Weininger v. CastroWeininger v. Castro
VICTOR MARRERO, United States District Judge.
Table of Contents
Page
I. BACKGROUND ........................................ 3
A. THE WEININGER JUDGMENT ............................ 3
B. THE McCARTHY JUDGMENT ............................. 9
C. JPM CHASE‘S CROSS-MOTION FOR RELIEF IN THE NATURE OF INTERPLEADER ............................ 12
II. STANDARD OF REVIEW ................................ 13
III. DISCUSSION ........................................ 13
A. ENFORCEABILITY OF THE WEININGER AND McCARTHY JUDGMENTS ................................ 18
1. The Full Faith and Credit Doctrine ........... 21
2. Recognition by Other Courts .................. 36
B. TRIA SECTION 201(a) ............................... 37
1. Subject Matter Jurisdiction .................. 38
2. TRIA § 201(a) ................................ 41
a. A Judgment Against a Terrorist Party .... 42
c. Blocked Assets .......................... 45
d. Compensatory Damages .................... 45
e. Execution Upon the Assets of an Agency or Instrumentality of a Terrorist Party.. 46
(i) Placing TRIA in Context in the FSIA.. 47
(ii) The Effect of TRIA upon Bancec ...... 52
3. Subject Matter Jurisdiction through Ancillary Jurisdiction ...................... 65
4. Personal Jurisdiction ....................... 69
5. Whether the Assets Belong to Agencies or Instrumentalities of Cuba ................... 77
i. The EMTELCUBA Account ................... 78
ii. The AT&T Long Lines Account ............. 83
iii. The Rabinowitz Boudin Account ........... 84
C. TURNOVER PURSUANT TO CPLR § 5225(b) .............. 89
D. JPM CHASE‘S MOTION FOR INTERPLEADER RELIEF ....... 91
1. Interpleader Relief ......................... 91
2. Attorney‘s Fees and Costs ................... 95
IV. ORDER ............................................ 97
None of the judgment debtors has appeared at any stage of
I. BACKGROUND4
A. THE WEININGER JUDGMENT
Weininger, invoking amendments to the Foreign Sovereign Immunities Act (“FSIA”) that removed the immunity of foreign countries from suits in United States courts for certain state-sponsored wrongful conduct,
Weininger commenced the instant litigation in state court by seeking summary judgment in lieu of complaint to domesticate the Florida state court judgment. On August 1, 2005, Weininger obtained an attachment order in New York State Supreme Court, New York County, directing the Sheriff of the City of New York to levy upon property held at JPM Chase as Garnishee in which the judgment debtors have an interest, naming specifically the three accounts mentioned above. On or about August 4, 2005, the sheriff levied upon JPM Chase, and in response, on August 11, 2005, JPM Chase served its garnishment statement pursuant to
JPM Chase removed the action to federal court on August 12, 2005, and on September 8, 2005 filed a third-party petition for interpleader relief against Weininger, McCarthy, and various other parties whom JPM Chase alleged may have an interest in the accounts. In particular, JPM Chase named (1) Rabinowitz Boudin in its capacity as alleged fiduciary in respect of the blocked Rabinowitz Boudin Account; (2) Banco Nacional de Cuba (“Banco Nacional”); (3) Empresa Cubana Exportadora de Alimentos y Productos Varios (“CUBAEXPORT”); (4) Empresa de Telecomunicaciones Internacionales de Cuba (“EMTELCUBA”); (5) Empresa de Radiocomunication y Difusion de Cuba (“RADIOCUBA”); (6) Empresa de Telecomunicaciones de Cuba SA (“ETECSA”) (7) AT&T; and (8) CATT.5 JPM Chase served a summons, notice of petition and third-party petition on each of these adverse claimants. AT&T and CATT were served pursuant to agreement with counsel. (See Kerr Suppl. Decl. ¶¶ 19, 36.) Rabinowitz Boudin was served by hand on October 5,
JPM Chase served the alleged agencies and instrumentalities of Cuba, or entities sited only in Cuba (such as ETECSA), pursuant to
JPM Chase also served these papers on the defendants in the underlying Weininger and McCarthy actions -- i.e., the Republic of Cuba, Fidel Castro, Raul Castro, and the Army of the Republic of Cuba -- by causing the summons, notice of
Weininger commenced a proceeding in this Court on November 2, 2005 against JPM Chase seeking turnover of the funds pursuant to the order of attachment. Weininger does not indicate that she served the judgment debtors with these papers pursuant to the FSIA, but instead provided notice according to
In addition, by Order dated December 13, 2005, this Court granted Weininger‘s motion for summary judgment in lieu of complaint domesticating the Florida state court judgment in New York, ordering that Weininger‘s Florida judgment, “including all of the findings of fact and conclusions of law therein, ... is entitled to full faith and credit in New York” and directing the Clerk of Court to enter judgment as provided in the Florida judgment. (Docket No. 71.) On December 27, 2005, this Court entered a writ of execution with respect to Weininger‘s judgment.
On January 9, 2006, Weininger also filed a cross-claim against Rabinowitz Boudin for turnover of the funds in the Rabinowitz Boudin Account at JPM Chase. (See Perkins Decl. ¶ 17.) Weininger served Rabinowitz Boudin by hand and mailed
Weininger now moves for a turnover order directing the Garnishees to relinquish funds from the Accounts. In response, JPM Chase cross-moved for interpleader relief. JPM Chase served its cross-motion for interpleader relief by DHL Air Mail upon ETECSA, EMTELCUBA, CUBAEXPORT, the Army of the Republic of Cuba, the Republic of Cuba, Raul Castro, Fidel Castro, RADIOCUBA, Banco Nacional. It served the same upon Rabinowitz Boudin by Express Mail. (See Kerr Suppl. Decl. ¶¶ 39-40; Exs. C(1), C(2).)
B. THE McCARTHY JUDGMENT
McCarthy‘s judgment is based on a claim against the Republic of Cuba arising from the execution of her husband, Howard F. Anderson (“Anderson”), by a Cuban firing squad shortly after his conviction by a “Revolutionary Tribunal” for allegedly acting as a liaison for an anti-communist group and conspiring to smuggle weapons to anti-Castro forces in Cuba.
McCarthy subsequently brought an action on the judgment in the United States District Court for the Southern District of Florida. On February 2, 2005, that court entered a final default judgment against the Republic of Cuba. (See DeMaria Decl., Ex. B., at 4-5.) On May 22, 2005, McCarthy registered that federal judgment with this Court pursuant to
On September 2, 2005, the United States Marshal served Rabinowitz Boudin and JPM Chase with a writ of execution levying upon the EMTELCUBA, AT&T Long Lines, and Rabinowitz
Separately, McCarthy sought to enforce the federal registered judgment in the New York Supreme Court. On August 24, 2005, that court held that the FSIA did not preclude enforcement of the Florida state and federal court judgments and granted McCarthy‘s motion to execute upon the judgment against the Republic of Cuba. See McCarthy v. Republic of Cuba, 800 N.Y.S. 2d 906, 909 (Sup. Ct. N.Y. Co. 2005).
As indicated above, JPM Chase‘s third-party petition was filed against McCarthy, among others. In response to JPM Chase‘s third-party petition, on November 14, 2005 McCarthy filed a counter-petition for turnover, asserted against both JPM Chase and Rabinowitz Boudin in their capacity as garnishees, seeking turnover of funds in those accounts. McCarthy served Rabinowitz Boudin by hand. (See Docket No. 104, Ex. 3 (Affidavit of Service).) In addition, McCarthy served her turnover petition in accordance in accordance with the FSIA upon the Republic of Cuba, as well as the various Cuban entities identified by Chase in its papers (including Banco Nacional, EMTELCUBA, RADIOCUBA, ETECSA, and CUBAEXPORT), by serving copies in both English and Spanish by DHL through the Clerk of Court. (See R.56.1 Statement ¶ 40; DeMaria Aff.
