Opinion
55600/2013
04-04-2019
Osqugama SWEZY, Jose Duran, on their Behalf and as Resprestatives of a Class of Judgment Creditors of the Estate of Ferdinand E. Marcos, Plaintiff, v. Merrill LYNCH, Pierce, Fenner & Smith Incorporated, New York City Department of Finance, Defendant.
Petitioners by Robert A. Swift, Kohn, Swift & Graf, P.C., 1600 Market Street, Suite 2500, Philadelphia, PA 19107 and Jeffrey E. Glen, Anderson Kill, P.C., 1251 Avenue of the Americas, New York, NY 10020 Respondent Merrill Lynch, Pierce, Fenner & Smith Inc. by Daniel A. McLaughlin, Sidley Austin LLP Intervenor Philippine National Bank and Arelma Inc. by Michael O. Ware, Mayer Brown LLP, 1221 Avenue of the Americas, New York, NY 10020
Petitioners by Robert A. Swift, Kohn, Swift & Graf, P.C., 1600 Market Street, Suite 2500, Philadelphia, PA 19107 and Jeffrey E. Glen, Anderson Kill, P.C., 1251 Avenue of the Americas, New York, NY 10020
Respondent Merrill Lynch, Pierce, Fenner & Smith Inc. by Daniel A. McLaughlin, Sidley Austin LLP
Intervenor Philippine National Bank and Arelma Inc. by Michael O. Ware, Mayer Brown LLP, 1221 Avenue of the Americas, New York, NY 10020
Andrew Borrok, J.
The following e-filed documents, listed by NYSCEF document number (Motion 007) 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 123, 124, 125, 126, 127, 128, 140, 141, 142, 143, 144, 145, 146, 147, 151 were read on this motion to/for VACATE STAY
Upon the foregoing documents, the motion to vacate the stay is denied without prejudice.
Reference is made to an Order (the 2014 First Department Order ), dated November 18, 2014, by the First Department which unanimously reversed an Order, entered June 13, 2014, of New York State Supreme Court Justice Charles Ramos in which Justice Ramos lifted a stay which the court had previously imposed and ordered Petitioner's counsel to serve the instant turnover petition on the Embassy of the Republic of the Philippines (the Republic ) in Washington, D.C. on the Philippine Consulate and giving the Republic 60 days from the filing of proof of service to intervene and respond to the petition.
The First Department noted that when Justice Ramos imposed a stay in this matter on June 13, 2014, the court observed that "[t]his petition cannot proceed to a final conclusion in the present landscape. [B]ut for the passage of time, the issues remain unaltered since the Court of Appeals' dismissal of Swezey's prior turnover petition ( Swezey v. Merrill Lynch, Pierce, Fenner & Smith, Inc ., 122 AD3d 489, 490 [1st Dept 2014] ). Nonetheless, as the First Department noted, a few months later, the court lifted the stay. This, the First Department concluded, was error.
The First Department further indicated that in Swezey , the Court of Appeals stated, "[I]f the Republic fails to seek enforcement of its [Philippine] judgment, the time may come when the class [whom petitioners represent] could again ask a New York court to reconsider the enforcement of its [U.S. federal] judgment" against the estate of nonparty Ferdinand E. Marcos (id., quoting Swezey v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 19 NY3d 543, 555 [2012] [emphasis added] ).
In addition, the First Department wrote that
The Republic did not fail to seek enforcement of its judgment; on the contrary, it moved in the Philippine Supreme Court for immediate issuance of entry of judgment. We note that, since the order appealed from, the Sandiganbayan (Philippine anti-corruption court) has issued a writ of execution. If the Republic fails to seek enforcement of this judgment within a reasonable time, petitioners may move to lift the stay that we are re-imposing ( Swezey , 122 AD3d at 490 ).
For the avoidance of doubt, with respect to the service provided in Justice Ramos' order, the First Department indicated that, putting aside whether the service required by the order violated 28 USC § 1608(a), the service violated the Vienna Convention on Consular Relations (id. , citing Autotech Techs v. Integral Research & Dev. , 499 F3d 737, 748 [7th Cir 2007] ("service through an embassy is expressly banned by an international treaty to which the United States is a party (viz., the Vienna Convention on Diplomatic Relations) and by US statutory law"), cert denied 552 US 1231 [2008] ; Sikhs for Justice v. Nath , 850 F Supp 2d 435, 441 [SD NY 2012] ("Under the Vienna [C]onvention (on Consular Relations), service of process at consular premises is prohibited") [internal quotation marks, brackets, and ellipses omitted] ).
