Bank of N.Y. v. Nickel, 14 A.D.3d 140, 145 (N.Y.
6 App. Div. 1st Dep’t 2004) (quoting Sidwell & Co. v. Kamchatimpex, 166 Misc. 2d
7 639, 644 (N.Y. Sup. Ct. Co. 1995)).
8 Doe contends that Grand Stores or Tajco are agencies or instrumentalities
9 of the FARC and that turnover of the FARC’s assets to satisfy his judgment is
4
The dissent takes issue with, among other things, this recitation of the N.Y. UCC statutory
scheme, as embraced by our decisions in Calderon-Cardona and Hausler. In so doing, the dissent sees
a tension between a SDGT’s interest in funds being, “in effect, entirely extinguished while
temporarily midstream,” on the one hand, and OFAC’s authority to block “property [or] interests
in property” of a SDGT, on the other. See Dissent, op. at 7-9. We, however, see no such tension.
The terms “interest” and “title” are “clearly not synonymous.” Asia Pulp, 609 F.3d at 120 (quoting
Bank of N.Y. v. Nickel, 14 A.D.3d 140, 145–47 (N.Y. App. Div. 1st Dep’t 2004)). “[A]lthough Article
4-A establishes that neither an originator nor a beneficiary owns or has title to a midstream EFT,
Article 4-A does not address the separate issue of who has an ‘interest’ in an EFT.” Id. (emphasis
in original). By contrast, the Global Terrorism Sanctions Regulations define “property” and
“property interest” very expansively to include, among other things, “any other property, real,
personal, or mixed, tangible or intangible, or interest or interests therein, present, future or
contingent.” 31 C.F.R. § 594.309. Similarly, the Regulations further define “interest” when used
with respect to property very broadly to mean “an interest of any nature whatsoever, direct or
indirect.” Id. § 594.306. As such, our holding here that the SDGTs at issue did not hold title to the
blocked assets—such that attachment under Section 201(a) is unavailable—does not preclude the
blocking of such assets under the Global Terrorism Sanctions Regulations. As the propriety of the
blocking of the assets is not properly before us, we need not reach that issue.
11
1 authorized by Section 201(a). All parties agree that Doe obtained a judgment
2 against a terrorist party, based upon an act of terrorism, and seeks execution only
3 to the extent of compensatory damages. Consequently, the only disputed issue
4 before us is whether the assets in the blocked accounts are property of SDGTs.
5 Here, as in Hausler, it is undisputed that no SDGT transmitted any of the
6 blocked EFTs directly to a blocking bank. See 770 F.3d at 212. Credit Suisse and
7 AHLI transmitted the funds held in the Grand Stores and Tajco blocked accounts
8 to JPMorgan, and neither Credit Suisse nor AHLI are SDGTs. See Ejercito, 2017
9 WL 591193, at *2. Consequently, our decisions in Calderon-Cardona and Hausler
10 compel the conclusion that neither Grand Stores nor Tajco has any attachable
11 property interest in the blocked funds at JPMorgan since they were not the
12 entities that directly passed the EFTs to JPMorgan. As such, as the District Court
13 correctly concluded, the blocked funds are not attachable under Section 201(a).
14 Doe invites us to depart from Calderon-Cardona and Hausler on the theory
15 that where, as here, the intermediary banks, which passed the EFTs on to
16 blocking banks, disclaim any interest in the blocked accounts and the originating
17 banks fail to appear or participate in the turnover proceedings, the funds
12
1 “move[] back up the chain or upstream” to the “sender[s] to that bank,” which
2 would be Grand Stores and Tajco (the two SDGTs). In other words, the
3 transaction, Doe contends, should be recast as though the funds moved directly
4 from the SDGTs to JPMorgan.
5 We decline this invitation because the Global Terrorism Sanctions
6 Regulations broadly prevent the unlicensed transfer of blocked assets and any
7 transfer in violation of the Regulations is “null and void.” See 31 C.F.R. §
8 594.202(a). The Regulations, section 594.312, go on define “transfer” in
9 exceptionally expansive language as “any actual or purported act or transaction .
10 . . the purpose, intent, or effect of which is to create, surrender, release, convey,
11 transfer, or alter, directly or indirectly, any right, remedy, power, privilege, or
12 interest with respect to any property.” These Regulations mean that any
13 disclaimer by the transmitting banks (Credit Suisse and AHLI) to an interest in
14 the blocked funds is incapable of effecting an unlicensed transfer to anyone and
15 certainly not a transfer “back up the chain” to an originating SDGT.