C. JPM CHASE‘S CROSS-MOTION FOR RELIEF IN THE NATURE OF INTERPLEADER
JPM Chase asserts that as a result of the Plaintiffs’ actions to execute against the Accounts, it is exposed to “inconsistent legal obligations and to the risk of double or multiple liability.” (Mem. of Law in Response to Motion for Partial Summary Judgment on Claims for Turnover and in Support of Cross-Motion for Relief in the Nature of Interpleader, dated Mar. 10, 2006 (“JPM Chase Mem.”), at 2.) JPM Chase commenced third-party proceedings in order to bring all adverse claimants to the blocked deposits before the Court and to obtain a discharge in interpleader and as a garnishee under
JPM Chase seeks an order from the Court that will (a) determine whether JPM Chase is to be required to comply with the turnover order sought by Plaintiffs; (b) incorporate findings intended to protect any turnover order from collateral attack, and (c) discharge JPM Chase from any further liability to any present or future adverse claimants-respondents, with respect to the accounts subject to turnover. JPM Chase also seeks reimbursement for its expenses in seeking interpleader relief.
To prevail on a motion for summary judgment, the moving party must demonstrate that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
III. DISCUSSION
The property in the United States of a foreign state and its agencies and instrumentalities is generally immune from execution under the FSIA unless a specific exception applies pursuant to the FSIA.
As set forth below, the Court concludes that Section 201(a) of the Terrorism Risk Insurance Act of 2002, Pub. L. No. 107-297, 116 Stat. 2322, (“TRIA”) provides an exception to immunity from execution over the funds in question.
Before reaching the question of TRIA‘s applicability to the Weininger and McCarthy judgments, the Court will first examine the question raised by JPM Chase and CEC regarding whether the Weininger and McCarthy judgments are entitled to
The Court first makes several preliminary observations.
It is beyond question that this Court must satisfy itself that it has jurisdiction to rule on any question it needs to decide that resolves the merits of a dispute. This unremarkable and fundamental principle is reflected in countless precedents as well as in the special status accorded subject matter jurisdiction in the Federal Rules of Civil Procedure, which allow the subject matter jurisdiction of a court to be raised at any time, even by the court on its own initiative.
To be sure, attacks on a prior court‘s jurisdiction, both subject matter and personal, are routinely made and obligate the later court to consider the challenge. Such an inquiry generally arises after a default judgment is rendered, when the party who won the judgment seeks to enforce it. The party who defaulted in the first proceeding will then collaterally attack the judgment, arguing that the rendering court lacked jurisdiction, and thus that he or she should not be bound. Here, however, the question is posed without any collateral attack by the parties against whom the judgment is sought to be enforced. Instead, the jurisdictional question is raised by a third party serving as amicus curiae, as well as by a garnishee seeking not to void the judgment but merely to obtain interpleader relief.
In the absence of any collateral attack, what governs this Court‘s obligation defining how far back in the decisional line it need go in ascertaining the propriety of the jurisdictional issues now before it and its own authority to rule? Stated differently, what duty does this Court have on its own motion to reexamine the jurisdictional competence,
In this case, there have already been two levels of review. First, the Florida state courts determined their jurisdiction. Nor was such determination implicit or cursory, as might have been the case in the entry of a routine default judgment. Instead, because
Then, in the McCarthy case, a Florida federal district court held that the state court judgment was entitled to full faith and credit. Those same judgment debtors were served and failed to appear, and the federal court made an implicit determination of jurisdiction -- both its own and the state court‘s -- and found the judgment entitled to be enforced. In the Weininger case, this Court granted summary judgment in lieu of complaint recognizing the Florida judgment, finding it
Even now, in these enforcement proceedings, neither the judgment debtors nor the other entities which JPM Chase has impleaded and whose alleged assets are at risk of loss, have appeared, despite notice, to contest the validity of the judgments or that such judgments should be enforced against them. Under these circumstances, the policies and principles underlying res judicata doctrine would make it manifestly inequitable for this Court to reopen the judgments so as to permit a challenge to the underlying adjudication at the request of parties not affected by the judgments, and in particular at the behest of a party who appears as amicus here by the grace of the Court.
A. ENFORCEABILITY OF THE WEININGER AND McCARTHY JUDGMENTS
JPM Chase and CEC assert that the Weininger and McCarthy judgments are unenforceable against the judgment debtors because the Florida state courts that rendered judgment erred in determining that FSIA § 1605(a)(7) (“§ 1605(a)(7)”) provided jurisdiction over the judgment debtors. The FSIA provides the sole basis for obtaining jurisdiction over a foreign state or an agency or instrumentality of a foreign
JPM Chase and CEC argue that the Florida state courts erroneously determined that the FSIA provided subject matter jurisdiction over the judgment debtors in the state court proceedings. As noted above, the Florida state courts held, after requisite fact-finding proceedings, that jurisdiction over the named defendants in the Weininger and McCarthy state court actions arose under
1. The Full Faith and Credit Doctrine
Plaintiffs argue that the judgments sought to be enforced in this proceeding must be recognized as valid pursuant to the requirements of full faith and credit. According to that doctrine, codified in the Full Faith and Credit Act, “the judicial proceedings of any court of any such State . . . shall have the same full faith and credit in every court within the United States . . . as they have by law or usage in the courts of such State . . . from which they are taken.”
The second step arises from the recognition that these full faith and credit principles are subject to “some basic limitations” -- “[c]hief among these limitations is the caveat, consistently recognized by this Court, that ‘a judgment of a court in one State is conclusive upon the merits in a court in another State only if the court in the first State had power to pass on the merits -- had jurisdiction, that is, to render the judgment.‘” Underwriters, 455 U.S. at 704 (quoting Durfee v. Duke, 375 U.S. 106, 110 (1963)). Thus, because neither federal nor state courts may enforce a “constitutionally infirm judgment,” see Kremer, 456 U.S. at 482-83, “before a court is bound by the judgment rendered in another State, it may inquire into the jurisdictional basis of the foreign court‘s decree. If that court did not have jurisdiction over the subject matter or the relevant parties, full faith and credit need not be given.” Underwriters, 455 U.S. at 705; McCloud, 1991 WL 136027, at *5. See Conopco, Inc. v. Roll Int‘l, 231 F.3d 82, 60 n.7 (2d Cir. 2000) (describing two-part analysis required under Full Faith and Credit Act as “(1) whether, under federal law, the judgment is entitled to full faith and credit; and (2) what preclusive effect would the judgment be given under the law of the rendering state“); American Steel Bldg. Co. v. Davidson & Richardson Constr. Co., 847 F.2d 1519, 1521 (11th Cir. 1988) (“The full faith and credit statute thus requires a two-tiered analysis: first, we must consider whether the original court had jurisdiction, thus entitling the judgment to full faith and credit; and second, we must determine how much credit the judgment is entitled to receive.“).10
With regard to the first step in the inquiry, a federal court is required to examine the state court‘s res judicata law to determine whether a collateral attack would be
The second step in a federal court‘s inquiry into the enforceability of a foreign court‘s judgment is whether there is a constitutional infirmity with the foreign court judgment.
