309 F. Supp. 3d 46
S.D. Ill.2018Background
- Petitioners (U.S.S. Cole victims) obtained a registered default judgment against the Republic of Sudan under 28 U.S.C. § 1605A and sought turnover of blocked EFTs, identifying an EFT held by Bank of New York Mellon (BNYM) as belonging to the Central Bank of Sudan.
- BNYM filed an interpleader and, after the Central Bank initially did not appear, stipulated with petitioners that the EFT was subject to turnover; the court ordered BNYM to turn the EFT over under §201(a) of the Terrorism Risk Insurance Act (TRIA).
- Before turnover was executed, the Central Bank appeared and moved under Rule 60(b)(4) to vacate the turnover order as void for lack of jurisdiction.
- The Central Bank produced evidence that it had instructed the Federal Reserve Bank of New York (FRBNY) to route the payment through BNYM (i.e., it did not transmit the EFT directly to BNYM), and that BNYM placed the EFT in a blocked account after refusing to execute because of sanctions.
- The district court analyzed New York U.C.C. law governing funds transfers (applicable because BNYM is in New York), including subrogation rules when an originator directs a specific intermediary, and addressed FSIA/TRIA sovereignty and immunity arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the turnover order is void under Rule 60(b)(4) for lack of jurisdiction | Petitioners: court had jurisdiction to order turnover under TRIA and state enforcement procedures | Central Bank: court lacked subject-matter and personal jurisdiction; turnover order therefore void | Denied — order not void; jurisdictional objections fail for reasons explained below |
| Whether TRIA applies — is the EFT a “blocked asset of” the Central Bank | Petitioners: EFT is a blocked asset of Central Bank and subject to TRIA turnover | Central Bank: it never directly transmitted the EFT to BNYM, so EFT is not its blocked asset and TRIA is inapplicable | Held: TRIA applies because under NY UCC the Central Bank is subrogated to FRBNY’s rights where the originator directed routing through BNYM, making Central Bank the party with a property interest |
| Property interest in EFT under New York law (UCC): who holds rights to recover the EFT | Petitioners: Central Bank has property interest via subrogation because it directed FRBNY to route through BNYM | Central Bank: disputes stipulation; says FRBNY, not Central Bank, directly transferred and therefore has property interest | Held: New York U.C.C. §4-A-402(5) subrogation applies when originator designates intermediary and intermediary cannot refund; Central Bank thus has the property interest and may be subject to TRIA turnover |
| Central bank immunity (28 U.S.C. §1611(b)(1)) — does central-bank immunity bar execution | Central Bank: EFT is property of a foreign central bank held for its own account and immune | Petitioners: TRIA applies notwithstanding other law; TRIA’s §201(a) displaces central-bank immunity for blocked assets of terrorist parties | Held: Central-bank immunity does not bar TRIA turnover; TRIA applies notwithstanding §1611(b)(1) per Supreme Court authority |
Key Cases Cited
- Grace v. Bank Leumi Tr. Co. of N.Y., 443 F.3d 180 (2d Cir. 2006) (Rule 60(b)(4) and when a judgment is void)
- NML Capital, Ltd. v. Banco Central de la Republica Argentina, 652 F.3d 172 (2d Cir.) (property of foreign state and FSIA attachment limits)
- Hausler v. JP Morgan Chase Bank, N.A., 770 F.3d 207 (2d Cir.) (governing law for EFT property interests and UCC analysis)
- Calderon-Cardona v. Bank of N.Y. Mellon, 770 F.3d 993 (2d Cir.) (EFT property interest depends on who directly transmitted the transfer)
- Grain Traders, Inc. v. Citibank, N.A., 160 F.3d 97 (2d Cir.) (UCC requires orderly unraveling; recovery generally only from direct transferor)
- Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533 (N.Y.) (New York turnover practice: jurisdiction over judgment debtor not required for garnishee turnover)
- Bank Markazi v. Peterson, 136 S. Ct. 1310 (Sup. Ct.) (TRIA’s §201(a) operates notwithstanding FSIA central-bank immunity)