In re 650 Fifth Avenue
15-2882-cv
2d Cir.Dec 8, 2016Background
- The United States brought a civil forfeiture action seeking assets (including the 650 Fifth Avenue building) allegedly tied to Assa entities and Bank Melli for violations of IEEPA and money‑laundering statutes. 650 Fifth Avenue Co. and Alavi Foundation were named in rem defendants.
- The Hegna Parties hold a default judgment against Iran and MOIS (2002) for damages related to a terrorism death and registered that judgment in SDNY; roughly $33.6M remained unsatisfied.
- Hegna Parties filed writs of execution and notices in the forfeiture case claiming entitlement to proceeds from sale of the Building to satisfy their judgment and asserted innocent‑owner / bona‑fide purchaser defenses under 18 U.S.C. § 983(d).
- The district court granted the government summary judgment (and struck the Hegna Parties’ innocent owner defense), concluding the Hegna Parties lacked a specific ownership interest in the Building and, alternatively, any lien had expired.
- The Hegna Parties obtained a Rule 54(b) certified appeal of the district court’s denial as to their innocent‑owner defenses; the Second Circuit affirmed the district court and dismissed the remainder of the appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hegna’s judgment lien creates an ownership interest in the Building such that they qualify as "owners" under 18 U.S.C. § 983(d) | Government: Hegna lacks a property interest in the Building because the judgment is against Iran/MOIS, not the record owner (650 Fifth Ave. Co.). | Hegna: Their judgment lien against Iran/MOIS attaches to Assa/Alavi’s partnership interest in the Building, creating a specific property interest. | Court: Judgment against Iran/MOIS does not create an interest in the specific asset; Hegna are general creditors, not ‘‘owners’’ under § 983(d)(6). |
| Whether any judgment lien survived such that Hegna had a present ownership interest | Government: Any lien expired under NY CPLR § 5203 and no renewal was shown. | Hegna: Post‑complaint protective order or other steps preserved or extended the lien. | Court: Lien expired after ten years; no renewal under CPLR 5014(3) shown; protective order does not extend the lien. |
| Whether Hegna could qualify as innocent owners as bona fide purchasers for value (if their interest postdated the illegal conduct) | Hegna: Even if interest postdated illegal activity, they are bona fide purchasers without knowledge of forfeiture. | Government: Hegna did not acquire a protected bona fide purchaser interest; their claimed interest is derivative of a judgment against a non‑owner. | Court: Hegna cannot meet bona fide purchaser test because they lack a cognizable post‑existing property interest in the Building. |
| Challenge to district court’s approval of settlement for pro rata distribution to judgment creditors | Hegna: Settlement unfairly affects their priority and rights under TRIA. | Government/others: Settlement was approved by the district court; Hegna did not challenge it below. | Court: Argument waived for failure to raise below; in any event not covered by Rule 54(b) certification, so no appellate jurisdiction. |
Key Cases Cited
- Garcia v. Hartford Police Dep't, 706 F.3d 120 (2d Cir. 2013) (summary judgment review standard)
- Doninger v. Niehoff, 642 F.3d 334 (2d Cir. 2011) (summary judgment standard and material fact inquiry)
- United States v. Ribadeneira, 105 F.3d 833 (2d Cir. 1997) (forfeiture owner must have interest in a specific asset, not a general claim)
- Millea v. Metro‑N. R.R. Co., 658 F.3d 154 (2d Cir. 2011) (issues not raised in district court are waived on appeal)
- In re 650 Fifth Ave. & Related Props., 830 F.3d 66 (2d Cir. 2016) (vacating related district court forfeiture judgment where material fact disputes existed about Alavi’s knowledge)