Nonetheless, “principles of preclusion apply equally to jurisdictional matters.” Stone, 970 F.2d at 1057. “It has long been the rule that principles of res judicata apply to jurisdictional determinations -- both subject matter and personal.” Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 n.9 (1982); see also Underwriters, 455 U.S. at 706. Thus, “‘a judgment is entitled to full faith and credit -- even as to questions of jurisdiction -- when the second court‘s inquiry discloses that those questions have been fully and fairly litigated and finally decided in the court which rendered the original judgment.‘” Underwriters, 455 U.S. at 706 (quoting Durfee, 375 U.S. at 111); see American Steel, 847 F.2d at 1521; McCloud, 1991 WL 136027, at *5. The same preclusive effect
However, where a judgment is rendered by default, it is not always clear whether such an opportunity to contest any jurisdictional deficiency actually existed. Certainly as to personal jurisdiction, default judgments do not foreclose collateral attacks. See Ins. Corp., 456 U.S. at 706 (“A defendant is always free to ignore the judicial proceedings, risk a default judgment, and then challenge that judgment on jurisdictional grounds in a collateral proceeding.“); Transaero, Inc. v. La Fuerza Aerea Boliviana, 162 F.3d 724,
However, each of the preceding cases involved a collateral attack by the judgment debtor, or presumptive party to the underlying action, who had sufficient standing to pursue an appeal or collateral attack on the underlying judgment. Here, there is no collateral attack by the judgment debtors. No judgment debtor has appeared to argue that it did not have an opportunity to contest the rendering court‘s subject matter jurisdiction or personal jurisdiction and that the judgments are void on that basis. While CEC objects to this Court‘s enforcement of the judgment, it does not have standing to bring a collateral attack upon the judgment.12 A garnishee such as JPM Chase may have standing to either directly or collaterally attack a judgment. See FG Hemisphere, 455 F.3d at 584 (allowing sovereign immunity of foreign state to be directly raised by garnishee on appeal);
Nor would enforcement of these judgments under these circumstances be so clearly wrong that it would comprise a
While those hearings may have entailed the submissions of only one side, in the absence of a collateral attack contesting the sufficiency of the evidence presented to establish jurisdiction, it is not appropriate at this stage for this Court on its own motion to review those findings. Moreover, the Florida state court examined its jurisdiction as required by
CEC also asserts that the state courts erred in determining that the courts had personal jurisdiction over the judgment debtors pursuant to the FSIA. Under the FSIA, personal jurisdiction is achieved where the court has subject matter jurisdiction pursuant to the FSIA and service has been made on the foreign state under
Finally, the Court concludes that enforcement of the judgments is not precluded by any other constitutional infirmity. A federal court may not enforce a judgment that is constitutionally defective because it was entered in violation of the defendant‘s due process rights. See Kremer, 456 U.S. at 482-83. This rule permits the enforcing court to decline enforcement not only on the basis of lack of jurisdiction, as discussed above, but also “if the procedures utilized in the original forum were in other respects so deficient as to reflect an absence of due process.” McCloud, 1991 WL 136027, at *17 (citing Fehlhaber v. Fehlhaber, 681 F.2d 1015, 1027-29 (Fifth Cir. Unit B 1982)). The Court concludes that the due process rights of the judgment debtors were not violated in the Florida Circuit Court.
There is no dispute that the judgment debtors were served in the state court proceedings in accordance with the requirements of the FSIA. Accordingly, reopening the state courts’ determinations would not be appropriate here. Reexamination would entail, in an essentially ex parte proceeding here, a reconsideration of the factual record before the state courts and a new determination as to whether the evidence before those courts supported the courts’
CEC argues that this Court has an obligation to raise sua sponte and decide the issue of subject matter jurisdiction. While this Court must consider whether it has subject matter jurisdiction in connection with the proceeding immediately before it, that is a separate issue from the
2. Recognition by Other Courts
There have been intervening court decisions recognizing the validity of Plaintiffs’ judgments. As to Weininger‘s, this Court has already recognized that such judgment, as well as “all of the findings of fact and conclusions of law therein,” are entitled to full faith and credit. (Order, dated Dec. 13, 2005 (Docket No. 71).) As to McCarthy‘s state judgment, a federal district court in Florida has already recognized that judgment and entered a default against the judgment debtors in respect of it. Moreover, a state court in New York has recognized it as well, after concluding that the FSIA did not preclude enforcement of the Florida judgment.14 No evidence of constitutional infirmity in the records of the proceedings in the courts that authorized these judgments has been called to this Court‘s attention.
B. TRIA SECTION 201(a)
As set forth below, the Court concludes that: (1) this Court has subject matter jurisdiction over the enforcement action before it pursuant to TRIA § 201(a); (2) TRIA § 201(a) permits execution against funds held by or owed to the Republic of Cuba; (3) TRIA § 201(a) permits execution against funds held by or owed to those entities that are agencies and instrumentalities of a foreign state as defined by the FSIA; and (4) Banco Nacional is not exempt from TRIA § 201(a) as a result of its status as a central bank.
The FSIA is the exclusive source of subject matter jurisdiction over all civil actions against foreign states or their agencies and instrumentalities. See Saudi Arabia, 507 U.S. at 355; Argentine Republic, 488 U.S. at 434; Robinson v. Government of Malaysia, 269 F.3d 133, 138 (2d Cir. 2001); Zappia, 215 F.3d at 250-51. “[S]ubject-matter jurisdiction in any such action depends on the existence of one of the specified exceptions to foreign sovereign immunity.” Verlinden, 461 U.S. at 493. Accordingly, “‘[a]t the threshold of every district court action against a foreign state, the court must satisfy itself that one of the exceptions [to immunity] applies [because its] subject matter jurisdiction ... depends on that application.‘” FG Hemisphere, 455 F.3d at 584 (quoting Republic of Austria v. Altmann, 541 U.S. 677, 691 (2004)); see Verlinden, 461 U.S. at 493-94; Robinson, 269 F.3d at 139; NYSA-ILA Pension Trust Fund ex rel. Bowers v. Garuda Indonesia, 7 F.3d 35, 39 (2d Cir. 1993) (“Before a federal court may apply ... any ... rule of law in a case involving a foreign state or instrumentality of that state, it must, as a threshold matter, find an exception to the FSIA‘s grant of sovereign immunity.“). Even if a party fails to enter an appearance and assert its claim of immunity, a court must determine whether immunity is available pursuant to the FSIA.
Under
2. TRIA § 201(a)
In November 2002, Congress enacted TRIA. Section 201(a) of TRIA provides:
Notwithstanding any other provision of law, and except as provided in subsection (b),17 in every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism, or for which a terrorist party is not immune under section 1605(a)(7) of title 28, United States Code, the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of any compensatory damages for which such terrorist party has been adjudged liable.
TRIA § 201(a), codified at
Thus, TRIA allows for execution on the blocked assets of a terrorist party, or its agency or instrumentality, to satisfy a judgment against the terrorist party, provided that the following requirements are met:
- a person has obtained a judgment against a terrorist
party; - the judgment is either
- for a claim based on an act of terrorism, or
- for a claim for which a terrorist party is not immune under
§ 1605(a)(7) ;
- the assets are “blocked assets” within the meaning of TRIA; and
- execution is sought only to the extent of any compensatory damages.
