24-2851-cv Khokhlov v. Euroclear SA/NV

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 TO 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, 40 Foley Square, in the City of New York, on the 4th day of November, two thousand twenty-five.

PRESENT: DENNY CHIN, RICHARD J. SULLIVAN, BETH ROBINSON, Circuit Judges. _____________________________________

Denis Khokhlov,

Plaintiff-Appellant,

v. 24-2851-cv

Euroclear SA/NV,

Defendant-Appellee. _____________________________________ FOR PLAINTIFF-APPELLANT: Denis Khokhlov, pro se, Brooklyn, NY.

FOR DEFENDANT-APPELLEE: Jeff E. Butler, Giannina M. Power, Clifford Chance US LLP, New York, NY.

Appeal from a judgment of the United States District Court for the Southern

District of New York (Jessica G. L. Clarke, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the September 30, 2024 judgment of the

district court is AFFIRMED.

Denis Khokhlov, proceeding pro se, appeals from the district court’s

judgment dismissing his complaint against Euroclear SA/NV, a Belgian financial

intermediary that clears and settles securities transactions. In a nutshell,

Khokhlov alleges that Euroclear wrongfully blocked his assets after Russia

invaded Ukraine in 2022 and Euroclear froze accounts belonging to Russia’s

central securities depository, the National Settlement Depository (“NSD”). While

2 the NSD was the record owner of the securities in Euroclear’s accounts, Khoklov

asserts that the frozen securities ultimately belonged to beneficial owners like

himself. He therefore brought claims under both the Due Process Clause of the

Fourteenth Amendment and the Alien Tort Statute (“ATS”), which the district

court dismissed for failure to state a claim. We assume the parties’ familiarity

with the underlying facts, the procedural history of the case, and the issues on

appeal, to which we refer only as needed to explain our decision.

“We review de novo a district court’s dismissal of a complaint pursuant to

Rule 12(b)(6), construing the complaint liberally, accepting all factual allegations

in the complaint as true, and drawing all reasonable inferences in the plaintiff’s

favor.” Mazzei v. The Money Store,

, 92 (2d Cir. 2023) (internal quotation

marks omitted). “[W]e liberally construe pleadings and briefs submitted by pro

se litigants, reading such submissions to raise the strongest arguments they

suggest.” McLeod v. Jewish Guild for the Blind,

(2d Cir. 2017)

(internal quotation marks omitted).

Khokhlov first maintains that Euroclear violated his due process rights by

freezing his assets. While Khokhlov concedes that “the conduct of private parties

lies beyond the Constitution’s scope,” he emphasizes that “governmental

3 authority may dominate an activity to such an extent that its participants must be

deemed to act with authority of the government.” Khokhlov Br. at 12. He

contends that the U.S. Treasury Department’s Office of Foreign Asset Control

(“OFAC”) imposed sanctions on NSD, and that Euroclear thus acted with

governmental authority sufficient to anchor a Due Process Clause claim against

it. 1

“To succeed on a Due Process Clause claim, plaintiffs must first

demonstrate that the challenged activity leading to their constitutional deprivation

is ‘fairly attributable’ to the state.” Barrows, 24 F.4th at 135 (quoting Brentwood

Acad. v. Tenn. Secondary Sch. Athletic Ass'n,

(2001)). As relevant

here, “a private entity’s action is fairly attribut[able] to the state . . . when the entity

acts pursuant to the coercive power of the state or is controlled by the state[.]”

(internal quotation marks omitted).

1 Under normal pleading standards, Khokhlov’s argument would fail outright because “the Fourteenth Amendment applies only to the states.” Maloney v. Soc. Sec. Admin.,

, 74 n.4 (2d Cir. 2008); see also Bolling v. Sharpe,

(1954). Since OFAC is a federal agency, Khokhlov’s arguments raise potential issues only under the Due Process Clause of the Fifth Amendment – not the Fourteenth. But because Khokhlov is a pro se litigant, we “liberally construe [his] pleadings” as raising a Fifth Amendment claim. McLeod,

(internal quotation marks omitted). As it turns out, we use the same state-action test to assess due process challenges brought under either amendment. See, e.g., Barrows v. Becerra,

, 135 (2d Cir. 2022) (articulating Fifth Amendment test by citing and quoting Fourteenth Amendment caselaw).

4 But Khokhlov alleges neither that OFAC controls Euroclear nor that it has

forced Euroclear to freeze the NSD assets of which he is the beneficial owner.

Quite the opposite. Khokhlov asserts that OFAC has “issued a general license

permitting non-sanctioned individuals to transfer their assets from sanctioned

financial institutions to non-sanctioned financial institutions.” Sp. App’x at 6

(emphasis added). In other words, Khokhlov’s beef is not with OFAC for forcing

Euroclear’s hand, but with Euroclear for not complying with an OFAC license that

permitted it to give Khokhlov his securities. Because Khokhlov alleges that

OFAC “permitt[ed]” Euroclear to transfer his assets to him – and not, as state-

action doctrine would require, that OFAC coerced Euroclear into freezing his

assets – Khokhlov has not alleged state action, which is fatal to his due process

claim.

Khokhlov’s ATS claims fare no better. In Jesner v. Arab Bank, PLC, the

Supreme Court expressly held that “foreign corporations may not be defendants

in suits brought under the ATS.”

, 272 (2018). Khokhlov tries to

circumvent that clear holding by emphasizing facts that purportedly distinguish

his case from that of the Jesner plaintiffs. Khokhlov Br. at 8. But Jesner did not

set out a soft standard allowing courts to determine when corporate liability

5 would make sense in specific cases. It instead concluded that “Congress [wa]s in

a better position” than the courts to “determin[e] whether and how best to impose

corporate [ATS] liability,” id. at 270, and that the decision of whether to impose

corporate liability should be “deferr[ed,] . . . quite appropriately, to the political

branches,” id. at 272 (internal quotation marks omitted). Because Jesner squarely

forecloses ATS actions against foreign corporations like Euroclear, the district

court did not err in dismissing Khokhlov’s ATS claims.

We have considered Khokhlov’s remaining arguments and find them to be

without merit. Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court

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