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Peterson v. Islamic Republic of Iran

United States District Court, District of Columbia

April 11, 2013

DEBORAH D. PETERSON, et al., Plaintiffs,
v.
ISLAMIC REPUBLIC OF IRAN, et al., Defendants

For ALAN L. BALARAN, Special Master: Alan Lee Balaran, LEAD ATTORNEY, LAW OFFICE OF ALAN L. BALARAN, Washington, DC.

For DEBORAH D. PETERSON, Personal Representative of the Estate of James C. Knipple (Deceased), Plaintiff: Allen Louis Rothenberg, LEAD ATTORNEY, Philadelphia, PA; Anthony J. LaSpada, LEAD ATTORNEY, Tampa, FL; David J. Cook, LEAD ATTORNEY, PRO HAC VICE, COOK COLLECTION ATTORNEYS, P.L.C., San Francisco, CA; Ferris Ridgely Bond, LEAD ATTORNEY, FERRIS RIDGELY BOND, BOND & NORMAN, Washington, DC; Jane Carol Norman, LEAD ATTORNEY, BOND & NORMAN, PLLC, Washington, DC; Joseph Peter Drennan, LEAD ATTORNEY, JOSEPH PETER DRENNAN, ATTORNEY-AT-LAW, Alexandria, VA; Kay M. Clarke, LEAD ATTORNEY, San Diego, CA; Robert Peter Feeney, LEAD ATTORNEY, ROBERT P. FEENEY, ESQUIRE, Gaithersburg, MD; Thomas Fortune Fay, LEAD ATTORNEY, Annie P. Kaplan, William Coleman Dowden, III, FAY KAPLAN LAW, PA, Washington, DC; Jamie Elizabeth Knight, PRO HAC VICE, Washington, DC.