In addition, as indicated, and important to this case, by its terms § 201 provides that the blocked assets that may be executed upon are those of either the “terrorist party” or “any agency or instrumentality of that terrorist party,” even though the judgment itself need be only against the terrorist party. The Court will examine each of these elements in turn.
a. A Judgment Against a Terrorist Party
TRIA defines “terrorist party” to mean
a terrorist, a terrorist organization (as defined in section 212(a)(3)(B)(vi) of the Immigration and Nationality Act (
8 U.S.C. 1182(a)(3)(B)(vi) )), or a foreign state designated as a state sponsor of terrorism under section 6(j) of the Export Administration Act of 1979 (50 U.S.C. App. 2405(j)) or section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371 ).
TRIA § 201(d)(4), codified at
In 1982, Cuba was designated by the State Department as a state sponsor of terrorism under Section 6(j) of the Export
b. A Claim Based on an Act of Terrorism or a Claim for Which the Terrorist Party Is Not Immune under § 1605(a)(7)
As indicated, to execute under TRIA, Plaintiffs must have a judgment against a terrorist party either for (a) a claim based on an act of terrorism, or (b) a claim for which a terrorist party is not immune under
In light of this conclusion, the Court need not decide whether Plaintiffs also have a judgment for “a claim based on
c. Blocked Assets
TRIA defines a “blocked asset” as “any asset seized or frozen by the United States under section 5(b) of the Trading With the Enemy Act (50 U.S.C. App. 5(b)) or under sections 202 and 203 of the International Emergency Economic Powers Act (
d. Compensatory Damages
Here, Weininger was awarded by the Florida Circuit Court $23,939,301.95 (including interest) in compensatory damages. Similarly, that court awarded McCarthy $67,000,000.00
e. Execution Upon the Assets of an Agency or Instrumentality of a Terrorist Party
Plaintiffs seek to execute on accounts that contain assets that the record suggests belong not to the named judgment debtors (the Republic of Cuba, Fidel Castro, Raul Castro, and the Army of the Republic of Cuba), but to other entities, including EMTELCUBA, Banco Nacional, and CUBAEXPORT. Plaintiffs contend that these entities are agencies or instrumentalities of Cuba, and that TRIA therefore allows execution on these assets to satisfy the judgments rendered against Cuba itself. Plaintiffs’ contention raises several issues. First is whether the entities at issue are agencies or instrumentalities of Cuba. Second is whether the FSIA imposes any jurisdictional barrier over executing upon the assets of such agencies or instrumentalities to satisfy a judgment that was rendered against another entity. The third issue, as pointed out by JPM Chase, is whether the Supreme Court’s decision in First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983) (“Bancec”), nonetheless prohibits execution upon these assets absent a showing by Plaintiffs that these alleged agencies and instrumentalities are not juridically separate from Cuba for
(i) Placing TRIA in Context in the FSIA
As indicated above, the FSIA is the exclusive source of subject matter jurisdiction over all civil actions against foreign states or their agencies and instrumentalities. See Saudi Arabia, 507 U.S. at 355; Argentine Republic, 488 U.S. at 434; Verlinden, 461 U.S. at 488.19 In addition,
Thus, the FSIA preserves a common law distinction between two different aspects of foreign sovereign immunity: jurisdictional immunity from actions brought in United States
Moreover, the FSIA defines a foreign state to include not only the foreign state itself, but also its political subdivisions and its agencies and instrumentalities. See
Sections 1610(a) and 1610(b) provide a list of several exceptions to the immunity from attachment and execution provided by
While at first glance
The legislative history of § 201 of TRIA provides persuasive guidance in the resolution of the issue before the Court. TRIA § 201 was passed in order to “deal comprehensively with the problem of enforcement of judgments rendered on behalf of victims of terrorism in any court of competent jurisdiction by enabling them to satisfy such judgments through the attachment of blocked assets of terrorist parties. It is the intent of the Conferees that Section 201 establish that such judgments are to be enforced.” H.R. Conf. Rep. 107-779, at 27 (2002), reprinted in 2002 U.S.C.C.A.N. 1430, at 1434-35; see Hill v. Republic of Iraq, No. 99 Civ. 03346, 2003 WL 21057173, at *2 (D.D.C. Mar. 11, 2003) (discussing enactment of TRIA). As noted by the Second Circuit, the plain meaning of the phrase that blocked assets “shall be subject to execution or attachment in aid of execution” “is to give terrorist victims who actually receive favorable judgments a right to execute against assets that would otherwise be blocked.” Smith ex rel. Estate of Smith v. Fed. Reserve Bank of New York, 346 F.3d 264, 271 (2d Cir. 2003).
(ii) The Effect of TRIA upon Bancec
In Bancec, the Supreme Court held that government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such, so that an agency or instrumentality of a foreign state could not automatically be liable for the debts of its associated foreign state. See 462 U.S. at 626-27.20 The rationale for this principle is that
[t]he language and history of the FSIA clearly establish that the Act was not intended to affect the substantive law determining the liability of a foreign state or instrumentality, or the attribution of liability among instrumentalities of a foreign state.
Id. at 620. Instead, FSIA expressly provided that liability of a foreign state is determined “‘in the same manner and to the same extent as a private individual under like circumstances.’” Id. (quoting
However, although there existed a “presumption that a foreign government’s determination that its instrumentality is to be accorded separate legal status,” id. at 628, such presumption could be overcome in certain circumstances. Id. First, where a corporate entity “is so extensively controlled by its owner that a relationship of principal and agent is created,” one could be held liable for the actions of the other. Id. at 629. Second, the doctrine of corporate entity would not be regarded “‘when to do so would work fraud or injustice.’” Id. (quoting Taylor v. Standard Gas Co., 306 U.S. 307, 322 (1939)).23
Under Bancec, before Plaintiffs here could recover on their judgments against Cuba by executing upon the assets of Cuba’s agencies or instrumentalities, they would need to overcome the presumption that the alleged agencies and instrumentalities here should be treated as entities juridically separate from Cuba. Post-Bancec, several circuits, including the Second Circuit, have followed this analysis. See, e.g., Flatow v. Islamic Republic of Iran, 308 F.3d 1065, 1069-73, 1073 (9th Cir. 2002) (finding that plaintiff could not overcome presumption that Iranian bank was juridically separate from Iran, and thus could not execute on assets of Iranian bank to satisfy judgment against Iran); Alejandre, 183 F.2d at 1284-89 (finding that plaintiffs did not overcome presumption that ETECSA, a Cuban telecommunications company, was juridically separate from Cuba, and thus could not execute on ETECSA’s assets to satisfy judgment against Cuba); Walter Fuller Aircraft Sales, Inc. v. Republic of Philippines, 965 F.2d 1375, 1381 (5th Cir. 1992)
Plaintiffs contend that TRIA obviates this Bancec analysis. By Plaintiffs’ account, TRIA’s plain language eliminates any impediment to execution against the blocked assets of a terrorist party’s agency or instrumentality to satisfy a judgment rendered against the terrorist party.
The Court agrees with Plaintiffs that TRIA works to obviate analysis of the Bancec presumption. TRIA clearly provides that “in every case in which a person has obtained a judgment against a terrorist party on a claim ... for which a terrorist party is not immune under
The legislative history of TRIA also supports this interpretation. On the Senate floor, addressing the Senate in connection with the conference report accompanying TRIA, Senator Harkin, a sponsor of TRIA, stated:
I rise to address a portion of this conference agreement relating to enforcement of judgments obtained by victims of terrorism against state sponsors of terrorism. ...
