16-410 District Attorney of New York County v. Republic of the Philippines

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007 is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not represented by counsel.

At a stated Term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, at 40 Foley Square, in the City of New York, on the 3rd day of March, two thousand sixteen.

Present: ROBERT A. KATZMANN, Chief Judge, RALPH K. WINTER, Circuit Judge, SIDNEY H. STEIN District Judge.* ________________________________________________

DISTRICT ATTORNEY OF NEW YORK COUNTY,

Plaintiff-Appellee,

v. No. 16-410

THE REPUBLIC OF THE PHILIPPINES,

Interpleader Defendant-Intervenor,

VILMA BAUTISTA,

Interpleader Defendant, Cross Defendant,

ESTER NAVALAKSANA, LEONOR HERNANDEZ, AIDA HERNANDEZ, IMELDA MARCOS, JORGE Y. RAMOS,

* Judge Sidney H. Stein, Senior Judge of the United States District Court for the Southern District of New York, sitting by designation.

1 METROPOLITAN MUSEUM OF MANILA FOUNDATION, INC.,

Interpleader Defendants,

JOSE DURAN, ON HIS BEHALF AND AS REPRESENTATIVE OF A CLASS OF JUDGMENT CREDITORS OF THE ESTATE OF FERDINAND E. MARCOS, IMELDA MARCOS, AND FERDINAND R. MARCOS,

Interpleader Defendant-Appellant.1

________________________________________________

For Interpleader Defendant-Intervenor: BRADLEY D. SIMON, Simon & Partners LLP, New York, NY.

For Interpleader Defendant-Appellant: ROBERT A. SWIFT, Kohn, Swift & Graf, P.C., Philadelphia, PA; Philip S. Raible (on the brief), Rayner Rowe LLP, New York, NY.

Appeal from the United States District Court for the Southern District of New York

(Failla, J.).

ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,

and DECREED that the order of the district court is AFFIRMED.

Interpleader defendant-appellant Jose Duran appeals from an order of the United States

District Court for the Southern District of New York (Failla, J.), dated January 28, 2016, denying

him leave to file a motion to partially vacate a stay of state court proceedings or to enjoin

interpleader defendant-intervenor Republic of the Philippines (“the Republic”) from litigating in

its home forum. We assume the parties’ familiarity with the underlying facts, the procedural

history of the case, and the issues on appeal.

1 The Clerk of the Court is instructed to amend the caption to conform to the above.

2 Duran was a victim of torture by the military in the Philippines under the direction of

Ferdinand E. Marcos during a time of martial law and has obtained a judgment against the

Marcos estate. In December 2012, Duran commenced a Turnover Petition in state court seeking

to recover property belonging to Imelda Marcos, a representative of the Marcos estate, in

satisfaction of his judgment. Because some of that property had been seized by the New York

District Attorney’s Office (“the DA”) during a criminal investigation, Duran named the DA as a

party to his petition. Duran then served a writ of execution to levy on two paintings in the DA’s

possession. In February 2014, the DA initiated a federal interpleader action to resolve competing

ownership claims to the property it had seized.2 The Republic, not a party to Duran’s state court

action, waived its sovereign immunity and became a party to the federal interpleader. The federal

and state court actions continued in parallel until February 19, 2015, when the district court

issued an oral decision staying the state court action. Several months later, on November 5, 2015,

Duran requested leave to file a motion to partially vacate that stay or, in the alternative, to enjoin

the Republic from pursuing litigation in the Philippines respecting the interpleaded property. The

district court denied Duran’s request on January 28, 2016. This appeal followed.

I. Appellate Jurisdiction

The Republic argues that we lack jurisdiction to hear this appeal because a stay of state

court proceedings pursuant to

, which authorizes a district court to enjoin

parties from “prosecuting any [domestic] proceeding . . . affecting the property . . . involved in

[an] interpleader action,” is not an injunction for which interlocutory appeal is available under

(a)(1). We disagree. This Court has repeatedly reviewed anti-suit injunctions

issued under

in an interlocutory posture. See, e.g., Hapag-Lloyd

Aktiengesellschaft v. U.S. Oil Trading LLC,

, 149–50 & n.10 (2d Cir. 2016); Ashton 2 The DA has since been discharged from that interpleader action. ECF Dkt. No. 88.

