Havlish v. Hegna

673 F. App'x 34

• Court: Court of Appeals for the Second Circuit
• Decided: December 8, 2016
• Docket: 15-2882-cv
• Status: Published

Opinion

SUMMARY ORDER

Claimants-appellants Edwena R. Heg-na, executrix of the estate of Paul B. Hegna, Steven A. Hegna, Craig H. Heg-na, and Lynn Marie Hegna Moore (together, the “Hegna Parties”) appeal from a judgment of the district court entered August 11, 2015 pursuant to Federal Rule of Civil Procedure 54(b), granting the government’s motion to strike or for summary judgment as to the Hegna Parties’ innocent owner defenses to forfeiture and denying the Hegna Parties’ motion for summary judgment.¹ The district court explained its reasoning in an opinion and order filed May 15, 2014. The government, claimants-appellees Alavi Foundation (“Alavi”) and 650 Fifth Avenue Company (“650 Fifth Avenue Co.”), and the Greenbaum, Acosta, Beer, Kirschenbaum, and certain other groups of judgment creditors, also' claimants-appellees, oppose the appeal.² We assume the parties’ familiarity with the underlying facts, procedural history, and issues on appeal.

The Hegna Parties hold a judgment from the United States District Court for the District of Columbia against Iran and the Iranian Ministry of Information and Security (“MOIS”), arising out of Iran and MOIS’s default in an action relating to the terrorist attack that killed Charles Hegna. The judgment, entered February 7, 2002, provided for $42 million in compensatory damages against Iran and MOIS, and $333 million in punitive damages against MOIS alone. On November 27, 2002, the Hegna Parties registered the judgment in the Southern District of New York. The remaining unpaid amount of their judgment is approximately $33,618,878.86.³

On December 17, 2008, the government filed this civil forfeiture action in the district court below seeking forfeiture of property owned by Assa Corporation, Assa Company Limited (together, “Assa”), and Bank Melli Iran (“Bank Melli”), alleging violations of the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., and 18 U.S.C. §§ 1956 and 1957. By amended complaint filed November 12, 2009, the government added properties held by Alavi and 650 Fifth Avenue Co. as defendants in rem. The government seeks forfeiture of the interests of Assa, Bank Melli, Alavi, and 650 Fifth Avenue Co. in a 36-story office building located at 650 Fifth Avenue in Manhattan (the “Building”), other real properties in several states, and the contents of several bank accounts (collectively, the “defendant properties”). The parties do not dispute that the Building is owned by 650 Fifth Avenue Co., a partnership between Alavi, a New York not-for-profit organization, and Assa. The government also alleges that the two Assa entities are shell companies controlled by Bank Melli, a bank owned and controlled by the government of Iran.

On September 16, 2013 and April 18, 2014, the district court granted summary judgment, inter alia, in favor of the government, forfeiting Assa, Alavi, and 650 Fifth Avenue Co.’s interests in the defendant properties. The district court entered final judgment as to these orders at the request of Alavi and 650 Fifth Avenue Co., who timely appealed. On July 20, 2016, we vacated the district court’s judgment after concluding that the record contained disputes of fact regarding Alavi’s knowledge of Bank Melli and Iran’s ownership of Assa. In re 650 Fifth Ave. & Related Properties, 830 F.3d 66, 75 (2d Cir. 2016).

Meanwhile, the Hegna Parties had filed notices in this action below claiming the right to satisfy their outstanding judgment “from the proceeds of the Sale of all right, title, and interest of [Assa and Bank Melli] in 650 Fifth Avenue Company.” The Heg-na Parties assert that they are innocent owners and bona fide purchasers for value of Assa and Bank Melli’s assets within the meaning of 18 U.S.C. § 983(d)(2)(A)(i) and (d)(3) (A) (i)-(ii).⁴

The Hegna Parties filed a motion for summary judgment on their claims, which became fully briefed on March 3, 2014, arguing that they were innocent owners of the Building because they purportedly had obtained a judgment lien on all of Iran’s real property in New York County.⁵ The government opposed the motion and moved to strike the Hegna Parties’ innocent owner defenses or, in the alternative, for summary judgment. Alavi, 650 Fifth Avenue Co., and several groups of judgment creditor plaintiffs also opposed the Hegna Parties’ motion.