Title II expressly addresses three particular issues which have vexed victims of terrorism in this context. First, there has been a dispute over the availability of “agency and instrumentality” assets to satisfy judgments against a terrorist state itself. Let there be no doubt on this point. Title II operates to strip a terrorist state of its immunity from execution or attachment in aid of execution by making the blocked assets of that terrorist state, including the blocked assets of any of
its agencies or instrumentalities, available for attachment and/or execution of a judgment issued against that terrorist state. Thus, for purposes of enforcing a judgment against a terrorist state, title II does not recognize any juridical distinction between a terrorist state and its agencies or instrumentalities.
148 Cong. Rec. S11524, at S11528 (Nov. 19, 2002) (statement of Sen. Harkin) (emphasis added). Where statements by a sponsor on the floor are consistent with the statutory language and other legislative history, congressional intent may be inferred. See Brock v. Pierce County, 476 U.S. 253, 263 (1986) (sponsor’s statements not controlling but provide evidence of congressional intent when “consistent with the statutory language and other legislative history”); Bowsher v. Merck & Co., 460 U.S. 824, 832-33 (1983) (sponsor’s statement, which had been the only explanation in the legislative history as to an amendment’s meaning and purpose, was “authoritative guide” to statute’s construction). Here, Senator Harkin’s statements are clear and consistent with the interpretation suggested by TRIA’s statutory language, and no contrary legislative history has been called to this Court’s attention.
The Court notes that the Eleventh Circuit has rejected the argument that
Notwithstanding any other provision of law, ... any property with respect to which financial transactions are prohibited or regulated pursuant to [certain statutes that authorize the blocking of assets] ... [or any] license issued pursuant thereto, shall be subject to execution or attachment in aid of execution of any judgment relating to a claim for which a foreign state (including any agency or instrumentality of such state) claiming such property is not immune under section 1605(a)(7).
Congress has previously demonstrated in the FSIA context that it knows how to express clearly an intent to make instrumentalities substantively liable for the debts of
their related foreign governments. Absent such a clear expression, which does not appear in section 1610(f)(1)(A), we see no reason to interpret that section as contravening Congress’ original understanding that the FSIA “[is] not intended to affect the substantive law determining the liability of a foreign state or instrumentality, or the attribution of liability among instrumentalities of a foreign state.”
Id. at 1287-88 (emphasis added) (quoting Bancec, 462 U.S. at 620). See also Flatow v. Islamic Republic of Iran, 308 F.3d 1065, 1071 n.10 (9th Cir. 2002) (agreeing with Alejandre analysis).
In contrast, in the plain language of TRIA and its legislative history there is such a clear expression to make the instrumentalities substantively liable for the debts of their related foreign governments, in certain circumstances. TRIA § 201(a) specifically provides that “in every case in which a person has obtained a judgment against a terrorist party on a claim ... for which a terrorist party is not immune under 28 U.S.C. § 1605(a)(7), the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution....” TRIA § 201(a) (emphasis added). TRIA thus expressly provides that where a judgment against a terrorist party exists, not only its assets, but the assets of its agencies and instrumentalities can be used to satisfy the judgment. In contrast, § 1610(f)(1)(A) states that if a creditor seeks to execute on assets claimed by an agency or instrumentality of
Further support for this interpretation is gleaned from a comparison provided by the court in Alejandre. There, the court noted that in 1988, a bill was introduced in the House of Representatives that would have amended § 1610(a) to deprive a foreign state‘s U.S. property of immunity from execution if “the property belongs to an agency or instrumentality of a foreign state engaged in a commercial activity in the United States and the judgment relates to a claim for which the foreign state is not immune from jurisdiction by virtue of section 1605 or 1607.” See Alejandre, 183 F.3d at 1287 n.25 (quoting H.R. Res. 3763, 100th Cong. § 3(1)(D) (1988), 134 Cong. Rec. H6484-01) (emphasis added). TRIA‘s language is similar and operates to make the agency or instrumentality of a terrorist party liable for judgments against the terrorist party itself. Finally, a clear expression of such congressional intent consistent with this reading is found in the statement of Senator Harkin on the Senate floor, as quoted above.
Thus, this Court finds that TRIA allows for execution of the blocked assets of “juridically separate” entities to satisfy a judgment against a designated terrorist party, as
However, given the common law distinction, preserved in the FSIA, between immunity from jurisdiction and immunity from execution, the question still remains of whether, even if the agency or instrumentality can be substantively liable for the debts of its related foreign state, whether and which of its assets are nonetheless immune from execution. Some courts have applied Bancec‘s separate juridical status presumption not only for liability determinations, but for exceptions to immunity. See Alejandre, 183 F.3d at 1284, 1287 n.23 (“[T]he Bancec presumption of separate juridical status applies for purposes of determining both whether an instrumentality can be held responsible for the debts of its related foreign government and whether the instrumentality retains its immunity from execution.“); Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 446 (D.C. Cir. 1990) (“The presumption of the juridical separateness of entities also applies to jurisdictional issues.“); see also Zappia, 215 F.3d 247, 251-52 (2d Cir. 2000) (holding that plaintiff did not demonstrate sufficient intermingling of private banks with foreign sovereign to overcome Bancec‘s presumption of juridical separateness, and therefore immunity exception that might have applied to foreign sovereign did not apply to its
This Court concludes that the “notwithstanding any other provision of law” language in TRIA operates as an exception to immunity from both jurisdiction and execution. In Alejandre the Eleventh Circuit observed that the “notwithstanding any other provision of law” provision of § 1610(f)(1)(A) could persuasively be read to be an exception to immunity, as well as functioning to remove a CACR license requirement for garnishing assets, but did not decide the issue. See Alejandre, 183 F.3d at 1287 n.23.26 Here, the Court finds that it makes sense to interpret § 201(a) of TRIA to indeed provide such an exception to immunity. First, TRIA is codified as a
Consistent with this Court‘s interpretation, other courts examining the scope of TRIA § 201(a) have concluded that the “notwithstanding any other provision of law” language specifically addresses immunity. See United States v. Holy Land Found. For Relief & Dev., 445 F.3d 771, 787 (5th Cir. 2006)
3. Subject Matter Jurisdiction through Ancillary Jurisdiction
As set forth above, because TRIA § 201(a) provides an exception to immunity from execution, this Court has subject matter jurisdiction over this action. Alternatively, at least with respect to the judgment debtors, this Court has subject
The Second Circuit has held that a foreign instrumentality‘s waiver of sovereign immunity “continues through post-judgment discovery and collection of the money judgment,” and thus “where subject matter jurisdiction under the FSIA exists to decide a case, jurisdiction continues long enough to allow proceedings in aid of any money judgment that is rendered in the case.” First City, Texas-Houston, N.A. v. Rafidain Bank, 281 F.3d 48, 52, 53-54 (2d Cir. 2002), cert. denied, 537 U.S. 813 (2002). Recently, another federal district court, in a proceeding to enforce a judgment by attaching property purportedly belonging to Iran, a foreign sovereign, chose this approach to finding subject matter jurisdiction over the enforcement proceeding. Faced with arguments by the trustees holding the property similar to those raised by the garnishee and amicus here, the court noted that “[t]o the extent that the trustee process defendants rely on Verlinden to argue that § 1609 is best construed as raising a threshold question of subject matter jurisdiction, it is largely irrelevant here, where the Court plainly has jurisdiction pursuant to
Following this analysis, the Court here has subject matter jurisdiction over both the Weininger and McCarthy enforcement actions through ancillary jurisdiction to enforce the judgment, at least as to Cuba. With regard to the Weininger judgment, on December 13, 2005, this Court entered an order and judgment in favor of Weininger. Accordingly, this Court has subject matter jurisdiction over this enforcement proceeding through ancillary jurisdiction to enforce a judgment. With regard to the McCarthy judgment, McCarthy obtained a federal judgment in the United States District Court for the Southern District of Florida, in an action on the state judgment, and on May 25, 2005 registered her federal judgment with this Court pursuant to
Of course, this proceeding involves attempts to execute on the assets of entities not named in the original judgment. Rubin did not involve an attempt to enforce a judgment against a foreign state by attaching the assets of an agency or instrumentality. The Court recognizes that the Supreme Court has stated that “[w]e have never authorized the exercise of ancillary jurisdiction in a subsequent lawsuit to impose an obligation to pay an existing federal judgment on a person not already liable for that judgment.” Peacock v. Thomas, 516 U.S. 349, 357 (1996). As aptly stated by the First Circuit:
Where a postjudgment proceeding presents an attempt simply to collect a judgment duly rendered by a federal court, even if chasing after the assets of the judgment debtor now in the hands of a third party, the residual jurisdiction stemming from the court‘s authority to render that judgment is sufficient to provide for federal jurisdiction over the postjudgment claim. However, where that postjudgment proceeding presents a new substantive theory to establish liability directly on the part of a new party, some independent ground is necessary to assume
federal jurisdiction over the claim, since such a claim is no longer a mere continuation of the original action.
