85 F. Supp. 3d 111
D.D.C.2015Background
- The United States filed an in rem civil forfeiture action seeking >$300 million that ING Bank transferred to the IRS under a Deferred Prosecution Agreement for alleged sanctions-evasion transactions involving Iran and Cuba.
- The Stethem Claimants are judgment creditors who obtained a 2002 judgment against Iran’s Ministry of Information and Security for terrorist acts (including the murder of Robert Stethem) and have not been paid.
- Upon learning ING transferred funds to the IRS, the Stethems filed an administrative petition for remission/mitigation and later served (then withdrew) a writ of execution on the IRS; they did not complete the D.C. procedures to perfect a lien against the specific funds.
- The Stethems filed a verified claim in the forfeiture proceeding asserting they are innocent owners and asking for remission/mitigation to satisfy their unpaid judgment.
- The United States moved to strike the Stethems’ claim for lack of standing and argued remission/mitigation claims are nonjusticiable federally; the Court granted the motion and dismissed the Stethems.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing to contest forfeiture | U.S.: Stethems lack a colorable property interest because they are unsecured creditors with no perfected lien | Stethems: Their 2002 judgment and prior service of a writ (withdrawn after govt. counsel warnings) give them standing; estoppel/constructive trust doctrines apply | Court: No standing — general unsecured creditors without a perfected lien lack a colorable interest; sovereign immunity made Maryland writ futile |
| Effect of withdrawn writ and govt. communications (estoppel) | U.S.: Government validly asserted sovereign immunity; writ would have been futile | Stethems: Withdrew reliance on govt. counsel’s representations; equities support estoppel and constructive trust | Court: Estoppel/constructive trust theory rejected; counsel had no compulsion to accept govt. assertions and sovereign immunity barred attachment |
| Justiciability of remission/mitigation claims | U.S.: Remission/mitigation are administrative remedies handled by DOJ and not judicially reviewable here | Stethems: Assert right to pursue remission/mitigation in this action to collect judgment | Court: Remission/mitigation claims are nonjusticiable here; administrative process remains available and will be reopened if funds are forfeited |
| Application of pleading/judgment-on-pleadings standard | U.S.: Motion to strike should be judged under Rule 12(c)/Twombly-Iqbal standard | Stethems: Opposed on merits | Court: Applied Rule 12(c) / Twombly-Iqbal framework and accepted well-pleaded facts but found no standing |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard applied)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard applied)
- Dep’t of the Army v. Blue Fox, Inc., 525 U.S. 255 (sovereign immunity bars attachment of Treasury funds)
- BCCI Holdings (Luxembourg), S.A., 46 F.3d 1185 (D.C. Cir.) (judgment creditors need perfected liens to challenge forfeiture)
- United States v. All Assets Held at Bank Julius Baer & Co., 959 F. Supp. 2d 81 (D.D.C.) (unsecured creditors lack standing in forfeiture; colorable-interest test)
- United States v. One–Sixth Share, 326 F.3d 36 (1st Cir.) (unsecured creditors lack standing)
- United States v. One Lincoln Navigator, 328 F.3d 1011 (8th Cir.) (state law defines property interest; federal law governs effect on standing)
- Rollins v. Wackenhut Servs., Inc., 703 F.3d 122 (D.C. Cir.) (Rule 12(c) and 12(b)(6) standards equivalent)