3 v. Josephine Bay Paul & C. Michael Paul Found., Inc.,

, 1068 (2d Cir. 1990). This

is consistent with

(a)(1), which “authorize[s] an [interlocutory] appeal only

from an injunctive order that gives, or aids in giving, substantive relief sought in the lawsuit in

order to preserve the status quo pending trial.” In re Zyprexa Prods. Liab. Litig.,

(2d Cir. 2010) (per curiam); see also HBE Leasing Corp. v. Frank,

(2d Cir.

1995) (holding that appealable interlocutory injunctions are “designed to . . . protect . . . the

substantive relief sought by a complaint”). Because the function of an anti-suit injunction in an in

rem case such as interpleader is to eliminate “the threat a second action poses to the first court’s

basis for jurisdiction,” China Trade & Dev. Corp. v. M.V. Choong Yong,

, 36 (2d Cir.

1987), such injunctions are essential to the district court’s ability “to preserve the status quo

pending trial,” In re Zyprexa,

, and “protect . . . the substantive relief sought by”

the parties, Frank,

. Interlocutory appeal of such injunctions is thus permissible.

The Republic next argues that the district court’s January 28, 2016 order was not an order

“refusing . . . [an] injunction[], or refusing to . . . modify [an] injunction[],”

(a)(1), because it merely denied Duran leave to file a motion. Although the district court’s

order “did not in terms refuse an injunction, it nonetheless had the practical effect of doing so.”

Carson v. Am. Brands, Inc.,

(1981) (internal quotation marks and alterations

omitted); see also New York v. Nuclear Regulatory Comm’n,

(2d Cir. 1977)

(“[I]t is abundantly clear that the practical, and immediate, effect of the order is the refusal of the

injunction sought.”). This technicality thus does not preclude appellate review of the district

court January 28, 2016 order.

4 II. Subject Matter Jurisdiction of the District Court

Duran argues that the district court lacked subject matter jurisdiction over the federal

interpleader action because the state court obtained prior exclusive jurisdiction over certain

interpleaded property. The Republic argues that we do not have appellate jurisdiction over this

specific issue because it was not addressed in the January 28, 2016 order appealed from or raised

in Duran’s Notice of Appeal. However, “[a]n appellate federal court must satisfy itself not only

of its own jurisdiction, but also of that of the lower courts.” Mitchell v. Maurer,

(1934). As a result, “if the district court lacked jurisdiction, we . . . have jurisdiction on

appeal, not of the merits but merely for the purpose of correcting the error of the lower court in

entertaining the suit.” Merritt v. Shuttle, Inc.,

(2d Cir. 1999) (internal

quotation marks omitted).

Under the doctrine of prior exclusive jurisdiction, a federal court does not assume in rem

or quasi in rem jurisdiction if a state court has previously assumed jurisdiction over the same res.

See Marshall v. Marshall,

(2006); Princess Lida of Thurn & Taxis v.

Thompson,

(1939). Here, the district court ruled that the state court had not

assumed prior exclusive jurisdiction over the relevant property.3 “In reviewing a district court’s

determination of whether it has subject matter jurisdiction, we review factual findings for clear

error and legal conclusions de novo.” Gualandi v. Adams,

(2d Cir. 2004).

Under Article 52 of the CPLR, “[l]evy upon personal property . . . by service of

execution” may be obtained over “any interest of the judgment debtor or obligor in personal

property.” CPLR § 5232(a). As the parties to this litigation have noted before both the district

3 Several months later, and in violation of the stay imposed by the district court, the state court ruled that it had assumed prior exclusive jurisdiction over the relevant property. Because the state court decision followed the district court’s jurisdictional ruling and stay, it has no bearing on our review.

