523 F.Supp.3d 14
D.D.C.2021Background
- Plaintiffs hold large, unsatisfied judgments against Iran (collectively nearly $1 billion) and seek to satisfy part of those judgments from roughly $9.98 million blocked at Wells Fargo that originated from an attempted electronic funds transfer (EFT) tied to Taif Mining Services (an Iran-linked front) buying an oil tanker (the Nautic).
- Taif deposited the purchase funds with HFW (escrow); HFW’s bank (Lloyds) sent a payment order that was routed through Wells Fargo (intermediary) to Credit Suisse for Crystal Holdings (seller). OFAC warned Wells Fargo and Wells Fargo froze the transfer midstream.
- The United States filed a forfeiture action to recover the funds for the Victims of State Sponsored Terrorism Fund and obtained an OFAC license conditioned on a valid forfeiture order; the Government intervened in private plaintiffs’ cases and moved to quash plaintiffs’ attachment writs to preserve forfeiture priority.
- Multiple courts initially issued writs of attachment/execution in favor of plaintiffs; this Court reassigned and reviewed the writs on the Government’s motions to quash.
- Central legal question: whether the frozen midstream EFT constitutes "property" or "blocked assets" of Iran (or its agent Taif) under TRIA and the FSIA such that private plaintiffs may attach/condemn the funds.
- Applying federal common law adopting U.C.C. Article 4A as the rule for mid-EFT ownership, the Court found that the immediate transferor (Lloyds Bank), not Taif/Iran, holds the refund/ownership interest, and that U.C.C. § 4A-402(e) subrogation does not apply here because Lloyds did not use the intermediary designated by the originator. The Court quashed the writs and denied condemnation motions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the frozen midstream EFT is "property" or "blocked assets" of Iran under TRIA/FSIA, allowing attachment | Plaintiffs: TRIA/FSIA permit attachment of blocked assets of terrorist states; Heiser supports treating originator (Taif/Iran) as having ownership | Government/Wells Fargo: Under Article 4A the only midstream property interest belongs to the immediate transferor (originator's bank, Lloyds), not the originator (Taif/Iran) | Court: Funds are not Iran's; only Lloyds has the attachable interest; writs quashed and condemnation denied |
| Whether U.C.C. § 4A-402(e) subrogation makes the originator (Taif/Iran) the owner of the interrupted EFT | Plaintiffs: Heiser indicates originator may be subrogated and thus own the refund right | Government: §4A-402(e) requires the originator's payment order to have routed through the intermediary actually used; here Lloyds used Wells Fargo, not the originator's designated intermediary, so subrogation fails | Court: §4A-402(e) not satisfied; no subrogation; Taif/Iran has no attachable interest |
Key Cases Cited
- Heiser v. Islamic Republic of Iran, 735 F.3d 934 (D.C. Cir. 2013) (adopts U.C.C. Article 4A as federal rule for determining ownership of midstream EFTs)
- Levin v. JPMorgan Chase Bank, N.A., [citation="751 F. App'x 143"] (2d Cir.) (applies Article 4A to mid-EFT ownership issues)
- Calderon-Cardona v. Bank of New York Mellon, 770 F.3d 993 (2d Cir. 2014) (treats intermediary-held EFTs as property of the immediate transferor under Article 4A)
- Grain Traders, Inc. v. Citibank, N.A., 160 F.3d 97 (2d Cir. 1998) (funds transfer is a series of discrete payment orders; refund rights lie only between immediate parties)
- Exp.-Imp. Bank of U.S. v. Asia Pulp & Paper Co., 609 F.3d 111 (2d Cir. 2010) (describes Article 4A structure: rights and obligations arise pairwise between sender and receiving bank)