United States v. All Funds on Deposit With R.J. O'Brien & Associates
783 F.3d 607
7th Cir.2015Background
- After 9/11 insurers (Appellees) obtained a default judgment against al Qaeda; they later sought to execute on $6.2 million in R.J. O’Brien accounts linked to al Qaeda-supporter al Tayyeb.
- OFAC blocked the accounts under Executive Order 13224/IEEPA on June 18, 2006; DOJ filed a civil forfeiture complaint June 19, 2011 and obtained an OFAC license (July 8, 2011) authorizing DOJ to pursue forfeiture and then arrested/took possession of the funds (July 12–14, 2011).
- Appellees filed verified claims in the forfeiture action and moved to execute under the Terrorism Risk Insurance Act (TRIA), which permits execution on “blocked assets” to satisfy terrorism judgments “notwithstanding any other provision of law.”
- District court allowed Appellees to amend claims, found TRIA superseded forfeiture standing rules, and granted summary judgment for Appellees on the premise the funds remained blocked.
- Seventh Circuit reviewed standing (constitutional and statutory) and the statutory question whether the funds remained “blocked assets” under TRIA given the OFAC license and in rem arrest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Constitutional standing to challenge forfeiture | Insurers: concrete injury from loss of funds they could execute to satisfy judgment | U.S.: injury speculative because judgment not final when claims filed | Court: Insurers have Article III standing (colorable, non-frivolous claim) |
| Statutory standing under TRIA (zone of interests) | TRIA intended to let terrorism victims execute on blocked assets; insurers fall within that zone | U.S.: procedural forfeiture rules and innocent-owner defense exclude insurers | Court: Insurers fall within TRIA zone; TRIA’s "notwithstanding" clause supersedes forfeiture standing requirements |
| Compliance with civil forfeiture pleading and timing rules | Insurers: operational constraints (classified funds, delayed final judgment) justified amendment and timely claims | U.S.: amended claims untimely and deficient; innocent-owner defense blocks participation | Court: District court properly allowed amendment; TRIA’s notwithstanding cures innocent-owner standing defect |
| Whether funds remained "blocked assets" under TRIA after OFAC license and arrest | Insurers: funds remained blocked; license simply permitted DOJ to pursue forfeiture and did not unambiguously make funds unblocked for TRIA | U.S.: OFAC license for DOJ and subsequent in rem arrest removed funds from TRIA’s definition of blocked assets so insurers cannot execute | Court: Funds are not "blocked"—license + arrest placed funds outside TRIA’s blocked-asset definition; vacated insurers’ summary judgment and directed judgment for U.S. |
Key Cases Cited
- Ministry of Defense & Support for the Armed Forces of the Islamic Republic of Iran v. Elahi, 556 U.S. 366 (observing TRIA permits attachment only of ‘blocked assets’)
- United States v. Bajakajian, 524 U.S. 321 (innocent-owner principle and limits on forfeiture)
- Conn. Nat’l Bank v. Germain, 503 U.S. 249 (cardinal canon: start and end with statutory text when unambiguous)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (Article III standing framework)
- Department of the Army v. Blue Fox, 525 U.S. 255 (sovereign immunity bars attachment of funds held by the United States)
- United States v. Holy Land Found for Relief & Dev., 722 F.3d 677 (5th Cir.) (discussed re: effect of OFAC license and restraining orders on blocked-asset status)
- Bank of N.Y. v. Rubin, 484 F.3d 149 (2d Cir.) (assets subject to a general OFAC licensing scheme are not TRIA blocked assets)