For JAMES ABBOTT, Personal Representative of the Estate of Terry Abbott (Deceased), ROBERT B. ALLMAN, Personal Representative of the Estate of John Robert Allman (Deceased), THOMAS C. BATES, SR., Personal Representative of the Estate of Ronny Bates (Deceased), THOMASINE BAYNARD, Personal Representative of the Estate of James Baynard (Deceased), PATRICIA CALLOWAY, Personal Representative of the Estate of Jess Beamon (Deceased), LUDDIE BELMER, Personal Representative of the Estate of Alvin Belmer (Deceased), EDNA BOHANNON, Personal Representative of the Estate of Leon Bohannon, CATHERINE BONK, Personal Representative of the Estate of John Bonk, Jr., AVENELL CALLAHAN, Personal Representative of the Estate of Paul Lynn Callahan, BILLIE JEAN BOLINGER, Personal Representative of the Estate of Mecot Camara, CLARE CAMPUS, Personal Representative of the Estate of Bradley Campus, ROBBIE CEASAR, Personal Representative of the Estate of Johnnie D. Ceasar, JAMES N. CONLEY, Personal Representative of the Estate of Robert Allen Conley, BETTY COPELAND, Personal Representative of the Estate of Johnny Len Copeland, LORRAINE MARY COULMAN, Personal Representative of the Estate of Kevin Coulman, HAROLD L. COSNER, Personal Representative of the Estate of David Cosner, HEIDI LEGAULT, Personal Representative of the Estate of Rick Robert Crudale, MARY M. MASON, Personal Representative of the Estate of Russell E. Cyzick, B. CHRISTINE DEVLIN, Personal Representative of the Estate of Michael J. Devlin, EARLINE MILLER, Personal Representative of the Estate of Nathaniel G. Dorsey, MICHAEL ROBERT DUNNIGAN, Personal Representative of the Estate of Timothy J. Dunnigan, LEONA MAE VARGAS, Personal Representative of the Estate of Bryan L. Earle, BARBARA ESTES, Personal Representative of the Estate of Danny R. Estes, MARILOU C. FLUEGEL, Personal Representative of the Estate of Richard A. Fluegel, RUBY A. FULCHER, Personal Representative of the Estate of Michael D. Fulcher, BARBARA GALLAGHER, Personal Representative of the Estate of Sean Gallagher, JULIANA RUDKOWSKI, Personal Represenative of the Estate of George Ganger, JESS GARCIA, Personal Representative of the Estate of Randall J. Garcia, LEROY GHUMM, Personal Representative of the Estate of Harold D. Ghumm, VALERIE GIBLIN, Personal Representative of the Estate of Timothy Giblin, JUDY A. GORCHINSKI, Personal Representative of the Estate of Michael Gorchinski, ALICE GORDON, Personal Representative of the Estate of Richard Gordon, JULIA HAIRSTON, Personal Representative of the Estate of Thomas Hairston, RICHARD HASKELL, Personal Representative of the Estate of Michael S. Haskell, MARY ANN TUREK, Personal Representative of the Estate of Mark A. Helms, DORIS P. HESTER, Personal Representative of the Estate of Stanley Hester, HENRY HUKILL, JR., Personal Representative of the Estate of Maurice Hukill, ELIZABETH IACOVINO, Personal Representative of the Estate of Edward Iacovino, Jr., JOHN J. JACKOWSKI, SR., Personal Representative of the Estate of James Jackowski, ELAINE M. JAMES, Personal Representative of the Estate of Jeffrey James, NATHALIE C. JENKINS, Personal Representative of the Estate of Nathaniel Jenkins, MARY L. BUCKNER, Personal Representative of the Estate of Edward Johnston, OLLIE JONES, Personal Representative of the Estate of Steven Jones, MARY A. COBBLE, Personal Representative of the Estate of Thomas C. Keown, SHIRLEY MARTIN, Personal Representative of the Estate of Daniel Kluck, FREAS KREISCHER, JR., Personal Representative of the Estate of Freas Kreischer, III, WILLIAM LAISE, Personal Representative of the Estate of Keith Laise, JOYCE HOUSTON, Personal Representative of the Estate of Michael S. LaRiviere, CHERYL A. COSSABOOM, Personal Representative of the Estate of Steven B. LaRiviere, MARLYS LEMNAH, Personal Representative of the Estate of Richard Lemnah, ANNETTE LIVINGSTON, Personal Representative of the Estate of Joseph Livingston, III, Plaintiffs: Allen Louis Rothenberg, LEAD ATTORNEY, Philadelphia, PA; Anthony J. LaSpada, LEAD ATTORNEY, Tampa, FL; David J. Cook, LEAD ATTORNEY, PRO HAC VICE, COOK COLLECTION ATTORNEYS, P.L.C., San Francisco, CA; Ferris Ridgely Bond, LEAD ATTORNEY, FERRIS RIDGELY BOND, BOND & NORMAN, Washington, DC; Jane Carol Norman, LEAD ATTORNEY, BOND & NORMAN, PLLC, Washington, DC; Joseph Peter Drennan, LEAD ATTORNEY, JOSEPH PETER DRENNAN, ATTORNEY-AT-LAW, Alexandria, VA; Kay M. Clarke, LEAD ATTORNEY, San Diego, CA; Robert Peter Feeney, LEAD ATTORNEY, ROBERT P. FEENEY, ESQUIRE, Gaithersburg, MD; Thomas Fortune Fay, LEAD ATTORNEY, FAY KAPLAN LAW, PA, Washington, DC; Jamie Elizabeth Knight, PRO HAC VICE, Washington, DC.

For ALL PLAINTIFFS, Plaintiff: Allen Louis Rothenberg, LEAD ATTORNEY, Philadelphia, PA; Anthony J. LaSpada, LEAD ATTORNEY, Tampa, FL; Ferris Ridgely Bond, LEAD ATTORNEY, FERRIS RIDGELY BOND, BOND & NORMAN, Washington, DC; Jane Carol Norman, LEAD ATTORNEY, BOND & NORMAN, PLLC, Washington, DC; Joseph Peter Drennan, LEAD ATTORNEY, JOSEPH PETER DRENNAN, ATTORNEY-AT-LAW, Alexandria, VA; Kay M. Clarke, LEAD ATTORNEY, San Diego, CA; Robert Peter Feeney, LEAD ATTORNEY, ROBERT P. FEENEY, ESQUIRE, Gaithersburg, MD; Steven R. Perles, LEAD ATTORNEY, PERLES LAW FIRM, P.C., Washington, DC; Thomas Fortune Fay, LEAD ATTORNEY, FAY KAPLAN LAW, PA, Washington, DC; David J. Cook, PRO HAC VICE, COOK COLLECTION ATTORNEYS, P.L.C., San Francisco, CA; Tuna Mecit, Washington, DC; Jamie Elizabeth Knight, PRO HAC VICE, Washington, DC.

