Opinion
11 Civ. 1608 (AJN)(MHD)
07-10-2012
ESTATE OF MICHAEL HEISER, et al., Petitioners, v. DEUTSCHE BANK TRUST COMPANY AMERICAS, Respondent.
MEMORANDUM AND ORDER
:
Respondent has filed a motion to stay this action pending resolution of consolidated appeals to the Second Circuit in two cases that present questions of law substantially related to this case. Petitioners oppose the stay. For the reasons that follow, respondent's motion is GRANTED.
BACKGROUND
Petitioners, the Estate of Michael Heiser, et al. (collectively, the "Heisers"), are the family members and personal representatives of seventeen U.S. Air Force officers and airmen killed in a 1996 terrorist bombing of the Khobar Towers in Khobar, Saudi Arabia. (Am. Pet. for Turnover Order ("Am. Pet.") ¶ 4; Pet'rs' Opp'n to Mot. to Stay ("Pet'rs' Opp'n Mem.") at 1). They seek to satisfy a judgment against the Islamic Republic of Iran by collecting against assets held at Deutsche Bank Trust Company Americas ("DBTCA"), in which Iran allegedly has an interest. (Resp't's Mem. of Law in Supp. of Resp't's Mot. to Stay ("Resp't's Mem. of Law") at 1; see also Am. Pet. ¶¶ 1, 17-18).
On March 8, 2011, the Heisers brought this turnover action seeking an order compelling DBTCA to turn over certain assets in its possession. (Am. Pet. ¶¶ 21, 38; see also Pet'rs' Opp'n Mem. at 3). The assets are comprised of ten electronic fund transfers ("EFTs"), which were routed through DBTCA and subsequently frozen in accordance with sanctions regulations of the United States Department of Treasury Office of Foreign Assets Control ("OFAC"). (Resp't's Mem. of Law at 1; Pet'rs' Opp'n Mem. at 1). Of the EFTs at issue in this case, one is also being sought for appropriation by plaintiffs in Calderon-Cardona v. JP Morgan Chase Bank, N.A., a separate judgment enforcement proceeding now on appeal to the Second Circuit. (Decl. of Mark P. Gimbel ¶ 2). The pendency of that appeal and a parallel one is respondent's asserted basis for a stay.
Petitioners in this case seek to enforce their judgment through the Terrorism Risk Insurance Act of 2002 ("TRIA") section 201(a), codified at 28 U.S.C. § 1610 note, as well as the Foreign Sovereign Immunities Act ("FSIA") § 1610(g), codified at 28 U.S.C. § 1610(g). (Am. Pet. ¶ 31; see also Pet'rs' Opp'n Mem. at 3). In pertinent part, section 201 of TRIA provides:
Notwithstanding any other provision of law, . . . in every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism, or for which a terrorist is not immune under section 1605(a) (7) of title 28, United States Code, the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of any compensatory damages for which such terrorist party has been adjudged liable.TRIA, Pub. L. No. 107-297, § 201(a), 116 Stat. 2322, 2337 (2002). As for 28 U.S.C. § 1610(g), it reads relevant in part:
[T]he property of a foreign state against which a judgment is entered under section 1605A, and the property of an agency or instrumentality of such a state, including property that is a separate juridical entity or is an interest held directly or indirectly in a separate juridical entity, is subject to attachment in aid of execution. . . .28 U.S.C. § 1610(g).
In Calderon-Cardona v. JP Morgan Chase Bank, ___ F. Supp.2d ___, 2011 WL 6155987 (S.D.N.Y. Dec. 7, 2011), the District Court dismissed a turnover action instituted by plaintiffs under the same statutes. In doing so, the court held that, under Article 4-A of New York State's Uniform Commercial Code ("UCC"), "EFTs are neither the property of the originator nor the beneficiary while briefly in the possession of an intermediary bank," such as DBTCA. Id. at *9, *15 (quoting Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 71 (2d Cir. 2009)). The court further held that neither TRIA § 201(a) nor FSIA § 1610(g) preempts New York's UCC. Id. at *13-14, *16.
On February 22, 2012, another court in this district addressed the same issue; that is, whether a turnover petitioner may use the TRIA to attach an EFT in a local bank branch, and it held, contrary to Calderon-Cardona, that the TRIA preempts New York's UCC and permits attachment. See Hausler v. J.P. Morgan Chase Bank, N.A., ___ F. Supp.2d ___, 2012 WL 601034, *5-10 (S.D.N.Y. Feb. 22, 2012).
