Harrison v. Republic of Sudan
Harrison v. Republic of Sudan
Opinion of the Court
The Central Bank of Sudan ("Central Bank") moves pursuant to Rule 60(b)(4), Fed. R. Civ. P., to vacate an order requiring the Bank of New York Mellon ("BNYM") to turnover a blocked electronic funds transfer ("EFT") purportedly belonging to the Central Bank to petitioners. (Dkt. 532). For the following reasons, the Central Bank's motion is DENIED.
*48BACKGROUND
The turnover order at issue stems from a default judgment entered by the District Court for the District of Columbia against the Republic of Sudan in a suit brought under 28 U.S.C. § 1605A
BNYM filed an interpleader petition and provided notice to the Central Bank. (Dkt. 217; Dkt. 368). After the time to respond to the interpleader petition had expired without the Central Bank appearing, BNYM and petitioners entered into a stipulation of facts establishing that the blocked EFT was subject to turnover. (Dkt. 506). The Court accepted the stipulated facts and ordered BNYM to turnover the EFT to petitioners pursuant to section 201(a) of the Terrorism Risk Insurance Act of 2002 ("TRIA"), Pub. L. No. 107-297,
LEGAL STANDARD
Rule 60(b)(4), Fed. R. Civ. P., provides that "[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding [if] ... the judgment is void." A judgment is void, and relief is warranted, "only if the court that rendered it lacked jurisdiction of the subject matter, or of the parties, or if it acted in a manner inconsistent with due process of law." Grace v. Bank Leumi Tr. Co. of N.Y.,
DISCUSSION
I. Terrorism Risk Insurance Act
The Foreign Sovereign Immunities Act ("FSIA"),
The Central Bank argues that the EFT is not a blocked asset "of" the Central Bank, rendering the TRIA inapplicable. The Second Circuit has instructed that to assess a party's property interest in a blocked EFT under the TRIA, courts must look to the governing law of the jurisdiction where the bank holding the EFT is located. Hausler v. JP Morgan Chase Bank, N.A.,
New York has adopted the Uniform Commercial Code ("U.C.C."), which provides a "comprehensive body of law that defines the rights and obligations that arise from wire transfers." Export-Import Bank of U.S. v. Asia Pulp & Paper Co.,
The Central Bank has provided evidence demonstrating that, contrary to a stipulation between BNYM and petitioners, the Central Bank did not pass the EFT directly to BNYM. (Dkt. 535). Rather, the Central Bank, in a payment order, instructed the Federal Reserve Bank of New York ("FRBNY") to route the EFT through BNYM, which was to then transfer the EFT to Al Shamal Khartoum, a bank where the Sudanese Libyan Investment and Development Company (the intended beneficiary) held an account. (Dkt. 533 at 4; Dkt. 535-6). Once BNYM received the EFT, it did not execute the order because the Libyan Sanction Regulations, 31 C.F.R. Part 550, precluded it from doing so. (Dkt. 533 at 5). BNYM subsequently placed the EFT in a new blocked account pursuant to the Sudanese Sanctions Regulations, 31 C.F.R. Part 538, where the EFT now rests. (Dkt. 138 ¶ 45; Dkt. 533 at 1).
This evidence, however, does not establish that the Court lacked jurisdiction to order the turnover of the EFT. If the EFT is not a blocked asset of the Central Bank *50under the TRIA, then it is also not "property in the United States of a foreign state" that is "immune from attachment[,] arrest[,] and execution." In Calderon-Cardona v. Bank of N.Y. Mellon, the Second Circuit addressed the nearly identical language found in
The FSIA also affords foreign states, their agencies, and their instrumentalities immunity "from the jurisdiction of the courts of the United States," but the Court did not need jurisdiction over the Central Bank to order BNYM to turnover the EFT.
