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In re Enforcement of Philippine Forfeiture Judgment Against All Assets of Arelma, S.A.

United States District Court, District of Columbia

July 15, 2019


          MEMORANDUM OPINION [DKT. NOS. 5, 15, 17, 22]


         Proposed intervenors Jose Duran ("Duran") and Jenna Roxas ("Roxas, ') seek to intervene as of right in this 28 U.S.C. § 2467 action brought by the United States to enforce a forfeiture judgment entered in the Philippines against $40 million in assets of a company, Arelma, S.A., once controlled by ex-Philippine president Roger Marcos ("the Arelma funds"). Duran represents a class of human rights victims ("the Duran Class" or "the Class") who have two judgments against the Marcos estate and who have fought for years to seize these Arelma funds in partial satisfaction of their judgments. Likewise, Roxas represents her father's estate ("Roxas estate") and the Golden Budha [sic] Corporation ("GBC"), which seek to seize the Arelma funds in satisfaction of their own judgments against the Marcos estate arising from Marcos's torture of Roxas's father and theft of a treasure he discovered. The Government does not oppose the Duran Class's motion to intervene, although it reserves the right to challenge the class's standing to raise certain arguments. The Government does, however, oppose Roxas's intervention.

         Additionally, Duran filed a motion to change venue to the Southern District of New York. The Government opposes this motion and would like the case to remain in the District of Columbia.

         The two motions to intervene and the motion to change venue are now fully briefed and ripe for review. Upon consideration of the parties' submissions and the entire record herein, I have concluded that Duran's motion to intervene must be GRANTED. In addition, Duran's motion to change venue is GRANTED. The Roxas motion to intervene, however, is DENIED without prejudice so that the judge assigned in the Southern District of New York can decide its virtue. Accordingly, this case is ordered transferred to the United States District Court for the Southern District of New York.


         Before delving into Duran's motions to intervene and change venue, a little background on the pot of money at issue in this case, the various parties jockeying to drain it, and how they have attempted to do so would seem appropriate.

         A. The Arelma Funds

         Writing for the Supreme Court, Justice Kennedy gave a succinct history of the funds that are at issue here:

In 1972, Ferdinand Marcos, then President of the Republic [of the Philippines], incorporated Arelma, S.A. (Arelma), under Panamanian law. Around the same time, Arelma opened a brokerage account with Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch) in New York, in which it deposited $2 million. As of the year 2000, the account had grown to approximately $35 million.
Alleged crimes and malfeasance by Marcos during his presidency became the subject of worldwide attention and protest. . . . After Marcos fled the Philippines in 1986, the [Philippine Presidential] Commission [on Good Governance] asked the Swiss Government for assistance in recovering assets-including shares in Arelma-that Marcos had moved to Switzerland. In compliance the Swiss Government froze certain assets and, in 1990, that freeze was upheld by the Swiss Federal Supreme Court. In 1991, the Commission asked the Sandiganbayan, a Philippine court of special jurisdiction over corruption cases, to declare forfeited to the Republic any property Marcos had obtained through misuse of his office. . . .
The Swiss assets were transferred to an escrow account set up by the Commission at the Philippine National Bank (PNB), pending the Sandiganbayan's decision as to their rightful owner. The Republic and the Commission requested that Merril Lynch follow the same course and transfer the Arelma assets to an escrow account at PNB. Merrill Lynch did not do so. Facing claims from various Marcos creditors . . . Merrill Lynch instead filed an interpleader action under 28 U.S.C. § 1335.

Republic of Philippines v. Pimentel, 553 U.S. 851, 857-59 (2008). The United States District Court for the District of Hawaii awarded the disputed Arelma funds to a class of victims of the Marcos regime in partial satisfaction of a judgment it previously entered in favor of the class. See Id. at 858-60. The Supreme Court ultimately overturned this award because the Republic of the Philippines ("the Republic") and the Commission- who claimed sovereign immunity and did not participate in the interpleader action-were necessary parties under Federal Rule of Civil Procedure 19(b). See Id. at 872.

         Thereafter, the Arelma funds were returned to Merrill Lynch. Swezey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 973 N.E.2d 703, 707 (N.Y. 2012). Two important things happened next. First, the class of human rights victims went to the New York state courts in an attempt to enforce the $2 billion class judgment against the Arelma funds in a state turnover proceeding. See Id. As part of this proceeding, Merrill Lynch transferred the Arelma funds to New York City's Commissioner of Finance pursuant to a court order. Id. at 707 n.5. (The parties agree that the New York City Department of Finance held the funds from 2010 until 2017, when they were transferred to the New York State Office of the State Comptroller, Office of Unclaimed Funds. [Dkt. #1] ¶ 4; [Dkt. #5] ¶ 4; [Dkt. #24-3]; [Dkt. #24-4] ¶ 3; [Dkt. #26] at 1.) "'Second, the Sandiganbayan ruled that the funds Marcos used to establish the Arelma account had been stolen from the Republic and that the company's assets had therefore been forfeited to the Republic." Swezey, 973 N.E.2d at 707.

         Like the U.S. Supreme Court, the New York Court of Appeals ultimately ruled that the Republic was a necessary party to the state turnover proceedings and ordered it dismissed without prejudice. Id. at 711. Undeterred, the human rights victims tried the New York courts again two years later, but the New York Supreme Court Appellate Division stayed the case pending an attempt by the Philippines to enforce the Sandiganbayan's judgment in the United States. Swezey v. Merrill Lynch, Pierce, Fenner & Smith Inc., 997 N.Y.S.2d 45, 46-47 (N.Y.App.Div. 2014). This action before me is that attempt.

         B. The Duran Class

         Jose Duran is a member and representative of a class of 9, 539 Filipino human rights victims who seek to intervene in this action. [Dkt. 5-2] ¶¶ 1-2. This is the same class of victims who were awarded a roughly $2 billion judgment against Ferdinand Marcos's estate in the District of Hawaii. See Hilao v. Estate of Marcos, 103 F.3d 767, 772, 787 (9th Cir. 1996); [Dkt. 5-2] ¶ 5. The class later secured a second judgment of over $350 million for civil contempt after the Marcos estate improperly disposed of estate assets. See In re Estate of Marcos Human Rights Litig., 496 Fed.Appx. 759, 760 (9th Cir.

         2012). As I explained above, the Duran Class has attempted to enforce its judgments against the Arelma funds both in Hawaii and in New York.[1] Crucially, after the Arelma Funds were transferred back to Merrill Lynch following the Supreme Court's 2008 decision in Pimentel, the Duran Class levied the funds in New York. [Dkt. 5-2] ¶ 20; [Dkt. 5-8] ¶ 2; [Dkt. 24-2] at 3.

         C. ...

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