U.S.I. Props., 230 F.3d 489, 498 (1st Cir. 2000) (citations omitted). Here, however, TRIA expressly holds such entities liable for the judgment and renders them not immune from execution, and thus provides the independent basis of subject matter jurisdiction in this enforcement proceeding against these entities.
4. Personal Jurisdiction
The Court also finds no defect of personal jurisdiction here. Preliminarily, the Court observes that the entities against which the judgments are sought to be enforced have not challenged personal jurisdiction. However, these entities have not waived personal jurisdiction but instead have defaulted entirely. Several circuits have held that because relief from a void judgment is mandatory, “when entry of a default judgment is sought against a party who has failed to plead or otherwise defend, the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties. In reviewing its personal jurisdiction, the court does not assert a personal defense of the parties; rather, the court exercises its responsibility to determine that it has the power to enter the default judgment.” Williams v. Life Sav. & Loan, 802 F.2d 1200, 1203 (10th Cir. 1986); see also System Pipe & Supply, Inc. v. M/V Viktor Kurnatovskiy, 242 F.3d 322, 324 (5th Cir. 2001)
In light of these concerns, and the FSIA‘s requirement that “[n]o judgment by default shall be entered by a court of the United States ... against a foreign state, a political subdivision thereof, or an agency or instrumentality of a foreign state, unless the claimant establishes his claim or right to relief by evidence satisfactory to the court,”
JPM Chase asserts that “this Court must determine that it has personal jurisdiction over parties whose assets are sought to be attached, i.e., that those parties have been properly served in accordance with
In response, Plaintiffs contend that the FSIA does not
In support of their arguments, Plaintiffs rely solely on RCA Corp. v. Tucker, which noted that under the New York CPLR, in turnover proceedings against a garnishee, the judgment debtor is not a necessary party but must merely be given notice. See 696 F. Supp. at 850. RCA Corp., however, did not involve a foreign sovereign and did not involve the FSIA. Rule 69 authorizes the use of state law enforcement procedures to the extent that they do not conflict with federal law. See
On the other hand, Plaintiffs’ position is not wholly without merit. Section 1330(b)‘s provisions for personal jurisdiction turn on § 1330(a)‘s provisions for subject matter jurisdiction, which in turn are grounded on the statutory exceptions to immunity from jurisdiction found in §§ 1605-1607, not the statutory exceptions to immunity from execution and attachment found in §§ 1610-1611. See
Nonetheless, the personal jurisdiction concern may be academic, because in the case at hand the alleged agencies and instrumentalities in question have been served by JPM Chase in accordance with the FSIA. JPM Chase has submitted evidence demonstrating that it effected FSIA service pursuant to § 1608(b)(3)(B) upon the agencies and instrumentalities affected by these proceedings, and service as well upon the judgment debtors. Indeed, JPM Chase relies on such service to
Section § 1608(b)(3)(B) provides that if service cannot be made pursuant to § 1608(b)(1) (by special arrangement between the plaintiff and agency or instrumentality), or § 1608(b)(2) (by delivery to an agent authorized to receive process in the United States or in accordance with international conventions on service of judicial documents), then service can be made upon an agency or instrumentality of a foreign state by delivering a copy of the summons and complaint, together with a translation of each into the official language of the foreign state, “by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the agency or instrumentality to be served,” provided that such service is “reasonably calculated to give actual notice.”
As to service on Cuba, Weininger has submitted an
Therefore, to the extent that the Court msut find personal jurisdiction over these entities pursuant to the FSIA by service pursuant to § 1608, the Court is satisfied that such personal jurisdiction exists.29
Finally, this Court addresses whether the blocked assets in question indeed belong to agencies or instrumentalities of Cuba. In addition, although Plaintiffs no longer seek turnover from accounts in which Banco Nacional is listed as an owner, JPM Chase has indicated that Banco Nacional may own assets in the other accounts at issue, and Plaintiffs seek turnover of any such amounts allegedly belonging to Banco Nacional. Thus, in connection with blocked assets belonging to Banco Nacional, this Court addresses whether § 1611 is a bar to attachment.
According to JPM Chase, none of the blocked accounts are in the name of any Judgment Debtor, including the Republic of Cuba. (See Third-Party Petition of JPMorgan Chase Bank, N.A. under Fed. R. Civ. P. 22, CPLR §§ 5239 & 6221 and Section 134 of the New York Banking Law, dated Sept. 8, 2005 (“JPM Chase Petition“), ¶ 1; Kerr Decl. ¶ 4; JPM Chase Garnishee
any entity–
(1) which is a separate legal person, corporate or otherwise, and
(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and
(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (e) of this title, nor created under the laws of any third country.
i. The EMTELCUBA Account
According to Plaintiffs, the funds in the EMTELCUBA Account consist of settlement payments owed by AT&T to EMTELCUBA, and no other party has any known claim to these funds. (See R. 56.1 Statement ¶ 48 (citing Answer and Defenses of AT&T Corp. to Third-Party Petition in Interpleader of JPMorgan Chase Bank, N.A., dated Oct. 28, 2005 (“AT&T Answer“), ¶ 30.)) JPM Chase has not contested this statement. AT&T admits that it deposited funds in the EMTELCUBA Account that represent settlement payments owed to EMTELCUBA. (AT&T Answer ¶ 30.)