The plaintiffs in Calderon-Cardona and the defendants in Hausler have appealed the district courts' decisions to the Court of Appeals. (See Gimbel Decl. Ex. 2 (Notice of Appeal)); Hausler, No. 12-1272 (2d Cir. 2012); Calderon-Cardona, No. 12-75 (2d Cir. 2012). The circuit court subsequently ordered that these appeals be heard in consolidated fashion, with initial briefs due by June 1, 2012. (Gimbel Decl. Ex. 5 (order granting motion to consolidate)).
In light of the appeals to the Second Circuit in Calderon-Cardona and Hausler -- which present an issue that is potentially dispositive here -- respondent DBTCA has moved to stay all proceedings in this case during the pendency of the appeals.
ANALYSIS
I. Legal Standard
In considering a motion to stay proceedings, the court possesses the "inherent" discretion "to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 96 (2d Cir. 2012) (quoting Landis v. N. Am. Co., 299 U.S. 248, 254 (1936), and citing Clinton v. Jones, 520 U.S. 681, 706-708 (1997)). The decision whether to grant a stay "calls for an exercise of judgment, which must weigh the competing interests and maintain an even balance." Landis, 299 U.S. at 254-55. The Supreme Court has observed that while plaintiffs should rarely be impeded from going forward with their claims, that general nostrum reflects "counsels of moderation rather than limitations upon power." Id. at 255. "[A] stay is an intrusion into the ordinary processes of administration and judicial review [and] . . . [t]he party requesting a stay bears the burden of showing that the circumstances justify an exercise of [the Court's] discretion." Maldonado-Padilla v. Holder, 651 F.3d 325, 328 (2d Cir. 2011) (quoting Nken v. Holder, 556 U.S. 418, 427, 434 (2009)) (internal quotation marks omitted).
In determining whether to enter a stay pending an appeal in a related case, courts have frequently applied a five-factor test, which looks to:
(1) the private interests of the plaintiffs in proceeding expeditiously with the civil litigation . . . (2) the private interests of and burden on the defendants; (3) the interests of the courts; (4) the interests of persons not parties to the civil litigation; and (5) the public interest.LaSala v. Needham & Co., Inc., 399 F. Supp.2d 421, 427 (S.D.N.Y. 2005) (quoting Kappel v. Comfort, 914 F. Supp. 1056, 1058 (S.D.N.Y. 1996) (quoting Volmar Distribs. v. N.Y. Post Co., 152 F.R.D. 36, 39 (S.D.N.Y. 1993)). This test "has been applied to stay a federal action in light of a concurrently pending federal action (either because the claim arises from the same nucleus of facts or because the pending action would resolve a controlling point of law). . . ." SST Global Tech., LLC v. Chapman, 270 F. Supp.2d 444, 445 (S.D.N.Y. 2003) (emphasis omitted); see also Goldstein v. Time Warner N.Y.C. Cable Group, 3 F. Supp.2d 423, 437-439 (S.D.N.Y. 1998) (granting a stay where an independent proceeding in federal court, which had a bearing on the immediate case, was under appellate review). The principal purpose of this five-factor test is "to avoid prejudice." Volmar, 152 F.R.D. at 39 (S.D.N.Y. 1993).
As a parenthetical matter, we note that petitioners in this case suggest that the appropriate test to guide our decision is the somewhat differently worded standard articulated in The Youngbloods v. BMG Music, 2011 WL 43510 (S.D.N.Y. Jan. 6, 2011). That test refers to: (1)the duration of the requested stay; (2) the balance of harm to the parties; (3) the promotion of judicial economy; and (4) other pertinent factors specific to the circumstances of the case. Id. at *4.
The test that we apply here has been applied repeatedly by courts in this district when analyzing the propriety of a stay pending an appeal of a concurrent, relevant action. See, e.g., Fried v. Lehman Bros. Real Estate Assocs. III, L.P., 2012 WL 252139, *5 (S.D.N.Y. Jan. 25, 2012); TradeWinds Airlines, Inc. v. Soros, 2011 WL 309636, *23 (S.D.N.Y. Feb. 1, 2011); Greystone CDE, LLC v. Sante Fe Pointe L.P., 2008 WL 482291, *1 (S.D.N.Y. Feb. 20, 2008); In re Literary Works in Elec. Databases Copyright Litig., 2001 WL 204212, at *2 (S.D.N.Y. Mar. 1, 2001). In any event, the two formulations are indisputably similar, and use of the Youngbloods test would not alter the outcome here.
In determining the propriety of granting a stay, the court may also consider the prospects of success on appeal, a consideration that is to be assessed with liberality. See, e.g., Gunter v. Carrion, 335 Fed. App'x 130, 131 (2d Cir. 2009) (citing LaRouche v. Kezer, 20 F.3d 68, 72 (2d Cir. 1994); Hirschfeld v. Bd. of Elections, 984 F.2d 35, 39 (2d Cir. 1993). The movant must proffer sufficient support to demonstrate "a substantial possibility, although less than a likelihood, of success on appeal." LaRouche, 20 F.3d at 72 (quoting Hirschfeld, 984 F.2d at 39) (internal quotations omitted).