For DEBRA HORNER, Personal Representative of the Estate of Ridchard Blankenship (Deceased), JOHN R. BLOCKER, Personal Representative of the Estate of John W. Blocker, JOSEPH BOCCIA, SR., Personal Representative of the Estate of Joseph J. Boccia, Jr., THOMAS FLUEGEL, Personal Representative of the Estate of Richar A. Fluegel, PATRICIA WRIGHT, Personal Representative of the Estate of David Green, JEFFREY HASKELL, Personal Representative of the Estate of Michael S. Haskell, PATRICIA LEE HOLBERTON, Personal Representative of the Estate of Richard H. Holberton, LISA HUDSON, Personal Representative of the Estate of Dr. John R. Hudson, JAMES J. LANGON, SR., Personal Representative of the Estate of James J. Langon, CHARLES F. COOK, Personal Representative of the Estate of Charles Dennis Cook, Plaintiffs: David J. Cook, LEAD ATTORNEY, PRO HAC VICE, COOK COLLECTION ATTORNEYS, P.L.C., San Francisco, CA; Steven R. Perles, LEAD ATTORNEY, PERLES LAW FIRM, P.C., Washington, DC; Thomas Fortune Fay, LEAD ATTORNEY, FAY KAPLAN LAW, PA, Washington, DC; Jamie Elizabeth Knight, Washington, DC.

For CYNTHIA D. LAKE, Personal Representative of the Estate of Donald Hildreth, Plaintiff: David J. Cook, LEAD ATTORNEY, PRO HAC VICE, COOK COLLECTION ATTORNEYS, P.L.C., San Francisco, CA; Steven R. Perles, LEAD ATTORNEY, PERLES LAW FIRM, P.C., Washington, DC; Thomas Fortune Fay, LEAD ATTORNEY, FAY KAPLAN LAW, PA, Washington, DC.

For ILA WALLACE, Personal Representative of the Estate of Stephen E. Spencer, Plaintiff: David J. Cook, LEAD ATTORNEY, PRO HAC VICE, COOK COLLECTION ATTORNEYS, P.L.C., San Francisco, CA; Thomas Fortune Fay, LEAD ATTORNEY, FAY KAPLAN LAW, PA, Washington, DC; Jamie Elizabeth Knight, Washington, DC.

For OFFICE OF FOREIGN ASSETS CONTROL, Interested Party: Rupa Bhattacharyya, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, CIVIL DIVISION, Washington, DC.

For UNITED STATES OF AMERICA, Interested Party: Eric R. Womack, Jacqueline E. Coleman Snead, LEAD ATTORNEYS, U.S. DEPARTMENT OF JUSTICE, Civil Division, Washington, DC; Heather R. Phillips, LEAD ATTORNEY, U.S. Department of Justice, Federal Programs Branch, Washington, DC; Scott Risner, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Washington, DC; Lynn Yuhee Lee, U.S. DEPARTMENT OF JUSTICE, Civil Division-Federal Programs Branch, Washington, DC; Varu Chilakamarri, U.S. DEPARTMENT OF JUSTICE, Washington, DC.

For CLEARSTREAM BANKING, S.A., Interested Party: Francis A. Vasquez, Jr, Frank Panopoulos, LEAD ATTORNEYS, WHITE & CASE LLP, Washington, DC.

For JAPAN BANK FOR INTERNATIONAL COOPERATION, Garnishee: James H. Hulme, LEAD ATTORNEY, ARENT FOX LLP, Washington, DC.

For WORLD BANK, Garnishee: Griffith L. Green, LEAD ATTORNEY, SIDLEY AUSTIN, LLP, Washington, DC.

For INTERNATIONAL FINANCE CORPORATION, Garnishee: Francis A. Vasquez, Jr, LEAD ATTORNEY, WHITE & CASE LLP, Washington, DC.

For MITSUBISHI INTERNATIONAL CORPORATION, Garnishee: Alex Young K. Oh, LEAD ATTORNEY, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP, Washington, DC.