On May 14, 2014, the district court issued an opinion and order denying the Hegna Parties’ motion and granting the government’s motion to strike or for summary judgment on the Hegna Parties’ innocent owner defenses. The district court held that the Hegna Parties did not qualify as innocent owners of the building because they lacked an ownership interest in the Building. In so holding, the district court noted that (1) the Hegna Parties held judgments against Iran and MOIS, who were not the record owners of the Building, (2) the Hegna Parties claimed an interest only in personal property, against which their judgment could not create a lien, and (3) any judgment lien they once held had expired. The district court further concluded that, even if the Hegna Parties did hold a valid ownership interest in the Building, they could not avail themselves of the innocent owner defense because any property interest they held did not predate the illegal activity giving rise to the forfeiture and they did not acquire any interest in the Building as bona fide purchasers for value.

After the district court denied the Heg-na Parties’ motion for reconsideration of its decision, the Hegna Parties filed a motion for entry of final judgment pursuant to Federal Rule of Civil Procedure 54(b), requesting that the district court “certify their innocent owner defenses to forfeiture for immediate appeal.” App. at 382. The district court granted the Hegna Parties’ motion, and they timely appealed.

We review a district court’s grant of summary judgment de novo, “resolv[ing] all ambiguities and drawling] all inferences against the moving party.” Garcia v. Hartford Police Dep’t, 706 F.3d 120, 127 (2d Cir. 2013) (per curiam).⁶ “Summary judgment is proper only when, construing the evidence in the light most favorable to the non-movant, ‘there is no genuine dispute as to’ any material fact and the movant is entitled to judgment as a matter of law.’ ” Doninger v. Niehoff, 642 F.3d 334, 344 (2d Cir. 2011) (quoting Fed. R. Civ. P. 56(a)).

If a claimant in a civil forfeiture can show, that it is an innocent owner of the property to be seized, that property will not be forfeited. 18 U.S.C. § 983(d)(1). The claimant must prove that it is an innocent owner by a preponderance of the evidence. Id. For purposes of the innocent owner defense, an owner is “a person with an ownership interest in the specific property sought to be forfeited, including a leasehold, lien, mortgage, recorded security interest, or valid assignment of an ownership interest” and not, inter alia, a “person with only a general unsecured interest in, or claim against, the property or estate of another.” Id. § 983(d)(6).

Section 983(d) classifies innocent owners by whether their property interest was in existence when the illegal conduct giving rise to the forfeiture took place. If the interest already existed, a claimant qualifies as an innocent owner if the claimant was unaware of the conduct or, “upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property.” Id. § 983(d)(2)(A). If the property interest was acquired after the illegal conduct took place, the claimant must have been a “bona fide purchaser or seller for value” who “did not know and was reasonably without cause to believe that the property was subject to forfeiture.” Id. § 983(d)(3)(A).

On appeal, the Hegna Parties argue principally that their judgment against Iran and MOIS functions as a lien against the Building. That judgment, however, is not against 650 Fifth Avenue Co., the entity that owns the Building; thus, it does not create a legal interest in the Building. See United States v. Ribadeneira, 105 F.3d 833, 836 (2d Cir. 1997) (“[A]n interest ‘in’ property must be an interest in a particular, specific asset, as opposed to a general interest in an entire forfeited estate or account.”). The Hegna Parties cite no authority for their claim that “the 650 Fifth Ave. Co. partnership is ignored under New York partnership law” such that the Heg-na Parties’ judgment lien would attach to Assa and Alavi’s interests in the Building. Appellants’ Br. at 10-11. Because the Heg-na Parties lack a specific property interest in the defendant properties, they are general creditors who cannot be owners for the purposes of the innocent owner statute. 18 U.S.C. § 983(d)(6)(B)(i).⁷

Furthermore, any ownership interest that the Hegna Parties once held has since expired under New York law. See N.Y. C.P.L.R. 5203(a) (explaining that a judgment lien is effective until “ten years after filing of the judgment-roll”). As noted above, there is no evidence on this record suggesting that the Hegna Parties ever sought renewal under the mechanism outlined in N.Y. C.P.L.R. 5014(3), which permits judgment creditors to apply for a renewal of their judgment liens in the year prior to expiration of the ten years. The Hegna Parties’ argument that the post-complaint protective order in the forfeiture action extends or somehow excuses the expiry of their judgment lien is baseless.