16 Consequently, disclaimers by intermediary banks can not serve to vest (or re-
13
1 vest) title to the transferred funds with the originators which were the initial
2 targets of the sanctions.
3 Moreover, we are not persuaded to depart from Calderon-Cardona and
4 Hausler by two unpublished district court decisions in which correspondent
5 banks waived their interests in blocked EFTs, Vera v. Republic of Cuba, No. 12-cv-
6 01596, 2015 WL 13657629 (S.D.N.Y. May 8, 2015)5 and Gates v. Syrian Arab
7 Republic, Nos. 11-cv-8715, 14-cv-6161, 2014 WL 5784859 (N.D. Ill. Nov. 6, 2014).
8 Doe notes that both of these decisions post-date Calderon-Cardona and Hausler
9 and analyze the disclaimer distinction in light of those opinions. We, however,
10 note that both Vera and Gates involved unique situations and, most importantly,
11 neither of them accounts for the applicable OFAC regulations which
12 unambiguously prohibit unlicensed transfers of blocked assets.6 Consequently,
13 we do not find them persuasive.
14 CONCLUSION
15 For the foregoing reasons, we AFFIRM the judgment of the District Court.
5
See also Vera v. Republic of Cuba, No. 12-cv-01596, ECF No. 814 (S.D.N.Y. Sept. 24, 2015) .
6
The dissent declines to conclude that the OFAC license requirement is clearly applicable in
these circumstances. See Dissent, op. at 11. We respectfully see no authority for this view.
14
DENNY CHIN, Circuit Judge:
I respectfully dissent.
It is undisputed that Doe satisfies the first three requirements of the
Terrorism Risk Insurance Act (ʺTRIAʺ), Pub. L. No. 107‐297, § 291, 116 Stat. 2322,
2337 (2002) (codified at 28 U.S.C. § 1610 note): (1) he obtained a judgment
against a terrorist party, (2) based upon an act of terrorism, and (3) execution is
sought only to the extent of compensatory damages. The only question is
whether the funds are ʺblocked assetsʺ of Specially Designated Global Terrorists
(ʺSDGTsʺ), subject to attachment under Section 201(a) of the TRIA. The majority
concludes they are not, relying on this Courtʹs decisions in Hausler v. JP Morgan
Chase Bank, 770 F.3d 207 (2d Cir. 2014) (per curiam), and Calderon‐Cardona v. Bank
of N.Y. Mellon, 770 F.3d 993 (2d Cir. 2014). I believe the cases are distinguishable,
however, and for the reasons set forth below, I disagree.
It is undisputed that the funds at issue originated with Grand Stores
Ltd. (ʺGrand Storesʺ) and Tajco Ltd. (ʺTajcoʺ), as they initiated the electronic fund
transfers (ʺEFTsʺ) that have been blocked by JPMorgan Chase Bank, N.A.
(ʺJPMorganʺ). It is also undisputed that Grand Stores and Tajco are agents and
instrumentalities of the Fuerzas Armadas Revolucion de Colombia (ʺFARCʺ), a
designated SDGT, and Doe holds judgments against the Ejército De Liberación
Nacional (ʺELNʺ) and against FARC for his kidnapping and torture by them.
Doe argues that because, under the New York Uniform Commercial Code (ʺN.Y.
U.C.C.ʺ), the originators of an EFT retain an interest in interrupted fund
transfers, and here, the originators are SDGTs, the funds in the blocked accounts
are attachable ʺblocked assetsʺ under the TRIA for purposes of satisfying Doeʹs
judgment. See Heiser v. Islamic Republic of Iran, 735 F.3d 934, 941 (D.C. Cir. 2013)
(explaining that under U.C.C. § 4A‐402(d)‐(e), ʺclaims on an interrupted funds
transfer ultimately belong to the originatorʺ);1 Bank of N.Y. v. Nickel, 14 A.D.3d
140, 145 (N.Y. App. Div. 1st Depʹt 2004) (ʺ[T]he right to attach the property is
only the same as the defendantʹs own interest in it.ʺ) (internal quotation marks
omitted)). 2
1 This provision has been adopted by the N.Y. U.C.C. See N.Y. U.C.C. § 4‐A‐402.
2 The TRIA defines a ʺblocked assetʺ as ʺany asset seized or frozen by the United
States under section 5(b) of the Trading With the Enemy Act (50 U.S.C. App. 5(b)) or
under sections 202 and 203 of the International Emergency Economic Powers Act (50
U.S.C. 1701, 1702).ʺ TRIA § 201(d)(2)(A). As discussed in the majority opinion, the
Department of the Treasury Office of Foreign Assets Control (ʺOFACʺ) regulations that
blocked the EFTs at issue were promulgated pursuant to Executive Order 13224, 66 Fed.