For SIEMENS CORPORATION, Garnishee: Robert W. Littleton, LITTLETON JOYCE UGHETTA PARK & KELLY, LLP, New York, NY.

For CATERPILLAR, INC., Garnishee: Bradford A. Berenson, LEAD ATTORNEY, SIDLEY AUSTIN LLP, Washington, DC; Jamie Elizabeth Knight, Washington, DC.

For INTELSAT, S.A., INTERNATIONAL TELECOMMUNICATIONS SATELLITE ORGANIZATION, Garnishees: David I. Bledsoe, LEAD ATTORNEY, David I. Bledsoe, Esq., Sole Practitioner, Alexandria, VA.

For HSBC Bank USA, N.A., Garnishee: Bruce Edward Clark, LEAD ATTORNEY, Alexander J. Willscher, SULLIVAN & CROMWELL, LLP, New York, NY.

OPINION

Page 94

Royce C. Lamberth, Chief United States District Judge.

MEMORANDUM OPINION

Plaintiffs moved for sanctions against garnishee HSBC Bank USA, N.A. (" HBUS" ) in the amount of roughly $2.7 billion (plus interest) based on their failure to disclose three blocked electronic fund transfers (" EFTs" ) of less than $25,000 in total. Pls.' Sanctions Mot., ECF No. 485. Plaintiffs also moved to schedule discovery and oral argument. Pls.' Scheduling Mot., ECF No. 494. Because HBUS committed no sanctionable conduct, the Court will DENY both motions.

I. BACKGROUND

This case is the lead action arising from the 1983 bombing of the United States Marine Barracks in Beirut, Lebanon, and it contains nearly 1,000 plaintiffs.

Page 95

See In Re Islamic Republic of Iran Terrorism Litigation, 659 F.Supp.2d 31, 101 (D.D.C. 2009). This Court entered final judgment in 2007, awarding plaintiffs roughly $2.7 billion. Peterson v. Islamic Republic of Iran, 515 F.Supp.2d 25 (D.D.C. 2007).

In their efforts to collect on this award, plaintiffs served a Writ of Attachment on HBUS on April 30, 2008, which included the following two interrogatories:

1. Were you at the time of the service of the writ of attachment, or have you been between the time of such service and the filing of your answers to this interrogatory indebted to the defendant(s), and if so, how, and in what amount?
2. Had you at the time of the service of the writ of attachment, or have you had between the time of such service and the filing of your answer to this interrogatory, any goods, chattels, or credits of the defendant(s) in you [sic] possession or charge, and, if so, what?

Interrogatories in Attachment, ECF No. 493-1. HBUS answered " No" to both questions and returned the document to plaintiffs on May 6, 2008. Id.

In 2012, plaintiffs issued a new subpoena to HBUS, seeking, inter alia :

All documents and/or electronically stored information for the calendar years of 2008 through 2009 and pertaining to any and all financial transactions, communications concerning, payments to or from, accounts either controlled (directly or indirectly), or payable to the Islamic Republic of Iran or its known financial instrumentalities (i.e. Bank Melli, Bank Kshavari, Bank Markazi, Bank Sepah, Bank Tejarat, the Export Development Bank of Iran) or any other Iranian Financial Institution subject to U.S. Sanctions against the Islamic Republic of Iran.

Subpoena 4, ECF No. 485-39. In response, HBUS acknowledged several EFTs blocked pursuant to Office of Foreign Assets Control (" OFAC" ) regulations, including three before May 6, 2008 (the date HBUS responded to plaintiffs' initial interrogatories):

Recipient

Current Value[1]

Date Blocked

Bank Melli PLC, London

$21,060.22

Feb. 21, 2008

Bank Melli Iran/ Iranian Airport Co.

$2,713.05

Mar. 12, 2008

Bank Mellat, Tehran, Iran

$508.38

Mar. 24, 2008

HBUS's Resp. & Objections to Subpoena 3, ECF No. 485-40. An EFT " is nothing other than an instruction to transfer funds from one account to another." Estate of Heiser v. Islamic Republic of Iran, 885 F.Supp.2d 429, 438 (D.D.C. 2012) (quoting Shipping Corp. of India Ltd. V. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 60 n.1 (2d Cir. 2009)). HBUS explains:

Many international EFTs are denominated in U.S. dollars and are therefore routed through one or more 'intermediary banks' in the United States. The participants in such EFTs are (1) the originator, the person seeking to transfer funds to another person; (2) the originator's bank; (3) one or more intermediary banks; (4) the beneficiary's bank, where the beneficiary's account can be credited; and (5) the beneficiary, the party meant to receive the funds.