Finally, the Hegna Parties appeal the district court’s approval of a settlement agreement between the government and several groups of judgment creditors, which provides for the pro rata distribution of proceeds to the judgment creditors who are parties to the agreement from any defendant properties that are ultimately forfeited in the civil action. Because the Hegna Parties did not challenge the settlement agreement in the district court, this argument is waived. Millea v. Metro-N. R.R. Co., 658 F.3d 154, 163 (2d Cir. 2011). Moreover, we lack appellate jurisdiction to consider the argument as it is not covered by the district court’s Rule 54(b) judgment.⁸

We have considered all of the Hegna Parties’ remaining arguments and find them to be without merit. Accordingly, for the reasons stated above, we AFFIRM the judgment of the district court certified to this court pursuant to Federal Rule of Civil Procedure 54(b) and DISMISS the remainder of the appeal.

1 . The Hegna Parties also appeal from the district court’s October 6, 2014 opinion and order denying their motion to extend their purpprted judgment lien under New York Civil Practice Law and Rules § 5203(b). Because the district court did not enter final judgment as to the October 6 order, we lack appellate jurisdiction over that aspect of the Hegna Parties’ appeal.

2 .The Greenbaum, Acosta, Beer, and Kir-schenbaum judgment creditors filed a brief in opposition to the Hegna- Parties' opening brief, which the Rubin, Heiser, Bland, Peterson, Havlish, and Bayani judgment creditors join in whole or in part.

3 .On March 20, 2003, the Hegna Parties applied to the United States Department of the Treasury for payment under the Victims of Trafficking and Violence Protection Act, Pub. L. No. 106-386, 114 Stat. 1464, as amended by section 201 of the Terrorism Risk Insurance Act of 2002, Pub. L. No. 107-297, 116 Stat. 2322. The Hegna Parties received $8,381,121.14 from the Office of Foreign Assets Control and, as a condition to receiving payment, relinquished “all rights and claims to punitive damages awarded in connection with the claim or claims [the Hegna Parties] brought under 28 U.S.C. [§ ] 1605(a)(7) and any related interest, costs, and attorneys fees.”

4 . The Hegna Parties took additional steps to enforce and satisfy their judgment outside of the civil forfeiture proceeding. On December 29, 2008, the Hegna Parties obtained a Writ of Execution from the Clerk of Court for the Southern District of New York for “goods and chattels of the Islamic Republic of Iran, its agencies and instrumentalities, including, but not limited to, Bank Melli Iran, Assa Corporation and/or Assa Co Limited (entities owned or controlled, directly or indirectly by Iran) and/or one Mohammad Hassan Dehghani Taf-ti.” The writs were delivered to the U.S. Marshal Service for service on Assa, Alavi, and 650 Fifth Avenue Co. on December 30, 2008.

Separately, on March 27, 2009, the Hegna Parties sought an order to show cause in the district court for the turnover and sale of the Building to satisfy their judgment against Iran and MOIS. Other private judgment creditors of Iran have also filed individual turnover actions against Assa, Alavi, and 650 Fifth Avenue Co. seeking attachment and turnover of their properties to satisfy the creditors’ outstanding judgments. The turnover actions, which have been consolidated with the forfeiture action in the district court, generally allege that Assa, Alavi, and 650 Fifth Avenue Co. are sufficiently related to Iran to render their property subject to turnover pursuant to the Foreign Sovereign Immunities Act ("FISA”) and the Terrorism Risk Insurance Act ("TRIA”). The Hegna Parties also appeal from several non-final orders entered in their turnover action; we dispose of that appeal in a separate summary order filed today. See Hegna v. Islamic Republic of Iran, 15-3007-cv.

5 . At the time the Hegna Parties filed their motion, they had not attempted to extend or renew their judgment lien. They subsequently filed a motion to extend the lien on August 22, 2014, after the district court had denied their motion for summary judgment on their innocent owner defenses; the district court denied the motion to extend the lien on October 6, 2014.

6 . Because we conclude that there are no material fact disputes and the government is entitled to judgment as a matter of law on the Hegna Parties’ innocent owner defenses, we do not separately consider their claims under the standard for a motion to strike.

7 . To the extent the Hegna Parties assert that they are innocent owners of unidentified personal property held by Alavi and Assa as a result of the writs of execution served in December 2008, that argument has been waived as it is raised for the first time on appeal. Millea v. Metro-N. R.R. Co., 658 F.3d 154, 163 (2d Cir. 2011).

8 . In contesting the settlement agreement, the Hegna Parties argue that their claims under the Terrorism Risk Insurance Act take priority over the government’s forfeiture claims, an argument they also make in the appeal in their turnover action. We also lack jurisdiction to consider this argument as it has never been presented to the district court and is not the subject of an appealable order.