The Eleventh Circuit did not find that EMTELCUBA was indeed an alter ego of the Republic of Cuba or the Cuban Government‘s Ministry of Communications. Rather, it merely assumed such point for purposes of analyzing whether another entity that succeeded to EMTELCUBA‘s contracts was an agency or instrumentality of Cuba and liable for Cuba‘s debts. See Alejandre, 183 F.3d at 1280 n.7 (“In order to facilitate our analysis of this case, we assume arguendo that EMTELCUBA is not a juridical entity separate from the Cuban Government‘s Ministry of Communications.“). However, the Circuit Court noted that the record strongly supported such characterization.30
In addition, Plaintiffs have submitted a letter dated October 10, 2000, from the Executive Office of the President, which indicates that for payment to Cuba judgment creditors in the Alejandre case made under another statute, the Department of the Treasury intended to draw in part on the EMTELCUBA account, as well as portions of the AT&T Long Lines Account believed to represent amounts due to EMTELCUBA. (See Letter from Jacob J. Lew, Director, Executive Office of the President, Office of Management and Budget, to The Honorable Connie Mack, United States Senate, dated October 10, 2000
In assessing whether these entities are agencies or instrumentalities of Cuba, the Court is “mindful that the instrumentality and its related government -- not the plaintiff -- will frequently possess most of the information needed to [make this determination]. These foreign entities obviously have little incentive to provide information that will help the plaintiff‘s case, and it may be difficult for the plaintiff to obtain discovery from them.” Alejandre, 183 F.3d at 1285 n.19. The Eleventh Circuit‘s words were addressed to analyzing whether an agency should be considered juridically separate from the foreign state, but the same reasoning holds true for assessing whether an entity is an agency or instrumentality of a foreign state. Moreover, following a default all factual allegations in the complaint other than those related to damages are accepted as true. See Cotton v. Sloane, 4 F.3d 176, 181 (2d Cir. 1993); Alejandre v. Republic of Cuba, 996 F. Supp. 1239, 1243 (S.D. Fla. 1997) (“Because Cuba has presented no defense, the Court will accept as true Plaintiffs’ uncontroverted factual allegations.“). In
JPM Chase has indicated that RADIOCUBA may also have an interest in this account and has attempted to bring RADIOCUBA before this Court. According to papers filed in the Alejandre case and relied on by Plaintiffs, in 1995, EMTELCUBA was dissolved and its assets transferred to RADIOCUBA. (See RADIOCUBA/EMTELCUBA Brief at 4.) In addition, according to these papers, RADIOCUBA also comes within the definition of an “agency or instrumentality” in that more than 50 percent of its ownership interests are owned by the Republic of Cuba. (Id.) In light of the absence of evidence to the contrary, this Court finds that to the extent these same blocked assets belong to RADIOCUBA, Plaintiffs may execute upon them.
Finally, JPM Chase has indicated that ETECSA may have succeeded to certain contractual rights of EMTELCUBA or RADIOCUBA, including claims to the blocked deposits. JPM Chase suggests that ETECSA is an indirect subsidiary of a foreign state, in that it is owned by several Cuban companies
ii. The AT&T Long Lines Account
According to Plaintiffs, the funds in the AT&T Long Lines
As indicated above, there is sufficient evidence in the record of this default proceeding to conclude that EMTELCUBA is an agency or instrumentality of Cuba. Accordingly, Plaintiffs may execute upon amounts owed to both the Republic of Cuba and to EMTELCUBA.
iii. The Rabinowitz Boudin Account
Plaintiffs assert that Rabinowitz Boudin is holding money in the Rabinowitz Boudin account on behalf of or in trust for the judgment debtors and/or their agencies or instrumentalities. JPM Chase‘s third-party petition for interpleader relief names Rabinowitz Boudin in its capacity as alleged fiduciary in respect of this account. Rabinowitz
According to Plaintiffs, the funds in the Rabinowitz Boudin Account are held by Rabinowitz Boudin as trustee for the account of the Republic of Cuba and its agencies and instrumentalities, including but not limited to Banco Nacional. (See R.56.1 Statement ¶ 51.) Plaintiffs have submitted documentation submitted in the Alejandre litigation consisting of (a) an affidavit by a Rabinowitz Boudin attorney indicating that the account is a fiduciary account maintained by the firm for deposit of litigation recoveries and that funds in the account consist of litigation recoveries owed to Banco Nacional, other Cuban juridical entities owned or controlled by Cuba, and the Republic of Cuba and other Cuban parties, except for approximately $20,000 in the account in 1963 when the Cuban Assets Control Regulations were promulgated; (b) an affidavit by an accountant retained by Rabinowitz Boudin indicating that the funds in such account in large part consist of recoveries owed to Banco Nacional, with some portion of these recoveries potentially owed to CUBAEXPORT; and (c) an affidavit from the Secretary and principal counsel of Banco Nacional indicating that the recovered funds in such account are owned by Banco Nacional and not CUBAEXPORT. (See Perkins Decl. Exs. Q, R, S
JPM Chase has named Rabinowitz Boudin in its capacity as alleged fiduciary in respect of this account, and contends that Rabinowitz Boudin has opened this account as an attorney trust account. (See JPM Chase Petition ¶¶ 18, 25.)
JPM Chase, relying on the same submissions made in the Alejandre case, agrees that Banco Nacional is the beneficial owner of most of the funds in the Rabinowitz Boudin Account and also notes based on these submissions that CUBAEXPORT, described as a Cuban state trading corporation, may also have an interest in some portion of the Rabinowitz Boudin Account. (See Kerr Decl. ¶ 18(b),(c).) However, JPM Chase also contends that Rabinowitz Boudin, as an alleged fiduciary in respect of this account, is the party in the best position to identify on whose behalf it holds funds in that account. (See JPM Chase Petition ¶ 28.)
The Court also takes note that the October 2000 letter from the Executive Office of the President indicates that for payment to the Cuba judgment creditors in the Alejandre case, the Department of the Treasury also intended to draw on the Rabinowitz Boudin Account. (See Exec. Ltr.)
Banco Nacional is apparently the central bank of the Republic of Cuba. (See R. 56.1 Statement ¶ 50.) JPM Chase
On this record, the Court is persuaded that to the extent the funds in the Rabinowitz Account belong to Banco Nacional or to CUBAEXPORT, they belong to agencies or instrumentalities of Cuba and Plaintiffs may execute upon them to satisfy their judgment against Cuba.
Notwithstanding the provisions of section 1610 of this chapter, the property of a foreign state shall be immune from attachment and from execution, if–
(1) the property is that of a foreign central bank or monetary authority held for its own account, unless such bank or authority, or its parent foreign government, has explicitly waived its immunity from attachment in aid of execution, or from execution, notwithstanding any withdrawal of the waiver which the bank, authority or government may purport to effect except in accordance with the terms of the waiver; or
(2) the property is, or is intended to be, used in connection with a military activity and
(A) is of a military character, or
(B) is under the control of a military authority or defense agency.
C. TURNOVER PURSUANT TO CPLR § 5225(b)
Upon a special proceeding commenced by the judgment creditor, against a person in possession or custody of money or other personal property in which the judgment debtor has an interest, or against a person who is a transferee of money or other personal property from the judgment debtor, where it is shown that the judgment debtor is entitled to the possession of such property or that the judgment creditor‘s rights to the property are superior to those of the transferee, the court shall require such person to pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor and, if the amount to be so paid is insufficient to satisfy the judgment, to deliver any other personal property, or so much of it as is of sufficient value to satisfy the judgment, to a designated sheriff. Costs of the proceeding shall not be awarded against a person who did not dispute the judgment debtor‘s interest or right to possession. Notice of the proceeding shall also be
served upon the judgment debtor in the same manner as a summons or by registered or certified mail, return receipt requested. The court may permit the judgment debtor to intervene in the proceeding. The court may permit any adverse claimant to intervene in the proceeding and may determine his rights in accordance with section 5239.