Reg. 49079 (Sept. 23, 2001) § 7, which executive authority was invoked under the IEEPA,
50 U.S.C. §§ 1701 et seq. The regulations block any ʺproperty and interests in propertyʺ
of SDGTs. 31 C.F.R. § 594.201(a); see also id. § 594.310 (defining SDGT as ʺany person
whose property and interests in property are blocked pursuant to § 594.201(a)ʺ).
2
I agree. First, attachment is consistent with the plain language and
purpose of the TRIA. The TRIA was enacted to ʺaid victims of terrorism to
satisfy their judgmentsʺ by authorizing judgment holders to attach the blocked
assets of liable terrorist parties. Calderon‐Cardona, 770 F.3d at 998; see also
Weininger v. Castro, 462 F. Supp. 2d 457, 483 (S.D.N.Y. 2006) (explaining that the
purpose of TRIA § 201 ʺis to ʹdeal comprehensively with the problem of
enforcement of judgments rendered on behalf of victims of terrorism in any court
of competent jurisdiction by enabling them to satisfy such judgments through
the attachment of blocked assets of terrorist parties.ʹʺ) (quoting H.R. Conf. Rep.
No. 107–779, at 27 (2002)).
In relevant part, section 201 of the TRIA, provides that:
Notwithstanding any other provision of law,
and except as provided in subsection (b), in
every case in which a person has obtained a
judgment against a terrorist party on a claim
based on an act of terrorism, or for which a
terrorist party is not immune under [28
U.S.C. § 1605(a)(7)], the blocked assets of that
terrorist party (including the blocked assets
of any agency or instrumentality of that
terrorist party) shall be subject to execution
or attachment in the aid of execution in order
to satisfy such judgment to the extent of any
compensatory damages for which such
terrorist party has been adjudged liable.
3
TRIA § 201(a). As Doe is a victim of terrorism and holds a judgment against a
terrorist party, and the EFTs were blocked pursuant to OFAC regulations as
ʺproperty or [an] interest[] in propertyʺ of that terrorist partyʹs agents or
instrumentalities, this case seems precisely to fall within the situation
contemplated by the TRIA. 31 C.F.R. § 594.201(a).
Second, Hausler and Calderon‐Cardona are not factually analogous,
and, in my view, do not preclude attachment under these circumstances. Hausler
involved non‐terrorist entities who had attempted to transfer funds to a terrorist
party, but the funds were blocked and never became the property of the terrorist
party. There, we held that the funds were not subject to execution under the
TRIA because they were not the ʺassets ofʺ a terrorist party. Hausler, 770 F.3d at
211 (citing TRIA § 201).
Calderon‐Cardona, on the other hand, involved blocked EFTs that
allegedly contained funds belonging to North Korea or an agency or
instrumentality of North Korea. In that case, we held that TRIA § 201(a) did not
apply because North Korea was not designated as a ʺterrorist partyʺ at the time
the judgment was issued. See Calderon‐Cardona, 770 F.3d at 999. We considered,
however, whether victims could instead recover under the Foreign Sovereign
4
Immunities Act, 28 U.S.C. § 1602 et seq., which also utilizes New York law
governing EFTs. Nevertheless, we held that there were factual issues
surrounding whether the entities that transmitted the EFTs to the blocking banks
were agencies or instrumentalities of North Korea and remanded the case to
develop that information. See id. at 1002.
Unlike in Hausler and Calderon‐Cardona, there is no dispute in this
case that the originating parties are designated terrorist parties. See, e.g., Martinez
v. Republic of Cuba, 149 F. Supp. 3d 469, 479 (S.D.N.Y. 2016) (explaining that Vera
v. Republic of Cuba, No. 12 Civ. 1596 (AKH) (S.D.N.Y. Sept. 24, 2015), was
distinguishable from Calderon‐Cardona and Hausler because it involved a
transaction that undisputedly originated with a terrorist party). Moreover,
unlike in Hausler and Calderon‐Carona, the upstream banks in this case have
disclaimed any interest they might have in the funds.
There appear to have only been two other cases involving blocked
fund transfers that were originated by terrorist parties and where the upstream
banks had waived or disclaimed any interest in the funds. In both cases, the
district courts concluded that our decisions in Hausler and Calderon‐Cardona did
not prevent turnover.