5 court and the state court, there is a dispute as to whether the levied property belongs to Imelda

Marcos, against whom Duran possesses a judgment, or to the Republic, whose embezzled funds

allegedly funded Imelda Marcos’s art collecting. The Republic argues that, in light of this bona

fide ownership dispute, no valid levy existed under CPLR § 5232(a) and that the state court thus

did not assume prior exclusive jurisdiction. The district court agreed.

Duran, on the other hand, argues that this analysis “puts the cart before the horse,” Reply

Br. 10, because the levy must necessarily come before adjudication of the parties’ respective

rights in the property. Duran is correct that levying property is not an adjudication of ultimate

right to the property as between the judgment debtor and creditor, but as noted above, property

can only be levied if the judgment debtor has “any interest” in that property. CPLR § 5232(a).

The Republic argues here that Imelda Marcos, the judgment debtor, has no interest in the

relevant property, rendering the levy executed in connection with the Turnover Petition invalid.

The New York Court of Appeals has suggested that the sufficiency and legality of a levy are

antecedent questions to the assumption of jurisdiction. See Beardslee v. Ingraham,

(1906) (“Assuming that there was a sufficient and legal levy . . . , such levy was effective to

give to the federal tribunal exclusive jurisdiction of the property, which could not be disturbed by

the state courts.” ); see also Citigroup Glob. Mkts., Inc. v. KLCC Invs., LLC, No. 06-CV-5466

(LBS),

, at *5 (S.D.N.Y. Jan. 11, 2007) (Sand, J.) (“Whether the alternative

forum . . . has assumed jurisdiction over the property at issue in this case . . . depends on who

owns the property. . . .”). Because the bona fide ownership dispute described above was not

resolved before the interpleader action was initiated, the district court correctly determined that it

had subject matter jurisdiction.

6 III. The District Court’s Denial of Leave

Duran also challenges the district court’s denial of leave to file a motion to partially

vacate the stay of state court proceedings or, in the alternative, to enjoin the Republic from

litigating in its home forum. “The district court has wide discretion in determining whether to

grant a preliminary injunction, and this Court reviews [its] determination only for abuse of

discretion.” Almontaser v. N.Y. City Dep’t of Educ.,

(2d Cir. 2008) (per

curiam) (alteration in original). The same standard applies to modification of an injunction. See

Sierra Club v. U.S. Army Corps of Eng’rs,

, 257 (2d Cir. 1984).

The district court did not abuse its discretion by denying Duran leave to file a motion to

partially vacating the stay of state court proceedings. All of the arguments Duran raised in

support of his proposed modification of the stay were considered by the district court in its initial

decision. And, notably, the September 2014 litigation that Duran cites as justifying his request to

modify the stay preceded the district court’s February 2015 imposition of the stay. Because

Duran’s modification arguments were already considered in “the underlying [February 2015]

order” and he did not present any “new matter” or changed circumstances justifying a

modification, Sierra On-Line, Inc. v. Phoenix Software, Inc.,

, 1419 n.4 (9th Cir.

1984), he provides no basis for us to conclude that the district court abused its discretion in

denying him leave to file a motion to partially vacate the stay.

Likewise, the district court did not abuse its discretion by denying Duran leave to file a

motion to enjoin the Republic from litigating in the Philippines. Foreign anti-suit injunctions are

assessed under the China Trade test. See Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading

LLC,

(citing China Trade & Dev. Corp. v. M.V. Choong Yong,

, 35 (2d Cir. 1987)). Duran’s letter motion to the district court did not mention the China

7 Trade test or endeavor to explain why enjoining the Republic, a sovereign nation, from litigating

in its home forum would be warranted under that test. As a result, the district court did not abuse

its discretion by denying Duran leave to file a motion for a foreign anti-suit injunction against the

Republic.

We have considered all of Duran’s remaining arguments and find them to be without

merit. For the reasons given, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk

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