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November 22, 2017
  Peterson v. Islamic Republic of Iran - Second Circuit
Headline: Second Circuit Remands Dismissal of Claims Against Foreign Banks for Review of Personal Jurisdiction in Case for Recovery on Judgment for Victims of Iranian-Sponsored Terrorism

Area of Law: Personal Jurisdiction

Issue(s) Presented:
Whether the trial court properly dismissed claims against non-sovereign third-party-defendant financial institutions allegedly holding assets of a foreign sovereign subject to execution?

Brief Summary: Plaintiffs-appellants are, or represent, persons who have been adjudicated in the United States District Court for the District of Columbia to be, victims of Iranian-sponsored terrorism. Plaintiffs-appellants obtained federal court judgments against the Islamic Republic of Iran ("Iran') and Iran's Ministry of Intelligence and Security ("MOIS") awarding the plaintiffs billions of dollars in compensatory damages pursuant to ยงยง 1605(a)(7) and 1605A of the Foreign Sovereign Immunities Act ("FSIA"). After registering their judgments with the United States District Court for the Southern District of New York, plaintiffs-appellants sought to enforce their judgments, in part, by compelling the turnover of approximately $1.68 billion in bond proceeds. Plaintiffs contended that the bond proceeds were owned by Bank Markazi ("Markazi"), Iran's central bank, and held by Clearstream Banking, S.A. ("Clearstream"), a Luxembourg bank, as cash in its correspondent account at JPMorgan Chase Bank, N.A. ("JPMorgan") in New York City.

Following oral argument, the district court declined to hold an evidentiary hearing on the dispute and found sufficient record evidence that the assets at issue were not held as cash in the United States but were recorded as a right to payment in Luxembourg. As a result of this finding, the district court dismissed JPMorgan from the lawsuit. Noting that the location of a plaintiffs' right to payment is determined by state law - in this case, New York law - the district court further found that the situs of this intangible property interest was Luxemberg, the location of the party, Clearstream, of whom performance would be required by the terms of the contract. As a result, the district court held that it lacked jurisdiction to order turnover because the asset at issue was recorded and held outside of the United States in Luxembourg, and thus was immune from execution under the FSIA.

On review as to the initial dismissing JPMorgan, the Second Circuit agreed, finding no abuse of discretion. As to whether jurisdiction existed over the right to payment located in Luxemberg, however, the Second Circuit found the district court's assumption to be reasonable but incorrect, concluding that a court sitting in New York may have authority to execute against property in another country if it has personal jurisdiction over a particular defendant. The Second Circuit reasoned that the FSIA's jurisdictional immunity applies only to a foreign state, which Clearstream is not, and the Act's grant of execution immunity seems to apply only to assets located in the United States, which the Luxembourg right to payment is not. Although the Second Circuit maintained that the FSIA provides the exclusive basis for obtaining subject matter jurisdiction over a foreign state, it nevertheless concluded that United States Supreme Court and New York Court of Appeals precedent may authorize a court sitting in New York with personal jurisdiction over a non-sovereign third party to recall to New York extraterritorial assets owned by a foreign sovereign.

Accordingly, the Second Circuit remanded to the district court to determine whether it has personal jurisdiction over Clearstream and, if it determines it does, to then determine if a barrier exists to exercising personal jurisdiction to recall to New York State the right to payment held by Clearstream in Luxembourg. Ultimately, the Second Circuit reasoned that if the asset is recalled and produced in New York, it would qualify as an asset in the United States of a foreign state and would either be afforded execution immunity or would be subject to execution-immunity exceptions.

The full opinion can be found at http://www.ca2.uscourts.gov/de...23bcc2e822d/1/hilite/.

Significance: This opinion provides a possible basis for district courts to require non-sovereign third parties to recall extraterritorial assets owned by a foreign sovereign. At least one other sister circuit has suggested the contrary conclusion, that a foreign sovereign's extraterritorial assets remain absolutely immune from execution.

Panel: Circuit Judges Pooler, Sack and Lohier

Argument Date: 06/08/2016

Argument Location: New York, New York

Date of Issued Opinion:
11/22/2017

Docket Number:
No. 15-0690

Decided: Affirmed in part, Vacated in part, and Remanded.

Case Alert Author: Marina Stinely

Counsel: Liviu Vogel (James P. Bonner, Patrick L. Rocco, and Susan M. Davies, Stone Bonner & Rocco LLP, on the brief), Salon Marrow Dyckman Newman & Broudly LLP, New York, New York, for Plaintiffs-Appellants; Donald F. Luke (Bension D. DeFunis, on the brief), Jaffe & Asher LLP, New York, New York, for Defendant-Appellee Bank Markazi, AKA Central Bank of Iran; Ugo Colella (John J. Zefutie, Jr., on the brief), Thompson Hine LLP, New York, New York, for Defendant-Appellee Banca UBAE, S.p.A.; Benjamin S. Kaminetzky (Gerald M. Moody, Jr., on the brief), Davis Polk & Wardwell LLP, New York, New York, for Defendant-Appellee Clearstream Banking, S.A.; Steven B. Feigenbaum, Levi Lubarsky Feigenbaum & Weiss LLP, New York, New York, for Defendant-Appellee JPMorgan Chase Bank, N.A.

Author of Opinion: Judge Sack

Circuit: Second Circuit

Case Alert Circuit Supervisor:
Professor Elyse Diamond

Edited: 11/24/2017 at 09:24 AM by Elyse Diamond

    Posted By: Elyse Diamond @ 11/22/2017 09:59 AM     2nd Circuit  

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