II. Analysis
A. The Interests of Petitioners
The Heisers argue that they will be severely prejudiced if this turnover proceeding is delayed. (Pet'rs' Opp'n Mem. at 7). They cite the fact that many of the members who comprise the so-called Heiser group are aging, while others have passed away during the course of this proceeding. (Id. at 7-8). Additionally, they reference the duration of this case as a source of prejudice, noting that it has subsisted for more than fifteen months. (Id. at 8). Respondent argues, in turn, that granting a stay would not prejudice petitioners because the Calderon-Cardona appeal will "ultimately promote the efficient resolution of this case, by either making clear that the Petitioners have no viable claim and/or resolving the competing claim of the Calderon-Cardona Plaintiffs" to the assets at issue here. (Resp't's Reply Mem. of Law at 6).
"Courts are generally reluctant to stay proceedings because they are concerned with vindicating the plaintiff's right to proceed with its case." LaSala, 399 F. Supp.2d at 428 (citing An Giang Agric. & Food Imp. Exp. Co. v. United States, 350 F. Supp.2d 1162, 1164 n.3 (Ct. Int'l Trade 2004)) (emphasis omitted). Indeed, the Second Circuit has at one time stated that a party's "right to proceed in court should not be denied except under the most extreme circumstances." Klein v. Adams & Peck, 436 F.2d 337, 339 (2d Cir. 1971). That said, petitioners' claim of prejudice is not particularly compelling here.
The issues to be considered in the consolidated appeal directly relate to petitioners' claims here, and an early decision on the availability of EFTs for attachment will obviously clarify whether petitioners have a legally viable basis for relief against DBTCA. (See Gimbel Decl. Ex. 3 (Calderon-Cardona Appeal Form C) at Addendum B, Issues 2, 4, 5); see also id. Ex. 4 (Hausler Appeal Form C) at Addendum B, Issues 2(A), 2(B)). Moreover, there is little likelihood of a prolonged delay in this case. The Second Circuit required that appellants' briefs were to be filed on or before June 1, 2012. (See id. Ex. 5 (order granting motion to consolidate)). Appellees may now have up to 91 days to submit an opposition brief -- that is, until August 31, 2012. See Second Cir. Local Rule 31.2. Any reply by appellants will be due, at the latest, on September 14, 2012. (See id.). We therefore reject petitioners' argument that granting a stay would be inappropriate because the time frame for the consolidated action before the Second Circuit is "indefinite" and "immoderate." (Pet'rs' Opp'n Mem. at 6). See, e.g., Wing Shing Prods. (BVI) Ltd. v. Simatelex Mfg. Co., Ltd., 2005 WL 912184, *3 (S.D.N.Y. Apr. 19, 2005) (dismissing assertion that granting a stay pending appeal to the Second Circuit would be of "indefinite duration," as it would be "automatically" lifted upon decision by the circuit court); see generally Fried, 2012 WL 252139, at *6 (staying a case pending appeal to the Second Circuit of a related case involving relevant legal issues).
In sum, we conclude that granting a stay in the instant case would not unduly prejudice the Heisers. To the contrary, the rulings of the Second Circuit in the Calderon-Cardona and Hausler appeals may advance their interests by providing the court with guidance as to the quality, nature, and validity of their claims, effectively expediting the resolution of this turnover proceeding.
B. The Interests of Respondent
Respondent's interests would clearly be secured by a stay. Because the decision of the circuit court may effectively dispose of some or all of this proceeding, a stay would potentially absolve DBTCA of the need to litigate a variety of issues otherwise presented here and thus avoid the need for unnecessary litigation.
C. The Interests of the Court and Non-Parties
Respondent argues that a stay in the instant case would promote judicial economy, as well as potentially obviate irrelevant litigation, including otherwise necessary third-party practice. (See Resp't's Mem. of Law at 8-9). Petitioners assert in response that "[j]udicial economy and case management standing alone are insufficient to stay proceedings." (See Pet'rs' Opp'n Mem. at 8). The Heisers, moreover, reject respondent's so-called "speculative assertions" as to the outcome of the Calderon-Cardona and Hausler appeal, and suggest that respondent's contemplated third-party practice in fact militates against any delay in the resolution of this proceeding. (Id. at 9).