The First Department reasoned that assuming that service was proper, the court should not have "put the Republic to a Hobson's choice between, on the one hand, its right not to litigate in this state and, on the other hand, protecting its interest in property that (through no fault of the Republic) happens to be located here" (id., quoting Swezey v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 87 AD3d 119, 130-31 [1st Dept 2011] ). Only the Republic can decide whether it should submit to New York's jurisdiction and it was inappropriate to force the Republic to litigate in our state court system contrary to an otherwise valid invocation of the sovereign prerogative.
Finally, the First Department commented that while the petitioners have a valid judgment, the judgment is secured "against the Estate of Ferdinand Marcos and it can be lawfully executed only against property that the estate legally owns. If the Arelma assets (i.e., the assets that petitioners are seeking in this turnover proceeding) belong to the people of the Philippines — as the country's highest court has declared — the class (i.e., petitioners) has no claim to that property" (Sweezy, 13NY3d at 555 [emphasis added]; see also Sweezy, 87AD3d at 132). Subsequent to the entry of this order by the First Department, on July 5, 2016, in Swezey v. Merrill Lynch, the First Department denied the renewal of the motion to vacate the stay "without prejudice seeking the same relief in Supreme Court."
Now, the Petitioners once again ask this court to lift the stay previously imposed arguing, among other things, that the litigation regarding the Arelma assets between the Class and the Republic have gone on for 19 years and the Petitioners' (victims of the Marcos regime) rights have been severely prejudiced in that the approximately $ 40 million at issue here could have significantly alleviated some of their hardship.
Furthermore, although in June, 2016, the US Department of Justice filed an application pursuant to 28 USC § 2467 (described as the Federal Enforcement Action more particularly below) to enforce the Sandiganbayan forfeiture judgment in the US District Court for the District of Columbia (the DC Federal Court ), the Petitioners argue that because the DC Federal Court has not moved swiftly enough, the matter is ripe for adjudication in this court and the stay should be lifted. To wit, the Petitioners argue that it has been over 26 months since the Petitioners have filed an intervention motion in that case and the DC Federal Court has not yet ruled on it and "for whatever reason, has ignored the case" (Affirmation of Robert Swift, dated October 12, 2018, ¶ 9). Moreover, the Petitioners speculate that the Department of Justice is content to not actively prosecute the case because (i) enforcement is barred by the 5-year statute of limitations, which statute according to the Petitioners began to run in 1972 when the assets were deposited in the US, and (ii) the Republic recovered the full value of the deposit ($ 2 million) with interest, from a settlement with Jose Campos in 1986 (id., at ¶¶ 10 and 11). Finally, the Petitioners argue that the Republic employed fraud in obtaining the 2009 forfeiture judgment from the Sandiganbayan by failing to inform the Sandiganbayan of the settlement. The argument is unavailing.
It is undisputed that the Republic made a mutual legal assistance request to the United States in January, 2015, which was certified for enforcement by the U.S. Attorney General's designee in February, 2016. The Money Laundering and Asset Recovery Section of the Criminal Division of the United States Department of Justice represents the United States in the federal action (the Federal Enforcement Action ) captioned In Re: Enforcement of Philippine Forfeiture Judgment Against All Assets of Arelma, S.A., 1:16-me-01339-RJL (D.D.C.) filed in the DC Federal Court in June, 2016. As such, the DC Federal Court is the court of primary jurisdiction as it relates to the issue of the federal statute of limitations raised by the Petitioners. It is simply inappropriate for this court to address the merits of a case already pending before the DC Federal Court. Finally, with respect to the Petitioners' concern that they have not yet received a decision in the DC Federal Enforcement Action as to their intervention, although the New York State Supreme Court Commercial Division is an important forum, it is not a stop-gap for the DC Federal Court or any other court of primary jurisdiction. If appropriate, the Petitioners should seek mandamus relief in the Federal Enforcement Action (see In re Trade & Commerce Bank , 890 F3d 301 [D.C. Cir 2018] ; Cheney v. United States Dist. Court for the Dist. of Columbia , 542 US 367 [2004] ; Kerr v. United States Dist. Court for Northern Dist. of Cal., 426 US 394 [1976] ).
Accordingly, the motion is denied without prejudice.