5
In Vera v. Republic of Cuba, No. 12 Civ. 1596 (AKH) (S.D.N.Y. Sept. 24,
2015), a Cuban bank, as originator, was attempting to move money between two
of its accounts at other banks. The money was blocked midstream pursuant to
U.S. banking regulations. The correspondent bank in that case argued that it was
merely acting as an agent for the originatorʹs bank, which was acting as an agent
for the originator that was subject to sanctions. The court held that because the
funds could not be returned to the Cuban bank, petitioners were entitled to them
under U.S. law.
In Gates v. Syrian Arab Republic, 2014 WL 5784859 (N.D. Ill. Nov. 6,
2014), the originator and beneficiary of a blocked funds transfer was an
instrumentality of Syria, and Syria was subject to U.S. sanctions. As in this case,
the intermediary bank disclaimed any interest it had in the blocked EFT. The
defendant in Gates also argued that, under Hausler and Calderon‐Cardona, the
blocked funds could not be attached because they were solely the property of the
intermediary bank. See id., at *2. The district court, however, rejected the
argument, and concluded that the funds were attachable because: (1) when the
ʺtransferor immediately preceding [the beneficiary bank] disclaim[s] any interest
in the fundsʺ then, ʺ[u]nder the U.C.C., the only party to whom those funds
6
would belong would be [the originator],ʺ id. at *2; and (2) allowing attachment
was consistent with the ʺbroad purpose of [the TRIA],ʺ which ʺis to compensate
victims of state sponsored terrorism at the expense of state sponsors of terror,ʺ id.
at *3. The court specifically noted that when the upstream bank disclaims any
interest in the blocked accounts, any risk of impact to innocent parties is obviated
and the ʺEFTs are attachable.ʺ Id. at *3.
Here, because Grand Stores and Tajco retained an interest in the
funds as the originators of the EFTs, and all parties with superior claims have
disclaimed any interest they might have, I would conclude that the blocked
funds are ʺblocked assetsʺ subject to attachment under § 201(a) of the TRIA.
Under the majorityʹs opinion, the funds remain frozen indefinitely in a blocked
account at JPMorgan, which does nothing to further the purpose of the TRIA.3
Finally, I have some technical concerns with the majorityʹs analysis.
Its conclusion is as follows: The funds are not the ʺblocked assetsʺ of the SDGTs
3 Defendants‐appellees contend that because, under Hausler and Calderon‐Cardona,
the banks were the rightful owners of the EFTs, their disclaimers have likely rendered
the funds ʺabandoned property under New Yorkʹs Abandoned Property Law and
therefore subject to turnover to the State of New York upon the lifting of sanctions or
the receipt of a license from OFAC.ʺ Def.‐Appellee Deutsche Bank Br. at 5 n.2. Giving
the funds to New York State, rather than to Doe, certainly would not further the
purpose of the TRIA.
7
because (a) under New York law, EFTs are ʺneither the property of the originator
nor the beneficiary while briefly in the possession of an intermediary bankʺ; (b)
here, Credit Suisse AG and AHLI United Bank UK PLC, the intermediary banks,
ʺimmediately preced[ed]ʺ the holding bank and thus are the ʺonly entit[ies] with
[] property interest[s]ʺ in the EFTs; and (c) Credit Suisse and AHLI are not
SDGTs so the funds do not constitute the ʺblocked assetsʺ of a designated
terrorist party. See Maj. Op. at 10‐12.
This conclusion is inherently at odds with OFAC regulations that
require the ʺproperty and interests in propertyʺ of SDGTs to be blocked in the
first place. See 31 C.F.R. § 594.201(a). If an SDGTʹs interest in funds is, in effect,
entirely extinguished while temporarily midstream, there would be no
authorization to block those midstream funds as ʺproperty [or] interests in
propertyʺ of a designated terrorist party because that property would belong
solely to the intermediary bank, not a designated terrorist party. See Maj. Op. at
10 (ʺ[T]he only entity with a property interest in an EFT while it is midstream is
the entity immediately preceding the bank ʹholdingʹ the EFT in the transaction
chain.ʺ (emphasis in original)). That result is inconsistent with our
understanding of how the economic sanctions regime works. See Maj. Op. at 5
8
(explaining that the relevant economic sanctions require U.S. banks to block
ʺproperty and interests in propertyʺ of designated entities, see 31 C.F.R. §
594.201(a), which includes transactions to and from SDGTs); see also FDA v.
Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (ʺA court must . . .
interpret [a] statute as a symmetrical and coherent regulatory scheme, and fit, if
possible, all parts into a harmonious whole.ʺ (internal citation and quotation
marks omitted)). Under that theory, JPMorgan should not have blocked the
funds at all, as the funds would not then be assets of an SDGT.
Hence, if we are to read Hausler and Calderon‐Cardona to compel
such a result, it is not clear what funds transfer could ever be blocked while
midstream. See 31 C.F.R. § 594.201(a) (blocking the ʺproperty and interests in
propertyʺ of SDGTs). A vast amount of everyday banking occurs through EFTs.
It is difficult to imagine a scenario where a terrorist party would directly pass
funds to a blocking bank without using its own bank or an intermediary bank to
execute that transaction on its behalf.4 If we are to adhere to the majorityʹs
4 This scenario would only seem to occur where the terrorist party is designated as
a state sponsor of terrorism and utilizes its state‐owned financial institutions to conduct
its banking. See, e.g., Calderon‐Cardona, 770 F.3d at 1002 (explaining, in the context of
EFTs involving North Korea, that EFTs are attachable only where ʺeither the state itself
or an agency or instrumentality thereof (such as a state‐owned financial institution)
transmitted the EFT directly to the bank where the EFT is held pursuant to the blockʺ).
9
reasoning, a significantly high‐risk area of terror financing would, in effect, be
read entirely out of reach of the sanctions.
. . .
In this case, the United States also filed an amicus brief in which it
argued that, even assuming the SDGTs had an interest in the funds, the banksʹ
purported disclaimers were without effect because OFAC regulations prohibit
entities from transferring interests in blocked property without receiving an
OFAC license. 5 The majority agrees with the Government that ʺany disclaimer
. . . is incapable of effecting an unlicensed transfer to anyone and certainly not a
transfer ʹback up the chainʹ to an originating SDGT.ʺ Maj. Op. at 13.
In Harrison v. Republic of Sudan, however, we held that TRIA
judgment holders ʺare exempt from the normal OFAC licensure requirement.ʺ
802 F.3d 399, 406‐07 (2d Cir. 2015), cert. granted on other grounds, ‐‐ S. Ct. ‐‐‐‐, 2018
This is, however, only one of many areas of terror financing that OFAC sanctions target.
The sanctions also encompass lists of designated terrorist parties, which include
transnational terrorist organizations and individuals. See Executive Order 13224, 66
Fed. Reg. 49079 (Sept. 23, 2001) § 1(c)‐(d).
5 A ʺtransferʺ is defined as including ʺany actual or purported act or transactionʺ
to ʺsurrenderʺ or ʺreleaseʺ an interest ʺwith respect to any [blocked] property.ʺ 31
C.F.R. § 594.312. Any transfer in violation of this restriction ʺis null and void and shall
not be the basis for the assertion or recognition of any interest in or right, right, power,
or privilege with respect toʺ the blocked property. Id. § 594.202(a).
10
WL 3096369 (Mem) (June 25, 2018) (relying on a number of Statements of Interest
from the Government that stated that TRIA judgment holders were exempt from
OFAC licensure requirements). Although we did not face the question of
whether an OFAC license was required prior to a bankʹs disclaimer of its property
interests in blocked assets, I disagree with the majority that the OFAC license
requirement is clearly applicable in these circumstances.6
For the reasons set forth above, in my view, the funds are attachable
as consistent with the TRIAʹs broad purpose of allowing victims of terrorism to
use blocked assets of liable terrorist parties to satisfy judgments. See Gates, 2014
WL 5784859, at *2.
Accordingly, I dissent.
6 The district court in Vera relied on our decision in Harrison and allowed
attachment without an OFAC license. See Vera, No. 12 Civ. 1596 (AKH), ECF No. 814 at
6 n.2. In a later case, Martinez v. Republic of Cuba, 149 F. Supp. 3d 469 (S.D.N.Y. 2016),
the Government filed a Statement of Interest and raised the same arguments as it does
here with respect to the OFAC license requirement. It argued that a bank cannot
disclaim its interest without an OFAC license, but that, ʺsetting aside [this] error . . . [the
courtʹs] reasoning in [Vera] is inapplicable here for the additional reason that there is no
indicationʺ that the terrorist party was the ʺoriginatorʺ of the funds in Martinez unlike in
Vera. See Martinez, No. 07 Civ. 6607 (VM), ECF No. 97, at 6.
11