"'[W]hen a similar action is pending in another court'" and "where a higher court is close to settling an issue of law bearing on the action" a stay is proper. LaSala, 399 F. Supp.2d at 427 n.39 (quoting 5C Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc. & 1360 (3rd ed.), and citing Marshel v. AFW Fabric Corp., 552 F.2d 471, 472 (2d Cir. 1977)); see also Fogarazzo v. Lehman Bros., Inc., 263 F.R.D. 90, 95 (S.D.N.Y. 2009) (noting that the court had stayed the matter pending the outcome of a Second Circuit decision on relevant legal issues). In recognition of the fact that the Second Circuit will likely be ruling on legal issues potentially dispositive in this case, it is in the best interest of this court to await the decision in the consolidated Calderon-Cardona and Hausler appeals. Failure to do so could well lead to unnecessary litigation that is time-consuming for this court, as well as for any third parties that might be joined in this turnover proceeding. See Goldstein, 3 F. Supp. at 437-438 (citing Levya v. Certified Grocers of California, Ltd., 593 F. 2d 857, 864 (9th Cir. 1979); Friarton Estates Corp. v. City of N.Y., 681 F.2d 150, 160 (2d Cir. 1982)) (remarking that a court may properly stay an action pending resolution of separate proceedings that are relevant to the case at issue, if the court finds a stay to be efficient for its own docket and to be the fairest course for the parties).
D. The Public Interest
Both the TRIA and FSIA can be viewed as freighted with public-policy considerations. These considerations, however, are now before the Second Circuit, as it reviews the district court decisions handed down in Calderon-Cardona and Hausler. More generally, considerations of judicial economy are frequently viewed as relevant to the public interest, and, as noted, they weigh against the investment of court resources that may prove to have been unnecessary. Cf. Payne v. Jumeriah Hospitality & Leisure (USA) Inc., 808 F. Supp.2d 604, 604 (S.D.N.Y. 2011) (finding on a motion to dismiss based on forum non conveniens that further proceedings in that forum would be "unproductive and incompatible with judicial economy").
Petitioners argue that this proceeding should not be stayed because "[t]he United States, New York, and the public generally all have a significant interest in upholding the rights of terrorism victims and deterring future attacks." (Pet'rs' Opp'n Mem. at 10). The importance of upholding the rights of victims of terrorism and deterring future attacks is, of course, unquestioned. However, granting a stay in this litigation for a limited period would not amount to a denial of those rights, nor would it "thwart the public support of justice for terrorism victims," as petitioners suggest. (Id.). Rather, a stay here will facilitate the streamlining of this case, effectively advancing justice for such victims.
III. Likelihood of Success on Appeal
Finally, we briefly address the question of potential success on appeal. Respondent argues that it is unlikely that the Second Circuit will overturn the district court's holding in Calderon-Cardona regarding EFTs in possession of an intermediary bank. (Resp't's Mem. of Law at 8). Petitioners disagree, suggesting that the court's holding in that case was antithetical to the majority view in this district, as espoused in Hausler and Levin v. Bank of N.Y., 2011 WL 812032 (S.D.N.Y. Mar. 4, 2011). (Pet'rs' Opp'n Mem. at 2). All we need observe on this point is that the pending appeals present substantial issues and that the outcome is not so predictable that -- as petitioners suggest -- the benefits of waiting for a decision are chimerical.
The Second Circuit has previously held that "EFTs are neither the property of the originator nor the beneficiary while briefly in the possession of an intermediary bank." Shipping Corp. of India, 585 F.3d at 71. Whether the circuit extends that holding to the current context -- as did the Calderon-Cardona court in ruling that the TRIA and FSIA are preempted by state law, 2011 WL 6155987, at *16 -- is uncertain, but the argument in favor of the ruling is more than just colorable.
The question of law relating to EFTs is an important one on which the district courts have disagreed. The matter is now an issue for the Second Circuit, and, for purposes of a stay motion, respondent need only show a "substantial possibility" of success. LaRouche, 20 F.3d at 72. Since the lower courts have disagreed on the issue, there is clearly a substantial possibility that the appellate court will agree with respondent, and this factor further supports the grant of the stay in this case.
CONCLUSION
For the reasons stated, respondent's motion to stay proceedings pending the Second Circuit's disposition of the consolidated Calderon-Cardona and Hausler appeals is GRANTED. DATED: New York, New York
July 10, 2012
/s/_________
MICHAEL H. DOLINGER
UNITED STATES MAGISTRATE JUDGE Copies of the foregoing Memorandum and Order have been sent today to: Barbara L. Seniawski, Esq.
Cary Samowitz, Esq.
DLA Piper LLP
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Dale K. Cathell, Esq.
David Misler, Esq.
DLA Piper LLP
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Baltimore, Maryland 21209 Mark P. Gimbel, Esq.
Covington & Burling LLP
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