Here, JPM Chase and Rabinowitz Boudin are each “a person in possession or custody of money or other personal property” in which the evidence has demonstrated the judgment debtors have an interest. One of the named judgment debtors is Cuba; by operation of TRIA, Cuba‘s agencies and instrumentalities also become the judgment debtors, and as set forth above, the evidence has demonstrated that these agencies and instrumentalities have an interest in the accounts. In addition, some evidence indicates that Cuba itself has an interest in the property -- namely, in the AT&T Long Lines Account, CATT has indicated that some deposits in that account consist of amounts owed by CATT to the Republic of Cuba. The judgment debtors are “entitled to possession of such property” except for the blocked nature of the accounts. However, the U.S. Department of Justice has indicated that “[i]n the event the Court determines that the funds are subject to TRIA, the funds may be distributed without a license from the Office of Foreign Assets Control.” (DOJ Ltr.) Accordingly, under CPLR § 5525(b) such property may be used to satisfy Plaintiffs’
D. JPM CHASE‘S MOTION FOR INTERPLEADER RELIEF
1. Interpleader Relief
JPM Chase has moved for discharge in interpleader pursuant to
In relevant part,
“Rooted in equity, interpleader is a handy tool to protect a stakeholder from multiple liability and the vexation of defending multiple claims to the same fund.” Washington Elec. Coop., Inc. v. Paterson, Walke & Pratt, P.C., 985 F.2d 677, 679 (2d Cir. 1993). “[W]hat triggers interpleader is ‘a real and reasonable fear of double liability or vexatious, conflicting claims.‘” Id. (quoting Indianapolis Colts v. Mayor of Baltimore, 741 F.2d 954, 957 (7th Cir. 1984), cert.
Interpleader “prevents the stakeholder from being obliged to determine at his peril which claimant has the better claim, and when the stakeholder has no interest in the fund, forces the claimants to contest what essentially is a controversy between them without embroiling the stakeholder in the litigation over the merits of the respective claims.” 7 Wright, Miller & Kane, Federal Practice and Procedure § 1702 at 534 (3d ed. 2001). Thus,
Interpleader litigation usually proceeds in two stages, the first determining whether interpleader is appropriate relief, and the second adjudicating the adverse claims. See
As indicated,
JPM Chase has identified a number of parties, in addition to Weininger and McCarthy, as having viable claims to the blocked assets. JPM Chase has alleged, upon information and belief, that the funds in the EMTELCUBA Account consist of payments made by AT&T to EMTELCUBA. (See JPM Chase Petition, ¶ 30.) AT&T admits that the funds it deposited into that account represented payments owed by AT&T to EMTELCUBA. (See AT&T Answer, ¶ 30.) As discussed above, RADIOCUBA may also have an interest in the EMTELCUBA Account, to the extent that it succeeded to the assets of EMTELCUBA.
According to JPM Chase, AT&T established the AT&T Long Lines Account to deposit monies it owed to Cuban entities, including CATT, EMTELCUBA, RADIOCUBA and possibly ETECSA. (See JPM Chase Petition, ¶ 33.) AT&T has stated that these funds were deposited by AT&T in satisfaction of amounts owed by CATT to EMTELCUBA, amounts owed by CATT to the Republic of Cuba, and amounts owed by AT&T to CATT, its wholly-owned subsidiary. (See AT&T Answer, ¶ 33.) Pursuant to an agreement with AT&T and CATT, Plaintiffs have agreed not to seek turnover of amounts owed by AT&T to CATT, on the basis that such funds are not the property of the Republic of Cuba or its agents or instrumentalities.
Finally, with respect to the Rabinowitz Boudin Account,
In light of these allegations, the Court finds that JPM Chase faces a reasonable fear of double liability or conflicting claims, and that relief by way of interpleader is warranted with respect to the EMTELCUBA Account, the AT&T Long Lines Account, and the Rabinowitz Boudin Account, with the exception of the portion of the AT&T Long Lines Accounts to which Plaintiffs have voluntarily excluded from their claims (approximately $6,332.843.49 as of September 30, 2005, plus any additional interest accruing thereon from September 30, 2005 up to the date of turnover to Plaintiffs). (See Stipulation of Agreement and Order Concerning Certain Funds in the Blocked Accounts, filed April 10, 2006 (Docket No. 152).)
2. Attorney‘s Fees and Costs
JPM Chase has also requested reasonable costs, expenses, and attorney‘s fees in an amount to be specified in an application submitted under
The Court notes, however, that JPM Chase‘s lititation strategy, to the extent that it advocated a position agianst Plaintiffs, went beyond that of a typical disinterested stakeholder, whose legal expenses are associated merely with its efforts to secure interpleader. See 7 Wright, Miller & Kane, Federal Practice and Procedure § 1719 at 686-87 (3d ed. 2001) (“In the usual case the [attorney‘s] fee will be relatively modest, inasmuch as all that is necessary is the preparation of a petition, the deposit in court or posting of a bond, service on the claimants, and the preparation of an order discharging the stakeholder.“). To this extent, JPM
Attorney‘s fees and costs “are generally awarded against the interpleader fund, but may, in the discretion of the court, be taxed against one of the parties when their conduct justifies it.” Septembertide, 884 F.2d at 683. In this case, no claimant has exhibited behavior justifying such a decision by the Court, and therefore JPM Chase‘s attorney‘s fees and costs will be awarded against the interpleader fund, to be divided between the claimants on a pro rata basis.
IV. ORDER
For the reasons set forth above, it is hereby
ORDERED that the motions (Docket Nos. 122 and 124) for partial summary judgment on claims for turnover order of plaintiffs Janet Ray Weininger (“Weininger“) and Dorothy Anderson McCarthy (“McCarthy“) are GRANTED; and it is further
ORDERED that the cross motion (Docket No. 143) for relief in the nature of interpleader of JPMorgan Chase Bank, N.A. (“JPM Chase“) is GRANTED; and it is further
ORDERED that judgment be entered in favor of Weininger and against JPM Chase and Rabinowitz, Boudin, Standard, Krinsky & Lieberman, P.C. (“Rabinowitz Boudin“), in their capacities as garnishees, directing JPM Chase and Rabinowitz Boudin to turn over to the United States Marshal, the entire
ORDERED that judgment be entered in favor of McCarthy and against JPM Chase and Rabinowitz Boudin, in their capacities as garnishees, directing JPM Chase and Rabinowitz Boudin to turn over to the United States Marshal, the entire remaining balance of the following accounts: (1) AT&T Long Lines (Account No. G00875) (less the portion of this account that Plaintiffs have voluntarily excluded from their claims -- approximately $6,332.843.49 as of September 30, 2005, plus any additional interest accruing thereon from September 30, 2005),
ORDERED that within five (5) business days of service of this Order, JPM Chase turn over the funds specified above to the Marshal; and it is further
ORDERED that within fourteen (14) days of service of this Order, JPM Chase submit a detailed accounting of its attorney‘s fees and costs in an application to the Court pursuant to
ORDERED that Weininger and McCarthy may respond to such application within ten (10) days of its filing, unless within such time the parties stipulate to an amount of attorney‘s fees and costs for the Court‘s endorsement; and it is further
ORDERED that within five (5) business days of service of an order by the Court ruling on JPM Chase‘s application for
ORDERED that, upon compliance with this Order, garnishee/respondent/third-party petitioner JPM Chase and garnishee/respondent Rabinowitz Boudin shall be fully discharged pursuant to
The Clerk of Court is directed to close this case, subject to its being reopened for the purpose of considering any application for reasonable attorney‘s fees and costs as provided herein.
Dated: New York, New York
17 November 2006
VICTOR MARRERO
U.S.D.J.
Notes
Applying these principles, the Supreme Court concluded that Bancec could be held liable, because Bancec’s claim against which Citibank sought a setoff had devolved into the hands of the Cuban government, the Cuban government would be the only beneficiary of any recovery, and Bancec itself had filed a claim against Citibank. Under such circumstances, giving effect to Bancec’s separate juridical status “would permit the real beneficiary of such an action, [] Cuba, to obtain relief in our courts that it could not obtain in its own right without waiving its sovereign immunity and answering for the seizure of Citibank’s assets.” Id. at 631-32.