HBUS's Sanctions Opp'n 9. HBUS was an intermediary bank in the three transactions

Page 96

at issue. But these EFTs were blocked pursuant to OFAC regulations. Id. at 10; see also 31 C.F.R. pts. 544, 594. The originator bank's account at HBUS was debited, but, instead of passing along to the Iranian-affiliated beneficiary banks, the proceeds were placed in a blocked account at HBUS under OFAC's supervision.

II. LEGAL STANDARD

D.C. Code § 16-526(b) provides that " [w]hen the garnishee has failed to answer the interrogatories served on him, . . . judgment shall be entered against him for the whole amount of the plaintiff's claim, and costs, and execution may be had thereon."

III. ANALYSIS

Before reaching the main question, the Court notes the ambiguity in the D.C. Code section which gives plaintiffs the right to a judgment against a garnishee who " fail[s] to answer the interrogatories served on him." D.C. Code § 16-526(b). This provision's applicability to a garnishee who knowingly answers an interrogatory with false information is, on first glance, ambiguous. A literal reading of the provision might suggest that such a person has not " failed to answer," although they did so dishonestly. See HBUS's Sanctions Opp'n 10. Under this reading, however, the provision incentivizes garnishees to lie. This appears to be a rather unlikely result. However, the Court need not firmly resolve the question here. [2] As explained below, even if a " fail[ure] to answer" encompasses a garnishee's dishonest, incomplete, or misleading answer to an interrogatory, plaintiffs' motion would still fail.

HBUS's May 2008 statement that it was neither " indebted to" the defendants nor in possession of any " any goods, chattels, or credits of the defendants" will not support a motion for sanctions pursuant to D.C. Code § 16-526(b) because these were legally accurate statements.

Interpreting the legal significance of the terms of the interrogatory requires looking to plaintiffs' statutory authority for pursuing these assets in the first place. Section 201(a) of the Terrorism Risk Insurance Act (" TRIA" ), Pub. L. No. 107-297, 116 Stat. 2322 (2002), allows a person holding a judgment against a state sponsor of terrorism to attach and execute on " the blocked assets of that terrorist party." This provision allows plaintiffs to " execute on only the assets 'of' --or, in other words, 'belonging to'--the terrorist state committing the act." Heiser, 885 F.Supp.2d at 438. This provision " preempt[s] District of Columbia law." Id. at 444. However, the statute does not provide standards to determine which assets " belong to" defendants. To answer that question, the Court " looks to Restatements, legal treatises, and state decisional law to find and apply what are generally considered to be the well-established standards of state common law, a method of evaluation which mirrors--but is distinct from--the federal common law approach." Id. (quoting Estate of Doe v. Islamic Republic of Iran, 808 F.Supp.2d 1, 23 n.7 (D.D.C. 2011)) (internal quotations omitted). Relying on Article 4A of the UCC, this Court has concluded that a blocked

Page 97

EFT does not " belong to" the terrorist party who was the intended beneficiary of the transaction, and thus may not be executed on by judgment creditors under TRIA § 201. Heiser, 885 F.Supp.2d at 448; [3] see also Calderon-Cardona v. JPMorgan Chase Bank, N.A., 867 F.Supp.2d 389, 400-05 (S.D.N.Y. 2011) (Cote, J.). [4]

Under Heiser, defendants had no property interest in these blocked EFTs. Accordingly, HBUS's 2008 statements that it was not " indebted to" defendants and did not possess any of their " goods, chattels, or credits" were legally accurate, notwithstanding their failure to mention these blocked EFTs. These accurate statements cannot support plaintiffs' motion for sanctions. Because this motion for sanctions fails, the Court also rejects plaintiffs' motion to schedule discovery and oral argument.

IV. CONCLUSION

For the foregoing reasons, both of plaintiffs' motions are DENIED. An order shall issue with this opinion.


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