The Central Bank's immunity from jurisdiction under section 1604, however, is relevant to BNYM's interpleader action, in which it named the Central Bank as a third-party respondent. (Dkt. 217). The interpleader action resulted in an order permanently enjoining the Central Bank "from instituting or pursuing any other pending or future legal actions or proceedings ... against BNY[M] with respect to the Blocked Account and the funds therein." (Dkt. 506 ¶ 6); see Republic of Philippines v. Pimentel,
Under New York law, an EFT is canceled by operation of law if it is not executed by the intermediary bank by the close of the fifth business day after the "execution date,"
But that is not the case when the originator directs the bank that receives the payment order to route the EFT through a specific intermediary bank. If that occurs, and the intermediary bank "is obliged to refund payment" because the transfer is canceled "but is unable to do so because [a refund is] not permitted by applicable law or because the bank suspends payments," then the bank that transferred the funds to the intermediary bank in compliance with the payment order "is entitled to receive or retain payment from the [originator]," and the originator "is subrogated to the right of the bank that paid the intermediary bank to refund," shifting the risk of loss to the originator.
Here, the Central Bank instructed FRBNY to transfer the EFT to BNYM. Although FRBNY, as the entity that directly transferred the EFT to the intermediary bank that now holds the EFT, would normally be the only entity with a property interest in the EFT, the Central Bank is subrogated to that right because it directed FRBNY to route the EFT through BNYM, leaving the Central Bank as "the only entity with a property interest in the stopped EFT." Hausler, 770 F.3d at 212 (quoting Calderon-Cardona,
The Court pauses briefly to stress the limited reach of its holding. Subrogation of an originator under New *52York law applies only when the originator specifies the use of the intermediary bank that cancels the EFT, and it applies only when the intermediary bank is precluded from refunding the payment. Of course, an erroneous attachment might occur, which would operate to cancel the EFT and give rise to a right to refund, but the Second Circuit has made clear that the cancellation of an EFT through an erroneous attachment order does not allow a creditor to attach a property interest that exists solely through mistake. Allied Mar., Inc. v. Descatrade SA,
II. Property of a Central Bank Held for its Own Account
The Central Bank argues that if the TRIA applies, the EFT is immune from execution as "property ... of a foreign central bank ... held for its own account."
CONCLUSION
For the foregoing reasons, the Central Bank's motion to vacate (Dkt. 532) is DENIED.
SO ORDERED.
This section allows certain plaintiffs to recover damages from a foreign state for personal injury or death "caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources for such an act if such act or provision of material support or resources is engaged in by an official, employee, or agent of such foreign state while acting within the scope of his or her office, employment, or agency" if the foreign state was designated as a state sponsor of terrorism when the act occurred, or was designated a state sponsor of terrorism as a result of the act, and "either remains so designated when the claim is filed under this section or was so designated within the 6-month period before the claim is filed under this section." 28 U.S.C. § 1605A(a), (c).
Indeed, the Central Bank concedes as much in its briefing, stating that the EFT "should be returned for the benefit of the Central Bank" if their motion to vacate is granted. (Dkt. 533 at 10).
Reference
- Full Case Name
- Rick HARRISON v. REPUBLIC OF SUDAN, Rick Harrison v. American Express Travel Related Services, Co. Banco Do Brasil, S.A. Bank of America Bank of Baroda, New York Branch Bank of China, New York Branch Bank of New York Mellon Bank of Tokyo-Mitsubishi UFJ Trust Company Barclays Bank PLC Citigroup Inc. Commerzbank AG Credit Agricole Corporate & Investment Bank Credit Suisse Securities (USA) LLC Deutsch Bank AG New York Deutsche Bank Trust Co. Americas Doha Bank Federal Reserve Bank of New York Habib American Bank HSBC Bank, USA, N.A. Interaudi Bank Intesa Sanpaolo S.P.A. JP Morgan Chase & Co. PNC Bank, N.A. RBS Citizens, N.A. Societe Generale Standard Chartered Bank State Bank of India Sumitomo Mitsui Banking Corp. The Royal Bank of Scotland N.V. United Bank Limited Wells Fargo Bank, N.A., Respondents/Garnishees.
- Status
- Published